CREDIT AGREEMENT


                                      among



                                AEARO CORPORATION


                                AEARO COMPANY I,


                           CERTAIN OF ITS SUBSIDIARIES

                                 VARIOUS BANKS,


                                       and


                             BANKERS TRUST COMPANY,
                             as ADMINISTRATIVE AGENT


                   -------------------------------------------


                            Dated as of July 11, 1995
                                                        and
                    Amended and Restated as of July 13, 2001

                   -------------------------------------------




    BARCLAYS BANK PLC                            NATIONAL CITY BANK, INDIANA
    SYNDICATION AGENT                               CO-DOCUMENTATION AGENT
                                 FLEET BANK, N.A.
                              CO-DOCUMENTATION AGENT


<PAGE>




     CREDIT AGREEMENT,  dated as of July 11, 1995 and amended and restated as of
July 13,  2001 among AEARO  CORPORATION,  a Delaware  corporation  ("Holdings"),
AEARO  COMPANY I, a  Delaware  corporation  (the "US  Borrower"),  AEARO  CANADA
LIMITED,  an Ontario  corporation (the "Canadian  Borrower"),  AEARO LIMITED,  a
limited  liability company formed under the laws of England (the "UK Borrower"),
the  Banks  party  hereto  from  time to time  and  BANKERS  TRUST  COMPANY,  as
Administrative  Agent (all capitalized  terms used herein and defined in Section
10 are used herein as therein defined).


     W I T N E S S E T H: WHEREAS,  Holdings, the Borrowers,  the Existing Banks
and  Bankers  Trust  Company,  as  administrative  agent  are  party to a Credit
Agreement, dated as of July 11, 1995 and amended and restated as of May 30, 1996
(as amended,  modified or otherwise  supplemented  from time to time to, but not
including, the Restatement Effective Date, the "Existing Credit Agreement").

     WHEREAS,  the parties hereto wish to amend and restate the Existing  Credit
Agreement in the form of this  Agreement to make  available to the Borrowers the
respective facilities provided for herein.

NOW, THEREFORE, IT IS AGREED:

SECTION 1.  Amount and Terms of Credit.

     1.01 The  Commitments.  (a)(A) Subject to and upon the terms and conditions
set forth herein,  (I) on the  Restatement  Effective Date, the Existing US Term
Loans made by each Existing  Lender to the US Borrower  pursuant to the Existing
Credit Agreement shall be continued,  and shall remain outstanding as Borrowings
of term loans hereunder in an aggregate amount of 7,176,979.63  Dollars and (II)
each  Bank  with an A-1 Term  Loan  Commitment  severally  agrees to make on the
Restatement  Effective Date a term loan or term loans (together with each of the
Existing US Term Loans continued pursuant to clause (I) above, each an "A-1 Term
Loan" and collectively, the "A-1 Term Loans") to the US Borrower, which A-1 Term
Loans shall (i) be made and maintained in Dollars,  (ii) at the option of the US
Borrower,  be incurred and maintained as, and/or converted into, Base Rate Loans
or one or more  Borrowings of Eurodollar  Loans having such Interest  Periods as
are selected by the US Borrower pursuant to Section 1.09, provided that prior to
the  Syndication  Date, A-1 Term Loans may only be incurred and maintained as or
converted  into  Eurodollar  Loans if the  Interest  Period in  respect  of such
Eurodollar Loans is a Pre-Syndication  Interest Period, and (iii) in the case of
those  incurred  pursuant  to clause  (II)  above,  not exceed for any Bank,  in
initial aggregate  principal amount,  that amount which equals the A-1 Term Loan
Commitment of such Bank at the time of incurrence  thereof (before giving effect
to any  reductions  thereto  on such date  pursuant  to Section  3.03(b)).  Once
repaid, A-1 Term Loans incurred hereunder may not be reborrowed.

     (B) Subject to and upon the terms and  conditions  set forth  herein,  each
Bank  with  an  A-2  Term  Loan  Commitment  severally  agrees  to  make  on the
Restatement  Effective  Date a term loan or term loans  (each an "A-2 Term Loan"
and collectively, the "A-2 Term Loans") to the US Borrower, which A-2 Term Loans
shall (i) be made and  maintained in Euros,  (ii) be incurred and  maintained as
one or more  Borrowings  of A-2 Term Loans having such  Interest  Periods as are
selected by the US Borrower pursuant to Section 1.09, provided that prior to the
Syndication  Date, all such A-2 Term Loans shall have Interest Periods which are
Pre-Syndication  Interest Periods, and (iii) not exceed for any Bank, in initial
aggregate  principal  amount,  that  amount  which  equals  the  A-2  Term  Loan
Commitment of such Bank at the time of incurrence  thereof (before giving effect
to any  reductions  thereto  on such date  pursuant  to Section  3.03(b)).  Once
repaid, A-2 Term Loans incurred hereunder may not be reborrowed.

     (C) Subject to and upon the terms and conditions  set forth herein,  on the
Restatement  Effective  Date,  the  Existing  Canadian  Term  Loans made by each
Existing  Lender  to the  Canadian  Borrower  pursuant  to the  Existing  Credit
Agreement  shall be continued,  and shall remain  outstanding,  as Borrowings of
term loans hereunder in an aggregate amount of 6,223,942.55 Canadian Dollars (as
so continued, each an "A-3 Term Loan" and collectively, the "A-3 Term Loans") to
the Canadian Borrower,  which A-3 Term Loans shall (i) be maintained in Canadian
Dollars,  (ii) be maintained as one or more  Borrowings of A-3 Term Loans having
such  Interest  Periods as are  selected by the  Canadian  Borrower  pursuant to
Section 1.09,  provided that prior to the  Syndication  Date,  all such A-3 Term
Loans shall have Interest Periods which are  Pre-Syndication  Interest  Periods,
and (iii) not exceed for any Bank, in initial aggregate  principal amount,  that
amount which equals the A-3 Term Loan Commitment of such Bank at the time of the
continuance thereof.  Once repaid, A-3 Term Loans continued hereunder may not be
reborrowed.

     (D) Subject to and upon the terms and conditions  set forth herein,  (I) on
the  Restatement  Effective  Date, the Existing UK Pounds Sterling Loans made by
each  Existing  Lender  pursuant  to the  Existing  Credit  Agreement  shall  be
continued, and shall remain outstanding as Borrowings of term loans hereunder in
an aggregate amount of 708,315.63 Pounds Sterling and (II) each Bank with an A-4
Term Loan Commitment severally agrees to make on the Restatement  Effective Date
a term loan or term loans (together with each of the Existing UK Pounds Sterling
Loans  continued  pursuant  to clause  (I)  above,  each an "A-4 Term  Loan" and
collectively,  the "A-4 Term  Loans") to the UK  Borrower,  which A-4 Term Loans
shall  (i) be made and  maintained  in Pounds  Sterling,  (ii) be  incurred  and
maintained  as one or more  Borrowings  of A-4 Term Loans  having such  Interest
Periods as are selected by the UK Borrower  pursuant to Section  1.09,  provided
that prior to the Syndication  Date, all such A-4 Term Loans shall have Interest
Periods which are  Pre-Syndication  Interest  Periods,  and (iii) in the case of
those  incurred  pursuant  to clause  (II)  above,  not exceed for any Bank that
amount which equals,  in initial aggregate  principal amount,  the A-4 Term Loan
Commitment of such Bank at the time of incurrence  thereof (before giving effect
to any  reductions  thereto  on such date  pursuant  to Section  3.03(b)).  Once
repaid, A-4 Term Loans incurred hereunder may not be reborrowed.

     (E) Subject to and upon the terms and conditions  set forth herein,  (I) on
the  Restatement  Effective  Date, the Existing US Pounds Sterling Loans made by
each  Existing  Lender  pursuant  to the  Existing  Credit  Agreement  shall  be
continued, and shall remain outstanding as Borrowings of term loans hereunder in
an aggregate  amount of  2,711,602.96  Pounds Sterling and (II) each Bank with a
A-5 Term Loan Commitment  severally agrees to make on the Restatement  Effective
Date a term loan or term loans  (together  with each of the  Existing  US Pounds
Sterling Loans continued  pursuant to clause (I) above,  each an "A-5 Term Loan"
and collectively, the "A-5 Term Loans") to the US Borrower, which A-5 Term Loans
shall  (i) be made and  maintained  in Pounds  Sterling,  (ii) be  incurred  and
maintained  as one or more  Borrowings  of A-5 Term Loans  having such  Interest
Periods as are selected by the US Borrower  pursuant to Section  1.09,  provided
that prior to the Syndication  Date, all such A-5 Term Loans shall have Interest
Periods which are  Pre-Syndication  Interest  Periods,  and (iii) in the case of
those  incurred  pursuant  to clause  (II)  above,  not exceed for any Bank,  in
initial aggregate  principal amount,  that amount which equals the A-5 Term Loan
Commitment of such Bank at the time of incurrence  thereof (before giving effect
to any  reductions  thereto  on such date  pursuant  to Section  3.03(b)).  Once
repaid, A-5 Term Loans incurred hereunder may not be reborrowed.

     (b) Subject to and upon the terms and  conditions  set forth  herein,  each
Bank  with a  Revolving  Loan  Commitment  severally  agrees  to  make to the US
Borrower at any time and from time to time on or after the Restatement Effective
Date and prior to the  Revolving  Loan  Maturity  Date,  a loan or loans (each a
"Revolving Loan" and collectively the "Revolving Loans"),  which Revolving Loans
(i) shall be made and maintained in Dollars, (ii) at the option of the Borrower,
shall be incurred and maintained as, and/or  converted  into, Base Rate Loans or
Eurodollar Loans, provided that prior to the Syndication Date all such Revolving
Loans shall have Interest Periods which are  Pre-Syndication  Interest  Periods,
(iii) may be repaid and  reborrowed in accordance  with the  provisions  hereof,
(iv) shall not exceed (immediately after giving effect to the making thereof and
the use of the proceeds  thereof) for any Bank that aggregate  principal  amount
which, when added to the sum of (x) the aggregate  principal amount of all other
Revolving  Loans made by such Bank and then  outstanding  and (y) the product of
(A) such Bank's Revolving  Percentage and (B) the aggregate amount of all Letter
of Credit  Outstandings  (exclusive of Unpaid Drawings which are repaid with the
proceeds of, and simultaneously with the incurrence of, Revolving Loans) at such
time, equals the Revolving Loan Commitment of such Bank at such time.

     1.02 Minimum Amount of Each Borrowing.  The aggregate  principal  amount of
each  Borrowing  shall not be less than the  Minimum  Borrowing  Amount  for the
respective  Tranche.  More than one Borrowing may occur on the same date, but at
no time shall there be  outstanding  more than 15  Borrowings of Euro Rate Loans
hereunder.


     1.03 Notice of  Borrowing.  (a) Whenever a Borrower  desires to incur Loans
hereunder  (excluding  Existing  Loans  continued  hereunder on the  Restatement
Effective  Date) it shall give the  Administrative  Agent at its  Notice  Office
written notice (or telephonic notice promptly  confirmed in writing) on the date
such Loan is to be made of each  Base Rate  Loan,  and at least  three  Business
Days' prior written notice (or telephonic notice promptly  confirmed in writing)
of each Euro Rate Loan,  provided  that any such notice  shall be deemed to have
been given on a certain day only if given  before  1:00 P.M.  (New York time) on
such day. Each such written notice or written  confirmation of telephonic notice
(each a "Notice of  Borrowing"),  shall be irrevocable and shall be given by the
Borrower in the form of Exhibit A,  appropriately  completed  to specify (i) the
date of such incurrence  (which shall be a Business Day), (ii) whether the Loans
being made shall  constitute  Term Loans,  or Revolving Loans and the Applicable
Currency of such Term Loans,  (iii) the aggregate  principal amount of the Loans
to be made, (iv) in the case of Dollar Loans,  whether such Loans being made are
to be initially maintained as Base Rate Loans or Eurodollar Loans and (v) in the
case of Euro Rate Loans, the initial  Interest Period to be applicable  thereto.
The  Administrative  Agent shall  promptly (and in any event within one Business
Day after its receipt of a Notice of Borrowing) give each Bank which is required
to make Loans of the Tranche  specified in the  respective  Notice of Borrowing,
notice of such proposed  incurrence,  of such Bank's proportionate share thereof
and of the other matters  required by the immediately  preceding  sentence to be
specified in the Notice of Borrowing.


     (b) Without in any way limiting the  obligation of a Borrower to confirm in
writing any  telephonic  notice of any incurrence of Loans,  the  Administrative
Agent may act without liability upon the basis of telephonic notice, believed by
the Administrative  Agent in good faith to be from an Authorized Officer of such
Borrower  prior to  receipt  of written  confirmation.  In each such case,  such
Borrower hereby waives the right to dispute the Administrative Agent's record of
the terms of such telephonic notice absent manifest error.


     1.04  Disbursement of Funds. No later than 2:00 P.M. (New York time) on the
date  specified in each Notice of Borrowing,  each Bank with a Commitment  under
the  respective  Tranche  will  make  available  its pro  rata  portion  of each
Borrowing  of Loans  requested to be made on such date,  in relevant  Applicable
Currency and in immediately available funds at the appropriate Payment Office of
the Administrative  Agent. The  Administrative  Agent will make available to the
relevant Borrower at the Payment Office in the relevant Applicable Currency,  in
immediately  available  funds, the aggregate of the amounts so made available by
the Banks prior to 2:00 P.M.  (local  time in the city in which the  proceeds of
such Loans are to be made available in accordance with the terms hereof) on such
day,  to the extent of funds  actually  received  by the  Administrative  Agent.
Unless the  Administrative  Agent shall have been  notified by any Bank prior to
the date of  Borrowing  that such Bank does not intend to make  available to the
Administrative  Agent such Bank's  portion of any  Borrowing  to be made on such
date,  the  Administrative  Agent may assume that such Bank has made such amount
available  to the  Administrative  Agent  on  such  date  of  Borrowing  and the
Administrative  Agent may, in reliance upon such  assumption,  make available to
the Borrower a corresponding amount. If such corresponding amount is not in fact
made  available to the  Administrative  Agent by such Bank,  the  Administrative
Agent shall be entitled to recover such corresponding amount on demand from such
Bank. If such Bank does not pay such  corresponding  amount  forthwith  upon the
Administrative  Agent's demand therefor, the Administrative Agent shall promptly
notify the US Borrower and the relevant Borrower and the relevant Borrower shall
immediately  pay such  corresponding  amount to the  Administrative  Agent.  The
Administrative  Agent shall also be entitled to recover on demand from such Bank
or the relevant  Borrower,  as the case may be,  interest on such  corresponding
amount in respect of each day from the date such  corresponding  amount was made
available  by the  Administrative  Agent to such  Borrower  until  the date such
corresponding  amount is recovered by the  Administrative  Agent,  at a rate per
annum equal to (i) if recovered from such Bank, the overnight Federal Funds Rate
and (ii) if recovered from such Borrower, the rate of interest applicable to the
respective  Borrowing,  as determined  pursuant to Section 1.08. Nothing in this
Section  1.04 shall be deemed to relieve  any Bank from its  obligation  to make
Loans  hereunder or to prejudice  any rights which any Borrower may have against
any Bank as a result of any failure by such Bank to make Loans hereunder.


     1.05 Notes.  (a) At the request of any Bank, each Borrower's  obligation to
pay the  principal  of,  and  interest  on,  the Loans made by such Bank to such
Borrower shall be evidenced  (i)(A) if A-1 Term Loans, by a promissory note duly
executed and delivered by the US Borrower  substantially  in the form of Exhibit
B-1(A) with blanks appropriately  completed in conformity herewith (each an "A-1
Term Note" and, collectively, the "A-1 Term Notes"), (B) if A-2 Term Loans, by a
promissory note duly executed and delivered by the US Borrower  substantially in
the form of Exhibit  B-1(B) with blanks  appropriately  completed in  conformity
herewith (each an "A-2 Term Note" and, collectively,  the "A-2 Term Notes"), (C)
if A-3 Term Loans,  by a  promissory  note duly  executed  and  delivered by the
Canadian  Borrower  substantially  in the form of  Exhibit  B-1 (C) with  blanks
appropriately  completed in  conformity  herewith  (each an "A-3 Term Note" and,
collectively the "A-3 Term Notes"),  (D) if A-4 Term Loans, by a promissory note
duly  executed  and  delivered by the UK Borrower  substantially  in the form of
Exhibit B-1(D) with blanks appropriately  completed in conformity herewith (each
an "A-4 Term Note" and,  collectively  the "A-4 Term Notes") and (E) if A-5 Term
Loans by a  promissory  note duly  executed  and  delivered  by the US  Borrower
substantially in the form of Exhibit B-1(E) with blanks appropriately  completed
in conformity  therewith  (each an "A-5 Term Note" and,  collectively,  the "A-5
Term Notes") and (ii) if Revolving Loans, by a promissory note duly executed and
delivered  by the US  Borrower  substantially  in the form of  Exhibit  B-2 with
blanks  appropriately  completed in conformity herewith (each a "Revolving Note"
and, collectively, the "Revolving Notes").


     (b) (A) The A-1 Term Note issued by the US Borrower to any Bank that has an
A-1 Term Loan  Commitment or outstanding A-1 Term Loans shall (i) be executed by
the US Borrower,  (ii) be payable to the order of such Bank and be dated (I) the
Original  Restatement  Effective  Date  for  A-1  Term  Loans  continued  on the
Restatement  Effective Date or (II) the Restatement  Effective Date for A-1 Term
Loans made on the Restatement  Effective Date, as the case may be, (iii) be in a
stated  principal  amount equal to (I) the A-1 Term Loans continued by such Bank
on the  Restatement  Effective Date or (II) the A-1 Term Loan Commitment of such
Bank on the Restatement  Effective Date, as the case may be (or, if issued after
the  Restatement  Effective Date, the outstanding A-1 Term Loans of such Bank at
such time),  (iv) mature on the Term Loan  Maturity  Date,  (v) bear interest as
provided in the appropriate clause of Section 1.08, (vi) be subject to voluntary
prepayment  as provided in Section 4.01 and  mandatory  repayment as provided in
Section 4.02 and (vii) be entitled to the benefits of this  Agreement and the US
Guaranties and be secured by the US Security Documents.

     (b) (B) The A-2 Term Note issued by the US Borrower to any Bank that has an
A-2 Term Loan  Commitment or outstanding A-2 Term Loans shall (i) be executed by
the US Borrower,  (ii) be payable to the order of such Bank and be dated (I) the
Original  Restatement  Effective  Date  for  A-2  Term  Loans  continued  on the
Restatement  Effective Date or (II) the Restatement  Effective Date for A-2 Term
Loans made on the Restatement  Effective Date, as the case may be, (iii) be in a
stated  principal  amount equal to the A-2 Term Loan  Commitment of such Bank on
the  Restatement  Effective  Date,  as the case may be (or, if issued  after the
Restatement  Effective Date, the outstanding A-2 Term Loans of such Bank at such
time), (iv) mature on the Term Loan Maturity Date, (v) bear interest as provided
in the  appropriate  clause  of  Section  1.08,  (vi) be  subject  to  voluntary
prepayment  as provided in Section 4.01 and  mandatory  repayment as provided in
Section 4.02 and (vii) be entitled to the benefits of this  Agreement and the US
Guaranties and be secured by the US Security Documents.

     (b) (C) The A-3 Term Note issued by the Canadian  Borrower to any Bank that
has outstanding  A-3 Term Loans shall (i) be executed by the Canadian  Borrower,
(ii) be payable to the order of such Bank and be dated the Original  Restatement
Effective  Date,  (iii) be in a stated  principal  amount  equal to the A-3 Term
Loans  continued by such Bank on the  Restatement  Effective Date (or, if issued
after the  Restatement  Effective  Date, the  outstanding A-3 Term Loans of such
Bank at such  time),  (iv)  mature  on the Term  Loan  Maturity  Date,  (v) bear
interest as provided in the appropriate  clause of Section 1.08, (vi) be subject
to voluntary  prepayment as provided in Section 4.01 and mandatory  repayment as
provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement
and the US Guaranties and any Canadian Subsidiary Guaranty and be secured by the
US Security Documents and the Canadian Security Documents.

     (b) (D) The A-4 Term Note issued by the UK Borrower to any Bank that has an
A-4 Term Loan  Commitment or outstanding A-4 Term Loans shall (i) be executed by
the UK Borrower,  (ii) be payable to the order of such Bank and be dated (I) the
Original  Restatement  Effective  Date  for  A-4  Term  Loans  continued  on the
Restatement  Effective Date or (II) the Restatement  Effective Date for A-4 Term
Loans made on the Restatement  Effective Date, as the case may be, (iii) be in a
stated  principal  amount equal to (I) the A-4 Term Loans continued by such Bank
on the  Restatement  Effective Date or (II) the A-4 Term Loan Commitment of such
Bank on the Restatement  Effective Date, as the case may be (or, if issued after
the  Restatement  Effective Date, the outstanding A-4 Term Loans of such Bank at
such time),  (iv) mature on the Term Loan  Maturity  Date,  (v) bear interest as
provided in the appropriate clause of Section 1.08, (vi) be subject to voluntary
prepayment  as provided in Section 4.01 and  mandatory  repayment as provided in
Section 4.02 and (vii) be entitled to the benefits of this  Agreement and any UK
Subsidiary  Guaranty  and the US  Guaranties  and be secured by the UK  Security
Documents and the US Security Documents.

     (b) (E) The A-5 Term Note issued by the US Borrower to any Bank that has an
A-5 Term Loan  Commitment or outstanding A-5 Term Loans shall (i) be executed by
the US Borrower,  (ii) be payable to the order of such Bank and be dated (I) the
Original  Restatement  Effective  Date  for  A-5  Term  Loans  continued  on the
Restatement  Effective Date or (II) the Restatement  Effective Date for A-5 Term
Loans made on the Restatement  Effective Date, as the case may be, (iii) be in a
stated  principal  amount equal to (I) the A-5 Term Loans continued by such Bank
on the  Restatement  Effective Date or (II) the A-5 Term Loan Commitment of such
Bank on the Restatement  Effective Date, as the case may be (or, if issued after
the  Restatement  Effective Date, the outstanding A-5 Term Loans of such Bank at
such time),  (iv) mature on the Term Loan  Maturity  Date,  (v) bear interest as
provided in the appropriate clause of Section 1.08, (vi) be subject to voluntary
prepayment  as provided in Section 4.01 and  mandatory  repayment as provided in
Section 4.02 and (vii) be entitled to the benefits of this  Agreement and the US
Guaranties and be secured by the US Security Documents.

     (c) The  Revolving  Note  issued by the US  Borrower to any Bank that has a
Revolving  Loan  Commitment  shall (i) be executed by the US  Borrower,  (ii) be
payable to the order of such Bank and be dated the date of issuance, (iii) be in
a stated principal amount equal to the Revolving Loan Commitment of such Bank at
the time of issuance,  (iv) mature on the Revolving Loan Maturity Date, (v) bear
interest as provided in the appropriate  clause of Section 1.08, (vi) be subject
to voluntary  prepayment as provided in Section 4.01 and mandatory  repayment as
provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement
and the US Guaranties and be secured by the US Security Documents.


     (d) Each Bank will note on its  internal  records  the  amount of each Loan
made by it and each payment in respect thereof and will prior to any transfer of
any of its Notes endorse on the reverse side thereof the  outstanding  principal
amount of Loans evidenced  thereby.  Failure to make any such notation shall not
affect the Borrower's obligations in respect of such Loans.


     1.06  Conversions.  The US Borrower shall have the option to convert on any
Business Day all or a portion equal to at least the applicable Minimum Borrowing
Amount for such Tranche of the outstanding  principal amount of the Dollar Loans
made to the US Borrower  pursuant to one or more  Borrowings  (so long as of the
same Tranche) of one or more Types of Loans into a Borrowing or  Borrowings  (of
the same  Tranche)  of  another  Type of  Loan,  provided  that  (i) no  partial
conversion of Eurodollar Loans shall reduce the outstanding  principal amount of
such  Eurodollar  Loans made  pursuant  to a single  Borrowing  to less than the
applicable  Minimum Borrowing Amount for such Tranche,  (ii) Base Rate Loans may
not be converted into  Eurodollar  Loans if any Event of Default is in existence
on the date of the conversion if the Administrative  Agent or the Majority Banks
in respect of the  applicable  Tranche have  previously  advised the US Borrower
that  conversions  will not be permitted  while such Event of Default remains in
existence,  (iii) no conversion  pursuant to this Section 1.06 shall result in a
greater number of Borrowings of Eurodollar Loans than is permitted under Section
1.02 and (iv)  prior to the  Syndication  Date,  no Loan may be  converted  into
Eurodollar Loans except on the first day of a  Pre-Syndication  Interest Period.
Each such  conversion  (other than  automatic  conversions  pursuant to the last
paragraph  of Section  1.09) shall be effected by the US  Borrower's  giving the
Administrative  Agent at its Notice Office prior to 1:00 P.M. (New York time) at
least three Business Days' prior written notice (each a "Notice of  Conversion")
specifying the Loans to be so converted, the Borrowing or Borrowings pursuant to
which  such  Loans  were made,  the date of such  conversion  (which  shall be a
Business Day) and, if to be converted into Eurodollar Loans, the Interest Period
to be initially  applicable  thereto.  The Administrative  Agent shall give each
Bank prompt notice of any such proposed conversion affecting any of its Loans.


     1.07 Pro Rata  Borrowings.  All  Borrowings  of Loans under a Tranche under
this  Agreement  shall be incurred from the Banks pro rata on the basis of their
Commitments under such Tranche (and after the termination  thereof,  Loans under
such  Tranche).  It is  understood  that no Bank  shall be  responsible  for any
default by any other Bank of its  obligation  to make Loans  hereunder  and that
each  Bank  shall be  obligated  to make  the  Loans  provided  to be made by it
hereunder,  regardless  of the  failure  of any  other  Bank to make  its  Loans
hereunder.


     1.08 Interest. (a) The US Borrower agrees to pay interest in respect of the
unpaid  principal  amount of each  Base  Rate  Loan  from the date the  proceeds
thereof are made  available to the US Borrower  until the conversion or maturity
(whether by  acceleration  or  otherwise)  of such Base Rate Loan, at a rate per
annum  which  shall be equal to the sum of the  Applicable  Margin plus the Base
Rate in effect from time to time.


     (b) Each Borrower severally agrees to pay interest in respect of the unpaid
principal  amount of each Euro Rate Loan incurred by such Borrower from the date
the proceeds thereof are made available to such Borrower until the conversion or
maturity  (whether by  acceleration  or  otherwise) of such Euro Rate Loan, at a
rate per annum which shall,  during each Interest Period applicable  thereto, be
equal to the sum of the applicable  Euro Rate for such Loans plus the Applicable
Margin for such Interest Period.

     (c) Overdue principal and, to the extent permitted by law, overdue interest
in respect of each Loan and any other overdue amount payable hereunder shall, in
each case,  bear  interest  at a rate per annum equal to the rate which is 2% in
excess of the rate then borne by such  Loans (or in the case of overdue  amounts
other than Loans, an amount equal to the sum of (i) the Base Rate in effect from
time to time, (ii) the Applicable Margin in respect of Base Rate Loans and (iii)
2%),  provided that overdue  principal in respect of Euro Rate Loans (other than
Eurodollar  Loans) shall bear interest from the date same becomes due until paid
in full at a rate  equal  to 2% in  excess  of  respective  Euro  Rate  plus the
Applicable  Margin for such  successive  periods (not exceeding three months) as
the  Administrative  Agent may determine from time to time in respect of amounts
comparable  to the amount not paid.  Interest  which  accrues under this Section
1.08(c) shall be payable on demand.

     (d)  Accrued  (and  theretofore  unpaid)  interest  shall be payable (i) in
respect of each Base Rate Loan,  quarterly in arrears on each Quarterly  Payment
Date,  (ii) in respect of each Euro Rate Loan,  on the last day of each Interest
Period  applicable  thereto and, in the case of an Interest  Period in excess of
three months,  on each date occurring at three month  intervals  after the first
day of such Interest  Period and (iii) in respect of each Loan, on any repayment
or  prepayment  (on the amount  repaid or  prepaid),  at  maturity  (whether  by
acceleration or otherwise) and, after such maturity, on demand.

     (e) Upon each Interest  Determination Date, the Administrative  Agent shall
determine the respective  interest rate for each Interest  Period  applicable to
the Euro  Rate  Loans  for  which  such  determination  is being  made and shall
promptly  notify the Borrower  and the Banks  thereof.  Each such  determination
shall, absent manifest error, be final and conclusive and binding on all parties
hereto.


     1.09  Interest  Periods.  At the time it gives any Notice of  Borrowing  in
respect  of the making of any Euro Rate Loan,  or any  Notice of  Conversion  in
respect of the  conversion  of any  Eurodollar  Loan (in the case of the initial
Interest Period applicable  thereto),  or on the third Business Day prior to the
expiration of an Interest  Period  applicable to any Euro Rate Loan (in the case
of any subsequent  Interest Period),  the relevant Borrower shall have the right
to elect, by giving the Administrative Agent notice thereof, the interest period
(each an "Interest  Period")  applicable to such Euro Rate Loan,  which Interest
Period shall, at the option of such Borrower,  be a one, two, three or six-month
period,  or with the consent of each Bank making such Euro Rate Loan,  a nine or
twelve-month   period  (provided  that  prior  to  the  Syndication  Date,  only
Pre-Syndication  Interest  Periods may be selected by the  Borrowers);  provided
that:

          (i) all Euro Rate Loans comprising a Borrowing shall at all times have
     the same Interest Period;

          (ii) the initial  Interest Period for any Borrowing of Euro Rate Loans
     shall  commence  on the date of such  Borrowing  (including  in the case of
     Dollar Loans,  the date of any conversion  thereto from a Borrowing of Base
     Rate Loans) and each  Interest  Period  occurring  thereafter in respect of
     such Euro Rate Loans shall  commence on the day on which the next preceding
     Interest Period applicable thereto expires;

          (iii) if any Interest  Period relating to a Euro Rate Loan begins on a
     day for which there is no  numerically  corresponding  day in the  calendar
     month at the end of such Interest Period, such Interest Period shall end on
     the last Business Day of such calendar month;

          (iv) if any Interest Period would  otherwise  expire on a day which is
     not a  Business  Day,  such  Interest  Period  shall  expire  on  the  next
     succeeding  Business Day;  provided,  however,  that if any Interest Period
     would otherwise expire on a day which is not a Business Day but is a day of
     the month after which no further  Business  Day occurs in such month,  such
     Interest Period shall expire on the next preceding Business Day;

          (v) no  Interest  Period may be  selected at any time when an Event of
     Default is then in  existence if the  Administrative  Agent or the Majority
     Banks in respect of the  applicable  Tranche  have  previously  advised the
     Borrower that conversions will not be permitted while such Event of Default
     remains in existence;

          (vi) no  Interest  Period  for a  Borrowing  under a Tranche  shall be
     selected which extends beyond the respective Maturity Date of such Tranche;
     and

          (vii) no  Interest  Period in respect of any  Borrowing  of Term Loans
     under a Tranche shall be selected  which extends beyond any date upon which
     a Scheduled  Repayment of Term Loans of such Tranche will be required to be
     made under Section 4.02(b) if the aggregate  principal amount of Term Loans
     under such Tranche which have Interest Periods which will expire after such
     date will be in excess of the aggregate principal amount of such Tranche of
     Term Loans then  outstanding  less the aggregate  amount of such  Scheduled
     Repayment.

     Prior to the  termination of any Interest  Period  applicable to any Loans,
the  relevant  Borrower  may,  at its  option,  designate  that  the  respective
Borrowing subject thereto be split into more than one Borrowing (for purposes of
electing multiple Interest Periods to be applicable  thereto upon the expiration
of such Interest  Period),  so long as each such  Borrowing  resulting  from the
action taken  pursuant to this sentence meets the Minimum  Borrowing  Amount for
such Loans.  If upon the  expiration  of any  Interest  Period  applicable  to a
Borrowing of Euro Rate Loans,  the relevant  Borrower has failed to elect, or is
not permitted to elect, a new Interest Period to be applicable to such Euro Rate
Loans as provided  above,  such Borrower  shall be deemed to have elected (x) in
the case of Eurodollar  Loans, to convert such  Eurodollar  Loans into Base Rate
Loans  effective as of the expiration  date of such current  Interest Period and
(y) in the case of Term Loans other than A-1 Term  Loans,  to select a one-month
Interest  Period for such Term Loans effective as of the expiration date of such
current Interest Period.

     1.10 Increased Costs, Illegality, etc. (a) In the event that any Bank shall
have determined (which  determination shall, absent manifest error, be final and
conclusive  and binding upon all parties hereto but, with respect to clauses (i)
and (iii)(z) below, may be made only by the Administrative Agent):

          (i) on any Interest  Determination Date that, by reason of any changes
     arising after the date of this Agreement  affecting the relevant  interbank
     market,  adequate  and  fair  means  do  not  exist  for  ascertaining  the
     applicable  interest  rate on the basis  provided for in the  definition of
     Eurodollar Rate (in the case of Eurodollar Loans),  EURIBOR (in the case of
     EURIBOR  Rate  Loans),  Canadian  Dollar Euro Rate (in the case of Canadian
     Dollar Loans) or Pounds  Sterling Euro Rate (in the case of Pounds Sterling
     Loans);


          (ii) at any time,  that  such  Bank  shall  incur  increased  costs or
     reductions in the amounts received or receivable  hereunder with respect to
     any Euro Rate Loan  which  such Bank  deems to be  material  because of any
     change  since  the  date  of  this  Agreement  in  any  applicable  law  or
     governmental rule, regulation,  order, guideline or request (whether or not
     having the force of law) or in the interpretation or administration thereof
     by any governmental  authority,  central bank or comparable  agency charged
     with the  interpretation  or  administration  thereof,  and  including  the
     introduction  of any  new  law or  governmental  rule,  regulation,  order,
     guideline  or request (a "Change in Law"),  which (A)  changes the basis of
     taxation  of payment to any Bank of the  principal  of or  interest on such
     Euro Rate Loan or any other amounts payable  hereunder  (except for changes
     in the rate of tax on, or  determined  by  reference  to, the net income or
     profits of such Bank,  pursuant  to the laws of the  jurisdiction  in which
     such  Bank is  organized  or in  which  such  Bank's  principal  office  or
     applicable lending office is located or any subdivision  thereof or therein
     and Taxes for which a payment is required pursuant to Section 4.04(a)), (B)
     changes  official  reserve  requirements  (except to the extent  covered by
     Section 1.10(d) in respect of Alternate  Currency Loans and, in all events,
     excluding  reserves  required under  Regulation D to the extent included in
     the  computation of the Eurodollar  Rate, the Canadian  Dollar Euro Rate or
     the Pounds  Sterling  Euro Rate)  and/or (c)  imposes  any other  condition
     affecting  such Bank or the  relevant  interbank  market or the position of
     such Bank in such market;


          (iii) at any time,  that the  making or  continuance  of any Euro Rate
     Loan has been made (x)  unlawful by any Change in Law,  (y)  impossible  by
     compliance  by any Bank in good faith with any  governmental  request  made
     after the date of this  Agreement  (whether or not having  force of law) or
     (z)  impracticable  as a result  of a Change in Law  which  materially  and
     adversely affects the relevant interbank market; or


          (iv) at any time, that such Bank shall incur any Mandatory Costs;


     then, and in any such event, such Bank (or the Administrative Agent, in the
case of clause (i) or (iii)(z)  above) shall  promptly give notice (by telephone
confirmed  in  writing)  to the  relevant  Borrower  and,  except in the case of
clauses  (i)  and  (iii)(z)   above,  to  the   Administrative   Agent  of  such
determination  (which notice the Administrative Agent shall promptly transmit to
each of the other Banks). Thereafter (w) in the case of clause (i) above, (A) in
the event that  Eurodollar  Loans are so  affected,  Eurodollar  Loans  shall no
longer be available until such time as the Administrative  Agent notifies the US
Borrower and the Banks that the circumstances  giving rise to such notice by the
Administrative  Agent no longer exist,  and any Notice of Borrowing or Notice of
Conversion  given by US Borrower with respect to Eurodollar Loans which have not
yet been incurred (including by way of conversion) shall be deemed a request for
Base  Rate  Loans by the US  Borrower  and (B) in the event  that any  Alternate
Currency Loans are so affected,  the interest rate for such  Alternate  Currency
Loan shall be determined on the basis  provided in the proviso to the definition
of the respective Euro Rate applicable to such Alternate  Currency Loans, (x) in
the case of clause (ii) above,  the  relevant  Borrower  shall pay to such Bank,
upon  written  demand  therefor,  such  additional  amounts  (in the  form of an
increased rate of, or a different  method of calculating,  interest or otherwise
as such Bank in its reasonable  discretion shall determine) as shall be required
to  compensate  such Bank for such  increased  costs or  reductions  in  amounts
received or receivable  hereunder (a written notice as to the additional amounts
owed to such Bank,  showing in reasonable  detail the basis for the  calculation
thereof,  based on averaging and  attribution  methods among customers which are
reasonable,  submitted to such Borrower by such Bank in good faith shall, absent
manifest error, be final and conclusive and binding on all the parties  hereto),
(y) in the case of clause (iii) above,  the relevant  Borrower shall take one of
the actions  specified  in Section  1.10(b) as promptly as possible  and, in any
event, within the time period required by law and (z) in the case of clause (iv)
above,  the  relevant  Borrower  shall pay to such  Bank,  upon  written  demand
therefor, such Mandatory Costs.

     (b) At any time that any Euro Rate Loan is  affected  by the  circumstances
described in Section 1.10(a)(ii), the relevant Borrower may and in the case of a
Euro Rate Loan affected by the circumstances  described in Section  1.10(a)(iii)
shall either (x) if the affected Euro Rate Loan is then being made  initially or
pursuant  to a  conversion,  cancel  the  respective  Borrowing  by  giving  the
Administrative  Agent  written  notice on the same date that such  Borrower  was
notified by the affected Bank or the  Administrative  Agent  pursuant to Section
1.10(a)(ii) or (iii) and, for Eurodollar Loans, deem it to be a request for Base
Rate Loans or (y) if the affected  Euro Rate Loan is then  outstanding,  upon at
least three Business Days' written  notice to the  Administrative  Agent and the
affected Bank, and subject to Section  4.02(j),  (A) in the case of a Eurodollar
Rate Loan, require the affected Bank to convert such Eurodollar Loan into a Base
Rate  Loan or  repay  such  Eurodollar  Loan in full  and (B) in the case of any
Alternate  Currency Loan, repay such Alternate  Currency Loan in full;  provided
that (i) if the  circumstances  described in Section  1.10(a)(iii)  apply to any
Alternate  Currency  Loan,  the  Borrower  may,  in lieu of taking  the  actions
described above,  maintain such Alternate  Currency Loan  outstanding,  in which
case the relevant  Euro Rate shall be  determined  on the basis  provided in the
last sentence of the definition of the respective  Euro Rate  applicable to such
Alternate Currency Loan, unless the maintenance of such Applicable Currency Loan
outstanding  on such basis would not stop the  conditions  described  in Section
1.10(a)(iii) from existing (in which case the actions  described above,  without
giving  effect to the  proviso,  shall be required to be taken) and (ii) if more
than one Bank is affected at any time,  then all affected  Banks must be treated
the same pursuant to this Section 1.10(b).

     (c) If any Bank shall have  determined  that,  after the date  hereof,  the
adoption or  effectiveness  of any applicable law, rule or regulation  regarding
capital adequacy,  or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration  thereof, or compliance
by such  Bank or any  corporation  controlling  such Bank  with any  request  or
directive regarding capital adequacy (whether or not having the force of law) of
any such  authority,  central bank or comparable  agency,  has or would have the
effect of reducing the rate of return on such Bank's or such other corporation's
capital or assets as a consequence  of such Bank's  Commitment or Commitments or
Loans  hereunder or its  obligations  hereunder to a level below that which such
Bank or such  other  corporation  could  have  achieved  but for such  adoption,
effectiveness,  change or compliance  (taking into  consideration such Bank's or
such other corporation's  policies with respect to capital adequacy),  then from
time  to  time,   upon  written  demand  by  such  Bank  (with  a  copy  to  the
Administrative Agent),  accompanied by the notice referred to in the penultimate
sentence  of this  clause  (c),  the US  Borrower  shall  pay to such  Bank such
additional  amount  or  amounts  as will  compensate  such  Bank  or such  other
corporation for such reduction.  In determining  such additional  amounts,  each
Bank will act reasonably and in good faith and will use reasonable averaging and
attribution  methods.  Each Bank, upon determining  that any additional  amounts
will be payable  pursuant to this  Section  1.10(c),  will give  prompt  written
notice thereof to the US Borrower (a copy of which shall be sent by such Bank to
the Administrative Agent), which notice shall set forth in reasonable detail the
basis of the  calculation of such  additional  amounts,  although the failure to
give any such notice shall not release or diminish the US Borrower's obligations
to pay additional  amounts  pursuant to this Section 1.10(c) upon the subsequent
receipt  of such  notice.  A  Bank's  reasonable  good  faith  determination  of
compensation  owing under this Section 1.10(c) shall,  absent manifest error, be
final and conclusive and binding on all the parties hereto.

     (d) In the  event  that  any  Bank  shall in good  faith  determine  (which
determination  shall, absent manifest error, be final and conclusive and binding
on all  parties  hereto)  at any time  that such Bank is  required  to  maintain
reserves (including, without limitation, any marginal, emergency,  supplemental,
special  or  other  reserves   required  by  applicable  law)  which  have  been
established  by any  Federal,  state,  local or  foreign  court or  governmental
agency,  authority,  instrumentality  or regulatory body with  jurisdiction over
such Bank (including any branch, Affiliate or funding office thereof) in respect
of any Alternate  Currency Loans or any category of  liabilities  which includes
deposits by reference to which the interest rate on any Alternate  Currency Loan
is  determined  or any  category of  extensions  of credit or other assets which
includes  loans by a non-United  States office of any Bank to non-United  States
residents,  then,  unless such reserves are included in the  calculation  of the
interest  rate  applicable  to such  Alternate  Currency  Loans  or are  payable
pursuant to Section  1.10(a)(ii)or  (iv),  such Bank shall  promptly  notify the
relevant  Borrower in writing  specifying  the  additional  amounts  required to
indemnify such Bank against the cost of maintaining  such reserves (such written
notice to provide in reasonable detail a computation of such additional amounts)
and such  Borrower  shall,  and  shall be  obligated  to,  pay to such Bank such
specified  amounts as  additional  interest  at the time that such  Borrower  is
otherwise  required to pay interest in respect of such  Alternate  Currency Loan
or, if later, on written demand therefor by such Bank.

     1.11  Compensation.  The relevant Borrower shall compensate each Bank, upon
its written request (which request shall set forth the basis for requesting such
compensation),  for all reasonable losses,  expenses and liabilities (including,
without  limitation,  any loss,  expense or liability  incurred by reason of the
liquidation or  reemployment of deposits or other funds required by such Bank to
fund its Euro Rate Loans,  but excluding loss of anticipated  profit) which such
Bank may  sustain:  (i) if for any reason  (other than a default by such Bank or
the Administrative  Agent) a Borrowing of, or conversion from or into, Euro Rate
Loans does not occur on a date  specified  therefor in a Notice of  Borrowing or
Notice of Conversion  given by such  Borrower  (whether or not withdrawn by such
Borrower);  (ii) if any  repayment  (including  any  repayment  made pursuant to
Section  4.01 or 4.02 or a result of an  acceleration  of the Loans  pursuant to
Section 9 or as a result of the  replacement  of a Bank pursuant to Section 1.13
or  13.12(b)) or  conversion  of any Euro Rate Loans  incurred by such  Borrower
occurs on a date which is not the last day of an Interest  Period  with  respect
thereto;  (iii) if any prepayment of any Euro Rate Loans is not made on any date
specified  in a  notice  of  prepayment  given  by such  Borrower;  or (iv) as a
consequence  of (x) any other  default by such  Borrower to repay its Loans when
required by the terms of this Agreement or any Note held by such Bank or (y) any
election made by such Borrower pursuant to Section 1.10(b).


     1.12 Change of Lending  Office.  (a) Each Bank may  transfer  and carry its
Loans  and/or  Commitments  at,  to or for the  account  of any  branch  office,
subsidiary or affiliate of such Bank; provided,  that the Borrowers shall not be
responsible  for costs arising under Section 1.10,  1.11, 2.05 or 4.04 resulting
from any such transfer  (other than a transfer  pursuant to Section  1.12(b)) to
the extent  such costs would not  otherwise  be  applicable  to such Bank in the
absence of such transfer.

     (b) Each Bank agrees that on the occurrence of any event giving rise to the
operation of Section  1.10(a)(ii)  or (iii) or (iv),  Section  1.10(c),  Section
1.10(d),  Section 2.05 or Section 4.04 with  respect to such Bank,  it will,  if
requested by the relevant  Borrower,  use reasonable efforts (subject to overall
policy  considerations of such Bank) to designate another lending office for any
Loans  or  Letters  of  Credit  affected  by  such  event,  provided  that  such
designation  is made on such terms that such Bank and its lending  office suffer
no economic, legal or regulatory  disadvantage,  with the object of avoiding the
consequence  of the event giving rise to the operation of such Section.  Nothing
in this  Section 1.12 shall  affect or postpone  any of the  obligations  of any
Borrower or the right of any Bank provided in Sections 1.10, 2.05 and 4.04.

     1.13 Replacement of Banks. (a) (i) If any Bank becomes a Defaulting Bank or
otherwise  defaults in its  obligations  to make Loans or fund Unpaid  Drawings,
(ii) if any Bank  refuses  to  consent to  certain  proposed  changes,  waivers,
discharges  or  terminations  with  respect  to this  Agreement  which have been
approved by the Required Banks as provided in Section 13.12(b) or (iii) upon the
occurrence  of any event giving rise to the  operation  of Section  1.10(a)(ii),
(iii) or (iv),  Section 1.10(c),  Section 1.10(d),  Section 2.05 or Section 4.04
with  respect to any Bank which  results in such Bank  charging to any  Borrower
increased costs in excess of those being  generally  charged by the other Banks,
such Borrower  shall have the right,  in  accordance  with the  requirements  of
Section 13.04(b),  if no Event of Default will exist after giving effect to such
replacement,  to  replace  such  Bank (the  "Replaced  Bank")  with an  Eligible
Transferee or Transferees,  none of which shall  constitute a Defaulting Bank at
the time of such replacement (collectively,  the "Replacement Bank"), reasonably
acceptable to the Administrative  Agent and the Issuing Bank,  provided that (i)
at the time of any  replacement  pursuant to this Section 1.13, the  Replacement
Bank shall enter into one or more Assignment and Assumption  Agreements pursuant
to Section  13.04(b)  (and with the  assignment  fee  payable  pursuant  to said
Section  13.04(b)  to be paid by the  Replacement  Bank)  pursuant  to which the
Replacement Bank shall acquire all of the Commitments and outstanding  Loans of,
and in each case  participations in Letters of Credit by, the Replaced Bank and,
in connection  therewith,  shall pay to (x) the Replaced Bank in respect thereof
an amount equal to the sum of (A) an amount equal to the  principal  of, and all
accrued  interest on, all outstanding  Loans of the Replaced Bank, (B) an amount
equal to all Unpaid  Drawings that have been funded by (and not  reimbursed  to)
such Replaced Bank,  together with all then unpaid interest with respect thereto
at such time and (C) an amount equal to all  accrued,  but  theretofore  unpaid,
Fees owing to the  Replaced  Bank  pursuant to Section  3.01 and (y) the Issuing
Bank an amount equal to such Replaced Bank's Revolving  Percentage of any Unpaid
Drawing (which at such time remains an Unpaid Drawing) to the extent such amount
was not theretofore funded by such Replaced Bank and (ii) all obligations of the
Borrowers owing to the Replaced Bank (other than those specifically described in
clause (i) above in respect of which the assignment  purchase price has been, or
is  concurrently  being,  paid)  shall  be paid in  full to such  Replaced  Bank
concurrently with such replacement.


     (b)  Upon  the  execution  of  the  respective  Assignment  and  Assumption
Agreements,  the  payment of amounts  referred to in clauses (i) and (ii) of the
proviso  contained in Section  1.13(a)  and, if so requested by the  Replacement
Bank, delivery to the Replacement Bank of the appropriate Note or Notes executed
by the  Borrower,  the  Replacement  Bank shall become a Bank  hereunder and the
Replaced Bank shall cease to constitute a Bank hereunder, except with respect to
indemnification  provisions applicable to the Replaced Bank under this Agreement
(including,  without  limitation,  Sections 1.10,  1.11,  2.05,  4.04, 13.01 and
13.06), which shall survive as to such Replaced Bank.

     1.14 Limitations on Additional Amounts,  etc.  Notwithstanding  anything to
the contrary  contained in Section 1.10,  1.11,  2.05 or 4.04 of this Agreement,
unless a Bank gives  notice to a Borrower  that it is obligated to pay an amount
under the respective Section within 180 days after the date such Bank incurs the
respective  increased costs,  Taxes,  loss,  expense or liability,  reduction in
amounts received or receivable or reduction in return on capital, then such Bank
shall  only be  entitled  to be  compensated  for such  amount by such  Borrower
pursuant to said Section  1.10,  1.11,  2.05 or 4.04, as the case may be, to the
extent the  costs,  Taxes,  loss,  expense or  liability,  reduction  in amounts
received  or  receivable  or  reduction  in return on capital  are  incurred  or
suffered  on or after the date which  occurs 180 days prior to such Bank  giving
notice to such  Borrower  that it is  obligated  to pay the  respective  amounts
pursuant to said Section 1.10,  1.11, 2.05 or 4.04, as the case may be; provided
that if the circumstances  giving rise to such claims have a retroactive effect,
then such  180-day  period  shall be  extended  to  include  the  period of such
retroactive effect.  Notwithstanding anything to the contrary in this Agreement,
this Section 1.14 shall have no  applicability  to any Section of this Agreement
other than said Sections 1.10, 1.11, 2.05 and 4.04.

     1.15 Special Sharing and Conversion  Provisions  Applicable Upon Occurrence
of a  Sharing  Event.  (a) On the date of the  occurrence  of a  Sharing  Event,
automatically (and without the taking of any action) (x)(I) all then outstanding
Canadian  Dollar Loans  maintained in Canadian  Dollars  shall be  automatically
converted  into  Canadian  Dollar  Loans  maintained  in Dollars,  (II) all then
outstanding  EURIBOR  Rate  Loans  maintained  in Euros  shall be  automatically
converted  into  EURIBOR  Rate  Loans  maintained  in  Dollars,  (III)  all then
outstanding  Pounds  Sterling  Loans  maintained  in  Pounds  Sterling  shall be
automatically  converted into Pounds  Sterling  Loans  maintained in Dollars and
(IV) all Unpaid Drawings maintained in Alternate  Currencies shall automatically
convert to Unpaid  Drawings  maintained  in  Dollars  (in each case in an amount
equal  to  the  Dollar  Equivalent  of the  aggregate  principal  amount  of the
respective  Alternate  Currency Loan or Unpaid Drawings,  as the case may be, on
the date such Sharing Event first occurred),  which Alternate Currency Loans (i)
shall  continue  to be owed by the  respective  Borrowers  and (ii) shall at all
times  thereafter be deemed to be Base Rate Loans with an interest rate equal to
that  applicable  to Dollar  Loans and (y) all  principal,  accrued  and  unpaid
interest and other amounts owing with respect to such  Alternate  Currency Loans
shall  thereafter  be payable in Dollars,  calculated on the basis of the Dollar
Equivalent as of the date of occurrence of the Sharing Event of such  principal,
accrued and unpaid interest and other amounts.

     (b) Upon the  occurrence of a Sharing  Event,  each Section 1.15 Bank shall
(and hereby  unconditionally  and  irrevocably  agrees to) purchase and sell (in
each case in Dollars) undivided participating interests in the Loans outstanding
to, and any Unpaid  Drawings  owing by, the  Borrowers  in such amounts in order
that (i)  after  giving  effect  to all such  purchases  and  sales as nearly as
possible after giving effect to clause (ii) of this sentence,  each Section 1.15
Bank shall have a pro rata interest in the Loans and Unpaid  Drawings under each
Tranche  and (ii) no Section  1.15 Bank shall  have any  obligation  to make any
payments to any other Bank in connection therewith. Upon any such occurrence the
Administrative  Agent shall compute the amounts of the participations  purchased
and sold pursuant to this Section 1.15 (which computation shall, absent manifest
error,  be final and  conclusive) and shall notify each Bank and the US Borrower
thereof.   Promptly  following  receipt  thereof,   each  Bank  which  has  sold
participations   in  any  of  its  Loans  or  Unpaid   Drawings   (through   the
Administrative  Agent)  will  deliver to each  Section  1.15 Bank  (through  the
Administrative  Agent)  which  has so  purchased  a  participating  interest,  a
participation  certificate  dated  the  date of the  Sharing  Event  and in such
amount.

     (c) Upon and after the occurrence of a Sharing Event, all amounts from time
to time  accruing  with respect to, and all amounts from time to time payable on
account of, any Loans  (including,  without  limitation,  any interest and other
amounts  which were  accrued but unpaid on the date of such  purchase)  shall be
payable in Dollars as if each such Loan had originally  been made in Dollars and
shall  be  distributed  by the  relevant  Banks  (or  their  Affiliates)  to the
Administrative  Agent for the  account of the Banks which made such Loans or are
participating therein. Notwithstanding anything to the contrary contained above,
the failure of any Bank to purchase its participating interest as required above
in any  extensions  of credit upon the  occurrence  of a Sharing Event shall not
relieve any other Bank of its obligation hereunder to purchase its participating
interests in a timely manner,  but no Bank shall be responsible  for the failure
of any other Bank to purchase the participating interest to be purchased by such
other Bank.

     (d) Whenever,  at any time after the  effectiveness  of the  participations
described in this Section 1.15, the various Banks receive any payment on account
of any Loans subject to such  participation,  such Banks will  distribute to the
Administrative  Agent,  for  the  account  of the  various  Banks  participating
therein,  such  participating  Banks'  interests in such amounts  (appropriately
adjusted, in the case of interest payments, to reflect the period of time during
which such participations were outstanding) in like funds as received, provided,
however, that in the event that such payment received by any Bank is required to
be returned,  the Banks who received previous  distributions in respect of their
participating  interests  therein will return to the respective Bank any portion
thereof  previously so  distributed to them (in like funds) as is required to be
returned by the respective Bank.

     (e) Each Bank's obligation to purchase participating  interests pursuant to
this Section 1.15 shall be absolute and  unconditional and shall not be affected
by any circumstance including, without limitation, (i) any setoff, counterclaim,
recoupment,  defense or other right  which such Bank may have  against any other
Bank,  the  Guarantors,  the  Borrowers  or any  other  Person  for  any  reason
whatsoever, (ii) the occurrence or continuance of an Event of Default, (iii) any
adverse  change in the  condition  (financial  or  otherwise)  of Holdings,  the
Borrowers (or each of them), any of their  respective  Subsidiaries or any other
Person,  (iv) any breach of this Agreement by any Guarantor,  any Borrower,  any
Bank or any other  Person,  or (v) any other  circumstance,  happening  or event
whatsoever, whether or not similar to any of the foregoing.

     (f)  Notwithstanding  anything to the contrary contained  elsewhere in this
Agreement,  upon any purchase of  participations  as required  above,  each Bank
which has purchased  such  participations  shall be entitled to receive from the
Borrowers,  on a joint and several basis,  any increased  costs and  indemnities
(including, without limitation,  pursuant to Sections 1.10, 1.11, 2.05 and 4.04)
directly  from the  respective  Borrower  to the same  extent  as if it were the
direct Bank as opposed to a participant therein,  which increased costs shall be
calculated  without regard to Section 1.13,  Section 13.04(a) or the penultimate
sentence of Section 13.04(b). The Borrowers acknowledge and agree that, upon the
occurrence  of a Sharing Event and after giving  effect to the  requirements  of
this Section 1.15,  increased Taxes may be owing by it pursuant to Section 4.04,
which  Taxes  shall be paid (to the  extent  provided  in  Section  4.04) by the
Borrowers,  without any claim that the increased  Taxes are not payable  because
same resulted  from the  participations  effected as otherwise  required by this
Section 1.15.

     1.16 Interest on Canadian  Dollar  Loans.  For purposes of the Interest Act
(Canada),  whenever  any  interest  in respect of any  Canadian  Dollar  Loan is
calculated  using an annual rate based on a period which is less than the actual
number of days in a year (the "Lesser Period"), such rate determined pursuant to
such  calculation,  when  expressed as an annual rate,  is equivalent to (i) the
applicable  rate based on such Lesser Period  multiplied by the actual number of
days in the calendar year in which the period for which such interest is payable
ends, and (ii) divided by the number of days in such Lesser Period.  The rate of
interest  specified in this Agreement in respect of the Canadian Dollar Loans is
a nominal  rate and all  interest  payment  computations  are to be made without
allowance or deduction for deemed reinvestment of interest.

<PAGE>




SECTION 2.  Letters of Credit.


     2.01  Letters of Credit.  (a) Subject to and upon the terms and  conditions
set forth  herein,  the US Borrower may request the Issuing Bank at any time and
from time to time on or after the  Restatement  Effective  Date and prior to the
fifth  Business  Day (or  30th  day in the  case of  Trade  Letters  of  Credit)
immediately preceding the Revolving Loan Maturity Date, to issue, and subject to
the terms and conditions set forth herein, the Issuing Bank agrees to issue, (x)
for the  account of the US  Borrower  and for the  benefit of any holder (or any
trustee,  administrative  agent or  other  similar  representative  for any such
holders) of L/C Supportable  Obligations of Holdings or any of its Subsidiaries,
an irrevocable sight standby letter of credit, in a form customarily used by the
Issuing  Bank or in such other form as has been  approved  by the  Issuing  Bank
(each such standby letter of credit, a "Standby Letter of Credit") in support of
such L/C Supportable  Obligations and (y) for the account of the US Borrower and
for  the  benefit  of  sellers  of  goods  to  the  US  Borrower  or  any of its
Subsidiaries,  an  irrevocable  sight  documentary  letter  of  credit in a form
customarily  used by the Issuing Bank or in such other form as has been approved
by the Issuing Bank (each such documentary  letter of credit, a "Trade Letter of
Credit",  and each such Trade Letter of Credit and Standby  Letter of Credit,  a
"Letter of Credit") in support of commercial  transactions of the US Borrower or
any such  Subsidiary.  All Letters of Credit  shall be  denominated  in Dollars,
Pounds Sterling, Canadian Dollars, Euros or any other currency acceptable to the
Issuing Bank.


     (b) Notwithstanding the foregoing,  (i) no Letter of Credit shall be issued
if the  Stated  Amount of such  Letter of  Credit,  when  added to all Letter of
Credit  Outstandings  at such  time,  would  exceed  $10,000,000  (or the Dollar
Equivalent thereof),  (ii) no Letter of Credit shall be issued the Stated Amount
of which, when added to the sum of (I) all Letter of Credit Outstandings at such
time and (II) the aggregate outstanding principal amount of all Revolving Loans,
at such time,  would exceed the Total  Revolving Loan Commitment then in effect,
(iii) each Standby  Letter of Credit  shall by its terms  terminate on or before
the  earlier of (x) the date which  occurs 12 months  after the date of issuance
thereof  (although at the request of the US Borrower any such Standby  Letter of
Credit shall be extendible  for  successive  periods of up to 12 months (but not
beyond the fifth Business Day immediately  preceding the Revolving Loan Maturity
Date) on terms  acceptable to the Issuing  Bank) and (y) the fifth  Business Day
immediately  preceding  the  Revolving  Loan  Maturity  Date and (iv) each Trade
Letter of Credit  shall by its terms  terminate  on or before the earlier of (x)
the date which occurs 12 months  after the date of issuance  thereof and (y) the
date which occurs 30 days prior to the Revolving Loan Maturity Date.


     (c) Notwithstanding the foregoing,  the Issuing Bank shall not be under any
obligation  to issue and, in the case of  sub-clause  (c)(ii)  below,  shall not
issue,  any Letter of Credit if any of the  applicable  conditions  contained in
Section  5 shall  not be met at the time of such  issuance  or if at the time of
such issuance:


          (i) any order,  judgment or decree of any  governmental  authority  or
     arbitrator  shall  purport by its terms to enjoin or  restrain  the Issuing
     Bank  from  issuing  such  Letter  of  Credit  or  any  requirement  of law
     applicable to the Issuing Bank or any request or directive  (whether or not
     having the force of law) from any governmental  authority with jurisdiction
     over the Issuing  Bank shall  prohibit,  or request  that the Issuing  Bank
     refrain from, the issuance of letters of credit generally or such Letter of
     Credit in  particular or shall impose upon the Issuing Bank with respect to
     such  Letter of Credit any  restriction  or reserve or capital  requirement
     (for which the Issuing  Bank is not  otherwise  compensated  or entitled to
     indemnification  hereunder)  not in  effect  on the date  hereof,  or shall
     result in any  unreimbursable  loss,  cost or expense to the  Issuing  Bank
     which would not have resulted from any law,  request or directive in effect
     as of the date  hereof  and  which the  Issuing  Bank in good  faith  deems
     material to it;


          (ii) the Issuing  Bank shall have  received  notice from the  Required
     Banks of the type described in Section 2.02(b); or


          (iii) a Bank  Default  exists,  unless the US Borrower and the Issuing
     Bank shall have entered into  arrangements  satisfactory to the US Borrower
     and the Issuing Bank to eliminate  the Issuing  Bank's risk with respect to
     the  respective  Defaulting  Bank's or Banks'  Revolving  Percentage of the
     Letter of Credit Outstandings.


     (d) Schedule XI attached  hereto  contains a description  of all letters of
credit  issued or deemed  issued  and  outstanding  under  the  Existing  Credit
Agreement  on the  Restatement  Effective  Date.  Each such  letter  of  credit,
including any extension  thereof (each,  an "Existing  Letters of Credit") shall
constitute a "Letter of Credit" for all purposes of this Agreement,  issued, for
purposes of Section 2.03(a), on the Restatement Effective Date.


     2.02 Letter of Credit  Requests;  Notices of Issuance.  (a) Whenever the US
Borrower  desires  that a Letter of Credit be issued  for its  account  it shall
execute and deliver to the Issuing Bank  (including by way of facsimile and with
copies  having been sent to the  Administrative  Agent) at least three  Business
Days  prior to the  issuance  thereof  (or  such  shorter  period  of time as is
acceptable  to the  Issuing  Bank),  a Letter of Credit  Request  in the form of
Exhibit C (each a "Letter of Credit Request").


     (b) The  making of each  Letter of Credit  Request  shall be deemed to be a
representation  and  warranty  by the US  Borrower  that  all of the  applicable
conditions set forth in Section 5 shall be met at the time of such issuance. The
Issuing Bank shall not issue any Letter of Credit after it has received  written
notice from the US Borrower or the Required  Banks  stating that a Default or an
Event of Default  exists until such time as the Issuing Bank shall have received
written  notice of (i)  rescission  of such  notice  from the  party or  parties
originally  delivering  the same or (ii) a waiver  of such  Default  or Event of
Default from the  Required  Banks (or all of the Banks,  to the extent  required
under Section 13.12).

     (c) The Issuing Bank shall,  promptly after the issuance of or amendment to
any Standby Letter of Credit, give the Administrative  Agent and the US Borrower
written  notice  of  such  issuance  or  amendment  and  such  notice  shall  be
accompanied  by a copy of such  issuance  or  amendment.  Upon  receipt  of such
notice, the Administrative  Agent shall promptly give each Participant a written
notice of such  issuance or  amendment  and if requested  by a  Participant  the
Administrative  Agent will provide such  Participant  with copies of issuance or
amendment.  With regard to Trade Letters of Credit, on the first Business Day of
each  week the  Issuing  Bank  will  provide  to the  Administrative  Agent,  by
facsimile,  a written report  detailing the daily  aggregate  outstanding  Trade
Letters of Credit issued by the Issuing Bank for the previous week. Upon receipt
of such notice,  the  Administrative  Agent shall provide to each  Participant a
copy of such report.


     2.03 Letter of Credit Participations.  (a) Immediately upon the issuance by
the Issuing  Bank of any Letter of Credit,  the Issuing  Bank shall be deemed to
have sold to each RC Bank (each such RC Bank, in its capacity under this Section
2.03(a), a "Participant"), and each such Participant shall be deemed irrevocably
and  unconditionally  to have  purchased  and  received  from the Issuing  Bank,
without recourse or warranty,  an undivided  interest and participation  (each a
"Participation"),  to the extent of such Participant's  Revolving  Percentage in
such Letter of Credit,  each  substitute  letter of credit,  each  drawing  made
thereunder  and the  obligations  of the US Borrower  under this  Agreement with
respect  thereto,  and any  security  therefor  or guaranty  pertaining  thereto
(although  Letter of Credit  Fees will be paid  directly  to the  Administrative
Agent for the ratable account of the Participants as provided in Section 3.01(b)
and the  Participants  shall have no right to receive  any portion of any Facing
Fees).  Upon any change in the Revolving Loan  Commitments of the Banks pursuant
to  Section  1.13 or 13.04,  it is  hereby  agreed  that,  with  respect  to all
outstanding  Letters of Credit,  and  Unpaid  Drawings  in respect of Letters of
Credit, there shall be an automatic adjustment to the Participations pursuant to
this Section 2.03 to reflect the new Revolving  Percentages  of the assignor and
assignee Bank.


     (b) In determining  whether to pay under any Letter of Credit,  the Issuing
Bank shall have no obligation relative to the Participants other than to confirm
that any  documents  required to be  delivered  under such Letter of Credit have
been delivered and that they appear to  substantially  comply on their face with
the  requirements  of such Letter of Credit.  Any action  taken or omitted to be
taken by the Issuing Bank under or in connection  with any Letter of Credit,  if
taken or omitted in the absence of gross negligence or willful misconduct, shall
not create for the Issuing Bank any resulting liability.

     (c) In the event that the Issuing  Bank makes any payment  under any Letter
of Credit and the US Borrower shall not have  reimbursed  such amount in full to
the Issuing Bank pursuant to Section  2.04(a),  the Issuing Bank shall  promptly
notify  the  Administrative   Agent  and  after  receipt  of  such  notice,  the
Administrative  Agent will notify each  respective  Participant of such failure,
and  each  such  Participant  shall  promptly  and  unconditionally  pay  to the
Administrative  Agent,  for the account of the Issuing Bank,  the amount of such
Participant's  Revolving Percentage of such unreimbursed payment in Dollars (or,
in the case of an unreimbursed payment made in a currency other than Dollars, of
the Dollar Equivalent of such payment,  as determined by the Issuing Bank on the
date on which such unreimbursed  payment was made) and in same day funds. If the
Administrative  Agent so  notifies,  prior to 11:00 A.M.  (New York time) on any
Business  Day,  any  Participant  required  to fund a payment  under a Letter of
Credit,  such Participant shall make available to the  Administrative  Agent for
the account of the Issuing Bank such Participant's  Revolving  Percentage of the
amount of such  payment on such  Business Day in Dollars (or, in the case of any
unreimbursed  payment  made in a  currency  other  than  Dollars,  of the Dollar
Equivalent thereof) and in same day funds. If and to the extent such Participant
shall not have so made its  Revolving  Percentage  of the amount of such payment
available to the Administrative  Agent for the account of the Issuing Bank, such
Participant  agrees to pay to the  Administrative  Agent for the  account of the
Issuing Bank,  forthwith on demand such amount,  together with interest thereon,
for  each  day  from  such  date  until  the  date  such  amount  is paid to the
Administrative  Agent  for the  account  of the  Issuing  Bank at the  overnight
Federal  Funds Rate.  The failure of any  Participant  to make  available to the
Administrative  Agent  for  the  account  of  the  Issuing  Bank  its  Revolving
Percentage of any payment under any Letter of Credit shall not relieve any other
Participant of its obligation  hereunder to make available to the Administrative
Agent for the  account  of the  Issuing  Bank its  Revolving  Percentage  of any
payment under any Letter of Credit on the date required, as specified above, but
no Participant  shall be responsible for the failure of any other Participant to
make available to the Administrative  Agent, such other Participant's  Revolving
Percentage of any such payment.


     (d)  Whenever  the  Issuing  Bank  receives  a payment  of a  reimbursement
obligation as to which the Administrative  Agent has received for the account of
the  Issuing  Bank any  payments  from the  Participants  pursuant to clause (c)
above,  the  Issuing  Bank  shall  pay  to  the  Administrative  Agent  and  the
Administrative  Agent shall promptly pay to each Participant  which has paid its
Revolving  Percentage  thereof,  in  Dollars  (or,  in the  case of any  payment
received in a currency other than Dollars, the Dollar Equivalent thereof) and in
same day funds, an amount equal to such  Participant's  Revolving  Percentage of
the principal amount of such  reimbursement and of interest  reimbursed  thereon
accruing   from  and  after  the  date  of  the   purchase  of  the   respective
Participations.


     (e)  The   obligations  of  the   Participants  to  make  payments  to  the
Administrative Agent for the account of the Issuing Bank with respect to Letters
of Credit shall be irrevocable and not subject to  counterclaim,  set-off or any
other defense or any other  qualification  or exception  whatsoever and shall be
made in accordance  with the terms and  conditions of this  Agreement  under all
circumstances, including, without limitation, any of the following circumstances
(other than in the case of gross negligence or willful misconduct of the Issuing
Bank):


          (i) any lack of validity or enforceability of this Agreement or any of
     the other Credit Documents;


          (ii) the existence of any claim, set-off, defense or other right which
     the US  Borrower  may have at any time  against  a  beneficiary  named in a
     Letter of Credit, any transferee of any Letter of Credit (or any Person for
     whom any such  transferee may be acting),  the  Administrative  Agent,  the
     Issuing Bank,  any Bank, or any other  Person,  whether in connection  with
     this Agreement, any Letter of Credit, the transactions  contemplated herein
     or any unrelated transactions (including any underlying transaction between
     the US Borrower and the beneficiary named in any such Letter of Credit);


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


          (iv) the surrender or  impairment of any security for the  performance
     or observance of any of the terms of any of the Credit Documents; or


          (v) the occurrence of any Default or Event of Default.


     2.04  Agreement  to Repay  Letter of Credit  Drawings.  (a) The US Borrower
hereby  agrees  to  reimburse  the  Issuing  Bank,  by  making  payment  to  the
Administrative Agent for the account of the Issuing Bank, in Dollars (or, in the
case of any payment or  disbursement  made by the Issuing  Bank in any  currency
other than Dollars, of the Dollar Equivalent of such Payment or disbursement, as
determined by the Issuing Bank on the date of such payment or disbursement)  and
in  immediately  available  funds  at  the  appropriate  Payment  Office  of the
Administrative  Agent, for any payment or disbursement  made by the Issuing Bank
under any Letter of Credit issued for the account of the US Borrower  (each such
amount or the Dollar Equivalent thereof as determined by the Issuing Bank on the
date of payment or  disbursement,  so paid or  disbursed  until  reimbursed,  an
"Unpaid  Drawing")  within one  Business  Day after the date of such  payment or
disbursement,  with  interest on the amount so paid or  disbursed by the Issuing
Bank,  to the extent not  reimbursed  prior to 2:00 P.M.  (New York time) on the
date of such payment, from and including the date paid to but excluding the date
reimbursement is made, at a rate per annum which shall be the Applicable  Margin
for Revolving  Loans which are  maintained as Base Rate Loans plus the Base Rate
in effect from time to time,  plus 2% if not  reimbursed  by 2:00 P.M. (New York
time) on the second Business Day following  receipt by the US Borrower of notice
of any such payment or disbursement), such interest to be payable on demand. The
Issuing Bank shall notify the US Borrower  and the  Administrative  Agent of any
payment under a Letter of Credit issued by the Issuing Bank as soon as practical
after such  payment,  provided that the failure to give any such notice shall in
no way affect, impair or diminish the US Borrower's obligations hereunder.


     (b) The US Borrower's  obligation  under this Section 2.04 to reimburse the
Issuing Bank with respect to Unpaid Drawings (including,  in each case, interest
thereon) shall be absolute and unconditional under any and all circumstances and
irrespective  of any  setoff,  counterclaim  or defense to payment  which the US
Borrower may have or have had against any  Participant,  the Issuing  Bank,  the
Administrative  Agent,  any  Bank,  or  any  other  Person,  including,  without
limitation,  any defense based upon the failure of any payment under a Letter of
Credit (each a "Drawing") to conform to the terms of the Letter of Credit or any
non-application  or  misapplication  by the  beneficiary of the proceeds of such
Drawing;  provided,  however,  that the US Borrower  shall not be  obligated  to
reimburse  the Issuing  Bank for any  wrongful  payment made by the Issuing Bank
under a Letter of Credit as a result of acts or omissions  constituting  willful
misconduct or gross negligence on the part of the Issuing Bank.


     (c) As  between  the US  Borrower  and the  Issuing  Bank,  absent  willful
misconduct or gross  negligence on the part of the Issuing Bank, the US Borrower
assumes  all risks of the acts and  omissions  of, or misuse of the  Letters  of
Credit  by, the  respective  beneficiaries  or  transferees  of such  Letters of
Credit. Further, and not in limitation of the foregoing, absent gross negligence
or willful misconduct on its part, the Issuing Bank shall not be responsible for
the following:


          (i) the form, validity,  sufficiency,  accuracy,  genuineness or legal
     effect  of any  documents  submitted  by any party in  connection  with the
     application  for and  issuance  of or any  drawing  under  such  Letters of
     Credit,  even if it  should  in fact  prove  to be in any and all  respects
     invalid, insufficient, inaccurate, fraudulent or forged;


          (ii) the validity or  sufficiency of any  instrument  transferring  or
     assigning or  purporting to transfer or assign any such Letter of Credit or
     the rights or benefits thereunder or proceeds thereof, in whole or in part,
     which may prove to be invalid or ineffective for any reason;


          (iii) errors,  omissions,  interruptions or delays in the transmission
     or delivery of any messages by mail, cable, telegraph, telecopier, telex or
     otherwise, whether or not they be in cipher;


          (iv) errors in interpretation of technical terms;


          (v) any loss or delay in the transmission or otherwise of any document
     required in order to make a drawing  under any such Letter of Credit or the
     proceeds thereof;


          (vi) the  misapplication  by the  beneficiary  of any such  Letter  of
     Credit or the proceeds of any drawing of any such Letter of Credit; and


          (vii) any  consequences  arising from causes beyond the control of the
     Issuing Bank, including, without limitation, any acts of governments.


     2.05 Increased  Costs.  If the Issuing Bank or any  Participant  determines
that after the Restatement  Effective Date the adoption or  effectiveness of any
applicable law, rule or regulation,  or any change therein, or any change in the
interpretation or administration thereof by any governmental authority,  central
bank or comparable  agency  charged with the  interpretation  or  administration
thereof,  or compliance by the Issuing Bank or any Participant  with any request
or  directive  (whether  or not having the force of law) by any such  authority,
central  bank or  comparable  agency  shall  either (i)  impose,  modify or make
applicable any reserve, deposit, capital adequacy or similar requirement against
Letters of Credit issued by the Issuing Bank or such Participant's participation
therein,  or (ii)  impose  on the  Issuing  Bank or any  Participant  any  other
conditions affecting this Agreement, any Letter of Credit, or such Participant's
participation therein, and the result of any of the foregoing is to increase the
cost  to the  Issuing  Bank or  such  Participant  of  issuing,  maintaining  or
participating  in any  Letter  of  Credit,  or to reduce  the  amount of any sum
received or receivable  by the Issuing Bank or any  Participant  hereunder  with
respect  to  Letters  of Credit  (except  for  changes in the rate of tax on, or
determined  by  reference  to, the net income or profits of the Issuing  Bank or
such  Participant  pursuant  to the laws of the United  States of  America,  the
jurisdiction  in which it is  organized  or in which  its  principal  office  or
applicable  lending office is located or any subdivision  thereof or therein and
except  for any taxes  for  which a payment  is  required  pursuant  to  Section
4.04(a)) or reduce the rate of return on its capital  with respect to Letters of
Credit  then,  upon  demand  to the US  Borrower  by the  Issuing  Bank  or such
Participant  (a copy of which  notice  shall be sent by the Issuing Bank or such
Participant  to the  Administrative  Agent),  the US  Borrower  shall pay to the
Issuing Bank or such Participant, as the case may be, without duplication of any
amounts due under Section 1.10(c) hereof,  such additional  amount or amounts as
will  compensate the Issuing Bank or such  Participant,  as the case may be, for
such  increased  cost or reduction in the amount  receivable or reduction on the
rate of return on its capital.  In  determining  such  additional  amounts,  the
Issuing Bank and each Participant will act reasonably and in good faith and will
use averaging and attribution  methods which are  reasonable,  provided that the
Issuing  Bank's  or such  Participant's,  as the case may be,  determination  of
compensation  owing under this Section 2.05 shall,  absent  manifest  error,  be
final and conclusive and binding on all the parties hereto.  The Issuing Bank or
any Participant,  upon determining that any additional amounts are payable to it
pursuant to this Section 2.05, will give prompt written notice thereof,  setting
forth in  reasonable  detail  the  basis  of the  calculation  of such  amounts,
although  the failure to give any such notice  shall not release or diminish the
US Borrower's  obligations  to pay additional  amounts  pursuant to this Section
2.05 upon  receipt of such  certificate.  The  certificate  submitted  to the US
Borrower by the Issuing Bank or such Participant,  as the case may be (a copy of
which  certificate  shall be sent by the Issuing Bank or such Participant to the
Administrative  Agent),  shall set forth in reasonable  detail the basis for the
determination of such additional  amount or amounts  necessary to compensate the
Issuing Bank or such Participant as provided above in this Section 2.05.


     2.06  Minimum  Stated  Amount.  The Stated  Amount of each Letter of Credit
shall be not less  than  $25,000  (or an amount  in the  respective  Alternative
Currency or other foreign currency having a Dollar  Equivalent of $25,000 in the
case of a Letter of Credit  issued in a  currency  other than  Dollars)  or such
lesser amount as is acceptable to the Issuing Bank.

SECTION 3.  Commitment Fee; Fees; Reductions of Commitment.


     3.01 Fees. (a) The US Borrower  agrees to pay to the  Administrative  Agent
for  distribution to each Bank a commitment fee (the  "Commitment  Fee") for the
period from and including the  Restatement  Effective  Date to but not including
the date the Total Commitment has been  terminated,  computed at a rate equal to
the  Applicable  Commitment  Fee  Percentage  on the  average  daily  Unutilized
Revolving Loan Commitment of such Bank. Accrued Commitment Fees shall be due and
payable  quarterly in arrears on each  Quarterly  Payment Date and the date upon
which the Total Commitment is terminated.


     (b)  The  US  Borrower  agrees  to  pay to  the  Administrative  Agent  for
distribution  to each RC Bank a fee in respect of each  Letter of Credit  issued
hereunder for the account of the US Borrower  (the "Letter of Credit Fee"),  for
the period from and including the date of issuance of such Letter of Credit (or,
if  later,  the  Restatement  Effective  Date)  to and  including  the  date  of
termination of such Letter of Credit (it being understood, however, that if such
Letter of  Credit is drawn on in full or  canceled  by the  beneficiary  thereof
prior to the time at which such Letter of Credit expires in accordance  with its
terms,  the  calculation of such fee shall not include the date of drawing being
honored or of  cancellation),  computed  at a rate per annum equal to (x) in the
case of Standby  Letters of Credit,  the Applicable  Margin for Revolving  Loans
that are maintained as Eurodollar  Loans and (y) in the case of Trade Letters of
Credit,  50% of the Applicable Margin for Revolving Loans that are maintained as
Eurodollar  Loans,  in each case of the daily  Stated  Amount of such  Letter of
Credit.  Letter of Credit Fees shall be distributed by the Administrative  Agent
to the RC  Banks on the  basis of the  respective  Revolving  Percentages  as in
effect from time to time. Accrued Letter of Credit Fees shall be due and payable
quarterly in arrears on each Quarterly  Payment Date and on the first date after
the  termination of the Total  Revolving Loan  Commitment on which no Letters of
Credit remain outstanding.

     (c) The US Borrower agrees to pay to the Issuing Bank, for its own account,
a facing fee in respect of each  Letter of Credit  issued by it  hereunder  (the
"Facing  Fee") for the period  from and  including  the date of issuance of such
Letter of Credit (or, if later, the Restatement Effective Date) to and including
the termination of such Letter of Credit (it being understood,  however, that if
such Letter of Credit is drawn on in full or canceled by the beneficiary thereof
prior to the time at which such Letter of Credit expires in accordance  with its
terms,  the  calculation  of such fee shall not include the date of such drawing
being honored or cancellation),  computed at a rate equal to 1/8 of 1% per annum
of the daily  Stated  Amount of such Letter of Credit (or such lesser  amount as
the Issuing Bank may agree);  provided  that in no event shall the annual Facing
Fee with  respect to each Letter of Credit  issued by BTCo or any of its Lending
Affiliates  be less than $500,  it being agreed that, on the date of issuance of
any  Letter  of  Credit  by BTCo or any of its  Lending  Affiliates  and on each
anniversary  thereof prior to the termination of such Letter of Credit,  if $500
will  exceed the amount of Facing  Fees that will  accrue  with  respect to such
Letter of Credit for the immediately  succeeding  12-month period, the full $500
shall be payable on the date of  issuance  of such  Letter of Credit and on each
such  anniversary  thereof  prior to the  termination  of such Letter of Credit.
Except as provided in the immediately  preceding  sentence,  accrued Facing Fees
shall be due and payable quarterly in arrears on each Quarterly Payment Date and
upon the first  day on or after the  termination  of the  Total  Revolving  Loan
Commitment upon which no Letters of Credit remain outstanding.


     (d) The US Borrower  agrees to pay to the Issuing  Bank,  upon each payment
under,  issuance of, or amendment  to, any Letter of Credit issued by it for the
account of the  Borrower,  such amount as shall at the time of such event be the
administrative charge which the Issuing Bank is generally imposing in connection
with such occurrence with respect to letters of credit.


     (e) The Borrowers  agree to pay to the  Administrative  Agent,  for its own
account,  such other fees as have been agreed to in writing by the Borrowers and
the Administrative Agent.


     3.02 Voluntary  Termination of Total Unutilized  Revolving Loan Commitment.
Upon at least three Business Days' prior notice to the  Administrative  Agent at
its Notice Office (which notice the Administrative Agent shall promptly transmit
to each of the Banks), the US Borrower shall have the right, at any time or from
time to time,  without  premium  or  penalty,  to  permanently  reduce the Total
Unutilized Revolving Loan Commitment, in whole or in part, in integral multiples
of  $1,000,000  in the  case  of  partial  reductions  to the  Total  Unutilized
Revolving  Loan  Commitment,  provided  that  each such  reduction  to the Total
Revolving Loan Commitment shall apply  proportionately to permanently reduce the
Revolving Loan Commitment of each RC Bank.


     3.03 Mandatory Reduction of Commitments.  (a) The Total Commitment (and the
Commitments  of each Bank)  shall  terminate  in its  entirety  on July 31, 2001
unless the Restatement Effective Date has occurred on or before such date.


     (b) In addition to any other mandatory  commitment  reductions  pursuant to
this Section  3.03,  the Total A-1 Term Loan  Commitment  (and the A-1 Term Loan
Commitment of each Bank),  the Total A-2 Term Loan  Commitment (and the A-2 Term
Loan  Commitment of each Bank),  the Total A-4 Term Loan Commitment (and the A-4
Term Loan  Commitment of each Bank) and the Total A-5 Term Loan  Commitment (and
the A-5  Term  Loan  Commitment  of  each  Bank),  shall  be  terminated  on the
Restatement  Effective  Date, in each case after giving effect to the incurrence
of the A-1, A-2, A-4 and A-5 Term Loans on such date.


     (c) In addition to any other mandatory  commitment  reductions  pursuant to
this Section 3.03, the Total  Revolving Loan  Commitment (and the Revolving Loan
Commitment  of each RC Bank) shall  terminate in its  entirety on the  Revolving
Loan Maturity Date.


     (d) In addition to any other mandatory  commitment  reductions  pursuant to
this Section 3.03, on each date after the Restatement  Effective Date upon which
a mandatory  repayment of Term Loans pursuant to any of Sections 4.02(c) through
(g), inclusive, is required and exceeds in amount the aggregate principal amount
of Term Loans then  outstanding  (or would be  required  if such Term Loans were
then  outstanding),  the Total  Revolving Loan  Commitment  shall be permanently
reduced  by the  amount,  if any,  by which the  amount  required  to be applied
pursuant to said Sections  (determined  as if an unlimited  amount of Term Loans
were actually  outstanding)  exceeds the aggregate principal amount of such Term
Loans then outstanding.


     (e) In addition to any other mandatory  commitment  reductions  pursuant to
this Section 3.03, the Total Commitment (and the Commitments of each Bank) shall
terminate on the dates set forth in Section 4.02(h).


     (f) Each reduction to the Total Revolving Loan Commitment  pursuant to this
Section  3.03 shall be applied  proportionately  to reduce  the  Revolving  Loan
Commitment of each Bank with such a Commitment.


     SECTION 4. Prepayments;  Payments;  Taxes. 4.01 Voluntary Prepayments.  The
Borrowers shall have the right to prepay Loans,  without premium or penalty,  in
whole or in part from time to time on the following terms and conditions:

          (i) the relevant Borrower shall give the  Administrative  Agent at its
     Notice  Office (x)  written  notice  prior to 1:00 P.M.  (New York time) at
     least three Business Days prior to the date of such  prepayment in the case
     of Euro Rate Loans,  (y) written  notice prior to 1:00 P.M. (New York time)
     on the date of such  prepayment  in the case of Base Rate  Loans  which are
     Revolving  Loans and (z) written  notice prior to 1:00 P.M. (New York time)
     at least one Business Day prior to the date of such  prepayment in the case
     of Base Rate Loans which are Term Loans, of its intent to prepay the Loans,
     whether A-1 Term Loans, A-2 Term Loans, A-3 Term Loans, A-4 Term Loans, A-5
     Term Loans or  Revolving  Loans  shall be prepaid  (subject  to clause (iv)
     below in the case of any  prepayment  of Term  Loans),  the  amount of such
     prepayment  and the Types of Loans to be prepaid,  and, in the case of Euro
     Rate Loans,  the specific  Borrowing or Borrowings  pursuant to which made,
     which notice the  Administrative  Agent shall promptly  transmit to each of
     the Banks;

          (ii) each prepayment  shall be in an aggregate  principal amount of at
     least the applicable  Minimum  Borrowing Amount for the Tranche and Type of
     Loans to be prepaid; provided that no partial prepayment of Euro Rate Loans
     made  pursuant to any  Borrowing  shall reduce the  outstanding  Loans made
     pursuant to such  Borrowing to an amount less than the  applicable  Minimum
     Borrowing Amount;

          (iii) each  prepayment  in respect  of any Loans  made  pursuant  to a
     Borrowing  shall be applied pro rata among such Loans;  provided,  however,
     that at the  Borrower's  election  in  connection  with any  prepayment  of
     Revolving Loans pursuant to this Section 4.01, such prepayment shall not be
     applied to any  Revolving  Loans of a Defaulting  Bank at any time when the
     aggregate amount of Revolving Loans of any Non-Defaulting Bank exceeds such
     Non-Defaulting  Bank's  Revolving  Percentage of all  Revolving  Loans then
     outstanding;

          (iv) each prepayment of Term Loans pursuant to Section 4.01 must apply
     pro rata to each  Tranche of Term  Loans in  accordance  with the  relevant
     Tranche  Percentages;  provided  that  prepayments  made  pursuant  to this
     Section  4.01 shall not be  applied  to repay the A-3 Term Loans  until the
     earlier of (x) the date which is five years after the Original  Restatement
     Effective  Date and (y) the date on which all other  Term  Loans  have been
     repaid in full;

          (v) each  prepayment  of A Term Loans  pursuant to this  Section  4.01
     shall be applied to reduce the then remaining  Scheduled  Repayments of the
     respective Tranche being repaid in direct order of maturity.

     4.02 Mandatory Repayments.  (a) If, on any day the sum of (I) the aggregate
outstanding principal amount of Revolving Loans and (II) the aggregate amount of
Letter of Credit  Outstandings  exceeds the Total  Revolving Loan  Commitment as
then in effect,  the US Borrower shall on such day repay  Revolving  Loans in an
amount equal to such excess.  If,  after giving  effect to the  repayment of all
outstanding   Revolving   Loans,  the  aggregate  amount  of  Letter  of  Credit
Outstandings  exceeds the Total  Revolving Loan Commitment as then in effect or,
if the Total  Revolving  Loan  Commitment has been  terminated,  the US Borrower
shall  pay to the  Administrative  Agent at the  appropriate  Payment  Office an
amount  of cash or Cash  Equivalents  equal to such  excess,  such  cash or Cash
Equivalents  to be  held as  security  for all  obligations  of the US  Borrower
hereunder in a cash collateral  account to be established  by, and  satisfactory
to,  the  Administrative  Agent  and the  Borrower  until  the  Letter of Credit
Outstandings do not exceed the Total Revolving Loan Commitment or all Letters of
Credit have been terminated or expire.


     (b) (A) In  addition  to any other  mandatory  repayments  pursuant to this
Section 4.02,  the US Borrower shall be required to repay on each date set forth
below a portion of the  principal  amount of A-1 Term Loans,  to the extent then
outstanding,  equal to the initial  aggregate  principal  amount of the A-1 Term
Loans  outstanding  multiplied by the  percentage  set forth below opposite such
date (each such  repayment,  as the same may be reduced as  provided in Sections
4.01 and 4.02, an "A-1 Term Loan Scheduled Repayment"):

    A-1 Term Loan Scheduled Repayment Date                            Percentage
    --------------------------------------                            ----------
    September 30, 2001                                                     2.08%
    December 31, 2001                                                      2.08%

    March 31, 2002                                                         2.08%
    June 30, 2002                                                          2.08%
    September 30, 2002                                                     2.08%
    December 31, 2002                                                      3.12%

    March 31, 2003                                                         3.12%
    June 30, 2003                                                          3.12%
    September 30, 2003                                                     3.12%
    December 31, 2003                                                      4.16%

    March 31, 2004                                                         4.16%
    June 30, 2004                                                          4.16%
    September 30, 2004                                                     4.16%
    December 31, 2004                                                      4.70%
    Term Loan Maturity Date                                               55.78%

     (B) In addition to any other mandatory  repayments pursuant to this Section
4.02,  the US Borrower shall be required to repay on each date set forth below a
portion  of the  principal  amount  of  A-2  Term  Loans,  to  the  extent  then
outstanding,  equal to the initial  aggregate  principal  amount of the A-2 Term
Loans multiplied by the percentage set forth below opposite such date (each such
repayment,  as the same may be reduced as provided in Sections 4.01 and 4.02, an
"A-2 Term Loan Scheduled Repayment"):

       A-2 Term Loan Scheduled Repayment Date                    Percentage
       --------------------------------------                    ----------
       September 30, 2001                                            2.08%
       December 31, 2001                                             2.08%

       March 31, 2002                                                2.08%
       June 30, 2002                                                 2.08%
       September 30, 2002                                            2.08%
       December 31, 2002                                             3.12%

       March 31, 2003                                                3.12%
       June 30, 2003                                                 3.12%
       September 30, 2003                                            3.12%
       December 31, 2003                                             4.16%

       March 31, 2004                                                4.16%
       June 30, 2004                                                 4.16%
       September 30, 2004                                            4.16%
       December 31, 2004                                             4.70%
       Term Loan Maturity Date                                      55.78%

     (C) In addition to any other mandatory  repayments pursuant to this Section
4.02,  the Canadian  Borrower  shall be required to repay on each date set forth
below a portion of the  principal  amount of A-3 Term Loans,  to the extent then
outstanding,  equal to the initial  aggregate  principal  amount of the A-3 Term
Loans  outstanding  multiplied by the  percentage  set forth below opposite such
date (each such  repayment,  as the same may be reduced as  provided in Sections
4.01 and 4.02, a "A-3 Term Loan Scheduled Repayment"):

   A-3 Term Loan Scheduled Repayment Date                           Percentage
   --------------------------------------                           ----------
   Term Loan Maturity Date                                             100%

     (D) In addition to any other mandatory  repayments pursuant to this Section
4.02,  the UK Borrower shall be required to repay on each date set forth below a
portion  of the  principal  amount  of  A-4  Term  Loans,  to  the  extent  then
outstanding,  equal to the initial  aggregate  principal  amount of the A-4 Term
Loans multiplied by the percentage set forth below opposite such date (each such
repayment,  as the same may be reduced as provided in Sections  4.01 and 4.02, a
"A-4 Term Loan Scheduled Repayment"):

    A-4 Term Loan Scheduled Repayment Date                            Percentage
    --------------------------------------                            ----------
    September 30, 2001                                                     2.08%
    December 31, 2001                                                      2.08%

    March 31, 2002                                                         2.08%
    June 30, 2002                                                          2.08%
    September 30, 2002                                                     2.08%
    December 31, 2002                                                      3.12%

    March 31, 2003                                                         3.12%
    June 30, 2003                                                          3.12%
    September 30, 2003                                                     3.12%
    December 31, 2003                                                      4.16%

    March 31, 2004                                                         4.16%
    June 30, 2004                                                          4.16%
    September 30, 2004                                                     4.16%
    December 31, 2004                                                      4.70%
    Term Loan Maturity Date                                               55.78%

     (E) In addition to any other mandatory  repayments pursuant to this Section
4.02,  the US Borrower shall be required to repay on each date set forth below a
portion  of the  principal  amount  of  A-5  Term  Loans,  to  the  extent  then
outstanding,  equal to the initial  aggregate  principal  amount of the A-5 Term
Loans  outstanding  multiplied by the  percentage  set forth below opposite such
date (each such  repayment,  as the same may be reduced as  provided in Sections
4.01 and 4.02, a "A-5 Term Loan Scheduled Repayment"):

  A-5 Term Loan Scheduled Repayment Date                              Percentage
  --------------------------------------                              ----------
  September 30, 2001                                                     2.08%
  December 31, 2001                                                      2.08%

  March 31, 2002                                                         2.08%
  June 30, 2002                                                          2.08%
  September 30, 2002                                                     2.08%
  December 31, 2002                                                      3.12%

  March 31, 2003                                                         3.12%
  June 30, 2003                                                          3.12%
  September 30, 2003                                                     3.12%
  December 31, 2003                                                      4.16%

  March 31, 2004                                                         4.16%
  June 30, 2004                                                          4.16%
  September 30, 2004                                                     4.16%
  December 31, 2004                                                      4.70%
  Term Loan Maturity Date                                               55.78%

     (c) Within  one  Business  Day  following  each date after the  Restatement
Effective  Date upon which  Holdings  or any of its  Subsidiaries  receives  any
proceeds from any issuance of equity  (excluding (i) proceeds  received from the
sale or issuance of equity which are used to effectuate  Permitted  Acquisitions
pursuant to Section  7.14,  (ii)  proceeds  received  from the  private  sale or
issuance of equity to the Sponsors,  any other Permitted Holder or management of
Holdings  and/or its  Subsidiaries,  (iii)  proceeds  received  from the sale or
issuance of equity by  Holdings,  to the extent used to  repurchase  equity from
management or employees  pursuant to Section  8.03(iv),  (iv) proceeds  received
upon the exercise of options or warrants by  management  or  employees,  and (v)
proceeds  received  from the sale or  issuance  of  equity  by  Subsidiaries  of
Holdings to Holdings or any of its Wholly-Owned  Subsidiaries),  an amount equal
to  100% of the  cash  proceeds  therefrom  (net of  underwriting  discounts  or
placement  discounts  and  commissions  and  other  reasonable  fees  and  costs
associated therewith) shall be applied as a mandatory repayment of the principal
of  outstanding  Term  Loans in  accordance  with the  requirements  of  Section
4.02(i).

     (d) Within  one  Business  Day  following  each date after the  Restatement
Effective Date upon which Holdings and/or any of its  Subsidiaries  receives any
proceeds  from  any  incurrence  of  Indebtedness  (excluding  any  Indebtedness
permitted  to be  incurred  pursuant  to  Section  8.04  as  in  effect  on  the
Restatement  Effective  Date (other than as  required by Section  8.04(xv)),  an
amount  equal  to 100%  of the  cash  proceeds  therefrom  (net of  underwriting
discounts or placement  discounts and commissions and other  reasonable fees and
costs  associated  therewith)  shall be applied as a mandatory  repayment of the
principal of  outstanding  Term Loans in  accordance  with the  requirements  of
Section 4.02(i).


     (e)  Within  three  Business  Days  following  each  date on and  after the
Restatement  Effective Date upon which Holdings  and/or any of its  Subsidiaries
receives  Cash  Proceeds from any Asset Sale, an amount equal to 100% of the Net
Cash  Proceeds  therefrom  shall be  applied  as a  mandatory  repayment  of the
principal of  outstanding  Term Loans in  accordance  with the  requirements  of
Section  4.02(i),  provided that such Net Cash Proceeds shall not be required to
be so applied on such date if no Default or Event of Default then exists and the
US Borrower  delivers a certificate to the  Administrative  Agent on or prior to
such  date  stating  that such Net Cash  Proceeds  shall be used  either  (i) to
purchase  assets used in the ordinary course of business in compliance with this
Agreement,  (ii) to make  permitted  Capital  Expenditures  or (iii) to purchase
equity interests or assets in connection with a Permitted  Acquisition,  in each
case within 360 days  following  the date of such Asset Sale (which  certificate
shall set forth the estimates of the proceeds to be so  expended),  and provided
further,  that if all or any portion of such Net Cash Proceeds not so applied to
the repayment of Term Loans are not so used (or binding commitments with respect
thereto are not made) within such 360 day period,  such remaining  portion shall
be applied on the last day of such period as a mandatory  repayment of principal
of  outstanding  Term  Loans as  provided  above  in this  Section  4.02(e).  In
addition, to the extent that the US Borrower is required to apply any portion of
any cash  proceeds  from any asset  sale to prepay or to make an offer to prepay
the  Senior  Subordinated  Notes  or  the  Permitted  Refinancing   Subordinated
Indebtedness,  the US  Borrower  shall  apply such cash  proceeds as a mandatory
repayment of  outstanding  Term Loans in  accordance  with the  requirements  of
Section 4.02(i).


     (f) On each Excess Cash Payment  Date, an amount equal to 75% of the Excess
Cash Flow for the  relevant  Excess Cash  Payment  Period  shall be applied as a
mandatory  repayment of the  principal of  outstanding  Term Loans in accordance
with the requirements of Section 4.02(i).


     (g) Within 10 days following each date after the Restatement Effective Date
on which  Holdings or any of its  Subsidiaries  receives any  proceeds  from any
Recovery  Event,  an amount equal to 100% of the proceeds of such Recovery Event
(net of reasonable costs including, without limitation, legal costs and expenses
and taxes incurred in connection with such Recovery Event) shall be applied as a
mandatory  repayment of the  principal of  outstanding  Term Loans in accordance
with the requirements of Section 4.02(i); provided that so long as no Default or
Event of  Default  then  exists and to the extent  such  proceeds  do not exceed
$20,000,000,  such proceeds  shall not be required to be so applied on such date
to  the  extent  that  the  US  Borrower  has  delivered  a  certificate  to the
Administrative  Agent on or prior to such date stating that such proceeds  shall
be used to repair,  replace or restore  any  properties  or assets in respect of
which  such  proceeds  were  paid  within  360 days  following  the date of such
Recovery Event (which  certificate shall set forth the estimates of the proceeds
to be so  expended),  and provided  further,  that if all or any portion of such
proceeds not required to be applied to the  repayment of Term Loans  pursuant to
the  preceding  proviso are not so used (or  binding  commitments  with  respect
thereto are not made) within such 360 day period,  such remaining  portion shall
be applied on the last day of such period as a mandatory  repayment of principal
of outstanding Term Loans as provided above in this Section 4.02(g).


     (h) The Borrower  shall repay the Loans in full,  and the Total  Commitment
(and the  Commitments  of each Bank) shall  terminate  upon the  occurrence of a
Change of Control.


     (i) The amount of each  principal  repayment of Term Loans made as required
by  Sections  4.02(c),  (d),  (e),  (f) and (g) shall be  applied  to repay each
Tranche of Term Loans in an amount equal to the relevant  Tranche  Percentage of
such  aggregate  repayment).  Each  prepayment  of Term  Loans  pursuant  to the
preceding sentence (other than prepayments required by Section 4.02(f)) shall be
applied to reduce the then  remaining  Scheduled  Repayments  of the  respective
Tranche  being repaid on a pro rata basis based on the amount of such  Scheduled
Repayments after giving effect to all prior reductions thereto.  Each prepayment
of Term  Loans  pursuant  to  Section  4.02(f)  shall be  applied  to reduce the
remaining  Scheduled  Repayments  of each  respective  Tranche  of Term Loans in
direct order of maturity.  Notwithstanding any other provision contained in this
Agreement or in any agreement or document ancillary hereto, (i) prepayments made
pursuant to this Section  4.02(i) shall not be applied to repay Canadian  Dollar
Loans until the  earlier of (x) the date that is five years  after the  Original
Restatement  Effective  Date and (y) the date on which all other Term Loans have
been repaid in full and thereafter  (except as herein provided) shall be applied
to repay Canadian Dollar Loans and (ii) any amount otherwise required by Section
4.02 to be applied to repay Canadian  Dollar Loans shall at any time on or prior
to the date that is five years after the Original  Restatement  Effective  Date,
unless an Event of Default has occurred and is continuing, not exceed the amount
equal  to the  positive  difference,  if any,  between  (a) 25% of the  original
principal amount of the Existing Canadian Term Loans outstanding on the Original
Restatement  Effective  Date  and (b) the  aggregate  amount  of  repayments  of
principal  theretofore  made in respect of the Canadian Dollar Loans. Any amount
that is  otherwise  required  to be  deposited  with  the  Administrative  Agent
pursuant to a cash collateral  arrangement  described in Section 4.02(j) that is
derived  directly or  indirectly  from  proceeds  received or  receivable by the
Canadian  Borrower  shall be  deemed,  for the  purposes  only of  applying  the
immediately  preceding sentence,  to be otherwise required by Section 4.02 to be
applied  to repay the  Canadian  Dollar  Loans pro rata in  proportion  to their
respective principal amounts.


     (j) With respect to each  repayment of Loans required by this Section 4.02,
the relevant  Borrower may  designate  the Types of Loans which are to be repaid
and, in the case of Euro Rate Loans, the specific Borrowing or Borrowings of the
respective Tranche pursuant to which such Loans were made, provided that: (i) if
any repayment of  Eurodollar  Loans made  pursuant to a single  Borrowing  shall
reduce the  outstanding  Euro Rate Loans made  pursuant to such  Borrowing to an
amount less than the applicable  Minimum Borrowing Amount,  such Borrowing shall
be converted at the end of the then current  interest period into a Borrowing of
Base  Rate  Loans;  and (ii) each  repayment  of any Loans  made  pursuant  to a
Borrowing shall be applied pro rata among such Loans; provided that no repayment
pursuant  to  Section  4.02(a)  shall be  applied  to any  Revolving  Loans of a
Defaulting Bank at any time when the aggregate  amount of the Revolving Loans of
any Non-Defaulting Bank exceeds such Non-Defaulting  Bank's Revolving Percentage
of Revolving  Loans then  outstanding.  In the absence of a  designation  by the
relevant  Borrower as described in the preceding  sentence,  the  Administrative
Agent shall, subject to the above, make such designation in its sole discretion.
Notwithstanding  the foregoing  provisions of this Section 4.02, if any time the
mandatory  prepayment  of Term Loans  pursuant to Sections  4.02(c)  through (g)
above,  or  repayments  of Euro Rate Loans  pursuant  to Section  1.10(b)  would
result,  after giving effect to the procedures set forth above, in the Borrowers
incurring breakage costs under Section 1.11 as a result of Euro Rate Loans being
prepaid other than on the last day of an Interest Period applicable thereto (the
"Affected  Euro  Rate  Loans"),  then  the  relevant  Borrower  may in its  sole
discretion  initially  deposit  a  portion  (up to  100%)  of the  amounts  that
otherwise  would have been paid in respect of the Affected  Euro Rate Loans with
the Administrative Agent (which deposit must be equal in amount to the amount of
Affected Euro Rate Loans not immediately prepaid) to be held as security for the
obligations of the relevant  Borrower  hereunder  pursuant to a cash  collateral
arrangement  to be  agreed  upon  in  form  and  substance  satisfactory  to the
Administrative Agent and the relevant Borrower,  with such cash collateral to be
directly applied upon the first  occurrence (or  occurrences)  thereafter of the
last day of an Interest  Period  applicable  to the relevant Term Loans that are
Euro Rate  Loans (or such  earlier  date or dates as shall be  requested  by the
relevant  Borrower),  to repay an aggregate  principal amount of such Term Loans
equal to the  Affected  Euro Rate Loans not  initially  repaid  pursuant to this
sentence.  Notwithstanding anything to the contrary contained in the immediately
preceding  sentence,  all amounts  deposited as cash collateral  pursuant to the
immediately  preceding  sentence shall be held for the sole benefit of the Banks
whose Term Loans would otherwise have been  immediately  repaid with the amounts
deposited and upon the taking of any action by the  Administrative  Agent or the
Banks pursuant to the remedial provisions of Section 9, any amounts held as cash
collateral  pursuant to this Section 4.02(j) shall,  subject to the requirements
of applicable law, be immediately applied to the Term Loans.


     (k) All  outstanding  Term  Loans  shall be repaid in full on the Term Loan
Maturity Date. All outstanding  Revolving Loans shall be repaid on the Revolving
Loan Maturity Date.


     4.03 Method and Place of Payment. Except as otherwise specifically provided
herein,  all  payments  under  this  Agreement  or any Note shall be made to the
Administrative  Agent for the account of the Bank or Banks  entitled  thereto no
later than 12:00 Noon (local time in the city in which such  payments  are to be
made) on the date when due and shall be made in immediately  available  funds at
the appropriate Payment Office of the Administrative  Agent and in: (x) Dollars,
if such payment is made in respect of any  obligation  of the US Borrower  under
this  Agreement,  except as  otherwise  provided in the  immediately  succeeding
clause (y); or (y) the respective Alternate Currency, if such payment is made in
respect of  principal  or interest on  Alternate  Currency  Loans.  Whenever any
payment  to be made  hereunder  or under any Note shall be stated to be due on a
day which is not a Business  Day, the due date thereof  shall be extended to the
next  succeeding  Business  Day and,  with  respect to  payments  of  principal,
interest shall be payable at the applicable rate during such extension.


     4.04 Net  Payments;  Taxes.  (a) All  payments  made by  Holdings  and each
Borrower  hereunder  or by each  Borrower  under any Note  will be made  without
setoff,  counterclaim or other defense.  Except as provided in Section  4.04(b),
all such  payments  will be made free and clear of,  and  without  deduction  or
withholding for, any present or future taxes,  levies,  imposts,  duties,  fees,
assessments or other charges of whatever nature now or hereafter  imposed by any
jurisdiction  or by any political  subdivision  or taxing  authority  thereof or
therein with respect to such payments (but excluding,  except as provided in the
second succeeding sentence,  any tax imposed on or measured by the net income or
net profits of a Bank  pursuant to the laws of the  jurisdiction  in which it is
organized  or the  jurisdiction  in which the  principal  office  or  applicable
lending  office of such Bank is located or any political  subdivision  or taxing
authority thereof or therein) and all interest, penalties or similar liabilities
with  respect  thereto  (collectively,  "Taxes").  If any Taxes are so levied or
imposed,  such  Borrower  agrees to pay the full amount of such Taxes,  and such
additional  amounts as may be necessary so that every payment of all amounts due
under this Agreement or under any Note, after withholding or deduction for or on
account of any Taxes, will not be less than the amount provided for herein or in
such Note.  If any  amounts  are  payable in  respect of Taxes  pursuant  to the
preceding  sentence,  such  Borrower  agrees to  reimburse  each Bank,  upon the
written request of such Bank, for taxes imposed on or measured by the net income
or net  profit  of such Bank  pursuant  to the laws of the  jurisdiction  or any
political  subdivision or taxing authority thereof or therein in which such Bank
is organized or in which the principal  office or applicable  lending  office of
such Bank is located as such Bank shall  determine  are  payable by, or withheld
from,  such Bank in respect of such amounts so paid to or on behalf of such Bank
pursuant to the  preceding  sentence and in respect of any amounts paid to or on
behalf of such Bank pursuant to this sentence. Such Borrower will furnish to the
Administrative  Agent  within 45 days after the date of the payment of any Taxes
is due pursuant to applicable  law certified  copies of tax receipts  evidencing
such payment by such Borrower.  Without  duplication of amounts payable pursuant
to the foregoing  provisions of this Section  4.04(a),  such Borrower  agrees to
indemnify and hold harmless each Bank,  and reimburse such Bank upon its written
request, for the amount of any Taxes so levied or imposed and paid by such Bank.


     (b) Each Bank that is not a United  States  person (as such term is defined
in Section  7701(a)(30) of the Code) for US federal income tax purposes and that
is a lender  to the US  Borrower  (a "US  Lender")agrees  to  deliver  to the US
Borrower and the Administrative  Agent on or prior to the Restatement  Effective
Date,  or in the case of a US Lender  that is an assignee  or  transferee  of an
interest  under this  Agreement  pursuant to Section  1.13 or 13.04  (unless the
respective US Lender was already a US Lender hereunder immediately prior to such
assignment or transfer),  on the date of such  assignment or transfer to such US
Lender, (i) two accurate and complete original signed copies of Internal Revenue
Service Form W-8ECI or Form W-8BEN (with respect to a complete  exemption  under
an income tax  treaty)  (or  successor  forms)  certifying  to such US  Lender's
entitlement  to a complete  exemption  from United States  withholding  tax with
respect to payments to be made under this  Agreement  and under any Note or (ii)
if the US Lender is not a "bank" within the meaning of Section  881(c)(3)(A)  of
the Code and cannot deliver either Internal  Revenue Service Form W-8ECI or Form
W-8BEN  (with  respect  to a  complete  exemption  under an income  tax  treaty)
pursuant to clause (i) above,  (x) a  certificate  substantially  in the form of
Exhibit D (any such certificate,  a "Section  4.04(b)(ii)  Certificate") and (y)
two accurate and complete  original  signed copies of Internal  Revenue  Service
Form W-8BEN (with respect to the  portfolio  interest  exemption)  (or successor
form)  certifying to such US Lender's  entitlement to a complete  exemption from
United  States  withholding  tax with respect to payments of interest to be made
under this Agreement and under any Note. Each other Bank that is a lender to the
US Borrower agrees to deliver to the US Borrower and the Administrative Agent on
or prior to the  Initial  Borrowing  Date,  or in the case of a Bank  that is an
assignee or transferee of an interest under this  Agreement  pursuant to Section
1.13  or  13.04  (unless  the  respective  Bank  was  already  a Bank  hereunder
immediately  prior  to  such  assignment  or  transfer),  on the  date  of  such
assignment or transfer to such Bank, one or more accurate and complete  original
signed  copies  (as the US  Borrower  or  Administrative  Agent  may  reasonably
request)  of  United  States  Internal  Revenue  Service  Form W-9 or  successor
applicable form (if required by law), as the case may be, providing the employer
identification  number for such Bank.  In addition,  each US Lender  agrees that
from time to time after the Restatement  Effective Date, when a lapse in time or
change  in  circumstances  renders  the  previous   certification   obsolete  or
inaccurate  in any  material  respect,  it  will  deliver  to  Holdings  and the
Administrative  Agent two new accurate and complete  original  signed  copies of
Internal Revenue Service Form W-8ECI or Form W-8BEN (with respect to the benefit
of any  income tax  treaty),  or Form  W-8BEN  (with  respect  to the  portfolio
interest exemption) and a Section 4.04(b)(ii)  Certificate or a form W-9 (or any
successor forms), as the case may be, and such other forms as may be required in
order to confirm or establish the  entitlement  of such US Lender to a continued
exemption  from or reduction in United  States  withholding  tax with respect to
payments  under this  Agreement  and any Note,  or it shall  immediately  notify
Holdings and the Administrative  Agent of its inability to deliver any such Form
or  Certificate,  in which case such US Lender  shall not be required to deliver
any such form of certificate  pursuant to this Section 4.04(b).  Notwithstanding
anything  to the  contrary  contained  in Section  4.04(a),  but  subject to the
immediately  succeeding sentence,  (x) the US Borrower shall be entitled, to the
extent it is required  to do so by law, to deduct or withhold  income or similar
taxes  imposed by the  United  States (or any  political  subdivision  or taxing
authority  thereof or therein)  from  interest,  Fees or other  amounts  payable
hereunder for the account of any US Lender to the extent that such US Lender has
not provided to the US Borrower US Internal Revenue Service Forms that establish
a complete  exemption from such deduction or withholding and (y) the US Borrower
shall not be obligated  pursuant to Section 4.04(a) hereof to gross-up  payments
to be made to a US Lender in respect of income or similar  taxes  imposed by the
United  States if (I) such US Lender has not  provided  to the US  Borrower  the
Internal  Revenue  Service  Forms  required  to be  provided  to the US Borrower
pursuant to this  Section  4.04(b) or (II) in the case of a payment,  other than
interest, to a US Lender described in clause (ii) above, to the extent that such
forms do not  establish a complete  exemption  from  withholding  of such taxes.
Notwithstanding  anything to the contrary contained in the preceding sentence or
elsewhere in this Section 4.04, the US Borrower agrees to pay additional amounts
and to  indemnify  each US Lender in the  manner  set forth in  Section  4.04(a)
(without regard to the identity of the  jurisdiction  requiring the deduction or
withholding)  in respect of any amounts  deducted or withheld by it as described
in the  immediately  preceding  sentence  as a result of any  changes  after the
Restatement  Effective Date in any applicable law,  treaty,  governmental  rule,
regulation,  guideline or order, or in the interpretation  thereof,  relating to
the deducting or withholding of such income or similar taxes.


     (c) Each Bank that is not a  resident  of the  United  Kingdom  for  United
Kingdom tax  purposes  and that is a lender to UK Borrower and each Bank that is
not a resident of Canada for  Canadian  tax purposes and that is a lender to the
Canadian Borrower agrees to use reasonable  efforts to deliver to the applicable
Borrower, at the time it becomes a party to this Agreement and promptly upon any
request therefor from time to time by such Borrower, to the extent it is legally
entitled to do so, such forms,  documents and  information as may be required by
applicable  law,  regulation  or  treaty  from  time  to time  and to  file  all
appropriate  forms to obtain a certificate or other  appropriate  documents from
the  appropriate  governmental  authorities to establish an exemption from, or a
reduction  in the  amount  of, any Tax with  respect  to  payments  made by such
Borrower,  provided,  however, that if such Bank is or becomes unable, by virtue
of any applicable law,  regulation or treaty,  to establish such exemption,  the
applicable  Borrower shall nonetheless  remain obligated under this Section 4.04
to pay the amounts described herein, and provided further, that no Bank shall be
required to take any action  hereunder  which,  in the reasonable  discretion of
such Bank,  would cause such Bank or its  applicable  lending office to suffer a
material economic, legal or regulatory disadvantage.


     (d) If a Borrower  determines in good faith that a reasonable  basis exists
for  contesting  a Tax, the  relevant  Bank,  or the  Administrative  Agent,  as
applicable,  shall cooperate with such Borrower in challenging  such Tax at such
Borrower's  expense and if  requested  by such  Borrower  in writing;  provided,
however,  that no Bank shall be required to take any action  hereunder which, in
the reasonable  discretion of such Bank, would cause such Bank or its applicable
lending office to suffer a material economic,  legal or regulatory disadvantage.
If any taxes imposed on any Bank are paid or indemnified against by any Borrower
under this  Section  4.04,  and such Bank (i) receives a refund of any amount of
taxes  paid or  reimbursed  by such  Borrower  or (ii)  after the  payment of or
indemnification  for such taxes  realized a tax  benefit  (whether by means of a
credit,  deduction  or  otherwise)  by reason of the payment of such taxes which
results in a  reduction  in the taxes due and  payable  by such Bank,  such Bank
shall pay to such Borrower, as the case may be, an amount equal to the reduction
in taxes due and  payable by such Bank  attributable  to such tax benefit or the
amount  of such  refund;  provided,  however,  that  (x) no Bank  is  under  any
obligation  to seek a refund of such taxes (except as described in the preceding
sentence),  (y)  determinations  as to whether a Bank has realized a tax benefit
(including  whether a tax benefit has been  realized as a result of an offset of
other  taxes due and payable by such Bank)  shall be in the sole  discretion  of
such  Bank and (z)  nothing  in this  Section  4.04(d)  shall  require a Bank to
disclose  any  confidential   information  to  a  Borrower   (including  without
limitation, its tax returns).

     SECTION 5. Conditions Precedent.  The obligation of each Bank to make Loans
hereunder,  and the  obligation  of the Issuing Bank to issue  Letters of Credit
hereunder,  is subject,  at the time of the making of each such Credit Event, to
the satisfaction of the following conditions:

     5.01  Execution  of  Agreement;  Notes.  On or  prior  to  the  Restatement
Effective  Date (i) this  Agreement  shall have been  executed and  delivered as
provided  in Section  13.10 and (ii)  there  shall  have been  delivered  to the
Administrative  Agent for the account of each of the Banks  requesting  them the
appropriate respective Notes executed by the respective Borrowers,  in each case
in the amount, maturity and as otherwise provided herein.


     5.02 No Default;  Representations and Warranties.  At the time of each such
Credit  Event and also after  giving  effect  thereto  (i) there  shall exist no
Default  or  Event  of  Default  and (ii)  all  representations  and  warranties
contained  herein or in the other Credit  Documents shall be true and correct in
all material  respects with the same effect as though such  representations  and
warranties  had been  made on the date of the  making of such  Credit  Event (it
being  understood  and agreed that any  representation  or warranty which by its
terms is made as of a specified date shall be required to be true and correct in
all material respects only as of such specified date).


     5.03  Officer's  Certificate.   On  the  Restatement  Effective  Date,  the
Administrative Agent shall have received a certificate dated such date signed by
the President or any Vice  President of the US Borrower  stating that all of the
applicable conditions set forth in Section 5.02, 5.13 and 5.15 have been met.


     5.04  Opinions  of  Counsel.   On  the  Restatement   Effective  Date,  the
Administrative  Agent shall have  received (i) from Simpson  Thacher & Bartlett,
special New York counsel to Holdings and its Subsidiaries,  an opinion addressed
to the  Administrative  Agent and each of the  Banks  and dated the  Restatement
Effective  Date  covering the matters set forth in Exhibit  E-1,  (ii) from Mary
Alice Osterbauer,  Associate Counsel to the US Borrower, an opinion addressed to
the  Administrative  Agent  and each of the  Banks  and  dated  the  Restatement
Effective Date covering the matters set forth in Exhibit E-2, (iii) from Davies,
Ward, Phillips & Vineberg LLP, special Ontario counsel to the Canadian Borrower,
an opinion addressed to the Administrative Agent and each of the Banks and dated
the  Restatement  Effective  Date covering the matters set forth in Exhibit E-3,
(iv) from  Linklaters,  special  United Kingdom  counsel to the UK Borrower,  an
opinion dated the  Restatement  Effective Date covering the matters set forth in
Exhibit E-4 and (v) from such other local and foreign  counsel  (with a limit of
one such opinion for each such jurisdiction)  satisfactory to the Administrative
Agent, opinions each of which shall be in form and substance satisfactory to the
Administrative  Agent and shall cover the  perfection of the security  interests
granted  pursuant to the  respective  Security  Documents and such other matters
incident to the transactions contemplated herein as the Administrative Agent may
reasonably request.

     5.05 Corporate  Documents;  Proceedings.  (a) On the Restatement  Effective
Date,  the  Administrative  Agent shall have received a  certificate,  dated the
Restatement  Effective  Date,  signed by an  Authorized  Officer of each  Credit
Party,  and  attested to by a second  Authorized  Officer of such Credit  Party,
substantially  in the form of Exhibit F with  appropriate  insertions,  together
with  copies  of  the  Certificate  of  Incorporation   and  By-Laws  (or  their
equivalents)  of such Credit  Party and the  resolutions  of such  Credit  Party
referred  to  in  such  certificate,  and  the  foregoing  shall  be  reasonably
acceptable to the Administrative Agent.

     (b) On the Restatement  Effective Date, all corporate and legal proceedings
and all instruments and agreements relating to the transactions  contemplated by
this Agreement and the other Documents shall be reasonably  satisfactory in form
and substance to the Administrative  Agent, and the  Administrative  Agent shall
have received all information and copies of all documents and papers,  including
records  of  corporate  proceedings,   governmental  approvals,   good  standing
certificates and bring-down  telegrams,  if any, which the Administrative  Agent
may have reasonably requested in connection therewith, such documents and papers
where   appropriate  to  be  certified  by  proper   corporate  or  governmental
authorities.

     5.06 Shareholders' Agreements;  Management Agreements; Etc.. On or prior to
the Restatement Effective Date, the Administrative Agent shall have received (i)
a certification from an Authorized Officer of Holdings and its Subsidiaries that
all  Plans,  Existing  Indebtedness  Agreements,  Shareholders'  Agreements  and
Management  Agreements  previously delivered to the Administrative Agent by each
Credit  Party,  remain in full  force and effect  (or  specifying  which of such
agreements  and plans do not  remain  in full  force  and  effect)  and (ii) any
amendments thereto or additional such agreements.

     5.07 Existing  Credit  Agreement.  On the  Restatement  Effective Date, all
Existing  Loans shall have been paid in full (or shall have been  converted into
Loans  hereunder as  contemplated  by Section 13.10) and all interest,  fees and
other amounts accrued and unpaid under the Existing Credit  Agreement shall have
been paid in full (including,  without  limitation,  amounts payable pursuant to
Section 1.11 of the Existing Credit Agreement and accrued and unpaid  commitment
fees, letter of credit fees and facing fees).

     5.08 Pledge Agreements.  (a) On the Restatement  Effective Date,  Holdings,
the US Borrower  and each  Domestic  Subsidiary  of the US  Borrower  which is a
Subsidiary  Guarantor shall have (i) duly authorized,  executed and delivered an
Amended and Restated Pledge  Agreement in the form of Exhibit G-1, (such Amended
and Restated Pledge Agreement, as modified, supplemented or amended from time to
time, the "US Pledge  Agreement"),  (ii) delivered to the Collateral  Agent,  as
Pledgee,  all the certificated  Pledge  Securities,  if any, referred to therein
then owned by such Credit Party, together with executed and undated stock powers
in the case of capital stock  constituting  Pledged  Securities  and (iii) taken
such other action to perfect the security  interests  created  thereunder as the
Collateral Agent shall reasonably request.

     (b) On the Restatement  Effective Date, Cabot  Intermediate shall have duly
authorized,  executed and delivered an amendment,  substantially  in the form of
Exhibit G-2, to the UK Pledge  Agreement (the "UK Pledge  Agreement  Amendment")
and the UK Pledge Agreement as so amended shall remain in full force and effect.

     5.09 Security Agreements.  On the Restatement  Effective Date (i) Holdings,
the US Borrower  and each  Domestic  Subsidiary  of the US  Borrower  which is a
Subsidiary  Guarantor  shall have duly  authorized,  executed  and  delivered an
Amended and Restated Security Agreement in the form of Exhibit H-1 (as modified,
supplemented or amended from time to time, the "US Security Agreement") covering
all of such Credit Party's  present and future  Security  Agreement  Collateral,
(ii) the Canadian Borrower shall have duly authorized, executed and delivered an
amendment,  substantially  in the form of Exhibit H-2, to the Canadian  Security
Agreement  (the  "Canadian  Security  Agreement  Amendment")  and  the  Canadian
Security  Agreement as so amended  shall remain in full force and effect,  (iii)
the UK Borrower shall have duly authorized, executed and delivered an amendment,
substantially  in form of Exhibit  H-3,  to the UK Security  Agreement  (the "UK
Security Agreement Amendment") and the UK Security Agreement as so amended shall
remain  in full  force and  effect  and (iv) the  Collateral  Agent  shall  have
received  evidence that all actions  necessary or, in the reasonable  opinion of
the Collateral  Agent,  desirable to perfect (or maintain the perfection of) and
protect the security  interests  purported to be created (or  maintained) by the
Security Agreements have been taken.


     5.10  Subsidiary  Guaranties.  On  the  Restatement  Effective  Date,  each
Domestic Subsidiary of the US Borrower shall have duly authorized,  executed and
delivered  an  Amended  and  Restated  Guaranty  in the  form of  Exhibit  I (as
modified,  supplemented  or  amended  from  time to  time,  the  "US  Subsidiary
Guaranty"), and the US Subsidiary Guaranty shall be in full force and effect.


     5.11 Material Adverse Change, etc. On or prior to the Restatement Effective
Date, since September 30, 2000, nothing shall have occurred (and the Banks shall
have become  aware of no facts or  conditions  not  previously  known) which the
Administrative  Agent or the Required Banks shall reasonably determine (a) could
reasonably  be  expected  to have a  material  adverse  effect on the  rights or
remedies of the Banks or the Administrative Agent, or on the ability of Holdings
and its Subsidiaries to perform their  obligations to the  Administrative  Agent
and the Banks under this  Agreement  or any other  Credit  Document or (b) could
reasonably  be expected to have a  materially  adverse  effect on the  business,
assets, liabilities,  operations, properties, condition (financial or otherwise)
or prospects of Holdings and its Subsidiaries taken as a whole.

     5.12 Mortgages;  Mortgage  Amendments and Endorsements.  On the Restatement
Effective  Date,  the  Collateral  Agent  shall  have  received  fully  executed
counterparts  of amendments  (the "Mortgage  Amendments")  in form and substance
reasonably  satisfactory to the Administrative  Agent, to each of the Mortgages,
which are  necessary  or, in the  reasonable  opinion of the  Collateral  Agent,
desirable  to  effectively  maintain  a valid  and  enforceable  first  priority
mortgage lien on each Mortgaged Property (subject to Permitted  Encumbrances) in
favor of the  Collateral  Agent (or such  other  trustee as may be  required  or
desired  under  local  law)  for  the  benefit  of  the  Secured  Creditors  and
arrangements  satisfactory to the Collateral  Agent shall be in place to provide
that  counterparts  of  each  Mortgage   Amendment  shall  be  recorded  on  the
Restatement Effective Date or within two Business Days thereafter.

     5.13  Litigation.  On the Restatement  Effective Date, no litigation by any
entity (private or governmental)  shall be pending or threatened with respect to
this Agreement,  or any  documentation  executed in connection  herewith or with
respect to the transactions  contemplated  hereby,  or which the  Administrative
Agent or Required Banks shall reasonably  determine could reasonably be expected
to have a materially adverse effect on the transactions  contemplated  hereby or
on  the  business,  assets,  liabilities,   operations,   properties,  condition
(financial or otherwise) or prospects of Holdings and its Subsidiaries  taken as
a whole.

     5.14 Fees,  etc. On the  Restatement  Effective Date, the US Borrower shall
have paid in full to the Administrative  Agent and the Banks all costs, fees and
expenses (including, without limitation, all reasonable out-of-pocket legal fees
and expenses)  payable to the  Administrative  Agent and the Banks to the extent
then due  pursuant  hereto  or as  otherwise  agreed  between  Holdings  and the
Administrative Agent.

     5.15  Approvals.  All  necessary  governmental  and  material  third  party
approvals in connection  with the  transactions  contemplated  hereby shall have
been  obtained  and remain in effect.  Additionally,  there  shall not exist any
judgment,  order,  injunction  or other  restraint  issued or filed or a hearing
seeking injunctive relief or other restraint pending or notified  prohibiting or
imposing materially adverse conditions upon the consummation of the transactions
contemplated  hereby,  the  making of the Loans or the  issuance  of  Letters of
Credit.

     5.16 Financial  Statements;  Projections;  Management Letter Reports. On or
prior to the  Restatement  Effective Date, the  Administrative  Agent shall have
received (i) the pro forma (after giving effect to the transactions contemplated
hereby)  consolidated balance sheet of Holdings and its Subsidiaries as of March
31, 2001 and (ii)  projections of Holdings and its  Subsidiaries as of March 31,
2001, all of which pro forma balance sheet and projections  shall be in form and
substance reasonably satisfactory to the Administrative Agent.

     5.17 Senior Subordinated Note Indenture. On the Restatement Effective Date,
the US Borrower shall have delivered to the  Administrative  Agent a certificate
of its chief financial officer  demonstrating in reasonable detail that the full
amount of the Loans to be incurred pursuant to this Agreement may be incurred on
the  Restatement  Effective  Date in accordance  with,  and will not violate any
provisions of, the Senior Subordinated Note Indenture.

     5.18 Notice of Borrowing; Letter of Credit Request. (a) Prior to the making
of each Loan, the Administrative Agent shall have received a Notice of Borrowing
meeting the requirements of Section 1.03.

     (b) Prior to the issuance of each Letter of Credit,  the Issuing Bank shall
have received a Letter of Credit  Request  meeting the  requirements  of Section
2.02.

     SECTION 6. Representations and Warranties.  In order to induce the Banks to
enter into this Agreement and to make the Loans,  and issue (or  participate in)
the Letters of Credit as provided  herein,  each of Holdings  and each  Borrower
makes the following  representations and warranties, on behalf of itself and its
Subsidiaries,  in each case after giving effect to the transactions contemplated
hereby on the  Restatement  Effective  Date,  with the occurrence of each Credit
Event on or after the  Restatement  Effective  Date being deemed to constitute a
representation  and  warranty  that the matters  specified in this Section 6 are
true and correct in all material respects on and as of the Restatement Effective
Date and on the date of each such Credit Event (it being  understood  and agreed
that any representation or warranty which by its terms is made as of a specified
date shall be required to be true and correct in all material  respects  only as
of such specified date):

     6.01 Status. Each of Holdings, each Borrower and each of their Subsidiaries
(i) is a duly organized and validly existing corporation or other entity in good
standing under the laws of the  jurisdiction of its  organization,  except where
the  failure  to be in good  standing,  so  organized  or  existing,  could  not
reasonably  be  expected  to have a  material  adverse  effect on the  business,
operations,  property, assets, liabilities or condition (financial or otherwise)
of Holdings and its  Subsidiaries  taken as a whole,  (ii) has the  corporate or
other power and  authority  to own its  property  and assets and to transact the
business  in which it is engaged and  presently  proposes to engage and (iii) is
duly  qualified and is authorized to do business and is in good standing in each
jurisdiction  where the conduct of its  business  requires  such  qualifications
except  for  failures  to be so  qualified,  have such  authority  or be in good
standing,  which,  individually  or in the  aggregate,  could not  reasonably be
expected  to  have  a  material  adverse  effect  on the  business,  operations,
property,  assets, liabilities or condition (financial or otherwise) of Holdings
and its Subsidiaries taken as a whole.


     6.02 Power and  Authority.  Each Credit  Party has the  corporate  or other
power and authority to execute,  deliver and perform the terms and provisions of
each of the Credit  Documents  to which it is party and has taken all  necessary
corporate or other action to authorize the execution,  delivery and  performance
by it of each such Credit  Document.  Each Credit  Party has duly  executed  and
delivered  each of the  Credit  Documents  to which it is  party,  and each such
Credit  Document  constitutes  the legal,  valid and binding  obligation of such
Person  enforceable  in  accordance  with its terms,  subject to the  effects of
bankruptcy,  insolvency,  reorganization,  fraudulent conveyance, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles  (regardless of whether considered in proceedings in equity
or at law) and an implied covenant of good faith and fair dealing.


     6.03 No Violation.  Neither the  execution,  delivery or performance by any
Credit Party of the Credit  Documents to which it is a party,  nor compliance by
it with the terms and provisions  thereof,  (i) will contravene any provision of
any applicable law, statute,  rule or regulation or any applicable order,  writ,
injunction  or decree of any court or  governmental  instrumentality,  (ii) will
conflict  with,  or  result  in any  breach  of any  of  the  terms,  covenants,
conditions or provisions  of, or  constitute a default  under,  or result in the
creation  or  imposition  of (or the  obligation  to create or impose)  any Lien
(except pursuant to the Security Documents) upon any of the properties or assets
of Holdings or any of its  Subsidiaries  pursuant to the terms of any indenture,
mortgage,  deed of  trust,  credit  agreement  or loan  agreement,  or any other
material  agreement,  contract or  instrument,  to which  Holdings or any of its
Subsidiaries is a party or by which it or any of its property or assets is bound
or to which it may be  subject  or  (iii)  will  violate  any  provision  of the
certificate of incorporation or by-laws or other  organizational  documents,  as
applicable, of Holdings or any of its Subsidiaries.


     6.04  Governmental  Approvals.  No  order,  consent,   approval,   license,
authorization  or validation of, or filing,  recording or registration  with, or
exemption by, any  governmental or public body or authority,  or any subdivision
thereof,  is required (i) to authorize,  or is required in connection  with, the
execution,  delivery and  performance of any Credit Document by any Credit Party
or (ii) to ensure the legality,  validity,  binding effect or  enforceability of
any such Document with respect to any Credit Party,  except (A) those which have
been obtained or made prior to the  Restatement  Effective  Date,  (B) those the
absence of which, either individually or in the aggregate,  could not reasonably
be  expected  to have a  material  adverse  effect on either  (x) the  business,
operations,  property, assets, liabilities or condition (financial or otherwise)
of Holdings and its Subsidiaries  taken as a whole or (y) the rights or remedies
of the Banks or the Administrative Agent or on the ability of Holdings or any of
its Subsidiaries to perform their respective obligations hereunder and under the
other Credit  Documents to which they are, or will be, a party,  (C) for filings
and  recordings  required to perfect the security  interests  created  under the
Security  Documents  on  the  Restatement  Effective  Date,  which  filings  and
recordings will be made within 10 Business Days after the Restatement  Effective
Date  or (D)  required  by laws  affecting  the  offer  and  sale of  securities
generally in connection with the exercise by the Collateral  Agent of certain of
its remedies under the Pledge Agreements.


     6.05 Financial Statements;  Financial Condition;  Undisclosed  Liabilities.
(a) The  consolidated  statements  of  financial  condition  of Holdings and its
Subsidiaries  at  September  30,  2000 and at  March  31,  2001 and the  related
consolidated   statements   of  income  and  cash  flows  of  Holdings  and  its
Subsidiaries for the fiscal year or six-month  period, as the case may be, ended
on such date,  and  furnished  to the Banks prior to the  Restatement  Effective
Date, present fairly (subject to normal year-end  adjustments in the case of the
March 31, 2001 financial  statements) the  consolidated  financial  condition of
Holdings and its  Subsidiaries  at the date of such  consolidated  statements of
financial  condition and the consolidated  results of the operations of Holdings
and its Subsidiaries for the respective  fiscal year or six-month period, as the
case may be. All such  consolidated  financial  statements have been prepared in
accordance  with  generally   accepted   accounting   principles  and  practices
consistently  applied.  The pro forma consolidated balance sheet of Holdings and
its  Subsidiaries  as of March 31,  2001,  a copy of which has  heretofore  been
furnished to each Bank,  presents a good faith estimate of the  consolidated pro
forma financial  condition of Holdings and its Subsidiaries  after giving effect
to the transactions contemplated hereby. Since March 31, 2001, there has been no
material  adverse  change  in  the  business,   operations,   property,  assets,
liabilities   or  condition   (financial  or  otherwise)  of  Holdings  and  its
Subsidiaries taken as a whole.


     (b) On and as of the Restatement Effective Date, on a pro forma basis after
giving effect to the  transactions  contemplated  hereby and to all Indebtedness
(including  the Loans) being  incurred or assumed on such date and Liens created
by the Credit Parties in connection  therewith,  (x) the sum of the assets, at a
fair valuation,  of Holdings and its Subsidiaries (on a consolidated basis), the
US  Borrower  and  its  Subsidiaries  (on a  consolidated  basis)  and of the US
Borrower (on a stand-alone  basis) will exceed their respective  debts, (y) each
of Holdings and its Subsidiaries (on a consolidated  basis), the US Borrower and
its Subsidiaries (on a consolidated basis) and the US Borrower (on a stand-alone
basis) have not  incurred  and do not intend to incur,  and do not believe  that
they will  incur,  debts  beyond  their  ability to pay such debts as such debts
mature and (z) each of Holdings and its Subsidiaries (on a consolidated  basis),
the US  Borrower  and its  Subsidiaries  (on a  consolidated  basis)  and the US
Borrower (on a stand-alone  basis) has sufficient  capital with which to conduct
its business. For purposes of this Section 6.05(b) "debt" means any liability on
a claim,  and "claim" means (i) right to payment  whether or not such a right is
reduced to  judgment,  liquidated,  unliquidated,  fixed,  contingent,  matured,
unmatured,  disputed, undisputed, legal, equitable, secured or unsecured or (ii)
right to an equitable remedy for breach of performance if such breach gives rise
to a payment,  whether or not such  right to an  equitable  remedy is reduced to
judgment, fixed, contingent,  matured, unmatured,  disputed, undisputed, secured
or unsecured.

     (c)  Except  as  fully  disclosed  in the  financial  statements  delivered
pursuant to Section 6.05(a),  there were as of the Restatement Effective Date no
liabilities or obligations  with respect to Holdings or any of its  Subsidiaries
of any nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in aggregate, could reasonably
be expected to be materially adverse to Holdings and its Subsidiaries taken as a
whole.

     6.06 Litigation.  There are no actions, suits or proceedings pending or, to
the best  knowledge of Holdings or any Borrower,  threatened (i) with respect to
the transactions  contemplated hereby or the Credit Documents or (ii) that could
reasonably  be  expected  to  materially  and  adversely  affect  the  business,
operations,  property, assets, liabilities or condition (financial or otherwise)
of Holdings and its Subsidiaries taken as a whole.


     6.07 True and  Complete  Disclosure.  Except to the extent set forth in the
immediately  succeeding  sentence,  all factual  information  (taken as a whole)
furnished by or on behalf of Holdings or any of its  Subsidiaries  in writing to
the  Administrative  Agent  or any  Bank  (including,  without  limitation,  all
information  contained in the Credit Documents) for purposes of or in connection
with this Agreement,  the other Credit Documents or any transaction contemplated
herein or therein is true and accurate in all  material  respects on the date as
of which such  information  is dated or certified and not incomplete by omitting
to state any fact  necessary  to make such  information  (taken as a whole)  not
misleading  in any material  respect at such time in light of the  circumstances
under which such information was provided.  The financial  projections and other
pro forma  financial  information  contained  therein  are  based on good  faith
estimates and assumptions  believed by such Persons to be reasonable at the time
made,  it being  recognized  by the  Administrative  Agent  and the  Banks  that
projections  as to  future  events  are not to be  viewed  as facts  or  factual
information and that actual results during the period or periods covered thereby
may differ from the projected results.


     6.08 Use of  Proceeds;  Margin  Regulations.  (a) All  proceeds of the Term
Loans  (other  than  Term  Loans  which  shall  be  continued  hereunder  on the
Restatement  Effective  Date) shall be used by the Borrower (i) to refinance the
loans  under  the  Existing  Credit  Agreement  (to  the  extent  not  continued
hereunder) and (ii) to pay fees and expenses related to thereto.


     (b) All proceeds of Revolving Loans may be used (i) for working capital and
general   corporate   purposes   (including,   without   limitation,   Permitted
Acquisitions  and permitted  repurchases of the Senior  Subordinated  Notes) and
(ii) to refinance the loans under the Existing  Credit  Agreement (to the extent
not continued  hereunder) and pay fees and expenses  related  thereto;  provided
that no more than $3,000,000 in the aggregate of Revolving Loans may be incurred
on the Restatement Effective Date.

     (c) No part of the  proceeds  of any Loan will be used to purchase or carry
any Margin Stock or to extend  credit for the purpose of  purchasing or carrying
any Margin  Stock.  Neither  the making of any Loan nor the use of the  proceeds
thereof  nor the  occurrence  of any  other  Credit  Event  will  violate  or be
inconsistent  with  the  provisions  of  Regulation  T, U or X of the  Board  of
Governors of the Federal Reserve System.


     6.09 Tax Returns and Payments.  Each of Holdings, the Borrowers and each of
their  Subsidiaries  has timely  filed or caused to be timely  filed  (including
pursuant  to  any  valid  extensions  of  time  for  filing)  thereof  with  the
appropriate  taxing  authority,  all  material  returns,  statements,  forms and
reports for taxes (the "Returns") required to be filed by or with respect to the
income,  properties or  operations of each of Holdings,  the Borrowers and their
Subsidiaries, as the case may be. The Returns accurately reflect in all material
respects  all  liability  for  taxes  of  Holdings,   the  Borrowers  and  their
Subsidiaries  for the periods covered thereby.  Each of Holdings,  the Borrowers
and their Subsidiaries have paid all material taxes and assessments with respect
to taxes  payable by them which have  become due other than those  contested  in
good faith and for which adequate  reserves have been  established in accordance
with generally accepted accounting  principles.  As of the Restatement Effective
Date, there is no action, suit, proceeding,  investigation,  audit, or claim now
pending or, to the best  knowledge  of Holdings,  the  Borrowers or any of their
Subsidiaries,  threatened  in  writing  by any  authority  regarding  any  taxes
relating to  Holdings,  the  Borrowers or any of their  Subsidiaries.  As of the
Restatement  Effective  Date,  none of Holdings,  the  Borrowers or any of their
Subsidiaries  has entered into an agreement or waiver or been requested to enter
into an agreement or waiver extending any statute of limitations relating to the
payment or collection of any material taxes of Holdings, the Borrowers or any of
their Subsidiaries. None of Holdings, the Borrowers or any of their Subsidiaries
has  provided,  with  respect to it or property  held by it, any  consent  under
Section 341 of the Code.


     6.10 ERISA.  (a) No ERISA Event has occurred or is  reasonably  expected to
occur  that,  when taken  together  with all other  such ERISA  Events for which
liability  is  reasonably  expected to occur,  could  reasonably  be expected to
result in a  material  adverse  effect on the  business,  operations,  property,
assets,  liabilities  or condition  (financial or  otherwise)  of Holdings,  any
Borrower  and their  Subsidiaries  taken as a whole.  The  present  value of all
accumulated  benefit  obligations under each Plan (based on the assumptions used
for purposes of Statement of Financial  Accounting  Standards  No. 87), did not,
except as noted below,  as of the date of the most recent  financial  statements
reflecting  such  amounts,  exceed the fair  market  value of the assets of such
Plan,  and the  present  value of all  accumulated  benefit  obligations  of all
underfunded  Plans (based on the  assumptions  used for purposes of Statement of
Financial  Accounting  Standards  No. 87) did not, as of the date of most recent
financial statement reflecting such amounts, exceed the fair market value of the
assets of all such underfunded Plans by more than $5,000,000.

     (b) Each Foreign Pension Plan has been maintained in substantial compliance
with its  terms  and  with  the  requirements  of any and all  applicable  laws,
statutes,  rules and  regulations.  All  contributions  required to be made with
respect to a Foreign  Pension  Plan have been  timely  made except to the extent
that any failure to make such  contribution on a timely basis will not result in
a material  adverse  effect.  Neither  Holdings,  any  Borrower nor any of their
Subsidiaries  has incurred any obligation in connection with the termination of,
or withdrawal  from, any Foreign  Pension Plan.  Except as set forth on Schedule
III,  the  present  value of the  accrued  benefit  liabilities  (whether or not
vested) under each Foreign Pension Plan required to be funded,  determined as of
the end of Holdings' and each  Borrower's most recently ended fiscal year on the
basis of the actuarial assumptions set forth in the most recent actuarial report
for such plan,  did not exceed the current  value of the assets of such  Foreign
Pension Plan allocable to such benefit liabilities.

     6.11 The Security Documents.  (a) The provisions of the Security Agreements
are effective to create in favor of the Collateral  Agent for the benefit of the
Secured  Creditors a legal,  valid and enforceable  security interest in, and/or
Lien on, all right, title and interest of each Credit Party party thereto in the
Security Agreement  Collateral  described therein that is, in the case of the US
Security Agreement subject to Article 8 or 9 of the UCC or constitutes  patents,
trademarks or copyrights,  and each Security Agreement (upon satisfaction of any
filing  or other  requirements  set forth  therein  and to the  extent  required
thereby)  creates a fully perfected first Lien on, and/or security  interest in,
all right,  title and  interest  of such  Credit  Party in all of such  Security
Agreement  Collateral,  subject to no other  Liens other than  Permitted  Liens.
Without  limiting  the  generality  of the  foregoing,  the  recordation  of the
Assignment  of Security  Interest in U.S.  Patents  and  Trademarks  in the form
attached to the US Security  Agreement in the United States Patent and Trademark
Office  together  with  filings on Form UCC-1 made  pursuant  to the US Security
Agreement  will be  effective,  under  applicable  law, to perfect the  security
interest  granted to the Collateral  Agent in the trademarks and patents covered
by the US Security Agreement.


     (b) The security  interests  created in favor of the Collateral  Agent,  as
Pledgee,  for the benefit of the Secured  Creditors  under the Pledge  Agreement
constitute (upon  satisfaction of any filing or other requirements in respect of
the Pledged Stock issued by any Foreign  Subsidiary)  first  priority  perfected
security  interests  in  the  Pledged  Securities   (assuming,   in  respect  of
certificated Pledged Stock and Pledged Securities constituting promissory notes,
the Collateral  Agent's continuous  possession  thereof) described in the Pledge
Agreement,  subject to no security  interests  of any other  Person  (other than
Liens  permitted under Section  8.01(i)).  Except as provided in the immediately
preceding  sentence,  no filings or recordings  are required in order to perfect
(or maintain the  perfection or priority of) the security  interests  created in
the Pledged  Securities  and the  proceeds  thereof  under the Pledge  Agreement
(other than filings of proper UCC-1  Financing  Statements in respect of Pledged
Securities constituting promissory notes, which filings have been made and other
than as  required  in respect of Pledged  Stock  issued by Foreign  Subsidiaries
other than the Canadian Borrower and the UK Borrower).

     (c)  Each  of the  Mortgages  creates,  as  security  for  the  obligations
purported to be secured thereby, a valid,  enforceable (upon satisfaction of any
filing or other  requirements set forth therein) and perfected security interest
in and  mortgage  lien on the  respective  Mortgaged  Property  in  favor of the
Collateral  Agent (or such other  trustee as may be  required  or desired  under
local law) for the  benefit of the Secured  Creditors,  superior to and prior to
the rights of all third Persons and subject to no other Liens  (except,  in each
case,  Permitted  Liens).  Schedule IV contains a true and complete list of each
material   parcel  of  Real  Property  owned  or  leased  by  Holdings  and  its
Subsidiaries  on the  Restatement  Effective  Date,  and sets  forth the type of
interest therein held by Holdings or such Subsidiary.


     6.12  Properties.  Each  of  Holdings,  the US  Borrower  and  each  of its
Subsidiaries has good and marketable  title to all material  properties owned by
them,  including all material  property  reflected in the  consolidated  balance
sheets of Holdings  referred to in Section  6.05(a) (except as sold or otherwise
disposed of since the date of such balance sheets as permitted by this Agreement
or the Credit  Documents)  clear of all Liens,  other than (i) as referred to in
the balance  sheet or in the notes  thereto or in the pro forma balance sheet or
(ii) Permitted Liens.


     6.13  Capitalization.  On the  Restatement  Effective  Date, the authorized
capital  stock of (i)  Holdings  shall  consist of (x) 200,000  shares of common
stock, $.01 par value per share, of which 102,088 were issued and outstanding as
of March 31, 2001 and (y) 200,000 shares of preferred stock,  $.01 par value per
share,  45,000 of which shall be issued and outstanding and (ii) the US Borrower
shall  consist of 1,000  shares of common  stock,  $.01 par value per share,  of
which 100 shall be  issued  and  outstanding  and  owned by  Holdings.  All such
outstanding shares of capital stock have been duly and validly issued, are fully
paid and nonassessable and are free of preemptive rights. Except as set forth on
Schedule V, neither  Holdings nor any of its  Subsidiaries  has  outstanding any
securities convertible into or exchangeable for its capital stock or outstanding
any rights to subscribe for or to purchase,  or any options for the purchase of,
or any  agreements  providing for the issuance  (contingent or otherwise) of, or
any calls,  commitments  or claims of any  character  relating  to, its  capital
stock.


     6.14 Subsidiaries.  Schedule VI lists each Subsidiary of Holdings,  and the
direct and indirect ownership  interest of Holdings therein,  in each case as of
the  Restatement  Effective  Date and after  giving  effect to the  transactions
contemplated hereby.


     6.15  Compliance  with  Statutes,  etc.  Each of  Holdings  and each of its
Subsidiaries  is in compliance  with all applicable  statutes,  regulations  and
orders of, and all applicable  restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property,  except such noncompliance as could not, individually or in the
aggregate,  reasonably  be  expected  to have a material  adverse  effect on the
business,  operations,  property, assets, liabilities or condition (financial or
otherwise) of Holdings and its Subsidiaries taken as a whole.


     6.16 Investment Company Act. None of Holdings or any of its Subsidiaries is
an "investment ------------------------ company" or a company "controlled" by an
"investment  company," within the meaning of the Investment Company Act of 1940,
as amended.


     6.17 Public  Utility  Holding  Company Act.  None of Holdings or any of its
Subsidiaries  is a "holding  company," or a  "subsidiary  company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary  company"
of a "holding  company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended.


     6.18  Environmental   Matters.  (a)  Each  of  Holdings  and  each  of  its
Subsidiaries has complied and is in compliance with all applicable Environmental
Laws and the requirements of any permits issued under such  Environmental  Laws.
There are no past,  pending or, to the best  knowledge of Holdings or any of its
Subsidiaries,  threatened  Environmental  Claims against  Holdings or any of its
Subsidiaries  or any  Real  Property  currently  or,  to the best  knowledge  of
Holdings or any of its Subsidiaries, previously owned or operated by Holdings or
any of its  Subsidiaries.  There  are no  facts,  circumstances,  conditions  or
occurrences on any Real Property  currently owned or operated by Holdings or any
of its  Subsidiaries  or,  to  the  best  knowledge  of  Holdings  or any of its
Subsidiaries,  on any formerly  owned or operated  Real Property or any property
adjoining or in the vicinity of any  currently  owned or operated  Real Property
that could  reasonably  be  expected  (i) to form the basis of an  Environmental
Claim against  Holdings or any of its  Subsidiaries  or any  currently  owned or
operated  Real Property or (ii) to cause any such Real Property to be subject to
any restrictions on the ownership,  occupancy,  use or  transferability  of such
Real  Property  by  Holdings  or any of its  Subsidiaries  under any  applicable
Environmental Law.


     (b) Hazardous Materials have not at any time been generated,  used, treated
or stored  on, or  transported  to or from,  or  Released  on or from,  any Real
Property  owned or operated by  Holdings  or any of its  Subsidiaries  except in
compliance with all applicable  Environmental Laws and as reasonably required in
connection with the operation,  use and maintenance of any such Real Property by
Holdings'  or such  Subsidiary's  business.  There  are not now any  underground
storage  tanks owned or operated by Holdings or of its  Subsidiaries  located on
any Real Property owned or operated by Holdings or any of its Subsidiaries.

     (c)  Notwithstanding  anything to the  contrary in this Section  6.18,  the
representations  made in this Section 6.18 shall only be untrue if the effect of
the  failures,  noncompliance  and other  circumstances  of the types  described
above, either individually or in the aggregate,  could reasonably be expected to
have a material adverse effect on the business,  operations,  property,  assets,
liabilities   or  condition   (financial  or  otherwise)  of  Holdings  and  its
Subsidiaries taken as a whole.


     6.19  Labor  Relations.  None of  Holdings  or any of its  Subsidiaries  is
engaged in any unfair labor practice that could reasonably be expected to have a
material  adverse  effect  on  the  business,   operations,   property,  assets,
liabilities   or  condition   (financial  or  otherwise)  of  Holdings  and  its
Subsidiaries  taken as a whole.  There is (i) no unfair labor practice complaint
pending against Holdings or any of its Subsidiaries or, to the best knowledge of
Holdings or the US Borrower, threatened against any of them, before the National
Labor Relations Board, and no significant  grievance or significant  arbitration
proceeding  arising out of or under any  collective  bargaining  agreement is so
pending against Holdings or any of its Subsidiaries or, to the best knowledge of
Holdings or the Borrower,  threatened against any of them, (ii) no strike, labor
dispute,   slowdown  or  stoppage   pending  against  Holdings  or  any  of  its
Subsidiaries  or,  to the  best  knowledge  of  Holdings  or  the  US  Borrower,
threatened  against  Holdings  or any of its  Subsidiaries  and  (iii)  no union
representation  question exists with respect to the employees of Holdings or any
of its Subsidiaries, except (with respect to any matter specified in clause (i),
(ii) or (iii) above,  either individually or in the aggregate) such as could not
reasonably  be  expected  to have a  material  adverse  effect on the  business,
operations,  property, assets, liabilities or condition (financial or otherwise)
of Holdings and its Subsidiaries taken as a whole.


     6.20 Intellectual  Property.  Each of Holdings and each of its Subsidiaries
owns or  possesses  valid  licenses  or other legal  rights to use all  patents,
trademarks,  service  marks,  trade names,  copyrights,  trade secrets and other
proprietary  intellectual property rights necessary for the present and proposed
conduct of its  business,  without any known  conflict with the rights of others
except,  with respect to any matter specified in this Section 6.20, as could not
reasonably be expected to result in a material  adverse  effect on the business,
operations,  property, assets, liabilities or condition (financial or otherwise)
of Holdings and its Subsidiaries taken as a whole.


     6.21 Indebtedness.  Schedule VII sets forth a true and complete list of all
Indebtedness of Holdings and its  Subsidiaries  as of the Restatement  Effective
Date and which is to remain  outstanding after giving effect to the consummation
of the transactions  contemplated hereby (excluding Indebtedness permitted under
Section   8.04,   other  than  clause  (ii)  thereof,   all  such   non-excluded
Indebtedness,  the "Existing Indebtedness"),  in each case showing the aggregate
principal  amount thereof and the name of the respective  borrower and any other
entity which directly or indirectly guaranteed such debt.


     6.22 Senior Subordinated Notes. The subordination  provisions  contained in
the Senior  Subordinated  Notes are  enforceable  against  the  holders  thereof
subject to the effects of bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable  principles  (regardless of whether enforcement is sought in equity or
at law) and an  implied  covenant  of good  faith  and fair  dealing.  As of the
Restatement   Effective  Date  and  after  giving  effect  to  the  transactions
contemplated  hereby, all Obligations of the Borrowers are within the definition
of "Senior Debt" (as defined in the Senior Subordinated Note Documents).

     6.23  Insurance.  Set forth on Schedule VIII hereto is a true,  correct and
complete list of all material  insurance  carried by each Credit Party on and as
of the Restatement Effective Date.

     SECTION  7.  Affirmative  Covenants.  Each  of  Holdings  and  each  of the
Borrowers  hereby  covenants and agrees for itself and each of its  Subsidiaries
that on and after the  Restatement  Effective Date and thereafter for so long as
this  Agreement is in effect and until the Total  Commitment  and all Letters of
Credit have terminated and the Loans,  Notes and Unpaid Drawings,  together with
all accrued but unpaid interest, Fees and other Obligations, are paid in full:

     7.01  Information  Covenants.  Holdings will furnish to the  Administrative
Agent (which shall promptly distribute a copy to each Bank):


     (a) Monthly Financial Statements. As soon as practicable,  and in any event
within 45 days after the close of each monthly  accounting period of each fiscal
year (other than the last monthly  accounting  period in any fiscal  quarter and
fiscal year), the consolidated balance sheet of Holdings and its Subsidiaries as
at the end of each such monthly  accounting period and the related  consolidated
statement  of income and the related  consolidated  statement  of cash flows for
each such monthly  accounting  period and for the elapsed  portion of the fiscal
year ended with the last day of each such  monthly  accounting  period,  setting
forth comparative figures for the corresponding monthly accounting period in the
prior fiscal year.


     (b) Quarterly Financial  Statements.  Within 45 days after the close of the
first three quarterly  accounting  periods in each fiscal year of Holdings,  the
consolidated  balance  sheet of Holdings and its  Subsidiaries  as at the end of
each such quarterly accounting period and the related consolidated  statement of
income  and the  related  consolidated  statement  of cash  flows  for each such
quarterly accounting period and for the elapsed portion of the fiscal year ended
with the last day of each  such  quarterly  accounting  period  (other  than the
fourth quarterly  accounting period),  setting forth comparative figures for the
related  periods in the prior fiscal year,  all of which shall be in  reasonable
detail and  certified  by the chief  financial  officer or treasurer of Holdings
that they fairly  present in all material  respects the  financial  condition of
Holdings and its Subsidiaries as of the dates indicated and the results of their
operations and changes in their cash flows for the periods indicated, subject to
normal  year-end  audit  adjustments  and shall be  accompanied  by a management
narrative of the results of operations  and financial  condition with respect to
such period.


     (c)  Annual  Financial  Statements.  Within 90 days after the close of each
fiscal year of  Holdings,  the  consolidated  balance  sheet of Holdings and its
Subsidiaries  as at the end of such  fiscal  year and the  related  consolidated
statement  of income and the related  consolidated  statement  of cash flows for
such fiscal year setting forth comparative figures for the preceding fiscal year
and certified by any of the "big five" independent  certified public accountants
or such other independent  certified public  accountants of recognized  national
standing  reasonably  acceptable to the  Administrative  Agent,  together with a
report of such  accounting  firm stating that in the course of its regular audit
of the  financial  statements  of  Holdings,  each  Borrower  and  each of their
Subsidiaries,  which audit was conducted in accordance  with generally  accepted
auditing  standards,  such accounting firm obtained no knowledge of any Event of
Default which has occurred and is continuing  under  Sections 8.07 through 8.10,
inclusive,  or,  if in the  opinion  of such  accounting  firm  such an Event of
Default has occurred and is continuing, a statement as to the nature thereof and
shall be accompanied  by a management  discussion and analysis of the results of
operations and financial condition with respect to such period.


     (d) Budgets.  No later than 60 days after the first day of each fiscal year
of Holdings,  a budget in form  reasonably  satisfactory  to the  Administrative
Agent  (including  budgeted  statements  of income  and cash  flows and  balance
sheets)  prepared by Holdings for (x) each quarterly  accounting  period in such
fiscal year  prepared  in detail and (y) such  fiscal  year  prepared in summary
form, in each case, of Holdings and its  Subsidiaries  on a consolidated  basis,
accompanied  by the  statement  of the chief  financial  officer or treasurer of
Holdings to the effect that, to the best of such officer's knowledge, the budget
is a reasonable good faith estimate of the period covered thereby. Additionally,
within 60 days after the consummation of each Permitted Acquisition, a budget in
the form described above for the business,  division or Person acquired pursuant
to such Permitted Acquisition.


     (e)  Officers'  Certificates.  At the time of the delivery of the financial
statements  provided for in Section  7.01(b) and (c), a certificate of the chief
financial  officer or treasurer  of Holdings to the effect,  to the best of such
officer's  knowledge after due inquiry,  that no Default or Event of Default has
occurred and is  continuing  or, if any Default or Event of Default has occurred
and is continuing,  specifying the nature and extent thereof,  which certificate
shall (x) set forth the calculations  required to establish whether Holdings and
its Subsidiaries  were in compliance with the provisions of Sections 8.03, 8.04,
8.05 and 8.07  through  8.10,  inclusive,  at the end of such fiscal  quarter or
year,  as the case may be and (y) if  delivered  with the  financial  statements
required  by  Section  7.01(c),  set forth the  amount of (and the  calculations
required to establish)  Excess Cash Flow for the respective  Excess Cash Payment
Period.


     (f)  Management   Letters.   Promptly  after  Holdings',   or  any  of  its
Subsidiaries'  receipt  thereof,  a copy of any "management  letter" received by
Holdings,  or such  Subsidiary  from its certified  public  accountants  and the
management's responses thereto.


     (g) Notice of Default or Litigation. Promptly, and in any event within five
Business  Days after an officer of Holdings or any of its  Subsidiaries  obtains
knowledge thereof, notice of (i) the occurrence of any event which constitutes a
Default or an Event of  Default  (provided  such  Default or Event of Default is
continuing) and (ii) any litigation or governmental  investigation or proceeding
pending or  threatened  (x) against  Holdings or any of its  Subsidiaries  which
could  reasonably be expected to materially  and adversely  affect the business,
operations,  property, assets, liabilities or condition (financial or otherwise)
of Holdings  and its  Subsidiaries  taken as a whole or (y) with  respect to any
Credit Document.


     (h)  Other  Reports  and  Filings.   Promptly,   copies  of  all  financial
information,  proxy materials and other  information and reports,  if any, which
Holdings or any of its Subsidiaries  shall file with the Securities and Exchange
Commission  or any  successor  thereto  (the "SEC") or deliver to holders of its
Indebtedness having an outstanding  principal amount (or upon the utilization of
any unused  commitments may have an outstanding  principal  amount) in excess of
$10,000,000   pursuant  to  the  terms  of  the  documentation   governing  such
Indebtedness  (or any  trustee,  administrative  agent or  other  representative
therefor) (but excluding administrative and other immaterial notices pursuant to
such  Indebtedness  documentation)  and not  otherwise  required to be delivered
hereunder.


     (i)  Environmental  Matters.  Promptly  upon,  and in any  event  within 30
Business Days after, an executive,  financial or compliance  officer of Holdings
or any of its Subsidiaries  obtains knowledge thereof,  notice of one or more of
the following  environmental  matters,  unless such environmental  matters could
not, individually or when aggregated with all other such environmental  matters,
be  reasonably  expected  to  materially  and  adversely  affect  the  business,
operations,  property, assets, liabilities or condition (financial or otherwise)
of Holdings and its  Subsidiaries  taken as a whole,  provided that in any event
Holdings and its  Subsidiaries  shall  deliver to the  Administrative  Agent all
material  notices  relating to such  matters  received by Holdings or any of its
Subsidiaries  from any government or governmental  agency under, or pursuant to,
CERCLA:


          (i) any pending or threatened (in writing) Environmental Claim against
     Holdings or any of its  Subsidiaries or any Real Property owned or operated
     by Holdings or any of its Subsidiaries;


          (ii) any  condition  or  occurrence  on,  or  arising  from,  any Real
     Property owned or operated by Holdings or any of its Subsidiaries  that (a)
     results in noncompliance  by Holdings or any of its  Subsidiaries  with any
     applicable  Environmental  Law or (b) could  reasonably be expected to form
     the  basis  of an  Environmental  Claim  against  Holdings  or  any  of its
     Subsidiaries or any such Real Property;


          (iii)  any  condition  or  occurrence  on any Real  Property  owned or
     operated by Holdings or any of its  Subsidiaries  that could  reasonably be
     expected to cause such Real Property to be subject to any  restrictions  on
     the ownership,  occupancy, use or transferability by Holdings or any of its
     Subsidiaries of such Real Property under any Environmental Law; and


          (iv) the taking of any removal or  remedial  action in response to the
     actual or alleged  presence of any Hazardous  Material on any Real Property
     owned or operated by Holdings or any of its Subsidiaries as required by any
     Environmental Law or any governmental or other administrative agency.


          All such notices shall describe in reasonable detail the nature of the
     Environmental  Claim,  condition,  occurrence or removal or remedial action
     and Holdings', or such Subsidiary's response thereto.

          (j) Annual Meetings with Banks.  At the request of the  Administrative
     Agent,  Holdings shall,  once during each fiscal year, hold a meeting (at a
     mutually  agreeable  location  and  time)  with  all of the  Banks at which
     meeting the financial results of the previous fiscal year and the financial
     condition of Holdings and its  Subsidiaries  and the budgets  presented for
     the current fiscal year shall be reviewed.


     (k) Promptly upon the  acquisition  thereof,  notice of the  acquisition by
Holdings  or any  Subsidiary  of Real  Property  having a fair  market  value of
$2,500,000 or more.


     (l)  Promptly  upon the  occurrence  thereof,  notice of any  change in the
Annexes of the Security Agreements and Pledge Agreements, in each case providing
reasonable  detail of such  change  which  would  affect the  perfection  of the
security interest in the Collateral thereunder.


     (m)  Other  Information.  From  time to time,  such  other  information  or
documents  (financial  or  otherwise)  with  respect to  Holdings  or any of its
Subsidiaries as the  Administrative  Agent or any Bank may reasonably request in
writing.


     7.02 Books, Records and Inspections.  Holdings will, and will cause each of
its Subsidiaries to, keep proper books of record and account in which full, true
and correct entries in conformity with generally accepted accounting  principles
(or the comparable foreign equivalent thereof) and all requirements of law shall
be made of all material  dealings and  transactions  in relation to its business
and  activities.  Holdings  will,  and will cause each of its  Subsidiaries  to,
permit officers and designated  representatives of the  Administrative  Agent or
any Bank to visit and inspect,  during regular business hours and under guidance
of officers of Holdings or such Subsidiary, any of the properties of Holdings or
any of its Subsidiaries,  and, subject to the foregoing requirements, to examine
the books of account of  Holdings  and any of its  Subsidiaries  and discuss the
affairs, finances and accounts of Holdings and any of its Subsidiaries with, and
be  advised  as  to  the  same  by,  its  and  their  officers  and  independent
accountants,  all at such reasonable  times and intervals,  upon such reasonable
notice and to such reasonable  extent as the  Administrative  Agent or such Bank
may request.


     7.03  Maintenance  of Property;  Insurance.  (a) Holdings and the Borrowers
will,  and will  cause  each of their  Subsidiaries  to,  (i) keep all  material
property  necessary  and  useful  in its  business  in good  working  order  and
condition,  (ii) maintain  insurance on its property with  reputable and solvent
insurance  companies in at least such amounts and against at least such risks as
is consistent and in accordance with industry practice and (iii) furnish to each
Bank, upon written request, full information as to the insurance carried.


     (b) Holdings will, and will cause each of its Subsidiaries to, at all times
keep  their  respective  property  in  which  a Lien  has  been  granted  to the
Collateral  Agent  insured in favor of the  Collateral  Agent,  and all policies
(including the Mortgage  Policies) or certificates (or certified copies thereof)
with respect to such insurance (and any other  insurance  maintained by Holdings
or any  such  Subsidiary)  (i)  shall  be  endorsed  to the  Collateral  Agent's
reasonable  satisfaction  for the benefit of the  Collateral  Agent  (including,
without  limitation,  by naming the Collateral Agent as loss payee (with respect
to Collateral)  or, to the extent  permitted by applicable law, as an additional
insured),  (ii) shall state that such  insurance  policies shall not be canceled
without 30 days' prior written  notice thereof (or 10 days' prior written notice
in the case of  cancellation  for the non-payment of premiums) by the respective
insurer to the Collateral Agent and (iii) shall be deposited with the Collateral
Agent. Notwithstanding the foregoing, if the Collateral Agent receives insurance
proceeds  which are not required to be applied to repay the Term Loans  pursuant
to Section  4.02(g),  such  proceeds  shall be  distributed  to  Holdings or its
applicable Subsidiary, as the case may be.


     (c) If  Holdings  or any of its  Subsidiaries  shall fail to  maintain  all
insurance in  accordance  with this Section  7.03,  or if Holdings or any of its
Subsidiaries  shall fail to so endorse and deposit all policies or  certificates
with respect thereto, the Administrative Agent and/or the Collateral Agent shall
have the right (but shall be under no  obligation),  upon notice to Holdings and
the US  Borrower,  to procure such  insurance,  and Holdings and the US Borrower
agree to reimburse the Administrative Agent or the Collateral Agent, as the case
may be, for all  reasonable  out-of-pocket  costs and expenses of procuring such
insurance.


     7.04  Franchises,   etc.   Holdings  will,  and  will  cause  each  of  its
Subsidiaries  to, do or cause to be done all things  necessary  to preserve  and
keep in full force and effect its existence and its material rights, franchises,
licenses  and, to the extent  required by the  Security  Agreement,  trademarks,
copyrights  and patents;  provided,  however,  that nothing in this Section 7.04
shall prevent (i) transactions  permitted by Section 8.02 or (ii) the withdrawal
by Holdings or any of its Subsidiaries of qualification as a foreign corporation
in any  jurisdiction  where such withdrawal  could not reasonably be expected to
have a material adverse effect on the business,  operations,  property,  assets,
liabilities   or  condition   (financial  or  otherwise)  of  Holdings  and  its
Subsidiaries taken as a whole.


     7.05 Compliance with Statutes,  etc.  Holdings will, and will cause each of
its Subsidiaries to, comply with all applicable statutes, regulations and orders
of,  and all  applicable  restrictions  imposed  by,  all  governmental  bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property,  except such noncompliance as could not, individually or in the
aggregate,  reasonably  be  expected  to have a material  adverse  effect on the
business,  operations,  property, assets, liabilities or condition (financial or
otherwise) of Holdings and its Subsidiaries taken as a whole.


     7.06 Compliance with Environmental  Laws. (a) (i) Holdings will comply, and
will use its best efforts to cause each of its Subsidiaries to comply,  with all
Environmental  Laws  applicable to the ownership or use of its Real Property now
or  hereafter  owned or operated by  Holdings or any of its  Subsidiaries,  will
promptly pay or cause to be paid all costs and expenses  incurred in  connection
with such  compliance,  and will keep or cause to be kept all such Real Property
free and clear of any Liens imposed pursuant to such Environmental Laws and (ii)
neither Holdings nor any of its Subsidiaries will generate,  use, treat,  store,
release  or dispose  of, or permit  the  generation,  use,  treatment,  storage,
release or disposal of Hazardous Materials on any Real Property now or hereafter
owned or operated by Holdings or any of its Subsidiaries, or transport or permit
the  transportation  of Hazardous  Materials to or from any such Real  Property,
except to the extent that the failure to comply with the requirements  specified
in clause (i) or (ii) above, either individually or in the aggregate,  could not
reasonably  be expected to result in  liability  under  Environmental  Laws that
could have a material  adverse  effect on the  business,  operations,  property,
assets,  liabilities  or condition  (financial or otherwise) of Holdings and its
Subsidiaries taken as a whole. If required to do so under any applicable legally
binding  directive  or  order  of any  governmental  agency,  Holdings  and  the
Borrowers agree to undertake, and cause each of their Subsidiaries to undertake,
to the  extent  required  under  applicable  Environmental  Laws,  any clean up,
removal, remedial or other action necessary to remove and clean up any Hazardous
Materials  from any Real  Property  owned or  operated by Holdings or any of its
Subsidiaries in accordance with the requirements of all applicable Environmental
Laws and in accordance  with such legally  binding  orders and directives of all
governmental  authorities,  except  to the  extent  that  (x)  Holdings  or such
Subsidiary  is  contesting  such  order  or  directive  in  good  faith  and  by
appropriate proceedings and for which adequate reserves have been established to
the extent  required by  generally  accepted  accounting  principles  or (y) the
failure to take any such  action  could not  reasonably  be  expected  to have a
material  adverse  effect  on  the  business,   operations,   property,  assets,
liabilities   or  condition   (financial  or  otherwise)  of  Holdings  and  its
Subsidiaries taken as a whole.

     (b) At the  written  request of the  Administrative  Agent or the  Required
Banks,  at any  time  and  from  time  to time as is  reasonable  after  (i) the
Obligations  have become due and payable pursuant to Section 9 or (ii) the Banks
receive notice under Section  7.01(i) for any event for which notice is required
to be delivered  with respect to conditions at any Real  Property,  Holdings and
the US Borrower will provide,  at their sole cost and expense,  an environmental
site assessment  report of reasonable scope and expense  concerning any relevant
Real  Property  now or  hereafter  owned or  operated  by Holdings or any of its
Subsidiaries,  prepared  by an  environmental  consulting  firm  approved by the
Administrative  Agent in its reasonable  discretion,  indicating the presence or
absence of Hazardous Materials and the potential cost of any removal or remedial
action in connection  with any  Hazardous  Materials on such Real  Property.  If
Holdings and the US Borrower  fail to provide the same within 45 days after such
request was made, the Administrative  Agent may order the same, and Holdings and
the US Borrower,  to the extent  Holdings and the US Borrower have the authority
to do so, shall grant and hereby  grants,  to the  Administrative  Agent and the
Banks  and  their  Administrative  Agents,  access  to such  Real  Property  and
specifically  grants  the  Administrative  Agent  and the  Banks an  irrevocable
non-exclusive  license,  subject to the rights of tenants,  to undertake such an
assessment, all at Holdings and the US Borrower's expense.

     7.07 ERISA. The relevant Borrower will furnish to the Administrative  Agent
prompt  written  notice of the  occurrence  of any ERISA  Event  that,  alone or
together  with any other ERISA Events that have  occurred,  could  reasonably be
expected to result in liability to one or more of Holdings, any Borrower and any
of their Subsidiaries in an aggregate amount exceeding  $1,500,000.  Each notice
delivered  under this  Section  7.07 shall be  accompanied  by a statement of an
Authorized  Officer of the relevant  Borrower  setting  forth the details of the
event or  development  requiring such notice and any action taken or proposed to
be taken with respect thereto.

     7.08 End of Fiscal Years; Fiscal Quarters.  Holdings will cause (i) each of
its, and each of its material Subsidiaries' (including, without limitation, each
Credit  Party's),  fiscal  years to end on  September  30 and (ii)  each of such
Person's  fiscal quarters to end on December 31, March 31, June 30 and September
30.


     7.09 Performance of Obligations.  Holdings will, and will cause each of its
Subsidiaries  to,  perform  all of its  obligations  under  the  terms  of  each
mortgage, deed of trust, indenture,  loan agreement or credit agreement and each
other material  agreement,  contract or instrument by which it is bound,  except
such non-performances as could not, individually or in the aggregate, reasonably
be  expected  to have a material  adverse  effect on the  business,  operations,
property,  assets, liabilities or condition (financial or otherwise) of Holdings
and its  Subsidiaries  taken as a whole;  provided  that the  failure to pay any
Indebtedness  shall not constitute a breach of this Section 7.09 unless it shall
give rise to an Event of Default under Section 9.04.


     7.10 Payment of Taxes. Holdings will pay and discharge, and will cause each
of its  Subsidiaries to pay and discharge,  all material taxes,  assessments and
governmental charges or levies imposed upon Holdings or its Subsidiaries or upon
the income or profits of Holdings or its  Subsidiaries,  or upon any  properties
belonging to it, prior to the date on which  penalties  would  otherwise  attach
thereto,  and all lawful claims which, if unpaid,  might become a lien or charge
not otherwise permitted under Section 8.01(i) upon any properties of Holdings or
any such  Subsidiary;  provided  that neither  Holdings nor any such  Subsidiary
shall be required to pay any such  material  tax,  assessment,  charge,  levy or
claim which is being  contested in good faith and by proper  proceedings so long
as Holdings or any such  Subsidiary  maintains  adequate  reserves  with respect
thereto in accordance with generally accepted accounting principles.


     7.11 Additional  Mortgages;  Further Assurances.  (a) At the request of the
Administrative  Agent or the Required Banks from time to time,  Holdings and the
Borrowers will, and will cause each of Holding's  Subsidiaries  to, grant to the
Collateral Agent security interests and mortgages (an "Additional  Mortgage") in
any Real Property owned by Holdings, any Borrower or any of such Subsidiaries of
any Borrower that is not covered by the original  Mortgages and which is located
in the United States,  Canada, or the United Kingdom, and which individually has
a fair  market  value  of at least  $2,500,000  (each  such  Real  Property,  an
"Additional Mortgaged Property"). All such Additional Mortgages shall be granted
pursuant to documentation  reasonably  satisfactory in form and substance to the
Administrative Agent and shall constitute valid and enforceable  perfected Liens
superior to and prior to the rights of all third Persons and subject to no other
Liens,  except  Permitted Liens and shall secure the Obligations of the relevant
Credit Party under the Credit Documents. The Additional Mortgages or instruments
related  thereto  shall be duly  recorded  or filed in such  manner  and in such
places as are required by law to  establish,  perfect,  preserve and protect the
Liens in favor of the Collateral  Agent  required to be granted  pursuant to the
Additional Mortgages and all taxes, fees and other charges payable in connection
therewith  shall  be paid in  full.  Notwithstanding  anything  to the  contrary
contained  above in this Section  7.11(a),  in connection with any (x) Leasehold
that has been designated as an Additional Mortgaged Property,  none of Holdings,
the Borrowers, or any such Subsidiaries shall be required to grant an Additional
Mortgage therein to the extent that such a grant is prohibited by the applicable
lease (and the lessor  thereunder or its mortgagees  has not consented  thereto)
and (y) Real  Property  that  has been  designated  as an  Additional  Mortgaged
Property,  none of Holdings,  the Borrowers,  or any such Subsidiaries  shall be
required to grant an Additional Mortgage therein to the extent that such a grant
is  prohibited  by the terms of any document  evidencing a prior Lien thereon to
the extent permitted under Section 8.01(i),  (vii),  (viii), (ix), or (xxi) (and
the senior lienholder has not consented thereto).


     (b)  Holdings  and the  Borrowers  will,  and  will  cause  each  of  their
Subsidiaries   to,  at  the  expense  of  Holdings,   such   Borrower  and  such
Subsidiaries,  make, execute, endorse,  acknowledge,  file and/or deliver to the
Collateral  Agent  from time to time  such  conveyances,  financing  statements,
transfer endorsements, powers of attorney, certificates, and other assurances or
instruments  and take such further steps relating to the  Collateral  covered by
any of the Security  Documents as the Collateral Agent may reasonably require to
ensure the validity,  enforceability,  perfection or priority of the  Collateral
Agent's security interest in the Collateral or to enable the Collateral Agent to
realize  or  exercise  the  rights and  benefits  intended  to be created by the
Security  Documents.  Furthermore,  Holdings and the Borrowers shall cause to be
delivered to the  Collateral  Agent such opinions of counsel,  title  insurance,
title  endorsements,  appraisals,  surveys and other related documents as may be
reasonably  requested by the Collateral Agent to assure itself that this Section
7.11 has been complied with.

     (c) In the event the Administrative  Agent or the Required Banks reasonably
determine  the  following  are required or  advisable  under  applicable  law or
regulation,  Holdings shall, and shall cause each of its Subsidiaries to, obtain
real estate  appraisals  with  respect to each  Mortgaged  Property,  which real
estate appraisal shall follow the valuation procedures set forth in 12 CFR, Part
34 -  Subpart  C,  and  shall  otherwise  be in form  and  substance  reasonably
satisfactory to the Administrative Agent.


     (d)  Holdings  and the  Borrowers  agree that each action  required by this
Section 7.11 shall be completed as soon as possible,  but in no event later than
90  days  after  such  action  is  requested  in  writing  to be  taken  by  the
Administrative Agent or the Required Banks.


     7.12  Foreign  Subsidiaries  Security.  (a) If  following  a change  in the
relevant  sections of the Code or the regulations,  rules,  rulings,  notices or
other  official  pronouncements  issued or promulgated  thereunder,  counsel for
Holdings reasonably acceptable to the Administrative Agent, within 30 days after
a request from the Administrative  Agent or the Required Banks, does not deliver
evidence mutually  satisfactory to Holdings and the  Administrative  Agent that,
with respect to any Foreign  Subsidiary of Holdings which (x) the Administrative
Agent or the Required Banks determine to be material to the business of Holdings
and its  Subsidiaries  taken as a whole and (y) has not  already  had all of its
stock pledged pursuant to a Pledge Agreement, (i) a pledge of 66-2/3% or more of
the total combined  voting power of all classes of capital stock of such Foreign
Subsidiary  entitled  to vote  and  (ii)  the  entering  into  by  such  Foreign
Subsidiary  of a  guaranty  in  substantially  the  form  of the  US  Subsidiary
Guaranty,  with such  changes  as are  required  to comply  with  local law (the
"Foreign Subsidiary Guaranty"),  in any such case, would cause the undistributed
earnings  of such  Foreign  Subsidiary  as  determined  for  Federal  income tax
purposes to be treated as a deemed dividend to such Foreign  Subsidiary's United
States  parent for Federal  income tax purposes in each case as a result of such
Foreign  Subsidiary  pledging its assets  (directly or indirectly) to secure the
Obligations of each Borrower  (including,  without limitation,  the US Borrower)
and each  Subsidiary  under the Credit  Documents  and the  obligations  of each
Borrower  (including,  without  limitation,  the US Borrower) under any Interest
Rate  Protection  Agreement or Other  Hedging  Agreement,  then in the case of a
failure to deliver the evidence  described in clause (i) above,  that portion of
such Foreign  Subsidiary's  outstanding  capital stock not  theretofore  pledged
pursuant to a Pledge Agreement shall be pledged to the Collateral Agent pursuant
to a Pledge  Agreement (or another  pledge  agreement in  substantially  similar
form, if needed), and in the case of a failure to deliver the evidence described
in clause (ii) above,  such  Foreign  Subsidiary  shall  execute and deliver the
Foreign Subsidiary Guaranty (or another guaranty in substantially  similar form,
if needed),  guaranteeing  the Obligations of each Borrower  (including  without
limitation,  the US Borrower) and each  Subsidiary of the US Borrower  under the
Credit  Documents and the  obligations of the US Borrower and each Subsidiary of
the US Borrower  under any Interest Rate  Protection  Agreement or Other Hedging
Agreement  to the  extent  that  the  entering  into of the  Foreign  Subsidiary
Guaranty, the pledge of the additional shares of capital stock and the amendment
to such  Security  Documents  (i) is  permitted  by the  laws of the  respective
foreign  jurisdiction,  (ii) is commercially  reasonable and (iii) would not, in
the reasonable opinion of Holdings and the Administrative  Agent,  result in any
adverse tax consequences to Holdings or its Subsidiaries, and with all documents
delivered  pursuant  to  this  Section  7.12(a)  to be  in  form  and  substance
reasonably satisfactory to the Administrative Agent and the Required Banks.


     (b)  Within 30 days of any  request  from the  Administrative  Agent or the
Required  Banks (which  requests may be made at any time and from time to time),
Holdings  shall,  in respect of each CTB  Subsidiary  of Holdings  which (x) the
Administrative  Agent or the Required Banks reasonably  determine to be material
to the  business of Holdings and its  Subsidiaries  taken as a whole and (y) has
not already had all of its stock pledged pursuant to the Pledge Agreement, cause
such CTB Subsidiary's outstanding capital stock not theretofore pledged pursuant
to the US Pledge Agreement to be pledged to the Collateral Agent pursuant to the
US Pledge Agreement (or another pledge agreement in substantially  similar form,
if  needed)  and to  enter  into a  guaranty  in  substantially  the form of the
Subsidiary Guaranty,  with such changes as are required to comply with local law
(the "CTB Subsidiary Guaranty")  guaranteeing the Obligations of the US Borrower
under the Credit  Documents  and the  obligations  of the US Borrower  under any
Interest  Rate  Protection  or Other  Hedging  Agreement  to the extent that the
entering into of the CTB Subsidiary  Guaranty,  the pledge of such capital stock
and the amendment to such Security Documents (i) is permitted by the laws of the
respective foreign  jurisdiction and (ii) is commercially  reasonable,  and with
all  documents  delivered  pursuant  to this  Section  7.12(b) to be in form and
substance  reasonably  satisfactory to the Administrative Agent and the Required
Banks.

     7.13 Ownership of Subsidiaries. Holdings will at all times ensure that each
of its  Subsidiaries  remains  as a  Wholly-Owned  Subsidiary  except (i) to the
extent that any such  Subsidiary  is merged,  consolidated  or  liquidated  in a
transaction  permitted by Section 8.02(v) or (vi) and (ii) for  non-Wholly-Owned
Subsidiaries  acquired after the Restatement  Effective Date pursuant to Section
8.05(xviii);  provided  that the US Borrower  will at all times own (directly or
indirectly)  at least a majority of the voting and  economic  interests  of each
non-Wholly-Owned  Subsidiary created or acquired after the Restatement Effective
Date as permitted  under Section 8.15,  except to the extent any such Subsidiary
is merged,  consolidated  or liquidated  in a  transaction  permitted by Section
8.02(v) or (vi).


     7.14 Permitted Acquisitions. Subject to the provisions of this Section 7.14
and the requirements contained in the definition of Permitted  Acquisition,  the
US Borrower and each of its Subsidiaries (to the extent that any such Subsidiary
which is a Credit  Party is able to,  and does,  grant a Lien to the  Collateral
Agent for the  benefit of the  Secured  Creditors  on and  security  interest in
assets  acquired  thereby in connection  with such  Permitted  Acquisition,  but
limited to 65% of the capital stock of any Foreign  Subsidiary) may from time to
time after the Restatement Effective Date effect Permitted Acquisitions, so long
as


          (i) the  Borrower  shall have given the  Administrative  Agent and the
     Banks at least 10 Business  Days'  prior  written  notice of any  Permitted
     Acquisition,


          (ii) no Default or Event of  Default  is in  existence  at the time of
     entering  into a legally  binding  agreement to consummate  such  Permitted
     Acquisition or would result immediately after giving effect thereto and all
     representations  and  warranties  contained  herein or in the other  Credit
     Documents shall be true and correct in all material  respects with the same
     effect as though such representations and warranties were made on and as of
     the date of entering into a legally  binding  obligation to consummate such
     Permitted Acquisition (both before and after giving effect thereto), unless
     stated  to  relate  to  a  specific   earlier  date,  in  which  case  such
     representations  and  warranties  shall be true and correct in all material
     respects as of such earlier date,


          (iii)  calculations are made by the US Borrower of compliance with the
     covenants  contained in Sections 8.08, 8.09 and 8.10 (in each case,  giving
     effect  to the last  sentence  appearing  therein)  for the  period of four
     consecutive  fiscal quarters (taken as one accounting period) most recently
     ended prior to the date of such Permitted  Acquisition  for which financial
     statements are available  (each, a  "Calculation  Period"),  on a Pro Forma
     Basis as if the  respective  Permitted  Acquisition  (as well as all  other
     Permitted Acquisitions  theretofore consummated after the first day of such
     Calculation  Period)  had  occurred  on the first  day of such  Calculation
     Period and such  recalculations  shall show that such  financial  covenants
     would have been complied with if the Permitted  Acquisition had occurred on
     the first day of such Calculation Period,


          (iv) the Total Unutilized  Revolving Loan Commitment shall be at least
     $10,000,000 after giving effect to the respective Permitted Acquisition,


          (v)  with  respect  to  any   Permitted   Acquisition   the  aggregate
     consideration in connection with which is $10,000,000 or more,  projections
     (it  being  recognized  by the  Administrative  Agent  and the  Banks  that
     projections  as to future  events  are not to be viewed as facts or factual
     information  and that actual results  during the period or periods  covered
     thereby may differ from the projected  results) prepared by the US Borrower
     in good  faith for the  period  from the date of the  consummation  of such
     Permitted  Acquisition  to the  date  which is one  year  thereafter  shall
     reflect that the Credit  Parties shall be in compliance  with the covenants
     set forth in Sections 8.08, 8.09 and 8.10, inclusive for such period,


          (vi) the cash  consideration  payable in connection  with the proposed
     Permitted Acquisition,  when combined with the aggregate cash consideration
     paid in connection with all other Permitted Acquisitions  consummated after
     the  Restatement  Effective  Date  and  on or  prior  to  the  date  of the
     consummation of the proposed Permitted  Acquisition does not exceed (A) the
     sum of (x) $30,000,000, (y) the then Available Retained ECF Amount, and (z)
     the Available Equity Issuance Amount less (B) the  Non-Qualified  Permitted
     Earn-Out Amount, and

          (vii)  Holdings shall have  delivered to the  Administrative  Agent an
     officer's  certificate  executed  by an  Authorized  Officer  of  Holdings,
     certifying to the best of his knowledge,  compliance with the  requirements
     of  preceding  clauses (i) through  (vi) and  containing  the  calculations
     required by preceding clauses (iii), (v) and (vi).


     7.15 Interest Rate Protection.  The US Borrower shall no later than 90 days
following the  Restatement  Effective Date enter into, and thereafter  maintain,
Interest   Rate   Protection   Agreements,   reasonably   satisfactory   to  the
Administrative  Agent,  with a term of at least two years  from the  Restatement
Effective Date,  establishing a fixed or maximum interest rate acceptable to the
Administrative Agent in respect of at least 25% of the outstanding Term Loans.

     SECTION 8. Negative  Covenants.  Each of Holdings and each Borrower  hereby
covenants and agrees for itself and each of its  Subsidiaries  that on and after
the Restatement Effective Date and until the Total Commitment and all Letters of
Credit have terminated and the Loans,  Notes and Unpaid Drawings,  together with
all accrued but unpaid interest, Fees and other Obligations, are paid in full:

     8.01 Liens. Holdings and the Borrowers will not, and will not permit any of
their Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or
with  respect  to  any  property  or  assets  (real  or  personal,  tangible  or
intangible)  of  Holdings  or any of its  Subsidiaries,  whether  now  owned  or
hereafter  acquired,  or  sell  any  such  property  or  assets  subject  to  an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets  (including sales of accounts  receivable with recourse to Holdings or
any of its Subsidiaries),  or assign any right to receive income,  provided that
the provisions of this Section 8.01 shall not prevent the creation,  incurrence,
assumption  or  existence of the  following  (Liens  described  below are herein
referred to as "Permitted Liens"):


          (i) Liens for taxes, assessments or governmental charges or levies not
     yet due and payable or Liens for taxes, assessments or governmental charges
     or levies being contested in good faith and by appropriate  proceedings for
     which adequate  reserves have been  established  to the extent  required by
     generally accepted accounting principles;


          (ii) Liens in respect of  property or assets of Holdings or any of its
     Subsidiaries  imposed by law, which were incurred in the ordinary course of
     business and do not secure Indebtedness, such as carriers', warehousemen's,
     materialmen's  and mechanics'  liens and other similar Liens arising in the
     ordinary  course  of  business,  and  (x)  which  do not  in the  aggregate
     materially  detract  from  the  value  of  Holdings'  or such  Subsidiary's
     property or assets or materially impair the use thereof in the operation of
     the  business  of  Holdings  or such  Subsidiary  or (y)  which  are  being
     contested in good faith by appropriate proceedings,  which proceedings have
     the effect of preventing  the  forfeiture or sale of the property or assets
     subject to any such Lien;


          (iii) Liens in existence on the  Restatement  Effective Date which are
     listed, and the property subject thereto described, in Schedule IX, and any
     renewals or  extensions  of such  Liens,  provided  that (x) the  aggregate
     principal  amount of the  Indebtedness,  if any, secured by such Liens does
     not increase from that amount  outstanding  at the time of any such renewal
     or extension  and (y) any such  renewal or extension  does not encumber any
     additional assets or properties of Holdings or any of its Subsidiaries;


          (iv) Permitted Encumbrances;


          (v) Liens created pursuant to the Security Documents;


          (vi)  leases or  subleases  granted to other  Persons in the  ordinary
     course of  business  not  materially  interfering  with the  conduct of the
     business of Holdings or any of its Subsidiaries;


          (vii) Liens upon assets  subject to Capitalized  Lease  Obligations to
     the extent permitted by Section  8.04(iv) or (xvi),  provided that (x) such
     Liens only serve to secure the payment of  Indebtedness  arising under such
     Capitalized  Lease Obligation and (y) the Lien encumbering the asset giving
     rise to the Capitalized  Lease Obligation does not encumber any other asset
     of Holdings or any of its Subsidiaries;


          (viii) Liens placed upon assets at the time of acquisition  thereof by
     any  Subsidiaries  of  Holdings  or  within  90 days  thereafter  to secure
     Indebtedness  incurred  to pay  all or a  portion  of  the  purchase  price
     thereof,  provided  that,  in either case,  (x) the  aggregate  outstanding
     principal  amount of all  Indebtedness  secured by Liens  permitted by this
     clause  (viii)  shall not at any time  exceed  the amount  permitted  under
     Section  8.04(iv) or (xvi) and (y) in all events,  the Lien encumbering the
     assets so acquired  does not encumber any other asset of Holdings or any of
     its Subsidiaries;


          (ix)  any  Lien  existing  on  any  property  or  asset  prior  to the
     acquisition  thereof by Holdings or any of its  Subsidiaries or existing on
     any property or asset of any Person that  becomes a Subsidiary  of Holdings
     after the date hereof prior to the time such Person becomes a Subsidiary of
     Holdings;  provided that (i) such Lien was not created in  contemplation of
     or in connection with such acquisition or such Person becoming a Subsidiary
     of Holdings, (ii) such Lien shall not apply to any other property or assets
     of Holdings  or any of its  Subsidiaries  and (iii) such Lien shall  secure
     only those  obligations which it secures on the date of such acquisition or
     the date such Person becomes a Subsidiary of Holdings;


          (x) easements,  rights-of-way,  restrictions,  encroachments and other
     similar charges or encumbrances, and minor title deficiencies, in each case
     not materially  interfering with the conduct of the business of Holdings or
     any of its Subsidiaries;


          (xi) Liens arising from precautionary UCC financing  statement filings
     or similar filings regarding operating leases;


          (xii) statutory and common law landlords'  liens under leases to which
     Holdings or any of its Subsidiaries is a party;


          (xiii)  Liens  incurred or  deposits  made in the  ordinary  course of
     business in connection with workers'  compensation,  unemployment insurance
     and  other  types of  social  security,  or to secure  the  performance  of
     tenders,  statutory  obligations,  surety and appeal bonds,  bids,  leases,
     government  contracts,  utilities,  performance and return-of-money  bonds,
     contracts,  Other Hedging Agreements and other similar obligations incurred
     in the ordinary course of business  (exclusive of contracts and obligations
     in respect of the payment for borrowed money);


          (xiv) Liens in favor of customers and revenue authorities arising as a
     matter of law to secure  payment of customs  duties in connection  with the
     importation of goods;


          (xv) normal and  customary  rights of set-off upon deposits of cash in
     favor of banks and other depository  institutions,  and pledges of cash and
     marketable securities pursuant to the general business conditions of German
     banks;


          (xvi) any Subsidiaries of Holdings may sell or assign overdue accounts
     receivable in connection with the collection thereof in the ordinary course
     of business;


          (xvii) Foreign  Subsidiaries may grant Liens on their assets to secure
     Indebtedness  outstanding  under  Section  8.04(xii)  or (xvi)  or  Section
     8.05(vii) or (ix);


          (xviii)  Liens  on  assets  subject  to  sale-leaseback   transactions
     permitted under Section 8.02(xii);


          (xix) any  agreement not  otherwise  prohibited by this  Agreement not
     intended   to   create   a  Lien   but   containing   language   permitting
     recharacterization if such intention is disregarded;


          (xx)  judgment  Liens and Liens  securing  appeal  bonds  relating  to
     judgments  not giving rise to an Event of Default  under  Section  9.09 and
     encumbering  assets with a fair market  value not in excess of  $3,000,000;
     and


          (xxi) Liens not  otherwise  permitted  pursuant to this  Section  8.01
     which secure  obligations  permitted  under this  Agreement  not  exceeding
     $3,000,000 in the aggregate at any one time outstanding.


     8.02 Consolidation, Merger, Sale of Assets, etc. Holdings and the Borrowers
will not, and will not permit any of their  Subsidiaries  to, wind up, liquidate
or  dissolve   its  affairs  or  enter  into  any   transaction   of  merger  or
consolidation,  or convey,  sell, lease or otherwise  dispose of (or agree to do
any of the  foregoing  at any future  time) all or any part of its  property  or
assets, or enter into any sale-leaseback transactions, except that:


          (i)  Subsidiaries  of Holdings may make sales of inventory,  equipment
     and other assets,  including sales to other  Subsidiaries,  in the ordinary
     course of business;


          (ii) Subsidiaries of Holdings may make sales of assets,  provided that
     (x) each such sale results in  consideration  at least 75% of which (taking
     into account the amount of cash and the principal  amount of any promissory
     notes  received as  consideration)  shall be in the form of cash  (provided
     that in lieu of cash such Subsidiary may receive, as consideration,  assets
     which such  Subsidiary  would have been  permitted to reinvest in under the
     terms  of  Section   4.02(e)  if  such   Subsidiary   had   received   cash
     consideration)  and (y) the aggregate sale proceeds from all assets subject
     to such sales shall not exceed $7,500,000 in any fiscal year of Holdings;


          (iii) so long as no Event of Default has occurred  and is  continuing,
     Subsidiaries of Holdings may make sales of assets in the ordinary course of
     business,  provided  that (w) each such sale is made for fair market  value
     (as  determined in good faith by  Holdings),  (x) each such sale results in
     consideration at least 75% of which (taking into account the amount of cash
     and the principal amount of any promissory notes received as consideration)
     shall be in the form of cash (provided that in lieu of cash such Subsidiary
     may receive, as consideration, assets which such Subsidiary would have been
     permitted  to  reinvest  in under  the  terms of  Section  4.02(e)  if such
     Subsidiary had received cash  consideration),  (y) in the case of each sale
     that results in  consideration of $10,000,000 or more, (A) calculations are
     made by Holdings of compliance  with covenants  contained in Sections 8.08,
     8.09 and 8.10 (in each case,  giving effect to the last sentence  appearing
     therein)  for  the  period  of  four  consecutive  quarters  (taken  as one
     accounting  period)  most  recently  ended  prior to the date of such asset
     sale,  on a pro  forma  basis as if such  asset  sale (as well as all other
     asset sales theretofore consummated after the first day of such period) had
     occurred on the first day of such period and such recalculations shall show
     that such financial  covenants  would have been complied with if such asset
     sale had  occurred  on the first day of such  period,  and (B)  projections
     prepared  by  Holdings  in good faith for the  period  from the date of the
     consummation  of such  asset  sale to the date that is one year  thereafter
     shall reflect that Holdings  shall be in compliance  with the covenants set
     forth in Sections 8.08, 8.09 and 8.10 for such period, and (z) the Net Cash
     Proceeds  therefrom  are either  applied as provided in Section  4.02(e) or
     reinvested in assets to the extent  permitted by Section  4.02(e) (it being
     understood  and agreed that to the extent that the aggregate  amount of Net
     Cash Proceeds from all assets subject to such sales exceeds  $15,000,000 in
     any fiscal year of  Holdings,  such excess  shall be applied as provided in
     Section 4.02(e) and without regard to the proviso contained therein);


          (iv)  Subsidiaries  of Holdings may lease (as lessor) or sublease real
     or personal property in the ordinary course of business;


          (v) any Foreign  Subsidiary  and any CTB Subsidiary of the US Borrower
     may be merged with and into, or be dissolved or liquidated into, or sell or
     otherwise  transfer  any of its  assets to (x) the US  Borrower  or (y) any
     Wholly Owned Subsidiary of the US Borrower;

          (vi) any Domestic Subsidiary of the US Borrower may be merged with and
     into, or be dissolved or liquidated  into, or transfer any of its assets to
     (x) the US Borrower or (y) any Wholly-Owned  Domestic  Subsidiary of the US
     Borrower;


          (vii) the US Borrower and its  Wholly-Owned  Subsidiaries  may sell or
     otherwise  transfer  assets  between or among one  another in the  ordinary
     course  of  business  so long as the  aggregate  value of all  such  assets
     transferred  in any  fiscal  year  of  the  US  Borrower  does  not  exceed
     $5,000,000;


          (viii) the US Borrower and its  Wholly-Owned  Subsidiaries may sell or
     otherwise transfer inventory, raw materials and work-in-progress between or
     among one another in the ordinary course of business;


          (ix) Subsidiaries of Holdings may sell or discount accounts receivable
     in the  ordinary  course  of  business,  but  only in  connection  with the
     collection or compromise thereof;


          (x)  Subsidiaries of Holdings may, in the ordinary course of business,
     license patents, trademarks, copyrights and know-how to third Persons or to
     the US Borrower or any of its  Subsidiaries,  so long as each such  license
     does  not  prohibit  the  granting  of a Lien  to  such  Subsidiary  in the
     intellectual property covered by such license;


          (xi)  transactions  permitted  under  Section  8.05 shall be permitted
     (including, without limitation, the purchase and sale of Cash Equivalents);


          (xii)   Subsidiaries   of  Holdings  may  enter  into   sale-leaseback
     transactions in so long as the assets sold pursuant to this clause (xii) do
     not have a fair market value in excess of  $10,000,000 in the aggregate and
     the Net Cash Proceeds  therefrom are either  applied as provided in Section
     4.02(e) or reinvested in assets to the extent provided in Section 4.02(e);

          (xiii)  Holdings  and its  Subsidiaries  may  liquidate  any  Inactive
     Subsidiary; and

          (xiv)  the US  Borrower  may  dispose  of all  or any  portion  of its
     Specialty Composites Division; provided that (x) each such sale is made for
     fair market value (as determined in good faith by Holdings),  (y) each such
     sale results in  consideration  at least 75% of which  (taking into account
     the  amount  of cash  and the  principal  amount  of any  promissory  notes
     received as  consideration)  shall be in the form of cash (provided that in
     lieu of cash such Subsidiary may receive,  as  consideration,  assets which
     such Subsidiary would have been permitted to reinvest in under the terms of
     Section 4.02(e) if such Subsidiary had received cash consideration) and (z)
     the Net Cash Proceed  therefrom  are either  applied as provided in Section
     4.02(e) or reinvested in assets to the extent provided in Section 4.02(e).

     To the extent the Required  Banks waive the provisions of this Section 8.02
with  respect  to the  sale  or  other  disposition  of any  Collateral,  or any
Collateral  is sold or otherwise  disposed of as permitted by this Section 8.02,
such Collateral (unless  transferred to a Credit Party or a Subsidiary  thereof)
shall in each case be sold or otherwise  disposed of free and clear of the Liens
created by the Security Documents and the  Administrative  Agent shall take such
actions (including,  without limitation,  directing the Collateral Agent to take
such actions) as are appropriate in connection therewith.

     8.03  Dividends.  Holdings and the Borrowers  will not, and will not permit
any of their  Subsidiaries  to,  authorize,  declare or pay any  Dividends  with
respect to Holdings or any of its Subsidiaries, except that:

          (i) any  Subsidiary of the US Borrower may pay Dividends to (x) the US
     Borrower or (y) any Wholly-Owned Subsidiary of the US Borrower;

          (ii) the US Borrower may pay cash Dividends to Holdings in the amounts
     and at the times of any payment by  Holdings in respect of taxes,  provided
     that any  refunds  received  by  Holdings  shall  promptly  be  returned by
     Holdings to the US Borrower;

          (iii) the US Borrower may pay cash  Dividends to Holdings in an amount
     not to exceed $1,000,000 in any fiscal year so long as the proceeds thereof
     are promptly  used by Holdings to pay  expenses in the  ordinary  course of
     business;

          (iv) (a) Holdings may redeem or purchase  shares of its capital  stock
     or other  equity  interests  (or options to purchase  its capital  stock or
     other  equity  interests)  held by  management  of  Holdings  or any of its
     Subsidiaries or employees following the termination of their employment (by
     death, disability,  termination,  resignation or retirement) or following a
     determination  by  management  of  Holdings  in good  faith that a hardship
     exists as to any member of management  or any  employee,  provided that (x)
     the only  consideration  paid by  Holdings  in respect of such  redemptions
     and/or purchases shall be cash and Shareholder  Subordinated Notes, (y) the
     sum of (A) the aggregate  amount paid by Holdings in cash in respect of all
     such  redemptions  and/or  purchases  plus (B) the aggregate  amount of all
     principal and interest  payments made on  Shareholder  Subordinated  Notes,
     shall not exceed $5,000,000 in any fiscal year of Holdings (plus the amount
     available  to be used  pursuant to this clause  (iv)(a)(y)  in prior fiscal
     years  and  not so  used,  but in no  event  more  than  $7,500,000  in the
     aggregate after the  Restatement  Effective  Date),  provided that all such
     amounts  shall be increased by (I) an amount equal to the net cash proceeds
     received by Holdings after the Restatement  Effective Date from the sale or
     issuance of its equity  interests (to the extent not required to be applied
     to repay  Term Loans  pursuant  to  Section  4.02(c),  not used to effect a
     Permitted Acquisition and not applied to make Capital Expenditures pursuant
     to  Section  8.07(b))  and (II) an amount  equal to key man life  insurance
     proceeds  received by Holdings and its  Subsidiaries  after the Restatement
     Effective Date and (z) at the time of any cash payment permitted to be made
     pursuant to this  Section  8.03(iv),  including  any cash  payment  under a
     Shareholder  Subordinated  Note,  no Default or Event of Default shall then
     exist  or  result  therefrom;  and (b) so long as no  Default  or  Event of
     Default then exists or would result therefrom, the US Borrower may pay cash
     Dividends to Holdings so long as Holdings  promptly  uses such proceeds for
     the purposes  described in clause  (iv)(a) of this Section 8.03  (including
     for the purpose of making interest or principal payments on any Shareholder
     Subordinated Note);

          (v) Holdings may pay Dividends on any  outstanding  Qualified  Capital
     Stock (including any Qualified Capital Stock outstanding on the Restatement
     Effective  Date) solely through the issuance of additional  shares or units
     of  Qualified  Capital  Stock of the same  class,  or  through  accrual  or
     accretion, but not in cash;

          (vi) the Borrower may pay Dividends to Holdings to enable  Holdings to
     make payments of the type referred to in Section 8.06(iv);

          (vii) the US Borrower may pay Dividends to Holdings to enable Holdings
     to make loans pursuant to Section 8.05(iii);

          (viii)  the US  Borrower  may pay  Dividends  to  Holdings  to  enable
     Holdings to make  required  payments on any  Permitted  Earn-Out  Preferred
     Equity in accordance with the terms thereof;

          (ix)  non-Wholly-Owned  Subsidiaries of Holdings  acquired pursuant to
     Section  8.05(xviii)  may pay Dividends,  so long as any such Dividends are
     paid pro rata to all equity holdings of such Subsidiaries; and

          (x) Holdings and the US Borrower  shall be permitted to pay  Dividends
     consisting  of shares of Qualified  Capital  Stock,  provided that any such
     Dividends paid by the US Borrower shall be paid only to Holdings.

     8.04 Indebtedness. Holdings and the Borrowers will not, and will not permit
any of their Subsidiaries to, contract, create, incur, assume or suffer to exist
any Indebtedness, except:

          (i) Indebtedness  incurred or continued pursuant to this Agreement and
     the other Credit Documents;


          (ii)  Existing  Indebtedness  to the  extent  the  same is  listed  on
     Schedule VII, and any  refinancing or renewals  thereof,  provided that any
     such refinancing and renewals shall not exceed the principal amount of, and
     shall not mature before such Existing Indebtedness  outstanding at the time
     of the refinancing or renewal thereof;


          (iii)   Permitted   Earn-Out  Debt  in  connection  with  a  Permitted
     Acquisition;


          (iv)  Indebtedness  evidenced by  Capitalized  Lease  Obligations  and
     purchase money  Indebtedness of Holdings and its  Subsidiaries  (other than
     Cabot Intermediate),  including any Indebtedness assumed in connection with
     the  acquisition  of assets,  provided that in no event shall the aggregate
     principal amount of Capitalized Lease Obligations, and the principal amount
     of all such  Indebtedness  incurred  or  assumed  in each  case  after  the
     Restatement Effective Date, permitted by this clause (iv) exceed $7,500,000
     at any time outstanding;


          (v) intercompany  Indebtedness  among Holdings and its Subsidiaries to
     the extent permitted by Section 8.05;


          (vi)  Indebtedness  of any Borrower  under  Interest  Rate  Protection
     Agreements  required  by  Section  7.15 or  entered  into to  protect  such
     Borrower  against   fluctuations  in  interest  rates  in  respect  of  the
     Obligations so long as management of such Borrower has determined  that the
     entering  into of such Interest Rate  Protection  Agreements  are bona fide
     hedging activities;


          (vii)  Indebtedness  of  Holdings  and its  Subsidiaries  under  Other
     Hedging Agreements providing protection against fluctuations in currency or
     commodity  values  in  connection  with  the  US  Borrower  or  any  of its
     Subsidiaries'  operations  so long as management of the US Borrower or such
     Subsidiary,  as the case may be, has  determined  that the entering into of
     such Other Hedging Agreements are bona fide hedging activities;


          (viii) any Borrower may become  liable as a guarantor  with respect to
     obligations of any of the Subsidiaries of such Borrower,  which obligations
     are otherwise permitted under this Agreement;


          (ix) Indebtedness in respect of those accounts receivable permitted to
     be sold or discounted pursuant to Section 8.02(ix);


          (x)  Permitted  Seller  Notes not to exceed  $25,000,000  in aggregate
     principal amount;


          (xi) Shareholder Subordinated Notes;


          (xii)  Indebtedness of the UK Borrower under the Overdraft Facility in
     an aggregate  outstanding principal amount not to exceed at the time of any
     incurrence thereunder the Pounds Sterling Equivalent of $5,000,000;


          (xiii)  Indebtedness of the US Borrower under the Senior  Subordinated
     Notes in an aggregate principal amount not to exceed $100,000,000 (less any
     repayments  or  prepayments  of  principal  thereof)  and  Indebtedness  of
     Holdings  arising  from the  guaranty  thereof  as set forth in the  Senior
     Subordinated Note Documents;


          (xiv) Indebtedness of the US Borrower and its Subsidiaries (other than
     Cabot  Intermediate)  under unsecured overdraft lines with commercial banks
     in the ordinary course of business and consistent  with past practices,  in
     an aggregate principal amount not to exceed $2,500,000 at any time;


          (xv) Permitted Refinancing Subordinated Indebtedness so long as (x) no
     Default or Event of Default then exists or would result  therefrom  and (y)
     the proceeds thereof are used, to promptly repurchase,  redeem or otherwise
     retire  outstanding  Senior  Subordinated  Notes  and/or  applied  to repay
     outstanding Term Loans as set forth in Section 4.02(d); and


          (xvi) additional  Indebtedness of Subsidiaries of Holdings (other than
     Cabot  Intermediate) not otherwise permitted under this Section 8.04 not to
     exceed $5,000,000 in aggregate principal amount at any time outstanding.


     Notwithstanding the foregoing,  Holdings and the US Borrower will not incur
any  Indebtedness  (other than  Revolving  Loans and  Obligations  in respect of
Letters of Credit) in excess of $10,000,000 under the basket set forth in clause
(vii) of the  definition of Permitted  Indebtedness  in the Senior  Subordinated
Note Indenture.


     8.05 Advances,  Investments,  Loans,  Purchase of Assets.  Holdings and the
Borrowers will not, and will not permit any of their  Subsidiaries  to, directly
or  indirectly,  (w) lend money or credit or make  advances to any  Person,  (x)
purchase or otherwise  acquire (in one or a series of related  transactions) any
part of the property or assets of any Person (including, without limitation, any
stock, obligations or securities of, or any other interest in, any other Person,
but excluding purchases or other acquisitions of inventory, materials, equipment
and other  tangible and intangible  assets in the ordinary  course of business),
(y) make any capital  contribution  to any other Person or (z) purchase or own a
futures contract or otherwise become liable for the purchase or sale of currency
or other  commodities  at a future  date in the  nature of a  futures  contract,
except that the following shall be permitted:

          (i)  Holdings  and its  Subsidiaries  may  acquire  and hold  accounts
     receivables  owing to any of them,  if created or acquired in the  ordinary
     course  of  business  and  payable  or  dischargeable  in  accordance  with
     customary terms;


          (ii) Holdings and its  Subsidiaries may acquire and hold cash and Cash
     Equivalents and Foreign  Subsidiaries may make and own similar  investments
     customary for countries in which they conduct business;


          (iii) Holdings and its Subsidiaries may (x) make loans and advances in
     the ordinary  course of business to their  respective  employees so long as
     the aggregate principal amount thereof at any time outstanding  (determined
     without regard to any write-downs or write-offs of such loans and advances)
     shall  not  exceed  $1,000,000,  (y)  make  loans  and  advances  to  their
     respective  employees for the purpose of enabling such employees to pay tax
     liabilities  arising  as a result of (I) the  vesting  or  acceleration  of
     restricted stock or membership interests in Holdings, and (II) the exercise
     of options or  warrants to purchase  Holdings  Common  Stock so long as the
     aggregate  principal  amount  thereof at any time  outstanding  (determined
     without regard to any write-downs or write-offs of such loans and advances)
     shall not exceed  $1,000,000 and (z) make loans to members of management to
     fund their  purchase of equity  interests of Holdings so long as no cash is
     paid by Holdings or any of its Subsidiaries in connection therewith (or any
     cash  so paid is  promptly  (and in any  event  within  one  Business  Day)
     returned to Holdings or such Subsidiary);


          (iv) the Borrowers may enter into Interest Rate Protection  Agreements
     to the extent permitted by Section 8.04(vi);


          (v) the US Borrower and its  Subsidiaries may enter into Other Hedging
     Agreements to the extent permitted by Section 8.04(vii);


          (vi)  investments  in existence on the  Restatement  Effective Date in
     Subsidiaries  of  Holdings  or listed  on  Schedule  X shall be  permitted,
     without giving effect to any additions thereto or replacements thereof;


          (vii) (A) any  Subsidiary  of the US  Borrower  may make  intercompany
     loans  to  the US  Borrower  or to any  Wholly-Owned  Subsidiary  of the US
     Borrower which is a Subsidiary Guarantor under a US Subsidiary Guaranty and
     the US Borrower may make  intercompany  loans to any Wholly-Owned  Domestic
     Subsidiary of the US Borrower  which is a Subsidiary  Guarantor  under a US
     Subsidiary  Guaranty,  (B) any Credit Party may make intercompany  loans to
     any Wholly-Owned Subsidiary of the US Borrower which is not a Credit Party,
     provided  that  the  aggregate  outstanding  principal  amount  of all such
     intercompany  loans and  intercompany  investments  made  pursuant  to this
     clause (B) shall not exceed $3,500,000 at any one time (determined  without
     regard to any  write-downs  or write-offs  of such loans),  (C) any Foreign
     Subsidiary which is not a Credit Party may make  intercompany  loans to, or
     other investments in, any other Foreign Subsidiary, (D) the UK Borrower and
     its  Subsidiaries  organized  under the laws of the United Kingdom may make
     intercompany  loans,  or  other  investments,  among  themselves,  (E)  the
     Canadian  Borrower and its Subsidiaries  organized under the laws of Canada
     may make intercompany  loans, or other investments,  among themselves,  (F)
     the US Borrower and any of its Subsidiaries may make intercompany loans to,
     or other investments in, the UK Borrower,  the Canadian Borrower and any of
     their  Subsidiaries,  provided that the aggregate  principal  amount of all
     such loans and  intercompany  investments  made pursuant to this clause (F)
     shall not exceed  $2,500,000 at any one time (determined  without regard to
     any  write-downs  or write-offs of such loans) and (G) any Credit Party may
     make  intercompany  loans to, or other  investments  in, any  Subsidiary of
     Holdings that is not a Credit Party provided that such Subsidiary  promptly
     makes an  intercompany  loan to or other  investment  in, or  applies  such
     proceeds toward the repayment of an  intercompany  loan made by, any Credit
     Party in a  corresponding  amount no later than the fifth Business Day from
     the time such Subsidiary receives such intercompany loan or investment; and
     provided  further,  that if any such  intercompany  loan is  evidenced by a
     promissory  note or other  instrument,  such  promissory note or instrument
     (other than the Swedish Note) shall be an Intercompany Note;


          (viii)  so long as no  Default  under  Section  9.01 or any  Event  of
     Default  then exists or would  result  therefrom,  the US Borrower  and its
     Subsidiaries   may  make  cash  equity   contributions   to  their  Foreign
     Subsidiaries to the extent required to cause such Foreign  Subsidiary to be
     in compliance with any local law capitalization  requirements provided that
     the  aggregate  amount  for  all  such   contributions   shall  not  exceed
     $2,500,000;


          (ix) the US Borrower and its  Subsidiaries  shall be permitted to make
     Capital Expenditures to the extent permitted under Section 8.07;


          (x)  Holdings  and  its  Subsidiaries  may  enter  into   transactions
     permitted  under  Section  8.02 and may acquire and hold  promissory  notes
     issued  by the  purchasers  of  assets  sold  in  accordance  with  Section
     8.02(ii), Section 8.02(iii) or Section 8.02(xiv);


          (xi) Holdings and its  Subsidiaries  may enter into  guarantees to the
     extent permitted by Section 8.04;


          (xii) the US Borrower  and any  Subsidiary  of the US Borrower (A) may
     make Permitted  Acquisitions  in accordance  with the  definition  thereof,
     Section  7.14  and the  other  provisions  of this  Agreement  and (B) make
     intercompany loans the proceeds of which are used to pay all or any portion
     of the cash consideration for any Permitted Acquisition;


          (xiii) Holdings and its Subsidiaries may hold investments  received in
     connection  with the  bankruptcy  or  reorganization  of, or  settlement of
     delinquent  accounts and disputes with,  customers and  suppliers,  in each
     case in the ordinary course of business;


          (xiv)  investments  of any  Person  existing  at the time such  Person
     becomes a Subsidiary  of the Borrower or at the time such Person  merges or
     consolidates  with the US  Borrower or any of its  Subsidiaries,  in either
     case, as the result of a Permitted Acquisition in compliance with the terms
     of this  Agreement,  provided that such  investments  were not made by such
     Person in connection  with, or in  anticipation or  contemplation  of, such
     Person  becoming  a  Subsidiary  of the  US  Borrower  or  such  merger  or
     consolidation;


          (xv) the US Borrower may advance funds to Holdings to permit  Holdings
     to make equity  redemptions or repurchases of the type described in Section
     8.03(iv) if such redemptions or repurchases take the form of redemptions or
     repurchases of equity interests in Holdings;


          (xvi) the Borrowers may make investments not otherwise permitted under
     this  Section 8.05 in an amount not to exceed the then  Available  Retained
     ECF Amount;


          (xvii)  Holdings  may make capital  contributions  and/or loans to any
     Wholly-Owned  Subsidiary  in an amount equal to the amount of any indemnity
     proceeds received by Holdings in respect of any A-O  Environmental  Loss or
     A-O Respirator  Loss (as such terms are  respectively  defined in the Cabot
     Acquisition Agreement); and


          (xviii)  the US  Borrower  and its  Subsidiaries  may make  additional
     advances, investments and loans after the Restatement Effective Date to the
     extent not otherwise permitted under this Section 8.05 (including,  without
     limitation, joint venture investments) so long as the Unrecovered Amount of
     such  advances,  investments  and loans does not exceed  $4,000,000  in the
     aggregate  (plus the  proceeds of any equity  issuance,  to the extent such
     proceeds  are not  required  to be applied to repay Term Loans  pursuant to
     Section  4.02(c),  not  applied  to make a  Permitted  Acquisition  and not
     applied to make Capital Expenditures pursuant to Section 8.07(b)).


     8.06 Transactions with Affiliates. Holdings and the Borrowers will not, and
will not permit any of their  Subsidiaries  to,  enter into any  transaction  or
series  of  related  transactions,  whether  or not in the  ordinary  course  of
business, with any Affiliate of Holdings or any of its Subsidiaries,  other than
on terms and conditions substantially as favorable to Holdings, such Borrower or
such  Subsidiary as would  reasonably be obtained by Holdings,  such Borrower or
such  Subsidiary at that time in a comparable  arm's-length  transaction  with a
Person other than an Affiliate, except that:


     (i) Dividends may be paid to the extent provided in Section 8.03;


     (ii) transactions permitted under Section 8.02 shall be permitted;


     (iii)  loans  may be made and other  transactions  may be  entered  into by
Holdings and its Subsidiaries to the extent permitted by Section 8.05;


     (iv)  Holdings and the US Borrower may make payments  under the  Management
Agreement as in effect on the Restatement Effective Date;


     (v) other  transactions  between or among Holdings and its Subsidiaries not
involving any other Affiliate and not otherwise  prohibited under this Agreement
shall be permitted; and


     (vi)  customary  fees may be paid to members of the Board of  Directors  of
Holdings and its  Subsidiaries  for their services as directors not in excess of
fees paid to directors who are not Affiliates.

     8.07 Maximum Capital Expenditures. (a) Holdings and the Borrowers will not,
and will not permit any of their Subsidiaries to, make any Capital Expenditures,
except that the US Borrower and its Subsidiaries  may make Capital  Expenditures
so long as the  aggregate  amount of such Capital  Expenditures  does not exceed
$15,000,000  in any  fiscal  year.  To the  extent  that the  amount of  Capital
Expenditures  (other  than those  described  in clause (b) below) made by the US
Borrower  and its  Subsidiaries  during  any year  period  set forth in the next
preceding  sentence is less than the amount  applicable to the respective fiscal
year set forth in such sentence  (without  giving effect to any increase in such
amount as  provided  below in this  clause  (a)),  the lesser of (x) such unused
amount and (y)  $7,500,000  (such lesser amount,  the "Rollover  Amount") may be
carried  forward and  utilized by the US Borrower and its  Subsidiaries  to make
additional  Capital  Expenditures  in the  immediately  succeeding  fiscal year,
provided  that no amount  once  carried  forward to the next  fiscal year may be
carried forward to a fiscal year thereafter,  and provided further, that Capital
Expenditures  made during any fiscal year shall be first  deemed made in respect
of the Rollover  Amount and then deemed made in respect of the scheduled  amount
permitted for such fiscal year.


     (b) In addition to the Capital  Expenditures  permitted to be made pursuant
to clause (a) of this Section  8.07,  the US Borrower and its  Subsidiaries  may
make Capital  Expenditures (i) with the proceeds of an equity  issuance,  to the
extent such proceeds are not required to be applied to repay Term Loans pursuant
to Section 4.02(c), not applied to make a Permitted Acquisition,  not applied to
pay a Dividend  under  Section  8.03(iv)  and not  applied  to make a  permitted
investment  pursuant  to Section  8.05(xviii),  (ii) with the  proceeds of Asset
Sales to the extent such  proceeds  are not required to be applied to repay Term
Loans  pursuant  to  Section  4.02(e),  (iii) to the extent  that any  Permitted
Acquisition in accordance with Section 7.14  constitutes a Capital  Expenditure,
(iv) with the proceeds of Recovery Events, (v) required pursuant to Section 7.06
and (vi) in an amount equal to the then Available Retained ECF Amount.

     8.08  Leverage  Ratio.  Holdings  and the  Borrowers  will not  permit  the
Leverage  Ratio as of the last day of any Test Period  ending on the last day of
any fiscal  quarter  ending on a date set forth  below to be more than the ratio
set forth opposite such date below:


    Date                                                             Ratio
    ----                                                             -----
    September 30, 2001                                               4.50:1.00
    December 31, 2001                                                4.50:1.00
    March 31, 2002                                                   4.50:1.00
    June 30, 2002                                                    4.50:1.00
    September 30, 2002                                               4.50:1.00
    December 31, 2002                                                4.25:1.00
    March 31, 2003                                                   4.25:1.00
    June 30, 2003                                                    4.00:1.00
    September 30, 2003                                               4.00:1.00
    December 31, 2003                                                3.75:1.00
    March 31, 2004                                                   3.75:1.00
    June 30, 2004                                                    3.50:1.00
    September 30, 2004                                               3.50:1.00
    December 31, 2004                                                3.35:1.00
    March 31, 2005                                                   3.35:1:00

Notwithstanding  anything  to the  contrary  contained  in this  Agreement,  all
calculations  of compliance  with this Section 8.08 shall be made on a Pro Forma
Basis.

     8.09 Interest  Coverage  Ratio.  Holdings and the Borrowers will not permit
the Interest  Coverage  Ratio for any Test Period  ending on the last day of any
fiscal  quarter  ending on a date set forth  below to be less than the ratio set
forth opposite such date below:


     Date                                                          Ratio
     ----                                                          -----
     September 30, 2001                                            2.00:1.00
     December 31, 2001                                             2.00:1.00
     March 31, 2002                                                2.00:1.00
     June 30, 2002                                                 2.00:1.00
     September 30, 2002                                            2.10:1.00
     December 31, 2002                                             2.20:1.00
     March 31, 2003                                                2.20:1.00
     June 30, 2003                                                 2.30:1.00
     September 30, 2003                                            2.30:1.00
     December 31, 2003                                             2.40:1.00
     March 31, 2004                                                2.40:1.00
     June 30, 2004                                                 2.50:1.00
     September 30, 2004                                            2.50:1.00
     December 31, 2004                                             2.60:1.00
     March 31, 2005                                                2.80:1.00

Notwithstanding  anything  to the  contrary  contained  in this  Agreement,  all
calculations  of compliance  with this Section 8.09 shall be made on a Pro Forma
Basis.

     8.10 Fixed  Charge  Coverage  Ratio.  Holdings and the  Borrowers  will not
permit the Fixed Charge  Coverage  Ratio for any Test Period  ending on the last
day of any fiscal quarter to be less than 1.00:1.00.

     Notwithstanding  anything to the contrary contained in this Agreement,  all
calculations  of compliance  with this Section 8.10 shall be made on a Pro Forma
Basis.

     8.11 Modifications of Certain Indebtedness; Modifications of Certificate of
Incorporation,  By-Laws and Certain Agreements;  etc. Holdings and the Borrowers
will not, and will not permit any of their Subsidiaries to:

          (i) make (or give any notice in respect of) any  voluntary or optional
     payment or prepayment on or redemption or acquisition  for value of, or any
     prepayment or  redemption as a result of any change of control,  asset sale
     or similar event of (1) after the issuance  thereof,  any Permitted  Seller
     Notes, (2) after the issuance thereof, any of the Shareholder  Subordinated
     Notes  except  as  provided  in  Section  8.03(iv),  (3) any of the  Senior
     Subordinated  Notes,  or  after  the  incurrence  thereof,   any  Permitted
     Refinancing  Subordinated   Indebtedness  or  (4)  any  Qualified  Earn-Out
     Obligation,  provided  that so long as no Default or Event of Default  then
     exists or would result therefrom the US Borrower may (x) repurchase, redeem
     or otherwise retire outstanding Senior Subordinated Notes with the proceeds
     of Permitted  Refinancing  Subordinated  Indebtedness  and (y)  repurchase,
     redeem or otherwise retire  outstanding  Senior  Subordinated Notes if both
     before and after  giving  effect to such  repurchase,  redemption  or other
     retirement (A) the Senior Leverage Ratio is less than 1.85:1.00 and (B) the
     Total Unutilized  Revolving Loan Commitment is equal to or greater than the
     sum of $10,000,000;

          (ii) amend or modify,  or permit the amendment or modification of, any
     Senior Subordinated Note Documents, but excluding any immaterial change not
     requiring the consent of the holders of the Senior Subordinated Notes;

          (iii) amend or modify,  or permit the amendment or modification of, in
     each  case in any  material  respect  any  provision  of any  documentation
     entered into in connection with the Indebtedness  referred to in clause (i)
     above  (other than the Senior  Subordinated  Notes but  including,  without
     limitation,  after the incurrence thereof,  the Permitted Seller Notes, any
     Shareholder  Subordinated Notes or any Permitted  Refinancing  Subordinated
     Indebtedness, as the case may be); or

          (iv)  amend,  modify or change its  certificate  of  incorporation  or
     limited  liability  company agreement or by-laws (if any), or any agreement
     entered  into by it,  with  respect to its  capital  stock or other  equity
     interests,  or enter into any new  agreement  with  respect to its  capital
     stock or other equity interests,  other than any amendments,  modifications
     or  changes,  or any such  new  agreements  which  are not  adverse  in any
     material respect to the interests of the Banks.

     8.12 Limitation on Certain  Restrictions on Subsidiaries.  Holdings and the
Borrowers will not, and will not permit any of their  Subsidiaries  to, directly
or indirectly,  create or otherwise cause or suffer to exist or become effective
any  encumbrance or restriction on the ability of any such Subsidiary to (a) pay
dividends  or make any other  distributions  on its  capital  stock or any other
interest or  participation in its profits owned by the US Borrower or any of its
Subsidiaries,  or pay any  Indebtedness  owed to the US  Borrower  or any of its
Subsidiaries,  (b)  make  loans or  advances  to the US  Borrower  or any of its
Subsidiaries, or (c) transfer any of its properties or assets to the US Borrower
or any  of its  Subsidiaries,  except  for  such  encumbrances  or  restrictions
existing under or by reason of (i)  applicable  law, (ii) this Agreement and the
other Credit Documents,  (iii) customary  provisions  restricting  subletting or
assignment of any lease governing a leasehold interest of Holdings or any of its
Subsidiaries,  (iv) customary provisions restricting assignment of any agreement
entered  into by the US  Borrower  or any  Subsidiary  of the US Borrower in the
ordinary course of business,  (v) customary provisions  restricting the transfer
of assets subject to Liens permitted under Section 8.01(iii),  (vii), (viii) and
(ix),  (vi) any  restrictions  contained  in  contracts  for the sale of  assets
permitted in accordance  with Section 8.02 solely in respect of the assets to be
sold pursuant to such contract,  (vii) any restrictions or conditions imposed by
any agreement  relating to secured  Indebtedness  permitted by this Agreement if
such  restrictions  or conditions  apply only to the property or assets securing
such Indebtedness,  (viii) any restrictions,  after the issuance thereof, in the
Senior Subordinated Note Documents or, after the issuance thereof, the Permitted
Refinancing Subordinated Indebtedness,  so long as the provisions thereof are no
more restrictive than the provisions in the Senior  Subordinated Note Documents,
and (ix) any restrictions set forth in the Overdraft Facility or Indebtedness of
Foreign Subsidiaries incurred pursuant to Section 8.04(xiv).

     8.13 Limitation on Issuance of Equity.  (a) Holdings will not permit any of
its Subsidiaries to issue any capital stock or other equity interests (including
by way of sales of treasury  stock) or any options or warrants to  purchase,  or
securities convertible into, capital stock or other equity interests, except (i)
for transfers and  replacements of then  outstanding  shares of capital stock or
other equity  interests,  (ii) for stock  splits,  stock  dividends  and similar
issuances  which do not decrease the percentage  ownership of Holdings or any of
its  Subsidiaries in any class of the capital stock or other equity interests of
such Subsidiary,  except that the US Borrower's indirect ownership percentage in
non-Wholly Owned Subsidiaries may decrease but not below a majority of the total
economic and voting interest of such Subsidiaries, (iii) for issuances to the US
Borrower or any of its Wholly-Owned Subsidiaries in connection with the creation
of new Wholly-Owned  Subsidiaries  permitted under Section 8.15 or in connection
with   transactions   permitted  under  Section  8.05,  (iv)  for  issuances  by
Subsidiaries  which are joint  ventures  created or acquired in accordance  with
Section  8.05(xviii),  (v) to  qualify  directors  to  the  extent  required  by
applicable law, (vi) for issuances to the US Borrower or any of its Wholly-Owned
Subsidiaries  pursuant to transactions  permitted  pursuant to Section  8.02(v),
(vi) or (vii), (vii) for issuances by Wholly-Owned  Foreign  Subsidiaries of the
US Borrower to third  Persons to satisfy  local law  requirements  or (viii) for
issuances  by  non-Wholly-Owned  Subsidiaries  of the  US  Borrower  created  in
accordance  with Section 8.15,  so long as the US Borrower's  direct or indirect
ownership percentage in such  non-Wholly-Owned  Subsidiary does not fall below a
majority of the total  economic  and voting  interest  of such  non-Wholly-Owned
Subsidiary.

     (b)  Holdings  will not,  and will not permit any of its  Subsidiaries  to,
issue after the  Restatement  Effective  Date (i) any class of preferred  equity
(provided  that (A)  Holdings may issue (x)  preferred  equity that is Qualified
Capital Stock and (y) Permitted Earn-Out Preferred Equity), and (B) Subsidiaries
of Holdings may issue  preferred  equity to the US Borrower or any  Wholly-Owned
Subsidiary of the US Borrower (or otherwise,  to the extent such Subsidiary is a
joint venture created or acquired in accordance with Section 8.05(xviii)).

     (c) Notwithstanding  the foregoing,  the US Borrower may issue common stock
and preferred stock to Holdings.

     8.14  Business.  (a)  Holdings  will not,  and will not  permit  any of its
Subsidiaries  to, engage (directly or indirectly) in any business other than any
of the lines of business  conducted  by  Holdings  and its  Subsidiaries  on the
Restatement  Effective  Date and any  business  similar,  ancillary  or  related
thereto or which  constitutes  a  reasonable  extension  or  expansion  thereof,
including  in  connection  with  Holdings'   existing  and  future   technology,
trademarks and patents.

     (b)  Notwithstanding  anything to the contrary contained in this Agreement,
Holdings  will  not  engage  in any  business  activities  and will not have any
significant  assets  or  liabilities  other  than its  ownership  of the  equity
interests  of the US  Borrower,  the making of other  investments  permitted  by
Section 8.05,  liabilities  imposed by law,  activities  in connection  with the
transactions  contemplated hereby,  contracts,  guaranties and other liabilities
entered  into or assumed in the  ordinary  course of business for the benefit of
its  Subsidiaries,  its obligations with respect to this Agreement and the other
Documents to which it is a party and the  Shareholder  Subordinated  Notes,  the
Permitted Seller Notes and activities  entered into in connection  therewith (it
being  understood  and agreed that Holdings may issue  Qualified  Capital Stock,
Permitted  Earn-Out Debt and Permitted  Earn-Out  Preferred Equity in accordance
with the terms of this Agreement).

     (c)  Notwithstanding  anything to the contrary contained in this Agreement,
Cabot  Intermediate  will not engage in any business  activities  other than its
ownership and licensing of patents,  trademarks and other  intangibles  and will
not have any significant  assets or liabilities  other than its ownership of (x)
such patents,  trademarks  and other  intangibles,  (y) the capital stock of its
Subsidiaries  and (z) the Swedish Note, and  liabilities  imposed by law and its
obligations with to this Agreement and the other Credit Documents to which it is
a party.

     8.15 Limitation on the Creation of Subsidiaries.  Notwithstanding  anything
to the contrary  contained in this  Agreement,  Holdings and the Borrowers  will
not,  and will not permit any of their  Subsidiaries  to,  establish,  create or
acquire any Subsidiary; provided that the US Borrower and its Subsidiaries shall
be permitted to establish,  create or acquire Wholly-Owned  Subsidiaries (or, to
the  extent   pursuant  to  an  investment   made  under  Section   8.05(xviii),
non-Wholly-Owned  Subsidiaries), so long as, subject to the terms and conditions
of Section  7.12 hereof,  (i) the capital  stock of such new  Subsidiary  to the
extent owned by the US Borrower or any other  Domestic  Subsidiary (up to 65% of
the  capital  stock of any such new  Foreign  Subsidiary)  is  promptly  pledged
pursuant to, and to the extent required by, the respective  Pledge Agreement and
the  certificates  representing  such  stock,  together  with stock  powers duly
executed in blank,  are  delivered  to the  Collateral  Agent,  (ii) if such new
Subsidiary  is organized  under the laws of Canada or the United  Kingdom and is
owned by the  Canadian  Borrower,  the UK Borrower,  or a Subsidiary  of either,
which is required to execute and deliver a Canadian  Subsidiary Guaranty or a UK
Subsidiary Guaranty, as the case may be, the capital stock of such Subsidiary is
promptly  pledged pursuant to the appropriate  Security  Document and (iii) such
new Subsidiary (to the extent that it is a Material  Wholly-Owned  Subsidiary of
the US Borrower  organized  under the laws of Canada,  the United Kingdom or the
U.S.) promptly executes a counterpart of the appropriate  Subsidiary Guaranty, a
Pledge Agreement and (in the case of any Domestic Subsidiary of the US Borrower,
or any Foreign  Subsidiary of the US Borrower which is organized  under the laws
of Canada or the United Kingdom) a Security Agreement,  in each case on the same
basis (and to the same  extent) as such  Subsidiary  would  have  executed  such
Credit  Documents if it were a Credit Party on the  Restatement  Effective  Date
(with such exceptions as may be reasonably  satisfactory  to the  Administrative
Agent)  and,  in the case of any  Foreign  Subsidiary,  to the  extent  that the
entering into of such Credit Documents are not prohibited under applicable local
law. In addition,  at the reasonable request of the  Administrative  Agent, each
new Wholly-Owned  Subsidiary shall execute and deliver,  or cause to be executed
and delivered, all other relevant documentation of the type described in Section
5.05(a) as such new  Wholly-Owned  Subsidiary  would have had to deliver if such
new  Wholly-Owned  Subsidiary were a Credit Party on the  Restatement  Effective
Date. For the avoidance of doubt,  it is understood  that a Subsidiary  which is
not a Material  Wholly-Owned  Subsidiary  upon its  establishment,  creation  or
acquisition  shall be required to comply with this  Section 8.15  promptly  upon
such Subsidiary first becoming a Material Wholly-Owned Subsidiary.

     8.16  Restrictions  on Swedish Note.  Holdings and the US Borrower will not
permit Cabot Intermediate to (i) forgive,  or otherwise consent to any reduction
in, any  amounts  owing  under the  Swedish  Note  (except as a result of a cash
repayment with respect  thereto),  (ii) amend or modify, or permit the amendment
or  modification  of, any provision of the Swedish  Note,  except for changes in
interest rate,  amortization  and maturity which could not adversely  effect the
ability of the Borrowers to perform their  Obligations  under this  Agreement or
(iii) sell,  assign,  encumber or  otherwise  transfer  the Swedish  Note to any
Person.

     SECTION 9. Events of Default.  Upon the  occurrence of any of the following
specified events (each an "Event of Default"):

     9.01  Payments.  (a) Any Borrower shall (i) default in the payment when due
of any principal of any Loan or any Note or (ii) default, and such default shall
continue unremedied for five or more days, in the payment when due of any Unpaid
Drawings (after notice is given to the Borrower pursuant to the last sentence of
Section  2.04(a))  or  interest  on any Loan or Note,  or any Fees or any  other
amounts owing  hereunder or under any other Credit Document or (b) any Guarantor
shall  default in the  payment of any  amount,  in respect of any payment of the
type  described  in clause  (a)(ii)  above  pursuant to its  Guaranty,  and such
default shall continue unremedied for five or more days; or

     9.02 Representations,  etc. Any representation,  warranty or statement made
by any Credit Party herein or in any other Credit Document or in any certificate
delivered  pursuant  hereto or thereto  shall prove to be untrue in any material
respect on the date as of which made or deemed made; or

     9.03  Covenants.  Any Credit Party shall (i) default in the due performance
or  observance  by it of any term,  covenant or  agreement  contained in Section
7.01(g)(i),  Section 7.11,  Section 7.14 or Section 8 or (ii) default in the due
performance  or  observance  by it of any  other  term,  covenant  or  agreement
contained in this  Agreement  (other than as provided in Section  9.01) and such
default shall  continue  unremedied for a period of 30 days after written notice
to the defaulting party by the Administrative Agent or the Required Banks; or

     9.04  Default  Under  Other   Agreements.   (i)  Holdings  or  any  of  its
Subsidiaries  shall (x) default in any payment of any  Indebtedness  (other than
the Obligations)  beyond the period of grace, if any, provided in the instrument
or  agreement  under which such  Indebtedness  was created or (y) default in the
observance or  performance  of any  agreement or condition  relating to any such
Indebtedness or contained in any instrument or agreement evidencing, securing or
relating thereto,  or any other event shall occur or condition exist, the effect
of which  default  or other  event or  condition  is to cause,  or to permit the
holder or holders  of such  Indebtedness  (or a trustee  agent on behalf of such
holder or holders) to cause (determined  without regard to whether any notice is
required),  any such Indebtedness to become due prior to its stated maturity, or
(ii) any such  Indebtedness  of  Holdings  or any of its  Subsidiaries  shall be
declared  to be due and  payable,  or  required  to be  prepaid  other than by a
regularly scheduled  prepayment or required prepayment (other than pursuant to a
"due-on-sale"  clause in a mortgage or similar security  agreement) (unless such
required  prepayment  results from a default  thereunder or an event of the type
that  constitutes an Event of Default),  prior to the stated  maturity  thereof,
provided  that it shall  not be a  Default  or an Event of  Default  under  this
Section  9.04  unless  the  aggregate   outstanding   principal  amount  of  all
Indebtedness  as  described  in  preceding  clauses  (i) and  (ii)  is at  least
$5,000,000; or

     9.05 Bankruptcy,  etc. Holdings or any of its Subsidiaries shall commence a
voluntary  case  concerning  itself  under  Title 11 of the United  States  Code
entitled  "Bankruptcy," as now or hereafter in effect,  or any successor thereto
(the "Bankruptcy Code"); or an involuntary case is commenced against Holdings or
any of its Subsidiaries and the petition is not controverted  within 15 days, or
is not dismissed within 60 days, after  commencement of the case; or a custodian
(as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially  all of the  property of Holdings or any of its  Subsidiaries;  or
Holdings  or  any of  its  Subsidiaries  commences  (or  is  required  by law to
commence)   any   other   proceeding,   or  is  deemed   insolvent,   under  any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency  or  liquidation  or similar law of any  jurisdiction  whether now or
hereafter in effect relating to Holdings or any of its Subsidiaries; or there is
commenced  against Holdings or any of its Subsidiaries any such proceeding which
remains  undismissed  for a  period  of 60  days;  or  Holdings  or  any  of its
Subsidiaries  is  adjudicated  insolvent or bankrupt;  or any order of relief or
other order approving any such case or proceeding is entered; or Holdings or any
of its Subsidiaries  suffers any appointment of any custodian or the like for it
or any substantial part of its property to continue undischarged or unstayed for
a period of 60 days;  or  Holdings  or any of its  Subsidiaries  makes a general
assignment  for the benefit of creditors;  or any  corporate  action is taken by
Holdings  or any of its  Subsidiaries  for the purpose of  effecting  any of the
foregoing; or

     9.06 ERISA.  An ERISA Event shall have occurred that, in the opinion of the
Required  Banks,  when taken  together  with all other  ERISA  Events  that have
occurred,  could reasonably be expected to result in liability of Holdings,  any
Borrower and any of their  Subsidiaries in an aggregate amount that could have a
material  adverse  effect  on  the  business,   operations,   property,  assets,
liabilities or condition (financial or otherwise) of Holdings,  any Borrower and
any of their Subsidiaries taken as a whole; or

     9.07 Security  Documents.  Except (x) in each case to the extent  resulting
from the  negligent  or  willful  failure  of the  Collateral  Agent  to  retain
possession  of the  applicable  Pledged  Securities  and  (y) in  respect  of an
immaterial  portion  of the  Collateral,  at any time  after the  execution  and
delivery thereof,  any of the Security Documents shall cease to be in full force
and effect,  or shall cease to give the Collateral  Agent for the benefit of the
Secured  Creditors  the Liens,  rights,  powers and  privileges  purported to be
created thereby (including,  without  limitation,  a perfected security interest
in,  and Lien on,  all of the  Collateral),  in favor of the  Collateral  Agent,
superior to and prior to the rights of all third Persons (except as permitted by
Section 8.01),  and subject to no other Liens (other than Permitted  Liens),  or
any Credit Party shall default in the due performance or observance of any term,
covenant or agreement  on its part to be  performed or observed  pursuant to (i)
any of the Security  Documents  and such default  shall  constitute  an Event of
Default under Section 9.01,  9.02 or 9.03, (ii) Sections 2.4, 2.5, 2.6, 3.6, 4.7
and 5.7 of the US Security  Agreement  and Sections 2.4, 2.5, 2.7 and 3.6 of the
Canadian  Security  Agreement,  Section  4.03 of the UK Security  Agreement,  or
Section  5 of the US  Pledge  Agreement  and in each  case  such  default  shall
continue unremedied for a period of 30 days or (iii) any other term, covenant or
agreement  on its part to be  performed  or observed  pursuant  to any  Security
Document  and such default  shall  continue  unremedied  for a period of 30 days
after  written  notice  to the  Borrowers  by the  Administrative  Agent  or the
Required Banks (or such longer grace period as is  specifically  provided in any
Mortgage); or

     9.08 Guaranties.  (a) Any Guaranty or any provision  thereof shall cease to
be in full force or effect as to the  relevant  Guarantor,  or any  Guarantor or
Person  acting by or on behalf of such  Guarantor  shall deny or disaffirm  such
Guarantor's  obligations under the relevant Guaranty, or (b) except as otherwise
provided in Section 9.01(b),  any Guarantor shall default in the due performance
or observance of any term,  covenant or agreement on its part to be performed or
observed  pursuant to such  Guaranty;  provided  that,  with respect to defaults
under Section 12 of the Guaranty  which relate to covenants in Section 7 of this
Agreement for which a grace period is applicable  under Section  9.03(ii),  such
Guarantors  shall  have the  benefit  of the grace  period  set forth in Section
9.03(ii); or

     9.09  Judgments.  One or more judgments or decrees shall be entered against
Holdings or any of its Subsidiaries  involving in the aggregate for Holdings and
its Subsidiaries a liability of $5,000,000 or more (not paid or fully covered by
a reputable and solvent  insurance  company) and such judgments or decrees shall
not have been vacated,  discharged or stayed or bonded  pending appeal within 60
days from the entry thereof;

     then, and in any such event,  and at any time  thereafter,  if any Event of
Default shall then be continuing,  the  Administrative  Agent,  upon the written
request of the Required Banks, shall by written notice to the US Borrower,  take
any or all of the  following  actions,  without  prejudice  to the rights of the
Administrative  Agent,  any Bank or the holder of any Note to enforce its claims
against any Credit Party  (provided  that,  if an Event of Default  specified in
Section  9.05 shall  occur with  respect to a Borrower,  the result  which would
occur upon the giving of written  notice by the  Administrative  Agent to the US
Borrower as  specified  in clauses (i) and (ii) below shall occur  automatically
without  the  giving of any such  notice):  (i)  declare  the  Total  Commitment
terminated,  whereupon all  Commitments of each Bank shall  forthwith  terminate
immediately  and any  Commitment  Fee shall  forthwith  become  due and  payable
without any other  notice of any kind;  (ii)  declare the  principal  of and any
accrued interest in respect of all Loans and the Notes and all Obligations owing
hereunder and thereunder to be,  whereupon the same shall become,  forthwith due
and payable without  presentment,  demand,  protest or other notice of any kind,
all of which are hereby waived by each Credit Party;  (iii) terminate any Letter
of Credit which may be terminated in accordance with its terms;  (iv) direct the
US Borrower to pay (and the US Borrower agrees that upon receipt of such notice,
or upon the  occurrence  of an Event of Default  specified  in Section 9.05 with
respect to the US Borrower,  it will pay) to the Collateral Agent at the Payment
Office such additional  amount of cash, to be held as security by the Collateral
Agent,  as is equal to the  aggregate  Stated  Amount of all  Letters  of Credit
issued for the account of the Borrower  and then  outstanding;  (v) enforce,  as
Collateral  Agent, all of the Liens and security  interests  created pursuant to
the Security Documents; and (vi) apply any cash collateral held pursuant to this
Agreement to pay Obligations.

SECTION 10.  Definitions and Accounting Terms.

     10.01 Defined Terms. As used in this  Agreement,  the following terms shall
have the following  meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):

     "A-1 Term Loan" shall have the meaning provided in Section 1.01(a)(A).

     "A-1 Term Loan  Commitment"  shall  mean,  with  respect to each Bank,  the
amount set forth  opposite  such Bank's  name on  Schedule I directly  below the
column  entitled  "A-1  Term Loan  Commitment",  as the same may be  reduced  or
terminated pursuant to Section 3.03 and/or 9.

     "A-1 Term Loan  Scheduled  Repayment"  shall have the  meaning  provided in
Section 4.02(b)(A).

     "A-1 Term Loan Scheduled Repayment Date" shall have the meaning provided in
Section 4.02(b)(A).

     "A-1 Term Note" shall have the meaning provided in Section 1.05(a)(i)(A).

     "A-2 Term Loan" shall have the meaning provided in Section 1.01(a)(B).

     "A-2 Term Loan  Commitment"  shall  mean,  with  respect to each Bank,  the
amount set forth  opposite  such Bank's  name on  Schedule I directly  below the
column  entitled  "A-2  Term Loan  Commitment",  as the same may be  reduced  or
terminated pursuant to Section 3.03 and/or 9.

     "A-2 Term Loan  Scheduled  Repayment"  shall have the  meaning  provided in
Section 4.02(b)(B).

     "A-2 Term Loan Scheduled Repayment Date" shall have the meaning provided in
Section 4.02(b)(B).

     "A-2 Term Note" shall have the meaning provided in Section 1.05(a)(i)(B).

     "A-3 Term Loan" shall have the meaning provided in Section 1.01(a)(C).

     "A-3 Term Loan  Scheduled  Repayment"  shall have the  meaning  provided in
Section 4.02(b)(C).

     "A-3 Term Loan Scheduled Repayment Date" shall have the meaning provided in
Section 4.02(b)(C).

     "A-3 Term Note" shall have the meaning provided in Section 1.05(a)(i)(C).

     "A-4 Term Loan" shall have the meaning provided in Section 1.01(a)(D).

     "A-4 Term Loan  Commitment"  shall  mean,  with  respect to each Bank,  the
amount set forth  opposite  such Bank's  name on  Schedule I directly  below the
column  entitled  "A-4  Term Loan  Commitment",  as the same may be  reduced  or
terminated pursuant to Section 3.03 and/or 9.

     "A-4 Term Loan  Scheduled  Repayment"  shall have the  meaning  provided in
Section 4.02(b)(D).

     "A-4 Term Loan Scheduled Repayment Date" shall have the meaning provided in
Section 4.02(b)(D).

     "A-4 Term Note" shall have the meaning provided in Section 1.05(a)(i)(D).

     "A-5 Term Loan" shall have the meaning provided in Section 1.01(a)(E).

     "A-5 Term Loan  Commitment"  shall  mean,  with  respect to each Bank,  the
amount set forth  opposite  such Bank's  name on  Schedule I directly  below the
column  entitled  "A-5  Term Loan  Commitment",  as the same may be  reduced  or
terminated pursuant to Section 3.03 and/or 9.

     "A-5 Term Loan  Scheduled  Repayment"  shall have the  meaning  provided in
Section 4.02(b)(E).

     "A-5 Term Loan Scheduled Repayment Date" shall have the meaning provided in
Section 4.02(b)(E).

     "A-5 Term Note" shall have the meaning provided in Section 1.05(a)(i)(E).

     "Additional Mortgage" shall have the meaning provided in Section 7.11(a).

     "Additional  Mortgaged Property" shall have the meaning provided in Section
7.11(a).

     "Adjusted  Consolidated Net Income" for any period shall mean  Consolidated
Net Income for such period plus, without  duplication,  the sum of the amount of
all  net  non-cash  charges  (including,   without   limitation,   depreciation,
amortization,  deferred  tax  expense  and  non-cash  interest  expense  and net
non-cash losses which were included in arriving at  Consolidated  Net Income for
such  period) for such period less (i) the sum of the amount of all net non-cash
gains  (exclusive of items reflected in Adjusted  Consolidated  Working Capital)
included in arriving at  Consolidated  Net Income for such period and (ii) gains
or losses for such period from sales of assets  other than sales in the ordinary
course of business.

     "Adjusted Consolidated Working Capital" at any time shall mean Consolidated
Current  Assets (but  excluding  therefrom all cash and Cash  Equivalents)  less
Consolidated Current Liabilities.

     "Administrative  Agent"  shall mean BTCo  (and/or any Lending  Affiliate of
BTCo performing obligations or functions on its behalf and reasonably acceptable
to the US  Borrower),  in its  capacity  as  Administrative  Agent for the Banks
hereunder, and shall include any successor to the Administrative Agent appointed
pursuant to Section 11.09.

     "Affected  Euro Rate  Loans"  shall have the  meaning  provided  in Section
4.02(j).

     "Affiliate"  shall mean,  with respect to any Person,  any other Person (i)
directly  or  indirectly  controlling  (including,   but  not  limited  to,  all
directors,  officers and partners of such Person) controlled by, or under direct
or indirect common control with, such Person or (ii) that directly or indirectly
owns more than 10% of any class of the voting  securities or capital stock of or
equity  interests  in such Person.  A Person shall be deemed to control  another
Person if such Person possesses,  directly or indirectly, the power to direct or
cause the direction of the management and policies of such other Person, whether
through the ownership of voting securities, by contract or otherwise.

     "Agreement"  shall mean this Credit Agreement,  as modified,  supplemented,
amended, restated, extended, renewed, refinanced or replaced from time to time.

     "Alternate Currency" shall mean each of Pounds Sterling, Euros and Canadian
Dollars.

     "Alternate Currency  Equivalent" shall mean the Canadian Dollar Equivalent,
the Euro Equivalent or the Pounds Sterling Equivalent, as the case may be.

     "Alternate  Currency Loan" shall mean Canadian  Dollar Loans,  EURIBOR Rate
Loans and Pounds Sterling Loans.

     "Applicable   Commitment  Fee  Percentage"  shall  mean,  for  purposes  of
calculating the applicable Commitment Fee on the daily Unutilized Revolving Loan
Commitment of any Bank, the appropriate  applicable percentage  corresponding to
the Leverage Ratio in effect as of the most recent Determination Date:


Pricing Level    Leverage Ratio           Commitment Fee
---------------- ------------------------ ---------------------------
---------------- ------------------------ ---------------------------
I                > 2.50:1.00              0.500%
---------------- ------------------------ ---------------------------
---------------- ------------------------ ---------------------------
II               > 2.50:1.00              0.375%
================ ======================== ===========================

     The Applicable  Commitment Fee Percentage  shall be determined and adjusted
quarterly on the date (each a "Determination  Date") two Business Days after the
date by which Holdings provides the officer's certificate in accordance with the
provisions  of Section  7.01(e) for the most  recently  ended fiscal  quarter of
Holdings;  provided,  however, that (i) the Applicable Commitment Fee Percentage
shall be 0.500% until the Determination  Date for the fiscal quarter of Holdings
ending on June 30, 2002, on and after which  Determination  Date such Applicable
Commitment  Fee  Percentage  shall be determined by the Leverage Ratio as of the
last day of the most  recently  ended fiscal  quarter of Holdings  preceding the
applicable  Determination  Date,  and  (ii) if  Holdings  fails to  provide  the
officer's certificate to the Administrative Agent as required by Section 7.01(e)
for the last day of the most recently ended fiscal quarter of Holdings preceding
the  Determination  Date,  the Applicable  Commitment  Fee Percentage  from such
Determination  Date  shall be based on  Pricing  Level I until  such  time as an
appropriate  officer's  certificate  is  provided,   whereupon  such  Applicable
Commitment  Fee  Percentage  shall be determined by the Leverage Ratio as of the
last day of the most recently  ended fiscal  quarter of Holdings  preceding such
Determination Date. Each Applicable Commitment Fee Percentage shall be effective
from one Determination Date until the next Determination Date.

     "Applicable  Currency"  shall  mean (i) in the event of A-1 Term  Loans and
Revolving  Loans,  Dollars,  (ii) in the case of  Letters  of  Credit,  Dollars,
Canadian Dollars,  Euros,  Pounds Sterling and any other currency  acceptable to
the Issuing Bank, (iii) in the case of A-2 Term Loans,  Euros,  (iv) in the case
of A-3 Term  Loans,  Canadian  Dollars and (v) in the case of A-4 Term Loans and
A-5 Term Loans, Pounds Sterling.

     "Applicable  Margin" shall mean, for purposes of calculating the applicable
interest  rate  for any day  for any  Revolving  Loan,  or any  Term  Loan,  the
appropriate applicable percentage  corresponding to the Leverage Ratio in effect
as of the most recent Determination Date:
<TABLE>
<CAPTION>


                                                                            Applicable Margin
                                                      ----------------------------- --------------------------------
                                                      For Revolving Loans           For Term Loans
------------------ ---------------------------------- ----------------------------- --------------------------------
------------------ ---------------------------------- --------------- ------------- ---------------- ---------------
                                                      Euro            Base Rate     Euro             Base Rate
Pricing Level                                         Rate Loans      Loans         Rate             Loans
                   Leverage Ratio                                                   Loans
------------------ ---------------------------------- --------------- ------------- ---------------- ---------------
<S>                <C>                                <C>             <C>           <C>              <C>
I                  > 4.25:1.00                        3.00%           2.00%         3.50%            2.50%
------------------ ---------------------------------- --------------- ------------- ---------------- ---------------
II                 > 3.50:1.0   > 4.25:1.0            2.75%           1.75%         3.25%            2.25%
------------------ ---------------------------------- --------------- ------------- ---------------- ---------------
III                > 3.00:1.0   > 3.50:1.0            2.50%           1.50%         3.00%            2.00%
------------------ ---------------------------------- --------------- ------------- ---------------- ---------------
IV                 > 2.50:1.00  > 3.00:1.00           2.25%           1.25%         3.00%            2.00%
------------------ ---------------------------------- --------------- ------------- ---------------- ---------------
------------------ ---------------------------------- --------------- ------------- ---------------- ---------------
V                  > 2.50:1.00                        2:00%           1.00%         3.00%            2.00%
================== ================================== =============== ============= ================ ===============
</TABLE>

The  Applicable  Margin  shall be  determined  and  adjusted  quarterly  on each
Determination  Date;  provided,  however,  that (i) the  Applicable  Margin  for
Revolving  Loans and Term Loans shall remain  unchanged at Pricing  Level II (as
shown above)  until the  Determination  Date for the fiscal  quarter of Holdings
ending on June 30,  2002,  on and after  which  time the  Applicable  Margin for
Revolving  Loans and Term Loans shall be determined by the Leverage  Ratio as of
the last day of the most recently ended fiscal quarter of Holdings preceding the
applicable  Determination  Date,  and  (ii) if  Holdings  fails to  provide  the
officer's certificate to the Administrative Agent as required by Section 7.01(e)
for the last day of the most recently ended fiscal quarter of Holdings preceding
the Determination Date, the Applicable Margin from such Determination Date shall
be  based  on  Pricing  Level I until  such  time  as an  appropriate  officer's
certificate is provided,  whereupon the Applicable Margin shall be determined by
the Leverage  Ratio as of the last day of the most recently ended fiscal quarter
of Holdings preceding such  Determination  Date. Each Applicable Margin shall be
effective from one Determination Date until the next Determination Date.

     "Approved Bank" shall have the meaning  provided in the definition of "Cash
Equivalents."

     "Asset Sale" shall mean any sale, transfer or other disposition by Holdings
or any of its  Subsidiaries  to any Person  other  than any of its  Wholly-Owned
Subsidiaries of any asset (including,  without limitation,  any capital stock or
other equity interests or securities of another  Person),  of Holdings or any of
its  Subsidiaries  other than any sale,  transfer or  disposition  permitted  by
clauses (i), (ii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi) and (xiii) of
Section 8.02.

     "Assignment  and  Assumption   Agreement"  shall  mean  an  Assignment  and
Assumption  Agreement  substantially  in the form of  Exhibit  J  (appropriately
completed).

     "Authorized  Officer"  of any  Credit  Party  shall  mean any of the  Chief
Executive Officer,  President,  the Chief Financial Officer, the Treasurer,  the
Controller,  any Managing Director, any Assistant Treasurer, any Vice President,
the Secretary or the General Counsel of such Person or any other officer of such
Person  which is  designated  in  writing  to the  Administrative  Agent and the
Issuing Bank by any of the foregoing officers of such Person as being authorized
to give such notices under this Agreement.

     "Available Equity Issuance Amount" shall mean, at the time of determination
thereof, an amount equal to (x) the Net Cash Proceeds received from the issuance
of equity by  Holdings  on or prior to such date and not  required to be used to
repay  Loans  pursuant  to  Section  4.02(i)  as a result of  clause  (i) of the
parenthetical of Section 4.02(c),  minus (y) any amount  previously used to make
Permitted Acquisitions in accordance with Section 7.14.

     "Available Retained ECF Amount" shall mean (i) an amount which is initially
equal to zero,  plus (ii) an amount of Excess Cash Flow permitted to be retained
by the  Borrowers  in any Excess  Cash  Payment  Period  commencing  with the US
Borrower's  2002 fiscal year after giving  effect to the  calculation  of Excess
Cash Flow for the previous  Excess Cash Payment  Period and the payment of Loans
required  pursuant to Section  4.02(f)  during such Excess Cash Payment  Period,
minus (iii) the amount of Excess Cash Flow for any Excess Cash Payment Period in
which  Excess  Cash Flow was a  negative  number,  minus  (iv) any amount of the
Excess Cash Flow retained by the Borrowers as described by clause (ii) above and
used to make Capital Expenditures as permitted by Section 8.07(b)(vi) minus (iv)
any  amount  designated  as  Available  Retained  ECF  Amount  and  utilized  to
effectuate a Permitted  Acquisition  pursuant to Section  7.14(vi) minus (v) any
amount  designated  as  Available  Retained  ECF  Amount  and  utilized  to make
Investments  pursuant  to Section  8.05(xvi).  Notwithstanding  anything  to the
contrary  contained above, the Available Retained ECF Amount shall be zero until
the occurrence of the first Excess Cash Payment Date.

     "Bank" shall mean each financial institution listed on Schedule II, as well
as any Person which becomes a "Bank" hereunder pursuant to 13.04(b).

     "Bank Default" shall mean (i) the refusal (which has not been retracted) of
a Bank to make  available its portion of any Borrowing or to fund its portion of
any unreimbursed payment under Section 2.03(c) or (ii) a Bank having notified in
writing any Borrower and/or the Administrative  Agent that it does not intend to
comply  with its  obligations  under  Section  1.01 or Section 2, in the case of
either  clause  (i) or (ii) as a  result  of any  takeover  of such  Bank by any
regulatory authority or agency.

     "Bankruptcy Code" shall have the meaning provided in Section 9.05.

     "Base  Rate" at any time shall mean the higher of (i) the rate which is 1/2
of 1% in excess of the  overnight  Federal Funds Rate and (ii) the Prime Lending
Rate.

     "Base  Rate  Loan"  shall  mean  each  Dollar  Loan  designated  or  deemed
designated as such by the US Borrower at the time of the  incurrence  thereof or
conversion thereto.

     "Borrowers"  shall mean the Canadian  Borrower,  the UK Borrower and the US
Borrower.

     "Borrowing"  shall  mean a  borrowing  of Loans of a single  Tranche  and a
single Type by the relevant  Borrower from all the Banks having  Commitments  in
respect of or outstanding Loans under the respective Tranche on a given date (or
resulting  from a conversion  or  conversions  on such date) and, in the case of
Euro Rate Loans, having the same Interest Period,  provided that Base Rate Loans
incurred  pursuant to Section  1.10(b) shall be  considered  part of the related
Borrowing of Euro Rate Loans.

     "BTCo" shall mean Bankers Trust Company,  in its individual  capacity,  and
any successor thereto by merger.

     "Business  Day"  shall mean (i) for all  purposes  other than as covered by
clause (ii) below, any day except Saturday, Sunday and any day which shall be in
New  York  City a legal  holiday  or a day on  which  banking  institutions  are
authorized or required by law or other government  action to close and (ii) with
respect to all notices and  determinations  in connection  with, and payments of
principal  and  interest  on, Euro Rate Loans,  any day which is a Business  Day
described in clause (i) above and which is also a day for trading by and between
banks in the London interbank  eurocurrency market and is not a legal holiday or
a day on which banking  institutions  are authorized or required by law or other
government  action to close in the city where the  applicable  Payment Office of
the Administrative Agent is located in respect of such Euro Rate Loan.

     "Cabot  Acquisition  Agreement"  shall  mean that  certain  Asset  Transfer
Agreement,  dated as of June 13,  1995,  among Cabot Safety  Corporation,  Cabot
Canada Ltd.,  Cabot Safety  Limited,  Cabot  Corporation,  Cabot Safety Holdings
Corporation and Cabot Safety Acquisition Corporation.

     "Cabot  Intermediate" shall mean Cabot Safety Intermediate  Corporation,  a
Delaware corporation and a Wholly-Owned Subsidiary of the US Borrower.

     "Calculation Period" shall have the meaning provided in Section 7.14.

     "Canadian  Borrower" shall have the meaning provided in the first paragraph
of this Agreement.

     "Canadian  Dollar  Equivalent"  shall mean, at any time for the computation
thereof, the amount of Canadian Dollars which could be purchased with the amount
of Dollars  involved in such  computation  at the spot exchange rate therefor as
quoted by the  Administrative  Agent as of 11:00 A.M.  (London time) on the date
three Business Days prior to the date of any determination  thereof for purchase
on such date.

     "Canadian  Dollar  Euro  Rate"  shall  mean (a) (i) the rate per annum that
appears on page 3740 of the Dow Jones  Telerate  Screen (or any successor  page)
for Canadian Dollar  deposits with maturities  comparable to the Interest Period
applicable to the Loans subject to the  respective  Borrowing,  determined as of
11:00 A.M.  (London  time) on the date which is two  Business  Days prior to the
commencement  of such Interest  Period or (ii) if such a rate does not appear on
page 3740 of the Dow Jones Telerate Screen (or any successor  page), the offered
quotation to first-class banks in the London interbank Eurodollar market by BTCo
for  Canadian  Dollar  deposits  of  amounts  in  immediately   available  funds
comparable to the  outstanding  principal  amount of the Canadian Dollar Loan of
BTCo with  maturities  comparable  to the  Interest  Period  applicable  to such
Canadian  Dollar Loan  commencing two Business Days  thereafter as of 11:00 A.M.
(London time) on the date which is two Business  Days prior to the  commencement
of such Interest Period,  in either case divided (and rounded off to the nearest
1/16 of 1%) by (b) a percentage equal to 100% minus the then stated maximum rate
of all  reserve  requirements  (including,  without  limitation,  any  marginal,
emergency,  supplemental,  special or other reserves required by applicable law)
applicable  to any  member  bank of the  Federal  Reserve  System in  respect of
Eurocurrency funding or liabilities as defined in Regulation D (or any successor
category of liabilities under Regulation D) to the extent applicable;  provided,
in the event that the Administrative  Agent has made any determination  pursuant
to Section  1.10(a)(i) in respect of Canadian Dollar Loans,  the Canadian Dollar
Euro Rate determined  pursuant to clause (a) of this definition shall instead be
the rate  determined  by BTCo as the all-in  cost of funds for BTCo to fund such
Euro Rate Loan denominated in Canadian Dollars with maturities comparable to the
Interest Period applicable thereto.

     "Canadian Dollar Loan" shall mean each A-3 Term Loan. --------------------

     "Canadian Dollars" shall mean freely transferable lawful money of Canada.

     "Canadian Security  Agreement" shall mean the Canadian Security  Agreement,
dated May 30, 1996 between the Canadian  Borrower and the Collateral  Agent,  as
amended by the Canadian  Security  Agreement  Amendment and as further  amended,
modified or supplemented from time to time.

     "Canadian Security Agreement  Amendment" shall have the meaning provided in
Section 5.09.

     "Canadian  Security  Documents" shall mean the Canadian Security  Agreement
and each agreement that creates a valid and enforceable  security  interest in a
Mortgaged  Property owned by the Canadian  Borrower or a Material  Subsidiary of
the  Canadian  Borrower  organized  under the laws of Canada  (or any  political
subdivision thereof) and any other security agreements executed and delivered by
any such Subsidiary pursuant to Section 8.15.

     "Canadian  Subsidiary Guaranty" shall mean each guaranty of the Obligations
of the  Canadian  Borrower  required  to be  delivered  by a  Subsidiary  of the
Canadian Borrower pursuant to Section 8.15.

     "Capital  Expenditures"  shall  mean,  with  respect  to  any  Person,  all
expenditures  by such  Person  which  would be  required  to be  capitalized  in
accordance with generally  accepted  accounting  principles,  including all such
expenditures  with  respect  to  fixed or  capital  assets  (including,  without
limitation, expenditures for maintenance and repairs which should be capitalized
in accordance  with  generally  accepted  accounting  principles)  and,  without
duplication,  the  amount of  Capitalized  Lease  Obligations  incurred  by such
Person.

     "Capitalized Lease Obligations" shall mean, with respect to any Person, all
rental obligations which, under generally accepted accounting principles, are or
will be required to be  capitalized  on the books of such  Person,  in each case
taken at the amount thereof  accounted for as  indebtedness  in accordance  with
such principles.

     "Cash  Equivalents"  shall mean (i) securities issued or directly and fully
guaranteed  or  insured  by the  United  States  of  America  or any  agency  or
instrumentality  thereof  (provided that the full faith and credit of the United
States of America is pledged in support  thereof) having  maturities of not more
than one year from the date of acquisition,  (ii) U.S. dollar  denominated  time
deposits,  certificates  of deposit and bankers  acceptances of (x) any Bank and
(y) any bank which has, or whose parent  company  has, a  short-term  commercial
paper rating from S&P of at least A-1 or the equivalent  thereof or from Moody's
of at least P-1 or the  equivalent  thereof (any such bank or Bank, an "Approved
Bank"),  in each case with maturities of not more than one year from the date of
acquisition, (iii) commercial paper issued by any Approved Bank or by the parent
company of any Approved Bank and  commercial  paper issued by, or guaranteed by,
any company  with a  short-term  commercial  paper rating of at least A-1 or the
equivalent  thereof by S&P or at least P-1 or the equivalent thereof by Moody's,
or guaranteed by any company with a long term  unsecured debt rating of at least
A or A2, or the equivalent of each thereof, from S&P or Moody's, as the case may
be, and in each case maturing  within six months after the date of  acquisition,
(iv) marketable direct  obligations  issued by any state of the United States of
America  or  any  political   subdivision  of  any  such  state  or  any  public
instrumentality  thereof  maturing  within one year from the date of acquisition
thereof and, at the time of  acquisition,  having one of the two highest ratings
obtainable  from either S&P or Moody's and (v) investments in money market funds
substantially  all the assets of which are  comprised of securities of the types
described in clauses (i) through (iv) above.

     "Cash  Proceeds"  shall mean, with respect to any Asset Sale, the aggregate
cash payments  (including any cash received by way of deferred  payment (but not
as interest)  pursuant to a note receivable issued in connection with such Asset
Sale,  but only as and when so  received)  received  by  Holdings  or any of its
Subsidiaries from such Asset Sale.

     "CERCLA" shall mean the Comprehensive Environmental Response, Compensation,
and Liability Act

     of 1980, as the same may be amended from time to time, 42 U.S.C.ss. 9601 et
seq., and any successor thereto.

     "Change in Law" shall have the meaning provided in Section 1.10.

     "Change of Control" shall mean (i) Holdings shall cease to own (directly or
indirectly) 100% of the outstanding  equity  interests of the US Borrower,  (ii)
prior to a Holdings IPO, (x) the Permitted  Holders shall cease to own (directly
or  indirectly)  a majority of the voting  capital  stock or other voting equity
interests  of Holdings on a fully  diluted  basis or (y) VCP and its  Affiliates
shall own (directly or indirectly) on a fully diluted basis less than 45% of the
number  of  shares  of  voting  capital  stock of  Holdings  owned by it and its
Affiliates on the  Restatement  Effective Date  (calculated  on a  fully-diluted
basis  and  without  giving  effect  to  any  stock-split,  spin-off,  split-up,
reclassification,  combination  of  shares,  or  similar  rearrangement),  (iii)
following a Holdings IPO, (A) any "Person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act),  excluding  Permitted Holders, is
or shall become the "beneficial  owner" (as defined in Rules 13(d)-3 and 13(d)-5
under the Exchange  Act),  directly or indirectly,  of a percentage  (the "Third
Party Stock Percentage") greater than 30% on a fully diluted basis (assuming for
such purpose that each  Permitted  Holder has exercised all warrants and options
it has for any such  voting  capital  stock or other  equity  interests)  of the
voting and economic  equity  interests of Holdings and (B) the percentage of the
voting and economic equity  interests of Holdings owned (directly or indirectly)
by the Permitted Holders (determined on a fully diluted basis) is less than such
Third Party Stock  Percentage,  (iv) the Board of  Directors  of Holdings  shall
cease to consist of a majority  of  Continuing  Directors  or (v) any "Change of
Control" (or any other defined term having a similar  purpose) shall occur under
the Senior  Subordinated  Note  Indenture  or, after the issuance  thereof,  any
document  evidencing  or  relating  to the  Permitted  Refinancing  Subordinated
Indebtedness.

     "Claims"   shall  have  the   meaning   provided  in  the   definition   of
"Environmental  Claims." "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the  regulations  promulgated  and rulings issued
thereunder.  Section references to the Code are to the Code, as in effect on the
date of this Agreement,  and to any subsequent provisions of the Code amendatory
thereof, supplemental thereto or substituted therefor.

     "Collateral"  shall  mean all  property  (whether  real or  personal)  with
respect to which any security  interests  have been granted (or  purported to be
granted) pursuant to any Security Document,  including,  without limitation, all
Pledge Agreement Collateral,  all Security Agreement  Collateral,  all Mortgaged
Properties, all Additional Mortgage Properties and all cash and Cash Equivalents
delivered as collateral pursuant to Sections 4.02 or 9 hereof.

     "Collateral Agent" shall mean the Administrative Agent acting as Collateral
Agent for the Secured Creditors pursuant to the Security Documents.

     "Commitment"  shall mean any of the commitments of any Bank, i.e.,  whether
the  A-1  Term  Loan  Commitment,  A-2  Term  Loan  Commitment,  A-4  Term  Loan
Commitment, A-5 Term Loan Commitment or Revolving Loan Commitment.

     "Commitment Fee" shall have the meaning provided in Section 3.01(a).

     "Consolidated  Capital  Expenditures"  shall  mean,  for  any  period,  the
aggregate amount of Capital  Expenditures  made by Holdings and its Subsidiaries
during such period.

     "Consolidated  Cash  Interest  Expense"  shall mean,  for any Test  Period,
Consolidated Interest Expense (net of cash interest income) for such Test Period
but only to the extent  such  Consolidated  Interest  Expense is payable in cash
during such Test Period.

     "Consolidated  Current  Assets" shall mean, at any time,  the  consolidated
current assets  (excluding any current  deferred tax assets) of Holdings and its
Subsidiaries at such time.

     "Consolidated   Current   Liabilities"   shall  mean,  at  any  time,   the
consolidated  current liabilities of Holdings and its Subsidiaries at such time,
but excluding (i) any such liabilities  which  constitute  Indebtedness and (ii)
any current deferred tax liabilities,  short-term  Indebtedness  payable,  taxes
payable and interest payable.

     "Consolidated  Debt" shall mean,  at any time,  an amount  equal to (i) the
average outstanding principal amount of Revolving Loans, calculated on the basis
of the outstanding principal amount of such Revolving Loans on the last Business
Day of each month during the period (the  "Revolver  Calculation  Period") of 12
months then most recently ended (or, if shorter,  the number of months beginning
with July 31, 2001 and ending with the then most recently ended month), provided
that if during such Revolver  Calculation  Period the US Borrower  consummated a
Permitted  Acquisition  financed in whole or in part with Revolving Loans,  then
for purposes of this clause (i) there shall be added to each month  occurring in
such Revolver  Calculation  Period prior to the  consummation  of such Permitted
Acquisition an amount equal to the principal  amount of Revolving Loans incurred
to finance such Permitted Acquisition,  plus (ii) the aggregate principal amount
of all other Indebtedness of Holdings and its Subsidiaries  (including,  without
limitation,  Loans hereunder other than Revolving Loans, but excluding (x) Trade
Letters of Credit  unless  any  Drawing  has  occurred  thereunder  which is not
reimbursed  in full  within 10 days  thereof  and (y)  Indebtedness  of the type
described  in clauses  (vi) and (vii) of the  definition  thereof) at such time,
minus (iii) cash and Cash Equivalents held by Holdings and its Subsidiaries.

     "Consolidated EBIT" shall mean, for any period, the Consolidated Net Income
for such period,  before  Consolidated  Interest  Expense for such  period,  the
aggregate  amount of letter of credit  fees for such  period and  provision  for
taxes and without  giving effect to any  extraordinary  gains or losses for such
period or gains or losses from sales of assets other than in the ordinary course
of business.

     "Consolidated  EBITDA"  shall  mean,  for any  period,  Consolidated  EBIT,
adjusted by adding thereto the following amounts (without duplication),  in each
case to the extent  deducted in arriving at  Consolidated  EBIT for such period:
(i)  all  amortization  of  intangibles  and  depreciation,  (ii)  all  non-cash
extraordinary and non-cash  non-recurring losses or charges,  (iii) all non-cash
expenses  incurred in the ordinary  course of business,  (iv) non-cash  expenses
resulting  from the grant of stock and stock options and other  compensation  to
management  personnel  of the US  Borrower  or its  Subsidiaries  pursuant  to a
written plan or agreement or the treatment of such options  under  variable plan
accounting,  (v)  step-up  in  inventory  valuation  as  a  result  of  purchase
accounting for Permitted  Acquisitions,  (vi) non-cash amortization of financing
costs by Holdings and its Subsidiaries for such period, (vii) any fees, expenses
or charges related to any equity offering,  permitted  investment,  acquisition,
disposal  or  recapitalization  or  Indebtedness  permitted  by  this  Agreement
(whether  or not  successful)  and fees,  expenses  or  charges  related  to the
transactions  contemplated hereby (including fees paid to the Sponsor and/or its
Affiliates),  (viii) any fees or expenses  related to the  Restructuring  not to
exceed  $8,000,000 in the aggregate and (ix) the amount of any minority interest
expense  deducted in calculating  Consolidated  Net Income;  it being  expressly
understood and agreed, however, that,  notwithstanding  anything to the contrary
set forth in this definition or in the definitions of Consolidated Net Income or
Consolidated  EBIT,  if any  restructuring  charges  are  taken or  incurred  by
Holdings and its Subsidiaries  after the Restatement  Effective Date (other than
any fees and expenses related to the Restructuring  referred to in clause (viii)
above),  such  charges  shall reduce  Consolidated  EBITDA,  provided  that such
reductions to Consolidated EBITDA shall be made at the times, and to the extent,
that cash amounts are paid in respect thereof  (whether such cash amounts reduce
reserves previously established, reduce Consolidated Net Income or otherwise).

     "Consolidated  Fixed  Charges"  shall  mean,  for any  period,  the sum of,
without  duplication,  (i)  Consolidated  Cash Interest Expense for such period,
(ii) the amount of all cash  Consolidated  Capital  Expenditures for such period
(other than (x) Consolidated Capital Expenditures constituting Capitalized Lease
Obligations, (y) Consolidated Capital Expenditures made during such period using
the  Rollover   Amount  from  a  previous   period  and  (z)  Excluded   Capital
Expenditures)  and  (iii) the  scheduled  principal  amount of all  amortization
payments on all Indebtedness  (excluding payments pursuant to a revolving credit
facility  or an  over-draft  facility  as a  result  of  the  occurrence  of the
scheduled termination date thereunder) of Holdings and its Subsidiaries for such
period, provided, that (a) for the Test Period ending on September 30, 2001, the
amortization  payments made pursuant to clause (iii) above,  shall be the actual
amortization  payments  made  pursuant  to clause  (iii)  above,  for the fiscal
quarter  ending  on  September  30,  2001  (taken  as  one  accounting  period),
multiplied  by 4, (b) for the Test  Period  ending on  December  31,  2001,  the
amortization  payments made pursuant to clause (iii) above,  shall be the actual
amortization  payments made  pursuant to clause (iii) above,  for the two fiscal
quarter  period  ending on December 31, 2001 (taken as one  accounting  period),
multiplied  by 2, and (c) for the Test  Period  ending  on March 31,  2001,  the
amortization  payments made pursuant to clause (iii) above,  shall be the actual
amortization  payments made pursuant to clause (iii) above, for the three fiscal
quarter period ending on March 31, 2001, multiplied by 4/3.

     "Consolidated  Interest  Expense"  shall mean,  for any  period,  the total
consolidated  interest  expense of Holdings and its Subsidiaries for such period
(calculated  without  regard to any  limitations  on the payment  thereof) plus,
without  duplication,  that portion of Capitalized Lease Obligations of Holdings
and its  Subsidiaries  representing  the interest  factor for such  period,  but
without  including  therein  any costs or  expenses  related  to  Interest  Rate
Protection Agreements or Other Hedging Agreements.

     "Consolidated Net Income" shall mean, for any period,  net after tax income
of Holdings and its Subsidiaries for such period; provided,  however, that there
shall be excluded from Consolidated Net Income (i) other than when calculated on
a Pro Forma Basis,  the income (or loss) of any Person accrued prior to the date
it  becomes  a  consolidated  Subsidiary  of  Holdings  or  is  merged  into  or
consolidated  with  Holdings  or any of its  consolidated  Subsidiaries  or such
Person's   assets  are   acquired  by  Holdings  or  any  of  its   consolidated
Subsidiaries,  except  to  the  extent  of  the  amount  of  cash  dividends  or
distributions actually paid to Holdings or any of its consolidated  Subsidiaries
by such  Person  during  such  period  and (ii) the  income of any  consolidated
Subsidiary of Holdings to the extent the  declaration or payment of dividends or
similar  distributions  by that  Subsidiary  of its  income  is not at the  time
permitted  by  operation  of the  terms  of its  charter  or  any  agreement  or
instrument (other than this Agreement or any other Credit  Document),  judgment,
decree,  order,  statute,  rule or  governmental  regulation  applicable to that
Subsidiary.

     "Contingent  Obligation"  shall mean, as to any Person,  any  obligation of
such Person  guaranteeing  or intended to guarantee  any  Indebtedness,  leases,
dividends or other obligations ("primary  obligations") of any other Person (the
"primary  obligor") in any manner,  whether  directly or indirectly,  including,
without  limitation,  any obligation of such Person,  whether or not contingent,
(i) to purchase any such primary obligation or any property  constituting direct
or  indirect  security  therefor,  (ii) to advance  or supply  funds (x) for the
purchase or payment of any such primary  obligation  or (y) to maintain  working
capital or equity  capital of the primary  obligor or  otherwise to maintain the
net worth or  solvency  of the  primary  obligor,  (iii) to  purchase  property,
securities  or services  primarily  for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary  obligation or (iv) otherwise to assure or hold harmless the holder
of such primary obligation against loss in respect thereof;  provided,  however,
that  the  term  Contingent   Obligation  shall  not  include   endorsements  of
instruments  for deposit or collection in the ordinary  course of business.  The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent  Obligation  is made or, if not stated or  determinable,  the maximum
reasonably  anticipated  liability in respect  thereof  (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.

     "Continuing  Directors" shall mean the members of the Board of Directors of
Holdings  on the  Restatement  Effective  Date and each  other  member,  if such
member's  nomination  for  election  to the Board of  Directors  of  Holdings is
recommended by a majority of the then Continuing Directors or if such member has
been designated by a Permitted Holder.

     "Credit  Documents"  shall mean this Agreement and, after the execution and
delivery  thereof  pursuant  to the terms of this  Agreement,  each  Note,  each
Security Document and each Guaranty.

     "Credit  Event"  shall mean the making of any Loan or the  issuance  of any
Letter of Credit.

     "Credit  Party" shall mean  Holdings,  each  Borrower  and each  Subsidiary
Guarantor.

     "CTB   Subsidiary"   shall  mean  each   Subsidiary  of  Holdings  that  is
incorporated  or organized  outside the United  States or any State or territory
thereof  but  which  is, or has  elected  to be,  treated  as a  partnership  or
disregarded  entity pursuant to the provisions of Treasury  Regulations  Section
301.7701.3;  provided,  however,  that the term CTB Subsidiary shall not include
any Subsidiary that is directly or indirectly owned by any Foreign Subsidiary of
the US Borrower.

     "CTB  Subsidiary  Guaranty"  shall  have the  meaning  provided  in Section
7.12(b).

     "Default" shall mean any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.

     "Defaulting  Bank" shall mean any Bank with respect to which a Bank Default
is in effect.

     "Determination  Date" shall have the meaning  provided in the definition of
Applicable Commitment Fee Percentage.

     "Dividends"  with  respect  to any Person  shall mean that such  Person has
declared or paid a dividend or returned any equity capital to its  stockholders,
members or other equity  owners or  authorized  or made any other  distribution,
payment or delivery of  property  or cash (other than equity  interests  in such
person or rights therefor) to its  stockholders,  members or other equity owners
as such,  or redeemed,  retired,  purchased or otherwise  acquired,  directly or
indirectly,  for  consideration  (other than equity  interests in such person or
rights  therefor)  any shares of any class of its capital  stock or other equity
securities  outstanding  on or  after  the  Restatement  Effective  Date (or any
options or warrants  issued by such Person with respect to its capital  stock or
other  equity  securities),  or set aside  any  funds  for any of the  foregoing
purposes,  or shall  have  permitted  any of its  Subsidiaries  to  purchase  or
otherwise acquire for consideration any shares of any class of the capital stock
or  other  equity  securities  of  such  Person  outstanding  on  or  after  the
Restatement  Effective  Date (or any options or  warrants  issued by such Person
with respect to its capital stock or other equity securities).  "Dividends" with
respect to any Person (x) shall  include  payments of principal  and interest in
respect of the Shareholder Subordinated Notes and (y) shall not include payments
made or required to be made by such Person  with  respect to any  management  or
employee  stock or  equity  appreciation  rights,  plans,  equity  incentive  or
achievement  plans or any  similar  plans or setting  aside of any funds for the
foregoing purposes.

     "Dollar Equivalent" shall mean, at any time for the determination  thereof,
the amount of Dollars which could be purchased  with (or, in the case of Letters
of Credit  denominated in a currency  other than Dollars,  the amount of Dollars
necessary to purchase) the amount of the relevant Alternate Currency (or, in the
case of a Letter of Credit or other Indebtedness denominated in a currency other
than an Alternate Currency, such other currency) involved in such computation at
the spot  exchange  rate  therefor as quoted by the  Administrative  Agent as of
11:00 A.M.  (London time) on the date two Business Days prior to the date of any
determination  thereof  for  purchase  on such  date,  provided  that the Dollar
Equivalent  of any  Unpaid  Drawing in a currency  other than  Dollars  shall be
determined at the time the drawing  under the related  Letter of Credit was paid
or disbursed by the relevant  Issuing Bank and such  computation  will be at the
spot exchange rate  therefor as quoted by the  Administrative  Agent as of 11:00
A.M. (New York time) on such date.

     "Dollar Loan" shall mean each A-1 Term Loan and each Revolving Loan.

     "Dollars" and the sign "$" shall each mean freely transferable lawful money
of the United States.

     "Domestic  Subsidiary"  shall  mean each  Subsidiary  of  Holdings  that is
incorporated  or  organized  in the  United  States  or any  State or  territory
thereof.

     "Drawing" shall have the meaning provided in Section 2.04(b).

     "Eligible  Transferee" shall mean and include a commercial bank,  financial
institution  or other  "accredited  investor" (as defined in Regulation D of the
Securities Act).

     "EMU  Legislation"  shall mean the  legislative  measures  of the  European
Council for the  introduction  of,  changeover  to or  operation  of a single or
unified European currency.

     "Environmental Claims" shall mean any and all administrative, regulatory or
judicial actions,  suits,  demands,  demand letters,  claims,  liens, notices of
non-compliance  or violation,  investigations  or proceedings  arising under any
Environmental Law (hereafter  "Claims") or any permit issued under any such law,
including,  without  limitation,  (a) any  and all  Claims  by  governmental  or
regulatory authorities for enforcement,  cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable  Environmental  Law, and (b)
any  and  all  Claims  by  any  third  party  seeking   damages,   contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Hazardous  Materials or arising  from alleged  injury or threat of injury to the
indoor or outdoor environment.

     "Environmental Law" shall mean any applicable Federal,  state,  provincial,
foreign or local  statute,  law,  rule,  regulation,  ordinance,  code,  legally
binding  guideline or written  policy and rule of common law now or hereafter in
effect  and in each  case  as  amended,  and any  legally  binding  judicial  or
administrative  interpretation thereof, including any judicial or administrative
order, consent decree or judgment relating to the indoor or outdoor environment,
employee  health  and  safety  or  Hazardous   Materials,   including,   without
limitation,   CERCLA;   RCRA;  the  Federal  Water  Pollution  Control  Act,  33
U.S.C.ss.2601  et seq.;  the Clean Air Act, 42 U.S.C.ss.  7401 et seq.; the Safe
Drinking Water Act, 42 U.S.C.ss. 3803 et seq.; the Oil Pollution Act of 1990, 33
U.S.C.ss.  2701 et seq.; the Emergency Planning and the Community  Right-to-Know
Act of 1986, 42  U.S.C.ss.11001 et seq.; the Hazardous  Material  Transportation
Act,  49  U.S.C.ss.1801  et seq.;  the  Occupational  Safety and Health  Act, 29
U.S.C.ss.  651 et seq.;  and any  state  and local or  foreign  counterparts  or
equivalents, in each case as amended from time to time.

     "ERISA" shall mean the Employee  Retirement Income Security Act of 1974, as
amended from time to time, and the  regulations  promulgated  and rulings issued
thereunder.  Section  references to ERISA are to ERISA, as in effect on the date
of this Agreement and any subsequent  provisions of ERISA,  amendatory  thereof,
supplemental thereto or substituted therefor.

     "ERISA  Affiliate"  shall  mean  any  trade  or  business  (whether  or not
incorporated)  which  together with  Holdings or any of the  Borrowers  would be
treated as a single  employer under Section 414(b) or (c) of the Code or, solely
for the purposes of Section 302 of ERISA and Section 412 of the Code, is treated
as a single employer under Section 414 of the Code.

     "ERISA Event" shall mean (a) any "reportable  event", as defined in section
4043(c) of ERISA or the  regulations  issued  thereunder  with respect to a Plan
(other  than an event for  which  the  30-day  notice  period  is  waived  under
subsection .22, .23, .25, .27 or .28 of PBGC Regulation  Section 4043);  (b) the
existence with respect to any Plan of an  "accumulated  funding  deficiency" (as
defined in  Section  412 of the Code or  Section  302 of ERISA),  whether or not
waived;  (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an  application  for a waiver of the minimum  funding  standard with
respect to any Plan;  (d) the  incurrence  by  Holdings,  any Borrower or any of
their ERISA  Affiliates of any liability under Title IV of ERISA with respect to
the termination of any Plan; (e) the receipt by Holdings,  any Borrower or their
ERISA Affiliates from the PBGC or a plan administrator of any notice relating to
an  intention  to  terminate  any Plan or  Plans  or to  appoint  a  trustee  to
administer  any Plan;  (f) the  incurrence  by Holdings,  any Borrower or any of
their ERISA  Affiliates  of any  liability  with  respect to the  withdrawal  or
partial  withdrawal from any Plan or  Multiemployer  Plan; or (g) the receipt by
Holdings,  any Borrower or any of their ERISA  Affiliates of any notice,  or the
receipt by any Multiemployer  Plan, from Holdings,  any Borrower or any of their
ERISA  Affiliates  of any  notice,  concerning  the  imposition  of  "withdrawal
liability" (within the meaning of Section 4201 of ERISA) or a determination that
a Multiemployer  Plan is or is expected to be,  insolvent or in  reorganization,
within the meaning of Title IV of ERISA.

     "EURIBOR"  shall mean, for each Interest  Period  applicable to any EURIBOR
Rate Loan,  (i) the per annum rate for  deposits in Euros as  determined  by the
Administrative  Agent for a period corresponding to the duration of the relevant
Interest Period which appears on Reuters Page EURIBOR-01 at approximately  10:00
A.M.  (London  time)  on the  date  which  is two  Business  Days  prior  to the
commencement  of such  Interest  Period  or (ii) if such  rate is not  shown  on
Reuters Page  EURIBOR-01,  the average  offered  quotation to prime banks in the
Euro-zone  interbank market by the Banks for Euro deposits of amounts comparable
to the  principal  amount of the EURIBOR Rate Loan for which an interest rate is
then being  determined with  maturities  comparable to the Interest Period to be
applicable to such EURIBOR Rate Loan (rounded  upward to the next whole multiple
of 1/16 of 1%),  determined as of 10:00 A.M.  (London time) on the date which is
two  Business  Days  prior to the  commencement  of such  Interest  Period.  The
reference to Reuters Page EURIBOR-01 in this definition shall be construed to be
a reference to the relevant page or any other page that may replace such page on
the Reuters service;  provided,  in the event the Administrative  Agent has made
any determination  pursuant to Section  1.10(a)(i) in respect of Euro Rate Loans
denominated  in Euros,  or in the  circumstances  described in clause (i) to the
proviso to Section  1.10(b) in respect of Euro Rate Loans  denominated in Euros,
the EURIBOR  determined  pursuant to this  definition  shall instead be the rate
determined  by the  Administrative  Agent as the  all-in-cost  of funds  for the
Administrative  Agent  to  fund a Euro  Rate  Loan  denominated  in  Euros  with
maturities comparable to the Interest Period applicable thereto.

     "EURIBOR Rate Loan" shall mean each A-2 Term Loan.

     "Euro" shall mean the single currency of the participating member states as
described in any EMU Legislation.

     "Eurodollar  Loan" shall mean each Dollar  Loan  designated  as such by the
Borrower at the time of the incurrence thereof or conversion thereto.

     "Eurodollar Rate" shall mean (a) the offered quotation to first-class banks
in the London interbank Eurodollar market by BTCo for Dollar deposits of amounts
in immediately available funds comparable to the outstanding principal amount of
the Eurodollar  Loan of BTCo with  maturities  comparable to the Interest Period
applicable to such Eurodollar Loan commencing two Business Days thereafter as of
11:00 A.M.  (London  time) on the date which is two  Business  Days prior to the
commencement  of such Interest  Period,  divided (and rounded off to the nearest
1/16 of 1%) by (b) a percentage equal to 100% minus the then stated maximum rate
of all  reserve  requirements  (including,  without  limitation,  any  marginal,
emergency,  supplemental,  special or other reserves required by applicable law)
applicable  to any  member  bank of the  Federal  Reserve  System in  respect of
Eurocurrency funding or liabilities as defined in Regulation D (or any successor
category of liabilities under Regulation D).

     "Euro Equivalent" shall mean, at any time for the computation  thereof, the
amount of Euros which could be purchased with the amount of Dollars  involved in
such   computation  at  the  spot  exchange  rate  therefor  as  quoted  by  the
Administrative Agent at 11:00 A.M. (London time) on the date three Business Days
prior to the date of any determination thereof for the purchase on such date.

     "Euro Rate" shall mean (i) with  respect to Dollar  Loans,  the  Eurodollar
Rate and (ii) with respect to the EURIBOR Rate Loans, EURIBOR (iii) with respect
to Canadian Dollar Loans, the Canadian Dollar Euro Rate and (iv) with respect to
Pounds Sterling Loans, the Pounds Sterling Euro Rate.

     "Euro Rate Loan" shall mean each  Eurodollar  Loan, each EURIBOR Rate Loan,
each Canadian Dollar Loan and each Pounds Sterling Loan.

     "Euro-zone"  shall  mean  the  region  composed  of the  member  states  as
described in any EMU Legislation.

     "Event of Default" shall have the meaning provided in Section 9.

     "Excess Cash Flow" shall mean, for any period,  the difference  between (a)
the sum of (i)  Adjusted  Consolidated  Net Income for such  period and (ii) the
decrease, if any, in Adjusted Consolidated Working Capital from the first day to
the last day of such  period,  and (b) the sum of (i) an amount equal to (1) the
amount of Consolidated Capital Expenditures (but excluding  Consolidated Capital
Expenditures  financed  with equity or  Indebtedness  (other than the  Revolving
Loans and loans under the Overdraft  Facility)) made during such period pursuant
to and in accordance  with Section  8.07(a) plus (or minus, if negative) and (2)
the  Rollover  Amount for such  period to be carried  forward to the next period
less the Rollover  Amount (if any) for the preceding  period carried  forward to
the current period, (ii) without duplication of amounts deducted under preceding
clause (b)(i),  the amounts expended by Holdings and its Subsidiaries in respect
of Permitted  Acquisitions (but excluding Permitted  Acquisitions  financed with
equity or  Indebtedness  other  than the  Revolving  Loans  and loans  under the
Overdraft Facility),  (iii) the aggregate amount of permanent principal payments
of Indebtedness of Holdings and its  Subsidiaries  (but excluding  repayments of
(A)  Indebtedness  made with the  proceeds of equity or with other  Indebtedness
(other than the Revolving Loans and loans under the Overdraft  Facility) and (B)
Loans, provided that repayments of Loans shall be deducted in determining Excess
Cash  Flow if such  repayments  were (x)  required  as a result  of a  Scheduled
Repayment under Section 4.02(b), or (y) made as a voluntary  prepayment pursuant
to Section 4.01 with internally  generated funds (but in the case of a voluntary
prepayment of Revolving  Loans,  only to the extent  accompanied  by a voluntary
reduction to the Total Revolving Loan Commitment))  during such period, (iv) the
increase, if any, in Adjusted Consolidated Working Capital from the first day to
the last day of such period, (v) an amount of cash spent during such period with
respect to expenses  accrued on Holdings'  or the  Borrower's  balance  sheet in
connection with the transactions  contemplated hereby or a Permitted Acquisition
including purchase accounting  reserves,  (vi) the aggregate amount of Dividends
paid during such period under  Section  8.03(iv),  (vi) and (vii) (to the extent
used to make loans to Persons  other than  Holdings and its  Subsidiaries),  (in
each case without duplication and excluding (A) any such Dividends paid with the
proceeds  of an equity  issuance  and (B) any such  Dividends  paid  during such
period to the extent deducted in determining  Adjusted  Consolidated  Net Income
for such period),  (vii) taxes paid by Holdings and its Subsidiaries during such
period to the extent not  deducted  in  determining  Adjusted  Consolidated  Net
Income for such period, and including as a deduction under this clause (vii) any
taxes payable by Holdings and its Subsidiaries in respect of such period even if
such taxes are paid in a subsequent period, provided that if a deduction is made
during any period for taxes payable in respect of, but not paid in, such period,
then no deduction shall be made for such taxes (under this clause (vii) or under
clause (vi) above) in the period in which such taxes are paid, (viii) reductions
in purchase  accounting reserves or reductions in other long term liabilities on
the balance sheet of Holdings or the Borrower on the Restatement  Effective Date
(to the extent such reductions resulted in an increase to Adjusted  Consolidated
Net Income for such period),  (ix) cash Restructuring costs incurred during such
period to the extent not constituting  Capital  Expenditures and not deducted in
determining Adjusted  Consolidated Net Income for such period and (x) the amount
of cash spent during such period to redeem or repurchase the Senior Subordinated
Notes to the extent  permitted under Section 8.11(i)  (excluding any such amount
paid with the proceeds of an equity  issuance or other  Indebtedness  other than
Revolving Loans).

     "Excess  Cash  Payment  Date"  shall  mean the  earlier  of (x) the date of
delivery of the financial  statements  pursuant to Section 7.01(c) in respect of
Holdings'  fiscal year then last ended and (y) the date occurring 105 days after
the last day of each fiscal year of Holdings (in either case  beginning with its
fiscal year ended on September 30, 2002).

     "Excess  Cash  Payment  Period"  shall  mean with  respect  to the  payment
required on each Excess Cash Payment Date, the immediately preceding fiscal year
of Holdings.

     "Exchange Act" shall mean the Securities  Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

     "Excluded Capital  Expenditures" shall mean Capital Expenditures made under
Section 8.07(b).

     "Existing  Bank" shall mean each Bank which is a "Bank"  under the Existing
Credit Agreement immediately prior to the Restatement Effective Date.

     "Existing Canadian Term Loans" shall mean the "Subsidiary A Canadian Dollar
Term Loans" under, and as defined in, the Existing Credit Agreement.

     "Existing Credit Agreement" shall have the meaning provided in the recitals
to this Agreement.

     "Existing Indebtedness" shall have the meaning provided in Section 6.21.

     "Existing  Indebtedness  Agreements" shall mean the "Existing  Indebtedness
Agreements," under and as defined in the Existing Credit Agreement.

     "Existing  Lender"  shall  mean  each  Lender  under  the  Existing  Credit
Agreement.

     "Existing  Letters of Credit"  shall have the  meaning  provided in Section
2.01(d).

     "Existing  Loans" shall mean the loans made pursuant to the Existing Credit
Agreement.

     "Existing UK Pounds  Sterling  Loans" shall mean the "Subsidiary A Sterling
Term Loans" under, and as defined in, the Existing Credit Agreement.

     "Existing US Pounds Sterling Loans" shall mean the "Company A Sterling Term
Loans" under, and as defined in, the Existing Credit Agreement.

     "Existing  US Term  Loans"  shall mean the  "Company A Dollar  Term  Loans"
under, and as defined in, the Existing Credit Agreement.

     "Facing Fee" shall have the meaning provided in Section 3.01(c).

     "Federal Funds Rate" shall mean for any period, a fluctuating interest rate
equal for each day during  such period to the  weighted  average of the rates on
overnight Federal Funds  transactions with members of the Federal Reserve System
arranged by Federal Funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding  Business Day) by the Federal Reserve
Bank of New York,  or, if such rate is not so  published  for any day which is a
Business Day, the average of the  quotations  for such day on such  transactions
received  by the  Administrative  Agent  from  three  Federal  Funds  brokers of
recognized standing selected by the Administrative Agent.

     "Fees" shall mean all amounts payable pursuant to or referred to in Section
3.01.

     "Fixed Charge Coverage Ratio" shall mean, for any Test Period, the ratio of
Consolidated  EBITDA to  Consolidated  Fixed  Charges for such Test Period.  All
calculations  of the Fixed  Charge  Coverage  Ratio shall be made on a Pro Forma
Basis, with  determinations of the Fixed Charge Coverage Ratio to give effect to
all  adjustments  contained in the  definition  of "Pro Forma  Basis"  contained
herein.

     "Foreign  Pension  Plan"  shall  mean any plan,  fund  (including,  without
limitation,  any  superannuation  fund) or other similar program  established or
maintained outside of the United States by Holdings,  any Borrower or any one or
more of their  Subsidiaries  primarily for the benefit of employees of Holdings,
any Borrower or any of their Subsidiaries residing outside of the United States,
which plan, fund or other similar program  provides,  or results in,  retirement
income,  a deferral of income in  contemplation  of retirement or payments to be
made upon  termination of employment,  and which plan is not subject to ERISA or
the Code.

     "Foreign Pledge Agreement" shall mean the "Foreign Pledge Agreement" under,
and as defined in, the Existing Credit Agreement.

     "Foreign  Subsidiary"  shall mean each Subsidiary of Holdings that is not a
Domestic Subsidiary or a CTB Subsidiary.

     "Foreign  Subsidiary  Guaranty" shall have the meaning  provided in Section
7.12(a).

     "Guaranteed Creditors" shall mean and include the Administrative Agent, the
Collateral  Agent,  the Issuing Bank,  each Bank and each Person (other than any
Credit  Party) party to an Interest Rate  Protection  Agreement or Other Hedging
Agreements  or the  Overdraft  Facility to the extent such party  constitutes  a
Secured Creditor under the Security Documents.

     "Guaranteed  Parties" shall mean (i) in respect of Holdings,  as Guarantor,
the US  Borrower  and each  Subsidiary  Borrower  and (ii) in  respect of the US
Borrower, as Guarantor, each Subsidiary Borrower.

     "Guarantor"  shall  mean  each  of  Holdings,  the  US  Borrower  and  each
Subsidiary Guarantor.

     "Guaranty"  shall mean and include each of the guaranties of Holdings,  the
US Borrower,  the US Subsidiary Guaranty,  any Canadian Subsidiary Guaranty, any
UK Subsidiary Guaranty and any Foreign Subsidiary Guaranty.

     "Hazardous  Materials"  shall  mean  (a)  any  petrochemical  or  petroleum
products,  radioactive  materials,  asbestos in any form that is  friable,  urea
formaldehyde  foam  insulation,  transformers  or other  equipment  that contain
dielectric fluid containing levels of polychlorinated  biphenyls, and radon gas;
and (b) any  chemicals,  materials or  substances  defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"restricted hazardous materials," "extremely hazardous materials,"  "restrictive
hazardous wastes," "toxic  substances,"  "toxic  pollutants,"  "contaminants" or
"pollutants,"  or words of  similar  meaning  and  regulatory  effect  under any
applicable Environmental Law.

     "Holdings"  shall have the meaning  provided in the first paragraph of this
Agreement.

     "Holdings  Common  Stock"  shall  mean  the  outstanding  common  stock  of
Holdings.

     "Holdings Guaranty" shall mean the guaranty of Holdings pursuant to Section
12.

     "Holdings IPO" shall mean a primary issuance by Holdings of Holdings Common
Stock pursuant to a registered initial public offering.

     "Inactive  Subsidiary"  shall mean any Subsidiary of Holdings (other than a
Borrower)  that does not have any  assets in excess of  $100,000  or has not had
revenues in excess of $100,000 for the Test Period then most recently  ended for
which financial statements are available.

     "Indebtedness" shall mean, as to any Person,  without duplication,  (i) all
indebtedness  of such Person for  borrowed  money or for the  deferred  purchase
price of property or  services,  (ii) the maximum  amount  available to be drawn
under all letters of credit issued for the account of such Person and all unpaid
drawings in respect of such  letters of credit,  (iii) all  Indebtedness  of the
types described in clause (i), (ii), (iv), (v), (vi) or (vii) of this definition
secured by any Lien on any property  owned by such  Person,  whether or not such
Indebtedness has been assumed by such Person, (iv) the aggregate amount required
to be  capitalized  under leases under which such Person is the lessee,  (v) all
obligations  of such  person  to pay a  specified  purchase  price  for goods or
services,  whether or not delivered or accepted,  i.e.,  take-or-pay and similar
obligations,  (vi) all  Contingent  Obligations  of such  Person in  respect  of
Indebtedness of a type described in clauses (i), (ii), (iii), (iv) or (vii), and
(vii) all net  obligations  or  exposure  under  any  Interest  Rate  Protection
Agreement or Other  Hedging  Agreement or under any similar type of agreement or
arrangement,  provided that  Indebtedness  shall not include trade  payables and
accrued expenses, in each case arising in the ordinary course of business.

     "Intercompany Note" shall mean promissory notes,  substantially in the form
of Exhibit K evidencing intercompany loans.

     "Interest Coverage Ratio" shall mean, for any Test Period, the ratio of (x)
Consolidated  EBITDA  for such Test  Period to (y)  Consolidated  Cash  Interest
Expense for such Test Period.  All  calculation  of the Interest  Coverage Ratio
shall be made on a Pro Forma Basis, with determinations of the Interest Coverage
Ratio to give effect to all  adjustments  contained  in the  definition  of "Pro
Forma Basis" contained herein.

     "Interest  Determination  Date" shall mean,  with  respect to any Euro Rate
Loan, the second  Business Day prior to the  commencement of any Interest Period
relating to such Euro Rate Loan.

     "Interest Period" shall have the meaning provided in Section 1.09.

     "Interest  Rate  Protection  Agreement"  shall mean any interest  rate swap
agreement, interest rate cap agreement, interest collar agreement, interest rate
hedging  agreement,  interest rate floor agreement or other similar agreement or
arrangement.

     "Issuing  Bank"  shall  mean  BTCo  (or  any  Lending   Affiliate  of  BTCo
(including,  but not limited to,  Deutsche Bank AG, New York Branch)  performing
obligations on its behalf and reasonably  acceptable to the US Borrower) and any
other Bank designated by, and acceptable to, the Administrative Agent and the US
Borrower.

     "Judgment Currency" shall have the meaning provided in Section 13.16(a).

     "Judgment  Currency  Conversion  Date" shall have the  meaning  provided in
Section 13.16(a).

     "L/C Supportable Obligations" shall mean (i) obligations of the US Borrower
or its Subsidiaries  incurred in the ordinary course of business with respect to
insurance obligations and workers' compensation,  surety bonds and other similar
obligations  and (ii) such other  obligations  of the US  Borrower or any of its
Subsidiaries  which would not be  inconsistent  with the internal  policy of the
Issuing  Bank  (applied  consistently  to all of its  customers)  and  otherwise
permitted to exist pursuant to the terms of this Agreement.

     "Leaseholds" of any Person means all the right,  title and interest of such
Person as lessee or  licensee  in,  to and  under  leases or  licenses  of land,
improvements and/or fixtures.

     "Lending  Affiliate"  shall mean,  with  respect to any  Person,  any other
Person (i) directly or indirectly  controlling  (including,  but not limited to,
all  directors,  officers and partners of such Person),  controlled by, or under
direct or indirect  common  control  with,  such Person or (ii) that directly or
indirectly  owns more than 50% of any class of the voting  securities or capital
stock of or equity interests in such Person. A Person shall be deemed to control
another Person if such Person  possesses,  directly or indirectly,  the power to
direct or cause the  direction  of the  management  and  policies  of such other
Person,  whether  through the  ownership  of voting  securities,  by contract or
otherwise.

     "Lesser Period" shall have the meaning provided in Section 1.16.

     "Letter of Credit" shall have the meaning provided in Section 2.01(a).

     "Letter of Credit Fee" shall have the meaning provided in Section 3.01(b).

     "Letter of Credit Outstandings" shall mean, at any time, the sum of (i) the
aggregate  Stated  Amount of all  outstanding  Letters  of  Credit  and (ii) the
aggregate amount of all Unpaid Drawings.

     "Letter of Credit  Request"  shall  have the  meaning  provided  in Section
2.02(a)

     "Leverage Ratio" shall mean, at any time, the ratio of Consolidated Debt at
such time to Consolidated  EBITDA for the Test Period most recently  ended.  All
calculations  of the  Leverage  Ratio shall be made on a Pro Forma  Basis,  with
determinations of the Leverage Ratio to give effect to all adjustments contained
in the definition of "Pro Forma Basis" contained herein.

     "Lien" shall mean any mortgage, pledge, hypothecation,  assignment, deposit
arrangement,  encumbrance, lien (statutory or other) or other security agreement
or preferential arrangement of any kind or nature whatsoever (including, without
limitation,  any conditional  sale or other title retention  agreement,  and any
lease having substantially the same effect as any of the foregoing).

     "Loan" shall mean each Term Loan and each Revolving Loan.

     "Majority Banks" of any Tranche shall mean those Non-Defaulting Banks which
would  constitute the Required Banks under, and as defined in, this Agreement if
all  outstanding  Obligations  of the other  Tranches  under this Agreement were
repaid in full and all Commitments with respect thereto were terminated.

     "Management Agreement" shall mean the Management Agreement,  dated July 11,
1995,  among Holdings,  the US Borrower,  certain of its  Subsidiaries,  VCP and
Cabot Corporation, as amended, supplemented or modified from time to time.

     "Mandatory  Cost" shall mean,  in relation to any part of any EURIBOR  Rate
Loan or any unpaid sum in respect  thereof,  the percentage  rate  determined in
accordance  with  Schedule  XIII to  compensate  the Banks (in  addition  to the
interest rate) for the cost of compliance with (a) the  requirements of the Bank
of England  and/or the Financial  Services  Authority  (or, in either case,  any
other  authority  which  replaces  all or any of its  functions)  in the case of
paragraph (a) of Schedule XIII or (b) the  requirements of the European  Central
Bank in the case of paragraph (b) of Schedule XIII.

     "Margin Stock" shall have the meaning provided in Regulation U.

     "Material Subsidiary" shall mean, at any time (a) any Subsidiary (i) having
assets  (valued at fair market  value) equal to or greater than 3% of the assets
(valued at fair market value) of Holdings and its Subsidiaries  taken as a whole
or (ii) having revenues for the then most recently ended fiscal year equal to or
greater  than 3% of the  revenues  for  such  fiscal  year of  Holdings  and its
Subsidiaries  taken as a whole  and (b) any  group of  Subsidiaries  (i)  having
aggregate  assets (valued at fair market value) and equal to or greater than 10%
of the assets  (valued at fair market  value) of Holdings  and its  Subsidiaries
taken as a whole or (ii) having  aggregate  revenues for the then most  recently
ended fiscal year equal or greater than 10% of the revenues for such fiscal year
of Holdings and its Subsidiaries taken as a whole.

     "Material Wholly-Owned  Subsidiary" shall mean a Material Subsidiary of any
Borrower that is a Wholly-Owned Subsidiary of such Borrower.

     "Maturity  Date" with respect to a Tranche  shall mean either the Term Loan
Maturity Date or the Revolving Loan Maturity Date, as the case may be.

     "Minimum  Borrowing  Amount" shall mean (i) with respect to Term Loans that
are  Dollar  denominated,  $5,000,000,  (ii) with  respect  to  Revolving  Loans
maintained  as  Eurodollar  Loans,  $1,000,000,  (iii) with respect to Revolving
Loans maintained as Base Rate Loans,  $250,000,  (iv) with respect to Term Loans
that are maintained as EURIBOR Rate Loans, (euro)3,000,000,  (v) with respect to
Term Loans that are maintained as Canadian Dollar Loans, CDN $1,000,000 and (vi)
with  respect  to Term  Loans  that are  maintained  as Pounds  Sterling  Loans,
(pound)2,000,000.  In  determining  whether  the  Minimum  Borrowing  Amount  is
satisfied on the  Restatement  Effective  Date, the Loans  continued and the new
Loans made shall be combined.

     "Moody's" shall mean Moody's Investors Service, Inc.

     "Mortgage"  shall mean all Mortgages  granted by the Borrowers  pursuant to
the  Original  Credit  Agreement  and which have not be  released by the lenders
prior to the  Restatement  Effective  Date and, after the execution and delivery
thereof, shall include each Additional Mortgage.

     "Mortgage Amendment" shall have the meaning provided in Section 5.12.

     "Mortgaged  Property"  shall mean all the Real Property of Holdings and its
Subsidiaries listed on Schedule XII and designated "Existing Mortgaged Property"
and, after the execution and delivery of any Additional Mortgage,  shall include
the respective Additional Mortgaged Property.

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

     "Net Cash  Proceeds"  shall mean,  with respect to any Asset Sale, the Cash
Proceeds  resulting  therefrom  net of (x)  cash  expenses  of  sale  (including
brokerage  fees,  if any,  and payment of  principal,  premium  and  interest of
Indebtedness  (other  than the Loans)  required to be repaid as a result of such
Asset  Sale)  and (y)  incremental  income  taxes  paid or  payable  as a result
thereof.

     "Non-Defaulting  Bank"  shall  mean and  include  each  Bank  other  than a
Defaulting Bank.

     "Non-Qualified  Permitted  Earn-Out  Amount" shall mean the maximum  amount
payable  in cash by  Holdings  and its  Subsidiaries  in  respect  of  Permitted
Earn-Out  Debt  and  Permitted  Earn-Out  Equity  which  does not  constitute  a
Qualified Earn-Out Obligation.

     "Note" shall mean each Term Note and Revolving Note.


     "Notice of Borrowing" shall have the meaning provided in Section 1.03.

     "Notice of Conversion" shall have the meaning provided in Section 1.06.

     "Notice  Office"  shall  mean the  office  of  Bankers  Trust  Company,  as
Administrative  Agent,  located at 130 Liberty Street, New York, New York 10006,
or such other  office or offices as the  Administrative  Agent may  designate to
Holdings, the Borrowers and the Banks from time to time.

     "Obligation Currency" shall have the meaning provided in Section 13.16(a).

     "Obligations" shall mean all amounts owing to the Administrative Agent, the
Collateral  Agent,  the Issuing  Bank or any Bank  pursuant to the terms of this
Agreement or any other Credit Document.

     "Original Restatement Effective Date" shall mean the "Restatement Effective
Date" under,  and as defined in, the Existing  Credit  Agreement  (i.e.  May 30,
1996).

     "Other Creditor" shall have the meaning provided in the respective Security
Documents.

     "Other  Hedging  Agreements"  shall mean any  foreign  exchange  contracts,
currency swap agreements,  commodity  agreements or other similar  agreements or
arrangements  designed to protect against  fluctuations of currency or commodity
values.

     "Overdraft  Facility" shall mean an arrangement between the UK Borrower and
a  credit  provider  reasonably  satifactory  to the  Administrative  Agent  for
extensions of credit in Pounds Sterling in an aggregate  amount not to exceed at
any time outstanding the Pounds Sterling Equivalent of $5,000,000 plus interest,
fees and other amounts owed thereunder, it being understood and agreed that such
extensions  of credit  shall be  secured  on an equal and  ratable  basis by the
Collateral subject to the UK Security Documents.

     "Participant" shall have the meaning provided in Section 2.03(a).

     "Participation" shall have the meaning provided in Section 2.03(a).

     "Payment  Office"  shall  mean (i) in  respect  of all Loans made to the US
Borrower,  Letters of Credit,  Fees and,  except as provided in clauses (ii) and
(iii) of this  definition,  all other  amounts owing under this  Agreement,  the
office of the Administrative Agent located at One Bankers Trust Plaza, New York,
New York,  ABA Number:  021-001-033,  Account Name:  Commercial  Loan  Division,
Account Number:  99-401-268,  Attention:  Deal Administrator,  Reference:  Aearo
Company I, (ii) in respect of all Loans made to the  Canadian  Borrower  and all
payments of interest in respect  thereof,  the  Administrative  Agent's  account
located at The Bank of Nova Scotia, Toronto, Canada, Account Name, Bankers Trust
Company, NY, Account Number 0204013,  Reference, Cabot Safety Canada Corporation
and (iii) in respect of all Loans made to the UK  Borrower  and all  payments of
interest in respect thereof, the office of the Administrative  Agent, located in
London,  England,  Account  Name,  Bankers Trust  Company,  NY,  Account  Number
700001012,  Reference:  Cabot Safety Limited, or in each case, such other office
or offices as the  Administrative  Agent may  hereafter  designate in writing as
such to the other parties hereto.

     "PBGC"  shall mean the Pension  Benefit  Guaranty  Corporation  established
pursuant to Section 4002 of ERISA, or any successor thereto.

     "Permitted  Acquisition"  shall mean the  acquisition by the US Borrower or
any of its  Subsidiaries  (to the  extent  that any such  Subsidiary  which is a
Credit Party is able to, and does,  grant a Lien to the Collateral Agent for the
benefit of the Secured  Creditors  on and security  interest in assets  acquired
thereby in connection with such Permitted Acquisition, but limited to 65% of the
capital  stock of any  Foreign  Subsidiary)  of (x) assets  constituting  all or
substantially  all of a  business  or  division  of any  Person  not  already  a
Subsidiary  of the US  Borrower or (y) all or  substantially  all of the capital
stock or other  ownership  interests of any such Person which Person shall, as a
result of such acquisition,  become a Wholly-Owned Subsidiary of the US Borrower
or such  Subsidiary,  provided that (A) the  consideration  paid by the Borrower
and/or  its  Domestic  Subsidiaries  can be in the  form of (i)  cash,  (ii) the
issuance to any such Person of  Permitted  Seller  Notes,  (iii) the issuance to
such Person of  Permitted  Earn-Out  Debt and/or  Permitted  Earn-Out  Preferred
Equity,  or (iv) the  issuance to any such  Person of  Qualified  Capital  Stock
issued by Holdings,  and (B) the assets acquired,  or the business of the Person
whose  stock is  acquired,  shall be in the same,  similar  or  related  line of
business  in which the US Borrower  and its  Subsidiaries  are already  engaged.
Notwithstanding  anything to the contrary contained in the immediately preceding
sentence,   an  acquisition  shall  be  a  Permitted  Acquisition  only  if  all
requirements of Section 7.14 are met with respect thereto.

     "Permitted   Acquisition   Cost  Savings"   shall  mean,  at  any  time  of
measurement,  in connection with each Permitted Acquisition,  those demonstrable
cost savings in connection  with or as a result of such  Permitted  Acquisition,
provided that such cost savings would be permitted to be recognized in pro forma
statements prepared in accordance with Regulation S-X of the Securities Act.

     "Permitted  Earn-Out Debt" shall mean  Indebtedness of Holdings incurred in
connection  with a Permitted  Acquisition  and in accordance  with Section 7.14,
which  Indebtedness  is not  secured  by any  assets of  Holdings  or any of its
Subsidiaries (including,  without limitation, the assets so acquired) and is not
guaranteed by any  Subsidiary of Holdings and is only payable by Holdings in the
event certain future  performance  goals are achieved with respect to the assets
acquired  and is not payable in  accordance  with its terms to the extent  there
exists a Default or an Event of Default  and is  otherwise  subordinated  to the
Obligations on the terms set forth in Exhibit N; provided that such Indebtedness
shall only  constitute  Permitted  Earn-Out Debt to the extent the terms of such
Indebtedness  expressly limit the maximum  potential  liability of Holdings with
respect thereto.

     "Permitted  Earn-Out  Preferred  Equity"  shall  mean  preferred  equity of
Holdings  issued in connection  with a Permitted  Acquisition  and in accordance
with  Section  7.14,  which  preferred  equity is not  secured  by any assets of
Holdings or any of its Subsidiaries (including,  without limitation,  the assets
so acquired)  and is not  guaranteed  by any  Subsidiary of Holdings and is only
payable by Holdings in the event certain future  performance  goals are achieved
with respect to the assets  acquired and is not payable in  accordance  with its
terms to the extent there exists a Default or an Event of Default; provided that
such preferred equity shall only constitute  Permitted Earn-Out Preferred Equity
to the extent the terms of such  preferred  equity  expressly  limit the maximum
potential liability of Holdings with respect thereto.

     "Permitted Encumbrance" shall mean, with respect to any Mortgaged Property,
such exceptions to title as are set forth in the title insurance policy or title
commitment  delivered  with respect  thereto,  all of which  exceptions  must be
acceptable to the Administrative Agent in its reasonable discretion.

     "Permitted  Holders"  shall mean Persons  holding the equity  interests (or
rights to purchase equity interests) of the Parent on the Restatement  Effective
Date and their  respective  Affiliates and partners and, in the case of any such
Person who is an  individual,  the immediate  family  members of such Person and
trusts  for the  benefit  of such  Person  and/or  his or her  immediate  family
members.

     "Permitted Liens" shall have the meaning provided in Section 8.01.

     "Permitted   Refinancing   Subordinated   Indebtedness"   shall   mean  any
Indebtedness   incurred  by  the  US  Borrower  which  is  subordinated  to  all
Obligations hereunder and any other obligations secured pursuant to the Security
Documents in a manner which,  in the reasonable  judgment of the  Administrative
Agent,  is customary  for such  Indebtedness,  so long as (i) such  Indebtedness
shall  require no  amortization,  sinking  fund  payment or any other  scheduled
maturity of the principal  amount  thereof on any date which is earlier than the
date occurring one year after the then latest  Maturity Date,  (ii) the interest
rate  for  such  Indebtedness  shall  not be in  excess  of that  of the  Senior
Subordinated Notes and (iii) the terms governing any such Indebtedness shall not
contain any provision (including,  without limitation,  covenants,  defaults and
remedies) which, in the opinion of the Administrative Agent, is more restrictive
than the provisions in the Senior Subordinated Notes and, in any event, shall be
reasonably satisfactory to the Administrative Agent.

     "Permitted  Seller Notes" shall mean notes issued by Holdings to sellers of
stock (or other  equity  interests)  or assets in a  Permitted  Acquisition  and
issued in  accordance  with  Section  7.14,  which notes shall be  subordinated,
unsecured and unguaranteed,  and shall be substantially in the form of Exhibit L
or shall otherwise be in form and substance  satisfactory to the  Administrative
Agent.

     "Person"  shall mean any  individual,  partnership,  joint  venture,  firm,
corporation,  limited liability company, association,  trust or other enterprise
or any  government  or  political  subdivision  or  any  agency,  department  or
instrumentality thereof.

     "Plan"  shall mean any  pension  plan as defined in Section  3(2) of ERISA,
which is maintained or  contributed to by (or to which there is an obligation to
contribute of) Holdings,  any Borrower or any of their Subsidiaries or any ERISA
Affiliate, and each such plan for the five year period immediately following the
latest date on which Holdings,  any Borrower or any of their Subsidiaries or any
ERISA Affiliate maintained, contributed to or had an obligation to contribute to
such plan.

     "Pledge Agreement Collateral" shall mean all "Collateral" as defined in the
Pledge Agreements.

     "Pledge  Agreements"  shall mean the US Pledge  Agreement and the UK Pledge
Agreement.

     "Pledged  Securities"  shall  have  the  meaning  provided  in  the  Pledge
Agreement.

     "Pledged Stock" shall have the meaning provided in the Pledge Agreement.

     "Pounds Sterling" shall mean freely transferable lawful money of the United
Kingdom.

     "Pounds  Sterling  Equivalent"  shall mean, at any time for the computation
thereof,  the amount of Pounds Sterling which could be purchased with the amount
of Dollars  involved in such  computation  at the spot exchange rate therefor as
quoted by the  Administrative  Agent as of 11:00 a.m.  (London time) on the date
three Business Days prior to the date of any computation thereof for purchase on
such date.

     "Pounds  Sterling  Loan"  shall  mean  each A-4 Term Loan and each A-5 Term
Loan.

     "Pounds  Sterling  Euro  Rate"  shall  mean (a) (i) the rate per annum that
appears on page 3750 of the Dow Jones  Telerate  Screen (or any successor  page)
for Pounds Sterling  deposits with maturities  comparable to the Interest Period
applicable to the Pounds  Sterling  Loans subject to the  respective  Borrowing,
determined as of 11:00 A.M. (London time) on the date which is two Business Days
prior to the  commencement  of such Interest  Period or (ii) if such a rate does
not  appear on page  3750 of the Dow Jones  Telerate  Screen  (or any  successor
page),  the  offered  quotation  to  first-class  banks in the London  interbank
Eurodollar market by BTCo for Pounds Sterling deposits of amounts in immediately
available  funds  comparable to the outstanding  principal  amount of the Pounds
Sterling  Loan  of  BTCo  with  maturities  comparable  to the  Interest  Period
applicable to such Pounds  Sterling Loan commencing two Business Days thereafter
as of 11:00 A.M.  (London  time) on the date which is two Business Days prior to
the  commencement of such Interest  Period,  in either case divided (and rounded
off tot he nearest 1/16 of 1%) by (b) a percentage  equal to 100% minus the then
stated maximum rate of all reserve requirements (including,  without limitation,
any marginal,  emergency,  supplemental,  special or other reserves  required by
applicable  law)  applicable to any member bank of the Federal Reserve System in
respect of  Eurocurrency  funding or  liabilities as defined in Regulation D (or
any  successor  category  of  liabilities  under  Regulation  D) to  the  extent
applicable;  provided,  in the event that the Administrative  Agent has made any
determination  pursuant  to Section  1.10(a)(i)  in  respect of Pounds  Sterling
Loans,  the  Sterling  Euro  Rate  determined  pursuant  to  clause  (a) of this
definition  shall  instead be the rate  determined by BTCo as the all-in cost of
funds for BTCo to fund such Pounds Sterling Loan with  maturities  comparable to
the Interest Period applicable thereto.

     "Pre-Syndication  Interest  Period" shall mean successive one week Interest
Periods  which shall apply to all  outstanding  Euro Rate Loans and the first of
which shall commence on the Restatement  Effective Date (or, if Eurodollar Loans
are not made on that date, on the first date on which  Eurodollar Loans are made
or converted from Base Rate Loans),  provided that no  Pre-Syndication  Interest
Period shall begin after the Syndication Date.

     "Prime  Lending Rate" shall mean the rate which BTCo announces from time to
time as its prime  lending  rate,  the Prime  Lending Rate to change when and as
such prime lending rate changes.  The Prime Lending Rate is a reference rate and
does not necessarily  represent the lowest or best rate actually  charged to any
customer. BTCo may make commercial loans or other loans at rates of interest at,
above or below the Prime Lending Rate.

     "Pro Forma  Basis"  shall  mean,  in  connection  with any  calculation  of
compliance  with any  financial  covenant or  financial  term,  the  calculation
thereof  after giving  effect on a pro forma basis to (x) the  incurrence of any
Indebtedness  the proceeds of which are used to finance a Permitted  Acquisition
after the first day of the relevant  Calculation Period as if such Indebtedness,
had been  incurred  (and the proceeds  thereof  applied) on the first day of the
relevant  Calculation  Period,  (y) the permanent  repayment of any Indebtedness
(other  than  revolving  Indebtedness  unless  accompanied  by  a  corresponding
commitment reduction or paid with other permitted  Indebtedness) after the first
day of the relevant  Calculation Period as if such Indebtedness had been retired
or  redeemed  on the first day of the  relevant  Calculation  Period and (z) the
Permitted  Acquisition,  if any,  then  being  consummated  as well as any other
Permitted   Acquisition   consummated  after  the  first  day  of  the  relevant
Calculation  Period  and on or  prior to the  date of the  respective  Permitted
Acquisition  then being  effected  as if such  Permitted  Acquisitions  had been
consummated  at the  beginning of such  Calculation  Period,  with the following
rules to apply in connection therewith:

          (i) all  Indebtedness (x) used to finance  Permitted  Acquisitions and
     incurred  after the first day of the relevant  Calculation  Period shall be
     deemed to have been  incurred  (and the  proceeds  thereof  applied) on the
     first day of the  respective  Calculation  Period  and  remain  outstanding
     through  the  date  of  determination   (and  thereafter  in  the  case  of
     projections  pursuant to Section  7.14(v)) and (y)  permanently  retired or
     redeemed after the first day of the relevant Calculation Period (other than
     revolving  Indebtedness  unless  accompanied by a corresponding  commitment
     reduction)  shall be deemed to have been  retired or  redeemed on the first
     day of the respective  Calculation  Period and remain  retired  through the
     date of determination  (and thereafter in the case of projections  pursuant
     to Section 7.14(v));


          (ii) all Indebtedness  assumed to be outstanding pursuant to preceding
     clause  (i)  shall  be  deemed  to have  borne  interest  at (x)  the  rate
     applicable thereto, in the case of fixed rate Indebtedness or (y) the rates
     which would have been applicable  thereto during the respective period when
     same was deemed  outstanding,  in the case of  floating  rate  Indebtedness
     (although  interest  expense with respect to any  Indebtedness  for periods
     while same was actually  outstanding  during the respective period shall be
     calculated  using  the  actual  rates  applicable  thereto  while  same was
     actually outstanding);  provided that for purposes of calculations pursuant
     to Section  7.14(v),  all  Indebtedness  (whether  actually  outstanding or
     deemed  outstanding)  bearing interest at a floating rate of interest shall
     be  tested  on  the  basis  of  the  rates   applicable  at  the  time  the
     determination is made pursuant to said provisions; and


          (iii) in making any  determination of Consolidated  EBITDA,  pro forma
     effect shall be given to all Permitted Acquisition Cost Savings, as if such
     Permitted  Acquisition  Cost Savings were  realized on the first day of the
     relevant period.


     "Qualified Capital Stock" shall mean the common stock of Holdings or the US
Borrower,  the preferred stock of Holdings issued pursuant to the Certificate of
Designations of Cabot Safety Holding Corporation, dated as of June 13, 1995, and
any other  preferred  equity of Holdings or the US Borrower the express terms of
which shall provide that  Dividends  thereon shall not be required to be paid in
cash at any time that such cash payment would be prohibited by the terms of this
Agreement (and any refinancing, replacements or extensions hereof) and in either
case  which,  by its  terms (or by the terms of any  security  into  which it is
convertible or for which it is exchangeable), or upon the happening of any event
(including an event which would  constitute a Change of Control),  cannot mature
(excluding  any maturity as the result of an optional  redemption  by the issuer
thereof)  and  is  not  mandatorily  redeemable,  pursuant  to  a  sinking  fund
obligation or otherwise,  and is not redeemable,  or required to be repurchased,
at the sole option of the holder thereof (including,  without  limitation,  upon
the occurrence of an event which would constitute a Change of Control), in whole
or in part,  on or prior to the first  anniversary  of the then latest  Maturity
Date.

     "Qualified  Earn-Out  Obligation"  shall  mean  obligations  of  Holding in
respect of Permitted  Earn-Out Debt and  Permitted  Earn-Out  Equity  which,  in
addition to the  requirements  therefor set forth in the respective  definitions
thereof,  does not require  Holdings or any  Subsidiary to make any cash payment
thereunder prior to the date which is six months after the latest Maturity Date.

     "Quarterly  Payment  Date" shall mean the last  Business Day of each March,
June,  September  and  December  (commencing  with  the  last  Business  Day  of
September, 2001).

     "RC Bank"  shall  mean,  at any  time,  each  Bank  with a  Revolving  Loan
Commitment  (or after the  termination of the Total  Revolving Loan  Commitment,
each Bank  which  had a  Revolving  Loan  Commitment  immediately  prior to such
termination).

     "RCRA" shall mean the Resource  Conservation  and Recovery Act, as the same
may be amended from time to time, 42 U.S.C.ss.  6901 et seq.,  and any successor
thereto.

     "Real Property" of any Person shall mean all the right,  title and interest
of such  Person  in and to land,  improvements  thereto  and  fixtures  thereon,
including Leaseholds.

     "Recovery  Event"  shall  mean  the  receipt  by  Holdings  or  any  of its
Subsidiaries of any cash insurance proceeds or condemnation award payable (i) by
reason of theft, loss, physical destruction or damage or any other similar event
with respect to any Mortgaged  Property,  and (ii) under any policy of insurance
required to be  maintained  under  Section  7.03 as  relating  to any  Mortgaged
Property.

     "Register" shall have the meaning provided in Section 13.14.

     "Regulation  D" shall mean  Regulation  D of the Board of  Governors of the
Federal  Reserve  System as from time to time in effect and any successor to all
or a portion thereof establishing reserve requirements.

     "Regulation  T" shall mean  Regulation  T of the Board of  Governors of the
Federal  Reserve  System as from time to time in effect and any successor to all
or a portion thereof.

     "Regulation  U" shall mean  Regulation  U of the Board of  Governors of the
Federal  Reserve  System as from time to time in effect and any successor to all
or a portion thereof.

     "Regulation  X" shall mean  Regulation  X of the Board of  Governors of the
Federal  Reserve  System as from time to time in effect and any successor to all
or a portion thereof.

     "Release" shall mean any spilling,  leaking,  pumping,  pouring,  emitting,
emptying,  discharging,  injecting,  escaping,  leaching,  dumping, disposing or
migration into the indoor or outdoor environment.

     "Replaced Bank" shall have the meaning provided in Section 1.13.

     "Replacement Bank" shall have the meaning provided in Section 1.13.

     "Required  Banks"  shall  mean  Non-Defaulting   Banks  the  sum  of  whose
outstanding  Term  Loans  and  Revolving  Loan  Commitments  (or after the Total
Revolving Loan Commitment has been terminated,  outstanding  Revolving Loans and
Revolving  Percentages of outstanding Letter of Credit Outstandings)  constitute
greater  than  50% of the  sum  of (i)  the  total  outstanding  Term  Loans  of
Non-Defaulting  Banks  and (ii) the Total  Revolving  Loan  Commitment  less the
aggregate  Revolving Loan  Commitments of Defaulting  Banks (or, after the Total
Revolving Loan Commitment has been terminated,  the total outstanding  Revolving
Loans of  Non-Defaulting  Banks and the aggregate  Revolving  Percentages of all
Non-Defaulting  Banks of the Letter of Credit  Outstandings  at such time).  For
purposes of determining the Required Banks at any time, the principal  amount of
each Term Loan  denominated  in a Alternate  Currency  shall be deemed to be the
Dollar Equivalent of the principal amount of such Term Loan at such time.

     "Restatement  Effective  Date" shall have the  meaning  provided in Section
13.10.

     "Restructuring"  shall mean the non recurring  expenses  incurred by the US
Borrower or any of its  Subsidiaries  in an effort to reduce  operating costs or
otherwise  change its  operations in any material  respect  attributable  to (i)
headcount and other operating expense reductions, (ii) direct labor and overhead
reductions,  (iii) material  sourcing and procurement or (iv)  consolidation and
rationalization  of facilities,  in each case which has been expensed within the
18 month period commencing on the Restatement Effective Date.

     "Returns" shall have the meaning provided in Section 6.09.

     "Revolving Loan" shall have the meaning provided in Section 1.01(b).

     "Revolving Loan Commitment" shall mean, for each Bank, the amount set forth
opposite  such  Bank's  name on  Schedule I directly  below the column  entitled
"Revolving  Loan  Commitment",  as the same may be (x) reduced from time to time
pursuant to Sections 3.02,  3.03 and/or 9, and (y) adjusted from time to time as
a result of  assignments  to or from  such  Bank  pursuant  to  Section  1.13 or
13.04(b).

     "Revolving Loan Maturity Date" shall mean March 31, 2005.

     "Revolving Note" shall have the meaning provided in Section 1.05(a)(ii).

     "Revolving  Percentage"  of any  Bank at any  time  shall  mean a  fraction
(expressed  as a  percentage)  the  numerator  of  which is the  Revolving  Loan
Commitment of such Bank at such time and the  denominator  of which is the Total
Revolving  Loan  Commitment  at  such  time,  provided  that  if  the  Revolving
Percentage  of any Bank is to be  determined  after  the  Total  Revolving  Loan
Commitment  has been  terminated,  then the Revolving  Percentages  of the Banks
shall be  determined  immediately  prior  (and  without  giving  effect) to such
termination but giving effect to any subsequent assignments permitted hereunder.

     "Rollover Amount" shall have the meaning provided in Section 8.07(a).

     "S&P" shall mean Standard & Poor's Ratings Services.

     "Scheduled  Repayments" shall mean each A-1 Term Loan Scheduled  Repayment,
each A-2 Term Loan Scheduled Repayment,  each A-3 Term Loan Scheduled Repayment,
each A-4 Term  Loan  Scheduled  Repayment  and  each  A-5  Term  Loan  Scheduled
Repayment.

     "SEC" shall have the meaning provided in Section 7.01(h).

     "Section  1.15 Bank"  shall mean each Bank other than a Bank which (x) does
not,  immediately prior to the occurrence of a Sharing Event, hold a Tranche A-3
Term Loan or a Tranche  A-4 Term Loan and (y) has  notified  the  Administrative
Agent  that  it  elects  not  to   participate  in  the  purchase  and  sale  of
participations pursuant to Section 1.15.

     "Section  4.04(b)(ii)  Certificate"  shall  have the  meaning  provided  in
Section 4.04(b).

     "Secured  Creditors"  shall have the  meaning  assigned to that term in the
respective Security Documents.

     "Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

     "Security  Agreement  Collateral" shall mean all "Collateral" as defined in
each Security Agreement.

     "Security  Agreements" shall mean the US Security  Agreement,  the Canadian
Security Agreement and the UK Security Agreement.

     "Security  Documents"  shall  mean each  Pledge  Agreement,  each  Security
Agreement and each Mortgage.

     "Senior   Consolidated   Debt"  shall  mean  all  Indebtedness  under  this
Agreement.

     "Senior Leverage Ratio" shall mean on the date of determination thereof the
Leverage Ratio at such date except that the reference  therein to  "Consolidated
Debt" shall be deemed to be a reference to "Senior Consolidated Debt".

     "Senior  Subordinated  Note  Documents"  shall mean and include each of the
documents,  instruments  (including  the  Senior  Subordinated  Notes) and other
agreements entered into by the US Borrower (including,  without limitation,  the
Senior  Subordinated Note Indenture) relating to the issuance by the US Borrower
of the Senior  Subordinated  Notes,  as in effect on the  Restatement  Effective
Date.

     "Senior Subordinated Note Indenture" shall mean the Indenture,  dated as of
July 11,  1995,  entered  into by and between the US Borrower  and Shawmut  Bank
Connecticut,   N.A.,  as  trustee   thereunder,   with  respect  to  the  Senior
Subordinated Notes as in effect on the Restatement Effective Date.

     "Senior  Subordinated  Notes" shall mean the Senior  Subordinated Notes due
2005  issued by the US Borrower  under the Senior  Subordinated  Note  Indenture
(which notes shall include any Series B Senior Subordinated Notes into which the
Senior  Subordinated  Notes were  exchanged  pursuant to the Senior  Subordinate
Notes Documents).

     "Shareholder Subordinated Note" shall mean an unsecured junior subordinated
note issued by Holdings  (and not  guaranteed  or supported in any way by the US
Borrower or any of its  Subsidiaries)  in the form of Exhibit M, as the same may
be amended,  modified or  supplemented  from time to time  pursuant to the terms
hereof and thereof.

     "Shareholders' Agreement" shall mean the "Shareholders'  Agreements" under,
and as defined in the Existing Credit Agreement.

     "Sharing  Event" shall mean (i) the occurrence of any Event of Default with
respect to  Holdings or the US  Borrower  pursuant  to Section  9.05 or (ii) the
acceleration  of the  maturity of the Loans  pursuant to the last  paragraph  of
Section  9 or (iii) if the  Required  Banks  so  elect  at any time  during  the
continuance of an Event of Default after the  declaration of the  termination of
the Commitments pursuant to the last paragraph of Section 9.

     "Specialty  Composites  Division"  shall mean the US  Borrower's  specialty
composites operating unit.

     "Sponsors"  shall  mean  each  of VCP  and its  respective  Affiliates  and
partners and, in the case of any such Person who is an individual, the immediate
family  members of such Person and trusts for the benefit of such Person  and/or
his or her immediate family members.

     "Standby  Letter of Credit"  shall  have the  meaning  provided  in Section
2.01(a).

     "Stated  Amount" shall mean, for each Letter of Credit,  the maximum amount
available to be drawn  thereunder,  in each case  determined  without  regard to
whether any  conditions to drawing could then be met,  provided that the "Stated
Amount" of each Letter of Credit  denominated  in a currency  other than Dollars
shall be, on any date of  calculation,  the  Dollar  Equivalent  of the  maximum
amount available to be drawn in the respective currency  thereunder  (determined
without regard to whether any conditions to drawing would then be met).

     "Subsidiary"  shall mean, as to any Person,  (i) any corporation  more than
50% of whose stock of any class or classes having by the terms thereof  ordinary
voting  power  to  elect  a  majority  of  the  directors  of  such  corporation
(irrespective  of  whether  or not at the time  stock of any class or classes of
such  corporation  shall  have or  might  have  voting  power by  reason  of the
happening of any  contingency) is at the time owned by such Person and/or one or
more  Subsidiaries of such Person and (ii) any  partnership,  limited  liability
company, association,  joint venture or other entity in which such Person and/or
one or more  Subsidiaries  of such Person has more than a 50% equity interest at
the time.

     "Subsidiary Borrower" shall mean the Canadian Borrower and the UK Borrower.

     "Subsidiary  Guarantor"  shall mean each  Subsidiary  of Holdings  which is
required to be party to any Guaranty pursuant to the terms of this Agreement.

     "Swedish Holdco" shall mean Aearo Peltor AB, a Swedish corporation.

     "Swedish Note" shall mean the Cabot  Intermediate loan to Swedish Holdco in
the aggregate principal amount of $86,000,000 of which approximately $64,000,000
in the aggregate  principal  amount is outstanding on the Restatement  Effective
Date.

     "Syndication Date" shall mean the earlier of (x) the 90th day following the
Restatement Effective Date and (y) that date upon which the Administrative Agent
determines  (and notifies the Borrower)  that the primary  syndication  (and the
resultant  addition  of Persons  as Banks  pursuant  to Section  13.04) has been
completed. "Tax Benefit" shall have the meaning provided in Section 4.04(d).

     "Taxes" shall have the meaning provided in Section 4.04(a).

     "Term  Loan"  shall mean each A-1 Term Loan,  each A-2 Term Loan,  each A-3
Term Loan, each A-4 Term Loan and each A-5 Term Loan.

     "Term Loan Commitment" shall mean shall mean each A-1 Term Loan Commitment,
each A-2 Term Loan  Commitment,  each A-4 Term Loan Commitment and each A-5 Term
Loan Commitment.

     "Term Loan Maturity Date" shall mean March 31, 2005.

     "Term  Note"  shall mean each A-1 Term Note,  each A-2 Term Note,  each A-3
Term Note, each A-4 Term Note and each A-5 Term Note.

     "Test  Period"  shall mean,  at any time,  each period of four  consecutive
fiscal quarters then last ended, in each case taken as one accounting period.

     "Total  Commitment"  shall mean, at any time, the sum of the Commitments of
each of the Banks.

     "Total Revolving Loan Commitment"  shall mean the sum of the Revolving Loan
Commitments of each of the Banks.

     "Total  Unutilized  Revolving Loan Commitment"  shall mean, at any time, an
amount equal to the remainder of (x) the then Total  Revolving  Loan  Commitment
less (y) the sum of the aggregate  principal  amount of Revolving Loans plus the
then aggregate amount of Letter of Credit Outstandings.

     "Trade  Letter of  Credit"  shall  have the  meaning  provided  in  Section
2.01(a).

     "Tranche" shall mean the respective  facility and  commitments  utilized in
making Loans hereunder,  with there being six separate Tranches,  i.e., A-1 Term
Loans,  A-2 Term  Loans,  A-3 Term  Loans,  A-4 Term  Loans,  A-5 Term Loans and
Revolving Loans.

     "Tranche  Percentage" shall mean, at any time (i) with respect to a Tranche
of Term Loans, a fraction  (expressed as a percentage) the numerator of which is
the aggregate  principal amount of Term Loans of such Tranche (or in the case of
Alternate  Currency Term Loans, the Dollar Equivalent  thereof) then outstanding
and the denominator of which is the aggregate principal amount of Term Loans (or
in the case of Alternate Currency Term Loans, the Dollar Equivalent  thereof) of
all Tranches then outstanding.

     "Type" shall mean the type of Loan  determined  with regard to the interest
option applicable thereto, i.e., whether a Base Rate Loan or a Eurodollar Loan.

     "UCC" shall mean the Uniform Commercial Code as from time to time in effect
in the relevant jurisdiction.

     "UK  Borrower"  shall have the meaning  provided in the first  paragraph to
this Agreement.

     "UK Pledge  Agreement" shall mean the Charge Over Shares,  dated as of July
11, 1995 between Cabot  Intermediate and the Collateral Agent, as amended by the
UK Pledge Agreement Amendment and as further amended,  modified and supplemented
from time to time including  pursuant to the amendment  thereto delivered on the
Restatement Effective Date in accordance with Section 5.08.

     "UK Pledge Agreement  Amendment" shall have the meaning provided in Section
5.08(b).

     "UK Security Agreement" shall mean the Debenture, dated as of July 11, 1995
between the UK Borrower and the Collateral  Agent, as amended by the UK Security
Agreement  Amendment and as further amended,  modified or supplemented from time
to time.

     "UK  Security  Agreement  Amendment"  shall have the  meaning  provided  in
Section 5.09.

     "UK  Security  Documents"  shall mean the UK  Security  Agreement  and each
agreement that creates a valid and  enforceable  security  interest in Mortgaged
Property  owned by the UK Borrower or a Material  Subsidiary  of the UK Borrower
organized  under the laws of the United  Kingdom (or any political  sub-division
thereof) and any other  security  agreements  executed and delivered by any such
Subsidiary pursuant to Section 8.15.

     "UK Subsidiary Guaranty" shall mean each guaranty of the Obligations of the
UK Borrower required to be delivered by a Subsidiary of the UK Borrower pursuant
to Section 8.15.

     "United States" and "U.S." shall each mean the United States of America.

     "Unpaid Drawing" shall have the meaning provided for in Section 2.04(a).

     "Unrecovered  Amount" shall mean, with respect to any  investment,  loan or
advance at any time, the principal cost of such investment, loan or advance less
(i) any return of capital with respect thereto and (ii) the net cash proceeds of
any sale of all or any part thereof;  provided that the "Unrecovered  Amount" of
any investment, loan or advance shall not be less than zero.

     "Unutilized Revolving Loan Commitment" with respect to any Bank at any time
shall mean such Bank's  Revolving Loan Commitment at such time, if any, less the
sum of (x) the aggregate  outstanding  principal  amount of all Revolving  Loans
made by such Bank and (y) such  Bank's  Revolving  Percentage  of the  Letter of
Credit  Outstandings  (or  Dollar  Equivalent  thereof in the case of Letters of
Credit issued in currency other than Dollars).

     "US  Borrower"  shall have the meaning  provided in the first  paragraph to
this Agreement.

     "US Borrower  Guaranty" shall mean the guaranty of the US Borrower pursuant
to Section 12.

     "US Guaranties" shall mean the Holdings Guaranty, the US Borrower Guaranty,
the US  Subsidiary  Guaranty and any guaranty  entered into  pursuant to Section
7.12.

     "US Lender" shall have the meaning provided in Section 4.04(b).

     "US Pledge Agreement" shall have the meaning provided in Section 5.08(a).

     "US Security Agreement" shall have the meaning provided in Section 5.09(i).

     "US Security Documents" shall mean the US Pledge Agreement, the US Security
Agreement, the UK Pledge Agreement and each Mortgage.

     "US  Subsidiary  Guaranty"  shall  have the  meaning  provided  in  Section
5.10(i).

     "VCP" shall mean Vestar Equity Partners, L.P.

     "Wholly-Owned  Domestic  Subsidiary" shall mean any Domestic  Subsidiary of
the Borrower that is a Wholly-Owned Subsidiary.

     "Wholly-Owned  Foreign Subsidiary" shall mean any Foreign Subsidiary of the
Borrower that is a Wholly-Owned Subsidiary.

     "Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any corporation
100% of whose capital stock or other equity interests (other than (a) director's
qualifying  shares  and (b) any other  shares of equity  interests  of a Foreign
Subsidiary of the Borrower (not to exceed 5% of such Foreign  Subsidiary's total
equity  interests  (determined on a fully diluted  basis)  required by law to be
issued to Persons other than the Borrower and its Wholly-Owned Subsidiaries)) is
at the time owned by such Person and/or one or more Wholly-Owned Subsidiaries of
such Person and (ii) any partnership,  limited liability  company,  association,
joint  venture  or  other  entity  in  which  such  Person  and/or  one or  more
Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such time
(other than a portion of such equity interest of any Foreign  Subsidiary (not to
exceed 5% of such Foreign  Subsidiary's  total equity interest  (determined on a
fully  diluted  basis)  required  by law to be issued to Persons  other than the
Borrower and its Wholly-Owned Subsidiaries).

SECTION 11.  The Administrative Agent.

     11.01  Appointment.  The Banks hereby designate BTCo as the  Administrative
Agent (for  purposes of this Section 11, the term  "Administrative  Agent" shall
include BTCo in its capacity as  Administrative  Agent and as  Collateral  Agent
pursuant to the Security  Documents and any Lending Affiliate of BTCo performing
any of the duties or functions of the  Administrative  Agent  hereunder or under
any other Credit  Document)  to act as specified  herein and in the other Credit
Documents. Each Bank hereby irrevocably authorizes,  and each holder of any Note
by the  acceptance of such Note shall be deemed  irrevocably  to authorize,  the
Administrative  Agent to take such action on its behalf under the  provisions of
this  Agreement,  the  other  Credit  Documents  and any other  instruments  and
agreements  referred  to herein or therein  and to  exercise  such powers and to
perform such duties hereunder and thereunder as are specifically delegated to or
required of the  Administrative  Agent by the terms  hereof and thereof and such
other powers as are reasonably  incidental thereto. The Administrative Agent may
perform  any of its duties  hereunder  by or through  its  respective  officers,
directors, agents, employees or affiliates.


     11.02 Nature of Duties. The Administrative  Agent shall not have any duties
or  responsibilities  except those  expressly set forth in this Agreement and in
the other  Credit  Documents.  Neither the  Administrative  Agent nor any of its
respective officers,  directors, agents, employees or affiliates shall be liable
for any  action  taken or  omitted  by it or them  hereunder  or under any other
Credit Document or in connection herewith or therewith,  unless caused by its or
their gross negligence or willful  misconduct.  The duties of the Administrative
Agent shall be mechanical and administrative in nature; the Administrative Agent
shall not have by reason  of this  Agreement  or any  other  Credit  Document  a
fiduciary  relationship  in respect  of any Bank or the holder of any Note;  and
nothing in this Agreement or any other Credit Document, expressed or implied, is
intended to or shall be so construed as to impose upon the Administrative  Agent
any obligations in respect of this Agreement or any other Credit Document except
as expressly set forth herein or therein.


     11.03 Lack of  Reliance  on the  Administrative  Agent.  Independently  and
without reliance upon the Administrative Agent, each Bank and the holder of each
Note, to the extent it deems  appropriate,  has made and shall  continue to make
(i) its own independent  investigation of the financial condition and affairs of
Holdings and its  Subsidiaries in connection with the making and the continuance
of the Loans and the taking or not taking of any action in  connection  herewith
and  (ii)  its  own  appraisal  of the  creditworthiness  of  Holdings  and  its
Subsidiaries  and,  except  as  expressly   provided  in  this  Agreement,   the
Administrative Agent shall not have any duty or responsibility, either initially
or on a continuing basis, to provide any Bank or the holder of any Note with any
credit or other  information  with  respect  thereto,  whether  coming  into its
possession  before the  making of the Loans or at any time or times  thereafter.
The  Administrative  Agent shall not be responsible to any Bank or the holder of
any  Note  for  any  recitals,  statements,   information,   representations  or
warranties herein or in any document,  certificate or other writing delivered in
connection herewith or for the execution, effectiveness,  genuineness, validity,
enforceability,  perfection,  collectibility,  priority or  sufficiency  of this
Agreement or any other Credit  Document or the  financial  condition of Holdings
and its  Subsidiaries or be required to make any inquiry  concerning  either the
performance or observance of any of the terms,  provisions or conditions of this
Agreement or any other Credit Document,  or the financial  condition of Holdings
and its  Subsidiaries  or the existence or possible  existence of any Default or
Event of Default.


     11.04 Certain Rights of the  Administrative  Agent.  If the  Administrative
Agent shall request instructions from the Required Banks with respect to any act
or action  (including  failure to act) in connection  with this Agreement or any
other Credit  Document,  the  Administrative  Agent shall be entitled to refrain
from such act or taking such action  unless and until the  Administrative  Agent
shall have received instructions from the Required Banks; and the Administrative
Agent shall not incur  liability to any Bank or the holder of any Note by reason
of so refraining.  Without limiting the foregoing,  no Bank or the holder of any
Note shall have any right of action whatsoever against the Administrative  Agent
as a result  of the  Administrative  Agent  acting  or  refraining  from  acting
hereunder or under any other Credit Document in accordance with the instructions
of the Required Banks.


     11.05  Reliance.  The  Administrative  Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
statement,  certificate,  telex,  teletype  or  telecopier  message,  cablegram,
radiogram,  order or other document or telephone message signed, sent or made by
any Person that the Administrative  Agent believed to be the proper Person, and,
with respect to all legal  matters  pertaining  to this  Agreement and any other
Credit Document and its duties hereunder and thereunder,  upon advice of counsel
selected by the Administrative Agent.


     11.06  Indemnification.  (a) To the extent the Administrative  Agent is not
reimbursed  and  indemnified  by  Holdings  and the  Borrowers,  the Banks  will
reimburse  and  indemnify  the  Administrative  Agent,  in  proportion  to their
respective  "percentages" as used in determining the Required Banks  (determined
as if there were no Defaulting  Banks), for and against any and all liabilities,
obligations,  losses, damages,  penalties,  claims, actions,  judgments,  costs,
expenses or  disbursements of whatsoever kind or nature which may be imposed on,
asserted  against or  incurred by the  Administrative  Agent in  performing  its
respective  duties  hereunder  or under any other  Credit  Document,  in any way
relating  to or arising  out of this  Agreement  or any other  Credit  Document;
provided  that no Bank  shall be liable  for any  portion  of such  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses  or  disbursements  resulting  from the  Administrative  Agent's  gross
negligence or willful misconduct.


     (b) The  Administrative  Agent  shall  be fully  justified  in  failing  or
refusing  to take any  action  hereunder  and under any  other  Credit  Document
(except  actions  expressly  required to be taken by it  hereunder  or under the
Credit  Documents)  unless it shall first be indemnified to its  satisfaction by
the Banks pro rata against any and all  liability,  cost and expense that it may
incur by reason of taking or continuing to take any such action.

     11.07 The Administrative Agent in its Individual Capacity.  With respect to
its obligation to make Loans under this Agreement,  the Administrative  Agent in
its individual  capacity shall have the rights and powers specified herein for a
"Bank"  and may  exercise  the same  rights  and  powers  as  though it were not
performing the duties specified herein;  and the term "Banks," "Required Banks,"
"holders  of Notes" or any  similar  terms  shall,  unless the  context  clearly
otherwise  indicates,   include  the  Administrative  Agent  in  its  individual
capacity.  The  Administrative  Agent  in its  individual  capacity  may  accept
deposits from, lend money to, and generally engage in any kind of banking, trust
or other  business with any Credit Party or any Affiliate of any Credit Party as
if it were not performing the duties specified  herein,  and may accept fees and
other consideration from the Borrowers or any other Credit Party for services in
connection  with this Agreement and otherwise  without having to account for the
same to the Banks.


     11.08 Holders. The Administrative Agent may deem and treat the payee of any
Note as the owner  thereof for all  purposes  hereof  unless and until a written
notice of the assignment,  transfer or endorsement  thereof, as the case may be,
shall have been filed with the Administrative  Agent. Any request,  authority or
consent of any Person  who,  at the time of making  such  request or giving such
authority or consent,  is the holder of any Note shall be conclusive and binding
on any subsequent holder, transferee,  assignee or indorsee, as the case may be,
of such Note or of any Note or Notes issued in exchange therefor.


     11.09 Resignation by the Administrative Agent. (a) The Administrative Agent
may resign from the performance of all its functions and duties hereunder and/or
under the other Credit  Documents at any time by giving 20 Business  Days' prior
written  notice to the US Borrower and the Banks.  Such  resignation  shall take
effect upon the  appointment  of a successor  Administrative  Agent  pursuant to
clauses (b) and (c) below or as otherwise provided below.


     (b) Upon any such notice of resignation, the Required Banks shall appoint a
successor  Administrative  Agent hereunder and under the other Credit  Documents
who  shall  be a  Bank,  a  commercial  bank  or a trust  company  in each  case
reasonably acceptable to the US Borrower.


     (c) If a successor  Administrative  Agent shall not have been so  appointed
within such 20 Business Day period, the  Administrative  Agent, with the consent
of the US  Borrower,  shall then  appoint a successor  Administrative  Agent who
shall  serve as  Administrative  Agent  hereunder  and under  the  other  Credit
Documents  until such time,  if any, as the Required  Banks  appoint a successor
Administrative Agent as provided above.


     (d) If no successor  Administrative  Agent has been  appointed  pursuant to
clause (b) or (c) above by the 25th  Business  Day after the date such notice of
resignation was given by the Administrative  Agent, the  Administrative  Agent's
resignation  shall become effective and the Banks shall  thereafter  perform all
the duties of the Administrative  Agent hereunder and/or under any of the Credit
Document  until such time,  if any, as the  Required  Banks  appoint a successor
Administrative Agent as provided above.


     11.10  Power  of  Attorney.  Each  Bank  hereby  expressly  authorizes  the
Administrative Agent and the Collateral Agent (with the right of sub-delegation)
by, and on behalf of,  such Bank to enter into any  security  document  or other
instrument  required to be executed and delivered  pursuant to this Agreement or
the other Credit  Documents in order to secure the  obligations of the Borrowers
and  Guarantors  hereunder  and  thereunder.  Each Bank  hereby  agrees that the
Administrative  Agent  and  the  Collateral  Agent  shall  be  entitled  to  all
declarations,  and may appoint any  attorney-in-fact to act on its behalf, as it
considers  necessary  or useful in  connection  with the  entering  into of such
security document or other instrument.  Each Bank hereby further agrees that the
Administrative  Agent and the  Collateral  Agent  shall be  entitled to rescind,
amend and/or execute new and different versions of the  aforementioned  security
documents or other  instruments in accordance  with the terms of this Agreement.
Each Bank hereby grants to each of the  Administrative  Agent and the Collateral
Agent an irrevocable power-of-attorney, in such Bank's name, to take the actions
contemplated above in this Section 11.10.


SECTION 12.  Guaranties.

     12.01 The  Guaranties.  In order to induce the  Administrative  Agent,  the
Issuing  Bank and the Banks to enter into this  Agreement  and to extend  credit
hereunder and in recognition  of the direct  benefits to be received by Holdings
and the US  Borrower  from the  proceeds  of the Loans and the  issuance  of the
Letters of Credit,  Holdings and the US Borrower  hereby agree with the Banks as
follows:  each  of  Holdings  and the US  Borrower  hereby  unconditionally  and
irrevocably  guarantees as primary obligor and not merely as surety the full and
prompt payment when due, whether upon maturity, by acceleration or otherwise, of
any  and all  indebtedness  (including  all  interest  that  accrues  after  the
commencement of any case or proceeding or other action relating to a bankruptcy,
insolvency,  reorganization or similar proceeding of any Guaranteed Party at the
rate  provided for in the  respective  documentation  whether or not a claim for
post-petition  interest  is allowed in any such  proceeding)  of the  Guaranteed
Parties,  to the Guaranteed  Creditors under this Agreement and the other Credit
Documents and all Interest Rate Protection Agreement or Other Hedging Agreements
entered  into by a  Guaranteed  Creditor or a Lending  Affiliate of a Guaranteed
Creditor.  If any or all of the  indebtedness  of the Guaranteed  Parties to the
Guaranteed  Creditors  becomes  due and  payable  hereunder  or under such other
Credit  Documents  or  Interest  Rate  Protection  Agreement  or  Other  Hedging
Agreements,  Holdings  and the US Borrower  unconditionally  promise to pay such
indebtedness  to the Banks,  on  demand,  together  with any and all  reasonable
out-of-pocket  expenses which may be incurred by the Administrative Agent or the
Banks in collecting any of such indebtedness. The word "indebtedness" is used in
this Section 12 in its most comprehensive  sense and means any and all advances,
debts,  obligations  and  liabilities  of  the  Guaranteed  Parties  arising  in
connection  with this  Agreement  or any  other  Credit  Documents  or under any
Interest Rate Protection  Agreement or Other Hedging Agreement with a Guaranteed
Creditor  or a  Lending  Affiliate  of a  Guaranteed  Creditor,  in  each  case,
heretofore,  now, or hereafter made, incurred or created, whether voluntarily or
involuntarily, absolute or contingent, liquidated or unliquidated, determined or
undetermined,  whether or not such indebtedness is from time to time reduced, or
extinguished  and  thereafter  increased  or  incurred,  whether the  Guaranteed
Parties  may be liable  individually  or  jointly  with  others,  whether or not
recovery upon such indebtedness may be or hereafter become barred by any statute
of limitations,  and whether or not such indebtedness may be or hereafter become
otherwise unenforceable.

     12.02  Bankruptcy.  Additionally,  each of  Holdings  and  the US  Borrower
unconditionally   and  irrevocably   guarantees  the  payment  of  any  and  all
indebtedness of the Guaranteed  Parties to the Guaranteed  Creditors  whether or
not due or payable by the  Guaranteed  Parties upon the occurrence of any of the
events specified in Section 9.05, and unconditionally  and irrevocably  promises
to pay such  indebtedness to the Guaranteed  Creditors,  or order, on demand, in
either Dollars or the applicable Alternate Currency (as appropriate).

     12.03 Nature of  Liability.  The  liability of Holdings and the US Borrower
hereunder is exclusive and  independent of any security for or other guaranty of
the  indebtedness of the Guaranteed  Parties whether  executed by Holdings,  any
other guarantor or by any other party,  and the liability of Holdings  hereunder
shall not be  affected or impaired by (a) any  direction  as to  application  of
payment  by the  Guaranteed  Parties  or by any  other  party,  or (b) any other
continuing or other guaranty, undertaking or maximum liability of a guarantor or
of any other party as to the indebtedness of the Guaranteed  Parties, or (c) any
payment on or in reduction of any such other guaranty or undertaking, or (d) any
dissolution,  termination  or  increase,  decrease or change in personnel by the
Guaranteed  Parties,  or (e) any payment made to any Guaranteed  Creditor on the
indebtedness  which such  Guaranteed  Creditor  repays to the  Guaranteed  Party
pursuant  to  court  order  in  any  bankruptcy,  reorganization,   arrangement,
moratorium  or other debtor relief  proceeding,  and each of Holdings and the US
Borrower  waives any right to the deferral or  modification  of its  obligations
hereunder by reason of any such proceeding.

     12.04 Guaranty Absolute. No invalidity, irregularity or unenforceability of
all or any  part  of  the  indebtedness  guaranteed  hereby  or of any  security
therefor  shall affect,  impair or be a defense to these  Guaranties,  and these
Guaranties  shall be primary,  absolute and  unconditional  notwithstanding  the
occurrence of any event or the existence of any other  circumstances which might
constitute  a legal or  equitable  discharge  of a surety  or  guarantor  except
payment in full of the indebtedness guaranteed herein.

     12.05  Independent  Obligation.  The  obligations  of  Holdings  and the US
Borrower  hereunder are independent of the obligations of any other guarantor or
the  Guaranteed  Parties,  and a separate  action or actions  may be brought and
prosecuted against Holdings and the US Borrower whether or not action is brought
against any other  guarantor  or the  Guaranteed  Parties and whether or not any
other  guarantor  or the  Guaranteed  Parties  be joined  in any such  action or
actions.  Each of Holdings  and the US Borrower  waives,  to the fullest  extent
permitted  by law,  the  benefit of any  statute of  limitations  affecting  its
liability  hereunder or the enforcement  thereof.  Any payment by the Guaranteed
Parties or other  circumstance which operates to toll any statute of limitations
as to the Guaranteed Parties shall operate to toll the statute of limitations as
to Holdings and the US Borrower.

     12.06  Authorization.  Each of Holdings and the US Borrower  authorizes the
Guaranteed  Creditors  without  notice  or  demand,  and  without  affecting  or
impairing its liability hereunder, from time to time to:

     (a)  change the  manner,  place or terms of payment  of,  and/or  change or
extend the time of payment of, renew, increase,  accelerate or alter, any of the
indebtedness  (including  any  increase  or  decrease  in the  rate of  interest
thereon),   any  security  therefor,  or  any  liability  incurred  directly  or
indirectly in respect thereof, and the Guaranties herein made shall apply to the
indebtedness as so changed, extended, renewed or altered;

     (b) take and hold  security for the payment of the  indebtedness  and sell,
exchange, release, surrender,  realize upon or otherwise deal with in any manner
and in any order any property by  whomsoever at any time pledged or mortgaged to
secure, or howsoever  securing,  the indebtedness or any liabilities  (including
any of those  hereunder)  incurred  directly or indirectly in respect thereof or
hereof, and/or any offset thereagainst;

     (c) exercise or refrain from  exercising  any rights against the Guaranteed
Parties or others or otherwise act or refrain from acting;

     (d)  release  or  substitute  any one or more  endorsers,  guarantors,  the
Guaranteed Parties or other obligors;

     (e) settle or compromise any of the indebtedness,  any security therefor or
any liability (including any of those hereunder) incurred directly or indirectly
in respect thereof or hereof, and may subordinate the payment of all or any part
thereof to the payment of any liability  (whether due or not) of the  Guaranteed
Parties to its creditors other than the Guaranteed Creditors;

     (f)  apply  any  sums by  whomsoever  paid  or  howsoever  realized  to any
liability or liabilities of the Guaranteed  Parties to the Guaranteed  Creditors
regardless of what  liability or  liabilities of Holdings and the US Borrower or
the Guaranteed Parties remain unpaid;

     (g)  consent  to or waive any breach  of, or any act,  omission  or default
under,  this  Agreement  or any of the  instruments  or  agreements  referred to
herein,  or otherwise amend,  modify or supplement this Agreement or any of such
other instruments or agreements; and/or

     (h)  take  any  other  action  which  would,  under  otherwise   applicable
principles  of  common  law,  give  rise to a legal or  equitable  discharge  of
Holdings and the US Borrower from its liabilities under this Section 12.

     12.07 Reliance. It is not necessary for any Guaranteed Creditors to inquire
into the capacity or powers of the Guaranteed Parties or its Subsidiaries or the
officers,  directors,  partners or agents  acting or  purporting to act on their
behalf,  and any  indebtedness  made or created in reliance  upon the  professed
exercise of such powers shall be guaranteed hereunder.

     12.08  Subordination.  Any  indebtedness  of the Guaranteed  Parties now or
hereafter held by Holdings and/or the US Borrower is hereby  subordinated to the
indebtedness  of the  Guaranteed  Parties  to the  Administrative  Agent and the
Banks; and such indebtedness of the Guaranteed Parties to Holdings and/or the US
Borrower,  if the Administrative Agent (at the direction of the Required Banks),
after an  Event of  Default  has  occurred,  so  requests,  shall be  collected,
enforced  and  received  by  Holdings  and the US  Borrower  as trustee  for the
Guaranteed  Creditors and be paid over to the Guaranteed Creditors on account of
the  indebtedness  of the Guaranteed  Parties to the Guaranteed  Creditors,  but
without  affecting or impairing in any manner the  liability of Holdings and the
US Borrower under the other  provisions of this Guaranty.  Prior to the transfer
by Holdings and the US Borrower of any note or negotiable  instrument evidencing
any  indebtedness  of the  Guaranteed  Parties to Holdings,  Holdings and the US
Borrower  shall mark such note or negotiable  instrument  with a legend that the
same is subject to this subordination.

     12.09 Waivers. (a) Each of Holdings and the US Borrower waives any right to
require any Guaranteed  Creditors to (i) proceed against the Guaranteed Parties,
any other  guarantor  or any other party,  (ii)  proceed  against or exhaust any
security  held from the  Guaranteed  Parties,  any other  guarantor or any other
party or (iii)  pursue  any other  remedy  in any  Guaranteed  Creditor's  power
whatsoever.  Each of Holdings and the US Borrower waives any defense based on or
arising out of any defense of the Guaranteed Parties, any other guarantor or any
other party other than payment in full of the indebtedness,  including,  without
limitation,  any  defense  based  on or  arising  out of the  disability  of the
Guaranteed   Parties,   any  other   guarantor  or  any  other  party,   or  the
unenforceability  of the indebtedness or any part thereof from any cause, or the
cessation from any cause of the liability of the  Guaranteed  Parties other than
to the extent of payment in full of the indebtedness.  The Guaranteed  Creditors
may, in accordance with the Credit  Documents,  at their election,  foreclose on
any security held by the Administrative Agent, the Collateral Agent or any other
Guaranteed  Creditors by one or more judicial or nonjudicial  sales,  whether or
not every aspect of any such sale is commercially reasonable (to the extent such
sale is permitted by applicable  law), or exercise any other right or remedy the
Guaranteed Creditors may have against the Guaranteed Parties or any other party,
or any  security,  without  affecting or  impairing in any way the  liability of
Holdings and the US Borrower hereunder except to the extent the indebtedness has
been paid.  Each of Holdings and the US Borrower  waives any defense arising out
of any such  election by the  Guaranteed  Creditors,  even though such  election
operates to impair or extinguish  any right of  reimbursement  or subrogation or
other right or remedy of Holdings  and the US  Borrower  against the  Guaranteed
Parties or any other party or any security.

     (b) Except as otherwise  specifically required hereunder,  each of Holdings
and the US Borrower waives all presentments,  demands for performance,  protests
and notices, including, without limitation,  notices of nonperformance,  notices
of protest, notices of dishonor,  notices of acceptance of these Guarantees, and
notices  of  the   existence,   creation  or  incurring  of  new  or  additional
indebtedness.  Each of Holdings and the US Borrower  assumes all  responsibility
for being and keeping  itself  informed  of the  Guaranteed  Parties'  financial
condition and assets,  and of all other  circumstances  bearing upon the risk of
non-payment of the  indebtedness  and the nature,  scope and extent of the risks
which  Holdings  assumes and incurs  hereunder,  and agrees that the  Guaranteed
Creditors  shall  have  no duty  to  advise  Holdings  and  the US  Borrower  of
information known to them regarding such circumstances or risks.

     Each of Holdings  and the US Borrower  warrants and agrees that each of the
waivers set forth above in this Section 12.09 is made with full knowledge of its
significance  and consequences and that if any of such waivers are determined to
be  contrary to any  applicable  law or public  policy,  such  waivers  shall be
effective only to the maximum extent permitted by law.

     12.10 Guaranty  Continuing.  These  Guarantees are continuing  ones and all
liabilities  to which they apply or may apply  under the terms  hereof  shall be
conclusively  presumed to have been  created in reliance  hereon.  No failure or
delay on the part of any Guaranteed  Creditors in exercising any right, power or
privilege  hereunder shall operate as a waiver thereof;  nor shall any single or
partial exercise of any right,  power or privilege  hereunder preclude any other
or  further  exercise  thereof  or the  exercise  of any other  right,  power or
privilege. The rights and remedies herein expressly specified are cumulative and
not exclusive of any rights or remedies  which any  Guaranteed  Creditors or any
subsequent holder of a Note, or issuer of, or participant in, a Letter of Credit
would  otherwise have. No notice to or demand on Holdings and the US Borrower in
any case shall  entitle  Holdings  and the US  Borrower  to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of the  Guaranteed  Creditors or any holder,  creator or purchaser to any
other or further action in any circumstances without notice or demand.

     12.11 Binding Nature of Guaranties.  These Guarantees shall be binding upon
Holdings and the US Borrower  and their  respective  successors  and assigns and
shall inure to the benefit of the Guaranteed  Creditors and their successors and
assigns.

     12.12 Judgments Binding. If claim is ever made upon any Guaranteed Creditor
for  repayment  or recovery  of any amount or amounts  received in payment or on
account of any of the  indebtedness  and such Guaranteed  Creditor repays all or
part of said amount by reason of (a) any judgment,  decree or order of any court
or  administrative  body  having  jurisdiction  over  such  payee  or any of its
property, or (b) any settlement or compromise of any such claim effected by such
Guaranteed  Creditor with any such claimant (including the Borrower) then and in
such event each of Holdings and the US Borrower  agrees that any such  judgment,
decree,  order,  settlement or compromise shall be binding upon Holdings and the
US Borrower,  notwithstanding  any revocation  hereof or the cancellation of any
Note, or other  instrument  evidencing any liability of the Guaranteed  Parties,
and Holdings and the US Borrower  shall be and remain  liable to the  Guaranteed
Creditors  hereunder for the amount so repaid or recovered to the same extent as
if such amount had never originally been received by any such payee.

SECTION 13.  Miscellaneous.

     13.01 Payment of Expenses, etc. Each of Holdings and the Borrowers, jointly
and severally, agree to: (i) whether or not the transactions herein contemplated
are consummated,  pay (A) all reasonable out-of-pocket costs and expenses of the
Administrative   Agent  (for   purposes  of  this   Section   13.01,   the  term
"Administrative  Agent" shall include BTCo in its capacity as  Collateral  Agent
pursuant  to  the  Security  Documents)  (including,   without  limitation,  the
reasonable fees and  disbursements  of White & Case LLP and one local counsel in
each jurisdiction) in connection with the preparation, execution and delivery of
this Agreement and the other Credit  Documents and the documents and instruments
referred  to herein and  therein,  (B) all  reasonable  out-of-pocket  costs and
expenses  of  the  Administrative  Agent  (including,  without  limitation,  the
reasonable fees and  disbursements  of counsel to the  Administrative  Agent) in
connection with any amendment, waiver or consent relating hereto or thereto, and
the   determination  of  compliance  or   non-compliance  by  Holdings  and  its
Subsidiaries  with  the  provisions  hereof  or  thereof,   including,   without
limitation, with respect to Permitted Acquisitions,  (C) all reasonable fees and
disbursements of consultants and advisors retained by the  Administrative  Agent
or its counsel in connection with the  administration  of the Credit  Documents,
but only to the extent  retained  after a  determination  by the  Administrative
Agent (in its sole  discretion)  that such retention is advisable to protect the
interests  of the Banks in light of  underperformance  by,  or other  distressed
situation  relating to, Holdings and its Subsidiaries  taken as a whole, (D) all
reasonable  out-of-pocket  costs and  expenses  of the  Administrative  Agent in
connection  with  its  syndication   efforts  with  respect  to  this  Agreement
(including, without limitation, the reasonable fees and disbursements of White &
Case  LLP)  and (E) all  reasonable  out-of-pocket  costs  and  expenses  of the
Administrative  Agent, the Issuing Bank and each of the Banks in connection with
the  enforcement  of this  Agreement  and the  other  Credit  Documents  and the
documents and  instruments  referred to herein and therein  (including,  without
limitation,   the  reasonable  fees  and   disbursements   of  counsel  for  the
Administrative  Agent and for each of the Banks);  (ii) pay and hold each of the
Banks harmless from and against any and all present and future stamp, excise and
other similar taxes with respect to the  execution,  delivery or  enforcement of
this  Agreement  or any other  Credit  Document or any  document  or  instrument
referred  to  therein  or herein  and save each of the Banks  harmless  from and
against any and all  liabilities  with respect to or resulting from any delay or
omission (other than to the extent attributable to such Bank) to pay such taxes;
and (iii) defend, protect, indemnify and hold harmless the Administrative Agent,
the Issuing Bank, each Bank and each of their respective Affiliates, and each of
their respective officers, directors, employees, representatives,  attorneys and
Administrative  Agents  (collectively called the "Indemnitees") from and against
any and all liabilities,  obligations  (including  removal or remedial actions),
losses, damages (including  foreseeable and unforeseeable  consequential damages
and punitive damages),  penalties, claims, actions, judgments, suits, reasonable
out-of-pocket costs, expenses and disbursements (including reasonable attorneys'
and consultants fees and  disbursements)  of any kind or nature  whatsoever that
may at any time be incurred by, imposed on or assessed  against the  Indemnitees
directly or  indirectly  based on, or arising or resulting  from,  or in any way
related  to,  or by  reason  of  (a)  any  investigation,  litigation  or  other
proceeding (whether or not the Administrative Agent, the Collateral Agent or any
Bank is a party thereto and whether or not any such investigation, litigation or
other  proceeding is between or among the  Administrative  Agent, the Collateral
Agent,  any Bank, any Borrower or any third person or otherwise)  related to the
entering into and/or  performance of this Agreement or any other Credit Document
or the use of any Letter of Credit or the proceeds of any Loans hereunder or the
consummation  of any  transactions  contemplated  herein or in any other  Credit
Document or the exercise of any of their rights or remedies  provided  herein or
in the other Credit Documents;  (b) any  non-compliance of any Environmental Law
relating  to any Real  Property at any time owned or operated by Holdings or any
of its Subsidiaries  which arises from or is related to the entering into and/or
performance  of this  Agreement or any other  Credit  Document or the use of any
Letter of Credit or the proceeds of any Loans  hereunder or the  consummation of
any  transactions  contemplated  herein or in any other  Credit  Document or the
exercise  of any of their  rights or  remedies  provided  herein or in any other
Credit Documents; (c) the actual or alleged generation,  presence, use, storage,
disposal or Release of Hazardous  Materials on or from, or the transportation of
Hazardous  Materials to or from, any Real Property owned or at any time operated
by Holdings or any of its  Subsidiaries  which  arises from or is related to the
entering into and/or  performance of this Agreement or any other Credit Document
or the use of any Letter of Credit or the proceeds of any Loans hereunder or the
consummation  of any  transactions  contemplated  herein or in any other  Credit
Document or the exercise of any of their rights or remedies  provided  herein or
in any other Credit Documents;  (d) any Environmental Claim relating to Holdings
or any of its Subsidiaries or any Real Property owned or at any time operated by
Holdings  or any of its  Subsidiaries  which  arises  from or is  related to the
entering into and/or  performance of this Agreement or any other Credit Document
or the use of any Letter of Credit or the proceeds of any Loans hereunder or the
consummation  of any  transactions  contemplated  herein or in any other  Credit
Document or the exercise of any of their rights or remedies  provided  herein or
in  any  other  Credit  Documents;  (e)  the  exercise  of  the  rights  of  the
Administrative  Agent  and of any  Bank  under  any of the  provisions  of  this
Agreement  or any other  Credit  Document  or any  Letter of Credit or any Loans
hereunder; or (f) the consummation of any transaction  contemplated herein or in
any  other  Credit  Document  (clauses  (a)  through  (f),   collectively,   the
"Indemnified  Matters")  regardless of when such Indemnified  Matter arises; but
excluding  any  such  Indemnified  Matter  to the  extent  based  on  the  gross
negligence or willful misconduct of any Indemnitee.

     13.02  Right of Setoff.  (a) In  addition  to any  rights now or  hereafter
granted under  applicable law or otherwise,  and not by way of limitation of any
such  rights,  upon the  occurrence  and during the  continuance  of an Event of
Default,  each  Bank is  hereby  authorized  at any  time or from  time to time,
without presentment,  demand,  protest or other notice of any kind to any Credit
Party or to any other Person,  any such notice being hereby expressly waived, to
set off and to appropriate  and apply any and all deposits  (general or special)
and any other  Indebtedness  at any time held or owing by such Bank  (including,
without  limitation,  by branches and agencies of such Bank wherever located) to
or for the credit or the account of each Credit Party  against and on account of
the Obligations and liabilities of such Person to such Bank under this Agreement
or under any of the other Credit Documents,  including,  without limitation, all
interests in  Obligations  purchased by such Bank pursuant to Section  13.06(b),
and all other  claims of any nature or  description  arising out of or connected
with this Agreement or any other Credit Document, irrespective of whether or not
such Bank shall have made any demand  hereunder and although  said  Obligations,
liabilities or claims, or any of them, shall be contingent or unmatured.

     (b)  Notwithstanding  the  foregoing  subsection  (a), at any time that the
Loans or any other  Obligation  shall be  secured  by real  property  located in
California,  no Bank or the  Administrative  Agent  shall  exercise  a right  of
setoff,  lien or  counterclaim  or take any  court or  administrative  action or
institute any  proceeding to enforce any provision of this Agreement or any Note
unless it is taken  with the  consent  of the  Required  Banks or, to the extent
required by Section 13.12 of this  Agreement,  all of the Banks,  or approved in
writing by the  Administrative  Agent,  if such  setoff or action or  proceeding
would or might (pursuant to California  Code of Civil  Procedure  Sections 580a,
580b,  580d and 726 of the California Code of Civil Procedure or Section 2924 of
the  California  Civil Code, if applicable,  or otherwise)  affect or impair the
validity,  priority,  or  enforceability  of the Liens granted to the Collateral
Agent pursuant to the Security  Documents or the enforceability of the Notes and
other  obligations  hereunder,  and any  attempted  exercise  by any Bank or the
Administrative  Agent of any such right  without  obtaining  such consent of the
Required  Banks  or the  Administrative  Agent  shall  be null  and  void.  This
subsection  (b) shall be  solely  for the  benefit  of each of the Banks and the
Administrative Agent hereunder.

     13.03 Notices.  Except as otherwise  expressly provided herein, all notices
and other  communications  provided for hereunder shall be in writing (including
facsimile communication) and mailed,  telecopied or delivered: if to Holdings or
any Borrower,  at its address specified  opposite its signature below; if to any
Bank,  at its address  specified  on Schedule  II; and if to the  Administrative
Agent,  at its Notice Office;  or, as to any Credit Party or the  Administrative
Agent,  at such other  address as shall be designated by such party in a written
notice to the other  parties  hereto and, as to each Bank, at such other address
as shall be designated by such Bank in a written  notice to the Borrower and the
Administrative  Agent. All such notices and  communications  shall, when mailed,
facsimilied or sent by overnight courier, be effective three Business Days after
deposited in the mails, certified,  return receipt requested,  one day following
delivery to an overnight courier,  as the case may be, or when sent by facsimile
device, except that notices and communications to the Administrative Agent shall
not be effective until received by the Administrative Agent.

     13.04 Benefit of Agreement.  (a) This  Agreement  shall be binding upon and
inure to the benefit of and be  enforceable  by the  respective  successors  and
assigns of the  parties  hereto;  provided,  however,  that no Credit  Party may
assign or transfer any of its rights, obligations or interest hereunder or under
any other Credit Document without the prior written consent of all of the Banks;
and provided  further,  that although any Bank may grant  participations  in its
rights  hereunder,  such Bank shall remain a "Bank" for all  purposes  hereunder
(and may not transfer or assign all or any portion of its  Commitments  or Loans
hereunder except as provided in Section  13.04(b)) and the participant shall not
constitute a "Bank" hereunder; and provided further, that no Bank shall transfer
or grant any  participation  under  which the  participant  shall have rights to
approve  any  amendment  to or waiver  of this  Agreement  or any  other  Credit
Document  except to the extent  such  amendment  or waiver  would (i) extend the
final  scheduled  maturity of any Loan,  Note or Letter of Credit  (unless  such
Letter of Credit is not extended  beyond the Revolving  Loan  Maturity  Date) in
which such participant is  participating,  or reduce the rate or extend the time
of payment of interest or Fees thereon  (except in  connection  with a waiver of
applicability  of any  post-default  increase in  interest  rates) or reduce the
principal amount thereof,  or increase the Commitments in which such participant
is  participating  over the amount  thereof then in effect (it being  understood
that a waiver of any  conditions  precedent,  covenants,  Defaults  or Events of
Default or of a mandatory  reduction in the Total  Commitment  or of a mandatory
prepayment  shall not  constitute  an  increase of the  Commitment  in which any
participant is  participating,  that an increase in the available portion of any
Commitment  of any Bank shall not  constitute  an increase in the  Commitment in
which any participant is  participating,  and that an increase in any Commitment
shall be permitted  without the consent of any participant if the  participant's
participation  is not  increased  as a  result  thereof),  (ii)  consent  to the
assignment or transfer by any Credit Party of any of its rights and  obligations
under this Agreement or (iii) release all or substantially all of the Collateral
under all of the Security  Documents (in each case except as expressly  provided
in the Credit  Documents),  or any Guarantor or Guaranty (in each case except as
expressly  provided  in the  relevant  Credit  Documents)  supporting  the Loans
hereunder in which such  participant is  participating.  In the case of any such
participation, the participant shall not have any rights under this Agreement or
any of the other Credit Documents (the participant's rights against such Bank in
respect of such participation to be those set forth in the agreement executed by
such Bank in favor of the participant  relating thereto) and all amounts payable
by the Borrowers hereunder shall be determined as if such Bank had not sold such
participation.

     (b) Notwithstanding the foregoing,  any Bank (or any Bank together with one
or more other  Banks) may (x)  assign all or a portion of its  Commitments  (and
related outstanding  Obligations hereunder) and/or its outstanding Term Loans to
(i) its parent  company  and/or any Lending  Affiliate of such Bank or to one or
more  Banks or (ii) in the case of any Bank that is a fund that  invests in bank
loans,  any other  fund that  invests  in bank  loans and is managed by the same
investment  advisor of a Bank or an Affiliate of such investment  advisor or (y)
assign all, or if less than all, a portion equal to at least  $5,000,000 (or the
Dollar Equivalent  thereof) in the aggregate for the assigning Bank or assigning
Banks,  of its Revolving Loan Commitment  (and related  outstanding  Obligations
hereunder) and/or $1,000,000 (or the Dollar Equivalent thereof) in the aggregate
of such assigning  Bank or assigning  Banks of its Term Loan  Commitment  and/or
outstanding  Term Loans to one or more  Eligible  Transferees  (treating (A) any
fund that  invests  in bank  loans and (B) any other  fund that  invests in bank
loans  and is  managed  by the same  investment  advisor  as such  fund or by an
Affiliate of such investment advisor, as a single Eligible Transferee),  each of
which assignees shall become a party to this Agreement as a Bank by execution of
an Assignment and Assumption  Agreement  substantially in the form of Exhibit J,
provided  that (i) at such time  Schedule I shall be deemed  modified to reflect
the Commitment  and/or  outstanding  Term Loans, as the case may be, of such new
Bank and of the existing  Banks,  (ii) if requested by the assigning Bank or the
assignee  Bank,  upon  surrender  of the old  Notes  (with  the old Notes of the
assigning  Bank to be  marked  "Canceled")  (or  the  furnishing  of a  standard
indemnity letter from the respective assigning Bank in respect of any lost Notes
reasonably acceptable to Holdings),  new Notes will be issued, at the Borrowers'
expense,  to such new Bank and to the  assigning  Bank,  such new Notes to be in
conformity   with  the   requirements   of  Section   1.05   (with   appropriate
modifications)  to the extent needed to reflect the revised  Commitments  and/or
outstanding  Term  Loans,  as  the  case  may  be,  (iii)  the  consent  of  the
Administrative Agent and, so long as no Event of Default exists, the US Borrower
shall be required in connection  with any  assignment to an Eligible  Transferee
pursuant to clause (y) of this Section  13.04(b) (which  consent,  in each case,
shall not be  unreasonably  withheld or delayed  and shall not be  required  for
Banks that have been approved by the US Borrower in writing in  connection  with
the primary  syndication which take by assignment on or prior to July 31, 2001),
(iv) the consent of the Issuing  Bank shall be required in  connection  with any
assignment of Revolving Loan Commitments  pursuant to clause (y) of this Section
13.04(b) (which consent shall not be  unreasonably  withheld or delayed) and (v)
the Administrative Agent shall receive at the time of each assignment,  from the
assigning or assignee  Bank, the payment of a  non-refundable  assignment fee of
$3,500 and,  provided  further,  that such  transfer or  assignment  will not be
effective until recorded by the Administrative Agent on the Register pursuant to
Section  13.14.  To the  extent  of any  assignment  pursuant  to  this  Section
13.04(b), the assigning Bank shall be relieved of its obligations hereunder with
respect to its assigned  Commitments  and/or outstanding Term Loans. At the time
of each  assignment  pursuant to this Section  13.04(b) to a Person which is not
already a Bank hereunder,  the respective  assignee Bank shall provide to the US
Borrower and the Administrative  Agent the appropriate  Internal Revenue Service
Forms (and,  if  applicable,  a Section  4.04(b)(ii)  Certificate)  described in
Section  4.04(b).  To the extent that an  assignment  of all or any portion of a
Bank's  Revolving  Loan  Commitments  and  outstanding  Obligations  pursuant to
Section 1.13 or this Section 13.04(b) would,  due to  circumstances  existing at
the time of such assignment, result in increased costs under Section 1.10, 1.11,
2.05 or 4.04 from those being charged by the respective  assigning Bank prior to
such assignment, then the Borrowers shall not be obligated to pay such increased
costs  (although  the  Borrowers  shall be obligated to pay any other  increased
costs of the type described  above  resulting from changes after the date of the
respective  assignment).  Notwithstanding  anything  to the  contrary  contained
above, at any time after the termination of the Total Revolving Loan Commitment,
if any Revolving Loans or Letters of Credit remain outstanding,  assignments may
be made as provided above,  except that the respective  assignment shall be of a
portion of the outstanding Revolving Loans of the respective RC Bank.

     (c) Nothing in this  Agreement  shall  prevent or prohibit any Bank or BTCo
from pledging its Loans and Notes hereunder to a Federal Reserve Bank in support
of  borrowings  made by such Bank from such Federal  Reserve Bank and,  with the
consent of the Administrative  Agent, any Bank which is a fund may pledge all or
any portion of its Notes or Loans to its  trustee in support of its  obligations
to its  trustee.  No  pledge  pursuant  to this  clause  (c) shall  release  the
transferor Bank from any of its obligations hereunder.

     13.05 No Waiver;  Remedies  Cumulative.  No failure or delay on the part of
the Administrative Agent or any Bank or any holder of any Note in exercising any
right,  power or privilege  hereunder or under any other Credit  Document and no
course of dealing between Holdings or any Borrower or any other Credit Party and
the Administrative  Agent or any Bank or the holder of any Note shall operate as
a waiver thereof;  nor shall any single or partial exercise of any right,  power
or privilege  hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right,  power or privilege
hereunder or thereunder.  The rights, powers and remedies herein or in any other
Credit  Document  expressly  provided are  cumulative  and not  exclusive of any
rights,  powers or remedies  which the  Administrative  Agent or any Bank or the
holder of any Note would  otherwise  have.  No notice to or demand on any Credit
Party in any case shall entitle any Credit Party to any other or further  notice
or demand in similar or other circumstances or constitute a waiver of the rights
of the  Administrative  Agent or any Bank or the holder of any Note to any other
or further action in any circumstances without notice or demand.

     13.06 Payments Pro Rata. (a) The Administrative  Agent agrees that promptly
after its receipt of each  payment  from or on behalf of any Borrower in respect
of any Obligations hereunder,  it shall distribute such payment to the Banks pro
rata based upon their respective shares, if any, of the Obligations with respect
to which such payment was received.

     (b)  Each of the  Banks  agrees  that,  if it  should  receive  any  amount
hereunder  (whether by voluntary payment,  by realization upon security,  by the
exercise  of the right of setoff or  banker's  lien,  by  counterclaim  or cross
action,  by  the  enforcement  of any  right  under  the  Credit  Documents,  or
otherwise),  which is applicable to the payment of the principal of, or interest
on, the Loans,  Unpaid  Drawings,  Commitment Fees or other Fees, of a sum which
with respect to the related sum or sums  received by other Banks is in a greater
proportion  than the  total of such  Obligation  then  owed and due to such Bank
bears to the  total of such  Obligation  then  owed and due to all of the  Banks
immediately prior to such receipt,  then such Bank receiving such excess payment
shall  purchase  for cash without  recourse or warranty  from the other Banks an
interest in the Obligations of the respective Credit Party to such Banks in such
amount as shall result in a proportional  participation by all the Banks in such
amount;  provided that if all or any portion of such excess amount is thereafter
recovered  from such Bank,  such  purchase  shall be rescinded  and the purchase
price restored to the extent of such recovery, but without interest.

     13.07  Calculations;  Computations.  (a)  The  financial  statements  to be
furnished to the Banks pursuant  hereto shall be made and prepared in accordance
with generally accepted accounting  principles in the United States consistently
applied  throughout  the  periods  involved  (except  as set  forth in the notes
thereto or as otherwise  disclosed in writing by Holdings or any Borrower to the
Banks;  it being  understood  and agreed that notes may be absent in the interim
financial  statements).  In addition,  except as otherwise specifically provided
herein,  all  computations  determining  compliance  with  Sections  4.02 and 8,
including  definitions  used therein,  shall utilize  accounting  principles and
policies  in effect  from  time to time;  provided  that if any such  accounting
principle or policy shall change after the  Restatement  Effective  Date, the US
Borrower shall give prompt notice thereof to the  Administrative  Agent and each
of the Banks and if within 90 days  following  such notice the US Borrower,  the
Administrative  Agent or the Required Banks shall elect by giving written notice
of such election to the other parties hereto,  such computations  shall not give
effect to such change unless and until this Agreement shall be amended  pursuant
to Section 13.12 to give effect to such change.  Notwithstanding  the foregoing,
to the extent expressly  required  pursuant to the provisions of this Agreement,
certain calculations shall be made on a Pro Forma Basis.

     (b) All  computations  of interest and Fees hereunder  shall be made on the
basis of a year of 360 days  (365-366  days in the case of interest on Base Rate
Loans  maintained  at the Prime  Lending  Rate and Loans  denominated  in Pounds
Sterling) for the actual number of days  (including  the first day but excluding
the last day)  occurring  in the  period  for which  such  interest  or Fees are
payable.

     (c) For purposes of this Agreement, the Dollar Equivalent of each Letter of
Credit  denominated  in a currency other than Dollars shall be calculated on the
first  Business  Day of each month and on the date of issuance of such Letter of
Credit. The Dollar Equivalent for all reimbursement  obligations with respect to
Letters of Credit issued in a currency other than Dollars shall be determined by
using the  Dollar  Equivalent  thereof  as in effect on the date the  respective
Unpaid  Drawing was paid or disbursed by the relevant  Issuing Bank.  The Dollar
Equivalent  for each Alternate  Currency (and for any other foreign  currency in
which a Letter of Credit may be  denominated)  shall  remain in effect until the
same is recalculated by BTCo as provided above and notice of such  recalculation
is received by the US Borrower,  it being  understood  that until such notice is
received, the Dollar Equivalent shall be that Dollar Equivalent as last reported
to the US Borrower by BTCo.  BTCo shall promptly  notify the US Borrower and the
Banks of each determination of the Dollar Equivalent for each Alternate Currency
(and  for any  other  foreign  currency  in  which a  Letter  of  Credit  may be
denominated).

     13.08  GOVERNING LAW;  SUBMISSION TO  JURISDICTION;  VENUE;  WAIVER OF JURY
TRIAL.  (a) THIS  AGREEMENT  AND THE OTHER CREDIT  DOCUMENTS  AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER  SHALL,  EXCEPT AS OTHERWISE
PROVIDED IN CERTAIN OF THE  SECURITY  DOCUMENTS  AND  GUARANTIES  WHICH BY THEIR
TERMS ARE GOVERNED BY OTHER THAN THE LAW OF THE STATE OF NEW YORK,  BE CONSTRUED
IN  ACCORDANCE  WITH AND BE  GOVERNED  BY THE LAW OF THE STATE OF NEW YORK.  Any
legal action or  proceeding  with respect to this  Agreement or any other Credit
Document  may be brought in the Courts of the State of New York or of the United
States for the Southern  District of New York, and, by execution and delivery of
this Agreement,  each of Holdings and each Borrower hereby  irrevocably  accepts
for itself and in respect of its property,  generally and  unconditionally,  the
jurisdiction  of  the  aforesaid  Courts.   Each  Credit  Party  hereby  further
irrevocably waives any claim that such courts lack jurisdiction over such Credit
Party,  and agrees not to plead or claim, in any legal action or proceeding with
respect to this  Agreement  or any other Credit  Document  brought in any of the
aforesaid courts, that any such court lacks jurisdiction over such Credit Party.
Each of  Holdings  and each  Borrower  irrevocably  consents  to the  service of
process out of any of the aforementioned Courts in any such action or proceeding
by the  mailing of copies  thereof by  registered  or  certified  mail,  postage
prepaid,  to Holdings or such  Borrower  at its address set forth  opposite  its
signatures  below,  such service to become effective 30 days after such mailing.
Nothing  herein  shall affect the right of the  Administrative  Agent under this
Agreement,  any Bank or the  holder  of any Note to serve  process  in any other
manner  permitted by law or to commence legal  proceedings or otherwise  proceed
against any Credit Party in any other jurisdiction.

     (b) Each of  Holdings  and each  Borrower  hereby  irrevocably  waives  any
objection  which it may now or  hereafter  have to the laying of venue of any of
the aforesaid  actions or proceedings  arising out of or in connection with this
Agreement  or any other  credit  document  brought in the Courts  referred to in
clause (a) above and hereby further  irrevocably  waives and agrees not to plead
or claim in any such Court  that any such  action or  proceeding  brought in any
such Court has been brought in an inconvenient forum.

     (c) Each of the parties to this  Agreement  hereby  irrevocably  waives all
right to a trial by jury in any action,  proceeding or counterclaim  arising out
of or relating to this Agreement, the other Credit Documents or the transactions
contemplated hereby or thereby.

     13.09  Counterparts.  This  Agreement  may be  executed  in any  number  of
counterparts and by the different parties hereto on separate counterparts,  each
of which when so executed and delivered  shall be an original,  but all of which
shall together  constitute one and the same  instrument.  A set of  counterparts
executed  by all the  parties  hereto  shall be  lodged  with  Holdings  and the
Administrative Agent.

     13.10 Effectiveness.  (a) This Agreement shall become effective on the date
(the  "Restatement  Effective Date") on which (x) Holdings,  each Borrower,  the
Required Banks under and as defined in the Existing Credit Agreement and each of
the Banks shall have signed a copy hereof (whether the same or different copies)
and shall  have  delivered  the same to the  Administrative  Agent at its Notice
Office  or, in the case of the Banks,  shall  have  given to the  Administrative
Agent  telephonic  (confirmed  in writing),  written or  facsimile  transmission
notice (actually  received) in accordance with Section 13.03 at such office that
the  same  has  been  signed  and  mailed  to it and (y)  all of the  applicable
conditions contained in Section 5 shall have been met to the satisfaction of the
Administrative  Agent and the Required Banks  (determined  immediately after the
occurrence of the Restatement  Effective Date). Unless the Administrative  Agent
has  received  actual  notice  from any Bank that the  conditions  contained  in
Section 5 have not been met to its  satisfaction,  upon the  satisfaction of the
condition described in clause (i) of the immediately preceding sentence and upon
the  Administrative   Agent's  good  faith  determination  that  the  conditions
described in clause (ii) of the  immediately  preceding  sentence have been met,
then the  Restatement  Effective  Date shall have been deemed to have  occurred,
regardless of any  subsequent  determination  that one or more of the conditions
thereto had not been met (although the occurrence of the  Restatement  Effective
Date shall not release the  Borrowers  from any liability for failure to satisfy
one  or  more  of  the  applicable  conditions  contained  in  Section  5).  The
Administrative Agent will give the Borrowers and each Bank prompt written notice
of the occurrence of the Restatement Effective Date.

     (b) On the  Restatement  Effective  Date,  and  upon the  repayment  of all
amounts  owing to such Existing  Banks as  contemplated  by Section  5.07,  each
Existing Bank which is not a Bank, shall,  without any further action,  cease to
be party to this  Agreement.  The Existing  Loans and  commitments  of each such
withdrawing Banks shall be deemed to be repaid and/or terminated,  in each case,
pursuant to section 1.13 of the Existing Credit Agreement.

     (c) On the  Restatement  Effective  Date,  the Existing  Loans of each Bank
shall, to the extent of the principal amount thereof, be continued as Term Loans
under this Agreement as provided in Section 1.01.

     13.11  Headings  Descriptive.  The  headings  of the several  sections  and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.

     13.12 Amendment or Waiver.  (a) Neither this Agreement nor any other Credit
Document nor any terms hereof or thereof may be changed,  waived,  discharged or
terminated  unless such change,  waiver,  discharge or termination is in writing
signed by the respective  Credit  Parties party thereto and the Required  Banks;
provided that no such change,  waiver,  discharge or termination shall,  without
the  consent  of each Bank  directly  affected  thereby:  (i)  extend  the final
scheduled  maturity  of any Loan or Note or extend  the stated  maturity  of any
Letter of Credit or Unpaid  Drawing  beyond the Revolving Loan Maturity Date, or
reduce  the rate or extend  the time of  payment  of  interest  or Fees  thereon
(except  in  connection  with a  waiver  of  applicability  of any  post-default
increase  in interest  rates),  or reduce the  principal  amount  thereof;  (ii)
release all or substantially all of the Collateral (except as expressly provided
in the relevant Credit  Documents) or all or substantially all of the Guarantors
from their Guaranties (in each case except as expressly provided in the relevant
Credit Documents);  (iii) amend,  modify or waive any provision of Section 13.06
or this Section  13.12;  (iv) reduce the  percentage  specified in, or otherwise
modify,  the definition of Required Banks (it being  understood  that,  with the
consent of the Required  Banks,  extensions of credit pursuant to this Agreement
in  addition  to those set forth in or  contemplated  by this  Agreement  on the
Restatement  Effective Date may be included in the determination of the Required
Banks on  substantially  the same  basis as the  extensions  of Term  Loans  and
Revolving Loan  Commitments are included on the Restatement  Effective Date); or
(v) consent to the  assignment or transfer by Holdings or any Borrower of any of
its rights and obligations under this Agreement;  provided further, that no such
change, waiver,  discharge or termination shall: (1) increase the Commitments of
any Bank over the  amount  thereof  then in effect (it being  understood  that a
waiver of any conditions precedent,  covenants, Defaults or Events of Default or
of a mandatory  reduction in the Total  Commitment or of a mandatory  prepayment
shall not  constitute  an increase of the  Commitment  of any Bank,  and that an
increase  in the  available  portion  of any  Commitment  of any Bank  shall not
constitute  an increase in the  Commitment  of such Bank) without the consent of
such Bank; (2) without the consent of the Issuing Bank,  amend,  modify or waive
any  provision of Section 2 or alter its rights or  obligations  with respect to
Letters of Credit; (3) without the consent of the Administrative  Agent,  amend,
modify or waive any provision of Section 11 or any other  provision  relating to
the rights or obligations of the  Administrative  Agent; (4) without the consent
of the Collateral Agent,  amend,  modify or waive any provision of Section 11 or
any other  provision  relating to the rights or  obligations  of the  Collateral
Agent;  (5) without the consent of the Majority  Banks of each Tranche  which is
being  allocated a lesser  prepayment,  repayment or  commitment  reduction as a
result of the actions  described  below (or without the consent of the  Majority
Banks of each Tranche in the case of an amendment to the  definition of Majority
Banks), amend the definition of Majority Banks or alter the required application
of any  prepayments  or repayments (or  commitment  reductions),  as between the
various Tranches,  pursuant to Section 4.01 or 4.02 (excluding  Section 4.02(b))
(although  the  Required  Banks  may  waive,  in  whole  or in  part,  any  such
prepayment,  repayment or commitment reduction,  so long as the application,  as
amongst the various  Tranches,  of any such prepayment,  repayment or commitment
reduction  which is still required to be made is not altered) or (6) without the
consent of the Majority Banks of the respective Tranche,  amend, modify or waive
any Scheduled Repayment of such Tranche.

     (b) If, in  connection  with any  proposed  change,  waiver,  discharge  or
termination  with  respect  to  any of  the  provisions  of  this  Agreement  as
contemplated  by clauses (i) through  (v),  inclusive,  of the first  proviso to
Section 13.12(a),  the consent of the Required Banks is obtained but the consent
of one or more of such other  Banks whose  consent is required is not  obtained,
then the US Borrower  shall have the right to replace  each such  non-consenting
Bank or Banks (so long as all non-consenting  Banks are so replaced) with one or
more  Replacement  Banks pursuant to Section 1.13 so long as at the time of such
replacement,  each  Replacement  Bank consents to the proposed  change,  waiver,
discharge or termination, provided that the Borrower shall not have the right to
replace a Bank solely as a result of the exercise of such Bank's rights (and the
withholding of any required consent by such Bank) pursuant to the second proviso
to Section 13.12(a).

     (c)  Notwithstanding  anything  to the  contrary  contained  above  in this
Section  13.12,  the  Collateral  Agent may (i)  enter  into  amendments  to the
Guaranties  and the  Security  Documents  for the  purpose of adding  additional
Subsidiaries  of Holdings (or other Credit Parties) or other pledgors as parties
thereto and (ii) enter into security  documents to satisfy the  requirements  of
Sections 7.11 and 7.14, in each case without the consent of the Required Banks.

     13.13 Confidentiality.  (a) Subject to the provisions of clause (b) of this
Section 13.13,  each Bank agrees that it will use its reasonable  efforts not to
disclose  without  the  prior  consent  of the US  Borrower  (other  than to its
employees, auditors, advisors or counsel or to another Bank if such Bank or such
Bank's holding or parent company in its sole discretion determines that any such
party should have access to such  information,  provided  such Persons  shall be
subject to the provisions of this Section 13.13 to the same extent as such Bank)
any information with respect to Holdings or any of its Subsidiaries which is now
or in the  future  furnished  pursuant  to this  Agreement  or any other  Credit
Document and which is  designated  by the US Borrower to the Banks in writing as
confidential  or  would  customarily  be  treated  as  confidential  in  banking
practice,  provided that any Bank may disclose any such  information  (a) as has
become generally  available to the public, (b) as may be required or appropriate
in any report,  statement or  testimony  submitted  to any  municipal,  state or
Federal  regulatory body having or claiming to have  jurisdiction over such Bank
or to the Federal Reserve Board or the Federal Deposit Insurance  Corporation or
similar  organizations  (whether  in the United  States or  elsewhere)  or their
successors,  (c) as may be required or  appropriate in respect to any summons or
subpoena or in connection with any  litigation,  (d) in order to comply with any
law,  order,   regulation  or  ruling  applicable  to  such  Bank,  (e)  to  the
Administrative  Agent or the  Collateral  Agent  and (f) to any  prospective  or
actual transferee or participant (or its investment  advisor) in connection with
any contemplated transfer or participation of any of the Notes or Commitments or
any interest  therein by such Bank,  provided that such  prospective  transferee
agrees to maintain the confidentiality contained in this Section.


     (b) Each of Holdings and each Borrower hereby  acknowledges and agrees that
each Bank may share with any of its Lending  Affiliates any information  related
to Holdings  or any of its  Subsidiaries  (including,  without  limitation,  any
nonpublic customer information regarding the creditworthiness of Holdings,  each
Borrower and their  Subsidiaries,  provided such Persons shall be subject to the
provisions of this Section 13.13 to the same extent as such Bank).

     13.14 Register. Each Borrower hereby designates the Administrative Agent to
serve as such  Borrower's  agent,  solely for purposes of this Section 13.14, to
maintain a register  (the  "Register")  on which it will record the  Commitments
from time to time of each of the Banks,  the Loans made by each of the Banks and
each  repayment  in respect of the  principal  amount of the Loans of each Bank.
Failure to make any such recordation,  or any error in such  recordation,  shall
not affect the relevant  Borrower's  obligations in respect of such Loans.  With
respect to any Bank, the transfer of the Commitments of such Bank and the rights
to the principal of, and interest on, any Loan made pursuant to such Commitments
shall  not be  effective  until  such  transfer  is  recorded  on  the  Register
maintained  by the  Administrative  Agent  with  respect  to  ownership  of such
Commitments  and Loans and prior to such  recordation  all amounts  owing to the
transferor with respect to such  Commitments and Loans shall remain owing to the
transferor. The registration of the assignment or transfer of all or part of any
Commitments  and Loans  shall be  recorded  by the  Administrative  Agent on the
Register  only upon the  acceptance  by the  Administrative  Agent of a properly
executed and delivered  Assignment and Assumption  Agreement pursuant to Section
13.04(b).  Coincident  with the delivery of such an  Assignment  and  Assumption
Agreement to the  Administrative  Agent for acceptance and  registration  of the
assignment  or  transfer  of all or  part of a Loan,  or as soon  thereafter  as
practicable,   the  assigning  or  transferor  Bank  shall  surrender  the  Note
evidencing such Loan which shall be returned to such Borrower marked "canceled",
and  thereupon  one or more new  Notes in the same  aggregate  principal  amount
shall,  to the extent  requested,  be issued to the assigning or transferor Bank
and/or the new Bank. Each Borrower agrees to indemnify the Administrative  Agent
from  and  against  any and all  losses,  claims,  damages  and  liabilities  of
whatsoever  nature which may be imposed on, asserted  against or incurred by the
Administrative  Agent in  performing  its duties under this Section  13.14 other
than those resulting from the Administrative Agent's willful misconduct or gross
negligence.


     13.15  Special  Provisions  Regarding  Pledges of Equity  Interests in, and
Promissory Notes Owed by, Persons Not Organized in the United States, Canada and
the United Kingdom. The parties hereto acknowledge and agree that the provisions
of the various Security  Documents  executed and delivered by the Credit Parties
require that, among other things,  all promissory notes executed by, and all (or
65%, as the case may be) of the capital  stock and other  equity  interests  in,
various Persons owned by the respective  Credit Party be pledged,  and delivered
for pledge,  pursuant to the  Security  Documents.  The parties  hereto  further
acknowledge  and agree that each  Credit  Party  shall be  required  to take all
actions under the laws of the United States,  Canada and the United Kingdom (the
"Qualified Jurisdictions"),  as applicable, to perfect the security interests in
the capital stock and other equity interests of, and promissory notes issued by,
any Person organized under the laws of said  jurisdictions (in each case, to the
extent said capital stock,  other equity interests or promissory notes are owned
by any Credit Party).  Except as provided in the immediately preceding sentence,
to the extent any  Security  Document  requires  or  provides  for the pledge of
promissory  notes issued by, or capital stock or other equity  interests in, any
Person organized under the laws of a jurisdiction  other than those specified in
the  immediately  preceding  sentence,  it  is  acknowledged  that,  as  of  the
Restatement  Effective  Date,  no  actions  have  been  required  to be taken to
perfect,  under  U.S.  or any local law of the  jurisdiction  of the  Person who
issued the  respective  promissory  notes or whose capital stock or other equity
interests are pledged,  under the Security Documents.  The Credit Parties hereby
agree that,  following any request by the Administrative Agent or Required Banks
to do so in respect to any such asset that is material, each Credit Party shall,
and shall cause its  Subsidiaries  to,  take such  actions  (including,  without
limitation,  the making of any filings and the  delivery  of  appropriate  legal
opinions)  under U.S. law or the local law of any  jurisdiction  with respect to
which such actions have not already been taken as are  reasonably  determined by
the Administrative Agent or Required Banks to be necessary or desirable in order
to fully  perfect,  preserve or protect the  security  interests  in such assets
granted  pursuant  to the  various  Security  Documents  under  the laws of such
jurisdictions,  provided that such actions are commercially  reasonable in light
of the  value  of the  collateral  which  is the  subject  of such  actions.  If
requested to do so pursuant to this  Section  13.15,  all such actions  shall be
taken in  accordance  with the  provisions  of this Section 13.15 as promptly as
reasonably  practicable.  All conditions and  representations  contained in this
Agreement and the other Credit  Documents shall be deemed modified to the extent
necessary to effect the foregoing and so that same are not violated by reason of
the failure to take  actions  under U.S. or local law (but only with  respect to
capital  stock of, other equity  interests in, and  promissory  notes issued by,
Persons   organized   under  laws  of   jurisdictions   other   than   Qualified
Jurisdictions)  not required to be taken in  accordance  with the  provisions of
this Section 13.15,  provided that to the extent any  representation or warranty
would not be true because the foregoing  actions were not taken,  the respective
representation  of  warranties  shall be  required to be true and correct in all
material  respects at such time as the respective action is required to be taken
in accordance with the foregoing provisions of this Section 13.15.

     13.16 Judgment Currency.  (a) The Credit Parties' obligations hereunder and
under the other Credit  Documents to make  payments in the  Applicable  Currency
(the  "Obligation  Currency") shall not be discharged or satisfied by any tender
or recovery pursuant to any judgment expressed in or converted into any currency
other than the  Obligation  Currency,  except to the extent  that such tender or
recovery  results in the  effective  receipt by the  Administrative  Agent,  the
Collateral  Agent or the  respective  Bank of the full amount of the  Obligation
Currency  expressed to be payable to the  Administrative  Agent,  the Collateral
Agent or such Bank under this Agreement or the other Credit  Documents.  If, for
the purpose of obtaining or enforcing  judgment  against any Credit Party in any
court or in any  jurisdiction,  it becomes necessary to convert into or from any
currency  other  than  the  Obligation   Currency  (such  other  currency  being
hereinafter  referred  to as  the  "Judgment  Currency")  an  amount  due in the
Obligation  Currency,  the  conversion  shall be made at the Alternate  Currency
Equivalent  or the Dollar  Equivalent  thereof,  as the case may be, and, in the
case of other currencies,  the rate of exchange (as quoted by the Administrative
Agent or if the  Administrative  Agent does not quote a rate of exchange on such
currency,  by a known dealer in such currency  designated by the  Administrative
Agent and reasonably  acceptable to the relevant Borrower)  determined,  in each
case, as of the Business Day immediately preceding the day on which the judgment
is given (such  Business  Day being  hereinafter  referred  to as the  "Judgment
Currency Conversion Date").

     (b) If there is a change in the rate of  exchange  prevailing  between  the
Judgment  Currency  Conversion Date and the date of actual payment of the amount
due,  the  Borrowers  covenant  and  agree to pay,  or  cause  to be paid,  such
additional  amounts,  if any (but in any  event not a lesser  amount)  as may be
necessary  to  ensure  that  the  amount  paid in the  Judgment  Currency,  when
converted  at the  rate of  exchange  prevailing  on the date of  payment,  will
produce the amount of the  Obligation  Currency  which could have been purchased
with the amount of  Judgment  Currency  stipulated  in the  judgment or judicial
award at the rate or exchange  prevailing  on the Judgment  Currency  Conversion
Date.

     (c) For purposes of determining  the Alternate  Currency  Equivalent or the
Dollar  Equivalent or any other rate of exchange for this Section,  such amounts
shall include any premium and costs  payable in connection  with the purchase of
the Obligation Currency.

     13.17 Amendment and Restatement;  Termination of Existing Credit Agreement.
On the  Restatement  Effective  Date,  without  further  action by any party the
Existing  Credit  Agreement shall be amended and restated to read in full as set
forth herein.  Holdings,  the US Borrower,  each Subsidiary Borrower and each of
the  Banks  agrees  that on and as of the  Restatement  Effective  Date  (x) the
"Commitments" as defined in the Existing Credit Agreement shall be terminated in
their  entirety  and all "Notes" as defined in, and issued  under,  the Existing
Credit  Agreement,  shall be superseded hereby and by the Notes issued hereunder
on the Restatement  Effective Date and (y) the Foreign Pledge Agreement shall be
terminated in its entirety.

     13.18  Post-Closing  Actions  Notwithstanding   anything  to  the  contrary
contained  in this  Agreement  or the other  Credit  Documents,  the US Borrower
hereby  agrees that (x) within 60 days of the  Restatement  Effective  Date,  it
shall cause an Additional Mortgage to be granted on the Real Property designated
on Schedule IV as "To be  Mortgaged"  on the terms and  conditions  set forth in
Section  7.11 and (y) within five  Business  Days of the  Restatement  Effective
Date,  it shall  deliver  to the  Collateral  Agent  endorsements  to each title
insurance  policy  insuring  the  existing  Mortgages as amended by the Mortgage
Amendments.




<PAGE>



     IN WITNESS  WHEREOF,  the parties hereto have caused their duly  authorized
officers  to execute  and  deliver  this  Agreement  as of the date first  above
written.


Address:
5457 West 79th Street                                   AEARO CORPORATION
Indianapolis, IN 46268
Telephone No.: (317) 692-6983
Telecopy No.: (317) 692-6784
Attention:  Jeff Kulka



                                       By            /s/  Jeff Kulka
                                       Title:  VP Finance, Secretary & Treasurer
with a copy to:


Vestar Capital Partners
245 Park Avenue, 41st Floor
New York, NY  10167
Telephone No.: (212) 351-1611
Telecopy No.: (212) 808-4922
Attention: Brian K. Ratzan



5457 West 79th Street                 AEARO COMPANY I
Indianapolis, IN 46268
Telephone No.: (317) 692-6983
Telecopy No.: (317) 692-6784          By             /s/  Jeff Kulka
                                      ---------------------------
Attention:  Jeff Kulka                Title: VP Finance, Secretary & Treasurer


with a copy to:


Vestar Capital Partners
245 Park Avenue, 41st Floor
New York, NY  10167
Telephone No.: (212) 351-1611
Telecopy No.: (212) 808-4922
Attention: Brian K. Ratzan


<PAGE>

                          AEARO CANADA LIMITED


                          By             /s/  Jeff Kulka
                               Title:  Secretary & Treasurer





                          AEARO LIMITED


                          By               /s/  Jeff Kulka
                               Title:  Director




<PAGE>




                   FLEET NATIONAL BANK



                   By:         /s/  Harvey H. Thayer
                       ------------------------------------------------
                       Name:   Harvey H. Thayer, Jr.
                       Title:  Managing Director



                   NATIONAL CITY BANK OF INDIANA



                   By:         /s/  Thomas R. Groh
                       ------------------------------------------------
                       Name:   Thomas R. Groh
                       Title:  Vice President



                   BARCLAYS BANK PLC



                   By:         /s/  Douglas Bernegger
                       ------------------------------------------------
                       Name:   Douglas Bernegger
                       Title:  Director



                   THE PROVIDENT BANK



                   By:         /s/  Frank B. Meltzer
                       ------------------------------------------------
                       Name:   Frank B. Meltzer
                       Title:  Vice President



                   FIFTH THIRD BANK



                   By:         /s/  David W. O'Neal
                       ------------------------------------------------
                       Name:   David W. O'Neal
                       Title:  Vice President

<PAGE>






                                             BANKERS TRUST COMPANY,
                                              Individually and as
                                              Administrative Agent








                                             By           /s/  Diane F.
                                                -----------------------
                                             Rolfe
                                             -----
                                                  Title: Vice President





<PAGE>


SCHEDULE XV







<PAGE>

SCHEDULE I

COMMITMENTS
<TABLE>
<CAPTION>


                            Outstanding              A-1 Term               A-2 Term               Outstanding
                                                                                    -
Bank                       A-1 Term Loan         Loan Commitment         Loan Commitment          A-3 Term Loans
----                       -------------         ---------------         ---------------          --------------
<S>                        <C>                    <C>                     <C>                     <C>
Bankers Trust Company      $1,250,078.93          $42,249,921.07    (euro)12,857,977.79           $6,223,942.55
Fleet National             $2,428,752.45           $2,071,247.55
Bank
National City Bank         $3,498,148.25           $1,001,851.75
of Indiana
Barclays Bank Plc
The Provident Bank                                $2,500,000.00
Fifth Third Bank                                  $5,000,000.00
---------------------- ----------------------- --------------------- ------------------------ -----------------------
Total:                    $7,176,979.63          $52,823,020.37     (euro)12,857,977.79           $6,223,942.55
</TABLE>


<PAGE>


SCHEDULE I
                                                                         Page 2

<TABLE>
<CAPTION>


                            Outstanding           A-4 Term          Outstanding          A-5 Term         Revolving Loan
Bank                      A-4 Term Loans      Loan Commitment     A-5 Term Loans      Loan Commitment       Commitment
----                      --------------      ---------------     --------------      ---------------       ----------

<S>                         <C>                        <C>           <C>              <C>                <C>
Bankers Trust Company(pound)236,105.21          (pound)0      (pound)472,304.21(pound)2,927,610.79       $11,000,000.00
Fleet National       (pound)236,105.21          (pound)0      (pound)917,630.09  (pound)891,405.56        $5,750,000.00
Bank
National City Bank of(pound)236,105.21          (pound)0    (pound)1,321,668.66  (pound)487,366.99        $5,750,000.00
Indiana
Barclays Bank Plc                       (pound)9,916,418.75
The Provident Bank                                                                                        $2,500,000.00
Fifth Third Bank                                                                                          $5,000,000.00
----------------------- -------------------- ------------------- ------------------ -------------------- ------------------
Total:               (pound)708,315.63  (pound)9,916,418.75   (pound)2,711,602.96(pound)4,306,383.34       $30,000,000.00

</TABLE>



<PAGE>






                                 SCHEDULE II



<PAGE>



                                     BANK ADDRESSES

Bank                                   Address
Bankers Trust Company                  130 Liberty Street
                                       New York, NY 10006
                                       Attn.: Diane Rolfe
                                       Tel. No.: (212) 250-1661
                                       Fax No.: (212) 250-7218
Barclays Bank PLC                      222 Broadway, 8th Fl.
                                       New York, NY 10038
                                       Attn:  Matthew McQuade
                                       Tel. No.: (212) 412-2088
                                       Fax No.: (212) 412-7511
Fifth Third Bank                       251 N. Illinois Street, Suite 1000
                                       Indianapolis, IN 46204
                                       Attn.: David W. O'Neal
                                       Tel. No.: (317) 383-2637
                                       Fax No.: (317) 383-2764
Fleet National Bank                    100 Federal Street
                                       Boston, MA  02110
                                       Attn.: Joseph Yotts
                                       Tel. No.: (617) 434-8264
                                       Fax No.: (617) 434-0601
National City Bank of Indiana          One National City Center, Suite 200E
                                       Indianapolis, IN 46255
                                       Attn.: Thomas R. Groh
                                       Tel. No.: (317) 267-7422
                                       Fax No.: (317) 267-8899
The Provident Bank                     20 North Meridian Street, Suite 400
                                       Indianapolis, IN 46204
                                       Attn.: Lori L. Johnson
                                       Tel. No.: (317) 822-6665
                                       Fax No.: (317) 822-9800


<PAGE>

                                  SCHEDULE III



ERISA   NONE


<PAGE>









                                  SCHEDULE XIII



                          CALCULATION OF MANDATORY COST

     (a) For the purpose of this  Agreement,  the Mandatory Cost for any Bank in
relation to a EURIBOR Rate Loan for each of its  Interest  Periods (or any other
period for which interest is calculated)  will be calculated by each Bank on the
basis of such  Bank's own rates in  accordance  with the  following  formula and
shall be notified by that Bank to the  Administrative  Agent on the first day of
each Interest Period (or as soon as possible thereafter):

          F x 0.01 % per annum.
          300

          Where:

          F         is the  charge  payable  by  that  Bank  to the  Financial
                    Services  Authority  pursuant to the Fees Regulations  (but,
                    for this  purpose,  ignoring  any  minimum  fee  requirement
                    pursuant to the Fees  Regulations)  and  expressed in Pounds
                    Sterling per (pound)1 million of the fee base of that Bank.

          (b)       The Mandatory Cost for a Bank lending in a Participating
                    State  will be the  percentage  notified  by the Bank to the
                    Administrative  Agent  as the  cost of  complying  with  the
                    minimum reserve requirements of the European Central Bank.

          (c)        For the purposes of this Schedule XIII:

                    (i) "fee base" has the  meaning  given to it in, and will be
                    calculated in accordance with, the Fees Regulations; and

                    (ii) "Fees Regulations" means the Banking Supervision (Fees)
                    Regulations 1999 or any other law or regulation as may be in
                    force from time to time in  respect  of the  payment of fees
                    for banking supervision.

                    (d) Each rate  calculated  in  accordance  with the  formula
                    shall, if necessary, be rounded upward to the nearest 1/16th
                    of one per cent. Calculations will be made on the basis of a
                    365 day year (or, if market practice differs,  in accordance
                    with market practice).

                    (e) Additional  amounts  calculated in accordance  with this
                    Schedule are payable on the last day of each Interest Period
                    to which they relate.

                    (f) The  determination  of the  Mandatory  Cost by a Bank in
                    relation  to any period  shall,  in the  absence of manifest
                    error,  be  conclusive  and  binding  on all of the  parties
                    hereto.

                    (g) If the Administrative  Agent determines that a change in
                    circumstances  has  rendered,  or will  render,  the formula
                    inappropriate,  the Administrative Agent (after consultation
                    with the Banks) shall  notify the  relevant  Borrower of the
                    manner in which the  Mandatory  Cost  will  subsequently  be
                    calculated.  The manner of  calculation  so  notified by the
                    Administrative  Agent  shall,  in the  absence  of  manifest
                    error, be binding on all parties.



<PAGE>



                                                 TABLE OF CONTENTS
                                                                          Page



SECTION 1.  Amount and Terms of Credit.........................................1
1.01  The Commitments..........................................................1
1.02  Minimum Amount of Each Borrowing.........................................3
1.03  Notice of Borrowing......................................................3
1.04  Disbursement of Funds....................................................4
1.05  Notes....................................................................5
1.06  Conversions..............................................................7
1.07  Pro Rata Borrowings......................................................7
1.08  Interest.................................................................8
1.09  Interest Periods.........................................................8
1.10  Increased Costs, Illegality, etc........................................10
1.11  Compensation............................................................13
1.12  Change of Lending Office................................................13
1.13  Replacement of Banks....................................................14
1.14  Limitations on Additional Amounts, etc..................................14
1.15  Special Sharing and Conversion Provisions
      Applicable Upon Occurrence of a Sharing Event...........................15
1.16  Interest on Canadian Dollar Loans.......................................17

SECTION 2.  Letters of Credit.................................................18

2.01  Letters of Credit.......................................................18
2.02  Letter of Credit Requests; Notices of Issuance..........................19
2.03  Letter of Credit Participations.........................................20
2.04  Agreement to Repay Letter of Credit Drawings............................22
2.05  Increased Costs.........................................................23
2.06  Minimum Stated Amount...................................................24

SECTION 3.  Commitment Fee; Fees; Reductions of Commitment....................24

3.01  Fees....................................................................24
3.02  Voluntary Termination of Total Unutilized Revolving Loan Commitmet......26
3.03  Mandatory Reduction of Commitments......................................26

SECTION 4.  Prepayments; Payments; Taxes......................................27

4.01  Voluntary Prepayments...................................................27
4.02  Mandatory Repayments....................................................28
4.03  Method and Place of Payment.............................................34
4.04  Net Payments; Taxes.....................................................34

SECTION 5.  Conditions Precedent..............................................37

5.01  Execution of Agreement; Notes...........................................37
5.02  No Default; Representations and Warranties..............................37
5.03  Officer's Certificate...................................................37
5.04  Opinions of Counsel.....................................................38
5.05  Corporate Documents; Proceedings........................................38
5.06  Shareholders' Agreements; Management Agreements; Etc....................38
5.07  Existing Credit Agreement...............................................38
5.08  Pledge Agreements.......................................................39
5.09  Security Agreements.....................................................39
5.10  Subsidiary Guaranties...................................................39
5.11  Material Adverse Change, etc............................................39
5.12  Mortgages; Mortgage Amendments and Endorsements.........................40
5.13  Litigation..............................................................40
5.14  Fees, etc...............................................................40
5.15  Approvals...............................................................40
5.16  Financial Statements; Projections; Management Letter Reports............41
5.17  Senior Subordinated Note Indenture......................................41
5.18  Notice of Borrowing; Letter of Credit Request...........................41

SECTION 6.  Representations and Warranties....................................41

6.01  Status..................................................................41
6.02  Power and Authority.....................................................42
6.03  No Violation............................................................42
6.04  Governmental Approvals..................................................42
6.05  Financial Statements; Financial Condition; Undisclosed Liabilities......43
6.06  Litigation..............................................................44
6.07  True and Complete Disclosure............................................44
6.08  Use of Proceeds; Margin Regulations.....................................44
6.09  Tax Returns and Payments................................................44
6.10  ERISA...................................................................45
6.11  The Security Documents...............................................45
6.12  Properties..............................................................46
6.13  Capitalization..........................................................47
6.14  Subsidiaries............................................................47
6.15  Compliance with Statutes, etc...........................................47
6.16  Investment Company Act..................................................47
6.17  Public Utility Holding Company Act......................................47
6.18  Environmental Matters...................................................47
6.19  Labor Relations.........................................................48
6.20  Intellectual Property...................................................48
6.21  Indebtedness............................................................49
6.22  Senior Subordinated Notes...............................................49
6.23  Insurance...............................................................49

SECTION 7.  Affirmative Covenants.............................................49

7.01  Information Covenants...................................................49
7.02  Books, Records and Inspections..........................................53
7.03  Maintenance of Property; Insurance......................................53
7.04  Franchises, etc.........................................................54
7.05  Compliance with Statutes, etc...........................................54
7.06  Compliance with Environmental Laws......................................54
7.07  ERISA...................................................................55
7.08  End of Fiscal Years; Fiscal Quarters....................................55
7.09  Performance of Obligations..............................................55
7.10  Payment of Taxes........................................................56
7.11  Additional Mortgages; Further Assurances................................56
7.12  Foreign Subsidiaries Security...........................................57
7.13  Ownership of Subsidiaries...............................................58
7.14  Permitted Acquisitions..................................................58
7.15  Interest Rate Protection................................................60

SECTION 8.  Negative Covenants................................................60

8.01  Liens...................................................................60
8.02  Consolidation, Merger, Sale of Assets, etc..............................63
8.03  Dividends...............................................................65
8.04  Indebtedness............................................................66
8.05  Advances, Investments, Loans, Purchase of Assets........................68
8.06  Transactions with Affiliates............................................71
8.07  Maximum Capital Expenditures............................................72
8.08  Leverage Ratio..........................................................72
8.09  Interest Coverage Ratio.................................................73
8.10  Fixed Charge Coverage Ratio.............................................74
8.11  Modifications of Certain Indebtedness; Modifications
         of Certificate of Incorporation,
         By-Laws and Certain Agreements; etc..................................74
8.12  Limitation on Certain Restrictions on Subsidiaries......................75
8.13  Limitation on Issuance of Equity........................................76
8.14  Business................................................................76
8.15  Limitation on the Creation of Subsidiaries..............................77
8.16  Restrictions on Swedish Note............................................78

SECTION 9.  Events of Default.................................................78

9.01  Payments................................................................78
9.02  Representations, etc....................................................78
9.03  Covenants...............................................................78
9.04  Default Under Other Agreements..........................................78
9.05  Bankruptcy, etc.........................................................79
9.06  ERISA...................................................................79
9.07  Security Documents......................................................79
9.08  Guaranties..............................................................80
9.09  Judgments...............................................................80

SECTION 10.  Definitions and Accounting Terms.................................81

10.01  Defined Terms..........................................................81

SECTION 11.  The Administrative Agent........................................117

11.01  Appointment...........................................................117
11.02  Nature of Duties......................................................117
11.03  Lack of Reliance on the Administrative Agent..........................117
11.04  Certain Rights of the Administrative Agent............................118
11.05  Reliance..............................................................118
11.06  Indemnification.......................................................118
11.07  The Administrative Agent in its Individual Capacity...................119
11.08  Holders...............................................................119
11.09  Resignation by the Administrative Agent...............................119
11.10  Power of Attorney.....................................................120

SECTION 12.  Guaranties......................................................120

12.01  The Guaranties........................................................120
12.02  Bankruptcy............................................................121
12.03  Nature of Liability...................................................121
12.04  Guaranty Absolute.....................................................121
12.05  Independent Obligation................................................121
12.06  Authorization.........................................................122
12.07  Reliance..............................................................123
12.08  Subordination.........................................................123
12.09  Waivers...............................................................123
12.10  Guaranty Continuing...................................................124
12.11  Binding Nature of Guaranties..........................................124
12.12  Judgments Binding.....................................................124

SECTION 13.  Miscellaneous...................................................124

13.01  Payment of Expenses, etc..............................................125
13.02  Right of Setoff.......................................................126
13.03  Notices...............................................................127
13.04  Benefit of Agreement..................................................127
13.05  No Waiver; Remedies Cumulative........................................129
13.06  Payments Pro Rata.....................................................130
13.07  Calculations; Computations............................................130
13.08  GOVERNING LAW; SUBMISSION TO JURISDICTION;
        VENUE; WAIVER OF JURY TRIAL..........................................131
13.09  Counterparts..........................................................132
13.10  Effectiveness.........................................................132
13.11  Headings Descriptive..................................................133
13.12  Amendment or Waiver...................................................133
13.13  Confidentiality.......................................................134
13.14  Register..............................................................135
13.15  Special Provisions Regarding Pledges of Equity Interests in,
        and Promissory Notes Owed by,
        Persons Not Organized in the United States,
        Canada and the United Kingdom........................................135
13.16  Judgment Currency.....................................................136
13.17  Amendment and Restatement; Termination of Existing Credit Agreement...137
13.18  Post-Closing Actions..................................................137


<PAGE>




SCHEDULE I              Commitments
SCHEDULE II             Bank Addresses
SCHEDULE III            ERISA
SCHEDULE IV             Real Property
SCHEDULE V              Convertible Securities, Options or Rights
SCHEDULE VI             Subsidiaries
SCHEDULE VII            Existing Indebtedness
SCHEDULE VIII           Insurance
SCHEDULE IX             Existing Liens
SCHEDULE X              Existing Investments
SCHEDULE XI             Existing Letters of Credit
SCHEDULE XII            Mortgaged Properties
SCHEDULE XIII           Calculation of Mandatory Cost



EXHIBIT A               Form of Notice of Borrowing
EXHIBIT B-1(A)          Form of A-1 Term Note
EXHIBIT B-1(B)          Form of A-2 Term Note
EXHIBIT B-1(C)          Form of A-3 Term Note
EXHIBIT B-1(D)          Form of A-4 Term Note
EXHIBIT B-1(E)          Form of A-5 Term Note
EXHIBIT B-2             Form of Revolving Note
EXHIBIT C               Form of Letter of Credit Request
EXHIBIT D               Form of Section 4.04(b)(ii) Certificate
EXHIBIT E-1             Form of Opinion of Simpson Thacher & Bartlett
EXHIBIT E-2             Form of Opinion of Mary Alice Osterbauer, Esq.
EXHIBIT E-3             Form of Opinion of Davis, Ward, Phillips & Vineberg LLP
EXHIBIT E-4             Form of Opinion of Linklaters
EXHIBIT F               Form of Officers' Certificate
EXHIBIT G-1             Form of US Pledge Agreement
EXHIBIT G-2             Form of UK Pledge Agreement Amendment
EXHIBIT H-1             Form of US Security Agreement
EXHIBIT H-2             Form of Canadian Security Agreement Amendment
EXHIBIT H-3             Form of UK Security Agreement Amendment
EXHIBIT I               Form of US Subsidiary Guaranty
EXHIBIT J               Form of Assignment and Assumption Agreement
EXHIBIT K               Form of Intercompany Note
EXHIBIT L               Form of Permitted Seller Note
EXHIBIT M               Form of Shareholder Subordinated  Note
EXHIBIT N               Form of Permitted Earn-Out Debt Subordination Provision

<PAGE>


                                  SCHEDULE III

                                      ERISA

                                      None



<PAGE>


                                   SCHEDULE IV
                                  REAL PROPERTY
Aearo Company I
<TABLE>
<CAPTION>
                                                                                           Subject to
                                                                                      Mortgage Under Credit
Facility                             Qualifications            Owned/Leased                Agreement
--------                             --------------            ------------                ---------
<S>                                 <C>                        <C>                         <C>
5457 West 79th Street               Administration             Owned                       Yes
Indianapolis, Indiana 46268         Manufacturing
90 Mechanic Street                  Manufacturing and          Leased                      No
Southbridge, Massachusetts 01550    Administration
8001-8003 Woodland Drive            Distribution and           Leased                      No
Indianapolis, Indiana 46268         Customer Service
1728 Frisco Avenue                  Manufacturing and          Leased                      No
Chickasha, Oklahoma 73018           Customer Service
401 East Jefferson                  Manufacturing and          Leased                      No
Plymouth, Indiana 46563             Customer Service
7911 Zionsville Rd.                 Manufacturing and          Owned                       To be mortgaged
Indianapolis, Indiana 46268         Distribution
650 Dawson Drive                    Manufacturing              Owned                       Yes
Newark, Delaware 19713
401 Pencader Boulevard              Manufacturing              Leased                      No
Newark, Delaware 19713

2110 Congress Parkway               Manufacturing and          Leased                      No
Athens, Tennessee 37371             Customer Service

Aearo Canada Limited
6889 Rexwood Road, Units 8&9        Manufacturing and          Leased                      No
Mississauga, Ontario L4V1R2         Customer Service
Canada

7000 Avenue du Parc, Suite 407      Manufacturing and          Leased                      No
Montreal, Quebec HCN 1X1            Customer Service
Canada

546 Byrne Drive, Unit C              Manufacturing,            Leased                      No
Barrie, Ontario L4N9P6              Distribution and
Canada                              Customer Service


Aearo Limited
First Avenue                        Manufacturing,             Leased                      No
Poynton Stockport, Cheshire         Distribution and
England SK12 1FJ                    Customer Service
4, Route De Gisy                    Sales                      Leased                      No
Batiment Antelia
91 570 Bievres
France
Via Boccaccio 37                    Sales                      Leased                      No
20090 Trezzano S/Navigio
Milano, Italy
C/Balmes, 152 702A                  Sales                      Leased                      No
08008 Barcelona
Spain

Peltor AG
Box 2341 Malmstensgatan 19          Manufacturing,             Owned                       No
S-331 02 Varnamo                    Distribution and
Sweden                              Customer Service
Postboks 253                        Manufacturing,             Leased                      No
N-1471 Skarer                       Distribution and
Norway                              Customer Service

Peltor AB
Einsteinstrasse 47                  Manufacturing,             Owned                       No
Postfach 612                        Distribution and
D-76275 Ettlingen                   Customer Service
Germany
</TABLE>



<PAGE>


                                   SCHEDULE V



                    CONVERTIBLE SECURITIES, OPTIONS OR RIGHTS



     Certain  options to purchase  common  Stock of  Holdings  may be granted to
members of the management of Holdings and its subsidiaries.  In addition, common
stock of  Holdings  held by  members  of  management  is subject to put and call
arrangements  pursuant to certain  stock  purchase and option plan  arrangements
provided  to such  members  of  management,  all of  which  are  subject  to the
restriction in the Credit Agreement.

<PAGE>



                                   SCHEDULE VI
                                  SUBSIDIARIES





<PAGE>


                                     SCHEDULE VII


<TABLE>
<CAPTION>
                                  EXISTING INDEBTEDNESS


                                                                                                      Refinancing/
Principal Amount           Owed to                               Purpose                              Renewal
<S>                  <C>                               <C>                                            <C>
$2,258,184           American United Life              Mortgage on Safety Plant,                      Permitted
                                                       79th Street, Indianapolis, IN
$193,285             State of Delaware                 Installment sale agreement, Specialty          Permitted
                                                       Composites, Newark, DE ($785,000 Gross
                                                       less $121,715 Deposit Advance Purchase
                                                       Price Fund)
$6,075               Dennis Downs                      Payout of Cabot Safety Corporation             Permitted
                                                       Stock Option Plan
$184,000             Norbanken                         Mortgage on Real Property                      Permitted
$37,000              Erland Olstad and Kristin         Payout to former owners of Peltor              Permitted
                     Odette Kaals                      Communications A/S in Norway
$1,000               BNP Paribas                       Computer Printer - France                      Permitted
$3,029,000           Aearo Company I                   Norhammer Purchase                             Permitted
$2,500,000           Aearo Limited                     To repatriate excess cash into the US          Permitted
$86,100,000          Cabot Safety Intermediate         Purchase of Peltor (approximately              Permitted
                     Corporation                       $64,000,000 aggregate principal amount
                                                       is outstanding as of the Restatement
                                                       Effective Date)
$54,000              Sparkasse Ettlingen               Mortgage on Real Property in Germany           Permitted

</TABLE>




<PAGE>


                                  SCHEDULE VIII


                                    INSURANCE
<TABLE>
<CAPTION>


Policy Period        Coverage                                 Carrier                     Limits
<S>                  <C>                                      <C>                         <C>
3/01/01-3/01/02      Property and Boiler                      Lexington and Various       $500,000,000 (subject to certain
                                                              Excess                      sublimits)
9/30/00-9/30/01      General Liability and Products           Twin City Fire              $2,000,000 general aggregate
                       Liability                                (Hartford)                $2,000,000 prods./comp. ops agg.
                                                                                          $1,000,000 per occurrence
                                                                                          $1,000,000 personal and
                                                                                          advertising injury
                                                                                          $1,000,000 EBL per employee
                                                                                          claim and aggregate (claims
                                                                                          made)
                                                                                          $1,000 fire damage (any one fire)
                                                                                          $5,000 medical expenses (any
                                                                                          one person)
9/30/00-9/30/01      Workers' Comp                            Travelers                   Coverage A:  Statutory
                                                                                          Coverage B:
                                                                                          $1,000,000 BI each Accident
                                                                                          $1,000,000 BI by Disease, each
                                                                                          employee
                                                                                          $1,000,000 BI by Disease,
                                                                                          Policy Limit
9/30/00-9/30/01      Automobile                               Travelers                   $1,000,000 combined single limit
                                                                                          BI/PD
                                                                                          $1,000,000 uninsured/under-
                                                                                          insured motorists combined
                                                                                          single limit
                                                                                          Statutory Personal Injury Protection
9/30/00-9/30/01      Umbrella Liability                       National Union Fire         $50,000,000 per occurrence/aggregate
9/30/00-9/30/01      Non-owned Aviation                       ACE                         $5,000,000 per occurrence
9/30/00-9/30-01      Aviation Products                        ACE                         $50,000,000 combined single limit
                                                                                          including Grounding aggregate.
9/30/00-9/30/01      Crime                                    Gulf                        $5,000,000 Employee Dishonesty
                                                                                          $5,000,000 Forgery and Alterations
                                                                                          $5,000,000 Theft, Disappearances
                                                                                          $5,000,000 Robbery & Safe Burglary
                                                                                          $5,000,000 Computer & Funds Transfer
                                                                                          $5,000,000 Money Orders/ Counterfeit
                                                                                          $500,000 Credit Card Forgery
9/30/00-9/30/01      Special Crime                            Underwriters at Lloyds      $5,000,000 ann/agg.
3/01/01-3/01/02      Fiduciary Liability                      AIG                         $7,500,000 per claim/aggregate
3/01/01-3/01/02      D&O Liability                            AIG                         $15,000,000 per occurrence/agg.
9/30/00-9/30/01      Foreign Liability                        ACE                         General Liability:
                                                                                              $1,000,000 per occurrence
                                                                                              $1,000,000 per occurrence
                                                                                                    prod/completed ops./agg
                                                                                              $1,000,000 aggregate Personal
                                                                                                    and Advertising Injury
                                                                                              $1,000,000 Premises Damage
                                                                                                    per occurrence
                                                                                              $10,000 Medical Expense any
                                                                                                    one person
                                                                                              $1,000,000 Contingent Auto
                                                                                                     Liability per accident

                                                                                          Employer's Liability:
                                                                                              $1,000,000 BI by Acc each Acc
                                                                                              $1,000,000 BI by Dis Policy
                                                                                                   Limit
                                                                                              $1,000,000 BI by Dis Each
                                                                                                   Empl
                                                                                              $250,000 Repatriation Limit

                                                                                          Employee Dishonesty:
                                                                                              $5,000 per occurrence
9/30/00-9/30/01      Marine Cargo                             ACE                         $1,000,000 per any one vessel or
                                                                                             aircraft
                                                                                          $100,000 on deck bill of lading

                                                                                          $1,000 UPS/Mail
                                                                                          Nil Inland Transit
</TABLE>


<PAGE>


                                   SCHEDULE IX

                                 EXISTING LIENS



                           A. Liens scheduled below:

<TABLE>
<CAPTION>


                                                               Filing                         Filing        Desc of       Renewal/
Debtor                        Secured Party                    Location         Filing Date   Number        Collateral    Extension
----------------------------- -------------------------------- ---------------- ------------- ------------- ------------- ---------
<S>                           <C>                              <C>              <C>           <C>           <C>           <C>
Aearo Corporation             Crown Credit Company             Delaware-SOS     12/26/2000    001649284     Equipment
650 Dawson Drive              44 S. Washington Street
Newark, DE 19713              New Bremen, OH 45869
                              34-1374207

Aearo Corporation             Crown Credit Company             Indiana-SOS      12/22/97      2163407       Equipment
8001 Woodland Drive           40 S. Washington Street
Indianapolis, In 46278        New Bremen, OH 45869

Aearo Corporation             Crown Credit Company             Indiana-SOS      01/8/98       2166450       Equipment
8001 Woodland Drive           40 S. Washington Street
Indianapolis, In 46278        New Bremen, OH 45869

Aearo Corporation             Crown Credit Company             Indiana-SOS      01/28/98      2169533       Equipment
8001 Woodland Drive           40 S. Washington Street
Indianapolis, In 46278        New Bremen, OH 45869

Aearo Corporation             Crown Credit Company             Indiana-SOS      02/10/98      2172185       Equipment
8001 Woodland Drive           40 S. Washington Street
Indianapolis, In 46278        New Bremen, OH 45869

Aearo Corporation             Crown Credit Company             Indiana-SOS      02/10/98      2172186       Equipment
8001 Woodland Drive           40 S. Washington Street
Indianapolis, In 46278        New Bremen, OH 45869

Aearo Corporation             Siemens Credit Corp              Indiana-SOS      04/13/98      2183247       Equipment
One Washington Mall, 8th      991 U. S. Hw Rte 22 West
floor                         Bridgewater, NJ 08807
Boston, MA 02108


Aearo Corporation             Crown Credit Company             Indiana-SOS      04/20/98      2185190       Equipment
8001 Woodland Drive           40 S. Washington Street
Indianapolis, In 46278        New Bremen, OH 45869


Aearo Corporation             Associated Material Handling     Indiana-SOS      05/28/98      2192904       Equipment
5457 W. 79th Street           Industries, Inc.
Indianapolis, In 46278        1230 Brookville Way
                              Indianopolis, IN 46239

Aearo Corporation             Siemens Credit Corporation       Indiana-SOS      11/13/98      2223601       Equipment
One Washington Mall, 8th      991 U. S. Hwy Rte 22 West
floor                         Bridgewater, NJ 08807
Boston, MA 02108


Aearo Corporation             Dell Financial Services, L. P.   Indiana-SOS      05/28/99      2260190       Equipment
5457 W. 79th Street           14050 Summit Drive
Indianapolis, In 46278        Building A. Suite 101
                              Austin, TX 78758

Aearo Corporation             Dell Financial Services, L. P.   Indiana-SOS                    2027753       Equipment
5457 W. 79th Street           14050 Summit Drive
Indianapolis, In 46278        Building A. Suite 101
                              Austin, TX 78758

Aearo Corporation I           National City Leasing            Indiana-SOS      09/26/00      2348935       Equipment
5457 W. 79th Street           Corporation
Indianapolis, In 46278        P. O. Box 36040
                              Louisville, KY 40233

Aearo Corporation I           National City Leasing            Indiana-SOS      01/04/01      2367407       Equipment     X
5457 W. 79th Street           Corporation
Indianapolis, In 46278        P. O. Box 36040
                              Louisville, KY 40233
                              61-0978678

Aearo Company I               Relational Funding Corporation   Indiana-SOS      08/12/99      2274261       Equipment
5457 West 79th Street         3701 Algonquin Road
Indianapolis, IN 46268        Rolling Meadows, IL 60008

Aearo Company                 Relational Funding Corporation   Indiana-SOS      08/12/99      2274250       Equipment
5457 West 79th Street         3701 Algonquin Road
Indianapolis, IN 46268        Rolling Meadows, IL 60008

Aearo Company                 Relational Funding Corporation   Indiana-SOS      08/20/99      2275555       Equipment
5457 West 79th Street         3701 Algonquin Road
Indianapolis, IN 46268        Rolling Meadows, IL 60008

Aearo Company                 Relational Funding Corporation   Indiana-SOS      11/17/99      2290514       Equipment
5457 West 79th Street         3701 Algonquin Road
Indianapolis, IN 46268        Rolling Meadows, IL 60008

Aearo Company                 Relational Funding Corporation   Indiana-SOS      02/03/00      2303716       Equipment
5457 West 79th Street         3701 Algonquin Road
Indianapolis, IN 46268        Rolling Meadows, IL 60008

Aearo Company                 Bankers/Softech                  Indiana-SOS      07/28/00      2339129       Equipment
5457 West 79th Street         Divisions of Eab Leasing Corp.
Indianapolis, IN 46268        4201 Lake Cook Road
                              NorthBrook, IL 60062

Aearo Company                 Relational Funding Corporation   Indiana-SOS      08/24/99      991358720     Equipment
5457 West 79th Street         3701 Algonquin Road
Indianapolis, IN 46268        Rolling Meadows, IL 60008

Aearo Company                 Relational Funding Corporation   Delaware-SOS     11/19/99      991496828     Equipment
D/b/a Aearo Company           3701 Algonquin Road
5457 West 79th Street         Rolling Meadows, IL 60008
Indianapolis, IN 46268

Aearo Company                 Relational Funding Corporation   Delaware-SOS     08/06/99      991332477     Equipment
5457 West 79th Street         3701 Algonquin Road
Indianapolis, IN 46268        Rolling Meadows
                              IL 60008

Specialty Composites          Department of Community          Delaware-SOS     09/25/78      7813968       Equipment
Corporation1                  Affairs and Economic
650 Dawson Avenue             Development
Newark, Delaware 19713        630 State College Road Dover
                              Delaware 19901

Specialty Composites          The Delaware Economic            Delaware-SOS     09/16/1983    8310456       Equipment     X
Corporation                   Development Authority,
650 Dawson Avenue             successor in interest to the
Newark, Delaware 19711        Department of Community
                              Affairs and Economic
                              Development
                              99 Kings Highway, P. O. Box
                              1401
                              Dover, DE 1990

Specialty Composites          The Delaware Economic            Delaware-SOS     09/01/1988    8811708       Equipment     X
Corporation                   Development Authority,
650 Dawson Avenue             successor in interest to the
Newark, Delaware 19711        Department of Community
                              Affairs and Economic
                              Development
                              630 State College Road
                              Dover , Delaware 19901

Specialty Composites          Department of Community          Delaware-SOS     12/29/88      8817178       Equipment     X
Corporation                   Affairs and Economic
650 Dawson Avenue             Development
Newark, Delaware 19711        630 State College Road
                              Dover , Delaware 19901

Specialty Composites          The Delaware Economic            Delaware-SOS     04/08/1989    8906123       Equipment     X
Corporation                   Development Authority
650 Dawson Avenue             99 Kings Highway P. o. Box 1401
De Industrial Park            Dover, DE 19903
Newark, Delaware 19713

E-A-R/Specialty Composites    The Delaware Economic            Delaware-SOS     02/25/91      9102387       Equipment     X
Corporation2                  Development Authority
650 Dawson Avenue             99 Kings Highway P. o. Box 1401
De Industrial Park            Dover, DE 19903
Newark, Delaware 19713

Specialty Composites          The Delaware Economic            Delaware-SOS     9/25/78       9304541       Equipment     X
Corporation                   Development Authority,
650 Dawson Avenue             successor in interest to the
De Industrial Park            Department of Community
Newark, Delaware 19713        Affairs and Economic
                              Development
                              99 Kings Highway; P. O. Box
                              1401
                              Dover , Delaware 19903

Aearo Company I               PNC Bank, Delaware, as Trustee   Delaware-SOS     09/25/78      8-13968       Equipment     X
5457 West 79th Street         222 Delaware Avenue
Indianapolis, IN 46268        P. O. Box 791
                              Wilmington, Delaware 19899-0791

Cabot Safety Corporation      Bank of Delaware, as Trustee     Delaware-SOS     09/25/78      8-13968       Equipment     X
650 Dawson Drive              222 Delaware Avenue
Delaware Industrial park      Wilmington, Delaware 19899-0791
Newark, Delaware 19713

E-A-R/ Specialty Composites   Bank of Delaware, as Trustee     Delaware-SOS     06/06/1990    9008262       Equipment
Corporation                   222 Delaware Avenue
650 Dawson Avenue             Wilmington, Delaware 19899
De Industrial Park
Newark, Delaware 19713

E-A-R/ Specialty Composites   Bank of Delaware, as Trustee     Delaware-SOS     08/02/1990    9011180       Equipment     X
Corporation                   222 Delaware Avenue
650 Dawson Avenue             Wilmington, Delaware 19899
De Industrial Park
Newark, Delaware 19713

Cabot Safety Corporation      Bank of Delaware, as Trustee     Delaware-SOS     6/6/90        9504812       Equipment     X
650 Dawson Drive              222 Delaware Avenue
Delaware Industrial park      Wilmington, Delaware 19899
Newark, Delaware 19713

Cabot Safety Corporation      Bank of Delaware, as Trustee     Delaware-SOS     06/06/90      9501434       Equipment     X
650 Dawson Drive              222 Delaware Avenue
Delaware Industrial park      Wilmington, Delaware 19899
Newark, Delaware 19713

Aearo Company I               Chase Manhattan bank Delaware,   Delaware-SOS     06/06/90      90-08262      Equipment     X
650 Dawson Drive              as Trustee
Delaware Industrial park      Attn: Global Trust
Newark, Delaware 19713        8th Floor
                              1201 N. Market Street
                              Wilmimgton, DE 19801

Cabot Safety Corporation      PNC Bank, Delaware, as Trustee   Delaware-SOS     06/06/90      9008262-00349 Equipment     X
650 Dawson Drive              222 Delaware Avenue
Delaware Industrial park      Wilmington, Delaware 19899
Newark, Delaware 19713

Aearo Company I               The Delaware Economic            Delaware-SOS     09/24/1998    9843174       Equipment
D/b/a Aearo Company           Development Authority
5457 West 79th Street         99 Kings Highway
Indianapolis, IN 46268        Dover, Delaware
                              19901-7305

Aearo Company I               National City Leasing            Indiana-SOS      01/4/01       2350379       Equipment
5457 West 79th Street         Corporation
Indianapolis, IN 46268        P. O. Box 36040
                              Louisville, KY 40233

Aearo Company                 Relational Funding Corporation   Oklahoma Cty,    8/17/99       N0006186      Computer
5457 West 79th Street         3701 Algonquin Road              Oklahoma                                     Equipment
Indianapolis, IN 46268        Rolling Meadows, IL 60008

Aearo Corporation             Metlife Capital, Limited         MA SOS           9/30/96       96419443      Equipment
90 Mechanic Street            Partnership
Southbridge, MA 01550         10900 N.E. 4th #500
                              Bellevue, WA 98004

Aearo Company                 Metlife Capital, Limited         MA SOS           10/31/96      96426602      Equipment
90 Mechanic Street            Partnership
Southbridge, MA 01550         10900 N.E. 4th #500
                              Bellevue, WA 98004

Aearo Corporation             Metlife Capital, Limited         MA SOS           10/31/96      96426602      Equipment
90 Mechanic Street            Partnership
Southbridge, MA 01550         10900 N.E. 4th #500
                              Bellevue, WA 98004


Aearo Corporation             Metlife Capital, Limited         MA               7/1/99        99643792      Equipment
90 Mechanic Street            Partnership
Southbridge, MA 01550         10900 N.E. 4th  #500
                              Bellevue, WA  98004


Aearo Corporation             G.E. Capital Business Asset      MA SOS           7/1/99        99643792      Equipment
5457 W. 79th Street           Funding Co. formerly known as
                              MetLife Capital Limited
                              Partnership
Indianapolis, In 46278        10900 N.E. 41st Street Suite
                              500
                              Bellevue, WA

Aearo Company                 Hewlett Packard Company          MA SOS           10/18/96      96424082      Computer
90 Mechanic Street            Finance & Remarketing Div.                                                    Equipment
Southbridge, MA  01550        333 Logue Avenue, Bld. 32
                              Mountain View, CA  94043

Aearo Company                 Pitney Bowes Credit Corporation  MA SOS           7/28/97       97485665      Equipment
90 Mechanic Street            27 Waterview Drive
Southbridge, MA  01550        Shelton, CT  06484

Aearo Corporation             Siemens Credit Corporation       MA SOS           2/4/98        98527253      Equipment
One Washington Mall,          991 U.S. Highway,
8th Floor                     Route 22 West
Boston, MA  02108             Bridgewater, NJ  08807

Aearo Corporation             Siemens Credit Corporation       MA SOS           2/4/98        98527254      Equipment
One Washington Mall, 8th      991 U.S.
Floor                         Highway Route
Boston, MA  02108             22 West
                              Bridgewater, NJ  08807

Aearo Company                 Hewlett Packard Company          MA SOS           2/24/98       98531363      Computer
90 Mechanic Street            Finance and Remarketing Div.                                                  Equipment
Southbridge, MA  01550        20 Perimeter Summit Blvd.
                              Atlanta, GA  30319

Aearo Company                 Alliance Energy Corp. d/b/a      MA SOS           6/16/99       99639452      Equipment
90 Mechanic Street            Casey Petroleum
Southbridge, MA  01550        800 South Street
                              Waltham, MA  02254

Aearo Company                 Fleet Business Credit            MA SOS           7/14/99       99646444      Equipment
5457 West 79th Street         Corporation
Indianapolis, IN  46268       One South Wacker Drive
                              Chicago, IL  60606

Aearo Company                 Relational Funding Corporation   MA SOS           8/12/99       99653363      Computer
5457 West 79th Street         3701 Algonquin Road                                                           Equipment
Indianapolis, IN  46268       Rolling Meadows, IL  60008

Aearo Company                 Relational Funding Corporatioin  MA SOS           8/20/99       99655063      Computer
5457 West 79th Street         3701 Algonquin Road                                                           Equipment
Indianapolis, IN  46268       Rolling Meadows, IL  60008

Aearo Company                 Relational Funding Corporation   MA SOS           11/17/99      99675453      Computer
5457 West 79th Street         3701 Algonquin Road                                                           Equipment
Indianapolis, IN  46268       Rolling Meadows, IL  60008

Aearo Company                 Relational Funding Corporation   MA SOS           2/3/00        00693073      Computer
5457 West 79th Street         3701 Algonquin Road                                                           Equipment
Indianapolis, IN  46268       Rolling Meadows  60008

Aearo Company I               National City Leasing            MA SOS           11/20/00      00757616      Equipment
90 Mechanic Street            Corporation
Southbridge, MA  01550        P.O. Box 36040
                              Louisville, KY  40233

Aearo Corporation             Metlife Capital Limited          MA SOS           9/30/96       96419443      Injection
90 Mechanic Street            Partnership                                                                   Molding Mach
Southbridge, MA  01550        10900 N.E. 4th Street #500
                              Bellevue, WA  98004

E-A-R/Specialty Composites    Bank of Delaware                 New Castle       8/2/90        17064         Equipment
Corporation                   222 Delaware Avenue              County, DE
650 Dawson Drive Delaware     Wilmington, DE  19899
Industrial Park
Newark, DE  19713

Cabot Safety Corporation      Bank of Delaware                 New Castle       6/6/90        26001         Equipment
650 Dawson Drive Delaware     222 Delaware Ave.                County, DE
Industrial Park               Wilmington, DE  19899
Newark, DE  19713

Aearo Company I               The Delaware Economic            New Castle       9/23/98       032984        Equipment
5457 West 79th Street         Development Authority            County, DE
Indianapolis, IN  46268       99 Kings Highway
                              Dover, DE  19901-7305

Aearo Corporation             Crown Credit Company             Marion Cty, IN   12/31/97      010760        Equipment
8001 Woodland Drive           40 S Washington Street
Indianapolis, IN  46278       New Bremen, OH  45869

Aearo Corporation             Crown Credit Company             Marion Cty, IN   1/5/98        000087        Equipment
8001 Woodland Drive           40 S Washington Street
Indianapolis, IN  46278       New Bremen, OH  45869

Aearo Corporation             Crown Credit Company             Marion Cty, IN   2/5/98        001086        Equipment
8001 Woodland Drive           40 S Washington Street
Indianapolis, IN  46278       New Bremen, OH  45869

Aearo Corporation             Crown Credit Company             Marion Cty, IN   2/13/98       001340        Equipment
8001 Woodland Drive           40 S Washington Street
Indianapolis, IN  46278       New Bremen, OH  45869

Aearo Corporation             Crown Credit Company             Marion Cty, IN   2/13/98       001341        Equipment
8001 Woodland Drive           40 S Washington Street
Indianapolis, IN  46278       New Bremen, OH  45869

Aearo Corporation             Crown Credit Company             Marion Cty, IN   4/21/98       003206        Equipment
8001 Woodland Drive           40 S Washington Street
Indianapolis, IN  46278       New Bremen, OH  45869

</TABLE>


B.  Liens securing Indebtedness listed on Schedule VII to the Credit Agreement.
C.  Liens on file in Ontario, Canada.  [see attached Annex A]
D.  Liens on file in England.  [see attached Annex B]


<PAGE>




                                     ANNEX A


                              AEARO CANADA LIMITED
                              AEARO CANADA LIMITEE

                          O N T A R I O S E A R C H E S
                          -----------------------------


A.   Personal Property Security Act

     (currency: July 10, 2001)

     Certified printouts revealed the following registrations:

1.   Financing Statement/Financing Change Statement(s)-Ref File No. 862334244
     -------------------------------------------------

Registration No.:                   20000530 1649 1882 3292
Date:                               May 30, 2000
Registration Period:                5 year(s)
First Debtor:                       Peltor Communication Ltd.
                                    546 Bryne Drive Unit C
                                    Barrie, Ontario L4N 9P7
Second Debtor:                      Aearo Canada Limited
                                    546 Bryne Drive Unit C
                                    Barrie, Ontario L4N 9P7
Secured Party:                      Northstar Leasing Corporation
                                    80 Bradford Street, Suite #300
                                    Barrie, Ontario L4N 6S7
Collateral Classification:          equipment, accounts, other
Date of Maturity:                   none fixed

         Amendment         -        Reg No.: 20000707 0923 1882 3356
         ---------
                                    Adding debtor:
                                    Norhammer Peltor Ltd.
                                    P.O. Box 443 Hwy 11 North
                                    Gravenhurst, Ontario P1P 1T8
                                    Aearo Canada Ltd Aearo Canada Limitee
                                    7115 Tomken Road
                                    Mississauga, Ontario L5S 1R8
                                    Collateral Class: equip, accounts, other



<PAGE>


2.  Financing Statement/Financing Change Statement(s) - Ref File No. 078425109
    -------------------------------------------------

Registration No.:            19960529 1432 0043 3178
Date:                        May 29, 1996
Registration Period:         6 year(s)
Debtor:                      Cabot Safety Canada Corporation
                             7115 Tomken Road
                             Mississauga, Ontario L5S 1R8
Secured Party:               Bankers Trust Company, as Collateral Agent
                             130 Liberty Street
                             New York, New York 10006
Collateral Classification:   inv, equip, accts, other, motor vehicle included

         Amendment         - Registration No.: 19961127 1203 0043 5959
         ---------
                             To change the name of the debtor:
                             Aearo Canada Limited

3.   Financing Statement/Financing Change Statement(s) - Ref File No. 816797052
     -------------------------------------------------

Registration No.:           19950918 1745 1513 1767
Date:                       September 18, 1995
Registration Period:        1 year(s)
Debtor:                     Cabot Safety Canada Corporation
                            7115 Tomken Rd
                            Mississauga, Ontario L5S 1R8
Secured Party:              Toronto-Dominion Bank - Mississauga 12752 ABC 5247
                            20 Milverton Drive & Highway #10
                            Mississauga, Ontario L5R 3G2
Collateral Classification:  accounts, other

         Renewal  -            Registration No.: 19960808 1745 1513 5953
         -------
                                 For 5 year(s)

         Amendment         -     Registration No.: 19961113 1748 1513 5594
         ---------
                                 Amend debtor name:
                                 Aearo Canada Limited

4.  Financing Statement/Financing Change Statement(s) - Ref File No. 059485113
    -------------------------------------------------

Registration No.:            19950710 1458 0043 5707
Date:                        July 10, 1995
Registration Period:         6 year(s)
Debtor:                      Cabot Safety Canada Acquisition Ltd.
                             7115 Tomken Road
                             Mississauga, Ontario L5S 1R8
Secured Party:               Bankers Trust Company, as Collateral Agent
                             130 Liberty Street
                             New York, New York 10006
Collateral Classification:   inv, equip, accts, other, motor vehicle included

         Amendment         - Registration No.: 19950714 1446 0043 7170
         ---------
                             The debtor name has changed:
                             Cabot Safety Canada Corporation

         Amendment         - Registration No.: 19961127 1203 0043 5958
         ---------
                             To change the name of the debtor:
                             Aearo Canada Limited

5.  Financing Statement/Financing Change Statement(s) - Ref File No. 960060042
    -------------------------------------------------

Registration No.:               19860722 1023 0088 9326
Date:                           July 22, 1986
Registration Period:            3 year(s)
Debtor:                         Norhammer Ltd
                                Pt Lot 4 Conc 9 Lot 22 Pt Lot 23
                                Gravenhurst, Ontario
Secured Party:                  The Toronto Dominion Bank
                                210 Muskoka Road South
                                Gravenhurst, Ontario
Collateral Classification:      inv, equip, book debts, other,
                                motor vehicle not included
General Collateral Description: general security agreement

         Renewal  -            Registration No.: 19890612 1041 0003 1377
         -------
                                            For 3 year(s)

         Renewal  -            Registration No.: 19920505 1035 0088 2866
         -------
                                            For 5 year(s)

         Renewal  -            Registration No.: 19970602 1803 1513 6731
         -------
                                            For 5 year(s)

6.  Financing Statement/Financing Change Statement(s) - Ref File No. 900692892
    -------------------------------------------------

CSRA No.:                  069289
Mortgagor(s):              Norhammer Tools Company Limited
Mortgagee(s):              The Toronto-Dominion Bank
Type of Instrument:        Security Agreement (purchase-money security interest)
Date of Filing:            September 6, 1983
B.    Bank Act

     We received Canadian Securities  Registration Systems' Confirmation Letters
dated July 7, 2001  regarding  Ontario  Bank Act  Security  - Section  427 which
reflect no registrations  against Aearo Canada Limited Aearo Canada Limitee (the
"Corporation").


C.    Executions

      (i)Toronto

     Executions  certificates  dated July 12, 2001  certified  that there are no
Writs of Execution,  Extent or  Certificates of Lien in the hands of the Sheriff
at Toronto against the real or personal property of the Corporation.

      (ii)        Regional Municipality of Peel

     Executions  certificates  dated July 12, 2001  certified  that there are no
Writs of Execution,  Extent or  Certificates of Lien in the hands of the Sheriff
at Brampton against the real or personal property of the Corporation.

      (iii)       District Municipality of Muskoka

     Executions  certificates  dated July 12, 2001  certified  that there are no
Writs of Execution,  Extent or  Certificates of Lien in the hands of the Sheriff
at Muskoka against the real or personal property of the Corporation.


D.    Insolvency/Bankruptcy

     Search  results  dated July 12, 2001 from  Industry  Canada,  Office of the
Superintendent  of Bankruptcy  indicate that the public record contains no facts
nor any reference (from 1978 to June 24, 2001) to the Corporation.


<PAGE>



                                                      ANNEX B
COMPANY DETAILS            [GRAPHIC OMITTED]

Name & Registered Office :          Company No. : 03066945
AEARO LIMITED                       Date of Incorporation : 12/06/1995
                                            Country of Origin : United Kingdom

FIRST AVENUE POYNTON STOCKPORT CHESHIRE SK12 1FJ

Status : Active

Company Type:                       Private Limited Company
Nature Of Business                          (SIC(92)):
                                            3663 - other manufacturing
                                            5170 - other wholesale



Accounting Reference Date: 30/09
Last Accounts Made Up To: 30/09/2000 (GROUP)
Next Accounts Due: 30/07/2002
Last Return Made Up To: 12/06/2000
Next Return Due: 10/07/2001



Last Members List : 12/06/2000


Mortgage: Number of Charges: 1( 1 outstanding / 0 satisfied / 0 part satisfied )

Previous Names
Date of Change :  Previous Name :
27/09/1996        CABOT SAFETY LIMITED
12/07/1995        CABOT SAFETY ACQUISITION LIMITED
21/06/1995        HACKREMCO (NO.1049) LIMITED





<PAGE>


Company Number :  03066945
Company Name :    AEARO LIMITED

Number of Charges : 1 (1 outstanding / 0 part satisfied / 0 satisfied)

The following details relate to all outstanding and  part-satisfied  charges for
the company  together  with  charges  satisfied  since  01/01/1987.  Charges are
displayed with the oldest first.

Description:  DEBENTURE

Charge is OUTSTANDING

Person(s) Entitled :       BANKERS TRUST COMPANY
Acquisition Date :
Created : 11/07/1995       Registered : 21/07/1995   Form Type : 395

Amount Secured : ALL OF THE  OBLIGATIONS AND LIABILITIES OF EVERY KIND OR NATURE
OF THE COMPANY  FORMERLY  KNOWN AS CABOT SAFETY  ACQUISITION  LIMITED TO BANKERS
TRUST COMPANYAS  COLLATERAL  AGENT,FOR ITSELF AND FOR THE SECURED  CREDITORS (AS
DEFINED IN THE CREDITAGREEMENT) UNDER THE PROVISIONS OF A CREDIT AGREEMENT DATED
11 JULY 1995,EACH  OTHER CREDIT DOCUMENT TO WHICH IT IS A PARTY AND ANY INTEREST
RATE PROTECTION AGREEMENT OR OTHER HEDGING AGREEMENT TO WHICH IT IS A PARTY (ALL
SUCH TERMS ARE DEFINED IN THE CREDIT  AGREEMENT)  Short  Particulars : FIXED AND
FLOATING  CHARGES OVER THE  UNDERTAKING  AND ALL PROPERTY AND ASSETS PRESENT AND
FUTURE INCLUDING  GOODWILL  BOOKDEBTS  UNCALLED CAPITAL BUILDINGS FIXTURES FIXED
PLANT AND MACHINERY SEE THE MORTGAGE CHARGE DOCUMENT FOR FULL DETAILS








<PAGE>


SCHEDULE  X  EXISTING  INVESTMENTS  $86,100,000  Note  (of  which  approximately
$64,000,000  aggregate  principal  amount  is  outstanding  on  the  Restatement
Effective Date) owed to Cabot Safety  Intermediate  Corporation for the purchase
of Peltor (the "Swedish Note")



<PAGE>


                                   SCHEDULE XI
                           EXISTING LETTERS OF CREDIT

<TABLE>
<CAPTION>

BENEFICIARY                                 AMOUNT               CREDIT #
<S>                                         <C>                  <C>
Travelers Indemnity Co.                     $220,000             S-13866
                                                                 (expires 9/30/01)
LaSalle Advisors Limited                    $60,000              S-12269
                                                                 (expires 1/16/02)
Her Majesty Customs and Excise (UK)         GBP 300,000          S-12141
                                                                 (expires 10/6/01)
</TABLE>


<PAGE>


                             SCHEDULE XII
                           MORTGAGED PROPERTIES

EXISTING MORTGAGED PROPERTIES
1.  Owned by:     Aearo Company I
Address:          5457 West 79th Street
                  Indianapolis, Indiana 46268

2.  Owned by:     Aearo Company I

Address: 650 Dawson Drive
                  Newark, Delaware 19713


PROPERTY TO BE MORTGAGED

1.  Owned by:     Aearo Company I

Address: 7911 Zionsville Road
                  Indianapolis, Indiana 46268



--------
1 Please note that all references to this company refer to Aearo Company I

2 Please note that all references to this company refer to Aearo Company I


<PAGE>



                                    EXHIBIT A


                           FORM OF NOTICE OF BORROWING


Bankers Trust Company, as Administrative Agent
  for the Banks party to the
  Credit Agreement referred
  to below
130 Liberty Street
New York, New York  10006

Attention:  ____________________

Ladies and Gentlemen:

     The undersigned [Aearo Company I (the "US Borrower")]1  [Aearo Limited (the
"UK Borrower")]2  refers to the Credit Agreement,  dated as of July 11, 1995 and
amended and restated as of July 13, 2001 (as amended,  modified or  supplemented
from time to time, the "Credit Agreement",  the terms defined therein being used
herein as therein defined),  among Aearo  Corporation,  [the US Borrower] [Aearo
Company I], Aearo Canada Limited,  [the UK Borrower] [Aearo Limited],  the Banks
from time to time  party  thereto,  and you,  as  Administrative  Agent for such
Banks, and hereby gives you notice,  irrevocably pursuant to Section 1.03 of the
Credit  Agreement,  that the  undersigned  hereby requests a Borrowing under the
Credit  Agreement,  and in that  connection  sets  forth  below the  information
relating to such  Borrowing  (the  "Proposed  Borrowing") as required by Section
1.03 of the Credit Agreement:

     (i) The Business Day of the Proposed Borrowing is [Date].3

     (ii)  The  aggregate   principal  amount  of  the  Proposed   Borrowing  is
       _____________.

     (iii) The  Proposed  Borrowing  is to  consist of [Term  Loans]  [Revolving
Loans] [denominated in [Dollars]4 [Euros]5 [Pounds Sterling]6]7.

     (iv) The  Loans to be made  pursuant  to the  Proposed  Borrowing  shall be
initially maintained as [Base Rate Loans] [Euro Rate Loans].8

     [(v) The initial Interest Period for the Proposed  Borrowing is [one week]9
[one, two, three, six, nine or twelve month[s]].10

     The undersigned hereby certifies that the following  statements are true on
the date hereof, and will be true on the date of the Proposed Borrowing:

     (A) the representations and warranties contained in the Credit Agreement or
in the other Credit  Documents  are and will be true and correct in all material
respects,  before and after giving  effect to the Proposed  Borrowing and to the
application of the proceeds thereof (except for any  representation and warranty
that speaks only as of a specific  date,  which shall be true and correct in all
material respects as of such date), as though made on such date; and

     (B) no Default or Event of Default has occurred and is continuing, or would
result from such  Proposed  Borrowing  or from the  application  of the proceeds
thereof.

  Very truly yours,

  [AEARO COMPANY I]
  [AEARO LIMITED]


  By:_______________________________
      Name:
      Title:



     1 To be  included  for a Proposed  Borrowing  of A-1 Term  Loans,  A-2 Term
Loans, A-5 Term Loans and Revolving Loans.

     2 To be included for a Proposed Borrowing of A-4 Term Loans.

     3 Shall be written  notice on the Business Day such Loans are to be made in
the case of Base Rate Loan and three  Business Days in the case of all Euro Rate
Loans.

     4 To be included in the event of A-1 Term Loans.

     5 To be included in the event of A-2 Term Loans.

     6 To be included in the event of A-4 and A-5 Term Loans.

     7 To be included in the event of Term Loans.

     8 Euro Rate Loans may not be incurred prior to the Syndication  Date except
on the first day of a Pre-Syndication Interest Period.

     9 To be included only prior to the Syndication Date.

     10 To be included for a Proposed Borrowing of Euro Rate Loans.

<PAGE>

                                 EXHIBIT B-1(A)
                                               FORM OF A-1 TERM NOTE


$___________________ New York, New York
[Date of Issuance]


     FOR  VALUE  RECEIVED,  Aearo  Company  I, a  Delaware  corporation  (the US
"Borrower"),  hereby promises to pay to the order of ______________________ (the
"Bank"), in lawful money of the United States in immediately available funds, at
the appropriate  Payment Office (as defined in the Agreement  referred to below)
of Bankers Trust Company (the "Administrative Agent"), on the Term Loan Maturity
Date (as  defined in the  Agreement)  the  principal  sum of  __________________
DOLLARS or, if less, the then unpaid  principal amount of all A-1 Term Loans (as
defined  in the  Agreement)  made or  continued  by the Bank to the US  Borrower
pursuant to the Agreement.

     The US  Borrower  promises  also to pay  interest  on the unpaid  principal
amount  hereof in like money at said office  from the date hereof  until paid at
the rates and at the times provided in Section 1.08 of the Agreement referred to
below.

     This Note is one of the A-1 Term Notes referred to in the Credit Agreement,
dated as of July 11,  1995 and  amended  and  restated as of July 13, 2001 among
Aearo Corporation,  the US Borrower,  Aearo Canada Limited,  Aearo Limited,  the
financial institutions from time to time party thereto (including the Bank), and
Bankers  Trust  Company,  as  Administrative  Agent  (as  amended,  modified  or
supplemented from time to time, the "Agreement") and is entitled to the benefits
thereof and of the other Credit  Documents.  This Note is also secured by the US
Security Documents (as defined in the Agreement).  As provided in the Agreement,
this Note is subject to voluntary  prepayment and mandatory  repayment  prior to
the Term Loan Maturity Date, in whole or in part.

     In case an Event of Default (as defined in the  Agreement)  shall occur and
be continuing,  the principal of and accrued interest on this Note may become or
be declared to be due and payable in the manner and with the effect  provided in
the Agreement.

     The US Borrower hereby waives presentment, demand, protest or notice of any
kind in connection with this Note.


<PAGE>


     THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE  WITH AND BE GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.

             AEARO COMPANY


             By:______________________________
                 Name:
                 Title:



<PAGE>
                                 EXHIBIT B-1(B)

                                               FORM OF A-2 TERM NOTE


(euro)___________________ New York, New York
[Date of Issuance]


     FOR VALUE  RECEIVED,  Aearo  Company  I, a  Delaware  corporation  (the "US
Borrower"),  hereby promises to pay to the order of ______________________  (the
"Bank"),  in Euros in immediately  available  funds, at the appropriate  Payment
Office (as defined in the Agreement  referred to below) of Bankers Trust Company
(the "Administrative  Agent"), on the Term Loan Maturity Date (as defined in the
Agreement) the principal sum of  __________________  EUROS or, if less, the then
unpaid principal amount of all A-2 Term Loans (as defined in the Agreement) made
by the Bank to the US Borrower pursuant to the Agreement.

     The US  Borrower  promises  also to pay  interest  on the unpaid  principal
amount  hereof in like money at said office  from the date hereof  until paid at
the rates and at the times provided in Section 1.08 of the Agreement referred to
below.

     This Note is one of the A-2 Term Notes referred to in the Credit Agreement,
dated as of July 11,  1995 and  amended  and  restated as of July 13, 2001 among
Aearo Corporation,  the US Borrower,  Aearo Canada Limited,  Aearo Limited,  the
financial institutions from time to time party thereto (including the Bank), and
Bankers  Trust  Company,  as  Administrative  Agent  (as  amended,  modified  or
supplemented from time to time, the "Agreement") and is entitled to the benefits
thereof and of the other Credit  Documents.  This Note is also secured by the US
Security Documents (as defined in the Agreement).  As provided in the Agreement,
this Note is subject to voluntary  prepayment and mandatory  repayment  prior to
the Term Loan Maturity Date, in whole or in part.

     In case an Event of Default (as defined in the  Agreement)  shall occur and
be continuing,  the principal of and accrued interest on this Note may become or
be declared to be due and payable in the manner and with the effect  provided in
the Agreement.

     The US Borrower hereby waives presentment, demand, protest or notice of any
kind in connection with this Note.


<PAGE>


     THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE  WITH AND BE GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.

                  AEARO COMPANY I


                  By:______________________________
                      Name:
                      Title:


<PAGE>

                                 EXHIBIT B-1(C)
                                               FORM OF A-3 TERM NOTE


                    $___________________ New York, New York
                                  May 30, 1996


     FOR VALUE  RECEIVED,  Aearo Canada  Limited,  an Ontario  corporation  (the
"Canadian    Borrower"),    hereby   promises   to   pay   to   the   order   of
______________________  (the "Bank"),  in lawful money of Canada in  immediately
available funds, at the appropriate Payment Office (as defined in the Agreement)
of Bankers Trust Company (the "Administrative Agent"), on the Term Loan Maturity
Date (as  defined  in the  Agreement  referred  to below) the  principal  sum of
__________________  CANADIAN  DOLLARS  or, if less,  the then  unpaid  principal
amount of all A-3 Term Loans (as defined in the Agreement) continued by the Bank
to the Canadian Borrower pursuant to the Agreement.

     The Canadian Borrower promises also to pay interest on the unpaid principal
amount  hereof in like money at said office  from the date hereof  until paid at
the rates and at the times provided in Section 1.08 of the Agreement referred to
below.

     This Note is one of the A-3 Term Notes referred to in the Credit Agreement,
dated as of July 11, 1995 and amended and  restated as of July 13,  2001,  among
Aearo Corporation,  Aearo Company I, the Canadian Borrower,  Aearo Limited,  the
financial institutions from time to time party thereto (including the Bank), and
Bankers  Trust  Company,  as  Administrative  Agent  (as  amended,  modified  or
supplemented from time to time, the "Agreement") and is entitled to the benefits
thereof and of the other Credit  Documents.  This Note is also secured by the US
Security  Documents  and the  Canadian  Security  Documents  (as such  terms are
defined in the Agreement). As provided in the Agreement, this Note is subject to
voluntary  prepayment  and mandatory  repayment  prior to the Term Loan Maturity
Date, in whole or in part.

     In case an Event of Default (as defined in the  Agreement)  shall occur and
be continuing,  the principal of and accrued interest on this Note may become or
be declared to be due and payable in the manner and with the effect  provided in
the Agreement.

     The Canadian Borrower hereby waives presentment,  demand, protest or notice
of any kind in connection with this Note.


<PAGE>



     THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE  WITH AND BE GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.

                                  AEARO CANADA LIMITED


                                  By:______________________________
                                      Name:
                                      Title:


<PAGE>
                                 EXHIBIT B-1(D)

                                               FORM OF A-4 TERM NOTE


(pound)___________________ New York, New York
[Date of Issuance]


     FOR VALUE RECEIVED, Aearo Limited, a limited liability company formed under
the laws of England (the "UK Borrower"),  hereby promises to pay to the order of
______________________ (the "Bank"), in Pounds Sterling in immediately available
funds,  at the  appropriate  Payment  Office (as  defined in the  Agreement)  of
Bankers Trust Company (the  "Administrative  Agent"),  on the Term Loan Maturity
Date (as  defined  in the  Agreement  referred  to below) the  principal  sum of
__________________ POUNDS STERLING or, if less, the then unpaid principal amount
of all A-4 Term Loans (as defined in the  Agreement)  made or  continued  by the
Bank to the UK Borrower pursuant to the Agreement.

     The UK  Borrower  promises  also to pay  interest  on the unpaid  principal
amount  hereof in like money at said office  from the date hereof  until paid at
the rates and at the times provided in Section 1.08 of the Agreement referred to
below.

     This Note is one of the A-4 Term Notes referred to in the Credit Agreement,
dated as of July 11, 1995 and amended and  restated as of July 13,  2001,  among
Aearo Corporation,  Aearo Company I, Aearo Canada Limited, the UK Borrower,  the
financial institutions from time to time party thereto (including the Bank), and
Bankers  Trust  Company,  as  Administrative  Agent  (as  amended,  modified  or
supplemented from time to time, the "Agreement") and is entitled to the benefits
thereof and of the other Credit  Documents.  This Note is also secured by the UK
Security  Documents and the US Security  Documents (as such terms are defined in
the Agreement).  As provided in the Agreement, this Note is subject to voluntary
prepayment  and mandatory  repayment  prior to the Term Loan  Maturity  Date, in
whole or in part.

     In case an Event of Default (as defined in the  Agreement)  shall occur and
be continuing,  the principal of and accrued interest on this Note may become or
be declared to be due and payable in the manner and with the effect  provided in
the Agreement.

     The UK Borrower hereby waives presentment, demand, protest or notice of any
kind in connection with this Note.


<PAGE>


     THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE  WITH AND BE GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.

                      AEARO LIMITED


                      By:______________________________
                          Name:
                          Title:

                                 EXHIBIT B-1(E)

                                               FORM OF A-5 TERM NOTE


(pound)___________________ New York, New York
[Date of Issuance]


     FOR VALUE  RECEIVED,  Aearo  Company  I, a  Delaware  corporation  (the "US
Borrower"),  hereby promises to pay to the order of ______________________  (the
"Bank"),  in Pounds Sterling in immediately  available funds, at the appropriate
Payment Office (as defined in the Agreement  referred to below) of Bankers Trust
Company (the "Administrative Agent"), on the Term Loan Maturity Date (as defined
in the Agreement) the principal sum of __________________ POUNDS STERLING or, if
less, the then unpaid  principal amount of all A-5 Term Loans (as defined in the
Agreement)  made or  continued  by the Bank to the US  Borrower  pursuant to the
Agreement.

     The US  Borrower  promises  also to pay  interest  on the unpaid  principal
amount  hereof in like money at said office  from the date hereof  until paid at
the rates and at the times provided in Section 1.08 of the Agreement referred to
below.

     This Note is one of the A-5 Term Notes referred to in the Credit Agreement,
dated as of July 11,  1995 and  amended  and  restated as of July 13, 2001 among
Aearo Corporation,  the US Borrower,  Aearo Canada Limited,  Aearo Limited,  the
financial institutions from time to time party thereto (including the Bank), and
Bankers  Trust  Company,  as  Administrative  Agent  (as  amended,  modified  or
supplemented from time to time, the "Agreement") and is entitled to the benefits
thereof and of the other Credit  Documents.  This Note is also secured by the US
Security Documents (as defined in the Agreement).  As provided in the Agreement,
this Note is subject to voluntary  prepayment and mandatory  repayment  prior to
the Term Loan Maturity Date, in whole or in part.

     In case an Event of Default (as defined in the  Agreement)  shall occur and
be continuing,  the principal of and accrued interest on this Note may become or
be declared to be due and payable in the manner and with the effect  provided in
the Agreement.

     The US Borrower hereby waives presentment, demand, protest or notice of any
kind in connection with this Note.


<PAGE>


     THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE  WITH AND BE GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.

                 AEARO COMPANY I


                 By:______________________________
                     Name:
                     Title:


<PAGE>
                                  EXHIBIT B-2
                                              FORM OF REVOLVING NOTE

New York, New York
[Date of Issuance]

     FOR VALUE  RECEIVED,  Aearo  Company  I, a  Delaware  corporation  (the "US
Borrower"),  hereby promises to pay to the order of  _____________________  (the
"Bank"), in lawful money of the United States in immediately available funds, at
the  appropriate  Payment  Office (as defined in the Agreement) of Bankers Trust
Company (the  "Administrative  Agent"),  on the Revolving Loan Maturity Date (as
defined  in the  Agreement)  the  principal  amount of all  Revolving  Loans (as
defined in the  Agreement)  made by the Bank to the US Borrower  pursuant to the
Agreement.

     The US  Borrower  promises  also to pay  interest  on the unpaid  principal
amount of the Revolving  Loans made to the US Borrower by the Bank in like money
at said  office  from the date  hereof  until paid at the rates and at the times
provided in Section 1.08 of the Agreement referred to below.

     This  Note  is  one of  the  Revolving  Notes  referred  to in  the  Credit
Agreement,  dated as of July 11, 1995 and  amended  and  restated as of July 13,
2001 among Aearo  Corporation,  the US  Borrower,  Aearo Canada  Limited,  Aearo
Limited,  the financial  institutions from time to time party thereto (including
the Bank),  and Bankers  Trust  Company,  as  Administrative  Agent (as amended,
modified or supplemented  from time to time, the "Agreement") and is entitled to
the  benefits  thereof  and of the  other  Credit  Documents.  This Note is also
secured by the US Security Documents (as defined in the Agreement).  As provided
in the  Agreement,  this Note is subject to voluntary  prepayment  and mandatory
repayment prior to the Revolving Loan Maturity Date, in whole or in part.

     In case an Event of Default (as defined in the  Agreement)  shall occur and
be continuing,  the principal of and accrued interest on this Note may become or
be declared to be due and payable in the manner and with the effect  provided in
the Agreement.

     The US Borrower hereby waives presentment, demand, protest or notice of any
kind in connection with this Note.



<PAGE>


     THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE  WITH AND BE GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.

                               AEARO COMPANY I


                               By:______________________________
                                   Name:
                                   Title:






<PAGE>



                                    EXHIBIT C



                        FORM OF LETTER OF CREDIT REQUEST




Dated: ______ 1/__________

Bankers Trust Company, as Administrative Agent, under
  the Credit Agreement (as amended, modified
  or supplemented from time to time, the "Credit
  Agreement"), dated as of July 11, 1995 and amended
  and restated as of July 13, 2001, among Aearo
  Corporation, Aearo Company I, Aearo Canada Limited,
  Aearo Limited, the financial institutions from time
  to time party thereto (the "Banks"), and Bankers Trust
  Company, as Administrative Agent
130 Liberty Street
New York, New York  10006

Issuing Bank:  [____________2_____________]
                       [
Address                    ]

Ladies and Gentlemen:

     We  hereby  request  that the  Issuing  Bank  referred  to  above,  issue a
[Trade][Standby]  Letter of Credit for the account of the  undersigned on 3 (the
"Date of Issuance") in the aggregate  Stated Amount of 4 . The requested  Letter
of Credit shall be denominated in 5 .

     For purposes of this Letter of Credit  Request,  unless  otherwise  defined
herein,  all  capitalized  terms  used  herein  which are  defined in the Credit
Agreement shall have the respective meaning provided therein.

     The  beneficiary  of the  requested  Letter of Credit  will be 6 , and such
Letter of Credit will be in support of 7 and will have a stated  expiration date
of 8 .

     We hereby certify that:

     (A) The representations and warranties contained in the Credit Agreement or
in the other Credit Documents will be true and correct in all material respects,
before and after giving effect to the issuance of the Letter of Credit requested
hereby  (except for any  representation  and  warranty  that speaks only as of a
specific  date,  which shall be true and correct in all material  respects as of
such date), on the Date of Issuance.

     (B) No Default or Event of Default  has  occurred  and is  continuing  nor,
after giving  effect to the issuance of the Letter of Credit  requested  hereby,
would such a Default or Event of Default occur.

     Copies of all documentation  with respect to the supported  transaction are
attached hereto.

AEARO COMPANY I



By:_____________________________
     Name:
     Title:



          1 Date of Letter of Credit Request.

          2  Name/address  of Letter of Credit  Issuer (for  Standby  Letters of
     Credit insert Bankers Trust Company, 130 Liberty Street, New York, New York
     10006, Attention:  Commercial Loan Division,  Standby LC Unit/MS NYC02-1403
     and for Trade Letters of Credit  insert  Deutsche Bank AG, New York Branch,
     31 West 52nd Street,  New York, New York 10019,  Attention:  Trade Finance,
     12th Floor).

          3 Date of Issuance shall be a Business Day at least three (3) Business
     Days from the date hereof (or such shorter  period as may be  acceptable to
     the Issuing Bank in any given case).


          4 Aggregate  initial Stated Amount of Letter of Credit which shall not
     be  less  than  $25,000.00  (or an  amount  in the  respective  Alternative
     Currency or other foreign currency having a Dollar Equivalent of $25,000.00
     in the case of a Letter of Credit issued in a currency  other than Dollars)
     (or such lesser amount as is acceptable to the Issuing Bank).


          5 Each  Letter of  Credit  shall be  denominated  in  Dollars,  Pounds
     Sterling,  Canadian Dollars,  Euros or any other currency acceptable to the
     Issuing Bank.

          6 Insert name and address of beneficiary.


          7 Insert brief description of L/C Supportable  Obligations in the case
     of a Standby  Letter of Credit and insert  brief  description  of permitted
     trade obligations in the case of Trade Letters of Credit.


          8 Insert last date upon which drafts may be presented which may not be
     later than (A) in the case of Standby Letters of Credit, the earlier of (x)
     12  months  after  the Date of  Issuance  and (y) the  fifth  Business  Day
     preceding  the  Revolving  Loan  Maturity Date and (B) in the case of Trade
     Letters of Credit, (x) 12 months after the Date of Issuance and (y) 30 days
     prior to the Revolving Loan Maturity Date.



<PAGE>


                                   EXHIBIT D


                     Form of Section 4.04(b)(ii) Certificate



          Reference is hereby made to the Credit Agreement, dated as of July 11,
     1995 and amended and restated as of July 13, 2001 among Aearo  Corporation,
     Aearo  Company  I, Aearo  Canada  Limited,  Aearo  Limited,  the  financial
     institutions from time to time party thereto, and Bankers Trust Company, as
     Administrative  Agent (as amended,  modified or  supplemented  from time to
     time,  the  "Credit  Agreement").  Pursuant  to the  provisions  of Section
     4.04(b)(ii) of the Credit Agreement,  the undersigned hereby certifies that
     it is not a "bank"  as such  term is used in  Section  881(c)(3)(A)  of the
     Internal Revenue Code of 1986, as amended.


                                   [NAME OF US LENDER]



                                   By:
                                      ----------------------------
                                       Name:
                                       Title:

                                       Date:


<PAGE>


                                   EXHIBIT E-1


                  FORM OF OPINION OF SIMPSON THACHER & BARTLETT




July 13, 2001


Bankers Trust Company,
         as Administrative Agent
130 Liberty Street
New York, New York 10006

         and

The Banks listed on Schedule I hereto
         which are parties to the Credit Agreement
         on the date hereof

     Re:  Credit Agreement,  dated as of July 11, 1995, and amended and restated
          as of July 13, 2001 (the "Credit Agreement"),  among Aearo Corporation
          ("Holdings"),  Aearo Company I (the "US Borrower"), each subsidiary of
          the US Borrower party thereto (the "Subsidiary Borrowers"),  the Banks
          party  thereto  from  time to time,  and  Bankers  Trust  Company,  as
          Administrative Agent (the "Agent")

Ladies and Gentlemen:

     We have acted as special New York counsel to Holdings, the US Borrower, the
Subsidiary  Borrowers and the  Subsidiaries of the US Borrower named on Schedule
II attached  hereto  (each,  a "Subsidiary  Guarantor"  and,  collectively,  the
"Subsidiary Guarantors"; the US Borrower, Holdings, the Subsidiary Borrowers and
the Subsidiary  Guarantors being referred to herein  collectively as the "Credit
Parties") in  connection  with the  preparation,  execution  and delivery of the
following documents:

(a)      the Credit Agreement;

(b)      the US Pledge Agreement;

(c)      the US Security Agreement;

(d)      the US Subsidiary Guaranty; and

(e)      the Notes delivered to the Banks on the date hereof.



The  documents   described  in  the  foregoing   clauses  (a)  through  (e)  are
collectively  referred  to  herein  as the  "Credit  Documents";  the  documents
described  in the  foregoing  clauses (b) and (c) are  collectively  referred to
herein as the "Security  Documents."  Unless  otherwise  indicated,  capitalized
terms used but not defined herein shall have the  respective  meanings set forth
in the Credit  Agreement.  This  opinion is furnished to you pursuant to Section
5.04(i) of the Credit Agreement.

                  In connection with this opinion, we have examined:

     (A)  the Credit Agreement, signed by each Credit Party party thereto and by
          the Agent and certain of the Banks; and

     (B)  each other Credit Document, signed by each Credit Party party thereto.

We also have  examined the  originals,  or  duplicates or certified or conformed
copies,  of such records,  agreements,  instruments and other documents and have
made such other  investigations  as we have deemed  relevant  and  necessary  in
connection with the opinions  expressed herein. As to questions of fact material
to this opinion,  we have relied upon  certificates  of public  officials and of
officers  and  representatives  of the  Credit  Parties.  In  addition,  we have
examined,  and have relied as to matters of fact upon, the representations  made
in the Credit Documents.

In rendering the opinions set forth below,  we have assumed the  genuineness  of
all signatures,  the legal capacity of natural persons,  the authenticity of all
documents submitted to us as originals,  the conformity to original documents of
all documents  submitted to us as  duplicates or certified or conformed  copies,
and the authenticity of the originals of such latter documents.

In  addition,  we have  assumed  that (1) the Credit  Parties have rights in the
Collateral  existing on the date  hereof and will have rights in property  which
becomes  Collateral  after the date  hereof,  (2) "value" (as defined in Section
1-201(44) of the Uniform  Commercial  Code as in effect in the State of New York
(the "New York  UCC"))  has been given by the Banks to the US  Borrower  for the
security  interests and other rights in the Collateral and (3) to the extent our
opinion  in  paragraph  6 relates to  securities  purportedly  represented  by a
certificate  and  issued by an  issuer  not  organized  under the laws of one of
States of the United  States,  such  securities  are  "certificated  securities"
within the meaning of ss.  8-102(4) of the Uniform  Commercial Code as in effect
in the State of New York (the "New York UCC").

     Based upon and subject to the foregoing,  and subject to the qualifications
and limitations set forth herein, we are of the opinion that:

     1. The execution  and delivery by any Credit Party of the Credit  Documents
to which it is a party,  its  borrowings  in  accordance  with the  terms of the
Credit Documents, performance of its payment obligations thereunder and granting
of  the  security  interests  to be  granted  by it  pursuant  to  the  Security
Documents,  (a) will not result in any violation  of,  assuming that proceeds of
borrowings  will be used in accordance  with the terms of the Credit  Agreement,
any Federal or New York statute or the Delaware  General  Corporation Law or any
rule or  regulation  issued  pursuant to any New York or Federal  statute or the
Delaware General Corporation Law or any order known to us issued by any court or
governmental agency or body and (b) will not breach or result in a default under
or result in the  creation of any lien upon or  security  interest in the Credit
Parties'  properties  pursuant  to the  terms of the  Senior  Subordinated  Note
Indenture;  provided, however, that the incurrence of any Indebtedness under the
Revolving  Loan  Commitments  in  excess  of the  $25,000,000  aggregate  amount
permitted to be incurred pursuant to clause (ii) of the definition of "Permitted
Indebtedness" in Section 1.01 of the Indenture would breach the Indenture if the
incurrence  of such  Indebtedness  is not permitted at the time of incurrence by
clause (vii) of the  definition of "Permitted  Indebtedness"  in Section 1.01 of
the Indenture or by Section 4.04(b) of the Indenture.

     2. No consent,  approval,  authorization,  order,  filing,  registration or
qualification of or with any Federal or New York governmental  agency or body or
any Delaware governmental agency or body acting pursuant to the Delaware General
Corporation  Law is required for the  execution and delivery by any Credit Party
of the Credit  Documents to which it is a party,  the  borrowings  by any Credit
Party in accordance with the terms of the Credit Documents or the performance by
the Credit  Parties of their  respective  payment  obligations  under the Credit
Documents or the granting of any security interest under the Security Documents,
except filings required for the perfection of security interest granted pursuant
to the Security Documents.

     3.  Assuming  that each of the  Credit  Documents  is a valid  and  legally
binding  obligation of each of the Banks parties thereto,  and assuming that (a)
each of the Credit  Parties is validly  existing and in good standing  under the
law of the  jurisdiction  in which  it is  organized  and has  duly  authorized,
executed and delivered the Credit Documents to which it is a party in accordance
with its  Certificate of  Incorporation  and By-Laws (or similar  organizational
documents), (b) execution,  delivery and performance by each Credit Party of the
Credit  Documents  to  which  it is a  party  do not  violate  the  laws  of the
jurisdiction  in which it is organized or any other  applicable  laws (excepting
the laws of the State of New York, the General  Corporation  Law of the State of
Delaware and the Federal laws of the United States), (c) execution, delivery and
performance by each Credit Party of the Credit  Documents to which it is a party
do not constitute a breach or violation of any agreement or instrument  which is
binding  upon the Company  and (d) no Credit  Party is an  "investment  company"
within the meaning of and subject to regulation under the Investment Company Act
of 1940, each Credit Document constitutes a valid and legally binding obligation
of each Credit Party which is a party thereto,  enforceable  against such Credit
Party in accordance with its terms.

     4.  Assuming  that each Credit  Party  entitled  to borrow  money under the
Credit Agreement will comply the provisions of the Credit Agreement  relating to
the use of proceeds,  the execution and delivery of the Notes by the US Borrower
and each other Credit Party entitled to borrow money under the Credit  Agreement
and the  making  of the  Loans  under  the  Credit  Agreement  will not  violate
Regulation T, U or X of the Board of Governors of the Federal Reserve System.

     5. The US Security  Agreement  creates in favor of the Collateral Agent for
the benefit of the  Secured  Creditors  a security  interest  in the  collateral
described therein in which a security interest may be created under Article 9 of
the New York UCC (the "Security Agreement Article 9 Collateral").

     6. The US Pledge Agreement creates in favor of the Collateral Agent for the
benefit of the Secured  Creditors a security  interest under the New York UCC in
the investment property identified on Annexes C and D to the US Pledge Agreement
(the "Pledged Securities").  The Collateral Agent will have a perfected security
interest in the  Pledged  Securities  for the  benefit of the Secured  Creditors
under the New York UCC upon delivery to the Collateral  Agent for the benefit of
the Secured Creditors in the State of New York of the certificates  representing
the Pledged  Securities  in registered  form,  indorsed in blank by an effective
indorsement  or  accompanied  by undated stock powers with respect  thereto duly
indorsed in blank by an effective indorsement. Assuming the Collateral Agent and
each of the Secured  Creditors  does not have notice of any adverse claim to the
Pledged  Securities,  the Collateral Agent will acquire the security interest in
the Pledged  Securities  for the benefit of the  Secured  Creditors  free of any
adverse claim.

     7. All  monetary  obligations  (including  reasonable  fees and expenses of
counsel)  incurred by the US Borrower under each of the Credit Agreement and the
Guaranty of the US Borrower set forth in Section 12 of the Credit Agreement will
constitute  "Senior Debt" as defined in the Senior  Subordinated Note Indenture;
provided,  however,  that any  Indebtedness  incurred  under the Revolving  Loan
Commitments  in excess  of the  $25,000,000  aggregate  amount  permitted  to be
incurred  pursuant to clause (ii) of the definition of "Permitted  Indebtedness"
in  Section  1.01 of the  Indenture  will not  constitute  "Senior  Debt" if the
incurrence  of such  Indebtedness  is not permitted at the time of incurrence by
clause (vii) of the  definition of "Permitted  Indebtedness"  in Section 1.01 of
the Indenture or by Section 4.04(b) of the Indenture.

     Our opinions in  paragraphs 3, 5 and 6 above are subject to (i) the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting  creditors' rights  generally,  (ii)
general equitable principles (whether considered in a proceeding in equity or at
law),  (iii) an implied  covenant  of good faith and fair  dealing  and (iv) the
effects  of the  possible  judicial  application  of  foreign  laws  or  foreign
governmental  or judicial action  affecting  creditors'  rights.  Our opinion in
paragraph 3 above also is subject to the qualification  that certain  provisions
of the Security Documents in whole or in part, may not be enforceable,  although
the inclusion of such provisions does not render the Security Documents invalid,
and the  Security  Documents  and the  laws of the  State  of New  York  contain
adequate  remedial  provisions  for the practical  realization of the rights and
benefits afforded thereby.

     Our  opinions  in  paragraph 5 is limited to Article 9 of the New York UCC,
and our  opinion in  paragraph  6 is limited to Articles 8 and 9 of the New York
UCC, and therefore  those opinion  paragraphs do not address (i) collateral of a
type not subject to Article 8 or 9, as the case may be, of the New York UCC, and
(ii) under New York UCC ss.  9-301 what law governs  perfection  of the security
interests granted in the collateral covered by this opinion letter.

     We note that (A) a New York statute provides that with respect to a foreign
currency  obligation a court of the State of New York shall render a judgment or
decree in such foreign  currency and such  judgment or decree shall be converted
into  currency of the United  States at the rate of exchange  prevailing  on the
date of entry of such  judgment  or  decree  and (B) with  respect  to a foreign
currency obligation a United States Federal court in New York may award judgment
in United States dollars,  provided that we express no opinion as to the rate of
exchange such court would apply.

                  We express no opinion with respect to:

     (A)  perfection  of any security  interest  (1) in any  Security  Agreement
          Article 9 Collateral of a type  represented by a certificate of title,
          (2) in any proceeds and (3) in any collateral consisting of money;

     (B)  the  effect of ss.  9-315(a)  of the New York UCC with  respect to any
          proceeds of Collateral that are not identifiable;

     (C)  perfection  of any  security  interest  whose  priority  is subject to
          Section 9-334 of the New York UCC;

     (D)  the priority of any security interest;

     (E)  the  effect of Section  552 of the  Bankruptcy  Code (11  U.S.C.  552)
          (relating to property  acquired by a pledgor after the commencement of
          a case under the United  States  Bankruptcy  Code with respect to such
          pledgor) and Section 506(c) of the Bankruptcy  Code (11 U.S.C.  506(c)
          (relating to certain  costs and expenses of a trustee in preserving or
          disposing of collateral);

     (F)  the effect of any provision of the Credit  Documents which is intended
          to establish  any standard  other than a standard set forth in the New
          York UCC as the  measure of the  performance  by any party  thereto of
          such party's obligations of good faith,  diligence,  reasonableness or
          care or of the  fulfillment of the duties imposed on any secured party
          with  respect  to  the  maintenance,   disposition  or  redemption  of
          collateral, accounting for surplus proceeds of collateral or accepting
          collateral in discharge of liabilities;

     (G)  the effect of any provision of the Credit  Documents which is intended
          to permit modification thereof only by means of an agreement signed in
          writing by the parties thereto;

     (H)  the  effect of any  provision  of the Credit  Documents  insofar as it
          provides that any Person  purchasing a participation  from a Lender or
          other  Person may exercise  set-off or similar  rights with respect to
          such  participation  or that any Lender or other  Person may  exercise
          set-off or similar  rights other than in  accordance  with  applicable
          law;

     (I)  the effect of any provision of the Credit Documents imposing penalties
          or forfeitures;

     (J)  the  enforceability of any provision of any of the Credit Documents to
          the extent that such provision constitutes a waiver of illegality as a
          defense to performance of contract obligations; or

     (K)  the  effect of any  provision  of the  Credit  Documents  relating  to
          indemnification  or exculpation in connection  with  violations of any
          securities  laws  or  relating  to  indemnification,  contribution  or
          exculpation in connection  with willful,  reckless or criminal acts or
          gross negligence of the indemnified or exculpated Person or the Person
          receiving contribution.

     In connection  with the  provisions  of the  Agreement  whereby the parties
submit to the  jurisdiction  of the courts of the United States for the Southern
District of New York and of the United States of America located in the State of
New York, we note the limitations of 28 U.S.C.  ss.ss.  1331 and 1332 on subject
matter  jurisdiction of the Federal courts. In connection with the provisions of
the Agreement which relate to forum selection of the courts of the United States
located in the State of New York (including,  without limitation,  any waiver of
any objection to venue or any objection that a court is an inconvenient  forum),
we note such court's  discretion to transfer an action from one Federal court to
another under 28 U.S.C. ss. 1404(a).

     We are  members of the Bar of the State of New York,  and we do not express
any  opinion  herein  concerning  any law other than the law of the State of New
York, the Federal law of the United States and the Delaware General  Corporation
Law

     This  opinion  letter  is  rendered  to you in  connection  with the  above
described  transactions.  This opinion  letter may not be relied upon by you for
any other purpose, or relied upon by, or furnished to, any other person, firm or
corporation without our prior written consent.

                                    Very truly yours,



                                    SIMPSON THACHER & BARTLETT





<PAGE>
July 13, 2001
                                   EXHIBIT E-2

                 FORM OF OPINION OF MARY ALICE OSTERBAUER, ESQ.




July 13, 2001


Bankers Trust Company,
as Administrative Agent
130 Liberty Street
New York, NY 10006
         and
The Bank Listed on Schedule I hereto

Re: Credit  Agreement,  dated as of July 11, 1995 and Amended and Restated as of
July __, 2001 (the "Credit  Agreement"),  among Aearo Corporation  ("Holdings"),
Aearo Company I (the "US  Borrower"),  each  subsidiary of the US Borrower party
thereto (the "Subsidiary Borrowers"), the Banks party thereto from time to time,
and Bankers Trust Company, as Administrative Agent

Ladies and Gentlemen:

     I am  Associate  Counsel of the US  Borrower,  and in such  capacity,  have
participated  in the  preparation,  execution  and  delivery  of  the  following
documents (collectively, the "Credit Documents"): (i) the Credit Agreement, (ii)
the US Pledge Agreement, (iii) the US Security Agreement, (iv) the US Subsidiary
Guaranty and (v) the Notes  executed  and  delivered by any Borrower on the date
hereof.

     The  opinions  expressed  below are  furnished  to you  pursuant to Section
5.04(ii) of the Credit Agreement. Unless otherwise defined herein, terms defined
in the Credit Agreement and used herein shall have meanings given to them in the
Credit Agreement.

     In  connection  with  this  opinion,  I have  examined  the  originals,  or
certified,  conformed,  or  reproduction  copies,  of all  records,  agreements,
instruments and documents as I have deemed necessary or appropriate for purposes
of this  opinion.  In my  examination,  I have  assumed the  genuineness  of all
signatures,  the authenticity of all documents  submitted to me as originals and
the  conformity to the original  documents of all  documents  submitted to me as
certified or photostatic  copies,  and the authenticity of the originals of such
latter documents.

     As to  questions  of fact  relevant  to this  opinion,  I have  relied upon
representations  and certificates of officers and  representatives of the Credit
Parties or of public officials.  I am not qualified to practice law in Canada or
the  United  Kingdom,  and my  opinions  set  forth  below as to the  Subsidiary
Borrowers are qualified accordingly.

     Based upon the foregoing,  and subject to the  qualifications,  limitations
and exceptions stated herein, I am of the opinion that:

     1. Each Credit Party has been duly incorporated and is validly existing and
in good standing under the laws of  jurisdiction  of its  incorporation,  except
where the failure to be in good  standing  could not  reasonably  be expected to
have a material adverse effect on the business,  operations,  property,  assets,
liabilities   or  condition   (financial  or  otherwise)  of  Holdings  and  its
Subsidiaries  taken as a whole.  Each Credit Party has the  corporate  power and
authority  to own its  property and assets and to transact the business in which
it is engaged and presently proposes to engage.

     2. Each Credit Party has the  corporate  power and authority to execute and
deliver  each of the Credit  Documents to which it is a party and to perform its
obligations  thereunder.  Each Credit  Party has taken all  necessary  corporate
action to authorize the execution, delivery and performance by it of each of the
Credit Documents to which it is a party. Each Credit Party has duly executed and
delivered each of the Credit Documents to which it is a party.

     3. Neither the execution nor the delivery by any Credit Party of the Credit
Documents (as defined in the Credit  Agreement) to which it is a party,  nor the
performance  of  its  obligations  thereunder,   nor  the  consummation  of  the
transactions  contemplated  thereby  (i) will  conflict  with,  or result in any
breach of, any of the terms, covenants,  conditions or provisions, or constitute
a default under,  or (other than pursuant to the Security  Documents)  result in
the creation or imposition  of (or the  obligation to create or impose) any lien
upon any of the property or assets of Holdings or any subsidiary pursuant to the
terms  of any  indenture,  mortgage,  deed  of  trust,  loan  agreement,  credit
agreement or other material  agreement or instrument known to me (other than the
Senior  Subordinated  Note  Indenture) to which  Holdings or any subsidiary is a
party or by which it or any of its  material  property  or assets is bound or to
which it may be subject;  or (ii) will violate any provision of the  Certificate
of Incorporation or By-Laws of any Credit Party.

     4. There are no actions, suits or proceedings pending, or to the best of my
knowledge,  threatened  with  respect to any Credit  Party (i)  relating  to any
Credit Document (as defined in the Credit Agreement), or (ii) that are likely to
have a  material  adverse  effect on the  condition  (financial  or  otherwise),
operations,  assets,  liabilities, or prospects of the Credit Parties taken as a
whole.

     5. Schedule VI to the Credit  Agreement  lists each  Subsidiary of Holdings
and the direct and indirect  ownership of Holdings therein,  in each case on the
Restatement Effective Date.

     6. Annex C to the US Pledge Agreement lists the record owner of all Pledged
Stock (as defined in the US Pledge Agreement) listed on said Annex C.

     7. As of the  Restatement  Effective  Date and after  giving  effect to the
initial  borrowing  under the Credit  Agreement,  the authorized and outstanding
capital stock of the US Borrower and each Domestic Subsidiary of the US Borrower
is set forth on Schedule II hereto. All such outstanding  capital stock has been
duly and  validly  issued,  is  fully  paid  and  non-assessable  and is free of
preemptive  rights.  Except as set forth on Schedule V to the Credit  Agreement,
neither the US  Borrower  nor any  Domestic  Subsidiary  of the US Borrower  has
outstanding  any securities  convertible  into or  exchangeable  for its capital
stock or outstanding any rights to subscribe for or to purchase,  or any options
for the purchase of, or any agreement providing for the issuance  (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
its capital stock.

     8. No Credit Party is, a "holding  company" or a "subsidiary  company" of a
"holding  company" or an  "affiliate"  of a "holding  company" or a  "subsidiary
company" of a "holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.

     I call your  attention to the fact that the Credit  Documents  provide that
they are to be  governed by and  construed  in  accordance  with the laws of the
State of New York.  I do not  purport to be expert on the laws of New York,  and
this opinion is limited to the Laws of the  Commonwealth of  Massachusetts,  the
General  Corporation of Law of the State of Delaware and the federal laws of the
United States of America.  For purposes of rendering this opinion I have assumed
that the  internal  laws of the State of New York are  identical to the internal
laws of the  Commonwealth of  Massachusetts;  and I express no opinion as to the
reasonableness  of such  assumptions.  I express  no  opinion  as to any  matter
relating to patents, trade names,  trademarks,  copyrights or other intellectual
property.



<PAGE>




     This  opinion is rendered  to you in  connection  with the  above-described
transactions.  This  opinion  may not be  relied  upon by you or your  permitted
assigns  and  participants  for any other  purpose,  or relied upon by any other
person, firm or corporation (other than your permitted assigns and participants)
without my prior written consent.


Very truly yours,



Mary Alice Osterbauer
Associate Counsel
Aearo Company I



<PAGE>



                                   SCHEDULE I



                              Bankers Trust Company
                                Barclays Bank Plc
                                Fifth Third Bank
                               Fleet National Bank
                          National City Bank of Indiana
                               The Provident Bank


<PAGE>



                                   SCHEDULE II


Aearo Company I
  Authorized Capital Stock                  1,000 shares of Common
  ------------------------
                                            Stock, par value $ .01
                                            per share
  Issued and Outstanding Capital Stock      100 shares of Common
  ------------------------------------
                                            Stock issued to Holdings
Cabot Safety Intermediate Corporation
  Authorized Capital Stock                  1,000 shares of Common
  ------------------------
                                            Stock, par value $ .01
                                            per share
  Issued and Outstanding Capital Stock      100 shares of Common
  ------------------------------------
                                            Stock issued to the US
                                            Borrower
CCS FSC, Inc.
  Authorized Capital Stock                  1,000 shares of Common
  ------------------------
                                            Stock, no par value
  Issued and Outstanding Capital Stock      1,000 shares issued to
  ------------------------------------
                                            the US Borrower

<PAGE>



                                    EXHIBIT F





                                              [NAME OF CREDIT PARTY]

                                               Officers' Certificate


     I, the  undersigned,  [Chief  Executive  Officer/President/Chief  Financial
Officer/Treasurer/Controller/Managing      Director/Assistant     Treasurer/Vice
President/Secretary/General  Counsel] of [Name of Credit  Party],  a corporation
organized  and  existing  under the laws of [the State of]  [____________]  (the
"Company")  [, which  corporation  constitutes  the  general  partner of ______,
a______ [general][limited] partnership (the "Partnership")][,  which corporation
constitutes  the managing  member of _________,  a _________  limited  liability
company (the "Limited Liability  Company")],  do hereby certify on behalf of the
Company [, as the general partner of the  Partnership][,  as the managing member
of the Limited Liability Company] that:

     This Certificate is furnished pursuant to the Credit Agreement, dated as of
July 11, 1995 and amended and restated as of July 13, 2001 among [the  Company,]
[Aearo Corporation,] [Aearo Company I,] [Aearo Canada Limited,] [Aearo Limited,]
the Banks  from  time to time  party  thereto  and  Bankers  Trust  Company,  as
Administrative  Agent (such Credit  Agreement,  as in effect on the date of this
Certificate,  being  herein  called the "Credit  Agreement").  Unless  otherwise
defined  herein,  capitalized  terms  used in this  Certificate  shall  have the
meanings set forth in the Credit Agreement.

     The following named  individuals are elected officers of the Company;  each
holds the office of the  Company set forth  opposite  his name and has held such
office since  _______ __,  ____.1 The  signature  written  opposite the name and
title of each such officer is his or her correct signature.

Name2                            Office                       Signature
----                             ------                       ---------




-------------------------------------------------------------------------------

     1.   Attached   hereto   as   Exhibit  A  is  a   certified   copy  of  the
[[Certificate][Articles]  of  Incorporation][Certificate  of  Partnership of the
Partnership][Certificate   of  Formation  of  the  Limited  Liability   Company]
[equivalent formation  documents],  together with all amendments thereto adopted
through the date hereof.

     2. Attached  hereto as Exhibit B is a [true and correct copy of the By-Laws
of the  Company,  which were duly  adopted,  are in full force and effect on the
date hereof, and have been in effect since  _____________,  ____][certified copy
of the  [Partnership  Agreement of the  Partnership][Limited  Liability  Company
Agreement  of the Limited  Liability  Company]],  together  with all  amendments
thereto adopted through the date hereof.

     3. Attached  hereto as Exhibit C is a true and correct copy of  resolutions
which were duly adopted on __________, ____ [by unanimous written consent of the
Board of  Directors  of the  Company] [by a meeting of the Board of Directors of
the  Company at which a quorum was  present  and  acting  throughout],  and said
resolutions  have not been  rescinded,  amended or modified.  Except as attached
hereto as Exhibit C, no resolutions  have been adopted by the Board of Directors
of the Company which deal with the execution,  delivery or performance of any of
the  Documents  to  which  the  Company  [,  as  the  general   partner  of  the
Partnership,][,  as the managing member of the Limited Liability  Company,] is a
party.

     [4.  On the date  hereof,  all  Plans,  Existing  Indebtedness  Agreements,
Shareholders'  Agreements and Management  Agreements previously delivered to the
Administrative  Agent by each Credit  Party,  remain in full force and effect [,
except [_________] which is attached as Exhibit D hereto].]3

     [4. On the date hereof,  all of the conditions in Sections  5.02,  5.13 and
5.15 of the Credit Agreement have been satisfied (except to the extent as to the
acceptability of any items to the Administrative Agent and/or the Required Banks
or as to  whether  the  Administrative  Agent  and/or  the  Required  Banks  are
satisfied with any of the matters described in said Sections)]4.

     [4.][5.] On the date hereof,  the  representations  and  warranties [of the
Company]5  contained in the Credit  Agreement and the other Credit Documents are
true and correct in all material  respects,  both before and after giving effect
to each  Credit  Event to occur on the date  hereof and the  application  of the
proceeds  thereof,  unless stated to relate to a specific earlier date, in which
case such  representations  and warranties were true and correct in all material
respects as of such earlier date.

     [6. On the date hereof,  no Default or Event of Default has occurred and is
continuing or would result from the Credit Events to occur on the date hereof or
from the application of the proceeds  thereof,  in each case after giving effect
thereto.]6

     [5.][7.] There is no pending  proceeding for the dissolution or liquidation
of the  [Company][Partnership][Limited  Liability  Company] or  threatening  its
existence.



<PAGE>


IN WITNESS  WHEREOF,  I have  hereunto set my hand this ____ day of  __________,
200_.

                                     [NAME OF CREDIT PARTY]



                                     ------------------------------
                                     Name:
                                     Title:

<PAGE>


     Exhibit F Page 5 I, the undersigned, [Secretary/Assistant Secretary] of the
Company, do hereby certify on behalf of the Company that:

          1. [Name of Person  making above  certifications]  is the duly elected
     and qualified  [President/Vice  President] of the Company and the signature
     above is his genuine signature.

          2.  The   certifications   made  by  [name  of  Person   making  above
     certifications]  on behalf of the  Company  in the third  paragraph  and in
     Items 1, 2, 3 and [5][7] above are true and correct.

   IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of _____, 200_.



                                           [NAME OF CREDIT PARTY]


                                           By:____________________________
                                               Name:
                                               Title:



------------------------



     1    Insert a date prior to the time of any  corporate  action  relating to
          the Credit Agreement or any other Document.

     2    Include  name,  office and signature of each officer who will sign any
          Credit Document, including the officer who will sign the certification
          at the end of this Certificate.

     3    Insert  bracketed item 4 only for the Certificate  delivered on behalf
          of Holdings.

     4    Insert  bracketed item 4 only for the Certificate  delivered on behalf
          of the US Borrower.

     5    Insert bracketed text only for the Certificate  delivered on behalf of
          each Subsidiary Guarantor.

     6    Insert bracketed item 6 only for the Certificates  delivered on behalf
          of the US Borrower and Holdings.

<PAGE>





                                                     ENDNOTES



                                    Exhibit J




                   FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT


                                                    Date: ___________,__________


     Reference  is made to the Credit  Agreement  described in Item 2 of Annex I
annexed hereto (as such Credit  Agreement may hereafter be amended,  modified or
supplemented from time to time, the "Credit Agreement"). Unless defined in Annex
I hereto,  terms  defined in the  Credit  Agreement  are used  herein as therein
defined.   __________________   (the  "Assignor")  and  __________________  (the
"Assignee") hereby agree as follows:

     1. The Assignor hereby sells and assigns to the Assignee  without  recourse
and  without  representation  or  warranty  (other  than as  expressly  provided
herein),  and the Assignee hereby purchases and assumes from the Assignor,  that
interest in and to all of the Assignor's rights and obligations under the Credit
Agreement  as of the  date  hereof  which  represents  the  percentage  interest
specified  in Item 4 of  Annex I hereto  (the  "Assigned  Share")  of all of the
outstanding  rights and obligations  under the Credit Agreement  relating to the
facilities listed in Item 4 of Annex I hereto,  including,  without  limitation,
(i) in the case of any assignment of all or any portion of the  outstanding  A-1
Term Loans, all rights and obligations with respect to the Assigned Share of all
then  outstanding  A-1 Term Loans,  (ii) in the case of any assignment of all or
any portion of the outstanding A-2 Term Loans,  all rights and obligations  with
respect to the Assigned Share of all then  outstanding A-2 Term Loans,  (iii) in
the case of any  assignment  of all or any portion of the  outstanding  A-3 Term
Loans, all rights and obligations with respect to the Assigned Share of all then
outstanding  A-3 Term Loans,  (iv) in the case of any  assignment  of all or any
portion of the  outstanding  A-4 Term  Loans,  all rights and  obligations  with
respect to the Assigned Share of all then outstanding A-4 Term Loans, (v) in the
case of any assignment of all or any portion of the  outstanding A-5 Term Loans,
all rights  and  obligations  with  respect  to the  Assigned  Share of all then
outstanding  A-5 Term Loans and (vi) in the case of any assignment of all or any
portion of the Total Revolving Loan Commitment,  all rights and obligations with
respect to the Assigned  Share of the Total  Revolving  Loan  Commitment and all
outstanding  Revolving Loans and Letters of Credit.  After giving effect to such
sale and  assignment,  the Assignee's  Total  Revolving Loan  Commitment and the
amount of the outstanding A-1 Term Loans,  A-2 Term Loans,  A-3 Term Loans,  A-4
Term  Loans,  and A-5 Term Loans owing to the  Assignee  will be as set forth in
Item 4 of Annex I hereto.

     2. The  Assignor  (i)  represents  and  warrants  that it is the  legal and
beneficial  owner of the interest  being  assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty  and  assumes  no  responsibility   with  respect  to  any  statements,
warranties or representations made in or in connection with the Credit Agreement
or  the  other  Credit   Documents  or  the   execution,   legality,   validity,
enforceability,  genuineness,  sufficiency,  or value of the Credit Agreement or
the  other  Credit  Documents  or any other  instrument  or  document  furnished
pursuant  thereto;  and (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Holdings or any of its
Subsidiaries  or the  performance  or observance by the Credit Parties of any of
their  obligations  under the Credit  Agreement or the other Credit Documents to
which they are a party or any other  instrument or document  furnished  pursuant
thereto.

     3. The  Assignee  (i)  confirms  that it has  received a copy of the Credit
Agreement and the other Credit Documents,  together with copies of the financial
statements  referred to therein and such other  documents and  information as it
has deemed  appropriate  to make its own credit  analysis  and decision to enter
into  this  Assignment  and  Assumption  Agreement;  (ii)  agrees  that it will,
independently and without reliance upon the  Administrative  Agent, the Assignor
or any other Bank and based on such  documents and  information as it shall deem
appropriate at the time,  continue to make its own credit decisions in taking or
not taking  action  under the Credit  Agreement;  (iii)  confirms  that it is an
Eligible Transferee under the Credit Agreement; (iv) appoints and authorizes the
Administrative  Agent and the Collateral  Agent to take such action as agent and
collateral  agent on its behalf and to  exercise  such  powers  under the Credit
Agreement and the other Credit Documents as are delegated to the  Administrative
Agent and the Collateral  Agent by the terms thereof,  together with such powers
as are reasonably  incidental thereto;  [and] (v) agrees that it will perform in
accordance  with their  terms all of the  obligations  which by the terms of the
Credit  Agreement are required to be performed by it as a Bank[; and (vi) to the
extent  legally  entitled  to do so,  attaches  the forms  described  in Section
4.04(b)(ii) of the Credit Agreement].1

     4. Following the execution of this  Assignment and Assumption  Agreement by
the Assignor and the Assignee,  an executed  original hereof  (together with all
attachments) will be delivered to the  Administrative  Agent. The effective date
of this  Assignment  and  Assumption  Agreement  shall be the date of  execution
hereof by the  Assignor  and the  Assignee and the receipt of the consent of the
Administrative Agent, each Issuing Bank and, so long as no Event of Default then
exists, the US Borrower pursuant to Section 13.04(b) of the Credit Agreement and
receipt by the  Administrative  Agent of the  assignment fee referred to in such
Section 13.04(b) (the "Settlement Date").

     5.  Upon  the  delivery  of  a  fully  executed   original  hereof  to  the
Administrative  Agent,  as of the  Settlement  Date, (i) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment and
Assumption  Agreement,  have the rights and obligations of a Bank thereunder and
under the other  Credit  Documents  and (ii) the Assignor  shall,  to the extent
provided in this Assignment and Assumption Agreement,  relinquish its rights and
be released from its obligations under the Credit Agreement and the other Credit
Documents.

     6. It is agreed that the Assignee  shall be entitled to (w) all interest on
the Assigned Share of the Loans at the rates specified in Item 6 of Annex I; (x)
all  Commitment  Fees  (if  applicable)  on the  Assigned  Share  of  the  Total
Commitment at the rate specified in Item 7 of Annex I hereto; and (y) all Letter
of Credit Fees (if applicable) on the Assignee's participation in all Letters of
Credit at the rate  specified  in Item 8 of Annex I hereto,  which accrue on and
after the Settlement Date, such interest and, if applicable, Commitment Fee and,
Letter of Credit Fees, to be paid by the  Administrative  Agent  directly to the
Assignee.  It is further  agreed  that all  payments  of  principal  made on the
Assigned Share of the Loans which occur on and after the Settlement Date will be
paid directly by the Administrative  Agent to the Assignee.  Upon the Settlement
Date, the Assignee shall pay to the Assignor an amount specified by the Assignor
in writing which  represents the Assigned  Share of the principal  amount of the
respective Loans made by the Assignor, and the Assignee's share of any Letter of
Credit  Outstandings (as applicable)  incurred  pursuant to the Credit Agreement
which are  outstanding  on the Settlement  Date,  net of any closing costs,  and
which are being assigned hereunder. The Assignor and the Assignee shall make all
appropriate adjustments in payments under the Credit Agreement for periods prior
to the Settlement Date directly between themselves on the Settlement Date.



<PAGE>


     7. THIS BANK  ASSIGNMENT AND ASSUMPTION  AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

     IN WITNESS  WHEREOF,  the parties hereto have caused their duly  authorized
officers to execute and deliver this Assignment and Assumption Agreement,  as of
the date first above written, such execution also being made on Annex I hereto.


Accepted this _____ day            [NAME OF ASSIGNOR],
of _________, __ ___                  as Assignor


                                   By_______________________________
                                      Name:
                                      Title:


                                   [NAME OF ASSIGNEE],
                                      as Assignee


                                   By______________________________
                                      Name:
                                      Title:

Acknowledged and Agreed:

BANKERS TRUST COMPANY, as
    Administrative Agent


By_________________________
    Name:
    Title:]2


AEARO COMPANY I3


Name of Each Issuing Bank as Issuing Bank4


By_________________________
    Name:
    Title:




<PAGE>


                                   Annex A to
                                    Exhibit J

                 ANNEX FOR ASSIGNMENT AND ASSUMPTION AGREEMENT


     1.   Borrowers:  Aearo  Company I, Aearo Canada  Limited and Aearo  Limited
          (the "Borrowers")

     2.   Name and Date of Credit Agreement:

          Credit  Agreement,  dated as of July 11, 1995 and amended and restated
          as of July 13, 2001 among Aearo Corporation,  the Borrowers, the Banks
          from  time to  time  party  thereto  and  Bankers  Trust  Company,  as
          Administrative Agent.

3.       Date of Assignment Agreement:

4.       Amounts (as of date of item #3 above):

<TABLE>
<CAPTION>

                   Outstanding    Outstanding     Outstanding    Outstanding    Outstanding        Total
                    Principal     Principal of   Principal of   Principal of    Principal of     Revolving
                   of A-1 Term      A-2 Term       A-3 Term       A-4 Term     A-5 Term Loans      Loan
                      Loans          Loans           Loans          Loans                       Commitments
<S>                <C>             <C>            <C>           <C>            <C>           <C>
a. Aggregate
   Amount for
   all Banks       $USD_____       (euro)__      $CDN___        GBP_____       GBP_____      $USD______
b. Assigned         ________%      ________%      _______%      ________%      ________%       ________%
   Share1
c. Amount of
   Assigned
   Share          $USD_____        (euro)__      $ CDN__        GBP_____       GBP_____      $USD_______


</TABLE>

5.       Settlement Date:

6.       Rate of Interest
         to the Assignee:
               As set forth in  Section  1.08 of the  Credit  Agreement  (unless
               otherwise agreed to by the Assignor and the Assignee)2

7.       Commitment Fee
         to the Assignee:

               As set forth in Section 3.01(a) of the Credit  Agreement  (unless
               otherwise agreed to by the Assignor and the Assignee)3

8.       Letter of Credit
         Fees to the Assignee:

               As set forth in Section 3.01(b) of the Credit  Agreement  (unless
               otherwise agreed to by the Assignor and the Assignee)4

9.       Notice Information for Assignor:

              ASSIGNOR:

                  ============================
                  ============================
                  Attention:
                  Telephone:
                  Telecopier:
                  Reference:



<PAGE>


         Payment Instructions for Assignor:

              ASSIGNOR:

                  ============================
                  ============================
                  Attention:
                  Reference:




<PAGE>


              Notice Information for Assignee:

<PAGE>




                  ----------------------------

<PAGE>


                  ----------------------------

<PAGE>


                  ----------------------------

<PAGE>


                  ----------------------------

<PAGE>


                  Attention:

<PAGE>


                  Telephone:

<PAGE>


                  Telecopier:

<PAGE>


                  Reference:

              Payment Instructions for Assignee:

                  ============================
                  ============================
                  Reference:


Accepted and Agreed:

[NAME OF ASSIGNEE]


By____________________________
    ----------------------------
    (Print Name and Title)



[NAME OF ASSIGNOR]


By____________________________
    ----------------------------
    (Print Name and Title)





------------------------



     1    Include bracketed language if the Assignee is organized under the laws
          of a jurisdiction outside the United States.

     2    The consent of the  Administrative  Agent (which  consent shall not be
          unreasonably  withheld or delayed) is required for (i) any  assignment
          pursuant to clause (y) of the first  sentence  of Section  13.04(b) of
          the Credit Agreement.


     3    The  consent  of  the  US  Borrower   (which   consent  shall  not  be
          unreasonably withheld or delayed) is required for any assignment to an
          Eligible  Transferee  pursuant to clause (y) of the first  sentence of
          Section 13.04(b) of the Credit Agreement.


     4    The  consent  of  each  Issuing  Bank  (which  consent  shall  not  be
          unreasonably  withheld or delayed) is required for any assignment of a
          Revolving Loan Commitment pursuant to clause (y) of the first sentence
          of Section 13.04(b) of the Credit Agreement.


     1    Percentage taken to 12 decimal places.

     2    The  Borrowers  and the  Administrative  Agent shall direct the entire
          amount  of the  interest  to the  Assignee  at the rate  set  forth in
          Section 1.08 of the Credit  Agreement,  with the Assignor and Assignee
          effecting the agreed upon sharing of the interest  through payments by
          the Assignee to the Assignor.

     3    Insert  "Not  Applicable"  in lieu of text if no  portion of the Total
          Commitment  is  being  assigned.  Otherwise,  the  Borrowers  and  the
          Administrative  Agent shall direct the entire amount of the Commitment
          Fee to the  Assignee  at the rate set forth in Section  3.01(a) of the
          Credit  Agreement,  with the Assignor and the Assignee  effecting  the
          agreed upon sharing of Commitment Fee through  payment by the Assignee
          to the Assignor.

     4    Insert  "Not  Applicable"  in lieu of text if no  portion of the Total
          Revolving Loan Commitment is being assigned.  Otherwise, the Borrowers
          and the  Administrative  Agent shall  direct the entire  amount of the
          Letter of Credit Fees to the Assignee at the rate set forth in Section
          3.01(b) of the Credit  Agreement,  with the  Assignor and the Assignee
          effecting  the agreed upon  sharing of Letter of Credit  Fees  through
          payment by the Assignee to the Assignor.


<PAGE>

                                    EXHIBIT K

                            FORM OF INTERCOMPANY NOTE


New York, New York
[Date]

     FOR VALUE RECEIVED,  __________________________,  a ___________ corporation
(the   "Payor"),   hereby   promises   to  pay  on   demand   to  the  order  of
______________________,  (the "Payee"),  in lawful money of the United States of
America in immediately available funds, at such location in the United States of
America as the Payee  shall from time to time  designate,  the unpaid  principal
amount of all loans and advances made by the Payee to the Payor.

     The Payor  promises  also to pay  interest on the unpaid  principal  amount
hereof in like money at said office from the date hereof until paid at such rate
per annum as shall be agreed upon from time to time by the Payor and Payee.

     Upon  the  commencement  of any  bankruptcy,  reorganization,  arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or
similar  proceeding  of any  jurisdiction  relating  to the  Payor,  the  unpaid
principal  amount  hereof  shall  become  immediately  due and  payable  without
presentment, demand, protest or notice of any kind in connection with this Note.

     This  Note  is one of the  Intercompany  Notes  referred  to in the  Credit
Agreement,  dated as of July 11, 1995 and  amended  and  restated as of July 13,
2001,  among Aearo  Corporation,  Aearo Company I, Aearo Canada  Limited,  Aearo
Limited,  the banks from time to time party thereto,  and Bankers Trust Company,
as Administrative Agent (as amended, modified or supplemented from time to time,
the  "Credit  Agreement")  and is  subject  to the terms  thereof,  and shall be
pledged by the Payee  pursuant  to the US Pledge  Agreement  (as  defined in the
Credit Agreement).  The Payor hereby acknowledges and agrees that the Collateral
Agent pursuant to and as defined in the Pledge Agreement, as in effect from time
to time, may exercise all rights provided therein with respect to this Note.

     The Payee is hereby  authorized  (but not required) to record all loans and
advances made by it to the Payor (all of which shall be evidenced by this Note),
and all repayments or prepayments thereof, in its books and records,  such books
and records constituting prima facie evidence of the accuracy of the information
contained therein.

     All payments under this Note shall be made without offset,  counterclaim or
deduction of any kind.

     The Payor hereby waives presentment,  demand, protest or notice of any kind
in connection with this Note.

     THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE  WITH AND GOVERNED BY THE LAW OF
THE STATE OF NEW YORK.


[NAME OF PAYOR]


By________________________
    Title:


Pay to the order of: _________________________.


----------------------------


[NAME OF PAYEE]


By________________________
    Title:

<PAGE>







                                    Exhibit L



                          FORM OF PERMITTED SELLER NOTE


$_______________                                 New York, New York
[DATE]


     FOR VALUE RECEIVED, AEARO CORPORATION, a Delaware corporation ("Holdings"),
hereby  promises  to pay to  _____________  or [his] [her]  [its]  assigns  (the
"Payee"),  in lawful  money of the  United  States  of  America  in  immediately
available    funds,    at    ____________________,    the   principal   sum   of
____________________ DOLLARS, which amount shall be payable on [ ].

     Holdings  promises  also to pay  interest  on the unpaid  principal  amount
hereof in like money at said office  from the date  hereof  until paid at a rate
per annum equal to  ___________________,  such interest to be paid  quarterly on
______________________,   ______________________,   ______________________   and
________________ of each year and at maturity hereof.

     This Note is subject to voluntary  prepayment,  in whole or in part, at any
time at the option of Payor,  without  premium or penalty.  Each such prepayment
shall be applied to accrued but unpaid interest and then the next installment(s)
in principal becoming due.

     This Note is issued pursuant to a ________________ Purchase Agreement dated
______  __,   ____  (the   "Agreement"),   between  [  ]  and  the   vendors  of
________________.  This Note is  subject  to the  provisions  of the  Agreement,
including, without limitation, adjustment of, and offset to the principal amount
pursuant to the Agreement.

     If an Event of Default (as hereinafter  defined) shall have occurred and be
continuing,  then, at the option of the holder hereof,  and subject to the terms
and  conditions  set forth on Annex A, this Note shall upon  presentment  become
immediately due and payable.

     An "Event of Default"  shall be deemed to have  occurred  hereunder  if (a)
Holdings  shall  fail to make any  payment  under this Note in full when due and
such failure  shall not be cured within  twenty (20) days  following  receipt of
written notice thereof; or (b) any proceeding shall be commenced by Holdings, as
debtor, under any bankruptcy, reorganization,  insolvency, readjustment of debt,
arrangement,  receivership or liquidation law or statute, and such proceeding is
not dismissed within 90 days or is not timely  controverted in good faith and on
reasonable  grounds  by  Holdings  or an  order of  relief  is  granted  in such
proceedings.

     This Note, and Holdings'  obligations  hereunder,  shall be subordinate and
junior to all  indebtedness of Holdings  constituting  Senior  Indebtedness  (as
defined in Section 1.07 of Annex A attached  hereto) on the terms and conditions
set forth in Annex A attached  hereto,  which Annex A is herein  incorporated by
reference and made a part hereof as if set forth herein in its entirety.

     This Note, and Holdings' obligations hereunder,  shall be equal in priority
with all other  Permitted  Acquisition  Indebtedness  (as  hereinafter  defined)
including,  without  limitation,  all interest  incurred in relation  thereto of
Holdings.  "Permitted  Acquisition  Indebtedness" shall mean all indebtedness of
Holdings  incurred in full or partial payment for the assets or stock associated
with a business  acquired by Holdings  or any of its  Subsidiaries  prior to the
date of this Note or at any future time except Senior  Indebtedness  (as defined
in Section 1.07 of Annex A attached hereto).

     Holdings hereby waives presentment,  demand,  protest or notice of any kind
in connection with this Note.

     THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE  WITH AND BE GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.



                         AEARO CORPORATION





                         By:
                             ---------------------------------
                             Name:
                             Title:





<PAGE>


                                   Annex A to
                                    Exhibit L

     Section 1.01. Subordination of Liabilities. Aearo Corporation ("Holdings"),
for itself, its successors and assigns, covenants and agrees, and each holder of
the Note to which  this  Annex A is  attached  (the  "Note")  by its  acceptance
thereof  likewise  covenants  and agrees,  that the payment of the principal of,
interest  on,  and all  other  amounts  owing  in  respect  of,  the  Note  (the
"Subordinated Indebtedness") is hereby expressly subordinated, to the extent and
in the manner hereinafter set forth, to the prior payment in full in cash of all
Senior Indebtedness (as defined in Section 1.07 of this Annex A). The provisions
of this Annex A are made for the benefit of the  present  and future  holders of
Senior  Indebtedness,  and such holders are hereby made  obligees  hereunder the
same as if their names were written herein as such, and they and/or each of them
may proceed to enforce such provisions.

     Section 1.02.  Holdings Not to Make  Payments with Respect to  Subordinated
Indebtedness  in  Certain  Circumstances.  (a) Upon the  maturity  of any Senior
Indebtedness  (including  interest thereon or fees or any other amounts owing in
respect thereof),  whether at stated maturity, by acceleration or otherwise, all
Obligations  (as  defined  in  Section  1.07 of this  Annex A) owing in  respect
thereof,  in each case to the extent due and owing,  shall first be paid in full
in cash, before any payment, whether in cash, property, securities or otherwise,
is made on account of the Subordinated Indebtedness.

     (b)  Holdings  may not,  directly  or  indirectly,  make any payment of any
Subordinated  Indebtedness and may not acquire any Subordinated Indebtedness for
cash or property until all Senior  Indebtedness has been paid in full in cash if
any  default  or event of  default  under the Credit  Agreement  (as  defined in
Section 1.07 of this Annex A) or any other issue of Senior  Indebtedness is then
in existence or would result  therefrom.  Each holder of the Note hereby  agrees
that, so long as any such default or event of default in respect of any issue of
Senior Indebtedness exists, it will not sue for, or otherwise take any action to
enforce Holdings' obligations to pay, amounts owing in respect of the Note. Each
holder of the Note understands and agrees that to the extent that the provisions
of clause (a) or (b) of this  Section  1.02  prohibits  the  payment of interest
and/or  principal  under the Note, in either case,  such unpaid amount shall not
constitute a payment  default  under the Note and the holder of the Note may not
sue for, or otherwise  take action to enforce  Holdings'  obligation to pay such
amount,  provided  that  such  unpaid  principal  or  interest  shall  remain an
obligation  of Holdings  to the holder of the Note  pursuant to the terms of the
Note.

     (c) In the event  that  notwithstanding  the  provisions  of the  preceding
subsections (a) and (b) of this Section 1.02, Holdings shall make any payment on
account of the Subordinated Indebtedness at a time when payment is not permitted
by said  subsection  (a) or (b), such payment shall be held by the holder of the
Note,  in  trust  for the  benefit  of,  and  shall be paid  forthwith  over and
delivered to, the holders of Senior Indebtedness or their  representative or the
trustee under the indenture or other agreement pursuant to which any instruments
evidencing any Senior  Indebtedness  may have been issued,  as their  respective
interests  may  appear,  for  application  pro rata to the payment of all Senior
Indebtedness  remaining  unpaid  to  the  extent  necessary  to pay  all  Senior
Indebtedness  in full in  cash in  accordance  with  the  terms  of such  Senior
Indebtedness,  after giving effect to any concurrent  payment or distribution to
or for the  holders of Senior  Indebtedness.  Without in any way  modifying  the
provisions  of this Annex A or  affecting  the  subordination  effected  hereby,
Holdings  shall give the holder of the Note prompt  written  notice of any event
which would prevent payments under Section 1.02(a) or (b) hereof.

     Section 1.03.  Subordination to Prior Payment of All Senior Indebtedness on
Dissolution, Liquidation or Reorganization of Holdings. Upon any distribution of
assets of Holdings upon dissolution,  winding up,  liquidation or reorganization
of Holdings  (whether in bankruptcy,  insolvency or receivership  proceedings or
upon an assignment for the benefit of creditors or otherwise):

     (a) the  holders of all Senior  Indebtedness  shall  first be  entitled  to
receive payment in full in cash of all Senior Indebtedness  (including,  without
limitation,  post-petition  interest at the rate  provided in the  documentation
with  respect to the  Senior  Indebtedness,  whether  or not such  post-petition
interest is an allowed  claim  against the debtor in any  bankruptcy  or similar
proceeding)  before the holder of the Note is entitled to receive any payment of
any kind or character on account of the Subordinated Indebtedness;

     (b) any  payment  or  distributions  of assets of  Holdings  of any kind or
character,  whether in cash,  property or  securities to which the holder of the
Note would be entitled  except for the provisions of this Annex A, shall be paid
by the  liquidating  trustee or agent or other  person  making  such  payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee
or other  trustee or agent,  directly to the holders of Senior  Indebtedness  or
their representative or representatives, or to the trustee or trustees under any
indenture  under which any instruments  evidencing any such Senior  Indebtedness
may have been issued, to the extent necessary to make payment in full in cash of
all Senior Indebtedness  remaining unpaid, after giving effect to any concurrent
payment or distribution to the holders of such Senior Indebtedness; and

     (c) in the event that,  notwithstanding  the  foregoing  provisions of this
Section 1.03, any payment or  distribution  of assets of Holdings of any kind or
character,  whether in cash,  property or  securities,  shall be received by the
holder of the Note on account  of  Subordinated  Indebtedness  before all Senior
Indebtedness  is paid in full in cash,  such  payment or  distribution  shall be
received  and held in trust  for and shall be paid  over to the  holders  of the
Senior Indebtedness  remaining unpaid or unprovided for or their  representative
or  representatives,  or to the trustee or trustees  under any  indenture  under
which any instruments  evidencing any of such Senior  Indebtedness may have been
issued,  for  application to the payment of such Senior  Indebtedness  until all
such  Senior  Indebtedness  shall have been paid in full in cash,  after  giving
effect to any concurrent  payment or  distribution to the holders of such Senior
Indebtedness.

     Without in any way  modifying  the  provisions of this Annex A or affecting
the subordination effected hereby,  Holdings shall give prompt written notice to
the  holder  of  the  Note  of  any  dissolution,  winding  up,  liquidation  or
reorganization  of Holdings  (whether in bankruptcy,  insolvency or receivership
proceedings or upon assignment for the benefit of creditors or otherwise).

     Section 1.04. Subrogation.  Subject to the prior payment in full in cash of
all  Senior  Indebtedness,  the holder of the Note  shall be  subrogated  to the
rights  of  the  holders  of  Senior   Indebtedness   to  receive   payments  or
distributions of assets of Holdings  applicable to the Senior Indebtedness until
all amounts owing on the Note shall be paid in full, and for the purpose of such
subrogation  no  payments  or   distributions  to  the  holders  of  the  Senior
Indebtedness by or on behalf of Holdings or by or on behalf of the holder of the
Note by  virtue  of this  Annex A which  otherwise  would  have been made to the
holder of the Note shall,  as between  Holdings,  its  creditors  other than the
holders  of Senior  Indebtedness,  and the  holder of the Note,  be deemed to be
payment  by  Holdings  to or on account  of the  Senior  Indebtedness,  it being
understood  that the provisions of this Annex A are and are intended  solely for
the purpose of defining  the relative  rights of the holder of the Note,  on the
one hand, and the holders of the Senior Indebtedness, on the other hand.

     Section 1.05.  Obligation of Holdings  Unconditional.  Nothing contained in
this Annex A or in the Note is intended to or shall impair,  as between Holdings
and the holder of the Note,  the  obligation of Holdings,  which is absolute and
unconditional, to pay to the holder of the Note the principal of and interest on
the Note as and when the same shall  become due and payable in  accordance  with
their terms, or is intended to or shall affect the relative rights of the holder
of the Note and  creditors  of  Holdings  other  than the  holders of the Senior
Indebtedness,  nor shall  anything  herein or therein  prevent the holder of the
Note from exercising all remedies otherwise  permitted by applicable law upon an
event of default under the Note,  subject to the  provisions of this Annex A and
the rights, if any, under this Annex A of the holders of Senior  Indebtedness in
respect of cash, property,  or securities of Holdings received upon the exercise
of any such remedy.  Upon any distribution of assets of Holdings  referred to in
this Annex A, the holder of the Note shall be entitled to rely upon any order or
decree made by any court of competent  jurisdiction  in which such  dissolution,
winding  up,  liquidation  or  reorganization  proceedings  are  pending,  or  a
certificate  of the  liquidating  trustee  or agent or other  person  making any
distribution  to the holder of the Note,  for the  purpose of  ascertaining  the
persons entitled to participate in such distribution,  the holders of the Senior
Indebtedness and other  indebtedness of Holdings,  the amount thereof or payable
thereon,  the amount or amounts paid or distributed  thereon and all other facts
pertinent thereto or to this Annex A.

     Section  1.06.  Subordination  Rights Not  Impaired by Acts or Omissions of
Holdings  or Holders of Senior  Indebtedness.  No right of any present or future
holders of any Senior  Indebtedness to enforce  subordination as herein provided
shall at any time in any way be  prejudiced or impaired by any act or failure to
act on the part of Holdings or by any act or failure to act in good faith by any
such holder,  or by any  noncompliance by Holdings with the terms and provisions
of the Note,  regardless of any knowledge thereof which any such holder may have
or be  otherwise  charged  with.  The  holders of the Senior  Indebtedness  may,
without  in any way  affecting  the  obligations  of the holder of the Note with
respect  hereto,  at any  time  or  from  time to  time  and in  their  absolute
discretion,  change the manner,  place or terms of payment of,  change or extend
the time of payment  of, or renew or alter,  any Senior  Indebtedness  or amend,
modify,  or supplement any agreement or instrument  governing or evidencing such
Senior  Indebtedness or any other document  referred to therein,  or exercise or
refrain from exercising any other of their rights under the Senior  Indebtedness
including,  without limitation, the waiver of default thereunder and the release
of any collateral  securing such Senior  Indebtedness,  all without notice to or
assent from the holder of the Note.

     Section 1.07 Senior Indebtedness. The term "Senior Indebtedness" shall mean
all  Obligations (as defined below) (i) of Holdings under, or in respect of, the
Credit  Agreement  (as  amended,  modified,  supplemented,  extended,  restated,
refinanced,  replaced or refunded  from time to time,  the "Credit  Agreement"),
dated as of July 11, 1995 and amended and  restated as of July 13,  2001,  among
Holdings,  Aearo Company I, Aearo Canada Limited,  Aearo Limited, the banks from
time to time party thereto, and Bankers Trust Company, as Administrative  Agent,
and the other Credit  Documents  (as defined in the Credit  Agreement),  and any
renewal, extension,  restatement,  refinancing or refunding thereof, (ii) under,
or in respect of, any  Interest  Rate  Protection  Agreements  or Other  Hedging
Agreements (each as defined in the Credit  Agreement),  and (iii) of Holdings in
respect of any other  indebtedness  permitted  to be  incurred  under the Credit
Agreement  unless,  in the case of any particular  indebtedness,  the instrument
creating or  evidencing  the same or  pursuant to which the same is  outstanding
expressly  provides  that  such  indebtedness  shall  not be  senior in right of
payment  to the Note.  As used  herein,  the term  "Obligation"  shall  mean any
principal,  interest, premium, penalties, fees, expenses,  indemnities and other
liabilities and obligations payable under the documentation governing any Senior
Indebtedness  (including  post-petition  interest  at the rate  provided  in the
documentation  with  respect to such  Senior  Indebtedness,  whether or not such
interest is an allowed  claim  against the debtor in any  bankruptcy  or similar
proceeding).

<PAGE>

                                   Exhibit M


                      FORM OF SHAREHOLDER SUBORDINATED NOTE


$_______________                                             New York, New York
                                                             [DATE]


     FOR VALUE RECEIVED, AEARO CORPORATION, a Delaware corporation ("Holdings"),
hereby  promises  to pay to  _____________  or [his] [her]  [its]  assigns  (the
"Payee"),  in lawful  money of the  United  States  of  America  in  immediately
available    funds,    at    ____________________,    the   principal   sum   of
____________________  DOLLARS,  which amount shall be payable on __________  __,
____.

     [Holdings  promises  also to pay  interest on the unpaid  principal  amount
hereof in like money at said office  from the date  hereof  until paid at a rate
per annum equal to  ___________________,  such  interest to be paid  [quarterly]
[semi- annually] [annually] on ______________________  [and ________________] of
each year and at maturity hereof.]

     This Note is subject to voluntary  prepayment,  in whole or in part, at the
option of Payor, without premium or penalty.

     Notwithstanding  anything to the contrary contained in this Note, the Payee
understands  and agrees that Holdings  shall not be required to make,  and shall
not make,  any payment of  principal,  interest or other amounts on this Note to
the  extent  that  such  payment  is  prohibited  by the  terms  of  any  Senior
Indebtedness.

     This Note, and Holdings'  obligations  hereunder,  shall be subordinate and
junior to all  indebtedness of Holdings  constituting  Senior  Indebtedness  (as
defined in Section 1.07 of Annex A attached  hereto) on the terms and conditions
set forth in Annex A attached  hereto,  which Annex A is herein  incorporated by
reference and made a part hereof as if set forth herein in its entirety.

     Holdings hereby waives presentment,  demand,  protest or notice of any kind
in connection with this Note.

     THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE  WITH AND BE GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.





<PAGE>




                           AEARO CORPORATION





                           By:
                               ------------------------------------------------
                               Name:
                               Title:





<PAGE>


                                   Annex A to
                                    Exhibit M






     Section 1.01. Subordination of Liabilities. Aearo Corporation ("Holdings"),
for itself, its successors and assigns, covenants and agrees, and each holder of
the Note to which  this  Annex A is  attached  (the  "Note")  by its  acceptance
thereof  likewise  covenants  and agrees,  that the payment of the principal of,
interest  on,  and all  other  amounts  owing  in  respect  of,  the  Note  (the
"Subordinated Indebtedness") is hereby expressly subordinated, to the extent and
in the manner hereinafter set forth, to the prior payment in full in cash of all
Senior Indebtedness (as defined in Section 1.07 of this Annex A). The provisions
of this Annex A are made for the benefit of the  present  and future  holders of
Senior  Indebtedness,  and such holders are hereby made  obligees  hereunder the
same as if their names were written herein as such, and they and/or each of them
may proceed to enforce such provisions.

     Section 1.02.  Holdings Not to Make  Payments with Respect to  Subordinated
Indebtedness  in  Certain  Circumstances.  (a) Upon the  maturity  of any Senior
Indebtedness  (including  interest thereon or fees or any other amounts owing in
respect thereof),  whether at stated maturity, by acceleration or otherwise, all
Obligations  (as  defined  in  Section  1.07 of this  Annex A) owing in  respect
thereof,  in each case to the extent due and owing,  shall first be paid in full
in cash, before any payment, whether in cash, property, securities or otherwise,
is made on account of the Subordinated Indebtedness.

     (b) Until  all  Senior  Indebtedness  has been paid in full in cash and all
commitments in respect of such Senior Indebtedness have been terminated, the sum
of all  payments  in respect of the Note  (including  principal  and  interest),
together  with the sum of (i) all  payments  made  under all  other  Shareholder
Subordinated  Notes and (ii) all payments made by Holdings and its  Subsidiaries
to redeem or repurchase  stock or options to purchase  stock of Holdings held by
employees or former employees of Holdings and its Subsidiaries  shall not exceed
at any time that amount permitted by the terms of the respective issue of Senior
Indebtedness.

     (c)  Holdings  may not,  directly  or  indirectly,  make any payment of any
Subordinated  Indebtedness and may not acquire any Subordinated Indebtedness for
cash or property until all Senior  Indebtedness has been paid in full in cash if
any  default  or event of  default  under the Credit  Agreement  (as  defined in
Section 1.07 of this Annex A) or any other issue of Senior  Indebtedness is then
in existence or would result  therefrom.  Each holder of the Note hereby  agrees
that, so long as any such default or event of default in respect of any issue of
Senior Indebtedness exists, it will not sue for, or otherwise take any action to
enforce Holdings' obligations to pay, amounts owing in respect of the Note. Each
holder of the Note  understands and agrees that to the extent that clause (b) of
this Section 1.02 reduces the payment of interest  and/or  principal which would
otherwise be payable  under the Note but for the  limitations  set forth in such
clause (b), or that the  provisions  of clause (a) or (c) of this  Section  1.02
prohibits  the payment of interest  and/or  principal  under the Note, in either
case,  such unpaid amount shall not constitute a payment  default under the Note
and the holder of the Note may not sue for, or otherwise  take action to enforce
Holdings' obligation to pay such amount,  provided that such unpaid principal or
interest  shall  remain an  obligation  of  Holdings  to the  holder of the Note
pursuant to the terms of the Note.

     (d) In the event  that  notwithstanding  the  provisions  of the  preceding
subsections  (a),  (b) and (c) of this  Section  1.02,  Holdings  shall make any
payment on account of the  Subordinated  Indebtedness  at a time when payment is
not permitted by said  subsection (a), (b) or (c), such payment shall be held by
the holder of the Note, in trust for the benefit of, and shall be paid forthwith
over  and   delivered   to,  the  holders  of  Senior   Indebtedness   or  their
representative or the trustee under the indenture or other agreement pursuant to
which any instruments  evidencing any Senior  Indebtedness may have been issued,
as their  respective  interests  may  appear,  for  application  pro rata to the
payment of all Senior  Indebtedness  remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full in cash in accordance with the terms of such
Senior   Indebtedness,   after  giving  effect  to  any  concurrent  payment  or
distribution  to or for the holders of Senior  Indebtedness.  Without in any way
modifying the provisions of this Annex A or affecting the subordination effected
hereby,  Holdings shall give the holder of the Note prompt written notice of any
event which would prevent payments under Section 1.02(a), (b) or (c) hereof.

     Section 1.03.  Subordination to Prior Payment of All Senior Indebtedness on
Dissolution, Liquidation or Reorganization of Holdings. Upon any distribution of
assets of Holdings upon dissolution,  winding up,  liquidation or reorganization
of Holdings  (whether in bankruptcy,  insolvency or receivership  proceedings or
upon an assignment for the benefit of creditors or otherwise):

     (a) the  holders of all Senior  Indebtedness  shall  first be  entitled  to
receive payment in full in cash of all Senior Indebtedness  (including,  without
limitation,  post-petition  interest at the rate  provided in the  documentation
with  respect to the  Senior  Indebtedness,  whether  or not such  post-petition
interest is an allowed  claim  against the debtor in any  bankruptcy  or similar
proceeding)  before the holder of the Note is entitled to receive any payment of
any kind or character on account of the Subordinated Indebtedness;

     (b) any  payment  or  distributions  of assets of  Holdings  of any kind or
character,  whether in cash,  property or  securities to which the holder of the
Note would be entitled  except for the provisions of this Annex A, shall be paid
by the  liquidating  trustee or agent or other  person  making  such  payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee
or other  trustee or agent,  directly to the holders of Senior  Indebtedness  or
their representative or representatives, or to the trustee or trustees under any
indenture  under which any instruments  evidencing any such Senior  Indebtedness
may have been issued, to the extent necessary to make payment in full in cash of
all Senior Indebtedness  remaining unpaid, after giving effect to any concurrent
payment or distribution to the holders of such Senior Indebtedness; and

     (c) in the event that,  notwithstanding  the  foregoing  provisions of this
Section 1.03, any payment or  distribution  of assets of Holdings of any kind or
character,  whether in cash,  property or  securities,  shall be received by the
holder of the Note on account  of  Subordinated  Indebtedness  before all Senior
Indebtedness  is paid in full in cash,  such  payment or  distribution  shall be
received  and held in trust  for and shall be paid  over to the  holders  of the
Senior Indebtedness  remaining unpaid or unprovided for or their  representative
or  representatives,  or to the trustee or trustees  under any  indenture  under
which any instruments  evidencing any of such Senior  Indebtedness may have been
issued,  for  application to the payment of such Senior  Indebtedness  until all
such  Senior  Indebtedness  shall have been paid in full in cash,  after  giving
effect to any concurrent  payment or  distribution to the holders of such Senior
Indebtedness.

     Without in any way  modifying  the  provisions of this Annex A or affecting
the subordination effected hereby,  Holdings shall give prompt written notice to
the  holder  of  the  Note  of  any  dissolution,  winding  up,  liquidation  or
reorganization  of Holdings  (whether in bankruptcy,  insolvency or receivership
proceedings or upon assignment for the benefit of creditors or otherwise).

     Section 1.04. Subrogation.  Subject to the prior payment in full in cash of
all  Senior  Indebtedness,  the holder of the Note  shall be  subrogated  to the
rights  of  the  holders  of  Senior   Indebtedness   to  receive   payments  or
distributions of assets of Holdings  applicable to the Senior Indebtedness until
all amounts owing on the Note shall be paid in full, and for the purpose of such
subrogation  no  payments  or   distributions  to  the  holders  of  the  Senior
Indebtedness by or on behalf of Holdings or by or on behalf of the holder of the
Note by  virtue  of this  Annex A which  otherwise  would  have been made to the
holder of the Note shall,  as between  Holdings,  its  creditors  other than the
holders  of Senior  Indebtedness,  and the  holder of the Note,  be deemed to be
payment  by  Holdings  to or on account  of the  Senior  Indebtedness,  it being
understood  that the provisions of this Annex A are and are intended  solely for
the purpose of defining  the relative  rights of the holder of the Note,  on the
one hand, and the holders of the Senior Indebtedness, on the other hand.

     Section 1.05.  Obligation of Holdings  Unconditional.  Nothing contained in
this Annex A or in the Note is intended to or shall impair,  as between Holdings
and the holder of the Note,  the  obligation of Holdings,  which is absolute and
unconditional, to pay to the holder of the Note the principal of and interest on
the Note as and when the same shall  become due and payable in  accordance  with
their terms, or is intended to or shall affect the relative rights of the holder
of the Note and  creditors  of  Holdings  other  than the  holders of the Senior
Indebtedness,  nor shall  anything  herein or therein  prevent the holder of the
Note from exercising all remedies otherwise  permitted by applicable law upon an
event of default under the Note,  subject to the  provisions of this Annex A and
the rights, if any, under this Annex A of the holders of Senior  Indebtedness in
respect of cash, property,  or securities of Holdings received upon the exercise
of any such remedy.  Upon any distribution of assets of Holdings  referred to in
this Annex A, the holder of the Note shall be entitled to rely upon any order or
decree made by any court of competent  jurisdiction  in which such  dissolution,
winding  up,  liquidation  or  reorganization  proceedings  are  pending,  or  a
certificate  of the  liquidating  trustee  or agent or other  person  making any
distribution  to the holder of the Note,  for the  purpose of  ascertaining  the
persons entitled to participate in such distribution,  the holders of the Senior
Indebtedness and other  indebtedness of Holdings,  the amount thereof or payable
thereon,  the amount or amounts paid or distributed  thereon and all other facts
pertinent thereto or to this Annex A.

     Section  1.06.  Subordination  Rights Not  Impaired by Acts or Omissions of
Holdings  or Holders of Senior  Indebtedness.  No right of any present or future
holders of any Senior  Indebtedness to enforce  subordination as herein provided
shall at any time in any way be  prejudiced or impaired by any act or failure to
act on the part of Holdings or by any act or failure to act in good faith by any
such holder,  or by any  noncompliance by Holdings with the terms and provisions
of the Note,  regardless of any knowledge thereof which any such holder may have
or be  otherwise  charged  with.  The  holders of the Senior  Indebtedness  may,
without  in any way  affecting  the  obligations  of the holder of the Note with
respect  hereto,  at any  time  or  from  time to  time  and in  their  absolute
discretion,  change the manner,  place or terms of payment of,  change or extend
the time of payment  of, or renew or alter,  any Senior  Indebtedness  or amend,
modify,  or supplement any agreement or instrument  governing or evidencing such
Senior  Indebtedness or any other document  referred to therein,  or exercise or
refrain from exercising any other of their rights under the Senior  Indebtedness
including,  without limitation, the waiver of default thereunder and the release
of any collateral  securing such Senior  Indebtedness,  all without notice to or
assent from the holder of the Note.

     Section 1.07 Senior Indebtedness. The term "Senior Indebtedness" shall mean
all  Obligations (as defined below) (i) of Holdings under, or in respect of, the
Credit  Agreement  (as  amended,  modified,  supplemented,  extended,  restated,
refinanced,  replaced or refunded  from time to time,  the "Credit  Agreement"),
dated as of July 11, 1995 and amended and  restated as of July 13,  2001,  among
Holdings,  Aearo Company I, Aearo Canada Limited,  Aearo Limited, the banks from
time to time party thereto, and Bankers Trust Company, as Administrative  Agent,
and the other Credit  Documents  (as defined in the Credit  Agreement),  and any
renewal, extension,  restatement,  refinancing or refunding thereof, (ii) under,
or in respect of, any  Interest  Rate  Protection  Agreements  or Other  Hedging
Agreements (each as defined in the Credit  Agreement),  and (iii) of Holdings in
respect of any other  indebtedness  permitted  to be  incurred  under the Credit
Agreement  unless,  in the case of any particular  indebtedness,  the instrument
creating or  evidencing  the same or  pursuant to which the same is  outstanding
expressly  provides  that  such  indebtedness  shall  not be  senior in right of
payment  to the Note.  As used  herein,  the term  "Obligation"  shall  mean any
principal,  interest, premium, penalties, fees, expenses,  indemnities and other
liabilities and obligations payable under the documentation governing any Senior
Indebtedness  (including  post-petition  interest  at the rate  provided  in the
documentation  with  respect to such  Senior  Indebtedness,  whether or not such
interest is an allowed  claim  against the debtor in any  bankruptcy  or similar
proceeding).

<PAGE>



                                    Exhibit N


     Section 1.01. Subordination of Liabilities. Aearo Corporation ("Holdings"),
for itself, its successors and assigns, covenants and agrees, and each holder of
the [___________] (the "Earn-Out Obligation") by its acceptance thereof likewise
covenants and agrees, that the payment of the principal of, interest on, and all
other amounts owing in respect of, the Earn-Out  Obligation  (the  "Subordinated
Indebtedness") is hereby expressly subordinated, to the extent and in the manner
hereinafter  set  forth,  to the  prior  payment  in full in cash of all  Senior
Indebtedness  (as defined in Section  1.07 of this Annex A). The  provisions  of
this Annex A are made for the  benefit  of the  present  and  future  holders of
Senior  Indebtedness,  and such holders are hereby made  obligees  hereunder the
same as if their names were written herein as such, and they and/or each of them
may proceed to enforce such provisions.

     Section 1.02.  Holdings Not to Make  Payments with Respect to  Subordinated
Indebtedness  in  Certain  Circumstances.  (a) Upon the  maturity  of any Senior
Indebtedness  (including  interest thereon or fees or any other amounts owing in
respect thereof),  whether at stated maturity, by acceleration or otherwise, all
Obligations  (as  defined  in  Section  1.07 of this  Annex A) owing in  respect
thereof,  in each case to the extent due and owing,  shall first be paid in full
in cash, before any payment, whether in cash, property, securities or otherwise,
is made on account of the Subordinated Indebtedness.

     (b)  Holdings  may not,  directly  or  indirectly,  make any payment of any
Subordinated  Indebtedness and may not acquire any Subordinated Indebtedness for
cash or property until all Senior  Indebtedness has been paid in full in cash if
any  default  or event of  default  under the Credit  Agreement  (as  defined in
Section 1.07 of this Annex A) or any other issue of Senior  Indebtedness is then
in existence or would result therefrom.  Each holder of the Earn-Out  Obligation
hereby  agrees that,  so long as any such default or event of default in respect
of any issue of Senior  Indebtedness  exists,  it will not sue for, or otherwise
take any  action to  enforce  Holdings'  obligations  to pay,  amounts  owing in
respect of the  Earn-Out  Obligation.  Each  holder of the  Earn-Out  Obligation
understands  and agrees that to the extent that the  provisions of clause (a) or
(b) of this Section 1.02 prohibits the payment of amounts due under the Earn-Out
Obligation,  in either case,  such unpaid amount shall not  constitute a payment
default under the Earn-Out  Obligation and the holder of the Earn-Out Obligation
may not sue for, or otherwise take action to enforce Holdings' obligation to pay
such amount,  provided  that such unpaid  principal or interest  shall remain an
obligation of Holdings to the holder of the Earn-Out  Obligation pursuant to the
terms of the Note.

     (c) In the event  that  notwithstanding  the  provisions  of the  preceding
subsections (a) and (b) of this Section 1.02, Holdings shall make any payment on
account of the Subordinated Indebtedness at a time when payment is not permitted
by said  subsection  (a) or (b), such payment shall be held by the holder of the
Earn-Out  Obligation,  in trust for the benefit of, and shall be paid  forthwith
over  and   delivered   to,  the  holders  of  Senior   Indebtedness   or  their
representative or the trustee under the indenture or other agreement pursuant to
which any instruments  evidencing any Senior  Indebtedness may have been issued,
as their  respective  interests  may  appear,  for  application  pro rata to the
payment of all Senior  Indebtedness  remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full in cash in accordance with the terms of such
Senior   Indebtedness,   after  giving  effect  to  any  concurrent  payment  or
distribution  to or for the holders of Senior  Indebtedness.  Without in any way
modifying the provisions of this Annex A or affecting the subordination effected
hereby, Holdings shall give the holder of the Earn-Out Obligation prompt written
notice of any event which would prevent  payments  under Section  1.02(a) or (b)
hereof.

     Section 1.03.  Subordination to Prior Payment of All Senior Indebtedness on
Dissolution, Liquidation or Reorganization of Holdings. Upon any distribution of
assets of Holdings upon dissolution,  winding up,  liquidation or reorganization
of Holdings  (whether in bankruptcy,  insolvency or receivership  proceedings or
upon an assignment for the benefit of creditors or otherwise):

     (a) the  holders of all Senior  Indebtedness  shall  first be  entitled  to
receive payment in full in cash of all Senior Indebtedness  (including,  without
limitation,  post-petition  interest at the rate  provided in the  documentation
with  respect to the  Senior  Indebtedness,  whether  or not such  post-petition
interest is an allowed  claim  against the debtor in any  bankruptcy  or similar
proceeding) before the holder of the Earn-Out  Obligation is entitled to receive
any  payment  of  any  kind  or  character   on  account  of  the   Subordinated
Indebtedness;

     (b) any  payment  or  distributions  of assets of  Holdings  of any kind or
character,  whether in cash,  property or  securities to which the holder of the
Earn-Out Obligation would be entitled except for the provisions of this Annex A,
shall be paid by the  liquidating  trustee or agent or other person  making such
payment  or  distribution,  whether a  trustee  in  bankruptcy,  a  receiver  or
liquidating trustee or other trustee or agent, directly to the holders of Senior
Indebtedness or their  representative or  representatives,  or to the trustee or
trustees  under any indenture  under which any  instruments  evidencing any such
Senior  Indebtedness  may have been  issued,  to the  extent  necessary  to make
payment  in full in cash of all  Senior  Indebtedness  remaining  unpaid,  after
giving effect to any concurrent  payment or  distribution to the holders of such
Senior Indebtedness; and

     (c) in the event that,  notwithstanding  the  foregoing  provisions of this
Section 1.03, any payment or  distribution  of assets of Holdings of any kind or
character,  whether in cash,  property or  securities,  shall be received by the
holder of the Earn-Out Obligation on account of Subordinated Indebtedness before
all Senior  Indebtedness  is paid in full in cash,  such payment or distribution
shall be received and held in trust for and shall be paid over to the holders of
the  Senior   Indebtedness   remaining   unpaid  or  unprovided   for  or  their
representative  or  representatives,  or to the  trustee or  trustees  under any
indenture under which any instruments evidencing any of such Senior Indebtedness
may have been issued, for application to the payment of such Senior Indebtedness
until all such Senior  Indebtedness  shall have been paid in full in cash, after
giving effect to any concurrent  payment or  distribution to the holders of such
Senior Indebtedness.

     Without in any way  modifying  the  provisions of this Annex A or affecting
the subordination effected hereby,  Holdings shall give prompt written notice to
the  holder  of  the  Earn-Out  Obligation  of  any  dissolution,   winding  up,
liquidation or reorganization of Holdings (whether in bankruptcy,  insolvency or
receivership  proceedings  or upon  assignment  for the benefit of  creditors or
otherwise).

     Section 1.04. Subrogation.  Subject to the prior payment in full in cash of
all  Senior  Indebtedness,  the  holder  of the  Earn-Out  Obligation  shall  be
subrogated  to the  rights of the  holders  of Senior  Indebtedness  to  receive
payments  or  distributions  of  assets of  Holdings  applicable  to the  Senior
Indebtedness until all amounts owing on the Earn-Out Obligation shall be paid in
full, and for the purpose of such  subrogation no payments or  distributions  to
the holders of the Senior  Indebtedness  by or on behalf of Holdings or by or on
behalf of the holder of the Earn-Out  Obligation by virtue of this Annex A which
otherwise would have been made to the holder of the Earn-Out  Obligation  shall,
as  between   Holdings,   its  creditors   other  than  the  holders  of  Senior
Indebtedness, and the holder of the Earn-Out Obligation, be deemed to be payment
by Holdings  to or on account of the Senior  Indebtedness,  it being  understood
that the provisions of this Annex A are and are intended  solely for the purpose
of defining the relative rights of the holder of the Earn-Out Obligation, on the
one hand, and the holders of the Senior Indebtedness, on the other hand.

     Section 1.05.  Obligation of Holdings  Unconditional.  Nothing contained in
this Annex A or in the Earn-Out  Obligation is intended to or shall  impair,  as
between  Holdings and the holder of the Earn-Out  Obligation,  the obligation of
Holdings,  which is  absolute  and  unconditional,  to pay to the  holder of the
Earn-Out  Obligation the principal of and interest on the Earn-Out Obligation as
and when the same shall become due and payable in  accordance  with their terms,
or is  intended  to or shall  affect  the  relative  rights of the holder of the
Earn-Out  Obligation  and  creditors  of Holdings  other than the holders of the
Senior Indebtedness,  nor shall anything herein or therein prevent the holder of
the Earn-Out  Obligation  from  exercising all remedies  otherwise  permitted by
applicable law upon an event of default under the Earn-Out  Obligation,  subject
to the provisions of this Annex A and the rights,  if any, under this Annex A of
the holders of Senior Indebtedness in respect of cash,  property,  or securities
of Holdings received upon the exercise of any such remedy. Upon any distribution
of assets of Holdings  referred  to in this Annex A, the holder of the  Earn-Out
Obligation  shall be entitled to rely upon any order or decree made by any court
of competent jurisdiction in which such dissolution,  winding up, liquidation or
reorganization  proceedings  are pending,  or a certificate  of the  liquidating
trustee or agent or other person  making any  distribution  to the holder of the
Earn-Out  Obligation,  for the purpose of ascertaining  the persons  entitled to
participate in such  distribution,  the holders of the Senior  Indebtedness  and
other  indebtedness  of Holdings,  the amount  thereof or payable  thereon,  the
amount or amounts  paid or  distributed  thereon and all other  facts  pertinent
thereto or to this Annex A.

     Section  1.06.  Subordination  Rights Not  Impaired by Acts or Omissions of
Holdings  or Holders of Senior  Indebtedness.  No right of any present or future
holders of any Senior  Indebtedness to enforce  subordination as herein provided
shall at any time in any way be  prejudiced or impaired by any act or failure to
act on the part of Holdings or by any act or failure to act in good faith by any
such holder,  or by any  noncompliance by Holdings with the terms and provisions
of the Earn-Out  Obligation,  regardless of any knowledge thereof which any such
holder  may  have or be  otherwise  charged  with.  The  holders  of the  Senior
Indebtedness  may, without in any way affecting the obligations of the holder of
the Earn-Out  Obligation with respect  hereto,  at any time or from time to time
and in their absolute  discretion,  change the manner, place or terms of payment
of,  change or extend  the time of  payment  of, or renew or alter,  any  Senior
Indebtedness  or amend,  modify,  or  supplement  any  agreement  or  instrument
governing or evidencing such Senior  Indebtedness or any other document referred
to therein,  or exercise or refrain  from  exercising  any other of their rights
under the  Senior  Indebtedness  including,  without  limitation,  the waiver of
default  thereunder  and the  release of any  collateral  securing  such  Senior
Indebtedness,  all without  notice to or assent from the holder of the  Earn-Out
Obligation.

     Section 1.07 Senior Indebtedness. The term "Senior Indebtedness" shall mean
all  Obligations (as defined below) (i) of Holdings under, or in respect of, the
Credit  Agreement  (as  amended,  modified,  supplemented,  extended,  restated,
refinanced,  replaced or refunded  from time to time,  the "Credit  Agreement"),
dated as of July 11, 1995 and amended and  restated as of July 13,  2001,  among
Holdings,  Aearo  Company I (the "US  Borrower"),  Aearo Canada  Limited,  Aearo
Limited,  the banks from time to time party thereto,  and Bankers Trust Company,
as  Administrative  Agent,  and the other  Credit  Documents  (as defined in the
Credit  Agreement),  and any renewal,  extension,  restatement,  refinancing  or
refunding thereof and (ii) under, or in respect of, any Interest Rate Protection
Agreements  or  Other  Hedging   Agreements  (each  as  defined  in  the  Credit
Agreement).  As used herein,  the term  "Obligation"  shall mean any  principal,
interest, premium, penalties, fees, expenses,  indemnities and other liabilities
and   obligations   payable  under  the   documentation   governing  any  Senior
Indebtedness  (including  post-petition  interest  at the rate  provided  in the
documentation  with  respect to such  Senior  Indebtedness,  whether or not such
interest is an allowed  claim  against the debtor in any  bankruptcy  or similar
proceeding).

<PAGE>



Conformed AS EXECUTED


                    FIRST AMENDMENT TO THE CHARGE OVER SHARES


     FIRST  AMENDMENT TO THE CHARGE OVER SHARES (the  "Amendment"),  dated as of
July 13, 2001, made by the undersigned (the "Chargor") in favor of Bankers Trust
Company,  as Collateral  Agent (the  "Collateral  Agent") for the benefit of the
Secured  Creditors as referred to in the Charge Over Shares (as defined  below).
Except as otherwise defined herein, capitalized terms used herein and defined in
the Charge Over Shares shall be used herein as therein defined.

                                                     RECITALS

     WHEREAS, the Chargor and the Collateral Agent are party to a certain Charge
Over Shares,  dated as of July 11, 1995 (as amended through the date hereof, the
"Charge Over Shares") and attached as Exhibit I hereto; and

     WHEREAS,  the  Borrowers,  the banks party  thereto and the  Administrative
Agent have agreed to amend the Credit Agreement by entering into the Amended and
Restated Credit Agreement, dated as of July 11, 1995 and amended and restated as
of July 13, 2001 (as amended,  modified or  supplemented  from time to time, the
"Amended and Restated Credit Agreement"); and

     WHEREAS, the Borrowers have requested the following amendment to the Charge
Over Shares to confirm and clarify that the Credit Agreement  referred to in the
Charge Over Shares  includes  such Amended and  Restated  Credit  Agreement,  as
amended, modified or supplemented from time to time;

     NOW,  THEREFORE,  for valuable  consideration,  the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:

         1.       Amendments.

     (a)  The First WHEREAS  clause of the Charge Over Shares is hereby  amended
          to read in its entirety as follows:

          "WHEREAS,  Aearo  Corporation  ("Holdings"),  Aearo Company I (the "US
     Borrower"),  Aearo Canada Limited (the "Canadian Borrower"),  Aearo Limited
     (the "UK  Borrower"  and,  together  with the US Borrower  and the Canadian
     Borrower, each a "Borrower" and collectively,  the "Borrowers"),  the banks
     from time to time party thereto (the  "Banks"),  and Bankers Trust Company,
     as Administrative Agent (together with any successor  Administrative Agent,
     the "Administrative Agent"), have entered into a Credit Agreement, dated as
     of July 11, 1995 and amended and  restated as of July 13, 2001 (as amended,
     modified  or  supplemented  from  time to time,  the  "Credit  Agreement"),
     providing for the making and  continuance  of Loans to, and the issuance of
     Letters  of Credit  for the  account  of,  the  Borrowers  as  contemplated
     therein;"

     2.   Effectiveness  Date. This Amendment shall become  effective as of July
          13, 2001 (the "Effective  Date") subject,  however,  to receipt by the
          Collateral  Agent of  counterparts  of this Amendment  executed by all
          parties hereto.

     3.   Miscellaneous.

     (a)  On the Effective  Date, each mortgage on, all right title and interest
          of the Chargor in the Pledged Securities  described in the Charge Over
          Shares, shall remain in full force and effect.

     (b)  Except  as  herein  expressly  amended,   all  terms,   covenants  and
          provisions  of the Charge  Over  Shares  are and shall  remain in full
          force and effect and all references therein to such Charge Over Shares
          shall  henceforth  refer to the Charge  Over Shares as amended by this
          Amendment.  This Amendment  shall be deemed  incorporated  into, and a
          part of, the Charge Over Shares.

     (c)  This  Amendment  shall be binding upon and inure to the benefit of the
          parties hereto and their respective  successors and assigns. No person
          who is not a party to this Amendment  shall have any rights to enforce
          any of the terms or  provisions  of this  Amendment  other  than those
          rights such person  would have had if the  Contracts  (Rights of Third
          Parties) Act had not become effective.

     (d)  This Amendment  shall be governed by and construed in accordance  with
          the laws of England.

     (e)  This Amendment may be executed in any number of counterparts,  each of
          which shall be deemed an original,  but all such counterparts together
          shall constitute but one and the same instrument.  Each of the parties
          hereto  understands  and agrees that this document may be delivered by
          any party  thereto  either in the form of an  executed  original or an
          executed original sent by facsimile transmission.

     (f)  This  Amendment,  together  with the Charge Over Shares,  contains the
          entire and exclusive agreement of the parties hereto with reference to
          the matters  discussed herein and therein.  This Amendment  supersedes
          all  prior  drafts  and  communications  with  respect  thereto.  This
          Amendment may not be amended except in accordance  with the provisions
          of Section 13.12 of the Credit Agreement.

     (g)  If any term or provision of this Amendment shall be deemed  prohibited
          by or  invalid  under any  applicable  law,  such  provision  shall be
          invalidated  without  affecting  the  remaining   provisions  of  this
          Amendment or the Charge Over Shares, respectively.


<PAGE>



(Amendment to Charge Over Shares)


(Amendment to Charge Over Shares)

          IN WITNESS  WHEREOF,  the parties hereto have caused this Amendment to
     be executed and delivered by their duly authorized  officers as of the date
     first above written.


                        CABOT SAFETY INTERMEDIATE CORPORATION



                        By:         /s/  Jeff Kulka
                            ------------------------------------------------
                            Name:    Jeff Kulka
                            Title:  Vice President, Treasurer & Assistant
                                       Secretary





<PAGE>






BANKERS TRUST COMPANY, as Collateral Agent


By:         /s/ Diane F. Rolfe
Title:  Vice President