<PAGE>1


                              AMENDED AND RESTATED
                          SECURITY AND PLEDGE AGREEMENT


          AMENDED AND RESTATED SECURITY AND PLEDGE AGREEMENT (the  "Agreement"),
dated as of December 2, 1997, by and between PAYLESS CASHWAYS,  INC., a Delaware
corporation,  as  successor  by  merger  to  Payless  Cashways,  Inc.,  an  Iowa
corporation  (in such capacity,  the  "Grantor")  and CANADIAN  IMPERIAL BANK OF
COMMERCE ("CIBC"), as coordinating and collateral agent (in such capacities, the
"Agent")  for its  benefit  and the  benefit of the other  Secured  Parties  (as
hereinafter defined).

     WHEREAS, pursuant to an Amended and Restated Credit Agreement,  dated as of
October 3, 1996 (as amended,  supplemented  or otherwise  modified  from time to
time, the "Pre-Petition  Credit  Agreement"),  among Payless Cashways,  Inc., an
Iowa corporation (the "Debtor"),  CIBC, as  administrative  and collateral agent
(in such capacity, the "Pre-Petition  Agent"),  certain co-agents named therein,
CIBC as the letter of credit bank (the "Letter of Credit  Bank") and the Lenders
named therein  (together with their  successors and assigns,  the  "Pre-Petition
Lenders"), the Pre-Petition Lenders agreed to extend credit to the Debtor in the
aggregate principal amount of up to $468 million in the form of revolving credit
and term loans and letters of credit; and

     WHEREAS,  the Debtor and the Pre-Petition Agent are parties to that certain
Amended and Restated  Borrower  Security  Agreement,  that  certain  Amended and
Restated  Note Pledge  Agreement  and that certain  Amended and  Restated  Stock
Pledge  Agreement,  each  dated  as  of  October  3,  1996  (collectively,   the
"Pre-Petition Security Agreements"), pursuant to which the Debtor granted to the
Pre-Petition Agent, for its benefit and the benefit of the Pre-Petition Lenders,
the  Letter  of  Credit  Bank  and  certain  other  parties  (the  "Pre-Petition
Parties"), a security interest in the Pre-Petition Collateral (as defined in the
Credit Agreement  hereinafter  defined) to secure the Debtor's obligations under
the Pre-Petition Credit Agreement,  the Pre-Petition Security Agreements and the
other loan and security documents executed in connection therewith; and

     WHEREAS, on July 21, 1997 (the "Filing Date"), the Debtor filed a voluntary
petition with the United  States  Bankruptcy  Court for the Western  District of
Missouri (the "Bankruptcy Court") commencing a Chapter 11 case and has continued
in the possession of its assets and in the  management of its business  pursuant
to  Sections  1107 and 1108 of the  Bankruptcy  Code (as  defined  in the Credit
Agreement); and

     WHEREAS,  pursuant to a Revolving  Credit  Agreement,  dated as of July 21,
1997 (as  heretofore  modified,  the "DIP Credit  Agreement")  among the Debtor,
certain of the Pre-Petition Lenders (together with their successors and assigns,
the  "DIP  Lenders"),   the  Fronting  Banks  (the  "Fronting  Banks")  and  the
Underwriters  (the  "Underwriters")  named therein and CIBC, as coordinating and
collateral  agent  for its  benefit  and the  benefit  of the DIP  Lenders,  the
Fronting Banks and the Underwriters (in such capacities,  the "DIP Agent"),  the
DIP Lenders agreed to extend credit to the Debtor as debtor in possession in the
aggregate principal amount of up to $125 million in the form of revolving credit
loans, standby letters of credit and documentary letters of credit; and


<PAGE>2


     WHEREAS,  pursuant  to the DIP  Financing  Order (as  defined in the Credit
Agreement), (i) the financing under the DIP Credit Agreement was approved by the
Bankruptcy  Court;  (ii) the DIP Parties (as  hereinafter  defined) were granted
superpriority  claims  and  superpriority  liens on all of the  Debtor's  assets
subject  only to valid and  perfected  prior  Liens (as  defined  in the  Credit
Agreement) existing on the Filing Date in favor of third parties (other than the
Pre-Petition  Parties);  and (iii) as part of the adequate protection ordered by
the  Bankruptcy  Court,  the  Pre-Petition  Parties  were  granted  Liens on the
properties  and other assets  subject to certain  existing Liens in favor of UBS
Mortgage  Finance,  Inc., as successor to The  Prudential  Insurance  Company of
America  (together  with UBS'  successors  and assigns,  "UBS") and on all other
collateral  granted  to the  DIP  Parties,  subject  only  to the  superpriority
administrative  claims and Liens  granted to the DIP  Parties and to other valid
and perfected prior Liens existing on the Filing Date; and

     WHEREAS,  the Debtor and the DIP Agent are parties to a Security and Pledge
Agreement, dated as of July 21, 1997 (the "DIP Security Agreement"), pursuant to
which the Debtor granted to the DIP Agent for its benefit and the benefit of the
DIP Lenders,  the  Underwriters and the Fronting Banks  (collectively,  the "DIP
Parties") a security  interest in all of its assets,  including the Pre-Petition
Collateral,  subject  only to valid and  perfected  prior Liens  existing on the
Filing  Date  (other than the Liens  granted to the  Pre-Petition  Agent for its
benefit and the  benefit of the  Pre-Petition  Parties)  to secure the  Debtor's
obligations under the DIP Credit Agreement,  the DIP Security  Agreement and the
other loan and security documents executed in connection therewith; and

     WHEREAS,  on September 5, 1997,  the Debtor filed its First Amended Plan of
Reorganization  with the Bankruptcy Court, which was modified on October 9, 1997
and  confirmed  by the  Bankruptcy  Court on  November  19,  1997 (the  "Plan of
Reorganization"); and

     WHEREAS, pursuant to the Plan of Reorganization, the Debtor has merged
with and into the  Grantor on or before the  Effective  Date (as  defined in the
Credit Agreement); and

     WHEREAS,   contemporaneously  with  the  execution  and  delivery  of  this
Agreement,  the  Grantor,  the  Pre-Petition  Parties  and the DIP  Parties  are
entering  into an Amended and Restated  Credit  Agreement,  dated as of the date
hereof (as amended,  amended and restated,  supplemented  or otherwise  modified
from time to time, the "Credit Agreement"); and

     WHEREAS,  unless  otherwise  defined  herein,  terms  defined in the Credit
Agreement are used herein as therein defined; and

     WHEREAS,  it is a condition  precedent to the  effectiveness  of the Credit
Agreement,  that the Grantor shall have executed and delivered to the Agent this
Amended  and  Restated  Security  and Pledge  Agreement  for its benefit and the
benefit of the other Secured Parties.

     NOW, THEREFORE, in consideration of the premises and (i) in order to
induce the Secured Parties to enter into the Credit Agreement,  (ii) in order to
induce the Lenders to restructure,  to continue and/or to make their  respective
Loans  pursuant to the Credit  Agreement,  (iii) in order to induce the Fronting
Banks to  continue  to issue,  and the New  Revolving  Lenders  to  continue  to


<PAGE>3


participate in, the Letters of Credit pursuant to the Credit Agreement,  (iv) in
consideration  of the financial  accommodation  provided by the Hedging Bank and
(v) in order to induce the Cash  Management  Banks to continue to provide  their
respective   cash   management   services  for  the  Grantor's  cash  management
operations,  and for other good and  valuable  consideration,  the  receipt  and
sufficiency of which is hereby acknowledged,  the Grantor hereby agrees with the
Agent, for its benefit and the benefit of the other Secured Parties, as follows:

     SECTION 1. Grant of Security  and Pledge.  The Grantor  hereby  assumes the
obligations of the Debtor under the Pre-Petition Security Agreements and the DIP
Security  Agreement and hereby  transfers,  grants,  bargains,  sells,  conveys,
hypothecates,  assigns,  pledges  and sets over to the Agent for its benefit and
the  benefit  of  the  Lenders,  the  Fronting  Banks,  the  Underwriters,   the
Pre-Petition Lenders, the Letter of Credit Bank, the Pre-Petition Agent, the DIP
Agent,  the DIP Fronting Banks,  the DIP Lenders,  the Hedging Bank and the Cash
Management Banks (collectively, together with the Agent, the "Secured Parties"),
a perfected pledge of and security interest in all of the Grantor's right, title
and interest in and to the following  (collectively,  the  "Collateral"),  which
pledge and security  interest  shall be a first priority  security  interest and
Lien senior to any and all other Liens,  except that it shall be junior to Liens
securing the Grantor's  obligations under the UBS Loan Documents (as hereinafter
defined) and Liens securing the Synthetic Lease Obligations,  each to the extent
in  existence  and  perfected  as of the date hereof and shall be subject to the
prior  rights of the Credit  Card Banks (as  hereinafter  defined)  under the GE
Credit  Program  Documents  (as  hereinafter  defined)  with  respect to certain
accounts receivable, returned merchandise and general intangibles of the Grantor
financed thereunder:

          (a) all present and future  accounts,  accounts  receivable  and other
rights  of the  Grantor  to  payment  for goods  sold or leased or for  services
rendered,  whether now existing or hereafter arising and wherever  arising,  and
whether  or  not  they  have  been  earned  by  performance  (collectively,  the
"Accounts");  it being agreed that the security interest and Lien granted hereby
in and on any Account representing a GECC Receivable,  Contractor  Receivable or
Monogram  Receivable  (each  as  hereinafter   defined)  shall  be  subject  and
subordinate  to perfected  security  interests  in or Liens on such  Accounts in
favor of any Credit Card Bank, as well as to any rights of set-off or recoupment
of the Credit Card Banks in respect of such Accounts;

          (b) all goods and merchandise  now owned or hereafter  acquired by the
Grantor  (wherever  located,  whether in the  possession  of the Grantor or of a
bailee or other person for sale, storage, transit,  processing, use or otherwise
consisting  of  whole  goods,  components,   supplies,  materials,  returned  or
repossessed  goods or goods consigned by the Grantor to a third party) which are
held for sale or lease or to be  furnished  (or have been  furnished)  under any
contract of service or which are raw materials, work-in-process,  finished goods
or materials  used or consumed in the business of the Grantor or processed by or
on behalf of the Grantor,  but expressly  excluding  inventory  consigned to the
Grantor by third parties (collectively,  the "Inventory");  it being agreed that
the  security  interest  and  Lien  granted  hereby  in  and  on  any  Inventory
constituting  returned  merchandise  in respect of a Contractor  Receivable or a
Monogram  Receivable  shall be subject and  subordinate  to  perfected  security
interests in or Liens on such Inventory in favor of any Credit Card Bank;



<PAGE>4


          (c) all machinery,  all  manufacturing,  distribution,  selling,  data
processing  and  office  equipment,  all  furniture,  furnishings,   appliances,
fixtures (other than Fixtures as hereinafter defined) and trade fixtures, tools,
tooling,  molds, dies,  vessels,  aircraft and all other goods of every type and
description (other than Inventory) which are used or bought for use primarily in
business,  in each  instance  whether  now owned or  hereafter  acquired  by the
Grantor and wherever  located  (collectively,  the  "Equipment");

          (d)  all  cars,  trucks,  trailers,   construction  and  earth  moving
equipment and other vehicles  covered by a certificate of title law of any State
or other  jurisdiction  wherever  located  and  whether  now owned or  hereafter
acquired,  and, in any event, shall include,  without  limitation,  the vehicles
listed on Schedule 1 hereto, and all tires and other appurtenances to any of the
foregoing (collectively,  the "Vehicles");

          (e) all  contracts  and  contract  rights of the  Grantor,  including,
without  limitation,  all  customer and  supplier  contracts,  firm sale orders,
rights under license and franchise  agreements;  all interest rate swap,  cap or
other interest rate protection  arrangements,  as the same may from time to time
be amended,  amended and restated,  supplemented  or otherwise  modified,  as to
which (i) the  Grantor  is to  receive  moneys  due  and/or to become  due to it
thereunder or in connection  therewith,  (ii) the Grantor is entitled to damages
arising  out of, or for,  breach or  default  in  respect  thereof  or (iii) the
Grantor is  entitled to perform and to exercise  all  remedies  thereunder,  but
excluding any contract,  agreement or license which  prohibits the assignment or
encumbrance  by the Grantor of such  contract,  agreement  or license (or of its
rights  thereunder),  except  to the  extent  that  such  prohibition  would  be
ineffective  pursuant to Section 9-318(4) of the Uniform  Commercial Code of the
State of New York (the "Code") as from time to time in effect (collectively, the
"Contracts").

          (f) all rights, interests,  choses in action, causes of action, claims
and all other intangible property of the Grantor of every kind and nature (other
than Accounts,  Trademarks,  Patents and Copyrights, each as defined herein), in
each instance whether now owned or hereafter acquired by the Grantor, including,
without limitation,  all general  intangibles;  all corporate and other business
records; all loans, royalties, and other obligations receivable; all inventions,
designs,  trade  secrets,  computer  programs,  software,  printouts  and  other
computer materials, goodwill,  registrations,  copyrights, licenses, franchises,
customer lists, credit files,  correspondence,  and advertising  materials;  all
interests in  partnerships  and joint  ventures;  all tax refunds and tax refund
claims;  all right,  title and interest  under leases,  subleases,  licenses and
concessions  and other  agreements  relating to real or personal  property;  all
payments  due or  made  to the  Grantor  in  connection  with  any  requisition,
confiscation,  condemnation,  seizure  or  forfeiture  of  any  property  by any
Governmental  Authority  or other  Person;  all  deposit  accounts  (general  or
special)  with any bank or other  financial  institution;  all credits  with and
other claims against carriers and shippers;  all rights to indemnification;  all
reversionary interests in pension and profit sharing plans and all reversionary,
beneficial  and residual  interests in trusts or in which the Grantor  otherwise
has an interest;  all proceeds of insurance of which the Grantor is beneficiary;
and all  letters of credit,  guaranties,  Liens,  security  interests  and other
security held by or granted to the Grantor;  and all other intangible  property,
whether or not similar to the foregoing; in each instance,  however and wherever
arising,  but excluding any contract,  agreement or license which  prohibits the
assignment or encumbrance by



<PAGE>5


the  Grantor  of  such  contract,   agreement  or  license  (or  of  its  rights
thereunder),  except to the extent that such  prohibition  would be  ineffective
pursuant  to  Section  9-318(4)  of the  Code  as from  time  to time in  effect
(collectively,  the  "General  Intangibles");  it being agreed that the security
interest and Lien granted hereby in and on any General Intangibles  representing
a GECC  Receivable  or other  obligation  of any Credit Card Bank to the Grantor
shall be subject and subordinate to perfected  security interests in or Liens on
such  General  Intangible  in favor of any Credit  Card Bank,  as well as to any
rights of  set-off or  recoupment  of such  Credit  Card Bank in respect of such
General Intangible;

          (g) all goods which have become so related to  particular  real estate
that an interest in them arises under real estate law (the "Fixtures"), it being
agreed  that the  security  interest  and Lien of the Agent  hereunder  shall be
junior to the Liens in favor of UBS pursuant to the UBS Loan  Documents  and the
Liens in favor of the Synthetic Lease Banks (as hereinafter defined) pursuant to
the Synthetic Lease Documents (as  hereinafter  defined),  each to the extent in
existence  and  perfected  on the  date  hereof;

          (h) all chattel paper,  all negotiable  instruments (as defined in the
Code as presently in effect),  all  certificated  securities  (as defined in the
Code as  presently  in effect),  all notes  (including,  but not limited to, the
notes  listed on Schedule 3 annexed  hereto and made a part hereof and any notes
or other  instruments and documents  hereafter pledged pursuant to a Note Pledge
Supplement  (as  hereinafter  defined))  and debt  instruments  and all payments
thereunder  and  instruments  and other  property from time to time delivered in
respect thereof or in exchange therefor, all bills of lading, warehouse receipts
and  documents  of title (each as defined in the Code as  presently  in effect),
other  documents  evidencing  transport  and other  documents,  in each instance
whether  now owned or  hereafter  acquired  by the  Grantor  (collectively,  the
"Pledged Notes");

          (i) all property or interests in property now or hereafter acquired by
the  Grantor  which  may be owned or  hereafter  may come  into the  possession,
custody or control of the Agent or any of the other Secured Parties or any agent
or Affiliate of the Agent or any of the other Secured  Parties in any way or for
any purpose (whether for safekeeping,  deposit,  custody, pledge,  transmission,
collection or otherwise),  and all rights and interests of the Grantor,  whether
now existing or hereafter arising and however and wherever  arising,  in respect
of any and all (i) notes, drafts, letters of credit, stocks, bonds, and debt and
equity securities,  whether or not certificated, and warrants, options, puts and
calls and other rights to acquire or otherwise  relating to the same; (ii) money
(including all cash and cash equivalents held in the Letter of Credit Accounts);
(iii) proceeds of loans,  including,  without  limitation,  Loans made under the
Credit Agreement;  and (iv) insurance proceeds and books and records relating to
any of the property covered by this Agreement;  together, in each instance, with
all accessions and additions thereto,  substitutions therefor, and replacements,
proceeds and products thereof;

          (j) all  trademarks,  trade names,  corporate  names,  company names,
business names,  fictitious  business names, trade styles,  service marks, logos
and other  source or  business  identifiers,  prints  and  labels on which  said
trademarks,  trade  names,  corporate  names,  company  names,  business  names,
fictitious  business names, trade styles,  service marks, logos and other source
or  business  identifiers,   have  appeared  or  appear,   designs  and  general
intangibles of like nature, now


<PAGE>6


existing or hereafter adopted or acquired,  and all registrations and recordings
thereof,  including,   without  limitation,   applications,   registrations  and
recordings in the United  States  Patent and Trademark  Office or in any similar
office or agency of the United States,  any State thereof,  or any other country
or political  subdivision  thereof (except for "intent to use"  applications for
trademark or service mark  registrations  filed pursuant to Section 1 (b) of the
Lanham Act,  unless and until an  Amendment  to Allege Use or a Statement of Use
under  Section  1 (c) of said Act has been  filed),  all  whether  now  owned or
hereafter  acquired  by the  Grantor,  including,  but  not  limited  to,  those
described in Schedule 4 annexed hereto and made a part hereof, and all reissues,
extensions or renewals thereof and all licenses thereof together,  in each case,
with the goodwill of the business  connected with the use of, and symbolized by,
each such  trademark,  service  mark,  trade  name and trade  dress  (all of the
foregoing being herein referred to as the "Trademarks");

          (k) all letters patent of the United States or any other country, and
all  registrations  and  recordings  thereof,  including,   without  limitation,
applications,  registrations  and  recordings  in the United  States  Patent and
Trademark  Office or in any similar office or agency of the United  States,  any
State  thereof or any other country or any political  subdivision  thereof,  all
whether now owned or  hereafter  acquired  by the  Grantor,  including,  but not
limited to, those  described in Schedule 5 annexed hereto and made apart hereof,
and all reissues, continuations, continuations-in-part or extensions thereof and
all licenses  thereof  (all of the  foregoing  being  herein  referred to as the
"Patents");

          (l) all  copyrights of the United States,  or any other country,  and
all  registrations  and  recordings  thereof,  including,   without  limitation,
applications, registrations and recordings in the United States Copyright Office
or in any similar office or agency of the United States,  any State thereof,  or
any other  country or political  subdivision  thereof,  all whether now owned or
hereafter  acquired  by the  Grantor,  including,  but  not  limited  to,  those
described in Schedule 6 hereto and all renewals and  extensions  thereof and all
licenses  thereof  (all  of  the  foregoing  being  herein  referred  to as  the
"Copyrights");

          (m) all books,  records,  ledger cards,  computer tapes and diskettes
and  other  property  at any  time  evidencing  or  relating  to  the  Accounts,
Inventory,  Equipment,  Vehicles,  Contracts,  General  Intangibles,   Fixtures,
Pledged Notes, Trademarks,  Patents, Copyrights,  Pledged Shares (as hereinafter
defined) or any other Collateral;

          (n) (i) all the shares of capital  stock owned by the Grantor  listed
on  Schedule  7 hereto of the  issuers  listed  thereon  or of any other  entity
(individually,  an "Issuer" and, collectively,  the "Issuers") and all shares of
capital stock or other equity securities of any Issuer obtained in the future by
the Grantor  (in each case  whether  certificated  or  uncertificated),  and any
certificates  representing or evidencing such shares or other equity securities,
which shall be pledged  pursuant to a Stock Pledge  Supplement  (as  hereinafter
defined) (collectively,  the "Pledged Shares"); (ii) subject to Section 9 below,
all dividends,  cash, instruments and other property from time to time received,
receivable or otherwise distributed,  in respect of, in exchange for or upon the
conversion  of the  securities  referred to in clauses  (i) and (ii) above;  and
(iii) subject to Section 9 below,  all rights and privileges of the Grantor,  as
applicable,  with respect to the securities  and other  property  referred to

in clauses (i) and (ii) (the items  referred  to in clauses  (i)  through  (iii)
being collectively called the "Pledged Stock Collateral");

          (o) all other personal  property of the Grantor,  whether tangible or
intangible,  and whether now owned or hereafter acquired;  and 

          (p) all proceeds and products of any of the  foregoing,  in any form,
including,  without  limitation,  any claims  against  third parties for loss or
damage to or  destruction of any or all of the  foregoing.


<PAGE>7


     As used herein, the following terms shall have the following meanings:

     "Contractor   Receivables"  shall  mean  those  certain  commercial  credit
accounts  sold by the Grantor and its  Subsidiaries  (including  any  documents,
instruments,  chattel  paper or  intangibles  evidencing  any  such  transferred
receivable or the transaction  giving rise thereto) (i) pursuant to the terms of
the GE Credit  Program  Documents  or (ii) to any other  Person  pursuant to any
similar  contractual  arrangement (but in such case solely to the extent such an
arrangement is permitted by the Credit Agreement, including, without limitation,
Section 5.9 thereof).

     "Credit Card Banks"  shall mean General  Electric  Credit  Corporation  and
Monogram Credit Card Bank of Georgia.

     "GECC  Receivables"  shall  mean  receivables   (including  any  documents,
instruments,  chattel  paper or  intangibles  evidencing  any  such  transferred
receivable or the transaction giving rise thereto) (i) payable to the Grantor by
Monogram  Credit  Card Bank of  Georgia  pursuant  to the terms of the GE Credit
Program  Documents arising out of private label credit card sales of merchandise
or services  made by the Grantor or (ii)  payable to the Grantor or purchased by
any other Person pursuant to any similar  contractual  arrangement solely to the
extent such an  arrangement  is  permitted by the Credit  Agreement  (including,
without limitation, Section 5.9 thereof).

     "GE Credit  Program  Documents"  shall mean (a) the  Amended  and  Restated
Monogram  Credit Card Bank of Georgia  Program  Agreement,  dated as of July 20,
1997,  between the Debtor and  Monogram  Credit  Card Bank of  Georgia,  as such
agreement  has  been  or  may  hereafter  be  amended,   amended  and  restated,
supplemented or modified from time to time to the extent permitted by the Credit
Agreement, together with any agreements entered into by the Grantor and Monogram
Credit Card Bank of Georgia, or any Affiliate,  in replacement of such agreement
to the extent permitted by the Credit Agreement (including,  without limitation,
Section 5.9 thereof);  and (b) the Second Amended and Restated Commercial Credit
Account  Purchase  and Service  Program  Agreement,  dated as of July 20,  1997,
between the Debtor and General Electric Capital  Corporation,  as such agreement
may hereafter be amended,  amended and restated,  supplemented  or modified from
time to time to the extent permitted by the Credit Agreement,  together with any
agreement entered into by the Grantor and General Electric Capital  Corporation,
or any Affiliate,  in  replacement of such agreement to the extent  permitted by
the Credit Agreement (including, without limitation, Section 5.9 thereof).



<PAGE>8


     "Monogram  Receivables"  shall mean all  obligations now or hereafter owing
to, and all rights now or hereafter  acquired by,  Monogram  Credit Card Bank of
Georgia arising out of any of the private label credit card sales referred to in
clause (i) of the definition of "GECC Receivables."

     "Synthetic  Lease  Banks" shall mean the banks and  financial  institutions
party to the Synthetic Lease Documents and their successors and assigns.

     "Synthetic  Lease  Documents" shall mean the Synthetic Lease Loan Agreement
(as hereinafter defined), the Mortgage, Assignment of Rents and Leases, Security
Agreement and Fixture  Filing  Statement  from the Grantor in favor of the agent
for the Synthetic Lease Banks for the Grantor's property located in Bloomington,
Indiana and in Overland Park, Kansas and the Deed of Trust,  Assignment of Rents
and Leases,  Security Agreement and Fixture Filing Statement from the Grantor in
favor of the agent for the  Synthetic  Lease  Banks for the  Grantor's  property
located  in Las  Vegas,  Nevada  and  any  and  all  documents,  agreements  and
instruments related thereto, each as amended, amended and restated, supplemented
or otherwise modified to the extent permitted by the Credit Agreement.

     "Synthetic  Lease Loan  Agreement"  shall mean that certain Loan Agreement,
dated on or about the Effective  Date,  among the Grantor,  the Synthetic  Lease
Banks and BA Leasing & Capital  Corporation,  as agent for the  Synthetic  Lease
Banks, as amended,  amended and restated,  supplemented or otherwise modified to
the extent permitted by the Credit Agreement.

     "UBS Loan  Agreement"  shall mean that certain  Amended and  Restated  Loan
Agreement, dated on or about the Effective Date, between the Grantor and UBS, as
amended, amended and restated,  supplemented or otherwise modified to the extent
permitted by the Credit Agreement.

     "UBS  Loan  Documents"  shall  mean  the UBS  Loan  Agreement,  each of the
mortgages and deeds of trust heretofore delivered by the Grantor to UBS, as such
documents have been modified as of the Effective  Date, with respect to the real
property  listed on  Schedule  1.1(c) to the  Credit  Agreement,  together  with
improvements, fixtures and appurtenances relating thereto, and any and all other
documents, agreements and instruments relating thereto, each as amended, amended
and restated,  supplemented or otherwise modified to the extent permitted by the
Credit Agreement.

     The Agent  acknowledges  that,  for  purposes  of this  Agreement,  (i) the
private  label credit card sales and  commercial  account  sales  referred to in
clause (i) of the  definition  of "GECC  Receivables"  constitute  extensions of
credit directly from Monogram Credit Card Bank of Georgia to cardholders or true
sales of accounts and indebtedness  from the Grantor to General Electric Capital
Corporation,  (ii) the  Grantor  has no right,  title or  interest  in or to any
Monogram  Receivables  or Contractor  Receivables,  except to the extent Grantor
purchases  such  receivables  pursuant  to the  terms of the GE  Credit  Program
Documents  and  (iii)  except to the  extent so  purchased  by the  Grantor,  no
Monogram Receivable or Contractor Receivable shall constitute Collateral (or any
category of property  included  within the  definition  thereof) for purposes of
this  Agreement.  The Agent  agrees with the Grantor  that  neither the security
interest created herein nor any related financing  statements may be assigned by
the Agent unless,  prior to any such assignments,  such financing statements are
amended (a) to include


<PAGE>9


the  definition  of "GE Credit  Program  Documents"  set forth  herein,  and (b)
specifically to exclude the Monogram Receivables and the Contractor  Receivables
from the collateral covered by such financing statements.

     Subject to the terms and  conditions  and  relying on the  representations,
warranties and covenants set forth herein and in the other Loan  Documents,  the
Pre-Petition  Security  Agreements  and the DIP  Security  Agreement  are hereby
amended and  restated in their  entirety and each  reference  to this  Agreement
shall be deemed to include a reference to the Pre-Petition  Security  Agreements
and the DIP  Security  Agreement,  each as  amended  and  restated  hereby.  The
Borrower  agrees  that the  Liens  and  security  interests  granted  under  the
Pre-Petition  Security  Agreements,  the  DIP  Security  Agreement  and  the DIP
Financing Order, and the Debtor's obligations thereunder and in respect thereof,
are  continuing,  valid and  enforceable  and are not  subject  to any  defense,
counterclaim, setoff or cause of action of any kind whatsoever.

     SECTION  2.  Security  for  Secured  Obligations.  This  Agreement  and the
Collateral  secure the prompt and complete  payment and performance  when due of
all obligations of the Grantor,  now or hereafter  existing,  under, or arising,
out of or in connection  with the Credit  Agreement,  the Notes,  the Letters of
Credit and the other Loan Documents,  and any other document made,  delivered or
given in connection therewith or herewith,  in each case, whether for principal,
interest,  fees,  expenses or  otherwise,  including  (without  limitation)  all
obligations of the Grantor now or hereafter existing under or in respect of this
Agreement,  including,  but not limited to, (a) the due and punctual  payment of
principal  of and interest on the Loans and the Notes and the  reimbursement  of
all amounts drawn under Letters of Credit (including,  without  limitation,  all
interest  accruing or payable at the then applicable rate provided in the Credit
Agreement  after the maturity of the Loans and  interest  accruing or payable at
the then  applicable rate provided in the Credit  Agreement or other  applicable
agreement after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to the Grantor), and
(b) the due and punctual payment of the Fees,  indemnities,  costs, expenses and
all other present and future, fixed or contingent,  direct or indirect, monetary
obligations,   including,  without  limitation,  any  of  the  Secured  Parties'
attorneys' and consultants'  fees,  investigation and laboratory fees,  response
costs,  court costs and litigation  expenses that are required to be paid by the
Grantor to or on behalf of the Lenders, the Fronting Banks, the Underwriters and
the Agent under the Loan Documents or to any of the other Secured  Parties under
the  agreements  in respect of the Hedging  Obligations  or the Cash  Management
Obligations  (all such  obligations  of the  Grantor  being  herein  called  the
"Secured Obligations").

     SECTION 3. Delivery of Pledged Stock  Collateral and Pledged  Notes;  Other
Action.  Upon written  request by the Agent,  all  certificates  or  instruments
representing  or evidencing  the Pledged Stock  Collateral and the Pledged Notes
shall be  delivered  to and  held by the  Agent  pursuant  hereto  and  shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance  satisfactory to the Agent. Upon the occurrence and during
the continuance of any Event of Default, the Agent shall have the right (for the
ratable  benefit of the  Secured  Parties),  at any time in its  discretion  and
without  notice to the  Grantor,  to  transfer  to or to register or cause to be
registered  in the name of the  Agent or any of its  nominees  any or all of the
Pledged Stock Collateral and any or all of the Pledged Notes.


<PAGE>10


     SECTION 4.  Representations  and  Warranties.  The Grantor  represents  and
warrants as follows:

          (a) Locations of Inventory and  Equipment;  Chief  Executive  Office;
Locations  of  Accounts;  Teadenames.  As of  the  Effective  Date,  all  of the
Inventory  and/or Equipment is located at the places mes specified in Schedule 8
hereto.  The chief places of business and chief executive offices of the Grantor
and the offices where the Grantor keeps its records  concerning any Accounts and
all originals of all chattel paper which evidence any Account are located at the
places  specified in Schedule 9 hereto.  All trade names under which the Grantor
has sold and will sell Inventory are listed on Schedule 4 hereto.

          (b) Title;  No Other Liens.  The Grantor owns the Collateral free and
clear of any Lien,  security  interest,  charge or  encumbrance  except  for the
security  interest  created  by this  Agreement  and except as  permitted  under
Section 6.1 of the Credit Agreement.  No effective  financing statement or other
instrument  similar in effect  covering all or any part of the  Collateral is on
file in any recording office, except (x) such as may have been filed in favor of
the Pre-Petition Agent relating to the Pre-Petition Credit Agreement or in favor
of the Agent relating to this Agreement and (y) in favor of any holder of a Lien
otherwise permitted under Section 6.1 of the Credit Agreement.

          (c) Trademarks, Patents and Copyrights. As of the Effective Date, the
Grantor does not own any material Trademarks,  Patents or Copyrights or have any
material  Trademarks,  Patents or  Copyrights  registered  in, or the subject of
pending  applications  in, the United States Patent and  Trademark  Office,  the
United  States  Copyright  Office or any  similar  office or agency in any other
country or any  political  subdivision  thereof,  other than those  described in
Schedules 4, 5 and 6 hereto.  The registrations for the Collateral  disclosed on
such Schedules 4, 5 and 6 hereto are valid, subsisting,  unexpired,  enforceable
and have not been abandoned.  Except as set forth on Schedule 4 hereto,  none of
such  Trademarks  is the subject of any  licensing  or franchise  agreement.  No
holding,  decision or judgment has been rendered by any  Governmental  Authority
which would limit,  cancel or question the validity of any such Trademark or the
Grantor's  ownership thereof.  No action or proceeding is pending (i) seeking to
limit, cancel or question the validity of any such Trademark,  or (ii) which, if
adversely  determined,  would have a Material Adverse Effect on the value of any
such Trademark or the Grantor's ownership thereof.  None of the material Patents
or Copyrights has been abandoned or dedicated.

          (d) Pledged Shares.  The Pledged Shares have been duly authorized and
validly issued and are fully paid and non-assessable.

          (e) Title to Shares; No Other Liens on Pledged Shares. The Grantor is
the legal and  beneficial  owner of the Pledged  Shares  described on Schedule 7
free and  clear of any  lien,  security  interest,  option  or other  charge  or
encumbrance,  except for the security  interest  created by this Agreement,  the
security interest in favor of the Pre-Petition Agent created by the Pre-Petition
Security Agreements,  the security interest in favor of the DIP Agent created by
the DIP Security


<PAGE>11


Agreement,  and the superpriority  claims and Liens created by the DIP Financing
Order and except as disclosed on Schedule 7.

          (f) Issuers of Pledged Stock. The Pledged Shares described in Section
1(n) hereof constitute all of the issued and outstanding shares of stock of each
of the Issuers  (other than any Issuer which is  unaffiliated  with the Grantor,
hereinafter,   an   "Unaffiliated   Issuer")  and  no  Issuer  (other  than  any
Unaffiliated Issuer) is under any contractual obligation to issue any additional
shares of stock or any other securities, rights or indebtedness.

          (g) Vehicles.  The Vehicles listed on Schedule 1 hereto  constitute a
complete  and  correct  list of all  Vehicles  owned  by the  Grantor  as of the
Effective Date.

          (h) Pledged  Notes.  The Pledged  Notes  delivered at any time by the
Grantor to the Agent in accordance with this Agreement and the Credit  Agreement
shall at all times  constitute  all of the Pledged Notes owned by the Grantor at
each such time.

          (i) No  Consent.  Except for the  Confirmation  Order and the filings
referred to in Section 4(j) below,  no  authorization,  approval or other action
by, and no notice to or filing with, any Governmental  Authority is required for
the grant and pledge by the Grantor of the security  interests granted hereby or
for the execution, delivery or performance of this Agreement by the Grantor.

          (j) Perfected First Priority Liens.  Except with respect to any money
not held by a Secured Party and any Accounts owing from Governmental Authorities
in which a security interest cannot be perfected under the Code, upon the filing
in the proper  locations of appropriate  financing  statements under the UCC (as
defined  in the  Credit  Agreement),  the  filing  of  notices  of lien or other
documents with pertinent state motor vehicle offices (with respect to Vehicles),
the filing of this Agreement with the United States Patent and Trademark  Office
and the United  States  Copyright  Office  (with  respect  to Patents  (if any),
Trademarks  and  Copyrights)  and the transfer of possession to the Agent of any
Pledged Notes and Pledged Shares, a security interest in which must be perfected
by  possession,  the Liens granted  pursuant to this  Agreement  (i)  constitute
perfected Liens on the Collateral in favor of the Agent, for its benefit and the
benefit of the other Secured Parties,  which are prior to all other Liens on the
Collateral  (except  for any Liens  permitted  under  Section  6.1 of the Credit
Agreement  and Liens which may be entitled  to  priority  by  operation  of law)
created or allowed by the Grantor and in  existence  on the date hereof and (ii)
are enforceable as prior perfected Liens against all creditors of and purchasers
from the Grantor (other than purchasers of Inventory sold in the ordinary course
of the Grantor's  business and other than unrelated third party  purchasers with
respect to other  asset  dispositions  permitted  by  Section  6.3 of the Credit
Agreement)  and against any owner or purchaser of the real property where any of
the Inventory or Equipment is located and any present or future  creditor of the
Grantor (other than any holder of a purchase  money lien on Inventory  permitted
by Section 6.1(v) of the Credit  Agreement to the extent  provided in clause (v)
of the definition of Permitted Liens),  or such owner or purchaser,  obtaining a
Lien on the Collateral.

          (k)  Accounts.  Any amount  which is at any time  represented  by the
Grantor to the Lenders as owing by each account debtor in respect of any Account
constituting  part of the  Collateral


<PAGE>12


will at such time be the correct  amount  actually  owing by such account debtor
thereunder.  No amount  payable to the Grantor under or in  connection  with any
Account is evidenced by any negotiable instrument or chattel paper which has not
been delivered to the Agent.

          (l)  Contracts.  No consent of any party  (other than the Grantor) to
any Contract is required,  or purports to be required,  in  connection  with the
execution,  delivery  and  performance  of this  Agreement.  To the  best of the
Grantor's knowledge after due inquiry, each Contract is in full force and effect
and  constitutes  a valid and  legally  enforceable  obligation  of the  parties
thereto,  except as  enforceability  may be limited by  bankruptcy,  insolvency,
reorganization,   moratorium  or  similar  laws  affecting  the  enforcement  of
creditors'  rights  generally,  and by  general  equitable  principles  (whether
enforcement  is  sought by  proceedings  in equity  or at law).  No  consent  or
authorization  of, filing with or other act by or in respect of any Governmental
Authority  or, to the best of the  Grantor's  knowledge  after due inquiry,  any
other  party to such  Contract is required  in  connection  with the  execution,
delivery, performance, validity or enforceability of any of the Contracts by the
Grantor, other than those which have been duly obtained, made or performed,  are
in full force and effect and do not  subject  the scope of any such  Contract to
any material adverse limitation,  either specific or general in nature.  Neither
the Grantor nor (to the best of the Grantor's  knowledge  after due inquiry) any
other  party to any  Contract is in default or is likely to become in default in
the performance or observance of any of the terms thereof. The Grantor has fully
performed all its obligations to date under each Contract.  The right, title and
interest of the Grantor in, to and under each  Contract  are not, to the best of
the  Grantor's  knowledge  after due inquiry,  subject to any  defense,  offset,
counterclaim or claim which would materially  adversely affect the value of such
Contract as  Collateral,  nor have any of the foregoing been asserted or alleged
against the Grantor as to any Contract. The Grantor has delivered to the Agent a
complete  and  correct  copy  of  each  Contract,   including  all   amendments,
supplements and other  modifications  thereto.  No amount payable to the Grantor
under or in  connection  with any  Contract is evidenced  by any  instrument  or
chattel paper which has not been delivered to the Agent.

          (m) Farm  Products.  None of the  Collateral  constitutes,  or is the
Proceeds  of,  crops or  livestock  or  supplies  used or  produced  in  farming
operations   or,  if  they  are   products  of  crops  or   livestock  in  their
unmanufactured  states,  they are not in the  possession of a debtor  engaged in
raising, fattening, grazing or other farming operations.

          (n)  Governmental   Obligors.   On  the  Effective  Date,  less  than
$1,000,000  of the  Accounts  of the Grantor are owed to the Grantor by obligors
which are Governmental Authorities.

          (o) Bank  Accounts.  Schedule 10 sets forth the location of each cash
concentration  account and all significant operating accounts and demand deposit
accounts  used for paying and receiving  purposes in the ordinary  course of the
Grantor's business.

          (p)  Survival  of   Representations   and  Warranties.   All  of  the
representations  and  warranties  made  in this  Section  4  shall  survive  the
execution  and  delivery  hereof,  the making of the Loans,  the issuance of the
Letters of Credit, the issuance and delivery to the Lenders of the Notes and the
expiration  or   termination  of  the  Total   Commitments   regardless  of  any
investigation  made by or


<PAGE>13


on behalf of any Secured  Party and shall be deemed to be repeated and confirmed
on the date of the making of each New  Revolving  Loan or the  issuance  of each
Letter of Credit  and each time any  additional  Collateral  becomes  subject to
pledge hereunder.

     SECTION 5. Compliance with Laws; Further Assurances; Certain Covenants.

          (a) Compliance  with  Requirements of Law. The Grantor will comply in
all material  respects with all Requirements of Law applicable to the Collateral
or any part thereof or to the operation of the Grantor's  business  except where
the necessity of compliance  therewith is contested in good faith by appropriate
proceedings  or where the  failure to comply  would not have a Material  Adverse
Effect;  provided,  that the Grantor must comply with any  Requirement of Law if
the failure to do so would adversely  affect the Secured  Parties' rights in the
Collateral or the priority of their Liens on the Collateral.

          (b) Financing  Statements,  etc. The Grantor agrees that from time to
time, at the expense of the Grantor,  it will  promptly  execute and deliver all
further  instruments  and documents,  and take all further  action,  that may be
necessary,  or that the Agent may  reasonably  request,  in order to perfect and
protect any security  interest  granted or purported to be granted  hereby or to
enable  the  Agent to  exercise  and  enforce  any of its  rights  and  remedies
hereunder with respect to any Collateral. Without limiting the generality of the
foregoing,  the Grantor  will execute and file such  financing  or  continuation
statements, or amendments thereto, and such other instruments or notices, as may
be necessary,  or as the Agent may reasonably  request,  in order to perfect and
preserve the security  interests  granted or purported to be granted  hereby.  A
carbon, photographic or other reproduction of this Agreement shall be sufficient
as a financing  statement for filing in any  jurisdiction.  The Grantor will not
change  its  name (or any  name  under  which  it does  business),  identity  or
corporate  structure to such an extent that any financing statement filed by the
Agent in connection  with this Agreement would become  seriously  misleading and
will not move any of the  Collateral to a location which would cause the Agent's
Lien thereon to be adversely  affected  unless all  necessary  filings have been
timely made to avoid such result.  The Grantor  hereby  authorizes  the Agent to
file one or more financing or  continuation  statements and amendments  thereto,
relative to all or any part of the Collateral  without  signature of the Grantor
where permitted by law.

          (c)  Instruments and Chattel Paper. If any amount payable under or in
connection  with any of the  Collateral  shall  be or  become  evidenced  by any
instrument  or  chattel  paper,  such  instrument  or  chattel  paper  shall  be
immediately  delivered to the Agent,  duly endorsed in a manner  satisfactory to
the Agent, to be held as Collateral pursuant to this Agreement.

          (d) Maintenance of Recods;  Identification of Collateral. The Grantor
will keep and  maintain at its own cost and expense  satisfactory  and  complete
records with respect to the Collateral,  including, without limitation, a record
of all payments  received and all credits  granted with respect to the Accounts.
The Grantor will furnish to the Agent from time to time statements and schedules
further  identifying  and  describing  the  Collateral and such other reports in
connection  with the  Collateral  as the Agent may  reasonably  request,  all in
reasonable detail.


<PAGE>14


          (e) Note Pledge  Supplements.  The Grantor hereby agrees from time to
time  hereafter,  that upon the acquisition or creation of any Pledged Notes, it
will  execute and  deliver to the Agent,  for its benefit and the benefit of the
other Secured  Parties,  a Note Pledge  Supplement  substantially in the form of
Annex A hereto (each, a "Note Pledge Supplement"), and will deliver such Pledged
Notes, in each case, accompanied by appropriate endorsements executed in blank.

          (f) Stock Pledge Supplements.  The Grantor hereby agrees from time to
time hereafter,  that upon the acquisition of or investment in any Subsidiary of
the Grantor or in any other  Issuer,  it will  execute and deliver to the Agent,
for its benefit and the benefit of the other  Secured  Parties,  a Stock  Pledge
Agreement  Supplement,  substantially  in the form of Annex B  hereto  (each,  a
"Stock Pledge Supplement"), and will deliver any additional certificated capital
stock or other equity securities issued to the Grantor, in each case accompanied
by  appropriate  endorsements  executed  in  blank  and,  in  the  case  of  any
uncertificated  capital stock or other equity securities,  will take or cause to
be taken,  all actions which may be necessary or may be reasonably  requested by
the Agent to perfect and  preserve  the  security  interest  therein  granted or
purported to be granted hereby.

          (g)  Defense  of Agent's  Rights.  The  Grantor  agrees to defend the
Agent's  right,  title and interest in and to, lien on and security  interest in
the Pledged  Shares and the Pledged  Notes against the claims and demands of all
Persons whomsoever.

          (h) Uncertificated  Equity Interests.  If an Issuer of Pledged Shares
is incorporated in a jurisdiction  which does not permit the use of certificates
to evidence  equity  ownership or if any of the Pledged Shares are not evidenced
by  certificates  for any other reason,  then the Grantor  shall,  to the extent
permitted by applicable law, (i) record such pledge on the stock register of the
Issuer,  (ii) execute any  customary  stock  pledge forms or other  documents or
(iii) take such other action as may be necessary to complete the pledge and give
the Agent the right to transfer  the Pledged  Shares under the terms hereof and,
in each such  case,  provide to the Agent an  opinion  of  counsel,  in form and
substance  satisfactory to it, in its judgment reasonably exercised,  confirming
the validity and perfection of such pledge.

          (i) Access to Books and  Records;  Right of  Inspection.  The Secured
Parties  shall at all times have full and free  access  during  normal  business
hours to all the  books,  correspondence  and  records of the  Grantor,  and the
Secured  Parties and their  representatives  may examine the same, take extracts
therefrom and make photocopies  thereof, and the Grantor agrees to render to the
Secured  Parties at the  Grantor's  cost and  expense,  such  clerical and other
assistance  as may be  reasonably  requested  with regard  thereto.  The Secured
Parties  and their  representatives  shall at all  times  also have the right to
enter into and upon any premises  where any of the Equipment or the Inventory or
any  other  Collateral  is  located  for the  purpose  of  inspecting  the same,
observing its use or otherwise protecting their interests therein.

          (j) Payment of  Obligations.  The Grantor will pay promptly  when due
all taxes,  assessments  and  governmental  charges or levies  imposed  upon the
Collateral  or in respect of its  income or  profits  therefrom,  as well as all
claims of any kind (including,  without limitation,  claims for


<PAGE>15


labor, materials and supplies) against or with respect to the Collateral, except
that no such  charge  need be paid  if the  Grantor  is  permitted  not to do so
pursuant to the Credit Agreement.

          (k)  Notices.  The  Grantor  will  advise  the  Agent  promptly,   in
reasonable detail, at the Agent's address set forth in the Credit Agreement, (i)
of any Lien (other than Liens  created  hereby or permitted  pursuant to Section
6.1  of  the  Credit  Agreement)  on,  or  claim  asserted  against,  any of the
Collateral and (ii) of the occurrence of any other event which could  reasonably
be expected to have an adverse  effect on the value of any  material  portion of
the Collateral or on the Liens created hereunder.

     SECTION 6. As to Equipment and Inventory.

          (a)  Locations.  The Grantor  shall keep the  Equipment and Inventory
(other than Inventory which has been sold in the ordinary course of business) at
the places  specified  therefor  in  Schedule 8 hereto or,  upon 30 days'  prior
written notice to the Agent, at other places in  jurisdictions  where all action
required by Section 5(b) shall have been taken to assure the continuation of the
perfection  of the  security  interest  of the Agent  (for its  benefit  and the
benefit  of the  other  Secured  Parties)  with  respect  to the  Equipment  and
Inventory.

          (b) Maintenance. The Grantor shall maintain or cause to be maintained
in good repair,  working order and condition,  excepting  ordinary wear and tear
and  damage due to  casualty,  all of the  Equipment  and,  to the  extent  such
Equipment is not  obsolete,  make or cause to be made all  appropriate  repairs,
renewals  and  replacements  thereof  consistent  with the past  practice of the
Grantor,  as quickly as  practicable  after the occurrence of any loss or damage
thereto.

          (c)  Records,  Physical  Count and Other  Inventory  Covenants.  With
respect to the Inventory:  (i) the Grantor shall at all times  maintain  records
with respect to Inventory reasonably  satisfactory to the Agent, keeping correct
and accurate  records  itemizing  and  describing  the kind,  type,  quality and
quantity  of  Inventory,  the  Grantor's  cost  therefor  and daily  withdrawals
therefrom and additions thereto; (ii) the Grantor shall conduct a physical count
of the Inventory at least once each year,  but at any time or times as the Agent
may request on or after an Event of Default  occurs and is  continuing or at any
time when the Grantor shall not have Required Inventory,  and promptly following
each such  physical  inventory  shall supply the Agent with a report in the form
and  with  such  specificity  as may be  reasonably  satisfactory  to the  Agent
concerning such physical count; (iii) the Grantor shall not remove any Inventory
from the  locations  set forth or permitted  herein,  without the prior  written
consent of the Agent,  except for sales of Inventory and returns of Inventory to
vendors,  in each case in the  ordinary  course of the  Grantor's  business  and
except to move  Inventory  directly  from one  location  set forth or  permitted
herein to another such location;  (iv) in addition to the requirements set forth
above,  upon the Agent's  request,  the Grantor shall,  at its expense,  conduct
through the Asset Support Group or another inventory counting service reasonably
acceptable to the Agent, or shall, at the Grantor's expense, permit the Agent to
conduct (if the Agent so elects),  a physical  count of the  Inventory  in form,
scope and  methodology  reasonably  acceptable to the Agent no more than once in
any twelve (12) month period,  but at any time or times as the Agent may request
on or after an Event of Default occurs and is continuing or at any time when the
Grantor  shall



<PAGE>16


not have Required Inventory,  the results of which shall be reported directly by
such  inventory  counting  service to the Agent and the Grantor  shall  promptly
deliver  confirmation  in a form  satisfactory  to the  Agent  that  appropriate
adjustments have been made to the Inventory  records of the Grantor to reconcile
the Inventory count to the Grantor's  Inventory  records;  (v) the Grantor shall
produce,  use,  store and maintain the Inventory,  with all reasonable  care and
caution and in  accordance  with  applicable  standards of any  insurance and in
conformity with all applicable  Requirements of Law (including,  but not limited
to, the  requirements  of the  Federal  Fair  Labor  Standards  Act of 1938,  as
amended,  and all rules,  regulations  and  orders  related  thereto);  (vi) the
Grantor shall retain all of its  responsibility  and  liability  arising from or
relating to the  production,  use, sale or other  disposition  of the Inventory;
(vii) the Grantor shall not sell  Inventory to any customer on approval,  or any
other basis which entitles the customer to return or may obligate the Grantor to
repurchase  such  Inventory  (other  than in the  ordinary  course  of  business
consistent  with past  practices  and  policies of the  Grantor or then  current
market  practice)  and (viii) the Grantor  shall keep the  Inventory in good and
marketable condition.

     SECTION 7. As to Accounts and Contracts.

          (a) Locations. The Grantor shall keep its chief place of business and
chief executive office and the office where it keeps its records  concerning the
Accounts,  and the offices  where it keeps all  originals  of all chattel  paper
which evidence Accounts,  at the location therefor specified in Section 4(a) or,
upon 30 days' prior written  notice to the Agent,  at such other  locations in a
jurisdiction  where all actions  required by Section  5(b) shall have been taken
with respect to the Accounts.

          (b) Amendments; diligence as to Rights; Notices. The Grantor will not
(i) amend,  modify,  terminate  or waive any  provision  of any  Contract or any
agreement giving rise to a material Account in any manner which could reasonably
be expected to affect  adversely the value of such Contract or material  Account
as  Collateral,  (ii) fail to exercise  promptly and  diligently  each and every
substantive  right which it may have under each  Contract  or  material  Account
(other  than any right of  termination)  or (iii) fail to deliver to the Agent a
copy of each substantive  demand,  notice or document received by it relating in
any way to any Contract or material Account.

          (c) Collections. Except as otherwise provided in this subsection (c),
the Grantor shall continue to collect in accordance with its customary practice,
at its own  expense,  all amounts due or to become due to the Grantor  under the
Accounts and, prior to the occurrence of an Event of Default,  the Grantor shall
have the right to  adjust,  settle or  compromise  the  amount or payment of any
Account,  or to release wholly or partly any account debtor or obligor  thereon,
or to allow any credit or discount thereon, all in accordance with its customary
practices.  Other than in the ordinary course of business,  the Grantor will not
grant any extension of the time of payment of any of the Accounts, compromise or
settle  the same for less  than the full  amount  thereof,  release,  wholly  or
partially,  any Person  liable for the payment  thereof,  or allow any credit or
discount whatsoever  thereon.  In connection with such collections,  the Grantor
may, upon the  occurrence  and during the  continuation  of an Event of Default,
take (and at the  direction  of the Agent shall take) such action as the Grantor
or the Agent may reasonably deem necessary or advisable to enforce collection of
the


<PAGE>17


Accounts; provided, that following the occurrence and during the continuation of
an Event of Default, (x) upon the request of the Agent, the Grantor shall notify
account  debtors on the  Accounts  and the parties to the  Contracts or (y) upon
written  notice by the Agent to the Grantor of its intention so to do, the Agent
shall have the right to notify the account  debtors or  obligors  under any such
Accounts or Contracts,  in each case,  that the Accounts and Contracts have been
assigned  to the Agent and to direct  such  account  debtors or obligors to make
payment of all amounts due or to become due to the Grantor  thereunder  directly
to the Agent and, upon such  notification and at the expense of the Grantor,  to
enforce collection of any such Accounts or Contracts,  to take possession of and
indorse and collect any checks, drafts, notes,  acceptances or other instruments
for  payment of moneys due under any Account or  Contract,  to file any claim or
take any other  action  or  proceeding  in any court of law or equity  otherwise
deemed appropriate by the Agent for the purpose of collecting any such money and
to adjust,  settle or  compromise  the amount or  payment  thereof,  in the same
manner and to the same extent as the Grantor  might have done.  After receipt by
the Grantor of the notice referred to in the proviso to the preceding  sentence,
(i) all amounts and proceeds (including  instruments) received by the Grantor in
respect of the Accounts or Contracts  shall be received in trust for the benefit
of the Agent (for its  benefit  and the  benefit of the other  Secured  Parties)
hereunder,  shall be  segregated  from other  funds of the  Grantor and shall be
forthwith  paid  over to the  Agent in the same  form as so  received  (with any
necessary  endorsement) to be held as cash collateral and either (A) released to
the  Grantor if such Event of Default  shall have been cured or waived or (B) if
such Event of Default shall be continuing,  paid to the Agent and applied to the
Secured  Obligations,  in the  order  provided  in  Section  7.2  of the  Credit
Agreement,  and (ii) the Grantor  shall not  adjust,  settle or  compromise  the
amount or payment of any  Account or under any  Contract,  or release  wholly or
partly any account  debtor or obligor  thereon,  or allow any credit or discount
thereon.

          (d) Test  Verifications.  The Agent shall have the right to make test
verifications  of the  Accounts  in any manner and  through  any medium  that it
reasonably  considers  advisable,   and  the  Grantor  shall  furnish  all  such
assistance and  information  as the Agent may  reasonably  require in connection
therewith.  At any time and from time to time,  upon the Agent's  request and at
the  expense  of  the  Grantor,  the  Grantor  shall  cause  independent  public
accountants or others  satisfactory to the Agent to furnish to the Agent reports
showing  reconciliations,  aging and test  verifications  of, and trial balances
for, the Accounts.

          (e)   Liability   of  Grantor.   Anything   herein  to  the  contrary
notwithstanding,  the Grantor shall remain liable under each of the Accounts and
Contracts  to observe and  perform  all the  conditions  and  obligations  to be
observed and performed by it thereunder, all in accordance with the terms of any
agreement  giving rise to each such Account and in accordance  with and pursuant
to the terms and provisions of each such Contract.  None of the Secured  Parties
shall have any  obligation  or  liability  under any Account  (or any  agreement
giving rise  thereto) or under any  Contract by reason of or arising out of this
Agreement or the receipt by such Secured  Party of any payment  relating to such
Account or Contract pursuant hereto, nor shall any Secured Party be obligated in
any manner to perform any of the obligations of the Grantor under or pursuant to
any Account (or any  agreement  giving rise thereto) or under or pursuant to any
Contract,  to make any  payment,  to make any  inquiry  as to the  nature or the
sufficiency  of  any  payment  received  by it or as to the  sufficiency  of any



<PAGE>18


performance  by any party  under  any  Account  (or any  agreement  giving  rise
thereto) or under any Contract, to present or file any claim, to take any action
to enforce any  performance  or to collect the payment of any amounts  which may
have been assigned to it or to which it may be entitled at any time or times.

          (f) Compliance with Terms of Contracts, etc. The Grantor will perform
and comply in all material respects with all its obligations under the Contracts
and all its other contractual obligations relating to the Collateral.

     SECTION 8. As to Trademarks, Patents and Copyrights.

          (a) Use of Trademarks.  Except with respect to any Trademark that the
Grantor shall reasonably determine is of negligible economic value to it (and so
advise  the Agent in  writing),  the  Grantor  shall,  either  itself or through
licensees,  (i) continue to use the Trademarks on each and every trademark class
of goods  applicable  to its current line as reflected in its current  catalogs,
brochures and price lists in order to maintain the Trademarks in full force free
from any claim of  abandonment  for  nonuse,  (ii)  maintain  as in the past the
quality of products and services offered under the Trademarks,  (iii) employ the
Trademarks with the appropriate  notice of  registration,  (iv) not adopt or use
any mark which is confusingly similar or a colorable imitation of the Trademarks
unless the Agent shall obtain a perfected  security interest therein pursuant to
this  Agreement  and (v) not (and will not permit any  licensee or  sublicensees
thereof to) do any act or knowingly omit to do any act whereby any Trademark may
become invalidated.

          (b) No Abandonment, Dedication, etc. The Grantor will not do any act,
or omit to do any act, whereby the Trademarks,  Patents or Copyrights may become
abandoned or  dedicated.  The Grantor shall notify the Agent  immediately  if it
knows of any reason or has reason to know that any  application or  registration
may become abandoned or dedicated or of any adverse determination or development
(including, without limitation, the institution of, or any such determination or
development in, any proceeding in the United States Patent and Trademark Office,
the United  States  Copyright  Office,  or any court or tribunal in any country)
regarding the Grantor's  ownership of any Trademark,  Patent or Copyright or its
right to register the same or to keep and maintain the same.

          (c)  Filings.  The  Grantor  will not,  either  itself or through any
agent,  employee,  licensee  or  designee,  (i)  file  an  application  for  the
registration  of any  Patent or  Trademark  with the  United  States  Patent and
Trademark  Office or any  similar  office or agency in any other  country or any
political  subdivision thereof or for the registration of any Copyright with the
United  States  Copyright  Office or any  similar  office or agency in any other
country or any political  subdivision thereof or (ii) file any assignment of any
Patent or Trademark,  which the Grantor may acquire from a third party, with the
United States Patent and Trademark Office or any similar office or agency in any
other country or any political subdivision thereof or of any Copyright which the
Grantor may acquire from a third party,  with the United States Copyright Office
or  any  similar  office  or  agency  in any  other  country  or  any  political
subdivision thereof,  unless the Grantor shall, within 15 days after the date of
any such  filing,  notify the Agent  thereof,  and,  upon  request of the Agent,
execute and deliver any and all assignments,  agreements, instruments, documents
and papers as the Agent may


<PAGE>19


request to evidence the Agent's interest in such Copyright,  Patent or Trademark
and the  goodwill and general  intangibles  of the Grantor  relating  thereto or
represented   thereby,   and  the  Grantor  hereby  constitutes  the  Agent  its
attorney-in-fact  to  execute  and  file  all such  writings  for the  foregoing
purposes,  all lawful acts of such attorney being hereby ratified and confirmed;
such power being  coupled with an interest is  irrevocable  until the payment in
full  in  cash  and  the  performance  of all of the  Secured  Obligations,  the
expiration or cancellation of all of the Letters of Credit and the expiration or
termination of the Total Commitments. The Grantor shall not sell Inventory under
any other Trademark without providing the Agent 30 days' prior written notice of
its intention to do so.

          (d)  Maintenance  of  Registrations,  etc.  The Grantor will take all
reasonable and necessary steps in any proceeding before the United States Patent
and Trademark  Office,  the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, to maintain
each  application  and  registration  of all  material  Trademarks,  Patents and
Copyrights,  including, without limitation,  filing of applications for renewal,
affidavits of use, affidavits of incontestability  and opposition,  interference
and cancellation proceedings.

          (e) Further Assurances. The Grantor will perform all acts and execute
and  deliver  all  further   instruments  and  documents,   including,   without
limitation, assignments for security in form suitable for filing with the United
States Patent and Trademark  Office,  and the United States Copyright Office, or
any similar  office or agency in any other country or any political  subdivision
thereof,  as may be  reasonably  requested by the Agent at any time to evidence,
perfect,  maintain,  record and  enforce the  Agent's  interest in all  material
Trademarks, Patents and Copyrights or otherwise in furtherance of the provisions
of this  Agreement,  and the Grantor hereby  authorizes the Agent to execute and
file one or more financing  statements (and similar documents) or copies thereof
or of this Agreement with respect to material Patents, Trademarks and Copyrights
signed only by the Agent.

          (f)  Infringement,  Misappropriation  or Dilution Suits. In the event
that any Patent, Trademark or Copyright included in the Collateral is infringed,
misappropriated  or diluted by a third party,  the Grantor shall promptly notify
the Agent after the Grantor learns  thereof and shall,  unless the Grantor shall
reasonably  determine that such Patent,  Trademark or Copyright is of negligible
economic  value to the Grantor (which  determination  the Grantor shall promptly
report  to the  Agent),  promptly  sue  for  infringement,  misappropriation  or
dilution, to seek injunctive relief where appropriate and to recover any and all
damages for such infringement,  misappropriation or dilution, or take such other
actions  as the  Grantor  shall  reasonably  deem  appropriate  or the Agent may
reasonably request under the circumstances to protect such Patent,  Trademark or
Copyright.

          (g)  Notification as to Trademark  confusion.  The Grantor will, upon
acquiring  knowledge  of any use by any  Person of any term or design  likely to
cause confusion with any material  Trademark,  promptly notify the Agent of such
use and, if requested by the Agent,  shall join with the Agent, at the Grantor's
expense,  in such action as the Agent,  in its reasonable  discretion,  may deem
advisable for the protection of the Agent's interest in and to the Trademarks.

     SECTION 9.  As to the Pledged Stock Collateral; Voting Rights; Dividends;
Etc.


<PAGE>20


               (a) So long as no Event of  Default  shall have  occurred  and be
          continuing:

               (i) the Grantor  shall be entitled to exercise any and all voting
          and other consensual rights pertaining to the Pledged Stock Collateral
          or any part thereof for any purpose not inconsistent with the terms of
          this Agreement; provided, that the Grantor shall not exercise or shall
          refrain from  exercising any such right if, in the Agent's  reasonable
          judgment,  such  action  would have a material  adverse  effect on the
          value of the Pledged Stock Collateral or any part thereof;

               (ii)  notwithstanding  the provisions of Section 1(n) hereof, the
          Grantor  shall be entitled to receive and retain any and all dividends
          paid in respect of the Pledged Stock  Collateral;  provided,  that any
          and all

                    (A) dividends  paid or payable other than in cash in respect
          of,  and  instruments  and  other  property  received,  receivable  or
          otherwise  distributed  in respect of, or in exchange for, any Pledged
          Stock Collateral, and

                    (B) dividends  and other  distributions  paid or payable in
          cash in respect of any Pledged Stock  Collateral in connection  with a
          partial or total  liquidation or  dissolution or in connection  with a
          reduction of capital,  capital surplus or  paid-in-surplus,

          shall be, and shall be  forthwith  delivered  to the Agent to hold as,
          Pledged Stock  Collateral  and shall,  if received by the Grantor,  be
          received in trust for the  benefit of the Agent and the other  Secured
          Parties,  be  segregated  from  the  other  property  or  funds of the
          Grantor,  and be  forthwith  delivered  to the Agent as Pledged  Stock
          Collateral  in the  same  form  as so  received  (with  any  necessary
          endorsement); and

               (iii)  the  Agent  shall  execute  and  deliver  (or  cause to be
          executed  and  delivered)  to the Grantor  all such  proxies and other
          instruments as the Grantor may  reasonably  request for the purpose of
          enabling  the Grantor to exercise the voting and other rights which it
          is entitled to exercise pursuant to paragraph (i) above and to receive
          the dividends which it is authorized to receive and retain pursuant to
          paragraph (ii) above;

          (b) upon the  occurrence  and during the  continuance  of an Event of
          Default:

               (i) upon  written  notice  from the Agent to the  Grantor to such
          effect,  all rights of the  Grantor to  exercise  the voting and other
          consensual  rights  which it would  otherwise  be entitled to exercise
          pursuant  to Section  9(a)(i) and to receive  the  dividends  which it
          would  otherwise  be  authorized  to receive  and retain  pursuant  to
          Section  9(a)(ii)  shall cease,  and all such rights  shall  thereupon
          become vested in the Agent, who shall thereupon have the sole right to
          exercise  such voting and other  consensual  rights and to receive and
          hold as Pledged Stock Collateral any such dividends; and


<PAGE>21


               (ii) all dividends which are received by the Grantor  contrary to
          the  provisions of paragraph  (b)(i) of this Section shall be received
          in trust for the benefit of the Agent and the other  Secured  Parties,
          shall be  segregated  from  other  funds of the  Grantor  and shall be
          forthwith  paid over to the Agent as Pledged  Stock  Collateral in the
          same form as so received (with any necessary endorsement).

     SECTION 10. As to Pledged Notes. In case, upon the dissolution, liquidation
(in whole or in part),  bankruptcy or  reorganization of the maker of any of the
Pledged  Notes or the  merger or  consolidation  of any such maker with and into
another  Person,  any sum or other property  shall be paid or  distributed  with
respect to any of the Pledged  Notes,  and such sum or property shall be paid or
distributed  on account of the principal of any of the Pledged  Notes,  such sum
and  property  shall be paid  over or  delivered  to the Agent to be held by the
Agent as additional  Collateral  hereunder unless any such sum or property shall
constitute  cash in which case, so long as there shall exist no Default or Event
of Default and the Grantor  shall have  Required  Inventory,  such cash shall be
paid to the Agent to be applied to the  payment of the  Secured  Obligations  as
provided  in Section  2.12(g) of the Credit  Agreement.  If there  shall exist a
Default or an Event of Default or the Grantor shall not have Required Inventory,
such cash shall be paid to the Agent to be applied to the Secured Obligations in
the order provided in Section 7.2 of the Credit Agreement.  All of the foregoing
property  (other  than cash) shall  constitute  Pledged  Notes for all  purposes
hereof.

     SECTION  11.  Vehicles.  The Grantor  will  maintain  each  Vehicle in good
operating condition,  ordinary wear and tear and immaterial impairments of value
and damage by the elements excepted,  and will provide all maintenance,  service
and repairs  necessary  for such purpose.  Promptly  after the date hereof (and,
with  respect to any  Vehicles  acquired by the Grantor  subsequent  to the date
hereof  promptly  after  the  date  of   acquisition),   all   applications  for
certificates of title  indicating the Agent's first priority Lien on the Vehicle
covered by such  certificate,  and any other necessary  documentation,  shall be
filed by the Grantor in each office in each  jurisdiction  which the Agent shall
deem  advisable to perfect or protect its Liens on the  Vehicles.  In connection
with the foregoing,  the Grantor shall notify the Agent,  in writing,  promptly,
but in any event within 30 days after the date of  acquisition,  of each Vehicle
acquired subsequent to the date hereof.

     SECTION 12.  Insurance.  The Grantor  shall,  at its own expense,  maintain
insurance  with  respect to the  Inventory,  Equipment,  Vehicles  and any other
customarily insured Collateral in such amounts, against such risks, in such form
and  with  such  insurers,  as is  provided  for in  Section  5.3 of the  Credit
Agreement.  Without  limiting  the  provisions  of  Section  5.3 of  the  Credit
Agreement,  upon the  occurrence  and  during  the  continuance  of any Event of
Default or at any time when the Grantor shall not have Required  Inventory,  all
insurance  payments in respect of such  Inventory and  Equipment  shall be held,
paid to the Agent and applied to the Secured  Obligations  in the order provided
in Section 7.2 of the Credit Agreement.


<PAGE>22


     SECTION 13.  Dispositions of Collateral;  Liens;  Additional Shares;  Other
Agreements.

          (a) Disposition of Collateral.  The Grantor shall not sell, transfer,
lease,  assign (by operation of law or otherwise) or otherwise dispose of any of
the  Collateral,  except  for  dispositions  otherwise  permitted  by the Credit
Agreement.

          (b) Liens.  The Grantor  shall not create,  incur or suffer to exist,
will  defend  the  Collateral  against  and will  take such  other  action as is
necessary to remove, any Lien, or other claim upon or with respect to any of the
Collateral  to secure any  obligation  of any  Person or entity,  except for the
security  interest  created by this Agreement and as otherwise  permitted by the
Credit Agreement, and will defend the right, title and interest of the Agent and
the other Secured Parties in and to any of the Collateral against the claims and
demands of all Persons whomsoever.

          (c) No Issuance of Stock.  The Grantor  agrees that it will (i) cause
each of the Issuers (other than any Unaffiliated  Issuer) not to issue any stock
or other securities in addition to or substitution for the Pledged Shares issued
by such  Issuer,  except to the Grantor and (ii) pledge  hereunder,  immediately
upon  its  acquisition  (directly  or  indirectly)  thereof,  any and  all  such
additional  shares of stock or other  securities  of each  Issuer of the Pledged
Shares.

          (d) Other Agreements.  The Grantor is not and will not become a party
to or otherwise be bound by any  agreement,  other than this  Agreement  and the
other Loan Documents, which restricts in any manner the rights of any present or
future holder of any of the Collateral other than the UBS Loan Agreement, the GE
Credit Program Documents and the Synthetic Lease Documents.

     SECTION 14.  Agent's  Appointment as  Attorney-in-Fact.  The Grantor hereby
irrevocably  appoints the Agent and any officer or agent thereof with full power
of substitution,  the Grantor's  attorney-in-fact  (which  appointment  shall be
irrevocable  until the payment in full in cash and the performance of all of the
Secured  Obligations,  the expiration or  cancellation  of all of the Letters of
Credit and the  expiration or termination  of the Total  Commitments  and deemed
coupled  with an  interest),  with full  authority in the place and stead of the
Grantor  and in the name of the Grantor or  otherwise,  from time to time in the
Agent's discretion,  upon and during the occurrence and continuation of an Event
of Default, to take any action and to execute any instrument which the Agent may
deem  necessary  or  advisable to  accomplish  the  purposes of this  Agreement,
including, without limitation:

               (i) to obtain and  adjust  insurance  required  to be paid to the
          Agent  pursuant to Section 12 or pursuant to Section 5.3 of the Credit
          Agreement;

               (ii) to ask, demand, collect, sue for, recover, compound, receive
          and give acquittance and receipts for moneys, claims and other amounts
          due and to become  due under or in  respect  of any of the  Collateral
          (including,  without limitation,  any Pledged Notes) and to extend the
          time of payment of any or all  thereof and to make any  allowance  and
          other adjustments with reference thereto;



<PAGE>23


               (iii) to receive, endorse, and collect any checks, drafts, notes,
          acceptances  or other  instruments,  any invoices,  freight or express
          bills,  bills of lading,  storage,  warehouse  receipts,  assignments,
          verifications,  notices  or other  documents  and  chattel  paper,  in
          connection with clause (i) or (ii) above;

               (iv) to receive, endorse and collect all instruments made payable
          to the Grantor  representing  any  dividend or other  distribution  in
          respect of the Pledged  Stock  Collateral  or any part  thereof and to
          give full discharge for the same;

               (v) to file any claims or take any action or  institute or defend
          any suit, action or proceeding at law or in equity which the Agent may
          deem  necessary  or  desirable  for  the  collection  of  any  of  the
          Collateral  or  otherwise  to  enforce  the  rights of the Agent  with
          respect to any of the  Collateral;

               (vi) to direct any party  liable for any payment in respect of or
          arising out of any of the  Collateral  to make  payment of any and all
          moneys due or to become due thereunder directly to the Agent or as the
          Agent shall direct;

               (vii) to  settle,  compromise  or  adjust  any  suit,  action  or
          proceeding described in clause (v) above and, in connection therewith,
          to give such discharges or releases as the Agent may deem appropriate;
          

               (viii) to set off or cause to be set off  amounts in any  account
          maintained with any Secured Party or otherwise  enforce rights against
          any of the Collateral in the possession of any Secured Party; (1)

               (ix) to pay or  discharge  Taxes and Liens levied or placed on or
          threatened  against the  Collateral  (except  where the Grantor is not
          required to discharge  such tax or Lien pursuant to the  provisions of
          this Agreement or the Credit Agreement),  to effect any repairs or any
          insurance  called  for by the terms of this  Agreement  or the  Credit
          Agreement,  to  adjust  the  same  and to pay  all or any  part of the
          premiums therefor and the costs thereof;

               (x) to assign any Trademark, Patent or Copyright (along with the
          goodwill  of the  business  to which  any such  Trademark,  Patent  or
          Copyright  pertains),  throughout the world for such term or terms, on
          such  conditions,  and in such manner,  as the Agent shall in its sole
          discretion determine;  and

               (xi) generally, to sell, transfer,  pledge and make any agreement
          with respect to or otherwise  deal with any of the Collateral as fully
          and completely as though the Agent were the absolute owner thereof for
          all  purposes,  and to do, at the  Agent's  option  and the  Grantor's
          expense,  at any time, or from time to time, all acts and things which
          the Agent deems  necessary  to protect,  preserve or realize  upon the
          Collateral  and the Agent's  Liens thereon and to effect the intent of
          this Agreement, all as fully and effectively as the Grantor might do.
         


<PAGE>24


     The Grantor hereby  ratifies all that said  attorneys  shall lawfully do or
cause to be done by virtue hereof.

     SECTION 15. Other Powers; Agent May Perform.

          (a) The Grantor also  authorizes  the Agent at any time and from time
to time to execute,  in connection  with any sale pursuant to Section 17 hereof,
any endorsements, assignments or other instruments of conveyance or any transfer
with respect to any Collateral.

          (b) If the Grantor fails to perform any agreement  contained  herein,
the Agent may itself perform,  or cause performance of, such agreement,  and the
expenses of the Agent incurred in connection  therewith  shall be payable by the
Grantor  under Section 18. If the Grantor fails to perform or comply with any of
its agreements  contained  herein and the Agent, as provided for by the terms of
this Agreement,  the Credit  Agreement or any other Loan Document,  shall itself
perform or comply,  or otherwise  cause  performance  or  compliance,  with such
agreement,   the  expenses  of  the  Agent  incurred  in  connection  with  such
performance or compliance, together with interest thereon at a rate per annum 2%
above the Alternate  Base Rate at the time of such failure to perform or comply,
shall be  payable by the  Grantor  to the Agent on demand  and shall  constitute
Secured Obligations secured hereby.

     SECTION  16.  Limitation  of Duty on the Part of  Agent  or  Other  Secured
Parties; Release.

          (a) Duties. The powers conferred on the Agent hereunder are solely to
protect its  interest  and the  interests  of the other  Secured  Parties in the
Collateral  and shall not impose any duty upon it or them to  exercise  any such
powers.  Except for the safe custody of any  Collateral in the possession of any
of  them  and  the  accounting  for  moneys  actually  received  by any of  them
hereunder, neither the Agent nor any of the other Secured Parties shall have any
duty as to any Collateral or as to the taking of any necessary steps to preserve
rights against prior parties or any other rights  pertaining to any  Collateral,
including,  without  limitation,  ascertaining  or taking action with respect to
calls, conversions,  exchanges, maturities, tenders or other matters relative to
any Pledged Stock Collateral,  whether or not the Agent has or is deemed to have
knowledge  of such  matters.  Neither  the Agent,  nor any of the other  Secured
Parties, nor any of their respective directors, officers, employees,  attorneys,
agents, advisors, attorneys-in-fact,  experts and Affiliates shall be liable for
failure to demand,  collect or realize upon all or any part of the Collateral or
for any delay in doing so or shall be under any  obligation to sell or otherwise
dispose of any Collateral upon the request of the Grantor or otherwise.

          (b)  Release.  The Grantor  releases the Agent and the other  Secured
Parties and each of their respective directors, officers, employees,  attorneys,
agents, advisors,  attorneys-in-fact,  experts and Affiliates,  from and against
any and all penalties,  fines,  expenses,  losses,  settlements,  costs, claims,
causes of action, debts, dues, sums of money, accounts, accountings, reckonings,
acts, omissions, demands, liabilities, obligations, damages, actions, judgments,
suits  proceedings or disbursements of any kind or nature  whatsoever,  known or
unknown,  contingent  or  otherwise  which


<PAGE>25


may be  imposed  on,  incurred  by or  asserted  against  any of them in any way
relating to or arising out of or with respect to this Agreement, the Collateral,
and/or any actions taken or omitted to be taken by the Agent or any of the other
Secured  Parties  with  respect  thereto  (except to the extent  that any of the
foregoing arises solely from the gross  negligence or willful  misconduct of the
party which would be so released as determined by a final order or judgment of a
court of  competent  jurisdiction),  and the Grantor  hereby  agrees to hold the
Secured Parties and their respective directors, officers, employees,  attorneys,
agents,  advisors,  attorneys-in-fact,  experts and Affiliates harmless from and
against any and all penalties,  fines,  expenses,  losses,  settlements,  costs,
claims,  causes of action,  debts, dues, sums of money,  accounts,  accountings,
reckonings,  acts,  omissions,  demands,  liabilities,   obligations,   damages,
actions,  judgments,  suits,  proceedings or disbursements of any kind or nature
whatsoever,  known or unknown,  contingent or otherwise which may be imposed on,
incurred by or asserted against any of them.

          (c) Survival of Agreements. The agreements of the Grantor contained in
this Section  shall survive the payment in full in cash and the  performance  of
all of the Secured  Obligations,  the expiration or  cancellation  of all of the
Letters of Credit,  the expiration or termination of the Total  Commitments  and
the termination of the security interests granted hereby.

     SECTION 17.  Remedies.  If any Event of Default  shall have occurred and be
continuing,  then,  subject  to the  provisions  of  Section  7.1 of the  Credit
Agreement:

          (a)  General.  The  Agent,  on  behalf  of the  Secured  Parties  may
exercise,  in addition to all other  rights and  remedies  granted to it in this
Agreement,  the  Credit  Agreement  and in any  other  instrument  or  agreement
securing,  evidencing  or relating to the  Secured  Obligations,  all rights and
remedies of a secured party under the Uniform Commercial Code, as then in effect
in the  jurisdiction  in which such rights are exercised.  Without  limiting the
generality of the foregoing,  the Agent,  without demand of performance or other
demand,  presentment,  protest,  advertisement or notice of any kind (except any
notice  required  by law  referred to below) to or upon the Grantor or any other
Person (all and each of which demands, defenses,  advertisements and notices are
hereby  waived),   may  in  such  circumstances   forthwith  collect,   receive,
appropriate  and realize upon the  Collateral,  or any part thereof,  and/or may
forthwith sell, lease, assign, give option or options to purchase,  or otherwise
dispose of and deliver the Collateral or any part thereof (or contract to do any
of the foregoing), in one or more parcels at public or private sale or sales, at
any  exchange,  broker's  board  or  office  of any of the  Secured  Parties  or
elsewhere  upon such terms and  conditions as it may deem  advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption  of any  credit  risk.  In case of any sale of all or any part of the
Collateral  on credit or for  future  delivery,  the  Collateral  so sold may be
retained by the Agent until the selling price is paid by the purchaser  thereof,
but none of the Secured Parties shall incur any liability in case of the failure
of such  purchaser to take up and pay for the Collateral so sold and, in case of
any such failure,  such  Collateral  may again be sold upon like notice.  To the
extent  permitted by applicable  law, in no event shall the  obligations  of the
Grantor to any of the Secured  Parties be credited with any part of the proceeds
of sale of any Collateral  until cash payment thereof has actually been received
by the Agent. The Agent shall not


<PAGE>26


be  obligated  to make any such sale  pursuant to any notice  thereof,  but may,
without notice or  publication,  adjourn any public or private sale or cause the
same to be  adjourned  from time to time by  announcement  at the time and place
fixed for the sale,  and such sale may be made at any time or place to which the
same may be so adjourned.  Any of the Secured  Parties shall have the right upon
any such public sale or sales,  and, to the extent  permitted  by law,  upon any
such private sale or sales,  to purchase the whole or any part of the Collateral
so sold,  and each Secured  Party shall be entitled,  for the purpose of bidding
and making settlement or payment of the purchase price for all or any portion of
the  Collateral  sold  at  such  sale,  to use  and  apply  any  of the  Secured
Obligations owed to such Person (or, in the case of the Agent, any or all of the
Secured  Obligations  owed to the Secured Parties) as a credit on account of the
purchase  price payable by such Person at such sale.  Each purchaser at any such
sale shall acquire the property sold  absolutely free from any claim or right on
the part of the  Grantor,  and the  Grantor  hereby  waives (to the full  extent
permitted by law) all rights of redemption,  stay and/or  appraisal which it now
has or may at any time in the future  have under any rule of law or statute  now
existing or  hereafter  enacted.  The  Grantor  further  agrees,  at the Agent's
request, to assemble the Collateral and make it available to the Agent at places
which the Agent shall reasonably  select,  whether at the Grantor's  premises or
elsewhere.  The Agent shall,  at such time or times as it determines,  apply the
net  proceeds  of  any  such  collection,   recovery,  receipt,   appropriation,
realization or sale,  after deducting all reasonable costs and expenses of every
kind incurred  therein or incidental  to the care or  safekeeping  of any of the
Collateral or in any way relating to the Collateral or the rights of the Secured
Parties hereunder, including, without limitation, reasonable attorneys' or other
agents'  fees  and  disbursements,  to the  payment  in  whole or in part of the
Secured  Obligations,  in the  order  provided  in  Section  7.2  of the  Credit
Agreement and, only after such application and after the payment by the Agent of
any other amounts  required by any provision of law to be paid to third parties,
including,  without limitation,  Section 9-504(1)(c) of the Code, need the Agent
account for the  surplus,  if any, to the  Grantor.  To the extent  permitted by
applicable  law,  the  Grantor  waives all  claims,  damages  and demands it may
acquire against any of the Secured Parties arising out of the exercise by any of
them of any  rights  hereunder.  If any  notice  of a  proposed  sale  or  other
disposition of Collateral  shall be required by law, such notice shall be deemed
reasonable  and  proper  if given at least  10 days  before  such  sale or other
disposition; provided, that no demand, advertisement or notice, all of which are
hereby expressly waived,  shall be required in connection with any sale or other
disposition of any part of the Collateral which threatens to decline speedily in
value or which is of a type customarily sold on a recognized market. The Grantor
shall  remain  liable for any  deficiency  if the  proceeds of any sale or other
disposition  of  the  Collateral  are   insufficient   to  satisfy  the  Secured
Obligations  in full and the fees and  disbursements  of any  attorneys or other
agents employed by any of the Secured Parties to collect such deficiency.


          (b) Suits. The Agent,  instead of exercising the power of sale herein
conferred  upon  it,  may  proceed  by a suit or suits  at law or in  equity  to
foreclose the security interests granted hereby and sell the Collateral,  or any
portion thereof,  under one or more judgments or decrees of a court or courts of
competent jurisdiction.

          (c) Pledged Notes. The Agent may in its discretion hold any or all of
the Pledged  Notes until  maturity  and receive any payments  therefrom  for its
benefit and the benefit of the other  Secured  Parties or may sell any or all of
such Pledged Notes in public or private sale.


<PAGE>27


          (d) Use of Patents,  Copyrights or Trademarks. The Agent may instruct
the Grantor not to make any further use of the Patents, Copyrights or Trademarks
or any mark similar thereto for any purpose.

          (e) Licensing.  The Agent may license,  whether  general,  special or
otherwise,  and  whether  on an  exclusive  or  nonexclusive  basis,  any of the
Trademarks,  Patents or Copyrights  throughout the world for such term or terms,
on  such  conditions,  and in  such  manner,  as the  Agent  shall  in its  sole
discretion determine.

          (f)  Enforcement of Remedies against  Licensees or Sublicensees.  The
Agent may (without  assuming any  obligations or liability  thereunder),  at any
time,  enforce  (and shall have the  exclusive  right to  enforce)  against  any
licensee or sublicensee  all rights and remedies of the Grantor in, to and under
any one or more license  agreements with respect to any of the  Collateral,  and
take or refrain from taking any action under any thereof, and the Grantor hereby
releases the Agent and the other Secured  Parties  from,  and agrees to hold the
Agent and the other  Secured  Parties  free and  harmless  from and  against any
claims  arising out of, any action  taken or omitted to be taken with respect to
any such license agreement.

          (g) Grantor's  Assistance in Manufacture and Sale of Products Bearing
Trademarks,  etc. In the event of any such  license,  assignment,  sale or other
disposition  of the  Collateral,  or any of it,  the  Grantor  shall  supply its
know-how  and  expertise  in  connection  with the  manufacture  and sale of the
products  bearing or  relating to  Trademarks,  Patents or  Copyrights,  and its
customer  lists  and  other  records  relating  to the  Trademarks,  Patents  or
Copyrights  and to the  distribution  of  said  products,  to the  Agent  or its
designee.

          (h)  Assignment  of  Trademarks,  etc.  In  order  to  implement  the
assignment,  sale  or  other  disposal  of  any of the  Trademarks,  Patents  or
Copyrights,  the Agent may, at any time,  pursuant to the  authority  granted in
Section 14 hereof,  execute  and deliver on behalf of the  Grantor,  one or more
instruments  of assignment  of the  Trademarks,  Patents or  Copyrights  (or any
application of registration thereof), in form suitable for filing,  recording or
registration in any country.

          (i) Proceeds.  Upon demand by the Agent, all Proceeds received by the
Grantor  consisting of cash,  checks and other  near-cash items shall be held by
the Grantor in trust for the Agent and the other Secured  Parties and segregated
from other  funds of the  Grantor,  and  shall,  forthwith  upon  receipt by the
Grantor,  be turned over to the Agent in the exact form  received by the Grantor
(duly  indorsed by the  Grantor to the Agent,  if  required).  All cash or other
Proceeds  received by the Agent in respect of any sale of,  collection  from, or
other  realization upon all or any part of the Collateral may, in the discretion
of the Agent,  be held by the Agent as  Collateral  for, and then or at any time
thereafter  applied (after payment of any amounts  payable to the Agent pursuant
to  Section  18) in whole  or in part  against,  all or any part of the  Secured
Obligations  in the order provided in Section 7.2 of the Credit  Agreement.  Any
surplus of such cash or other  Proceeds  held by the Agent and  remaining  after
payment in full in cash and the  performance of all of the Secured  Obligations,
the  expiration  or  cancellation  of all of  the  Letters  of  Credit  and  the
expiration or  termination  of the Total


<PAGE>28


Commitments  shall be paid over to the Grantor or to whomsoever  may be lawfully
entitled to receive such surplus.

          (j) Private Sale of Pledged Notes and Pledged Stock Collateral. If at
any time when the Agent shall determine to exercise its right to sell all or any
Pledged  Notes or any part of the  Pledged  Stock  Collateral  pursuant  to this
Section,  such Pledged Notes or Pledged Stock  Collateral or the part thereof to
be sold shall not be effectively registered under the Securities Act of 1933, as
amended,  and as from time to time in  effect,  and the  rules  and  regulations
thereunder (the "Securities  Act"), the Agent is hereby expressly  authorized to
sell such  Pledged  Notes or Pledged  Stock  Collateral  or such part thereof by
private sale in such manner and under such  circumstances  as the Agent may deem
necessary or  advisable in order that such sale may legally be effected  without
such  registration.  The  Grantor  agrees that  private  sales so made may be at
prices and other terms less  favorable to the seller than if such Pledged  Notes
or Pledged Stock Collateral were sold at public sales, and that the Agent has no
obligation to delay sale of any such Pledged  Notes or Pledged Stock  Collateral
for the period of time  necessary to permit the issuer of such Pledged  Notes or
Pledged  Stock  Collateral,  even if such issuer would agree,  to register  such
Pledged Notes or Pledged Stock  Collateral for public sale under such applicable
securities  law.  The Grantor  agrees that  private  sales shall not,  solely by
virtue of being  private  sales,  be deemed to have been made in a  commercially
unreasonable  manner.  Without limiting the generality of the foregoing,  in any
such event the Agent,  in compliance with  applicable  securities  laws, (a) may
proceed to make such private sale notwithstanding that a registration  statement
for the  purpose of  registering  such  Pledged  Stock  Collateral  or such part
thereof  shall have been filed under such  Securities  Act, (b) may approach and
negotiate with a limited number of potential  purchasers to effect such sale and
(c) may restrict such sale to purchasers as to their number,  nature of business
and investment intention including without limitation to purchasers each of whom
will represent and agree to the satisfaction of the Agent that such purchaser is
purchasing  for its own  account,  for  investment,  and not  with a view to the
distribution or sale of such Pledged Notes or Pledged Stock Collateral,  or part
thereof,  it being  understood  that the Agent may cause or require the Grantor,
and the Grantor  hereby agrees upon the written  request of the Agent,  to cause
(i) a legend or legends to be placed on the certificates to be delivered to such
purchasers  to the effect that the  Pledged  Notes or Pledged  Stock  Collateral
represented  thereby  have not been  registered  under  the  Securities  Act and
setting  forth or  referring  to  restrictions  on the  transferability  of such
securities; and (ii) the issuance of stop transfer instructions to such Issuer's
transfer  agent,  if any,  with  respect to the Pledged  Notes or Pledged  Stock
Collateral,  or, if such Issuer transfers its own securities,  a notation in the
appropriate  records of such Issuer.  In the event of any such sale, the Grantor
does hereby  consent and agree that the Agent shall incur no  responsibility  or
liability  for selling all or any Pledged Notes or any part of the Pledged Stock
Collateral  at  a  price  which  the  Agent  may  deem   reasonable   under  the
circumstances, notwithstanding the possibility that a substantially higher price
might be realized if the sale were public and deferred until after  registration
as aforesaid.

          (k) Registration of Pledged Notes or Pledged Stock Collateral. If the
Agent,  in  its  reasonable  discretion,  determines  that  it is  necessary  or
advisable,  in connection  with the exercise by the Agent of its remedies  under
this Section,  to effect a public  registration  of any Pledged Notes or Pledged
Stock  Collateral  pursuant to the Securities Act or any state Blue Sky laws (or
any similar


<PAGE>29


statutes  then in  effect),  the Grantor  shall,  as  expeditiously  as possible
(except with respect to any Pledged Notes or Pledged  Shares of an  Unaffiliated
Issuer):

          (i) cause the issuer  thereof to prepare and file with the  Securities
     and Exchange  Commission (the  "Commission") a registration  statement with
     respect  to  the  Collateral  and  use  its  best  efforts  to  cause  such
     registration statement to become and remain effective;

          (ii) cause the issuer  thereof to prepare and file with the Commission
     such  amendments  and  supplements to such  registration  statement and the
     prospectus  used in  connection  therewith as may be necessary to keep such
     registration  statement  effective and to comply with the provisions of the
     Securities Act with respect to the sale or other disposition of the Pledged
     Notes or Pledged Stock Collateral  covered by such  registration  statement
     whenever  the Agent  shall  desire  to sell or  otherwise  dispose  of such
     Pledged Notes or Pledged Stock Collateral; (1)

          (iii) furnish or cause the issuer thereof to furnish to the Agent such
     numbers of copies of a summary prospectus or other prospectus,  including a
     preliminary  prospectus,   in  conformity  with  the  requirements  of  the
     Securities  Act,  and such  other  documents  as the Agent  may  reasonably
     request in order to facilitate the public sale or other disposition of such
     Pledged Notes or Pledged Stock Collateral by the Agent;

          (iv) cause the issuer thereof to register or qualify the Pledged Notes
     or Pledged Stock Collateral  covered by such  registration  statement under
     such other  securities  or Blue Sky laws of such  jurisdictions  within the
     United States as the Agent shall request, and do such other reasonable acts
     and things as maybe  required of it to enable the Agent to  consummate  the
     public sale or other  disposition  in such  jurisdictions  of such  Pledged
     Notes or Pledged Stock Collateral by the Agent; (1)

          (v) furnish or cause the issuer thereof to furnish,  at the request of
     the Agent,  on the date that the Pledged Notes or Pledged Stock  Collateral
     shall  be  delivered  to  the   underwriters  for  sale  pursuant  to  such
     registration  or, if such Pledged Notes or Pledged Stock Collateral are not
     being  sold  through  underwriters,  on  the  date  that  the  registration
     statement  with respect to such Pledged Notes or Pledged  Stock  Collateral
     becomes  effective,  (A) an opinion,  dated such date,  of the  independent
     counsel  representing the issuer of the applicable Pledged Notes or Pledged
     Shares  for  the   purposes  of  such   registration,   addressed   to  the
     underwriters, if any, and if such Pledged Notes or Pledged Stock Collateral
     are not being sold through  underwriters,  then to the Agent,  stating that
     such  registration  statement has become effective under the Securities Act
     and  that  (1) to the  best  knowledge  of  such  counsel,  no  stop  order
     suspending the effectiveness thereof has been issued and no proceedings for
     that purpose have been instituted or are pending or contemplated  under the
     Securities Act, (2) the registration statement, the related prospectus, and
     each  amendment  or  supplement  thereto  comply as to form in all material
     respects  with the  requirements  of the  Securities  Act (except that such
     counsel  need  express  no  opinion as to  financial  statements  contained
     therein),  (3) such  counsel  has no  reason to


<PAGE>30


     believe that either the  registration  statement or the prospectus,  or any
     amendment  or  supplement  thereto,  contains  any  untrue  statement  of a
     material  fact  required  to be stated  therein  or  necessary  to make the
     statements therein not misleading, (4) the descriptions in the registration
     statement or the prospectus, or any amendment or supplement thereto, of all
     legal matters and contracts and other legal  documents or  instruments  are
     accurate and fairly present the information  required to be shown,  and (5)
     such  counsel  does not  know of any  legal  or  governmental  proceedings,
     pending or  contemplated,  required  to be  described  in the  registration
     statement or prospectus,  or any amendment or supplement thereto, which are
     not described as required, nor of any contracts or documents or instruments
     of a character  required to be described in the  registration  statement or
     prospectus,  or any  amendment  or  supplement  thereto,  or to be filed as
     exhibits to the registration  statement which are not described or filed or
     incorporated by reference as required;  and (B) a letter,  dated such date,
     from the  independent  certified  public  accountants  of the issuer of the
     applicable  Pledged Notes or Pledged Shares addressed to the  underwriters,
     if any,  and if such  Pledged  Notes or  Pledged  Shares are not being sold
     through underwriters,  then to the Agent, stating that they are independent
     certified public  accountants  within the meaning of the Securities Act and
     that,  in the opinion of such  accountants,  the financial  statements  and
     other financial data of such issuer included in the registration  statement
     or the  prospectus,  or any amendment or supplement  thereto,  comply as to
     form in all respects with the  applicable  accounting  requirements  of the
     Securities Act. Such opinion of counsel shall additionally cover such other
     legal  matters  with respect to the  registration  in respect of which such
     opinion is being  given as the Agent may  reasonably  request.  Such letter
     from the independent  certified public accountants shall additionally cover
     such other financial matters (including information as to the period ending
     not more than five  Business  Days prior to the date of such  letter)  with
     respect to the  registration in respect of which such letter is being given
     as the Agent may reasonably request; and

          (vi) otherwise use its best efforts to comply with or cause the issuer
     thereof  to  comply  with  all  applicable  rules  and  regulations  of the
     Commission,  and  make  available  to its  security  holders,  as  soon  as
     reasonably  practicable,  but not later than 18 months after the  effective
     date of the  registration  statement,  an earnings  statement  covering the
     period of at least 12 months  beginning with the first full month after the
     effective date of such  registration  statement,  which earnings  statement
     shall satisfy the provisions of Section 11(a) of the Securities Act.

     All expenses  incurred in complying with this Section,  including,  without
limitation,  all  registration  and filing  fees,  underwriting  fees,  printing
expenses,  fees and disbursements of counsel for the issuer of the Pledged Notes
or Pledged Shares, the reasonable fees and expenses of counsel for the Agent and
expenses of complying with the securities or Blue Sky laws of any jurisdictions,
shall be paid by the Grantor.

          (1) Additional Inventory Remedies.  Until the payment in full in cash
and  the  performance  of all of the  Secured  Obligations,  the  expiration  or
cancellation  of all of the Letters of Credit and the


<PAGE>31


expiration or termination of the Total Commitments, at any time when an Event of
Default has occurred and is continuing: (i) the Grantor will perform any and all
reasonable  actions  requested  by the Agent to  enforce  the  Agent's  security
interest in the  Inventory  and all of the  Agent's  rights  hereunder,  such as
leasing warehouses to the Agent or its designee,  placing and maintaining signs,
appointing custodians,  transferring Inventory to warehouses,  and delivering to
the Agent,  warehouse receipts,  documents of title and such other documentation
as the Agent may reasonably request;  (ii) if any Inventory is in the possession
or control of any of the  Grantor's  agents,  contractors  or  processors or any
other third  party,  the Grantor  will notify the Agent  thereof and will notify
such agents,  contractors  or processors or third party of the Agent's  security
interest therein and, upon request, instruct them to hold all such Inventory for
the  Agent's and the  Grantor's  account,  as their  interests  may appear,  and
subject to the  Agent's  instructions;  (iii) the Agent  shall have the right to
hold all Inventory subject to the security interest granted hereunder;  and (iv)
the Agent shall have the right to take  possession  of the Inventory or any part
thereof and to maintain such  possession on the Grantor's  premises or to remove
any or all of the  Inventory to such other place or places as the Agent  desires
in its sole  discretion.  If the Agent exercises its right to take possession of
the Inventory, the Grantor, upon the Agent's demand, will assemble the Inventory
and make it  available  to the Agent at the  Grantor's  premises  at which it is
located.



<PAGE>32


     SECTION 18. Indemnity and Expenses

          (a) The Grantor agrees on demand, to pay, and to save,  indemnify and
keep the Secured Parties and their respective  directors,  officers,  employees,
attorney, agents, advisors, attorneys-in-fact,  experts and Affiliates (each, an
"Indemnified  Party")  harmless from and against any and all  penalties,  fines,
expenses,  losses,  settlements,  costs, claims,  causes of action, debts, dues,
sums of money,  accounts,  accountings,  reckonings,  acts, omissions,  demands,
liabilities,  obligations,  damages,  actions,  judgments,  suits, proceeding or
disbursements of any kind or nature whatsoever,  known or unknown, contingent or
otherwise,  including,  without  limitation,  attorneys' and consultants'  fees,
investigation  and laboratory fees,  response costs,  court costs and litigation
expenses  (i) with respect to, or  resulting  from,  any delay by the Grantor in
paying,  any and all  excise,  sales or other  Taxes  which  may be  payable  or
determined to be payable with respect to any of the Collateral, (ii) arising out
of the use of the  Trademarks,  Patents and  Copyrights or any alleged defect in
any  product  manufactured,  promoted  or  sold  by  the  Grantor  or out of the
manufacture,  promotion,  labeling, sale or advertisement of any such product by
the Grantor,  (iii) with respect to, or resulting from, any delay by the Grantor
in complying with any  Requirement of Law applicable to any of the Collateral or
(iv) in connection with any of the transactions  contemplated by this Agreement,
including the fees and disbursements of counsel and of any other experts,  which
any of the Secured Parties or their respective directors,  officers,  employees,
attorneys,  consultants,  experts or agents may incur in connection with (w) the
administration or enforcement of this Agreement,  including such expenses as are
incurred to preserve the value of the Collateral  and the validity,  perfection,
rank and value of any Liens granted hereunder, (x) the collection, sale or other
disposition  of any of the  Collateral,  (y) the exercise by the Agent of any of
the rights  conferred  upon it hereunder or (z) any Default or Event of Default,
but excluding any such penalties, fines, expenses, losses,  settlements,  costs,
claims,  causes of action,  debts, dues, sums of money,  accounts,  accountings,
reckonings,  acts,  omissions,  demands,  liabilities,   obligations,   damages,
actions,  judgments,  suits,  proceeding or  disbursements of any kind or nature
whatsoever,  known or  unknown,  contingent  or  otherwise,  including,  without
limitation, attorneys' and consultants' fees, investigation and laboratory fees,
response costs, court costs and litigation expenses incurred solely by reason of
the  gross  negligence  or  willful  misconduct  of  the  Indemnified  Party  as
determined by a final order or judgment of a court of competent jurisdiction.

          (b) In any suit,  proceeding  or action  brought  by any  Indemnified
Party under any Account or Contract for any sum owing thereunder,  or to enforce
any  provisions of any Account or Contract,  the Grantor agrees to pay, and will
save,  indemnify and keep such  Indemnified  Party harmless from and against any
and all penalties, fines, expenses, losses,  settlements,  costs, claims, causes
of action, debts, dues, sums of money, accounts, accountings,  reckonings, acts,
omissions,  demands,  liabilities,  obligations,  damages,  actions,  judgments,
suits,  proceeding or disbursements of any kind or nature  whatsoever,  known or
unknown, contingent or otherwise, including, without limitation,  attorneys' and
consultants'  fees,  investigation  and laboratory fees,  response costs,  court
costs and  litigation  expenses  suffered  by reason  of any  defense,  set-off,
counterclaim,  recoupment  or reduction or liability  whatsoever  of the account
debtor or  obligor  thereunder,  arising  out of a breach by the  Grantor of any
obligation  thereunder or arising out of any other  agreement,  indebtedness  or
liability at any time owing to or in favor of such account  debtor or obligor or
its successors  from the


<PAGE>33


Grantor or any of its  Subsidiaries,  but excluding any such  penalties,  fines,
expenses,  losses,  settlements,  costs, claims,  causes of action, debts, dues,
sums of money,  accounts,  accountings,  reckonings,  acts, omissions,  demands,
liabilities,  obligations,  damages,  actions,  judgments,  suits, proceeding or
disbursements of any kind or nature whatsoever,  known or unknown, contingent or
otherwise,  including,  without  limitation,  attorneys' and consultants'  fees,
investigation  and laboratory fees,  response costs,  court costs and litigation
expenses incurred solely by reason of the gross negligence or willful misconduct
of the  Indemnified  Party as determined by a final order or judgment of a court
of competent jurisdiction.

          (c) Any amount due  hereunder  which is not paid on demand shall bear
interest at a rate equal to the sum of 2% plus the Alternate Base Rate in effect
at such time.

          (d) The  agreements  of the Grantor  contained in this Section  shall
survive  the payment in full in cash and the  performance  of all of the Secured
Obligations,  the expiration or cancellation of all of the Letters of Credit and
the  expiration or termination  of the Total  Commitments.  All of the Grantor's
obligations  to  indemnify  each  Secured  Party  and its  directors,  officers,
employees, attorneys,  consultants,  experts and agents hereunder shall (without
duplication)  be in addition to, and shall not limit in any way,  the  Grantor's
indemnification  obligations contained in the Credit Agreement.

     SECTION  19.  Security  Interest  Absolute.  All  rights  of the  Agent and
security  interests  hereunder,  and all  obligations of the Grantor  hereunder,
shall be absolute and  unconditional,  irrespective  of any  circumstance  which
might  constitute a defense  available  to, or a discharge  of, any guarantor or
other obligor in respect of the Secured Obligations.

     SECTION 20.  Intentionally Omitted.

     SECTION 21.  Louisiana  Remedies.  For purposes of executory  process under
applicable  Louisiana law (and only for such purposes),  upon the occurrence and
during the continuance of an Event of Default,  the Grantor hereby  acknowledges
the indebtedness owed under the Secured Obligations,  CONFESSES JUDGMENT thereon
and consents  that judgment be rendered and signed,  whether  during the court's
term or during vacation,  in favor of the Agent, for its benefit and the benefit
of the other Secured  Parties,  for the full amount of the Secured  Obligations.
Upon the  occurrence  of an  Event of  Default,  and in  addition  to all of its
rights,  powers and remedies under this Agreement and applicable  law, the Agent
may, at its option, cause all or any part of the Collateral located in Louisiana
(the "Louisiana  Collateral")  to be seized and sold under executory  process or
under writ of fieri facias issued in execution of an ordinary  judgment obtained
upon the Secured  Obligations,  without  appraisement to the highest bidder, for
cash or under such  terms as the Agent  deems  acceptable.  The  Grantor  hereby
waives all and every  appraisement  of the Louisiana  Collateral  and waives and
renounces the benefit of  appraisement  of the Louisiana  Collateral  seized and
sold under  executory or other legal process.  The Grantor agrees to waive,  and
does hereby specifically waive:


<PAGE>34


                    (1)  the benefit of  appraisement  provided  for in Articles
                         2332,  2336,  2723 and  2724,  Louisiana  Code of Civil
                         Procedure, and all other laws conferring such benefits;

                    (2)  the demand and three days delay  accorded  by  Articles
                         2639 and 2721, Louisiana Code of Civil Procedure;

                    (3)  the notice of seizure  required  by  Articles  2293 and
                         2721, Louisiana Code of Civil Procedure;

                    (4)  the three  days delay  accorded  by  Articles  2331 and
                         2722, Louisiana Code of Civil Procedure;

                    (5)  the benefit of the other  provisions of Articles  2331,
                         2722 and 2723, Louisiana Code of Civil Procedure;

                    (6)  the benefit of the  provisions of any other articles of
                         the Louisiana Code of Civil Procedure not  specifically
                         mentioned above; and

                    (7)  all rights of division and  discussion  with respect to
                         the Secured Obligations.

     Pursuant to the authority contained in La.R.S. 9:5136 through 9:5140.1, the
Grantor and the Agent do hereby expressly designate the Agent or its designee to
be keeper or receiver ("Keeper") for the benefit of the Agent or any assignee of
the Agent,  such designation to take effect  immediately upon any seizure of any
of the  Louisiana  Collateral  under writ of executory  process or under writ of
sequestration  or fieri facias as an incident to an action brought by the Agent.
It  is  hereby   agreed  that  the  Keeper  shall  be  entitled  to  receive  as
compensation,  in excess of its  reasonable  costs and expenses  incurred in the
administration or preservation of the Louisiana  Collateral,  an amount equal to
the  lesser  of $200  per day or  four  percent  of the  gross  revenues  of the
Louisiana  Collateral  and the  payment  of such fees  shall be  secured  by the
security  interest in the Louisiana  Collateral  granted in this Agreement.  The
designation  of Keeper made  herein  shall not be deemed to require the Agent to
provoke the appointment of a Keeper.

     SECTION 22.  Addresses  for Notices.  All notices and other  communications
provided for hereunder shall be in writing and shall be given in accordance with
the applicable provisions of the Credit Agreement.  For the purposes hereof, the
addresses of the Grantor,  the Agent and the other Secured  Parties shall be the
addresses  in effect from time to time under the Credit  Agreement or such other
address provided in writing to the Agent and the Grantor.

     SECTION 23.  Continuing  Security  Interest.  This Agreement shall create a
continuing  security  interest  in the  Collateral  and shall (i) remain in full
force and effect until the payment in full in cash and the performance of all of
the Secured Obligations, the expiration or cancellation of all of the Letters of
Credit and the  termination of the Total  Commitments,  (ii) be binding upon the
Grantor,


<PAGE>35


its  successors  and  assigns  and (iii)  inure,  together  with the  rights and
remedies  of the Agent  hereunder,  to the  benefit of the Agent and each of the
other Secured Parties and their respective successors,  transferees and assigns.
Upon the payment in full in cash and the performance of the Secured Obligations,
the expiration or termination of the Total  Commitments,  the security  interest
granted hereby shall terminate and all rights to the Collateral  shall revert to
the Grantor subject to any existing Liens, security interests or encumbrances on
such  Collateral.  Upon any such  termination,  the Agent will, at the Grantor's
expense,  execute and deliver to the Grantor such documents as the Grantor shall
reasonably request to evidence such termination.

     SECTION  24.  GOVERNING  LAW.  THIS  AGREEMENT  SHALL  BE  GOVERNED  BY AND
CONSTRUED IN ACCORDANCE  WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES, AND BY FEDERAL LAW TO THE EXTENT APPLICABLE.

     SECTION 25. Severability. If any provision of this Agreement is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other  provisions  hereof  shall remain in full force and effect in such
jurisdiction  and  shall be  liberally  construed  in favor of the Agent and the
other Secured Parties in order to carry out the intentions of the parties hereto
as nearly as may be possible; and (ii) the invalidity or unenforceability of any
provision  hereof  in  any  jurisdiction   shall  not  affect  the  validity  or
enforceability of such provision in any other jurisdiction.

     SECTION 26. No Waiver; Cumulative Remedies

          None of the  Secured  Parties  shall by any act  (except  by a written
instrument executed and delivered in accordance with Section 27 hereof),  delay,
indulgence,  omission or  otherwise be deemed to have waived any right or remedy
hereunder  or to have  acquiesced  in any  Default or Event of Default or in any
breach of any of the terms and conditions  hereof.  No failure to exercise,  nor
any delay in exercising,  on the part of any Secured Party, any right,  power or
privilege  hereunder  shall  operate as a waiver  thereof.  No single or partial
exercise of any right, power or privilege  hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver  by any  Secured  Party of any  right or  remedy  hereunder  on any one
occasion  shall not be  construed  as a bar to any right or  remedy  which  such
Secured  Party  would  otherwise  have on any  future  occasion.  The rights and
remedies  herein  provided  are  cumulative,  may  be  exercised  alternatively,
successively  or  concurrently  and are not  exclusive of any rights or remedies
provided by law or at equity.

     SECTION 27. Waivers and  Amendments;  Successors  and Assigns.  None of the
terms or provisions of this Agreement may be waived,  amended,  supplemented  or
otherwise  modified except by a written  instrument  executed by the Grantor and
the Agent;  provided,  that any provision of this Agreement may be waived by the
Agent in a written  letter or  agreement  executed by the Agent or by  facsimile
transmission from the Agent. Any amendment,  modification or supplement of or to
any provision of this  Agreement,  any termination or waiver of any provision of
this Agreement and any consent to any departure by the Grantor from the terms of
any provision of this Agreement shall be effective only in the specific instance
and for the specific purpose for which made or given. No notice


<PAGE>36


to or demand  upon the  Grantor in any  instance  hereunder  shall  entitle  the
Grantor  to  any  other  or  further  notice  or  demand  in  similar  or  other
circumstances.  This  Agreement  shall be  binding  upon and shall  inure to the
benefit  of the  Grantor,  the  Agent and the other  Secured  Parties  and their
respective successors,  transferees and assigns;  provided, that the Grantor may
not assign  its  rights and  obligations  hereunder  without  the prior  written
consent of the Agent and each Lender.

     SECTION 28.  Headings.  Section  headings in this  Agreement  are  included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.

     SECTION 29. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION.  THE GRANTOR AND
THE AGENT HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY
IN ANY  LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION  WITH, OR ARISING
OUT  OF  THIS  AGREEMENT  OR  THE  COLLATERAL,  OR  THE  VALIDITY,   PROTECTION,
INTERPRETATION,  COLLECTION OR ENFORCEMENT HEREOF OR THEREOF, OR ANY OTHER CLAIM
OR DISPUTE  HOWSOEVER  ARISING,  BETWEEN THE GRANTOR AND THE AGENT.  THE GRANTOR
HEREBY  IRREVOCABLY  CONSENTS TO THE NONEXCLUSIVE  JURISDICTION OF THE COURTS OF
THE STATE OF NEW YORK AND, TO THE EXTENT  PERMITTED  BY  APPLICABLE  LAW, OF ANY
FEDERAL COURT,  IN EACH CASE LOCATED IN NEW YORK COUNTY AND ANY APPELLATE  COURT
THEREFROM,  IN  CONNECTION  WITH ANY  ACTION  OR  PROCEEDING  ARISING  OUT OF OR
RELATING TO THIS AGREEMENT OR ANY DOCUMENT OR INSTRUMENT  DELIVERED  PURSUANT TO
THIS AGREEMENT OR THE COLLATERAL.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
AND  UNCONDITIONALLY  AGREES  THAT ALL CLAIMS IN  RESPECT OF ANY SUCH  ACTION OR
PROCEEDING  MAY BE HEARD AND  DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE
EXTENT  PERMITTED  BY LAW, IN SUCH  FEDERAL  COURT.  EACH OF THE PARTIES  HERETO
AGREES  THAT A  FINAL  JUDGMENT  IN ANY  SUCH  ACTION  OR  PROCEEDING  SHALL  BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT SHALL AFFECT ANY
RIGHT THAT THE AGENT OR ANY OTHER SECURED PARTY MAY OTHERWISE  HAVE TO BRING ANY
ACTION OR PROCEEDING  RELATING TO THIS AGREEMENT OR THE  COLLATERAL  AGAINST THE
GRANTOR  IN THE  COURTS OF ANY  JURISDICTION.  THE  GRANTOR  HEREBY  WAIVES  THE
DEFENSES OF FORUM NON CONVENIENS AND IMPROPER VENUE.

     SECTION 30.  Counterparts.  This Agreement may be executed in any number of
counterparts,  each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute one and the same Agreement.


<PAGE>37


     IN WITNESS WHEREOF,  the Grantor and the Agent have caused this Amended and
Restated  Security  and Pledge  Agreement to be duly  executed and  delivered by
their respective  officers  thereunto duly authorized as of the date first above
written.

                            GRANTOR:

                            PAYLESS CASHWAYS, INC.


                            By:  /s/ Stephen A. Lightstone
                            -----------------------------------------
                            Title:  Senior Vice President-Finance


                            AGENT:

                            CANADIAN IMPERIAL BANK OF COMMERCE,
                              as Coordinating and Collateral Agent


                            By:  /s/ Robert N. Greer
                            -----------------------------------------
                            Title: Assistant General Manager


<PAGE>COVER




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


                              AMENDED AND RESTATED
                          SECURITY AND PLEDGE AGREEMENT


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



                                     Between

                             PAYLESS CASHWAYS, INC.,

                                   as Grantor,

                                       and


                       CANADIAN IMPERIAL BANK OF COMMERCE,

                      as Coordinating and Collateral Agent



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


                          Dated as of December 2, 1997

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



<PAGE>i



                                TABLE OF CONTENTS
                                                                            PAGE

SECTION 1.    Grant of Security and Pledge....................................3

SECTION 2.    Security for Secured Obligations................................9

SECTION 3.    Delivery of Pledged Stock Collateral and 
              Pledged Notes; Other Action....................................10

SECTION 4.    Representations and Warranties.................................10
               (a) Locations of Inventory and Equipment; Chief 
                   Executive Office; Locations of Accounts; Tradenames.......10
               (b) Title; No Other Liens.....................................10
               (c) Trademarks, Patents and Copyrights........................10
               (d) Pledged Shares............................................11
               (e) Title to Pledged Shares; No Other Liens 
                   on Pledged Shares.........................................11
               (f) Issuers of Pledged Stock..................................11
               (g) Vehicles..................................................11
               (h) Pledged Notes.............................................11
               (i) No Consent................................................11
               (j) Perfected First Priority Liens............................12
               (k) Accounts..................................................12
               (l) Contracts.................................................12
               (m) Farm Products.............................................13
               (n) Governmental Obligors.....................................13
               (o) Bank Accounts.............................................13
               (p) Survival of Representations and Warranties................13

SECTION 5.    Compliance with Laws; Further Assurances; Certain Covenants....13
               (a) Compliance with Requirements of Law.......................13
               (b) Financing Statements, etc.  ..............................14
               (c) Instruments and Chattel Paper.............................14
               (d) Maintenance of Records; Identification of Collateral......14
               (e) Note Pledge Supplements...................................14
               (f) Stock Pledge Supplements..................................14
               (g) Defense of Agent's Rights.................................15
               (h) Uncertificated Equity Interests...........................15
               (i) Access to Books and Records; Right of Inspection..........15
               (j) Payment of Obligations....................................15
               (k) Notices...................................................15

SECTION 6.    As to Equipment and Inventory..................................16
               (a) Locations.................................................16
               (b) Maintenance...............................................16
               (c) Records, Physical Count and Other Inventory Covenants.....16


<PAGE>ii


SECTION 7.    As to Accounts and Contracts...................................17
               (a) Locations.................................................17
               (b) Amendments; Diligence as to Rights; Notices...............17
               (c) Collections...............................................17
               (d) Test Verifications........................................18
               (e) Liability of Grantor......................................18
               (f) Compliance with Terms of Contracts, etc...................19

SECTION 8.    As to Trademarks, Patents and Copyrights.......................19
                         (a) Use of Trademarks...............................19
                         (b) No Abandonment, Dedication, etc.................19
                         (c) Filings.........................................19
                         (d) Maintenance of Registrations, etc...............20
                         (e) Further Assurances..............................20
                         (f) Infringement, Misappropriation or
                             Dilution Suits..................................20
                         (g) Notification as to Trademark Confusion..........20

SECTION 9.    As to the Pledged Stock Collateral; Voting Rights;
              Dividends; Etc.................................................21

SECTION 10.   As to Pledged Notes ...........................................22

SECTION 11.   Vehicles.......................................................22

SECTION 12.   Insurance .....................................................23

SECTION 13.   Dispositions of Collateral; Liens; Additional 
              Shares; Other Agreements.......................................23
               (a) Disposition of Collateral.................................23
               (b) Liens.....................................................23
               (c) No Issuance of Stock......................................23
               (d) Other Agreements..........................................23

SECTION 14.   Agent's Appointment as Attorney-in-Fact........................23

SECTION 15.   Other Powers; Agent May Perform................................25

SECTION 16.   Limitation of Duty on the Part of Agent or Other 
              Secured Parties; Release.......................................25
               (a) Duties....................................................25
               (b) Release...................................................26
               (c) Survival of Agreements....................................26

SECTION 17.   Remedies.......................................................26
               (a) General...................................................26
               (b) Suits.....................................................28
               (c) Pledged Notes.............................................28
               (d) Use of Patents, Copyrights or Trademarks..................28
               (e) Licensing.................................................28
               (f) Enforcement of Remedies against Licensees 
                   or Sublicensees...........................................28
               (g) Grantor's Assistance in Manufacture and Sale of Products


<PAGE>iii


                   Bearing Trademarks, etc...................................28
               (h) Assignment of Trademarks, etc.  ..........................29
               (i) Proceeds..................................................29
               (j) Private Sale of Pledged Notes and 
                   Pledged Stock Collateral..................................29
               (k) Registration of Pledged Notes or 
                   Pledged Stock Collateral..................................30
               (l) Additional Inventory Remedies.............................32

SECTION 18.   Indemnity and Expenses.........................................33

SECTION 19.   Security Interest Absolute.....................................34

SECTION 20.   Intentionally Omitted..........................................34

SECTION 21.   Louisiana Remedies.............................................34

SECTION 22.   Addresses for Notices..........................................35

SECTION 23.   Continuing Security Interest...................................36

SECTION 24.   GOVERNING LAW..................................................36

SECTION 25.   Severability...................................................36

SECTION 26.   No Waiver; Cumulative Remedies.................................36

SECTION 27.   Waivers and Amendments; Successors and Assigns.................37

SECTION 28.   Headings.......................................................37

SECTION 29.   WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION..................37

SECTION 30.   Counterparts...................................................38

Annex A       Form of Note Pledge Supplement
Annex B       Form of Stock Pledge Supplement

Schedule 1    Vehicles
Schedule 2    Contracts
Schedule 3    Notes
Schedule 4    Trademarks
Schedule 5    Patents
Schedule 6    Copyrights
Schedule 7    Pledged Stock
Schedule 8    Locations of Equipment and Inventory
Schedule 9    Locations of Chief Executive Office, Chief Place of Business
                and Locations Where Records Concerning Accounts are Kept
Schedule 10   Location of Concentration Accounts, Significant Operating
                Accounts And Demand Deposit Accounts