$95,000,000

                                CREDIT AGREEMENT

                          DATED AS OF JANUARY 28, 2000
                                      AMONG
                           PARAGON TRADE BRANDS, INC.
                                   AS BORROWER

                                       AND
                      THE LENDERS AND ISSUERS PARTY HERETO
                                       AND
                               CITICORP USA, INC.
                             AS ADMINISTRATIVE AGENT
                                       AND
                              SALOMON SMITH BARNEY
                                   AS ARRANGER



                           WEIL, GOTSHAL & MANGES LLP
                                767 FIFTH AVENUE
                          NEW YORK, NEW YORK 10153-0119




<PAGE>



<TABLE>
<CAPTION>
                                TABLE OF CONTENTS



                                            ARTICLE I

                        DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS

         <S>               <C>                                                                        <C>
         Section 1.1.      Defined Terms................................................................1

         Section 1.2.      Computation of Time Periods.................................................30

         Section 1.3.      Accounting Terms and Principles.............................................30

         Section 1.4.      Certain Terms...............................................................30

                                           ARTICLE II

                                          THE FACILITY

         Section 2.1.      The Revolving Credit Commitments............................................31

         Section 2.2.      Borrowing Procedures........................................................31

         Section 2.3.      Swing Loans.................................................................32

         Section 2.4.      Letters of Credit...........................................................34

         Section 2.5.      Reduction and Termination of the Revolving Credit
                             Commitments...............................................................38

         Section 2.6.      Repayment of Loans..........................................................39

         Section 2.7.      Evidence of Debt............................................................39

         Section 2.8.      Optional Prepayments........................................................39

         Section 2.9.      Mandatory Prepayments.......................................................40

         Section 2.10.     Interest....................................................................41

         Section 2.11.     Conversion/Continuation Option..............................................42

         Section 2.12.     Fees........................................................................42

         Section 2.13.     Payments and Computations; Protective Advances..............................43

         Section 2.14.     Special Provisions Governing Eurodollar Rate Loans..........................46

         Section 2.15.     Capital Adequacy............................................................47

         Section 2.16.     Taxes.......................................................................47

         Section 2.17.     Substitution of Lenders.....................................................49

                                           ARTICLE III

                                       CONDITIONS TO LOANS AND LETTERS OF CREDIT

         Section 3.1.      Conditions Precedent to Initial Loans and Letters of Credit.................50

         Section 3.2.      Conditions Precedent to Each Loan and Letter of Credit......................53

                                       i
<PAGE>

         Section 3.3.      Conditions to Increased Fixed Asset Amount Availability.....................56

                                           ARTICLE IV

                                 REPRESENTATIONS AND WARRANTIES

         Section 4.1.      Corporate Existence; Compliance with Law....................................55

         Section 4.2.      Corporate Power; Authorization; Enforceable Obligations.....................56

         Section 4.3.      Ownership of Borrower; Subsidiaries.........................................56

         Section 4.4.      Financial Statements........................................................57

         Section 4.5.      Material Adverse Change.....................................................57

         Section 4.6.      Solvency....................................................................58

         Section 4.7.      Litigation..................................................................58

         Section 4.8.      Taxes.......................................................................58

         Section 4.9.      Full Disclosure.............................................................59

         Section 4.10.     Margin Regulations..........................................................59

         Section 4.11.     No Burdensome Restrictions; No Defaults.....................................59

         Section 4.12.     Investment Company Act; Public Utility Holding Company Act..................59

         Section 4.13.     Use of Proceeds.............................................................59

         Section 4.14.     Insurance...................................................................60

         Section 4.15.     Labor Matters...............................................................60

         Section 4.16.     ERISA.......................................................................60

         Section 4.17.     Environmental Matters.......................................................61

         Section 4.18.     Intellectual Property.......................................................61

         Section 4.19.     Title; Real Property........................................................62

         Section 4.20.     Related Documents...........................................................63

         Section 4.21.     Year 2000 Compliance........................................................64

                                            ARTICLE V

                                       FINANCIAL COVENANTS

         Section 5.1.      Maximum Leverage Ratio......................................................64

         Section 5.2.      Minimum Fixed Charge Coverage Ratio.........................................64

         Section 5.3.      Minimum EBITDA..............................................................65

         Section 5.4.      Maintenance of Tangible Net Worth...........................................65

         Section 5.5.      Capital Expenditures........................................................66

                                       ii
<PAGE>

                                           ARTICLE VI

                                       REPORTING COVENANTS

         Section 6.1.      Financial Statements........................................................66

         Section 6.2.      Default Notices.............................................................68

         Section 6.3.      Litigation..................................................................68

         Section 6.4.      Notices under Related Documents.............................................68

         Section 6.5.      SEC Filings; Press Releases.................................................68

         Section 6.6.      Labor Relations.............................................................68

         Section 6.7.      Tax Returns.................................................................69

         Section 6.8.      Insurance...................................................................69

         Section 6.9.      ERISA Matters...............................................................69

         Section 6.10.     Environmental Matters.......................................................69

         Section 6.11.     Borrowing Base Determination................................................70

         Section 6.12.     Other Information...........................................................71

                                           ARTICLE VII

                                      AFFIRMATIVE COVENANTS

         Section 7.1.      Preservation of Corporate Existence, Etc....................................71

         Section 7.2.      Compliance with Laws, Etc...................................................71

         Section 7.3.      Conduct of Business.........................................................72

         Section 7.4.      Payment of Taxes, Etc.......................................................72

         Section 7.5.      Maintenance of Insurance....................................................72

         Section 7.6.      Access......................................................................72

         Section 7.7.      Keeping of Books............................................................72

         Section 7.8.      Maintenance of Properties, Etc..............................................72

         Section 7.9.      Application of Proceeds.....................................................73

         Section 7.10.     Environmental...............................................................73

         Section 7.11.     Additional Collateral and Guaranties........................................73

         Section 7.12.     Cash Collateral Accounts and Cash Management System.........................73

         Section 7.13.     Real Property...............................................................74

                                          ARTICLE VIII

                                       NEGATIVE COVENANTS

         Section 8.1.      Indebtedness................................................................75

                                      iii
<PAGE>

         Section 8.2.      Liens, Etc..................................................................76

         Section 8.3.      Investments.................................................................77

         Section 8.4.      Sale of Assets..............................................................78

         Section 8.5.      Restricted Payments.........................................................78

         Section 8.6.      Restriction on Fundamental Changes..........................................79
         Section 8.7.      Change in Nature of Business................................................79

         Section 8.8.      Transactions with Affiliates................................................79

         Section 8.9.      Restrictions on Subsidiary Distributions; No New Negative
                           Pledge

         Section 8.10.     Modification of Constituent Documents.......................................80

         Section 8.11.     Modification of Related Documents...........................................80

         Section 8.12.     Modification of Senior Subordinated Notes;..................................80

         Section 8.13.     Accounting Changes; Fiscal Year.............................................80

         Section 8.14.     Margin Regulations..........................................................80

         Section 8.15.     Operating Leases; Sale/Leasebacks...........................................81

         Section 8.16.     Cancellation of Indebtedness Owed to It.....................................81

         Section 8.17.     No Speculative Transactions.................................................81

         Section 8.18.     Compliance with ERISA.......................................................81

         Section 8.19.     Environmental...............................................................81

                                           ARTICLE IX

                                        EVENTS OF DEFAULT

         Section 9.1.      Events of Default...........................................................81

         Section 9.2.      Remedies....................................................................83

         Section 9.3.      Actions in Respect of Letters of Credit.....................................83

         Section 9.4.      Rescission..................................................................84

                                            ARTICLE X

                                    THE ADMINISTRATIVE AGENT

         Section 10.1.     Authorization and Action....................................................84

         Section 10.2.     Administrative Agent's Reliance, Etc........................................85

         Section 10.3.     The Administrative Agent Individually.......................................85

         Section 10.4.     Lender Credit Decision......................................................85

         Section 10.5.     Indemnification.............................................................86

                                       iv
<PAGE>

         Section 10.6.     Successor Administrative Agent..............................................86

         Section 10.7.     Concerning the Collateral and the Collateral Documents......................87

         Section 10.8.     Collateral Matters Relating to Related Obligations..........................88

                                           ARTICLE XI

                                          MISCELLANEOUS

         Section 11.1.     Amendments, Waivers, Etc....................................................88

         Section 11.2.     Assignments and Participations..............................................90

         Section 11.3.     Costs and Expenses..........................................................92

         Section 11.4.     Indemnities.................................................................93

         Section 11.5.     Limitation of Liability.....................................................94

         Section 11.6.     Right of Set-off............................................................94

         Section 11.7.     Sharing of Payments, Etc....................................................95

         Section 11.8.     Notices, Etc................................................................95

         Section 11.9.     No Waiver; Remedies.........................................................96

         Section 11.10.    Binding Effect..............................................................96

         Section 11.11.    Governing Law...............................................................96

         Section 11.12.    Submission to Jurisdiction; Service of Process..............................96

         Section 11.13.    Waiver of Jury Trial........................................................97

         Section 11.14.    Marshaling; Payments Set Aside..............................................97

         Section 11.15.    Section Titles..............................................................98

         Section 11.16.    Execution in Counterparts...................................................98

         Section 11.17.    Entire Agreement............................................................98

         Section 11.18.    Confidentiality.............................................................98
</TABLE>

                                       v

<PAGE>


SCHEDULES
 Schedule I      -        Revolving Credit Commitments
 Schedule II     -        Applicable Lending Offices and Addresses for Notices
 Schedule 4.2    -        Consents
 Schedule 4.3    -        Ownership of Subsidiaries
 Schedule 4.7    -        Litigation
 Schedule 4.8    -         Taxes
 Schedule 4.15   -        Labor Matters
 Schedule 4.16   -        List of Plans
 Schedule 4.17   -        Environmental Matters
 Schedule 4.18   -        Intellectual Property
 Schedule 8.1    -        Existing Indebtedness
 Schedule 8.2    -        Existing Liens
 Schedule 8.3    -        Existing Guaranty Obligations
 Schedule 8.3    -        Existing Investments

                                    EXHIBITS

Exhibit A        -        Form of Assignment and Acceptance
Exhibit B        -        Form of Revolving Credit Note
Exhibit C        -        Form of Notice of Borrowing
Exhibit D        -        Form of Letter of Credit Request
Exhibit E        -        Form of Borrowing Base Certificate
Exhibit F        -        Form of Notice of Conversion or Continuation
Exhibit G        -        Form of Opinion of Counsel for the Loan Parties
Exhibit H        -        Form of Guaranty
Exhibit I        -        Form of Pledge and Security Agreement
Exhibit J        -        Form of Blocked Account Letter


                                     vi

<PAGE>




                  CREDIT AGREEMENT,  dated as of January 28, 2000, among PARAGON
TRADE BRANDS,  INC., a Delaware  corporation (the  "BORROWER"),  the Lenders (as
defined  below),   the  Issuers  (as  defined  below)  and  CITICORP  USA,  INC.
("CITICORP"),  as agent for the Lenders and the Issuers (in such  capacity,  the
"ADMINISTRATIVE AGENT").

                              W I T N E S S E T H:

                  WHEREAS,  on January  6, 1998 the  Borrower  commenced  a case
under Chapter 11 of the Bankruptcy Code; and

                  WHEREAS,  on November 15, 1999 the  Borrower  filed its Second
Amended Plan of  Reorganization  and  Disclosure  Statement  with the Bankruptcy
Court; and

                  WHEREAS, on January 13, 2000 the Bankruptcy Court entered  the
Confirmation Order; and

                  WHEREAS,  as a condition to the  effectiveness  of the Plan of
Reorganization,  the Borrower is required to obtain working capital financing of
at least  $95,000,000,  and has  requested  that the Lenders  and  Issuers  make
available  to the Borrower a revolving  credit and letter of credit  facility in
order to satisfy such condition; and

                  WHEREAS,  the  Borrower  has  requested  that the  Lenders and
Issuers make available for the purposes  specified in this Agreement a revolving
credit and letter of credit facility; and

                  WHEREAS, the Lenders and Issuers are willing to make available
to the Borrower  such  revolving  credit and letter of credit  facility upon the
terms and subject to the conditions set forth herein;

                  NOW,  THEREFORE,  in  consideration  of the  premises  and the
covenants and agreements  contained  herein,  the parties hereto hereby agree as
follows:

                                   ARTICLE I

                DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS

          SECTION 1.1.        DEFINED TERMS.  As  used  in this  Agreement,  the
following  terms  have the  following  meanings  (such  meanings  to be  equally
applicable to both the singular and plural forms of the terms defined):

                  "ACCOUNT"  means any  "account,"  as such term is  defined  in
Section  9-106 of the New York  UCC,  now  owned or  hereafter  acquired  by the
Borrower.

                  "ACCOUNT  DEBTOR" means any "account  debtor," as such term is
defined in Section 9-105(1)(a) of the New York UCC.

                  "ADMINISTRATIVE  AGENT"  has  the  meaning  specified  in  the
preamble to this Agreement.

<PAGE>

                  "ADVANCE  RATE"  means  (a) up to 80% in the case of  Eligible
Receivables,  (b) up to 65% in the case of Eligible Raw Materials, (c) up to 65%
in the case of Eligible  Work-in-Process,  (d) up to 65% in the case of Eligible
Finished Goods,  (e) up to 15% in the case of Eligible  Supplies,  and (f) up to
25% in the case of Eligible Parts.

                  "AFFILIATE"  means,  with  respect  to any  Person,  any other
Person which,  directly or  indirectly,  controls,  is controlled by or is under
common  control with such Person,  each officer,  director,  general  partner or
joint-venturer  of such Person,  and each Person who is the beneficial  owner of
10% or more of any class of Voting  Stock of such  Person.  For the  purposes of
this definition,  "CONTROL" means the possession of the power to direct or cause
the direction of  management  and policies of such Person,  whether  through the
ownership of voting securities, by contract or otherwise.

                  "AGREEMENT" means this Credit Agreement.

                  "APPLICABLE  MARGIN" means (a) during the period commencing on
the Closing  Date and ending on March 31, 2001,  with  respect to the  Revolving
Loans  maintained  as (i) Base Rate  Loans,  a rate equal to 1.50% per annum and
(ii)  Eurodollar Rate Loans, a rate equal to 2.50% per annum and (b) thereafter,
as of any date of  determination,  a per annum  rate equal to the rate set forth
below  opposite the  applicable  type of Loan and the then  applicable  Leverage
Ratio  (determined  for the  period  ending  on the last day of the most  recent
Fiscal Quarter or Fiscal Year, as  applicable,  for which  Financial  Statements
have been delivered pursuant to SECTION 6.1) set forth below:


<TABLE>
<CAPTION>
                     LEVERAGE RATIO                          BASE RATE LOANS   EURODOLLAR RATE
                                                                                    LOANS
------------------------------------------------------------ ----------------- -----------------
<S>                                                               <C>               <C>
Greater than or equal to 4.75 to 1                                1.75%             2.75%

Less than 4.75 to 1 and equal to or greater
than 4 to 1                                                       1.50%             2.50%

Less than 4 to 1 and equal to or greater than 3 to 1              1.25%             2.25%

Less than 3 to 1                                                  1.00%             2.00%
</TABLE>


Subsequent  changes  in the  Applicable  Margin  resulting  from a change in the
Leverage  Ratio shall become  effective as to all Loans two Business  Days after
delivery by the Borrower to the Administrative Agent of new financial statements
pursuant to SECTION  6.1(B) for each of the first three Fiscal  Quarters of each
Fiscal Year and SECTION 6.1(C) for each Fiscal Year. Notwithstanding anything to
the contrary set forth in this Agreement  (including the then effective Leverage
Ratio),  if the Borrower shall fail to deliver such financial  statements within
the time  periods  specified  in  SECTION  6.1(B)  or (C),  as  applicable,  the
Applicable  Margin from and  including the 46th day after the end of such Fiscal
Quarter or the 91st day after the end of such Fiscal  Year,  as the case may be,
to but not including the date the Borrower delivers to the Administrative  Agent
such financial  statements shall equal the highest  Applicable  Margin set forth
above.

                                       2
<PAGE>

                  "APPLICABLE  LENDING  OFFICE"  means,  with  respect  to  each
Lender,  its Domestic  Lending  Office in the case of a Base Rate Loan,  and its
Eurodollar Lending Office in the case of a Eurodollar Rate Loan.

                  "APPLICABLE UNUSED COMMITMENT FEE RATE" means 0.5% per annum.

                  "APPROVED  FUND"  means,  with respect to any Lender that is a
fund that  invests in bank loans,  any other fund that invests in bank loans and
is advised or managed  by the same  investment  advisor as such  Lender or by an
Affiliate of such investment advisor.

                  "ASSET SALE" has the meaning specified in SECTION 8.4.

                  "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance
entered  into  by a  Lender  and  an  Eligible  Assignee,  and  accepted  by the
Administrative Agent, in substantially the form of EXHIBIT A.

                  "AVAILABILITY  RESERVES"  means, as of two Business Days after
the date of written notice of any  determination  thereof to the Borrower by the
Administrative  Agent, such amounts as the Administrative  Agent, as directed by
the Requisite Lenders, may from time to time establish against the Facility,  in
the Requisite  Lenders' sole discretion  exercised  reasonably and in accordance
with customary  business  practices for comparable  asset based  transactions of
$50,000,000 or more, in order either (a) to preserve the value of the Collateral
or the Administrative Agent's Lien thereon, or (b) to provide for the payment of
unanticipated  liabilities of any of the Loan Parties  arising after the Closing
Date.

                  "AVAILABLE  CREDIT" means, at any time, an amount equal to (a)
the lesser of (i) the Revolving  Credit  Commitments  in effect at such time and
(ii) the  Borrowing  Base at such time,  MINUS (b) the sum of (i) the  aggregate
Revolving Credit Outstandings at such time and (ii) any Availability Reserves in
effect at such time.

                  "BAILEE'S  LETTER"  means  a  letter  in  form  and  substance
reasonably  acceptable to the Administrative Agent executed by any Person (other
than the  Borrower)  who is in possession of Inventory on behalf of the Borrower
pursuant  to  which  such  Person   acknowledges,   among  other   things,   the
Administrative Agent's Lien with respect thereto.

                  "BANKRUPTCY  CODE"  means title 11,  United  States  Code,  as
amended from time to time.

                  "BANKRUPTCY COURT"  means the United  States  Bankruptcy Court
for the Northern District of Georgia.

                  "BASE RATE" means, for any period, a fluctuating interest rate
per annum as shall be in effect from time to time, which rate per annum shall be
equal at all times to the highest of:

          (a)      the rate of  interest  announced  publicly by Citibank in New
         York, New York, from time to time, as Citibank's base rate;

          (b)      the sum  (adjusted to the nearest 0.25% or,  if  there  is no
         nearest  0.25%,  to the next  higher  0.25%) of (i) 0.5% per annum PLUS
         (ii) the rate per annum obtained by dividing (A) the latest  three-week
         moving average of secondary market morning offering


                                       3
<PAGE>

         rates in the United States for  three-month  certificates of deposit of
         major United States money market banks,  such three-week moving average
         being  determined  weekly on each  Monday (or, if any such day is not a
         Business Day, on the next  succeeding  Business Day) for the three-week
         period  ending on the previous  Friday by Citibank on the basis of such
         rates reported by  certificate  of deposit  dealers to and published by
         the Federal Reserve Bank of New York or, if such  publication  shall be
         suspended  or  terminated,  on the basis of  quotations  for such rates
         received by Citibank from three New York certificate of deposit dealers
         of recognized standing selected by Citibank,  by (B) a percentage equal
         to 100% MINUS the  average of the daily  percentages  specified  during
         such three-week period by the Federal Reserve Board for determining the
         maximum reserve requirement  (including any emergency,  supplemental or
         other  marginal  reserve   requirement)  for  Citibank  in  respect  of
         liabilities  consisting  of  or  including  (among  other  liabilities)
         three-month U.S. dollar nonpersonal time deposits in the United States,
         PLUS (iii) the  average  during such  three-week  period of the maximum
         annual  assessment rates estimated by Citibank for determining the then
         current annual  assessment  payable by Citibank to the Federal  Deposit
         Insurance  Corporation  (or any successor) for insuring Dollar deposits
         in the United States; and

          (c)    the sum of (i) 0.5% per annum PLUS (ii) the Federal Funds Rate.

                  "BASE RATE LOAN"  means any Loan during any period in which it
bears interest based on the Base Rate.

                  "BLOCKED  ACCOUNT"  has the meaning  specified  in the Blocked
Account Letter.

                  "BLOCKED  ACCOUNT  BANK"  means  Wachovia  Bank or such  other
financial institution selected or approved by the Administrative Agent.

                  "BLOCKED  ACCOUNT  LETTER"  means the  agreement  between  the
Blocked  Account  Bank and each  other  financial  institution  with  which  the
Borrower  shall have  established  a Blocked  Account (or any other account into
which  proceeds  of  Accounts  are  deposited)  and  the  Administrative  Agent,
substantially  in the  form of  EXHIBIT  J (with  such  changes  thereto  as are
satisfactory  to the  Administrative  Agent),  as such agreements may be amended
from time to time in accordance with the terms thereof.

                  "BORROWING" means a borrowing  consisting of Loans made on the
same day by the Lenders ratably  according to their respective  Revolving Credit
Commitments.

                  "BORROWING  BASE"  means (a) the sum of (i) the product of the
Advance Rate then in effect for Eligible  Receivables and the face amount of all
Eligible  Receivables of the Borrower  (calculated  net of all finance  charges,
late fees and other fees which are unearned, sales, excise or similar taxes, and
credits or  allowances  granted at such  time),  (ii) the product of the Advance
Rate then in  effect  for  Eligible  Finished  Goods,  Eligible  Raw  Materials,
Eligible Work-in-Process,  Eligible Supplies and Eligible Parts (valued, in each
case,  at  the  lower  of  cost  and  market  on a  first-in,  first-out  basis)
constituting  each such class at such time of the Borrower,  and (iii) the Fixed
Asset Amount then in effect, MINUS (b) any Eligibility Reserve then in effect.

                  "BORROWING  BASE  CERTIFICATE"  means  a  certificate  of  the
Borrower substantially in the form of EXHIBIT E.

                                       4
<PAGE>

                  "BUSINESS  DAY" means a day of the year on which banks are not
required or authorized to close in New York City and, if the applicable Business
Day relates to notices, determinations, fundings and payments in connection with
the  Eurodollar  Rate or any  Eurodollar  Rate Loans, a day on which dealings in
Dollar deposits are also carried on in the London interbank market.

                  "CAPITAL  EXPENDITURES"  means, with respect to any Person for
any period,  the  aggregate  of amounts  that would be reflected as additions to
property,  plant or equipment on a consolidated balance sheet of such Person and
its  Subsidiaries   prepared  in  conformity  with  GAAP,   excluding   interest
capitalized during construction.

                  "CAPITAL LEASE" means,  with respect to any Person,  any lease
of property by such Person as lessee which would be  accounted  for as a capital
lease on a balance sheet of such Person prepared in conformity with GAAP.

                  "CAPITAL LEASE OBLIGATIONS" means, with respect to any Person,
the  capitalized  amount  of  all  obligations  of  such  Person  or  any of its
Subsidiaries  under Capital  Leases,  as determined on a  consolidated  basis in
conformity with GAAP.

                  "CASE" means the case  commenced by the Borrower on January 6,
1998 under Chapter 11 of the Bankruptcy Code.

                  "CASH  COLLATERAL  ACCOUNT" means the cash collateral  account
opened by the  Bororwer  with the  Administrative  Agent for the deposit of cash
collateral in accordance with the Loan Documents.

                  "CASH  EQUIVALENTS"  means  (a)  securities  issued  or  fully
guaranteed or insured by the United States government or any agency thereof, (b)
certificates of deposit,  eurodollar time deposits,  overnight bank deposits and
bankers'  acceptances  of any commercial  bank  organized  under the laws of the
United States, any state thereof, the District of Columbia, any foreign bank, or
its branches or agencies (fully protected against currency  fluctuations) which,
at the time of acquisition, are rated at least "A-1" by Standard & Poor's Rating
Services ("S&P") or "P-1" by Moody's Investors Services,  Inc. ("MOODY'S"),  (c)
commercial  paper of an issuer  rated at least "A-1" by S&P or "P-1" by Moody's,
and (d) shares of any money  market fund that (i) has at least 95% of its assets
invested  continuously  in the types of  investments  referred to in CLAUSES (A)
through (C) above,  (ii) has net assets of not less than  $500,000,000 and (iii)
is rated at least "A-1" by S&P or "P-1" by Moody's; PROVIDED,  HOWEVER, that the
maturities of all  obligations  of the type specified in clauses (a) through (c)
above shall not exceed 180 days.

                  "CASH INTEREST  EXPENSE" means, with respect to any Person for
any  period,  the  Interest  Expense  of such  Person for such  period  LESS the
Non-Cash Interest Expense of such Person for such period.

                  "CASH  SWEEP  EVENT"  has the  meaning  specified  in  SECTION
7.12(E).

                  "CHANGE OF CONTROL" means any event, transaction or occurrence
as a result of which (a)  Wellspring  shall  cease to own and control all of the
economic and voting rights  associated  with  ownership of at least  thirty-five
percent  (35%) (or such higher  percentage  as may be  necessary  to ensure that
Wellspring's  ownership of the outstanding  Voting Stock of the Borrower exceeds
that of any  other  holder  of  Voting  Stock  of the  Borrower  (including  any

                                       5
<PAGE>

Affiliate  of any such  holder)  calculated  on a  fully-diluted  basis)  of the
outstanding  Voting  Stock of all  classes of the  Borrower  on a fully  diluted
basis;  or (b) during any period of  twenty-four  consecutive  calendar  months,
individuals  who at the  beginning  of such  period  constituted  the  board  of
directors of the Borrower (together with any new directors whose election by the
board of  directors  of the  Borrower or whose  nomination  for  election by the
stockholders  of the  Borrower  was approved by a vote of at least a majority of
the directors then still in office who either were directors at the beginning of
such period or whose  elections or  nomination  for election was  previously  so
approved)  cease for any reason other than death or  disability  to constitute a
majority of the directors then in office.

                  "CITIBANK"   means   Citibank,   N.A.,   a   national  banking
association.

                  "CITICORP"  has the meaning  specified in the preamble to this
Agreement.

                  "CLOSING DATE" means the first  date on which any Loan is made
or Letter of Credit is issued.

                  "CODE"  means  the  Internal  Revenue  Code  of  1986  (or any
successor legislation thereto), as amended from time to time.

                  "COLLATERAL"  means all property and interests in property and
proceeds  thereof now owned or  hereafter  acquired by any Loan Party in or upon
which a Lien is granted under any of the Collateral Documents.

                  "COLLATERAL   DOCUMENTS"   means  the  Pledge   and   Security
Agreement, the Mortgages and any other document executed and delivered by a Loan
Party  granting a Lien on any of its  property to secure  payment of the Secured
Obligations.

                  "COMPLIANCE  CERTIFICATE" has the meaning specified in SECTION
6.1(D).

                  "CONCENTRATION  ACCOUNT" has the meaning  specified in Section
7.12.

                  "CONFIRMATION  ORDER" means the order of the Bankruptcy  Court
entered  pursuant to Section 1129 of the Bankruptcy  Code confirming the Plan of
Reorganization.

                  "CONSOLIDATED  CURRENT  ASSETS"  means,  with  respect  to any
Person at any date, the total  consolidated  current assets (other than cash and
Cash  Equivalents) of such Person and its Subsidiaries at such date,  determined
in conformity with GAAP.

                  "CONSOLIDATED  CURRENT LIABILITIES" means, with respect to any
Person at any date, all liabilities of such Person and its  Subsidiaries at such
date which should, in accordance with GAAP, be classified as current liabilities
on a consolidated balance sheet of such Person and its Subsidiaries  prepared in
conformity with GAAP, but excluding,  in the case of the Borrower the sum of (a)
the principal amount of any current portion of long-term Financial Covenant Debt
and (b) (without duplication of clause (a) above) the then outstanding principal
amount of the Loans.

                  "CONSOLIDATED  NET  INCOME"  means,  for  any  Person  for any
period,  the net income (or loss) of such Person and its  Subsidiaries  for such
period,  determined on a  consolidated  basis in conformity  with GAAP PROVIDED,
HOWEVER, that (a) the net income of any other Person in which such Person or one
of its Subsidiaries has a joint interest with a third party (which interest



                                       6
<PAGE>

does not cause the net income of such other Person to be  consolidated  into the
net income of such Person in accordance with GAAP) shall be included only to the
extent of the  amount  of  dividends  or  distributions  paid to such  Person or
Subsidiary,  (b) the net income of any Subsidiary of such Person that is subject
to any  restriction  or  limitation on the payment of dividends or the making of
other  distributions  shall be  excluded  to the extent of such  restriction  or
limitation,  (c)(i) the net income (or loss) of any Person acquired in a pooling
of interest transaction for any period prior to the date of such acquisition and
(ii) any net gain (but not loss)  resulting from an Asset Sale by such Person or
any of its  Subsidiaries  other than in the ordinary course of business shall be
excluded,  and (d)  extraordinary  gains and losses and any one-time increase or
decrease to net income which is required to be recorded  because of the adoption
of new  accounting  policies,  practices or standards  required by GAAP shall be
excluded.

                  "CONSTITUENT DOCUMENTS" means, with respect to any Person, (a)
the  articles/certificate  of  incorporation  (or the equivalent  organizational
documents)  of  such  Person,  (b) the  by-laws  (or  the  equivalent  governing
documents)  of such  Person  and (c) any  document  setting  forth the manner of
election and duties of the directors or managing members of such Person (if any)
and the designation,  amount and/or relative rights, limitations and preferences
of any class or series of such Person's Stock.

                  "CONTAMINANT"  means any material,  substance or waste that is
classified,  regulated or otherwise characterized under any Environmental Law as
hazardous,  toxic,  a  contaminant  or a pollutant  or by other words of similar
meaning or  regulatory  effect,  including  any  petroleum or  petroleum-derived
substance or waste, asbestos and polychlorinated biphenyls.

                  "CONTRACTUAL  OBLIGATION" of any Person means any  obligation,
agreement,  undertaking  or similar  provision  of any  Security  issued by such
Person or of any agreement,  undertaking,  contract, lease, indenture, mortgage,
deed of trust or other  instrument  (excluding  a Loan  Document)  to which such
Person is a party or by which it or any of its property is bound or to which any
of its properties is subject.

                  "CONTROL  ACCOUNT  LETTER"  has the meaning  specified  in the
Pledge and Security Agreement.

                  "CREDITORS'   COMMITTEE"  means  the  Official   Committee  of
Unsecured Creditors of the Borrower appointed in the Case.

                  "CUSTOMARY PERMITTED LIENS" means, with respect to any Person,
any of the following Liens:

          (a)      Liens  with respect  to the payment of taxes,  assessments or
         governmental  charges  in all cases  which are not yet due or which are
         being  contested  in good  faith by  appropriate  proceedings  and with
         respect to which adequate reserves or other appropriate  provisions are
         being maintained to the extent required by GAAP;

          (b)      Liens  of   landlords   arising   by  statute  and  liens  of
         suppliers,  mechanics, carriers,  materialmen,  warehousemen or workmen
         and other  liens  imposed  by law  created  in the  ordinary  course of
         business  for amounts not yet due or which are being  contested in good
         faith by  appropriate  proceedings  and with respect to which  adequate
         reserves or other  appropriate  provisions are being  maintained to the
         extent required by GAAP;

                                       7
<PAGE>

          (c)      deposits  made  in  the  ordinary   course  of  business   in
         connection with worker's compensation,  unemployment insurance or other
         types of social security benefits or to secure the performance of bids,
         tenders,  sales,  contracts  (other than for the  repayment of borrowed
         money) and surety, appeal, customs or performance bonds;

          (d)      encumbrances  arising  by  reason  of  zoning   restrictions,
         easements, licenses, reservations,  covenants,  rights-of-way,  utility
         easements,  building restrictions and other similar encumbrances on the
         use of real property which do not materially  detract from the value of
         such real  property  or  interfere  with the  ordinary  conduct  of the
         business conducted and proposed to be conducted at such real property;

          (e)      encumbrances  arising  under  leases  or  subleases  of  real
         property  which do not in the  aggregate  materially  detract  from the
         value of such real property or interfere  with the ordinary  conduct of
         the  business  conducted  and  proposed  to be  conducted  at such real
         property; and

          (f)      financing  statements of a lessor's rights in and to personal
         property  leased to such Person in the ordinary course of such Person's
         business.

                  "DEBT  ISSUANCE"  means the incurrence of  Indebtedness of the
type specified in CLAUSE (A) and (B) of the definition of  "INDEBTEDNESS" by the
Borrower or any of its Subsidiaries.

                  "DEFAULT"  means any event  which with the  passing of time or
the giving of notice or both would become an Event of Default.

                  "DISCLOSURE  STATEMENT" means the disclosure  statement of the
Borrower dated November 15, 1999, as amended, modified or supplemented from time
to  time,  describing  the  Second  Amended  Plan  of  Reorganization  (and  the
transactions and events contemplated thereby) filed on November 15, 1999.

                  "DISQUALIFIED  STOCK"  means with  respect to any Person,  any
Stock  which,  by its terms (or by the terms of any  security  into  which it is
convertible  or for  which it is  exchangeable),  or upon the  happening  of any
event,  matures  or  is  mandatorily  redeemable,  pursuant  to a  sinking  fund
obligation or otherwise,  or is exchangeable for Indebtedness of such Person, or
is redeemable at the option of the holder thereof,  in whole or in part, in each
case on or prior to the Scheduled Termination Date.

                  "DOCUMENTARY  LETTER OF  CREDIT"  means  any  letter of credit
issued by an Issuer  pursuant to SECTION  2.4 for the  account of the  Borrower,
which is drawable upon presentation of documents evidencing the sale or shipment
of goods  purchased by the Borrower or any of its  Subsidiaries  in the ordinary
course of its business.

                  "DOLLARS"  and the sign "$" each mean the lawful  money of the
United States of America.

                  "DOMESTIC  LENDING OFFICE" means,  with respect to any Lender,
the office of such Lender  specified as its "Domestic  Lending Office"  opposite
its name on SCHEDULE II or on the Assignment and Acceptance by which it became a
Lender or such other  office of such Lender as such Lender may from time to time
specify to the Borrower and the Administrative Agent.

                                       8
<PAGE>

                  "DOMESTIC  SUBSIDIARY"  means any  Subsidiary  of the Borrower
organized  under the laws of any state of the  United  States of  America or the
District of Columbia.

                  "EBITDA" means,  with respect to any Person for any period, an
amount equal to (a)  Consolidated Net Income of such Person for such period PLUS
(b) the sum of, in each case to the extent  included in the  calculation of such
Consolidated  Net Income but without  duplication,  (i) any provision for income
taxes,  (ii)  Interest  Expense,  (iii) loss from  extraordinary  items and (iv)
depreciation,   depletion  and  amortization  of  intangibles  or  financing  or
acquisition  costs,  (v) all other non-cash charges and non-cash losses for such
period,  including the amount of any compensation deduction as the result of any
grant of Stock  or  Stock  Equivalents  to  employees,  officers,  directors  or
consultants  and (vi) to the extent not included  under clause (iii) above,  all
non-recurring  restructuring  charges (including  severance payments) associated
with the closing or  downsizing of a plant or other  facility  MINUS (c) the sum
of, in each case to the extent included in the calculation of such  Consolidated
Net Income but without duplication, (i) any credit for income tax, (ii) interest
income, (iii) gains from extraordinary items for such period, (iv) any aggregate
net gain (but not any  aggregate  net loss)  from the  sale,  exchange  or other
disposition of capital  assets by such Person,  and (v) any other non-cash gains
or other items  which have been added in  determining  Consolidated  Net Income,
including any reversal of a change  referred to in CLAUSE (B)(V) above by reason
of a decrease in the value of any Stock or Stock Equivalent.

                  "EFFECTIVE  DATE OF  REORGANIZATION"  means the first  date on
which the Plan of Reorganization  shall have become effective in accordance with
its terms.

                  "ELIGIBILITY  RESERVES"  means,  effective  as of two Business
Days  after the date of  written  notice  of any  determination  thereof  to the
Borrower by the Administrative  Agent, such amounts as the Administrative Agent,
in its sole  discretion,  may from  time to time  establish  against  the  gross
amounts  of  Eligible   Receivables,   Eligible  Finished  Goods,  Eligible  Raw
Materials,  Eligible Supplies,  Eligible  Work-in-Process  and Eligible Parts to
reflect risks or  contingencies  which may affect any one or class of such items
and which have not already  been taken into  account in the  calculation  of the
Borrowing Base.

                  "ELIGIBLE  ASSIGNEE"  means (a) a Lender or any  Affiliate  or
Approved  Fund of such  Lender;  (b) a  commercial  bank having  total assets in
excess  of  $5,000,000,000;  (c) a finance  company,  insurance  company,  other
financial institution or fund reasonably acceptable to the Administrative Agent,
which is regularly  engaged in making,  purchasing  or  investing in loans,  and
having total assets in excess of $250,000,000  or, to the extent assets are less
than  such  amount,  a  finance  company,  insurance  company,  other  financial
institution or fund,  reasonably  acceptable to the Administrative Agent and the
Borrower;  or (d) a savings and loan association or savings bank organized under
the laws of the  United  States or any  State  thereof  which  has a net  worth,
determined in accordance with GAAP, in excess of $250,000,000.

                  "ELIGIBLE  EQUIPMENT"  means the Equipment of the Borrower (a)
which  is  owned  solely  by  the  Borrower,  (b)  with  respect  to  which  the
Administrative  Agent has a valid and perfected  first priority Lien (subject to
Customary  Permitted  Liens),  (c) with  respect to which no  representation  or
warranty contained in any of the Loan Documents has been breached,  (d) which is
not, in the Administrative  Agent's sole discretion,  obsolete or unmerchantable
and (e) which the Administrative Agent deems to be Eligible Equipment,  based on
such credit and collateral  considerations as the  Administrative  Agent may, in
its sole discretion, deem appropriate.

                                       9
<PAGE>

                  "ELIGIBLE   FINISHED  GOODS"  means  Inventory   comprised  of
finished goods (which are classified, consistent with past practice, as Eligible
Finished  Goods in the  Borrower's  accounting  system)  and which is  otherwise
Eligible Inventory.

                  "ELIGIBLE  INVENTORY"  means  the  Inventory  of the  Borrower
(other than any Inventory  which has been  consigned by the Borrower)  including
raw materials, work-in-process,  finished goods, parts and supplies (a) which is
owned solely by the Borrower, (b) with respect to which the Administrative Agent
has a valid and  perfected  first  priority  Lien,  (c) with respect to which no
representation  or  warranty  contained  in any of the Loan  Documents  has been
breached,  (d) which is not,  in the  Administrative  Agent's  sole  discretion,
obsolete  or  unmerchantable,  (e) with  respect  to which  (in  respect  of any
Inventory  labeled  with a brand  name or  trademark  and  sold by the  Borrower
pursuant  to a  trademark  owned by the  Borrower  or a license  granted  to the
Borrower)  the  Administrative  Agent would have rights under such  trademark or
license  pursuant  to the  Pledge  and  Security  Agreement  or other  agreement
satisfactory  to the  Administrative  Agent to sell such Inventory in connection
with a liquidation  thereof,  and (f) which the Administrative Agent deems to be
Eligible  Inventory  based on such credit and collateral  considerations  as the
Administrative Agent may, in its sole discretion, deem appropriate. No Inventory
of the Borrower shall be Eligible  Inventory if such  Inventory  consists of (i)
goods  returned or rejected by customers  other than goods that are undamaged or
are  resaleable in the normal  course of business,  (ii) goods to be returned to
its  suppliers,  (iii)  goods  located,  stored,  used  or  held  at  any of the
Borrower's current sales offices located in Washington,  Arizona, New York, Utah
or Ohio,  (iv) goods in transit to third  parties,  or (v) goods  located at the
premises of a third party,  unless in the case of (v) (i)(A) the  Administrative
Agent shall have  received a Landlord  Waiver or  Bailee's  Letter or (B) in the
case  of  Inventory  located  at  a  leased  premises,  an  Eligibility  Reserve
satisfactory  to the  Administrative  Agent  shall  have been  established  with
respect  thereto and (ii) an appropriate  UCC-1  financing  statement shall have
been executed and properly filed.

                  "ELIGIBLE PARTS" means Inventory comprised of parts (which are
classified,  consistent with past practice,  as Eligible Parts in the Borrower's
accounting  system) and which is otherwise  Eligible  Inventory but which do not
constitute Eligible Supplies.

                  "ELIGIBLE  RAW  MATERIALS"  means  Inventory  comprised of raw
materials (which are classified,  consistent with past practice, as Eligible Raw
Materials in the Borrower's  accounting  system) and which is otherwise Eligible
Inventory but which do not constitute Eligible Supplies or Eligible Parts.

                  "ELIGIBLE  REAL  PROPERTY"  means  any  parcel  of owned  Real
Property in the United States of the Borrower and the  Subsidiary  Guarantors as
to which each of the following conditions has been satisfied at such time:

          (a)      (i) a first  priority  perfected  Lien on such parcel of Real
         Property (subject to Customary Permitted Liens) shall have been granted
         by the  Borrower  in favor of the  Administrative  Agent  pursuant to a
         Mortgage  and (ii) such Lien shall be in full force and effect in favor
         of the Administrative Agent at such time;

          (b)      except as otherwise  permitted  by the  Administrative Agent,
         the  Administrative  Agent and the title insurance  company issuing the
         policy referred to in CLAUSE (C) of this definition shall have received
         maps or plats of an  as-built  survey of such  parcel of Real  Property
         certified to the Administrative  Agent and such title insurance



                                       10
<PAGE>

         company  in a manner  reasonably  satisfactory  to  them,  dated a date
         reasonably  satisfactory  to the  Administrative  Agent and such  title
         insurance  company,  by  an  independent   professional  licensed  land
         surveyor reasonably  satisfactory to the Administrative  Agent and such
         title insurance  company,  which maps or plats and the surveys on which
         they are based shall be made in form and substance  satisfactory to the
         Administrative Agent;

          (c)      the Administrative  Agent shall  have received  in respect of
         such  parcel  of Real  Property  (i) a  mortgagee's  title  policy  (or
         policies)   ("MORTGAGEE'S   TITLE  INSURANCE   POLICY")  dated  a  date
         reasonably  satisfactory to the  Administrative  Agent, and such policy
         shall (A) be in an amount not less than the  Mortgage  Value (as of the
         Closing  Date)  of such  parcel  of Real  Property,  (B) be  issued  at
         ordinary  rates,  (C)  insure  that the Lien  granted  pursuant  to the
         Mortgage  insured  thereby creates a valid first Lien on such parcel of
         Real  Property free and clear of all defects and  encumbrances,  except
         such as may be  approved  by the  Administrative  Agent  and  Customary
         Permitted Liens, (D) name the  Administrative  Agent for the benefit of
         the Secured  Parties as the insured  thereunder,  (E) be in the form of
         ALTA  Loan  Policy - 1992  (or  such  local  equivalent  thereof  as is
         reasonably  satisfactory to the  Administrative  Agent),  (F) contain a
         comprehensive   lender's   endorsement   and  any  other   endorsements
         reasonably  required by the  Administrative  Agent (including,  but not
         limited  to,  a  revolving  credit  endorsement  and  a  floating  rate
         endorsement,  if  reasonably  available)  and (G) be issued by  Chicago
         Title  Insurance  Company,  First  American  Title  Insurance  Company,
         Lawyers  Title  Insurance   Corporation  or  any  other  title  company
         reasonably satisfactory to the Administrative Agent (including any such
         title  companies  acting as co-insurers or  reinsurers),  (ii) evidence
         satisfactory  to it that all  premiums in respect of each such  policy,
         all  recording  fees and stamp,  documentary,  intangible  or  mortgage
         taxes, if any, in connection with the Mortgage have been paid and (iii)
         a copy of all documents  referred to, or listed as exceptions to title,
         in such title policy (or policies);

          (d)      the Administrative Agent shall have received an appraisal (in
         the case of any appraisals received after the Closing Date, dated as of
         a date reasonably  acceptable to the Administrative Agent) with respect
         to such  parcel  of Real  Property  that is  satisfactory  in form  and
         substance  to the  Administrative  Agent and  performed by an appraiser
         that is satisfactory to the Administrative Agent;

          (e)      a Phase I  environmental report with  respect to such  parcel
         of Real  Property,  dated a date  not more  than one year  prior to the
         Closing Date,  showing no material  condition of environmental  concern
         shall  have  been  delivered  to the  Administrative  Agent and in form
         reasonably satisfactory to the Administrative Agent;

          (f)      no  casualty shall have  occurred  materially  affecting  the
         value or affecting the use or operation of such parcel of Real Property
         if such  casualty  has not been  restored or repaired by the  mortgagor
         under the Mortgage encumbering such parcel of Real Property;

          (g)      no  condemnation  or taking  by  eminent  domain  shall  have
         occurred nor shall any notice of any pending or threatened condemnation
         or other proceeding against such parcel of Real Property been delivered
         to the owner or lessee of such  parcel  of Real  Property  which  would
         materially affect the use, operation or value of such; and

                                       11
<PAGE>

          (h)      the mortgagor under the relevant  Mortgage  encumbering  such
         parcel  of Real  Property  shall  (i)  make  such  representations  and
         warranties   and   covenants   as  are   reasonably   required  by  the
         Administrative  Agent,  (ii) in all material  respects  comply with all
         Requirements of Law of any  Governmental  Authority  applicable to such
         parcel of Real Property or to the use or occupancy  thereof,  and (iii)
         pay and discharge all taxes of every kind and nature,  all assessments,
         all water and sewer rents and charges and all other  charges  which may
         become  a lien on the  Real  Property  on or  before  the date the same
         becomes delinquent.

                  "ELIGIBLE  RECEIVABLE" means the gross outstanding  balance of
those  Accounts of the Borrower  arising out of sales of  merchandise,  goods or
services in the ordinary course of business, which are made by the Borrower to a
Person that is not an Affiliate of the Borrower,  which are not in dispute,  and
that  constitute  Collateral  in  which  the  Administrative  Agent  has a fully
perfected first priority Lien (subject to Customary Permitted Liens);  PROVIDED,
HOWEVER, that an Account shall in no event be an Eligible Receivable if:

          (a)      (i)  such  Account  is more  than 60 days past  due according
         to the  original  terms of  sale,  or (ii) 90 days  past  the  original
         invoice date thereof; or

          (b)      any  warranty  contained in this  Agreement or any other Loan
         Document with respect to such specific  Account is not true and correct
         with respect to such Account; or

          (c)      the Account  Debtor  on such  Account has disputed  liability
         or made any  claim  with  respect  to any other  Account  due from such
         Account  Debtor to the  Borrower but only to the extent of such dispute
         or claim; or

          (d)      the Account Debtor on such Account has:  (i) filed a petition
         for  bankruptcy  or any other relief under the  Bankruptcy  Code or any
         other law relating to bankruptcy, insolvency,  reorganization or relief
         of debtors; (ii) made an assignment for the benefit of creditors; (iii)
         had filed against it any petition or other application for relief under
         the Bankruptcy  Code or any such other law; (iv) has failed,  suspended
         business  operations,   become  insolvent,  called  a  meeting  of  its
         creditors  for the purpose of obtaining  any  financial  concession  or
         accommodation;  or (v) had or  suffered a  receiver  or a trustee to be
         appointed  for all or a  significant  portion of its assets or affairs,
         unless such Account Debtor (A) is a debtor-in-possession in a case then
         pending under chapter 11 of the Bankruptcy  Code,  (B) has  established
         debtor-in-possession   financing   which   is   satisfactory   to   the
         Administrative Agent in its sole discretion and (C) otherwise satisfies
         each of the  requirements  set  forth in this  definition  of  Eligible
         Receivables; or

          (e)      the Account  Debtor on such Account or any of its  Affiliates
         is also a supplier to or creditor of the Borrower  unless such supplier
         or  creditor  has  executed  a  no-offset  letter  satisfactory  to the
         Administrative Agent, in its sole discretion; or

          (f)      the sale represented  by such Account is to an Account Debtor
         located  outside  the United  States or  Canada,  unless the sale is on
         letter of credit or acceptance terms  acceptable to the  Administrative
         Agent, in its sole discretion; or

          (g)      the sale to such Account Debtor on such Account is on a bill-
         on-hold,   guaranteed  sale,   sale-and-return,   sale-on-approval   or
         consignment basis; or

                                       12
<PAGE>

          (h)     such Account is subject to a Lien in favor of any Person other
         than the  Administrative  Agent for the benefit of the Secured Parties;
         or

          (i)      such  Account   is   subject   to  any   deduction,   offset,
         counterclaim,  return  privilege or other  conditions other than volume
         sales  discounts  given  in  the  ordinary  course  of  the  Borrower's
         business; or

          (j)      the  Account  Debtor  on  such  Account  is  located  in  New
         Jersey or Minnesota, unless the Borrower (i) has received a certificate
         of authority  to do business  and is in good  standing in such state or
         (ii)  has  filed a  Notice  of  Business  Activities  Report  with  the
         appropriate office or agency of such state for the current year; or

          (k)      the  Account  Debtor  on   such  Account  is  a  Governmental
         Authority,  unless the  Borrower  has assigned its rights to payment of
         such Account to the Administrative  Agent pursuant to the Assignment of
         Claims Act of 1940, as amended,  in the case of a federal  Governmental
         Authority,  and pursuant to applicable  law, if any, in the case of any
         other Governmental Authority, and such assignment has been accepted and
         acknowledged by the appropriate government officers; or

          (l)      50% or more of the outstanding Accounts of the Account Debtor
         have become,  or have been determined by the  Administrative  Agent, in
         accordance with the provisions hereof, to be, ineligible; or

          (m)      the  sale  represented by  such Account  is  denominated in a
         currency other than Dollars or Canadian Dollars; or

          (n)      such Account  is not evidenced by an invoice or other writing
         in form acceptable to the Administrative Agent, in its sole discretion;
         or

          (o)      the  Borrower,  in  order  to  be  entitled  to collect  such
         Account,  is required to perform any additional service for, or perform
         or incur any  additional  obligation to, the Person to whom or to which
         it was made; or

          (p)      the total  Accounts of such Account  Debtor  to the  Borrower
         represent  more  than  20%,  (or,  in the  case  of  Wal-Mart  and  its
         Affiliates,  50%) of the Eligible  Receivables  individually  or in the
         aggregate  as to the  Borrower at such time,  but only to the extent of
         such excess; or

          (q)      the total Accounts  of all Account  Debtors located in Canada
         to the Borrower  represent  more than 20% of the  Eligible  Receivables
         individually  or in the aggregate as to the Borrower at such time,  but
         only to the extent of such excess.

                  "ELIGIBLE  SUPPLIES"  means  Inventory  comprised of materials
used or  consumed  or to be used or  consumed  in the  manufacture,  processing,
packaging,   delivery  or  shipping  of  Eligible   Finished  Goods  (which  are
classified,   consistent  with  past  practice,  as  Eligible  Supplies  in  the
Borrower's  consolidated  accounting  system)  and which is  otherwise  Eligible
Inventory but which do not constitute Eligible Parts.

                                       13
<PAGE>

                  "ELIGIBLE   WORK-IN-PROCESS"   means  Inventory  comprised  of
work-in-process which is classified,  consistent with past practice, as Eligible
Work-in-Process in the Borrower's  consolidated  accounting system) and which is
otherwise Eligible Inventory.

                  "ENVIRONMENTAL LAWS" means all applicable Requirements of  Law
now or  hereafter  in  effect,  as amended  or  supplemented  from time to time,
relating to pollution or the regulation and protection of human health,  safety,
the environment or natural resources,  including the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section
9601 ET SEQ.); the Hazardous Material  Transportation Act, as amended (49 U.S.C.
Section 180 ET SEQ.); the Federal Insecticide,  Fungicide,  and Rodenticide Act,
as  amended  (7 U.S.C.  Section  136 ET SEQ.);  the  Resource  Conservation  and
Recovery Act, as amended (42 U.S.C.  Section 6901 ET SEQ.);  the Toxic Substance
Control Act, as amended (42 U.S.C.  Section 7401 ET SEQ.); the Clean Air Act, as
amended (42 U.S.C.  Section 740 ET SEQ.);  the Federal Water  Pollution  Control
Act, as amended (33  U.S.C.Section  1251 ET SEQ.); the  Occupational  Safety and
Health Act, as amended (29 U.S.C.  Section 651 ET SEQ.); the Safe Drinking Water
Act,  as amended  (42 U.S.C.  Section  300f ET SEQ.);  and their state and local
counterparts  or  equivalents  and any  transfer of  ownership  notification  or
approval  statute,  including the Industrial Site Recovery Act (N.J.  Stat. Ann.
Section 13:1K-6 ET SEQ.).

                  "ENVIRONMENTAL  LIABILITIES AND COSTS" means,  with respect to
any Person, all liabilities,  obligations,  responsibilities,  Remedial Actions,
losses, damages, punitive damages,  consequential damages, treble damages, costs
and expenses (including all fees, disbursements and expenses of counsel, experts
and consultants and costs of  investigation  and  feasibility  studies),  fines,
penalties, sanctions and interest incurred as a result of any claim or demand by
any other Person, whether based in contract,  tort, implied or express warranty,
strict liability, criminal or civil statute, including any thereof arising under
any  Environmental  Law,  Permit,  order  or  agreement  with  any  Governmental
Authority or other Person,  which relate to any environmental,  health or safety
condition or a Release or threatened Release,  and result from the past, present
or future  operations of, or ownership of property by, such Person or any of its
Subsidiaries.

                  "ENVIRONMENTAL   LIEN"   means   any  Lien  in  favor  of  any
Governmental Authority for Environmental Liabilities and Costs.

                  "EQUIPMENT"  means any "equipment," as such term is defined in
Section  9-109(2) of the New York UCC,  now owned or  hereafter  acquired by the
Borrower.

                  "EQUITY  ISSUANCE" means the issue or sale of any Stock of the
Borrower or any of the  Subsidiaries  of the  Borrower by the Borrower or any of
the Subsidiaries of the Borrower to any Person other than the Borrower or any of
such Subsidiaries.

                  "ERISA" means the Employee  Retirement  Income Security Act of
1974 (or any successor legislation thereto), as amended from time to time.

                  "ERISA  AFFILIATE" means any trade or business (whether or not
incorporated)  under  common  control or treated as a single  employer  with the
Borrower or any of its Subsidiaries  within the meaning of Section 414 (b), (c),
(m) or (o) of the Code.

                  "ERISA  EVENT"  means  (a) a  reportable  event  described  in
Section  4043(b) or  4043(c)(1),  (2),  (3),  (5), (6), (8) or (9) of ERISA with
respect to a Title IV Plan or a  Multiemployer  Plan;  (b) the withdrawal of the
Borrower,  any of its  Subsidiaries  or any ERISA Affiliate from a Title IV Plan
subject  to  Section  4063  of  ERISA  during  a plan  year  in  which  it


                                       14
<PAGE>

was a
substantial  employer,  as  defined  in  Section  4001(a)(2)  of ERISA;  (c) the
complete or partial  withdrawal of the Borrower,  any of its Subsidiaries or any
ERISA Affiliate from any  Multiemployer  Plan; (d) notice of  reorganization  or
insolvency  of a  Multiemployer  Plan;  (e) the  filing of a notice of intent to
terminate a Title IV Plan or the treatment of a plan  amendment as a termination
under Section 4041 of ERISA;  (f) the  institution of proceedings to terminate a
Title IV Plan or  Multiemployer  Plan by the PBGC;  (g) the  failure to make any
required  contribution  to a  Title  IV  Plan  or  Multiemployer  Plan;  (h) the
imposition  of a lien under  Section  412 of the Code or Section 302 of ERISA on
the Borrower or any of its Subsidiaries or any ERISA Affiliate; or (i) any other
event or condition  which might  reasonably  be expected to  constitute  grounds
under  Section 4042 of ERISA for the  termination  of, or the  appointment  of a
trustee to administer, any Title IV Plan or Multiemployer Plan or the imposition
of any liability  under Title IV of ERISA,  other than for PBGC premiums due but
not delinquent under Section 4007 of ERISA.

                  "EUROCURRENCY  LIABILITIES"  has the meaning  assigned to that
term in  Regulation D of the Federal  Reserve  Board,  as in effect from time to
time.

                  "EURODOLLAR  BASE  RATE"  means  the  rate  determined  by the
Administrative  Agent to be the  offered  rate for  deposits  in Dollars for the
applicable Interest Period which appears on Telerate Page 3750 as of 11:00 a.m.,
London  time,  on the  second  full  Business  Day  before the first day of each
Interest  Period.  In the event that such rate does not appear on Telerate  Page
3750 (or otherwise on the Dow Jones Markets  screen),  the Eurodollar  Base Rate
for the purposes of this  definition  shall be  determined  by reference to such
other comparable  publicly available service for displaying  eurodollar rates as
may be  selected  by the  Administrative  Agent,  or,  in the  absence  of  such
availability,  the Eurodollar Base Rate shall be the rate of interest determined
by the  Administrative  Agent to be the average  (rounded  upward to the nearest
whole  multiple of 1/16 of one percent per annum,  if such average is not such a
multiple) of the rates per annum at which deposits in Dollars are offered by the
principal  office of Citibank  in London to major banks in the London  interbank
market at 11:00 A.M.  (London  time) two  Business  Days before the first day of
such Interest  Period in an amount  substantially  equal to the Eurodollar  Rate
Loan of Citibank for a period equal to such Interest Period.

                  "EURODOLLAR LENDING OFFICE" means, with respect to any Lender,
the office of such Lender specified as its "Eurodollar  Lending Office" opposite
its name on SCHEDULE II or on the Assignment and Acceptance by which it became a
Lender (or, if no such office is specified, its Domestic Lending Office) or such
other  office of such Lender as such Lender may from time to time specify to the
Borrower and the Administrative Agent.

                  "EURODOLLAR  RATE" means,  with respect to any Interest Period
for any  Eurodollar  Rate Loan, an interest rate per annum equal to the rate per
annum  obtained by dividing  (a) the  Eurodollar  Base Rate by (b) a  percentage
equal to 100% MINUS the reserve  percentage  applicable two Business Days before
the first day of such Interest Period under regulations issued from time to time
by the Federal Reserve Board for  determining  the maximum  reserve  requirement
(including any emergency,  supplemental or other marginal  reserve  requirement)
for a member bank of the Federal Reserve System in New York City with respect to
liabilities or assets  consisting of or including  Eurocurrency  Liabilities (or
with respect to any other  category of liabilities  which  includes  deposits by
reference to which the  Eurodollar  Rate is  determined)  having a term equal to
such Interest Period.

                  "EURODOLLAR  RATE LOAN"  means any Loan that,  for an Interest
Period, bears interest based on the Eurodollar Rate.

                                       15
<PAGE>

                  "EVENT OF DEFAULT" has the meaning specified in SECTION 10.1.

                  "EXCLUDED  PROPERTY"  has the  meaning  set  forth in  Section
8.4(f).

                  "EXISTING  FOREIGN JOINT VENTURE  AGREEMENTS"  means  (a) that
certain  Pledge  Agreement  dated  as of  January  26,  1996  by and  among  PTB
International,  Inc.,  International  Disposable Products Investments,  Ltd. and
Danielson Trust Company; (b) that certain Investment Agreement dated January 26,
1996 by and among Mr.  Gilberto Marin  Quintero,  Grupo P.I. Mabe, S.A. de C.V.,
the Company,  and PTB International,  Inc.; (c) that certain Put and Call Option
Agreement  for Grupo  Mabe  Shares  dated as of January  26,  1996  between  Mr.
Gilberto Marin Quintero,  the Company,  PTB  International,  Inc. and Grupo P.I.
Mabe,  S.A. de C.V.; (d) that certain Joint Venture  Agreement dated January 26,
1996  by  and  between  Mr.  Gilberto  Marin  Quintero,   the  Company  and  PTB
International,  Inc. and Paragon Mabesa  International de C.V.; (e) that certain
Shareholder  Agreement  dated August 26, 1997 by and between PTB  International,
Inc.  and Euro America 2000 Trust;  (f) that certain  Shareholders  Agreement of
Serenity  S.A.  dated August 26, 1997 by and among  Stronger  Corporation  S.A.,
Cerro Moteado S.A., PTB International, Inc., Euro American 2000 Trust, Mr. Mario
Walter Garcia and Mr. Juan Carlos  Marshall;  (g) that certain  Irrevocable Call
Option  Agreement  dated as of  November  6, 1996 by and  between  International
Disposable Products Investments, Ltd. (now, Hortela Investiments, S.A. by reason
of merger), PTB International, Inc., Juliette Research S.A. and the Company; (h)
that certain Facility  Financing Side Letter dated January 26, 1996 by and among
Mr.  Gilberto  Marin  Quintero,  PTB  International,  Inc. and the Company;  (i)
Articles of Association of Goodbaby Paragon Hygienic Products Co. Ltd.; (j) that
certain Joint Venture  Contract  dated  September 30, 1997 among  Goodbaby Group
Co.,  the  Company  and  First  Shanghai  Investments  Ltd.;  (k)  that  certain
Technology  License  Agreement  dated January 26, 1996 by and between Grupo P.I.
Mabe,  S.A.  de C.V.  and the  Company;  (l)  that  certain  Technology  License
Agreement  dated January 26, 1996 by and between  Paragon Mabesa  International,
S.A. de C.V.  and the  Company;  (m) that  certain  Transfer of  Technology  and
Licensing Contract dated as of September 30, 1997 by and between the Company and
Goodbaby Paragon Hygienic Products Co. Ltd.; (n) that certain Product Supply and
Services  Agreement  dated  January  26,  1996  by  and  between  Paragon-Mabesa
International,  S.A. de C.V. and the Company,  as amended by First  Amendment to
the  Product  Supply and  Services  Agreement  dated March 14,  1997;  (o) those
certain  Purchase  Loan and Security  Agreements  by and between  Paragon-Mabesa
International,  S.A. de C.V. and the Company;  and (p) that certain Agreement as
to Contingent Labor Liability  regarding the facility in Tijuana,  and any other
document,  instrument or agreement relating to any of the foregoing in each case
as the  same may be  amended,  restated,  replaced,  supplemented  or  otherwise
modified from time to time.

                  "FACILITY"  means the  Revolving  Credit  Commitments  and the
provisions  herein  related to the Revolving  Loans,  Swing Loans and Letters of
Credit.

                  "FAIR  MARKET  VALUE"  means (a) with  respect to any asset or
group of assets (other than a marketable Security) at any date, the value of the
consideration obtainable in a sale of such asset at such date assuming a sale by
a willing seller to a willing  purchaser dealing at arm's length and arranged in
an orderly  manner over a reasonable  period of time having regard to the nature
and  characteristics  of such asset,  as  reasonably  determined by the Board of
Directors  of the  Borrower,  or, if such asset shall have been the subject of a
relatively  contemporaneous  appraisal by an independent  third party appraiser,
the basic  assumptions  underlying  which have not materially  changed since its
date,  the  value  set  forth in such  appraisal,  and (b) with  respect  to any
marketable  Security at any date, the closing sale price of such Security on the
Business Day next


                                       16
<PAGE>

preceding  such  date,  as  appearing  in any  published  list  of any  national
securities  exchange or the Nasdaq  Stock Market or, if there is no such closing
sale price of such  Security,  the final price for the purchase of such Security
at face  value  quoted  on  such  business  day by a  financial  institution  of
recognized standing which regularly deals in securities of such type selected by
the Administrative Agent.

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

                  "FEDERAL  RESERVE  BOARD"  means the Board of Governors of the
Federal Reserve System, or any successor thereto.

                  "FEE  LETTER"  shall mean the letter  dated as of October  13,
1999,  addressed to the Borrower  from  Citicorp and accepted by the Borrower on
October 15,  1999,  with respect to certain fees to be paid from time to time to
Citicorp and the Arranger.

                  "FINANCIAL  COVENANT DEBT" of any Person means Indebtedness of
the type  specified in CLAUSES (A), (B), (D), (E), (F) and (H) of the definition
of "INDEBTEDNESS".

                  "FINANCIAL  STATEMENTS" means the financial  statements of the
Borrower and its Subsidiaries delivered in accordance with SECTIONS 4.4 and 6.1.

                  "FINAL ORDER" means an order of the  Bankruptcy  Court that is
in effect and is not stayed,  and as to which the time to appeal,  petition  for
certiorari,  or move for  reargument or rehearing has expired and as to which no
appeal,  petition  for  certiorari,  or  other  proceedings  for  reargument  or
rehearing shall then be pending or as to which any right to appeal, petition for
certiorari,  reargue  or rehear  shall  have been  waived in writing in form and
substance  reasonably  satisfactory  to the  Borrower,  or in the event  that an
appeal,  writ of certiorari or reargument or rehearing  thereof has been sought,
such order of the Bankruptcy Court shall have been affirmed by the highest court
to which such order was  appealed,  or  certiorari,  reargument or rehearing has
been denied, and the time to take any further appeal, petition for certiorari or
move for reargument or rehearing shall have expired.

                  "FISCAL  MONTH"  means  (a)  for the  Fiscal  Year  ending  on
December 31, 2000,  each of the monthly  periods ending on January 28,  February
27,  March 26,  April 30, May 28, June 25,  July 30,  August 27,  September  24,
October  29,  November  26 and  December  31; (b) for the Fiscal  Year ending on
December 30, 2001,  each of the monthly  periods  ending on February 4, March 4,
April 1, May 6, June 3, July 1, August 5, September 2, September 30, November 4,
December 2 and  December  30; and (c) for the Fiscal Year ending on December 29,
2002,  each of the monthly  periods ending on February 3, March 3, March 31, May
5, June 2, June 30, August 4, September 1, September 29,  November 3, December 1
and December 29.

                  "FISCAL  QUARTER"  means  (a) for the  Fiscal  Year  ending on
December 31, 2000,  each of the three month periods ending on March 26, June 25,
September  24 and  December  31,


                                       17
<PAGE>

and, in the case of the first Fiscal  Quarter ending after the Closing Date, the
period from the Closing Date through March 26, 2000, PROVIDED, HOWEVER, that the
Fiscal Quarter ending March 26, 2000 shall commence on January 28, 2000; (b) for
the Fiscal Year ending on December  30,  2001,  each of the three month  periods
ending on April 1, July 1,  September 30 and December 30; and (c) for the Fiscal
Year ending on December  29,  2002,  each of the three month  periods  ending on
March 31, June 30, September 29 and December 29.

                  "FISCAL  YEAR"  means  the  twelve  month  periods  ending  on
December 31, 2000,  December 30, 2001 and December 29, 2002;  PROVIDED  that the
Fiscal  Year  ending  December  31, 2000 shall be deemed to begin on the Closing
Date.

                  "FIXED ASSET  AMOUNT" means (A) prior to the  satisfaction  of
the conditions set forth in SECTION 3.3,  $15,000,000;  and (B) thereafter,  the
lesser of (a) $30,000,000 and (b) the sum of (i) 75% of the orderly  liquidation
value of the Borrower's Eligible Equipment and (ii) 50% of the Fair Market Value
of the Borrower's  Eligible Real Property,  as determined by the  Administrative
Agent on the basis of the most recent appraisal  provided to the  Administrative
Agent in accordance with SECTION 6.11; PROVIDED,  HOWEVER,  that the Fixed Asset
Amount shall be further adjusted as required by SECTIONS 6.11(D) AND 8.4.

                  "FIXED CHARGES" means, for any Person for any period,  the sum
of (a) the  Cash  Interest  Expense  of such  Person  for such  period,  (b) the
principal  amount of  Financial  Covenant  Debt of such  Person  and each of its
Subsidiaries determined on a consolidated basis in conformity with GAAP having a
scheduled  due date during such period,  and (c) all cash  dividends  payable by
such Person and its  Subsidiaries  on Stock in respect of such period to Persons
other than such Person and its Subsidiaries.

                  "FIXED  CHARGE  COVERAGE  RATIO"  means,  with  respect to any
Person for any period, the ratio of (a) EBITDA less Capital Expenditures of such
Person for such  period less the total  federal  income tax  liability  actually
payable by such Person for such  period to (b) the Fixed  Charges of such Person
for such period.

                  "GAAP" means generally accepted  accounting  principles in the
United  States  of  America  as in  effect  from  time to time set  forth in the
opinions and pronouncements of the Accounting  Principles Board and the American
Institute of Certified Public  Accountants and the statements and pronouncements
of the Financial Accounting Standards Board, or in such other statements by such
other entity as may be in general use by significant  segments of the accounting
profession,  which  are  applicable  to  the  circumstances  as of the  date  of
determination.

                  "GOVERNMENTAL  AUTHORITY" means any nation or government,  any
state  or  other  political   subdivision  thereof  and  any  entity  exercising
executive,  legislative,  judicial, regulatory or administrative functions of or
pertaining to government.

                  "GUARANTY" means the guaranty,  in  substantially  the form of
EXHIBIT H, executed by each Subsidiary Guarantor.

                  "GUARANTY  OBLIGATION"  means,  as applied to any Person,  any
direct or  indirect  liability,  contingent  or  otherwise,  of such Person with
respect to any Indebtedness of another Person,  if the purpose or intent of such
Person in  incurring  the  Guaranty  Obligation  is to provide  assurance to the
obligee of such  Indebtedness that such Indebtedness will be paid or discharged,
or that any agreement relating thereto will be complied with, or that any holder
of such


                                       18
<PAGE>

Indebtedness  will be  protected  (in whole or in part)  against loss in respect
thereof including, (a) the direct or indirect guaranty,  endorsement (other than
for  collection  or  deposit in the  ordinary  course of  business),  co-making,
discounting  with recourse or sale with recourse by such Person of  Indebtedness
of another  Person and (b) any  liability  of such  Person for  Indebtedness  of
another Person through any agreement  (contingent or otherwise) (i) to purchase,
repurchase or otherwise acquire such Indebtedness or any security  therefor,  or
to provide funds for the payment or discharge of such  Indebtedness  (whether in
the form of a loan, advance, stock purchase, capital contribution or otherwise),
(ii) to maintain  the  solvency or any  balance  sheet item,  level of income or
financial  condition of another  Person,  (iii) to make  take-or-pay  or similar
payments,  if  required,  regardless  of  non-performance  by any other party or
parties to an agreement,  (iv) to purchase,  sell or lease (as lessor or lessee)
property, or to purchase or sell services, primarily for the purpose of enabling
the debtor to make payment of such  Indebtedness or to assure the holder of such
Indebtedness  against  loss,  or (v) to supply  funds to or in any other  manner
invest  in  such  other  Person  (including  to pay  for  property  or  services
irrespective  of  whether  such  property  is  received  or  such  services  are
rendered),  if in the case of any agreement described under subclause (i), (ii),
(iii),  (iv) or (v) of CLAUSE (B) of this sentence the primary purpose or intent
thereof is as described in the  preceding  sentence.  The amount of any Guaranty
Obligation  shall be equal to the amount of the  Indebtedness  so  guaranteed or
otherwise supported.

                  "HEDGING CONTRACTS" means all Interest Rate Contracts, foreign
exchange  contracts,  currency  swap or option  agreements,  forward  contracts,
commodity  swap,  purchase or option  agreements,  other commodity price hedging
arrangements, and all other similar agreements or arrangements designed to alter
the risks of any Person arising from  fluctuations in interest  rates,  currency
values or commodity prices.

                  "INDEBTEDNESS" of any Person means without duplication (a) all
indebtedness  of such Person for borrowed  money,  (b) all  obligations  of such
Person  evidenced by notes,  bonds,  debentures or similar  instruments or which
bear interest, (c) all reimbursement and all obligations with respect to letters
of credit, bankers' acceptances,  surety bonds and performance bonds, whether or
not matured, (d) all indebtedness for the deferred purchase price of property or
services,  other than trade payables incurred in the ordinary course of business
which are not overdue,  (e) all  indebtedness  of such Person created or arising
under any conditional  sale or other title  retention  agreement with respect to
property  acquired by such Person  (even  though the rights and  remedies of the
seller or lender  under such  agreement  in the event of default  are limited to
repossession  or sale of such  property),  (f) all Capital Lease  Obligations of
such Person, (g) all Guaranty Obligations of such Person, (h) all obligations of
such Person to purchase,  redeem, retire, defease or otherwise acquire for value
any Stock or Stock Equivalents of such Person, valued, in the case of redeemable
preferred  stock,  at the greater of its  voluntary or  involuntary  liquidation
preference plus accrued and unpaid dividends,  (i) all payments that such Person
would have to make in the event of an early termination on the date Indebtedness
of such  Person is being  determined  in respect of  Hedging  Contracts  of such
Person and (j) all  Indebtedness  referred to above secured by (or for which the
holder of such Indebtedness has an existing right,  contingent or otherwise,  to
be secured  by) any Lien upon or in  property  (including  Accounts  and general
intangibles)  owned by such  Person,  even though such Person has not assumed or
become liable for the payment of such Indebtedness.

                  "INDEMNITEES" has the meaning specified in SECTION 12.5.

                                       19
<PAGE>


                  "INTEREST  COVERAGE  RATIO" means,  with respect to any Person
for any  period,  the ratio of EBITDA of such Person for such period to Interest
Expense of such Person for such period.

                  "INTEREST  EXPENSE" means, for any Person for any period,  (a)
total  interest  expense of such  Person and its  Subsidiaries  for such  period
determined on a consolidated  basis in conformity with GAAP that is reflected in
Consolidated Net Income and including, in any event, interest capitalized during
construction  for such period and net costs under  Interest  Rate  Contracts for
such  period  MINUS  (b)  the  sum of (i)  net  gains  of  such  Person  and its
Subsidiaries  under  Interest  Rate  Contracts  for such period  determined on a
consolidated basis in conformity with GAAP PLUS (ii) any interest income of such
Person and its Subsidiaries for such period  determined on a consolidated  basis
in conformity with GAAP.

                  "INTEREST  PERIOD" means,  in the case of any Eurodollar  Rate
Loan, (a) initially, the period commencing on the date such Eurodollar Rate Loan
is made or on the date of conversion of a Base Rate Loan to such Eurodollar Rate
Loan and ending one,  two,  three or six months  thereafter,  as selected by the
Borrower in its Notice of  Borrowing  or Notice of  Conversion  or  Continuation
given to the  Administrative  Agent  pursuant  to SECTION  2.2 or 2.11,  and (b)
thereafter, if such Loan is continued, in whole or in part, as a Eurodollar Rate
Loan  pursuant  to  SECTION  2.11,  a period  commencing  on the last day of the
immediately preceding Interest Period therefor and ending one, two, three or six
months  thereafter,  as selected by the Borrower in its Notice of  Conversion or
Continuation  given  to the  Administrative  Agent  pursuant  to  SECTION  2.11;
PROVIDED,  HOWEVER,  that all of the foregoing  provisions  relating to Interest
Periods in respect of Eurodollar Rate Loans are subject to the following:

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

                    (iii)     any  Interest  Period  that  begins  on  the  last
         Business  Day of a  calendar  month (or on a day for which  there is no
         numerically  corresponding day in the calendar month at the end of such
         Interest  Period)  shall  end on the last  Business  Day of a  calendar
         month;

                    (iv)      the  Borrower  may not select any  Interest Period
         that ends after the date of a scheduled  principal payment on the Loans
         as set  forth  in  ARTICLE  II  unless,  after  giving  effect  to such
         selection, the aggregate unpaid principal amount of the Loans for which
         Interest  Periods end after such scheduled  principal  payment shall be
         equal to or less  than the  principal  amount  to which  the  Loans are
         required to be reduced after such scheduled principal payment is made;

                    (v)      the Borrower may not select any Interest Period  in

         respect  of Loans  having an  aggregate  principal  amount of less than
         $2,000,000; and

                                       20
<PAGE>

                    (vi)     there shall be outstanding at any one  time no more
          than five Interest Periods in the aggregate.

                  "INTEREST  RATE  CONTRACTS"   means  all  interest  rate  swap
agreements,  interest rate cap agreements,  interest rate collar  agreements and
interest rate insurance.

                  "INVESTMENT"  means,  with  respect  to any  Person,  (a)  any
purchase or other acquisition by that Person of (i) any Security issued by, (ii)
a  beneficial  interest  in any  Security  issued by, or (iii) any other  equity
ownership  interest in, any other Person, (b) any purchase by that Person of all
or a significant  part of the assets of a business  conducted by another Person,
and (c) any loan,  advance  (other than  deposits  with  financial  institutions
available for withdrawal on demand,  prepaid expenses,  accounts  receivable and
similar  items made or incurred in the ordinary  course of business as presently
conducted),  or  capital  contribution  by  that  Person  to any  other  Person,
including  all  Indebtedness  to such Person  arising from a sale of property by
such Person other than in the ordinary course of its business.

                  "INVENTORY"  means any "inventory," as such term is defined in
Section  9-109(4) of the New York UCC,  now owned or  hereafter  acquired by the
Borrower, and wherever located.

                  "IRS" means the Internal  Revenue Service of the United States
or any successor thereto.

                  "ISSUER"  means each Lender or  Affiliate of a Lender that (a)
is listed on the signature pages hereof as an "Issuer" or (b) hereafter  becomes
an Issuer with the  approval  of the  Administrative  Agent and the  Borrower by
agreeing  pursuant to an  agreement  with and in form and  substance  reasonably
satisfactory  to the  Administrative  Agent and the  Borrower to be bound by the
terms hereof applicable to Issuers.

                  "LANDLORD  WAIVER"  means  a  letter  in  form  and  substance
reasonably  acceptable to the  Administrative  Agent,  executed by a landlord in
respect of  Inventory  of the  Borrower  located at any leased  premises  of the
Borrower  pursuant  to which  such  landlord,  among  other  things,  waives  or
subordinates any Lien such landlord may have in respect of such Inventory.

                  "LEASES"  means,  with  respect  to any  Person,  all of those
leasehold  estates in real  property of such Person,  as lessee,  as such may be
amended, supplemented or otherwise modified from time to time.

                  "LENDER" means each financial institution or other entity that
(a) is listed on the  signature  pages  hereof as a "Lender" or (b) from time to
time becomes a party hereto by execution of an Assignment and Acceptance.

                  "LETTER OF CREDIT" means any letter of credit issued  pursuant
to SECTION 2.4.

                  "LETTER  OF  CREDIT  OBLIGATIONS"  means,  at  any  time,  the
aggregate  of all  liabilities  at such time of the Borrower to all Issuers with
respect to Letters of Credit,  whether or not any such  liability is contingent,
and includes the sum of (a) the  Reimbursement  Obligations at such time and (b)
the Letter of Credit Undrawn Amounts at such time.

                  "LETTER OF CREDIT  REIMBURSEMENT  AGREEMENT"  has the  meaning
specified in SECTION 2.4(E).

                  "LETTER  OF  CREDIT  REQUEST"  has the  meaning  specified  in
SECTION 2.4(C).

                                       21
<PAGE>

                  "LETTER  OF CREDIT  SUBLIMIT"  has the  meaning  specified  in
SECTION 2.4(A)(IV).

                  "LETTER OF CREDIT  UNDRAWN  AMOUNTS"  means,  at any time, the
aggregate undrawn face amount of all Letters of Credit outstanding at such time.

                  "LEVERAGE  RATIO"  means,  with  respect to any Person for any
period,  the ratio of (a) Financial  Covenant Debt of such Person as of the last
day of such period to (b) EBITDA for such Person for such period.

                  "LIEN"   means   any   mortgage,   deed  of   trust,   pledge,
hypothecation,   assignment,  charge,  deposit  arrangement,  encumbrance,  lien
(statutory  or other),  conveyance  of  security  title,  security  interest  or
preference,  priority or other security agreement or preferential arrangement of
any kind or nature whatsoever  intended to assure payment of any Indebtedness or
other  obligation,  including  any  conditional  sale or other  title  retention
agreement,  the interest of a lessor under a Capital Lease,  any financing lease
having substantially the same economic effect as any of the foregoing.

                  "LOAN"  means any loan  made by any  Lender  pursuant  to this
Agreement.

                  "LOAN  DOCUMENTS"  means,  collectively,  this Agreement,  the
Revolving  Credit Notes (if any), the Guaranty,  the Fee Letter,  each Letter of
Credit Reimbursement  Agreement,  the Collateral Documents and each certificate,
agreement  or  document   executed  by  a  Loan  Party  and   delivered  to  the
Administrative  Agent or any Lender in connection with or pursuant to any of the
foregoing.

                  "LOAN  PARTY"  means  each of the  Borrower,  each  Subsidiary
Guarantor and each other Subsidiary of the Borrower that executes and delivers a
Loan Document.

                  "MABESA OPTION" means the Borrower's call option to acquire up
to an  additional  36%  interest in the Stock of Grupo  Mabesa,  S.A. de C.V., a
Mexican  corporation  ("Mabesa"),   pursuant  to  the  Irrevocable  Call  Option
Agreement   dated  as  of   November  6,  1996  among  the   Borrower,   Hortela
Investimentos,  S.A (successor by merger to  International  Disposable  Products
Investments, Ltd.), PTB International, Inc. and Juliette S.A..

                  "MATERIAL  ADVERSE CHANGE" means a material  adverse change in
any of (a)  the  condition  (financial  or  otherwise),  business,  performance,
prospects, operations or properties of the Borrower individually or the Borrower
and  its  Subsidiaries  taken  as  a  whole,  (b)  the  legality,   validity  or
enforceability of any Loan Document, (c) the perfection or priority of the Liens
granted pursuant to the Collateral  Documents  (subject to Liens permitted under
Section 8.2), (d) the ability of the Borrower to repay the Obligations or of the
Loan Parties to perform their obligations  under the Loan Documents,  or (e) the
rights and remedies of the  Administrative  Agent or the Lenders  under the Loan
Documents.

                  "MATERIAL  ADVERSE  EFFECT" means an effect that results in or
causes,  or could  reasonably  be  expected  to result in or cause,  a  Material
Adverse Change.

                  "MATERIAL SUBSIDIARY" means any wholly-owned Subsidiary of the
Borrower  owning  at  least  10% of Total  Assets  generating  at  least  10% of
Consolidated  Net Income of the Borrower and its  Subsidiaries on a consolidated
basis.

                                       22
<PAGE>

                  "MAXIMUM CREDIT" means, at any time, (a) the lesser of (i) the
Revolving Credit  Commitments in effect at such time and (ii) the Borrowing Base
at such time  MINUS (b) the  aggregate  amount of any  Availability  Reserve  in
effect at such time.

                   "MORTGAGE  VALUE"  means,  with  respect  to  any  parcel  of
Eligible  Real  Property,  the value of such parcel of Eligible Real Property at
the time the  applicable  Mortgage  was  recorded as set forth in the  appraisal
delivered to and approved by the Administrative Agent with respect thereto.

                  "MORTGAGEE'S TITLE INSURANCE POLICY" has the meaning specified
in the definition of Eligible Real Property.

                  "MORTGAGES" means the mortgages,  deeds of trust or other real
estate security  documents made or required herein to be made by the Borrower or
any other Loan Party.

                   "MULTIEMPLOYER  PLAN" means a multiemployer  plan, as defined
in Section  4001(a)(3) of ERISA, to which the Borrower,  any of its Subsidiaries
or any ERISA Affiliate has any obligation or liability, contingent or otherwise.

                  "NET  CASH  PROCEEDS"  means  (a)  proceeds  received  by  the
Borrower  or any of its  Subsidiaries  after  the  Closing  Date in cash or Cash
Equivalents  from any Asset Sale, other than Asset Sales permitted under CLAUSES
(A) through (E) and CLAUSE (G) and (H) of SECTION 8.4, net of (i) the reasonable
cash costs of sale, assignment or other disposition,  (ii) taxes paid or payable
as a result  thereof  and (iii) any  amount  required  to be paid or  prepaid on
Indebtedness (other than the Obligations)  secured by the assets subject to such
Asset Sale; PROVIDED,  HOWEVER, that the evidence of each of (I), (II) and (III)
are provided to the Administrative Agent in form reasonably  satisfactory to it;
(b)  proceeds of  insurance on account of the loss of or damage to any assets or
property,  and payments of compensation for any such assets or property taken by
condemnation or eminent domain; and (c) proceeds received after the Closing Date
by any Loan  Party in cash or Cash  Equivalents  from  (i) any  Equity  Issuance
(other than any such  issuance of common Stock of the Borrower  occurring in the
ordinary  course  of  business  to any  director,  member of the  management  or
employee  of the  Borrower  or  its  Subsidiaries  or  pursuant  to  the  Option
Agreement,  the  Warrant  Agreement  or Plan of  Reorganization  (as  each  such
agreement is in effect on the Closing Date)),  or (ii) any Debt Issuance (except
for Indebtedness  permitted under SECTION 8.1), in each case net of brokers' and
advisors'  fees and other costs  incurred in connection  with such  transaction;
PROVIDED, HOWEVER, that evidence of such costs is provided to the Administrative
Agent.

                  "NET   WORTH"  of  any  Person   means,   at  any  date,   the
stockholders'  equity that would be reflected on a consolidated balance sheet of
such Person and its Subsidiaries at such date prepared in conformity with GAAP.

                  "NEW YORK UCC" means the Uniform  Commercial Code in effect in
the State of New York.

                  "NON-CASH  INTEREST EXPENSE" means, with respect to any Person
for any period,  the sum of the following  amounts to the extent included in the
calculation of Interest  Expense of such Person for such period:  (a) the amount
of debt discount and debt issuances  costs  amortized,  (b) charges  relating to
write-ups or  write-downs  in the book or carrying  value of existing


                                       23
<PAGE>

Financial Covenant Debt and (c) interest payable in evidences of Indebtedness or
by addition to the principal of the related Indebtedness.

                  "NON-FUNDING  LENDER"  has the  meaning  specified  in SECTION
2.2(D).

                  "NON-U.S.  LENDER" means each Lender or  Administrative  Agent
that is not a United  States  person as defined in  Section  7701(a)(30)  of the
Code.

                  "NOTICE OF  BORROWING"  has the meaning  specified  in SECTION
2.2(A).

                  "NOTICE  OF  CONVERSION  OR  CONTINUATION"   has  the  meaning
specified in SECTION 2.11.

                  "OBLIGATIONS"   means  the   Loans,   the   Letter  of  Credit
Obligations and all other advances, debts, liabilities,  obligations,  covenants
and duties owing by the Borrower to the  Administrative  Agent, any Lender,  any
Issuer,  any  Affiliate  of any of them or any  Indemnitee,  of  every  type and
description,  present or future, arising under this Agreement or under any other
Loan  Document,  by reason of an extension of credit,  opening or amendment of a
Letter of Credit or  payment  of any draft  drawn  thereunder,  loan,  guaranty,
indemnification,  foreign exchange  transaction,  Hedging Contract or otherwise,
whether direct or indirect (including those acquired by assignment), absolute or
contingent,  due or to become due, now existing or hereafter arising and however
acquired and whether or not evidenced by any note,  guaranty or other instrument
or for the  payment  of money.  The term  "OBLIGATIONS"  includes  all letter of
credit,  cash  management  and other fees and all interest,  charges,  expenses,
fees,  attorneys'  fees and  disbursements  and  other  sums  chargeable  to the
Borrower under this Agreement or any other Loan Document and all  obligations of
the Borrower to cash collateralize Letter of Credit Obligations.

                  "Option  Agreement"  means the  option  agreement  dated as of
January 28, 2000 between the Borrower,  as grantor, and PTB Acquisition Company,
LLC, as grantee,  relating to the sale of Stock of the Borrower to provide funds
for the exercise of the Mabesa Option.

                  "PBGC" means the Pension Benefit  Guaranty  Corporation or any
successor thereto.

                  "PERMIT" means any permit, approval,  authorization,  license,
variance  or  permission  required  from  a  Governmental   Authority  under  an
applicable Requirement of Law.

                  "PERSON"   means  an  individual,   partnership,   corporation
(including  a business  trust),  joint stock  company,  estate,  trust,  limited
liability company, unincorporated association, joint venture or other entity, or
a Governmental Authority.

                  "PLAN OF  REORGANIZATION"  means the Modified  Second  Amended
Plan of  Reorganization of the Borrower under Chapter 11 of the Bankruptcy Code,
filed in the Case by the  Borrower and the  Creditors'  Committee on January 13,
2000.

                  "PLEDGE  AND  SECURITY  AGREEMENT"  means  an  agreement,   in
substantially  the  form  of  EXHIBIT  I,  executed  by the  Borrower  and  each
Subsidiary Guarantor.

                  "PRO FORMA BALANCE SHEET" has the meaning specified in SECTION
4.4(D).

                                       24
<PAGE>

                  "PROJECTIONS"   means  those   financial   projections   dated
September  7, 1999  covering  the  fiscal  years  ending in 2000  through  2003,
inclusive, to be delivered to the Lenders by the Borrower.

                  "RATABLE  PORTION" or  "RATABLY"  means,  with  respect to any
Lender, the percentage  obtained by dividing (a) the Revolving Credit Commitment
of such Lender by (b) the aggregate  Revolving Credit Commitments of all Lenders
(or, at any time after the Revolving  Credit  Termination  Date,  the percentage
obtained  by  dividing  the  aggregate  outstanding  principal  balance  of  the
Revolving Credit Outstandings owing to such Lender by the aggregate  outstanding
principal balance of the Revolving Credit Outstandings owing to all Lenders).

                  "REAL PROPERTY" means all of those plots, pieces or parcels of
land now owned, leased or hereafter acquired or leased by the Borrower or any of
its Subsidiaries  (the "LAND"),  together with the right,  title and interest of
the  Borrower,  if any, in and to the streets,  the land lying in the bed of any
streets,  roads or avenues,  opened or proposed,  in front of, the air space and
development  rights  pertaining  to the Land and the right to use such air space
and development  rights, all rights of way,  privileges,  liberties,  tenements,
hereditaments  and appurtenances  belonging or in any way appertaining  thereto,
all  fixtures,  all  easements  now or  hereafter  benefiting  the  Land and all
royalties  and  rights  appertaining  to the  use  and  enjoyment  of the  Land,
including  all alley,  vault,  drainage,  mineral,  water,  oil and gas  rights,
together  with all of the  buildings  and other  improvements  now or  hereafter
erected on the Land, and any fixtures appurtenant thereto.

                  "REGISTER" has the meaning specified in SECTION 11.3.

                  "REIMBURSEMENT OBLIGATIONS" means all matured reimbursement or
repayment  obligations  of the  Borrower to any Issuer  with  respect to amounts
drawn under Letters of Credit.

                  "RELATED  DOCUMENTS" means the Senior  Subordinated Notes, the
Senior Subordinated Note Indenture,  the Warrant Agreement, the Warrants and the
Plan of Reorganization.

                  "RELEASE"  means,  with  respect to any Person,  any  release,
spill, emission,  leaking, pumping,  injection,  deposit,  disposal,  discharge,
dispersal,  leaching or  migration,  in each case, of any  Contaminant  into the
indoor  or  outdoor  environment  or into or out of any  property  owned by such
Person,  including  the movement of  Contaminants  through or in the air,  soil,
surface water, ground water or property.

                  "REMEDIAL  ACTION" means all actions required to (a) clean up,
remove,  treat or in any other way  address  any  Contaminant  in the  indoor or
outdoor  environment,  (b)  prevent the Release or threat of Release or minimize
the  further  Release so that a  Contaminant  does not  migrate or  endanger  or
threaten  to  endanger  public  health  or  welfare  or the  indoor  or  outdoor
environment  or  (c)  perform   pre-remedial   studies  and  investigations  and
post-remedial monitoring and care.

                  "REORGANIZATION"  means  the  reorganization  of the  Borrower
described in the Plan of Reorganization.

                  "REQUIREMENT  OF LAW" means,  with respect to any Person,  the
common  law  and  all  federal,   state,  local  and  foreign  laws,  rules  and
regulations,   orders,  judgments,  decrees  and


                                       25
<PAGE>

other determinations of any Governmental Authority or arbitrator,  applicable to
or binding  upon such  Person or any of its  property or to which such Person or
any of its property is subject.

                  "REQUISITE LENDERS" means,  collectively,  Lenders having more
than  fifty-one  percent  (51%)  of  the  aggregate  outstanding  amount  of the
Revolving Credit  Commitments or, after the Revolving Credit  Termination  Date,
fifty-one  percent  (51%) of the  aggregate  Revolving  Credit  Outstandings.  A
Non-Funding  Lender  shall not be  included  in the  calculation  of  "REQUISITE
LENDERS."

                  "RESPONSIBLE  OFFICER" means, with respect to any Person,  any
of the principal  executive  officers,  managing  members or general partners of
such Person,  but in any event,  with respect to  financial  matters,  the chief
financial officer, treasurer or controller of such Person.

                  "RESTRICTED   PAYMENT"   means  (a)  any   dividend  or  other
distribution,  direct or indirect,  on account of any Stock or Stock Equivalents
of the Borrower or any of its Subsidiaries now or hereafter outstanding,  except
a  dividend  payable  solely  in Stock or Stock  Equivalents  or a  dividend  or
distribution  payable  solely  to the  Borrower  and/or  one or more  Subsidiary
Guarantors,  (b) any redemption,  retirement,  sinking fund or similar  payment,
purchase or other  acquisition  for value,  direct or indirect,  of any Stock or
Stock  Equivalents of the Borrower or any of its  Subsidiaries  now or hereafter
outstanding  other than one payable  solely to the  Borrower  and/or one or more
Subsidiary Guarantors,  and (c) any payment or prepayment of principal,  premium
(if any),  interest,  fees  (including  fees to obtain  any waiver or consent in
connection  with any  Security) or other  charges on, or  redemption,  purchase,
retirement,  defeasance,  sinking  fund or similar  payment with respect to, any
Indebtedness of the Borrower or any of its Subsidiaries or any other Loan Party,
other than any required redemptions, retirement, purchases or other payments, in
each case to the extent  permitted to be made by the terms of such  Indebtedness
after  giving  effect  to  any  applicable  subordination  provisions,  and  any
refinancing of Indebtedness permitted by SECTION 8.1(E).  Anything herein to the
contrary  notwithstanding,  the  making of any  investment  in  compliance  with
SECTION 8.3 of this Agreement shall not constitute a Restricted Payment.

                  "REVOLVING CREDIT BORROWING" means Revolving Loans made on the
same day by the Lenders ratably  according to their respective  Revolving Credit
Commitments.

                  "REVOLVING  CREDIT  COMMITMENT"  means,  with  respect to each
Lender,  the  commitment  of such  Lender to make  Revolving  Loans and  acquire
interests in other  Revolving  Credit  Outstandings  in the aggregate  principal
amount  outstanding  not to exceed the amount set forth  opposite  such Lender's
name on SCHEDULE I under the caption  "REVOLVING CREDIT  COMMITMENT," as amended
to reflect each  Assignment and  Acceptance  executed by such Lender and as such
amount may be reduced or modified pursuant to this Agreement.

                  "REVOLVING  CREDIT  NOTE"  means  a  promissory  note  of  the
Borrower  payable to the order of any Lender in a principal  amount equal to the
amount of such Lender's  Revolving  Credit  Commitment  evidencing the aggregate
Indebtedness  of the Borrower to such Lender  resulting from the Revolving Loans
owing to such Lender.

                  "REVOLVING CREDIT OUTSTANDINGS" means, at any particular time,
the sum of (a) the principal  amount of the Revolving Loans  outstanding at such
time PLUS (b) the Letter of Credit Obligations outstanding at such time PLUS (c)
the principal amount of the Swing Loans outstanding at such time.

                                       26
<PAGE>

                  "REVOLVING CREDIT TERMINATION DATE" shall mean the earliest of
(a) the Scheduled Termination Date, (b) the date of termination of the Revolving
Credit  Commitments  pursuant  to  SECTION  2.5 and (c) the  date on  which  the
Obligations become due and payable pursuant to SECTION 9.2.

                  "REVOLVING LOAN" has the meaning specified in SECTION 2.1.

                  "RIGHTS  OFFERING"  means the rights  offering of up to 35% of
Stock in the Borrower, as more fully described in the Plan of Reorganization.

                  "SCHEDULED TERMINATION DATE" means January 27, 2003.

                  "SECONDARY SECURITIES" has the meaning specified in the Senior
Subordinated Note Indenture.

                  "SECURED OBLIGATIONS" means, in the case of the Borrower,  the
Obligations,  and, in the case of any other Loan Party,  the obligations of such
Loan Party  under the  Guaranty  and the other Loan  Documents  to which it is a
party.

                  "SECURED  PARTIES"  means  the  Lenders,   the  Issuers,   the
Administrative Agent and any other holder of any of the Obligations.

                  "SECURITY"  means any Stock,  Stock  Equivalent,  voting trust
certificate,  bond, debenture,  note or other evidence of Indebtedness,  whether
secured, unsecured, convertible or subordinated, or any certificate of interest,
share or  participation  in, or any  temporary  or interim  certificate  for the
purchase or acquisition  of, or any right to subscribe to,  purchase or acquire,
any of the foregoing, but shall not include any evidence of the Obligations.

                  "SENIOR  SUBORDINATED  NOTE  INDENTURE"  means the  Indenture,
dated  as  of  January  28,  2000,  between  Norwest  Bank  Minnesota,  National
Association,  as  Trustee,  and the  Borrower,  pursuant  to  which  the  Senior
Subordinated Notes were issued.

                  "SENIOR    SUBORDINATED    NOTES"   means  the  11.25%  Senior
Subordinated Notes due 2005 of the Borrower.

                  "SOLVENT" means, with respect to any Person, that the value of
the assets of such Person (both at fair value and present fair  saleable  value)
is, on the date of  determination,  greater than the total amount of liabilities
(including  contingent and  unliquidated  liabilities) of such Person as of such
date and that, as of such date,  such Person is able to pay all  liabilities  of
such  Person as such  liabilities  mature and does not have  unreasonably  small
capital.  In computing the amount of contingent or  unliquidated  liabilities at
any time, such liabilities will be computed at the amount which, in light of all
the facts and  circumstances  existing at such time,  represents the amount that
can reasonably be expected to become an actual or matured liability.

                  "STANDBY  LETTER OF CREDIT"  means any letter of credit issued
pursuant to SECTION 2.4 which is not a Documentary Letter of Credit.

                  "STOCK" means shares of capital stock (whether  denominated as
common  stock  or  preferred  stock),  beneficial,   partnership  or  membership
interests, participations or other


                                       27
<PAGE>

equivalents (regardless of how designated) of or in a corporation,  partnership,
limited liability company or equivalent entity, whether voting or non-voting.

                  "STOCK  EQUIVALENTS" means all securities  convertible into or
exchangeable for Stock and all warrants,  options or other rights to purchase or
subscribe for any Stock, whether or not presently  convertible,  exchangeable or
exercisable.

                  "SUBSIDIARY"   means,   with   respect  to  any  Person,   any
corporation,  partnership, limited liability company or other business entity of
which more than 50% of the outstanding Voting Stock is, at the time, directly or
indirectly,  owned or controlled by such Person and/or one or more  Subsidiaries
of such Person.

                  "SUBSIDIARY  GUARANTOR"  means each Subsidiary of the Borrower
party to the Guaranty.

                  "SWING LOAN" has the meaning specified in SECTION 2.3.

                  "SWING LOAN BORROWING" means a borrowing consisting of a Swing
Loan.

                  "SWING LOAN LENDER"  means  Citicorp and each other Lender who
becomes  the  Administrative  Agent  or who  agrees  with  the  approval  of the
Administrative Agent and the Borrower to act as a Swing Loan Lender hereunder.

                  "SWING  LOAN  REQUEST"  has the meaning  specified  in SECTION
2.3(B).

                  "TANGIBLE NET WORTH" of any Person means, at any date, the Net
Worth of such Person at such date, EXCLUDING, HOWEVER, from the determination of
the Total Assets of such Person at such date,  (a) all goodwill,  organizational
expenses,   research  and  development   expenses,   trademarks,   trade  names,
copyrights,  patents,  patent applications,  licenses and rights in any thereof,
and other similar  intangibles,  (b) all prepaid  expenses,  deferred charges or
unamortized  debt  discount  and  expense,  (c) cash held in a sinking  or other
analogous fund established for the purpose of redemption, retirement, defeasance
or prepayment of any Stock or  Indebtedness,  (d) any write-up in the book value
of any asset  resulting from a revaluation  thereof,  other than, in the case of
the  Borrower  and its  Subsidiaries,  as a result of "fresh  start"  accounting
utilized by the  Borrower in  connection  with the  Reorganization,  and (e) any
items not  included  in  clauses  (a)  through  (d) above  which are  treated as
intangibles in conformity with GAAP.

                  "TAX  AFFILIATE"  means,  with respect to any Person,  (a) any
Subsidiary of such Person,  and (b) any Affiliate of such Person with which such
Person  files or is  eligible  to file  consolidated,  combined  or unitary  tax
returns.

                  "TAX RETURN" has the meaning specified in SECTION 5.3.

                  "TAXES" has the meaning specified in SECTION 2.16(A).

                  "TITLE  IV  PLAN"   means  a  pension   plan,   other  than  a
Multiemployer  Plan, which is covered by Title IV of ERISA to which the Borrower
any of its  Subsidiaries  or any ERISA Affiliate has any obligation or liability
(contingent or otherwise).

                                       28
<PAGE>

                  "TOTAL  ASSETS" of any Person  means,  at any date,  the total
assets  of  such  Person  and its  Subsidiaries  at such  date  determined  on a
consolidated  basis in conformity  with GAAP MINUS (a) any minority  interest in
non-wholly-owned  Subsidiaries that would be reflected on a consolidated balance
sheet of such person and its  Subsidiaries  at such date  prepared in conformity
with  GAAP  and (b)  any  Securities  issued  by such  Person  held as  treasury
securities (to the extent reflected on such Person's balance sheet as assets).

                  "UNFUNDED  PENSION  LIABILITY"  means,  with  respect  to  the
Borrower at any time,  the sum of (a) the  amount,  if any, by which the present
value of all accrued  benefits under each Title IV Plan (other than any Title IV
Plan  subject to Section  4063 of ERISA)  exceeds the fair  market  value of all
assets of such Title IV Plan allocable to such benefits in accordance with Title
IV of ERISA,  as determined as of the most recent  valuation date for such Title
IV Plan using the actuarial  assumptions in effect under such Title IV Plan, and
(b) the aggregate  amount of withdrawal  liability  that could be assessed under
Section  4063  with  respect  to each  Title IV Plan  subject  to such  Section,
separately  calculated  for  each  such  Title  IV  Plan as of its  most  recent
valuation  date and (c) for a  period  of five  years  following  a  transaction
reasonably  likely to be  covered  by  Section  4069 of ERISA,  the  liabilities
(whether  or not  accrued)  that could be avoided  by the  Borrower,  any of its
Subsidiaries or any ERISA Affiliate as a result of such transaction.

                  "UNUSED  COMMITMENT FEE" has the meaning  specified in SECTION
2.12(A).

                  "VOTING STOCK" means Stock of any Person having ordinary power
to vote in the election of members of the board of directors, managers, trustees
or other controlling  Persons,  of such Person  (irrespective of whether, at the
time,  Stock of any other  class or classes of such  entity  shall have or might
have voting power by reason of the happening of any contingency).

                  "WARRANT AGREEMENT" means the agreement dated January 28, 2000
between the Borrower and ChaseMellon  Shareholder Services,  L.L.C., pursuant to
which the Warrants were issued.

                  "WARRANTS"  mean  the  warrants  to  acquire  up to 5% of  the
Borrower,  as more fully described in the Plan of Reorganization and the Warrant
Agreement.

                  "WELLSPRING" means collectively, Wellspring Capital Management
L.L.C.,  Co-Investment  Partners,  L.P., Ontario Teachers Pension Plan Board and
any Affiliate of the foregoing,  (including, without limitation, PTB Acquisition
Company,  LLC) and shall  also mean the direct and  indirect  general  partners,
shareholders  or managing  members of the foregoing or any  Affiliate  that is a
partnership or a limited liability company.

                  "WITHDRAWAL  LIABILITY" means, with respect to the Borrower at
any time,  the  aggregate  liability  incurred  (whether or not  assessed)  with
respect to all  Multiemployer  Plans  pursuant  to Section  4201 of ERISA or for
increases  in  contributions  required to be made  pursuant  to Section  4243 of
ERISA.

                  "WORKING  CAPITAL"  means,  for any  Person at any  date,  the
amount  by which the  Consolidated  Current  Assets of such  Person at such date
exceeds the Consolidated Current Liabilities of such Person at such date.

                  "YEAR 2000 COMPLIANT" means the ability of hardware,  firmware
or  software  systems  associated  with  information  processing  and  delivery,


                                       29
<PAGE>

operations or services,  operated by, provided to or otherwise  necessary to the
business or  operations  of the Borrower or its  Subsidiaries  to recognize  and
properly perform date-sensitive  functions involving certain dates prior to, and
at any date after, December 31, 1999.

          SECTION 1.2.        COMPUTATION OF TIME PERIODS. In this Agreement, in
the  computation of periods of time from a specified  date to a later  specified
date,  the word "FROM" means "from and including" and the words "TO" and "UNTIL"
each mean "to but excluding" and the word "THROUGH" means "to and including."

          SECTION 1.3.        ACCOUNTING TERMS AND PRINCIPLES.

          (a) Except as set forth below,  all accounting  terms not specifically
defined  herein shall be construed in  conformity  with GAAP and all  accounting
determinations  required to be made  pursuant  hereto  shall,  unless  expressly
otherwise provided herein, be made in conformity with GAAP.

          (b) If any change in the accounting principles used in the preparation
of the most recent Financial  Statements referred to in SECTION 6.1 is hereafter
required or permitted by the rules, regulations,  pronouncements and opinions of
the Financial  Accounting Standards Board or the American Institute of Certified
Public Accountants (or any successors thereto) and such change is adopted by the
Borrower with the agreement of its independent public accountants and results in
a change in any of the  calculations  required by ARTICLE V or ARTICLE  VIII had
such  accounting  change not  occurred,  the parties  hereto agree to enter into
negotiations in order to amend such  provisions so as to equitably  reflect such
change with the desired result that the criteria for evaluating  compliance with
such  covenants by the  Borrower  shall be the same after such change as if such
change had not been made; PROVIDED, HOWEVER, that for purposes of this Agreement
only, no change in GAAP that would affect a calculation that measures compliance
with any  covenant  contained in ARTICLE V or ARTICLE VIII shall be given effect
until such provisions are amended to reflect such changes in GAAP.

          SECTION 1.4.      CERTAIN TERMS.

          (a) The  words  "HEREIN," "HEREOF" and "HEREUNDER"  and  similar words
refer to this Agreement as a whole, and not to any particular Article,  Section,
subsection or clause in, this Agreement.

          (b)  References in this  Agreement to an Exhibit,  Schedule,  Article,
Section,  subsection or clause refer to the appropriate  Exhibit or Schedule to,
or Article, Section, subsection or clause in this Agreement.

          (c) Each   agreement   defined   in   this   ARTICLE  I shall  include
all appendices, exhibits and schedules thereto. Unless the prior written consent
of the Requisite  Lenders is required  hereunder for an amendment,  restatement,
supplement or other  modification  to any such agreement and such consent is not
obtained,  references  in this  Agreement  to such  agreement  shall  be to such
agreement as so amended, restated, supplemented or modified.

          (d)  References  in this  Agreement  to any statute  shall be  to such
statute as amended or modified  and in effect at the time any such  reference is
operative.

                                       30
<PAGE>

          (e) Except as expressly  stated to the contrary,  the term "INCLUDING"
when used in any Loan Document means "including without  limitation" except when
used in the computation of time periods.

          (f) The terms  "LENDER,"  "ISSUER"  and "ADMINISTRATIVE AGENT" include
their respective successors.

          (g) Upon  the  appointment  of  any  successor  Administrative   Agent
pursuant to SECTION 10.6, references to Citicorp in SECTION 10.3 and to Citibank
in the  definitions of Base Rate and Eurodollar Rate shall be deemed to refer to
the financial  institution then acting as the Administrative Agent or one of its
Affiliates if it so designates.

                                   ARTICLE II

                                  THE FACILITY

          SECTION 2.1.        THE  REVOLVING CREDIT  COMMITMENTS.  On  the terms
and subject to the conditions contained in this Agreement, each Lender severally
agrees to make loans (each a "REVOLVING LOAN") to the Borrower from time to time
on any Business  Day during the period from the date hereof until the  Revolving
Credit  Termination  Date in an  aggregate  amount  not to  exceed  at any  time
outstanding  for all such loans by such Lender such  Lender's  Revolving  Credit
Commitment;  PROVIDED, HOWEVER, that at no time shall any Lender be obligated to
make a  Revolving  Loan (i) in excess of such  Lender's  Ratable  Portion of the
Available  Credit and (ii) to the extent  that the  aggregate  Revolving  Credit
Outstandings,  after  giving  effect to such  Revolving  Loan,  would exceed the
Maximum  Credit in effect  at such  time.  Within  the  limits of each  Lender's
Revolving Credit Commitment, amounts of Revolving Loans repaid may be reborrowed
under this SECTION 2.1.

          SECTION 2.2.      BORROWING PROCEDURES.

          (a)  Each  Revolving  Credit  BorrowinG   shall  be  made   on  notice
given by the Borrower to the Administrative Agent not later than 11:00 A.M. (New
York City  time)  (i) on the date of the  proposed  Borrowing,  in the case of a
Borrowing  of Base Rate Loans and (ii)  three  Business  Days,  in the case of a
Borrowing of Eurodollar Rate Loans,  prior to the date of the proposed Revolving
Credit Borrowing. Each such notice shall be in substantially the form of EXHIBIT
C (a "NOTICE OF BORROWING"),  specifying (A) the date of such proposed Revolving
Credit  Borrowing,  (B) the aggregate  amount of such proposed  Revolving Credit
Borrowing,  (C) whether any portion of the proposed  Revolving  Credit Borrowing
will be of Base Rate Loans or Eurodollar Rate Loans and (D) the initial Interest
Period or Periods for any such Eurodollar Rate Loans.  The Revolving Loans shall
be made as Base Rate  Loans  unless  (subject  to  SECTION  2.14) the  Notice of
Borrowing  specifies  that all or a portion  thereof  shall be  Eurodollar  Rate
Loans.  Each Revolving  Credit  Borrowing shall be in an aggregate amount of not
less than $2,000,000 or an integral multiple of $1,000,000 in excess thereof.

          (b) The Administrative Agent shall give to each Lender  prompt  notice
of  the  Administrative  Agent's  receipt  of a  Notice  of  Borrowing  and,  if
Eurodollar  Rate Loans are properly  requested in such Notice of Borrowing,  the
applicable  interest rate determined  pursuant to SECTION  2.14(A).  Each Lender
shall,  before  11:00  A.M.  (New  York City  time) on the date of the  proposed
Borrowing  or,  in the  case  of  Base  Rate  Loans  in  respect  of  which  the
Administrative


                                       31
<PAGE>

Agent  has
received the Notice of Borrowing  on the date of the  proposed  Borrowing,  1:00
P.M., make available to the  Administrative  Agent at its address referred to in
SECTION 11.8, in immediately  available funds,  such Lender's Ratable Portion of
such proposed Borrowing.  After the Administrative Agent's receipt of such funds
and upon fulfillment of the applicable  conditions set forth in SECTIONS 3.1 and
3.2, the Administrative Agent will make such funds available to the Borrower.

          (c) Unless the  Administrative Agent shall have  received  notice from
a Lender prior to the date of any proposed  Borrowing  that such Lender will not
make available to the Administrative Agent such Lender's Ratable Portion of such
Borrowing,  the  Administrative  Agent may assume that such Lender has made such
Ratable  Portion  available  to the  Administrative  Agent  on the  date of such
Borrowing in accordance with this SECTION 2.2 and the Administrative  Agent may,
in reliance upon such assumption,  make available to the Borrower on such date a
corresponding  amount.  If and to the extent that such Lender  shall not have so
made such Ratable Portion available to the Administrative Agent, such Lender and
the Borrower severally agree to repay to the  Administrative  Agent forthwith on
demand such  corresponding  amount together with interest thereon,  for each day
from the date such amount is made  available to the Borrower until the date such
amount  is  repaid  to the  Administrative  Agent,  at (i)  in the  case  of the
Borrower,  the interest rate applicable at the time to the Loans comprising such
Borrowing  and (ii) in the case of such Lender,  the Federal  Funds Rate for the
first Business Day and thereafter at the interest rate applicable at the time to
the  Loans  comprising  such  Borrowing.  If  such  Lender  shall  repay  to the
Administrative  Agent such  corresponding  amount,  such amount so repaid  shall
constitute  such  Lender's  Loan as part of such  Borrowing for purposes of this
Agreement.  If the  Borrower  shall  repay  to  the  Administrative  Agent  such
corresponding  amount,  such  payment  shall  not  relieve  such  Lender  of any
obligation it may have hereunder to the Borrower.

          (d) The failure of any Lender to make the Loan or any payment required
by it on the date specified (a "NON-FUNDING  LENDER"),  including any payment in
respect of its  participation  in Swing Loans and Letter of Credit  Obligations,
shall not  relieve  any other  Lender  of its  obligations  to make such Loan or
payment  on such date but no such  other  Lender  shall be  responsible  for the
failure of any Non-Funding  Lender to make a Loan or payment required under this
Agreement.

          SECTION 2.3.      SWING LOANS.

          (a) On the  terms  and subject  to the  conditions contained  in  this
Agreement,  the Swing Loan Lender may in its sole  discretion make loans (each a
"SWING LOAN")  otherwise  available to the Borrower under the Facility from time
to time on any  Business  Day during the period from the date  hereof  until the
Revolving Credit Termination Date in an aggregate amount at any time outstanding
at any time not to exceed the lesser of $10,000,000  and the Swing Loan Lender's
Ratable Portion of the Available Credit; PROVIDED,  HOWEVER, that the Swing Loan
Lender shall not make any Swing Loan to the extent that,  after giving effect to
such Swing Loan, the aggregate  Revolving Credit  Outstandings  would exceed the
Maximum  Credit.  The Swing Loan  Lender  shall be  entitled to rely on the most
recent Borrowing Base Certificate  delivered to the  Administrative  Agent. Each
Swing  Loan  shall be a Base Rate Loan and must be repaid in full  within  seven
days of its making or, if sooner,  upon any Revolving Credit Borrowing hereunder
and shall in any event  mature no later than the  Revolving  Credit  Termination
Date. Within the


                                       32
<PAGE>

limits
set forth in the first sentence of this SECTION  2.3(A),  amounts of Swing Loans
repaid may be reborrowed under this SECTION 2.3(A).

          (b) In order to  request a Swing  Loan, the  Borrower  shall  telecopy
to the Administrative Agent a duly completed request setting forth the date, the
requested  amount and date of the Swing  Loan (a "SWING  LOAN  REQUEST"),  to be
received  by the  Administrative  Agent not later than 1:00 p.m.  (New York City
time) on the day of the  proposed  borrowing.  The  Administrative  Agent  shall
promptly  notify the Swing Loan  Lender of the  details of the  requested  Swing
Loan. Subject to the terms of this Agreement, the Swing Loan Lender shall make a
Swing Loan  available to the  Administrative  Agent which will make such amounts
available to the Borrower on the date of the relevant  Swing Loan  Request.  The
Swing Loan Lender shall not make any Swing Loan in the period  commencing on the
first Business Day after it receives  written notice from any Lender that one or
more of the conditions precedent contained in SECTION 3.2 shall not on such date
be satisfied,  and ending when such  conditions  are  satisfied.  The Swing Loan
Lender  shall not  otherwise  be  required  to  determine  that,  or take notice
whether,  the  conditions  precedent  set forth in SECTION  3.2 hereof have been
satisfied in connection with the making of any Swing Loan.

          (c) The Swing Loan  Lender  shall notify the  Administrative  Agent in
writing (which may be by telecopy) weekly, by no later than 10:00 a.m. (New York
City time) on the first  Business Day of each week, of the  aggregate  principal
amount of its Swing Loans then outstanding.

          (d) The Swing Loan Lender  may demand at any time that each Lender pay
to the  Administrative  Agent, for the account of the Swing Loan Lender,  in the
manner provided in subsection (e) below, such Lender's Ratable Portion of all or
a portion of the outstanding Swing Loans, which demand shall be made through the
Administrative  Agent,  shall be in writing and shall  specify  the  outstanding
principal amount of Swing Loans demanded to be paid.

          (e) The Administrative  Agent shall forward each notice referred to in
CLAUSE (C) above and each demand  referred to in CLAUSE (D) above to each Lender
on the day such notice or such demand is  received by the  Administrative  Agent
(except  that any such  notice or demand  received by the  Administrative  Agent
after 2:00 p.m.  (New York City  time) on any  Business  Day or any such  demand
received  on a day  that is not a  Business  Day  shall  not be  required  to be
forwarded to the Lenders by the  Administrative  Agent until the next succeeding
Business Day),  together with a statement prepared by the  Administrative  Agent
specifying  the  amount  of  each  Lender's  Ratable  Portion  of the  aggregate
principal  amount of the Swing Loans stated to be  outstanding in such notice or
demanded to be paid pursuant to such demand, and, notwithstanding whether or not
the  conditions  precedent  set forth in SECTION  3.2 shall have been  satisfied
(which conditions  precedent the Lenders hereby irrevocably  waive), each Lender
shall,  before  11:00  a.m.  (New  York  City  time)  on the  Business  Day next
succeeding  the date of such Lender's  receipt of such written  statement,  make
available to the Administrative  Agent, in immediately  available funds, for the
account of the Swing Loan Lender,  the amount specified in such statement.  Upon
such payment by a Lender,  such Lender  shall,  except as provided in CLAUSE (F)
below,  be  deemed  to  have  made  a  Revolving  Loan  to  the  Borrower.   The
Administrative  Agent shall use such funds to repay the Swing Loans to the Swing
Loan Lender.  To the extent that any Lender fails to make such payment available
to the  Administrative  Agent for the  account  of the Swing  Loan  Lender,  the
Borrower shall repay such Swing Loan on demand.

                                       33
<PAGE>

          (f) Upon  the  occurrence  of a  Default under  SECTION  9.1(F),  each
Lender shall acquire,  without recourse or warranty, an undivided  participation
in each Swing Loan  otherwise  required to be repaid by such Lender  pursuant to
CLAUSE (E) above,  which  participation  shall be in a principal amount equal to
such  Lender's  Ratable  Portion of such Swing Loan, by paying to the Swing Loan
Lender on the date on which such Lender would  otherwise  have been  required to
make a payment in respect of such Swing Loan  pursuant  to CLAUSE (E) above,  in
immediately available funds, an amount equal to such Lender's Ratable Portion of
such Swing Loan. If such amount is not in fact made  available by such Lender to
the Swing Loan Lender on such date,  the Swing Loan Lender  shall be entitled to
recover such amount on demand from such Lender  together with  interest  accrued
from such date at the Federal  Funds Rate for the first  Business Day after such
payment was due and  thereafter at the rate of interest then  applicable to Base
Rate Loans.

          (g) From and after  the date on which  any Lender  is  deemed  to have
made a Revolving  Credit Loan  pursuant to CLAUSE (E) above with  respect to any
Swing Loan or  purchases  an  undivided  participation  interest in a Swing Loan
pursuant to CLAUSE (F) above, a Swing Loan Lender shall  promptly  distribute to
such Lender such  Lender's  Ratable  Portion of all payments of principal of and
interest  received  by the Swing Loan Lender on account of such Swing Loan other
than those received from a Lender pursuant to CLAUSE (E) or (F) above.

          SECTION 2.4.      LETTERS OF CREDIT.

          (a) On  the terms  and  subject to  the conditions  contained  in this
Agreement,  each  Issuer  agrees to issue one or more  Letters  of Credit at the
request of the Borrower for the account of the Borrower from time to time during
the period  commencing  on the  Closing  Date and  ending on the  earlier of the
Revolving Credit Termination Date and 30 days prior to the Scheduled Termination
Date; PROVIDED,  HOWEVER,  that no Issuer shall be under any obligation to issue
any Letter of Credit if:

                    (i)      any order,  judgment or  decree of any Governmental
                  Authority or  arbitrator  shall purport by its terms to enjoin
                  or restrain  such Issuer from issuing such Letter of Credit or
                  any  Requirement  of Law  applicable  to  such  Issuer  or any
                  request or directive  (whether or not having the force of law)
                  from any Governmental  Authority with  jurisdiction  over such
                  Issuer shall  prohibit,  or request  that such Issuer  refrain
                  from,  the  issuance  of letters of credit  generally  or such
                  Letter of  Credit  in  particular  or shall  impose  upon such
                  Issuer with  respect to such Letter of Credit any  restriction
                  or reserve or capital  requirement  (for which such  Issuer is
                  not otherwise  compensated)  not in effect on the date of this
                  Agreement or result in any unreimbursed  loss, cost or expense
                  which was not applicable, in effect or known to such Issuer as
                  of the date of this  Agreement  and which such  Issuer in good
                  faith deems material to it;

                    (ii)      such  Issuer shall  have received  written  notice
                  from the Administrative  Agent, any Lender or the Borrower, on
                  or prior to the  requested  date of issuance of such Letter of
                  Credit,  that  one  or  more  of  the  applicable   conditions
                  contained in SECTIONS 3.1 and 3.2 is not then satisfied;

                    (iii)     after giving effect to the issuance of such Letter
                  of Credit, the aggregate  Revolving Credit  Outstandings would
                  exceed the Maximum Credit at such time;

                                       34
<PAGE>

                    (iv)      after giving effect to the issuance of such Letter
                  of Credit, the sum of (i) the Letter of Credit Undrawn Amounts
                  at such time and (ii) the  Reimbursement  Obligations  at such
                  time exceeds $15,000,000 (the "LETTER OF CREDIT SUBLIMIT"); or

                    (v)      any  fees  due  in  connection  with  a   requested
                  issuance have not been paid;

None of the Lenders  (other  than the  Issuers in their  capacity as such) shall
have any  obligation  to issue any Letter of Credit.  No Letter of Credit may be
issued without the consent of the Administrative Agent.

          (b) In no event shall the  expiration date of any Letter of Credit (i)
be more than one year after the date of issuance  thereof,  or (ii) be less than
thirty days prior to the Scheduled Termination Date; PROVIDED, HOWEVER, that any
Letter of Credit with a one-year  term may  provide for the renewal  thereof for
additional  one-year  periods  (which shall in no event extend beyond the expiry
date referred to in CLAUSE (II) above).

          (c) In connection  with the  issuance  of each  Letter of Credit,  the
Borrower shall give the relevant  Issuer and the  Administrative  Agent at least
two Business Days' prior written notice,  in substantially the form of EXHIBIT D
(or in such other written or electronic  form as is acceptable to the Issuer) (a
"LETTER OF CREDIT REQUEST"), of the requested issuance of such Letter of Credit.
Such notice shall be irrevocable  and shall specify the Issuer of such Letter of
Credit, the stated amount of the Letter of Credit requested, which stated amount
shall not be less than $100,000,  the date of issuance of such requested  Letter
of Credit (which day shall be a Business  Day), the date on which such Letter of
Credit is to expire  (which  date shall be a Business  Day),  and the Person for
whose benefit the requested Letter of Credit is to be issued. Such notice, to be
effective,  must be received by the relevant Issuer and the Administrative Agent
not later than 11:00 A.M.  (New York City time) on the third  Business Day prior
to the requested issuance of such Letter of Credit.

          (d) Subject to the  satisfaction of the  conditions set  forth in this
SECTION 2.4, the relevant Issuer shall, on the requested date, issue a Letter of
Credit on behalf of the  Borrower in  accordance  with such  Issuer's  usual and
customary business practices.  No Issuer shall issue any Letter of Credit in the
period  commencing on the first  Business Day after it receives  written  notice
from  any  Lender  that one or more of the  conditions  precedent  contained  in
SECTION 3.2 shall not on such date be satisfied, and ending when such conditions
are satisfied.  The relevant Issuer shall not otherwise be required to determine
that, or take notice whether,  the conditions precedent set forth in SECTION 3.2
have been satisfied in connection with the issuance of any Letter of Credit.

          (e) If requested by the relevant Issuer, prior to the issuance of each
Letter of Credit by such Issuer,  and as a condition of such issuance and of the
participation  of each Lender in the Letter of Credit  Obligations  arising with
respect  thereto,  the Borrower  shall have delivered to such Issuer a letter of
credit  reimbursement  agreement,  in such form as the  Issuer may employ in its
ordinary   course  of  business  for  its  own  account  (a  "LETTER  OF  CREDIT
REIMBURSEMENT  AGREEMENT"),  signed by the Borrower, and such other documents or
items as may be  required  pursuant  to the terms  thereof.  In the event of any
conflict between the terms of any Letter of Credit  Reimbursement  Agreement and
this Agreement, the terms of this Agreement shall govern.

                                       35
<PAGE>

          (f) Each Issuer shall:

                    (i)       give the  Administrative Agent written  notice (or
                  telephonic  notice confirmed  promptly  thereafter in writing,
                  which may be by  telecopier)  of the  issuance or renewal of a
                  Letter of Credit issued by it, of all drawings  under a Letter
                  of Credit  issued by it and the payment (or the failure to pay
                  when due) by the Borrower of any Reimbursement Obligation when
                  due (which  notice the  Administrative  Agent  shall  promptly
                  transmit by telecopy or similar transmission to each Lender).

                    (ii)      upon the request of any Lender,  furnish  to  such
                  Lender copies of any Letter of Credit Reimbursement  Agreement
                  to which such  Issuer is a party and such other  documentation
                  as may reasonably be requested by such Lender; and

                    (iii)     no  later  than  the  tenth (10th)  Business   Day
                  following  the last day of each Fiscal  Month,  provide to the
                  Administrative  Agent  (and  the  Administrative  Agent  shall
                  provide  a copy to each  Lender  requesting  the same) and the
                  Borrower  separate   schedules  for  Documentary  and  Standby
                  Letters  of  Credit  issued  by  it,  in  form  and  substance
                  reasonably  satisfactory to the Administrative  Agent, setting
                  forth the aggregate Letter of Credit  Obligations  outstanding
                  at the end of each month and any information  requested by the
                  Borrower or the Administrative Agent relating thereto.

          (g)  Immediately upon the issuance by an Issuer  of a Letter of Credit
in accordance with the terms and conditions of this Agreement, such Issuer shall
be deemed to have sold and transferred to each Lender,  and each Lender shall be
deemed irrevocably and  unconditionally to have purchased and received from such
Issuer,  without recourse or warranty,  an undivided interest and participation,
to the extent of such Lender's Ratable Portion, in such Letter of Credit and the
obligations of the Borrower with respect thereto (including all Letter of Credit
Obligations  with  respect  thereto)  and any  security  therefor  and  guaranty
pertaining thereto.

          (h) The Borrower  agrees to pay to the Issuer of any  Letter of Credit
the  amount of all  Reimbursement  Obligations  owing to such  Issuer  under any
Letter of Credit  issued for its account  when such amounts are due and payable,
irrespective  of any claim,  set-off,  defense or other right which the Borrower
may have at any time against such Issuer or any other Person.  In the event that
any Issuer makes any payment  under any Letter of Credit and the Borrower  shall
not have repaid  such amount to such Issuer  pursuant to this CLAUSE (H) or such
payment is rescinded or set aside for any reason, such Reimbursement  Obligation
shall be payable on demand with interest thereon computed from the date on which
such Reimbursement Obligation arose to the date of repayment in full at the rate
of interest  applicable to past due Revolving Credit Loans bearing interest at a
rate based on the Base Rate during such period,  and such Issuer shall  promptly
notify the Administrative Agent, which shall promptly notify each Lender of such
failure,  and  each  Lender  shall  promptly  and  unconditionally  pay  to  the
Administrative  Agent for the account of such Issuer the amount of such Lender's
Ratable Portion of such payment in Dollars and in immediately  available  funds.
If the  Administrative  Agent so notifies  such Lender prior to 11:00 A.M.  (New
York City time) on any Business  Day,  such Lender  shall make  available to the
Administrative  Agent for the account of such Issuer its Ratable  Portion of the
amount of such payment on such Business Day in immediately available funds. Upon
such payment by a Lender,  such Lender shall, except during the continuance of a
Default or Event of


                                       36
<PAGE>

Default under SECTION 9.1(F) and  notwithstanding  whether or not the conditions
precedent set forth in SECTION 3.2 shall have been satisfied  (which  conditions
precedent  the  Lenders  hereby  irrevocably  waive)  be  deemed  to have made a
Revolving Loan to the Borrower in the principal amount of such payment. Whenever
any Issuer receives from the Borrower a payment of a Reimbursement Obligation as
to which the  Administrative  Agent has  received for the account of such Issuer
any payment from a Lender  pursuant to this CLAUSE (H), such Issuer shall pay to
the Administrative Agent and the Administrative Agent shall promptly pay to each
Lender, in immediately available funds, an amount equal to such Lender's Ratable
Portion of the amount of such payment  adjusted,  if  necessary,  to reflect the
respective  amounts  the  Lenders  have paid in  respect  of such  Reimbursement
Obligation.

          (i) The  Borrower's  obligation  to pay each  Reimbursement Obligation
and the obligations of the Lenders to make payments to the Administrative  Agent
for the  account of the  Issuers  with  respect  to  Letters of Credit  shall be
absolute,  unconditional  and  irrevocable,  and shall be performed  strictly in
accordance  with the terms of this  Agreement,  under any and all  circumstances
whatsoever,  including the  occurrence  of any Default or Event of Default,  and
irrespective of:

                    (i)      any  lack  of  validity or  enforceability  of  any
                  Letter  of  Credit  or  any  Loan  Document,  or any  term  or
                  provision therein;

                    (ii)     any  amendment  or  waiver  of  or  any  consent to
                  departure  from all or any of the  provisions of any Letter of
                  Credit or any Loan Document;

                    (iii)     the  existence of any claim,  set off,  defense or
                  other right that the Borrower,  any other party  guaranteeing,
                  or otherwise  obligated with, the Borrower,  any Subsidiary or
                  other  Affiliate  thereof or any other  Person may at any time
                  have  against  the  beneficiary  under any  Letter of  Credit,
                  Issuer,  the  Administrative  Agent or any Lender or any other
                  Person,  whether in connection with this Agreement,  any other
                  Loan Document or any other  related or unrelated  agreement or
                  transaction;

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

                    (v)       payment  by the Issuer under  a  Letter of  Credit
                  against  presentation  of a draft or other  document that does
                  not comply with the terms of such Letter of Credit; and

                    (vi)      any other act or  omission  to act or delay of any
                  kind of the Issuer, the Lenders,  the Administrative  Agent or
                  any  other   Person  or  any  other   event  or   circumstance
                  whatsoever,  whether or not  similar to any of the  foregoing,
                  that might, but for the provisions of this Section, constitute
                  a legal or equitable  discharge of the Borrower's  obligations
                  hereunder.

Any  action  taken or  omitted to be taken by the  relevant  Issuer  under or in
connection  with any  Letter of Credit,  if taken or  omitted in the  absence of
gross  negligence  or willful  misconduct,  shall not put such Issuer  under any
resulting liability to the Borrower or any Lender. In determining whether drafts
and other  documents  presented  under a Letter of Credit  comply with

                                       37
<PAGE>

the terms thereof,  the Issuer may accept documents that appear on their face to
be in order, without responsibility for further investigation, regardless of any
notice or  information  to the  contrary  and, in making any  payment  under any
Letter of Credit the Issuer may rely  exclusively on the documents  presented to
it under  such  Letter of Credit as to any and all  matters  set forth  therein,
including  reliance  on the amount of any draft  presented  under such Letter of
Credit,  whether or not the amount due to the beneficiary  thereunder equals the
amount of such draft and whether or not any document  presented pursuant to such
Letter of Credit proves to be insufficient  in any respect,  if such document on
its face appears to be in order,  and whether or not any other  statement or any
other document  presented  pursuant to such Letter of Credit proves to be forged
or invalid or any  statement  therein  proves to be  inaccurate or untrue in any
respect  whatsoever  and any  noncompliance  in any  immaterial  respect  of the
documents presented under such Letter of Credit with the terms thereof shall, in
each case, be deemed not to constitute willful misconduct or gross negligence of
the Issuer.

          (j) If and  to the  extent such  Lender  shall not  have  so  made its
Ratable  Portion  of the  amount of the  payment  required  by CLAUSE  (I) above
available  to the  Administrative  Agent for the  account of such  Issuer,  such
Lender agrees to pay to the Administrative  Agent for the account of such Issuer
forthwith on demand such amount  together with interest  thereon,  for the first
Business  Day after  payment  was  first  due at the  Federal  Funds  Rate,  and
thereafter  until  such  amount is repaid  to the  Administrative  Agent for the
account  of such  Issuer,  at the rate per annum  applicable  to Base Rate Loans
under  the  Facility.  The  failure  of any  Lender  to  make  available  to the
Administrative  Agent for the account of such Issuer its Ratable  Portion of any
such payment shall not relieve any other Lender of its  obligation  hereunder to
make  available to the  Administrative  Agent for the account of such Issuer its
Ratable  Portion of any payment on the date such  payment is to be made,  but no
Lender  shall  be  responsible  for the  failure  of any  other  Lender  to make
available to the  Administrative  Agent for the account of the Issuer such other
Lender's Ratable Portion of any such payment.

          SECTION 2.5.      REDUCTION  AND  TERMINATION OF  THE REVOLVING CREDIT
COMMITMENTS.

          (a) The Borrower may, upon at least three Business  Days' prior notice
to the  Administrative  Agent,  terminate in whole or reduce in part ratably the
unused portions of the respective  Revolving Credit  Commitments of the Lenders;
PROVIDED,  HOWEVER, that each partial reduction shall be in the aggregate amount
of not less than  $5,000,000  or an integral  multiple of  $1,000,000  in excess
thereof.

          (b) The then current Revolving Credit  Commitments shall be reduced on
each  date on which a  prepayment  of  Revolving  Loans  or Swing  Loans is made
pursuant to SECTIONS 2.9(A) or 2.9(E)(I) or would be required to be made had the
outstanding  Revolving  Loans and  Swing  Loans  equaled  the  Revolving  Credit
Commitments  then in effect,  in each case in the amount of such  prepayment (or
deemed  prepayment) (and the Revolving Credit Commitment of each Lender shall be
reduced by its Ratable Portion of such amount).

                                       38
<PAGE>

          SECTION 2.6.      REPAYMENT OF LOANS.  The Borrower  shall  repay  the
entire unpaid principal amount of the Revolving Loans and all other  Obligations
on the Scheduled Termination Date.

          SECTION 2.7.      EVIDENCE OF DEBT.

          (a) Each Lender shall  maintain in accordance  with its usual practice
an account or accounts  evidencing  Indebtedness  of the Borrower to such Lender
resulting from each Loan of such Lender from time to time, including the amounts
of  principal  and  interest  payable  and paid to such Lender from time to time
under this Agreement.

          (b) The  Administrative  Agent shall  maintain  accounts in accordance
with its usual practice in which it will record (i) the amount of each Loan made
and, if a Eurodollar Rate Loan, the Interest Period applicable thereto, (ii) the
amount of any  principal  or interest  due and  payable by the  Borrower to each
Lender hereunder and (iii) the amount of any sum received by the  Administrative
Agent  hereunder  from  the  Borrower  and  each  Lender's  share  thereof,   if
applicable.

          (c) The entries made in the accounts  maintained  pursuant  to CLAUSES
(A) and (B) of this SECTION 2.7 shall,  to the extent  permitted  by  applicable
law, be PRIMA FACIE  evidence of the  existence  and amounts of the  obligations
recorded  therein;  PROVIDED,  HOWEVER,  that the  failure  of any Lender or the
Administrative Agent to maintain such accounts or any error therein shall not in
any  manner  affect  the  obligations  of the  Borrower  to repay  the  Loans in
accordance with their terms.

          (d) Notwithstanding any other provision of the Agreement, in the event
that any Lender requests that the Borrower execute and deliver a promissory note
or notes payable to such Lender in order to evidence the  Indebtedness  owing to
such Lender by the Borrower  hereunder,  the Borrower will promptly  execute and
deliver  a  Revolving  Credit  Note or  Revolving  Credit  Notes to such  Lender
evidencing any Revolving Credit Loans of such Lender,  substantially in the form
of EXHIBIT B, and the  interests  evidenced  by such note or notes  shall at all
times (including after assignment of all or part of such interests) be evidenced
by one or more  Revolving  Credit Notes  payable to the order of the payee named
therein.

          SECTION 2.8.      OPTIONAL PREPAYMENTS.

          (a) The Borrower may, upon at least three  Business Days' prior notice
to the Administrative  Agent,  stating the proposed date and aggregate principal
amount  of the  prepayment,  prepay  the  outstanding  principal  amount  of the
Revolving Loans in whole or in part; PROVIDED,  HOWEVER,  that if any prepayment
of any  Eurodollar  Rate Loan is made by the Borrower other than on the last day
of an Interest  Period for such Loan,  the  Borrower  shall also pay any amounts
owing pursuant to SECTION 2.14(E);  and,  PROVIDED,  FURTHER,  that each partial
prepayment shall be in an aggregate principal amount not less than $2,000,000 or
integral  multiples of  $1,000,000  in excess  thereof.  Upon the giving of such
notice of prepayment,  the principal  amount of Revolving Credit Loans specified
to be prepaid  shall  become  due and  payable  on the date  specified  for such
prepayment.

          (b) The  Borrower shall have no right to prepay the  principal  amount
of any Revolving Loan other than as provided in this SECTION 2.8.

                                       39
<PAGE>

          SECTION 2.9.      MANDATORY PREPAYMENTS.

          (a) Upon  receipt by the Borrower  or any of  its  Subsidiaries of Net
Cash Proceeds  arising (i) from an Asset Sale or a Debt  Issuance,  the Borrower
shall  immediately  prepay the Loans in an amount equal to 100% of such Net Cash
Proceeds,  and (ii) from an Equity  Issuance,  the  Borrower  shall  immediately
prepay the Loans in an amount equal to 50% of such Net Cash  Proceeds.  Any such
mandatory prepayment shall be applied in accordance with SECTION 2.9(B) below.

          (b) Any  prepayments  made by the Borrower  required  to be applied in
accordance with this SECTION 2.9(B) shall be applied as follows: FIRST, to repay
the  outstanding  principal  balance of the Swing  Loans  until such Swing Loans
shall  have been  repaid in full;  SECOND,  to repay the  outstanding  principal
balance of the Revolving  Loans until such Revolving  Loans shall have been paid
in full;  and  THEN,  to  provide  cash  collateral  for any  Letter  of  Credit
Obligations  in the  manner set forth in  SECTION  9.3 until all such  Letter of
Credit  Obligations have been fully cash  collateralized in the manner set forth
therein.  All  repayments  of  Revolving  Loans and Swing  Loans  required to be
applied in accordance with this SECTION 2.9(B) or SECTION 2.9(E)(I) shall result
in a permanent  reduction  of the  Revolving  Credit  Commitments  to the extent
provided therein.

          (c)  If at  any  time, the  aggregate principal  amount  of  Revolving
Credit  Outstandings  exceed the Maximum Credit at such time, the Borrower shall
forthwith  prepay  the Swing  Loans  first  and then the  Revolving  Loans  then
outstanding in an amount equal to such excess.  If any such excess remains after
repayment in full of the aggregate  outstanding Swing Loans and Revolving Loans,
the Borrower shall provide cash collateral for the Letter of Credit  Obligations
in the manner set forth in SECTION 9.3 to the extent  required to eliminate such
excess.

          (d) Upon the  occurrence  of a Cash Sweep Event,  the  Borrower agrees
that all  available  funds in the  Concentration  Account  shall be applied on a
daily basis FIRST to repay the outstanding  principal  amount of the Swing Loans
until such Swing Loans have been repaid in full; SECOND to repay the outstanding
principal  balance of the Revolving  Loans until such Revolving Loans shall have
been repaid in full; and THIRD to any other Obligation then due and payable.

          (e) (i) Except as  provided in CLAUSE  (II)  below,  promptly,  and in
any event within 10 days of receipt by the Administrative Agent, the Borrower or
any  Subsidiary  Guarantor of any Net Cash  Proceeds in excess of $500,000  (for
each  occurrence) from payments of insurance on account of the loss or damage to
any assets or  property,  or  payments  of  compensation  for any such assets or
property taken by condemnation or eminent domain, the applicable party receiving
such Net Cash  Proceeds  shall  notify  the other  parties  of such  receipt  in
writing,  and not later than 30 days  following  such  receipt of notice,  there
shall  become due and payable a  prepayment  of the Loans in an amount  equal to
100% of such Net Cash Proceeds.

                      (ii)  The Borrower may elect, by written  notice delivered
to the  Administrative  Agent no later than the date on which  prepayment  would
otherwise be required under CLAUSE (I) above,  to apply all or a portion of such
Net Cash  Proceeds  to the  replacement  or repair of such  assets or  property;
PROVIDED, HOWEVER, that if within 150 days of such election, such replacement or
repair has not  commenced,  or is  abandoned or  otherwise  discontinued  or not
diligently  pursued,  100% of the Net Cash Proceeds shall be immediately applied
to the  Loans in  accordance  with  SECTION  2.9(B).  If the  Borrower  makes an
election  under this CLAUSE (II),  then the  Borrower  shall apply such Net Cash
Proceeds to the  repayment of the Loans (but not in


                                       40
<PAGE>

permanent  reduction of the  Revolving  Credit  Commitments)  and any  remaining
proceeds  shall be  maintained  in the Cash  Collateral  Account  and may not be
withdrawn by the Borrower other than for the replacement or repair  specified in
the Borrower's  election notice. The  Administrative  Agent shall be entitled to
require proof that the proceeds of any such withdrawal are being applied for the
purposes specified in the Borrower's election notice.

          SECTION 2.10.     INTEREST.

          (a)  RATE OF  INTEREST.  All  Loans  and  the  outstanding  amount  of
all other Obligations  shall bear interest,  in the case of Loans, on the unpaid
principal  amount  thereof from the date such Loans are made and, in the case of
such other Obligations, from the date such other Obligations are due and payable
until,  in all cases,  paid in full,  except as  otherwise  provided  in SECTION
2.10(C), as follows:

                    (i)       if a Base Rate Loan or such other Obligation, at a
                  rate per  annum  equal  to the sum of (A) the Base  Rate as in
                  effect from time to time, PLUS (B) the Applicable Margin; and

                    (ii)      if a  Eurodollar  Rate Loan,  at a rate  per annum
                  equal to the sum of (A) the Eurodollar Rate determined for the
                  applicable  Interest Period, PLUS (B) the Applicable Margin in
                  effect  from  time to time  during  such  Eurodollar  Interest
                  Period.

          (b)  INTEREST  PAYMENTS.  (i)  Interest accrued on each Base Rate Loan
shall  be  payable  in  arrears  (A) on the  last  day of each  calendar  month,
commencing  on the first such day  following  the making of such Base Rate Loan,
and (B) if not previously paid in full, at maturity  (whether by acceleration or
otherwise) of such Base Rate Loan; (ii) interest accrued on Swing Loans shall be
payable in  arrears  on the first  Business  Day of the  immediately  succeeding
calendar  month;  (iii) interest  accrued on each  Eurodollar Rate Loan shall be
payable in arrears (A) on the last day of each  Interest  Period  applicable  to
such Loan and if such Interest  Period has a duration of more than three months,
on each day during such Interest Period which occurs every three months from the
first day of such Interest Period, (B) upon the payment or prepayment thereof in
full or in part, and (C) if not previously paid in full, at maturity (whether by
acceleration  or  otherwise)  of such  Eurodollar  Rate Loan;  and (iv) interest
accrued on the amount of all other  Obligations  shall be payable on demand from
and  after  the  time  such  Obligation  becomes  due and  payable  (whether  by
acceleration or otherwise).

          (c) DEFAULT INTEREST.  Notwithstanding the rates of interest specified
in  SECTION  2.10(A)  or  elsewhere  herein,   effective  immediately  upon  the
occurrence of an Event of Default,  and for as long  thereafter as such Event of
Default shall be continuing,  the principal  balance of all Loans and the amount
of all other  Obligations shall bear interest at a rate which is two percent per
annum in excess of the rate of interest applicable to such Obligations from time
to time.

          SECTION 2.11.     CONVERSION/CONTINUATION OPTION.

          (a) The  Borrower may elect (i) at any time to convert Base Rate Loans
(other than Swing Loans) or any portion  thereof to  Eurodollar  Rate Loans,  or
(ii) at the end of any applicable  Interest Period,  to convert  Eurodollar Rate
Loans or any portion thereof into Base Rate Loans or to continue such Eurodollar
Rate Loans or any portion thereof for an additional Interest


                                       41
<PAGE>

Period; PROVIDED, HOWEVER, that the aggregate amount of the Eurodollar Loans for
each Interest Period must be in the amount of $2,000,000 or an integral multiple
of $1,000,000  in excess  thereof.  Each  conversion  or  continuation  shall be
allocated among the Loans of each Lender in accordance with its Ratable Portion.
Each such  election  shall be in  substantially  the form of EXHIBIT F hereto (a
"NOTICE  OF  CONVERSION  OR  CONTINUATION")  and  shall  be made by  giving  the
Administrative  Agent  at  least  three  Business  Days'  prior  written  notice
specifying (A) the amount and type of Loan being converted or continued,  (B) in
the case of a conversion  to or a  continuation  of Eurodollar  Rate Loans,  the
applicable  Interest  Period,  and (C) in the case of a conversion,  the date of
conversion  (which  date  shall be a  Business  Day and,  if a  conversion  from
Eurodollar  Rate Loans,  shall also be the last day of the  applicable  Interest
Period).

          (b) The Administrative Agent shall  promptly notify each Lender of its
receipt of a Notice of Conversion or  Continuation  and of the options  selected
therein.  Notwithstanding  the  foregoing,  no conversion in whole or in part of
Base Rate Loans to Eurodollar  Rate Loans,  and no  continuation  in whole or in
part of Eurodollar  Rate Loans upon the  expiration of any  applicable  Interest
Period,  shall be  permitted  at any time at which (i) a Default  or an Event of
Default shall have occurred and be  continuing or (ii) the  continuation  of, or
conversion into, would violate any of the provisions of SECTION 2.14. If, within
the  time  period   required   under  the  terms  of  this  SECTION  2.11,   the
Administrative  Agent does not receive a Notice of  Conversion  or  Continuation
from the  Borrower  containing a permitted  election to continue any  Eurodollar
Rate Loans for an additional Interest Period or to convert any such Loans, then,
upon the  expiration  of the  applicable  Interest  Period,  such  Loans will be
automatically  converted  to Base  Rate  Loans.  Each  Notice of  Conversion  or
Continuation shall be irrevocable.

          SECTION 2.12.     FEES.

          (a)  UNUSED COMMITMENT FEE. The Borrower agrees to pay to each  Lender
a commitment fee on the average amount by which the Revolving Credit  Commitment
of such Lender  exceeds such Lender's  Ratable  Portion of the Revolving  Credit
Outstandings  (the  "UNUSED  COMMITMENT  FEE")  from the date  hereof  until the
Revolving Credit  Termination Date at the Applicable Unused Commitment Fee Rate,
payable in arrears (i) on the last day of each calendar month, commencing on the
first such day  following  the  Closing  Date and (ii) on the  Revolving  Credit
Termination Date.

          (b)  LETTER OF CREDIT FEES.  The Borrower agrees  to pay the following
amounts with respect to Letters of Credit issued by any Issuer:

                    (i)       to the  Administrative  Agent for  the  account of
                  each Issuer of a Letter of Credit, with respect to each Letter
                  of Credit  issued by such  Issuer,  an  issuance  fee equal to
                  0.25% per annum of the maximum  amount  available from time to
                  time to be drawn  under  such  Letter of  Credit,  payable  in
                  arrears (A) on the last day of each calendar month, commencing
                  on the first such day following the issuance of such Letter of
                  Credit and (B) on the Revolving Credit Termination Date;

                    (ii)     to the Administrative Agent for the ratable benefit
                  of the Lenders,  with respect to each Letter of Credit,  a fee
                  accruing  at a rate per annum equal to the  Applicable  Margin
                  for  Revolving  Loans  that are  Eurodollar  Rate Loans of the
                  maximum  amount  available from time to time to be drawn under
                  such Letter of Credit,  payable in arrears (A) on the last day
                  of each calendar



                                       42
<PAGE>

                  month, commencing on the first such day following the issuance
                  of such  Letter  of  Credit  and (B) on the  Revolving  Credit
                  Termination   Date;   PROVIDED,   HOWEVER,   that  during  the
                  continuance  of  an  Event  of  Default,  such  fee  shall  be
                  increased  by two  percent  per annum and shall be  payable on
                  demand; and

                    (iii)    to the Issuer of any Letter of Credit, with respect

                  to the  issuance,  amendment  or  transfer  of each  Letter of
                  Credit  and each  drawing  made  thereunder,  documentary  and
                  processing  charges in accordance with such Issuer's  standard
                  schedule  for such  charges in effect at the time of issuance,
                  amendment, transfer or drawing, as the case may be.

          (c)  ADDITIONAL  FEES.  The  Borrower  has   agreed  to  pay   to  the
Administrative  Agent and the Arranger  additional fees, the amount and dates of
payment of which are embodied in the Fee Letter.

          SECTION 2.13.     PAYMENTS AND COMPUTATIONS; PROTECTIVE ADVANCES.

          (a) The Borrower shall make each payment hereunder (including fees and
expenses) not later than 11:00 A.M. (New York City time) on the day when due, in
Dollars, to the Administrative  Agent at its address referred to in SECTION 11.8
in  immediately   available   funds  without   set-off  or   counterclaim.   The
Administrative   Agent  will  promptly   thereafter   cause  to  be  distributed
immediately  available funds relating to the payment of principal or interest or
fees to the Lenders, in accordance with the application of payments set forth in
CLAUSES (E) and (F) of this  SECTION  2.13,  as  applicable,  for the account of
their respective  Applicable Lending Offices;  PROVIDED,  HOWEVER,  that amounts
payable pursuant to SECTION 2.14(C), 2.14(E), 2.15 or 2.16 shall be paid only to
the affected  Lender or Lenders and amounts  payable with respect to Swing Loans
shall  be  paid  only  to  the  Swing  Loan  Lender.  Payments  received  by the
Administrative Agent after 11:00 A.M. (New York City time) shall be deemed to be
received on the next Business Day.

          (b) All  computations of  interest  and of fees  shall be  made by the
Administrative Agent on the basis of a year of (i) 365 days (in the case of Base
Rate Loans and fees) and (y) 360 days (in the case of  Eurodollar  Rate  Loans),
and in each case,  for the actual  number of days  (including  the first day but
excluding the last day) occurring in the period for which such interest and fees
are payable.  Each determination by the Administrative Agent of an interest rate
hereunder  shall be  conclusive  and binding for all purposes,  absent  manifest
error.

          (c) Whenever any payment hereunder shall be  stated to be due on a day
other than a Business  Day,  such payment  shall be made on the next  succeeding
Business  Day, and such  extension of time shall in such case be included in the
computation  of  payment  of  interest  or fees,  as the case may be;  PROVIDED,
however,  that if such extension would cause payment of interest on or principal
of any Eurodollar Rate Loan to be made in the next calendar month,  such payment
shall be made on the immediately  preceding  Business Day. All repayments of any
Revolving  Loans shall be applied first to repay such Loans  outstanding as Base
Rate Loans and then to repay such Loans  outstanding  as  Eurodollar  Rate Loans
with those Eurodollar Rate Loans which have earlier expiring Eurodollar Interest
Periods  being  repaid  prior to those  which  have  later  expiring  Eurodollar
Interest Periods.

          (d) Unless  the Administrative Agent shall  have received  notice from
the  Borrower  to the  Lenders  prior to the date on which  any  payment  is due
hereunder   that  the  Borrower  will  not  make  such  payment  in  full,   the
Administrative Agent may assume that the



                                       43
<PAGE>

Borrower has made such payment in full to the Administrative  Agent on such date
and the Administrative Agent may, in reliance upon such assumption,  cause to be
distributed  to each Lender on such due date an amount  equal to the amount then
due such  Lender.  If and to the  extent the  Borrower  shall not have made such
payment in full to the  Administrative  Agent,  each  Lender  shall repay to the
Administrative  Agent forthwith on demand such amount distributed to such Lender
together with interest thereon at the Federal Funds Rate, for the first Business
Day, and,  thereafter,  at the rate applicable to Base Rate Loans,  for each day
from the date such  amount is  distributed  to such  Lender  until the date such
Lender repays such amount to the Administrative Agent.

          (e) Subject to the  provisions of CLAUSE (F) of this SECTION 2.13  and
(except as  otherwise  provided  in SECTION  2.9),  all  payments  and any other
amounts  received  by the  Administrative  Agent from or for the  benefit of the
Borrower shall be applied FIRST, to pay principal of and interest on any portion
of the Loans which the  Administrative  Agent may have advanced  pursuant to the
express  provisions  of this  Agreement  on behalf of any Lender,  for which the
Administrative  Agent  has  not  then  been  reimbursed  by such  Lender  or the
Borrower;  SECOND, to pay all other Obligations then due and payable; and THIRD,
as the Borrower so  designates.  Payments in respect of Swing Loans  received by
the Administrative Agent shall be distributed to the Swing Loan Lender; payments
in respect of  Revolving  Loans  received by the  Administrative  Agent shall be
distributed to each Lender in accordance with such Lender's Ratable Portion; and
all payments of fees and all other  payments in respect of any other  Obligation
shall be  allocated  among  such of the  Lenders  and  Issuers  as are  entitled
thereto,  and, if to the Lenders,  in  proportion  to their  respective  Ratable
Portions.

          (f) After  the occurrence and  during the  continuance  of an Event of
Default,  the  Borrower  hereby  irrevocably  waives  the  right to  direct  the
application  of any and all  payments  in  respect  of the  Obligations  and any
proceeds of Collateral,  and agrees that the Administrative Agent may, and shall
upon  either  (A) the  written  direction  of the  Requisite  Lenders or (B) the
acceleration of the  Obligations  pursuant to SECTION 9.1, apply all payments in
respect of any  Obligations  and all  proceeds of  Collateral  in the  following
order:

                    (i)      FIRST, to pay interest on and then principal of any

                  portion of the Revolving Loans which the Administrative  Agent
                  may have  advanced  on  behalf  of any  Lender  for  which the
                  Administrative  Agent  has not then  been  reimbursed  by such
                  Lender or the Borrower;

                    (ii)     SECOND,  to pay interest  on and then  principal of
                  any Swing Loan;

                    (iii)    THIRD, to pay Obligations in respect of any expense
                  reimbursements  or  indemnities  then  due the  Administrative
                  Agent;

                    (iv)     FOURTH,  to  pay  Obligations  in  respect  of  any
                  expense  reimbursements or indemnities then due to the Lenders
                  and the Issuers;

                    (v)      FIFTH,  to pay  Obligations in  respect of any fees
                  then due to the  Administrative  Agent,  the  Lenders  and the
                  Issuers;

                    (vi)     SIXTH,  to pay  interest then due  and  payable  in
                  respect of the Loans and Reimbursement Obligations;

                                       44
<PAGE>

                    (vii)    SEVENTH, to pay or prepay principal payments on the
                  Loans  and  Reimbursement  Obligations  and  to  provide  cash
                  collateral for outstanding Letter of Credit Undrawn Amounts in
                  the manner  described in SECTION 9.3, ratably to the aggregate
                  principal amount of such Loans,  Reimbursement Obligations and
                  Letter of Credit Undrawn Amounts,  and Obligations  owing with
                  respect to Hedging Contracts; and

                    (viii)   EIGHTH,  to   the  ratable  payment  of  all  other
                  Obligations;

PROVIDED,  HOWEVER,  that if  sufficient  funds  are not  available  to fund all
payments to be made in respect of any of the Obligations described in any of the
foregoing  clauses FIRST through EIGHTH,  the available funds being applied with
respect to any such Obligation (unless otherwise specified in such clause) shall
be allocated to the payment of such Obligations ratably, based on the proportion
of the  Administrative  Agent's and each  Lender's  or Issuer's  interest in the
aggregate  outstanding  Obligations  described  in such  clauses.  The  order of
priority set forth in clauses FIRST through  EIGHTH of this SECTION  2.13(F) may
at any time and from time to time be changed by the  agreement of the  Requisite
Lenders  without  necessity  of  notice  to or  consent  of or  approval  by the
Borrower,  any Secured  Party that is not a Lender or Issuing Bank, or any other
Person.  The order of priority set forth in clauses  FIRST through FIFTH of this
SECTION  2.13(F)  may be  changed  only with the prior  written  consent  of the
Administrative Agent in addition to the Requisite Lenders.

          (g) All  payments  of  principal  on  the Swing  Loans,  Reimbursement
Obligations,  interest, fees, expenses and other sums due and payable in respect
of the Revolving Loans and all expenses,  disbursements and advances incurred by
the Administrative Agent pursuant to the Loan Documents after the occurrence and
during the continuance of an Event of Default which the Administrative Agent, in
its sole  discretion,  deems  necessary  or desirable to preserve or protect the
Collateral or any portion  thereof or to enhance the  likelihood or maximize the
amount of repayment of the Obligations may, at the option of the  Administrative
Agent, be paid from the proceeds of Swing Loans or Revolving Loans. The Borrower
hereby  authorizes the Swing Loan Lender to make Swing Loans pursuant to SECTION
2.3(A), and the Lenders to make Revolving Loans pursuant to SECTION 2.2(A), from
time to time in such Swing Loan Lender's, or such Lender's discretion, which are
in the amounts of any and all principal  payable with respect to the Swing Loans
and interest,  fees, expenses and other sums payable in respect of the Revolving
Loans,  and  further  authorizes  the  Administrative  Agent to give the Lenders
notice of any Borrowing with respect to such Swing Loans and Revolving Loans and
to distribute  the proceeds of such Swing Loans and Revolving  Loans to pay such
amounts.  The Borrower  agrees that all such Swing Loans and Revolving  Loans so
made  shall  be  deemed  to  have  been  requested  by it  (irrespective  of the
satisfaction  of the  conditions in SECTION 3.2,  which  conditions  the Lenders
irrevocably  waive) and directs that all proceeds  thereof  shall be used to pay
such amounts.

          SECTION 2.14.     SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS.

          (a) DETERMINATION OF  INTEREST RATE.  The  Eurodollar  Rate  for  each
Interest   Period  for  Eurodollar   Rate  Loans  shall  be  determined  by  the
Administrative  Agent  pursuant to the procedures set forth in the definition of
"EURODOLLAR RATE." The Administrative Agent's determination shall be presumed to
be correct, absent manifest error, and shall be binding on the Borrower.

          (b) INTEREST RATE UNASCERTAINABLE,  INADEQUATE OR UNFAIR. In the event
that: (i) the  Administrative  Agent  determines that adequate and fair means do
not exist for ascertaining


                                       45
<PAGE>

the applicable  interest  rates by reference to which the  Eurodollar  Rate then
being  determined  is to be fixed;  or (ii) the  Requisite  Lenders  notify  the
Administrative  Agent that the Eurodollar  Rate for any Interest Period will not
adequately  reflect the cost to the Lenders of making or maintaining  such Loans
for such Interest Period, the Administrative Agent shall forthwith so notify the
Borrower and the Lenders, whereupon each Eurodollar Loan will automatically,  on
the last day of the current  Interest Period for such Loan,  convert into a Base
Rate Loan and the obligations of the Lenders to make Eurodollar Rate Loans or to
convert Base Rate Loans into  Eurodollar Rate Loans shall be suspended until the
Administrative  Agent shall notify the Borrower that the Requisite  Lenders have
determined that the circumstances causing such suspension no longer exist.

          (c)  INCREASED  COSTS.  If at any  time  any  Lender  shall  determine
that the introduction of or any change in or in the  interpretation  of any law,
treaty or governmental  rule,  regulation or order (other than any change by way
of imposition or increase of reserve  requirements  included in determining  the
Eurodollar  Rate Reserve  Percentage)  or the compliance by such Lender with any
guideline,  request or  directive  from any central  bank or other  Governmental
Authority  (whether or not having the force of law), there shall be any increase
in the cost to such Lender of agreeing to make or making, funding or maintaining
any  Eurodollar  Rate Loans,  then the  Borrower  shall from time to time,  upon
demand by such Lender (with a copy of such demand to the Administrative  Agent),
pay to the  Administrative  Agent  for the  account  of such  Lender  additional
amounts  sufficient  to  compensate  such  Lender  for such  increased  cost.  A
certificate as to the amount of such increased  cost,  submitted to the Borrower
and the Administrative Agent by such Lender, shall be conclusive and binding for
all purposes, absent manifest error.

          (d) ILLEGALITY. Notwithstanding any other provision of this Agreement,
if any Lender  determines  that the  introduction  of or any change in or in the
interpretation  of any law,  treaty or  governmental  rule,  regulation or order
after the date of this Agreement shall make it unlawful,  or any central bank or
other Governmental Authority shall assert that it is unlawful, for any Lender or
its Eurodollar  Lending Office to make  Eurodollar  Rate Loans or to continue to
fund or maintain  Eurodollar  Rate  Loans,  then,  on notice  thereof and demand
therefor by such Lender to the Borrower  through the  Administrative  Agent, (i)
the obligation of such Lender to make or to continue  Eurodollar  Rate Loans and
to convert Base Rate Loans into  Eurodollar  Rate Loans shall be suspended,  and
each such Lender shall make a Base Rate Loan as part of any requested  Borrowing
of Eurodollar Rate Loans and (ii) if the affected Eurodollar Rate Loans are then
outstanding,  the Borrower shall immediately  convert each such Loan into a Base
Rate Loan. If at any time after a Lender gives notice under this SECTION 2.14(D)
such Lender  determines that it may lawfully make  Eurodollar  Rate Loans,  such
Lender shall promptly give notice of that  determination to the Borrower and the
Administrative  Agent, and the Administrative  Agent shall promptly transmit the
notice to each other Lender. The Borrower's right to request,  and such Lender's
obligation, if any, to make Eurodollar Rate Loans shall thereupon be restored.

          (e)  BREAKAGE COSTS.  In addition  to all amounts  required to be paid
by the Borrower  pursuant to SECTION 2.10,  the Borrower shall  compensate  each
Lender,  upon demand,  for all losses,  expenses and liabilities  (including any
loss or  expense  incurred  by  reason of the  liquidation  or  reemployment  of
deposits  or other  funds  acquired  by such  Lender  to fund or  maintain  such
Lender's  Eurodollar  Rate Loans to the Borrower but  excluding  any loss of the
Applicable  Margin on the  relevant  Loans) which that Lender may sustain (i) if
for  any  reason  a  proposed  Borrowing,  conversion  into or  continuation  of
Eurodollar Rate Loans does not occur on


                                       46
<PAGE>

a date specified  therefor in a Notice of Borrowing or a Notice of Conversion or
Continuation  given by a Borrower or in a telephonic request by it for borrowing
or conversion or continuation or a successive  Interest Period does not commence
after notice  therefor is given pursuant to SECTION 2.11, (ii) if for any reason
any Eurodollar Rate Loan is prepaid (including  mandatorily  pursuant to SECTION
2.9) on a date  which  is not the last day of the  applicable  Interest  Period,
(iii) as a consequence of a required  conversion of a Eurodollar  Rate Loan to a
Base Rate Loan as a result of any of the events indicated in SECTION 2.14(B), or
(iv) as a  consequence  of any  failure by a Borrower to repay  Eurodollar  Rate
Loans when  required  by the terms  hereof.  The Lender  making  demand for such
compensation  shall  deliver to the  Borrower  concurrently  with such  demand a
written statement as to such losses,  expenses and liabilities  (which statement
shall show in  reasonable  detail the factual basis for and the  computation  of
such losses,  expenses and liabilities),  and this statement shall be conclusive
as to the amount of compensation due to that Lender, absent manifest error.

          SECTION 2.15.       CAPITAL ADEQUACY.  If  at  any  time  any   Lender
determines that (a) the adoption of or any change in or in the interpretation of
any law, treaty or governmental rule, regulation or order after the date of this
Agreement regarding capital adequacy,  (b) compliance with any such law, treaty,
rule,  regulation,  or order, or (c) compliance with any guideline or request or
directive from any central bank or other Governmental  Authority (whether or not
having the force of law) shall have the effect of reducing the rate of return on
such  Lender's  (or any  corporation  controlling  such  Lender's)  capital as a
consequence of its obligations hereunder or under or in respect of any Letter of
Credit to a level  below that which such Lender or such  corporation  could have
achieved but for such adoption, change, compliance or interpretation, then, upon
demand  from  time to time by such  Lender  (with a copy of such  demand  to the
Administrative  Agent), the Borrower shall pay to the  Administrative  Agent for
the  account of such  Lender,  from time to time as  specified  by such  Lender,
additional  amounts  sufficient to compensate such Lender for such reduction.  A
certificate as to such amounts submitted to the Borrower and the  Administrative
Agent by such Lender shall be  conclusive  and binding for all  purposes  absent
manifest error.

          SECTION 2.16.     TAXES.

          (a) Any  and all payments by  the Borrower  under each  Loan  Document
shall be made free and clear of and without deduction for any and all present or
future taxes,  levies,  imposts,  deductions,  charges or withholdings,  and all
liabilities with respect  thereto,  excluding (i) in the case of each Lender and
the Administrative  Agent (A) franchise taxes imposed on it, by the jurisdiction
(or any political  subdivision  thereof)  under the laws of which such Lender or
the Administrative Agent (as the case may be) is organized and taxes measured by
its net income and (B) any United States  withholding taxes payable with respect
to payments under the Loan Documents under laws  (including any statute,  treaty
or  regulation)  in effect on the  Closing  Date (or, in the case of an Eligible
Assignee,  the date of the Assignment and Acceptance)  applicable to such Lender
or the  Administrative  Agent,  as the case may be, but not excluding any United
States  withholding  payable  as a result of any  change in such laws  occurring
after the Closing Date (or the date of such  Assignment and Acceptance) and (ii)
in the case of each Lender,  franchise taxes imposed on it, by the  jurisdiction
in which such Lender's  Applicable  Lending Office is located and taxes measured
by its net income (all such non-excluded  taxes,  levies,  imposts,  deductions,
charges, withholdings and liabilities being hereinafter referred to as "TAXES").
If any Taxes shall be  required by law to be deducted  from or in respect of any
sum payable  under any Loan Document to any Lender or the  Administrative  Agent
(i) the sum payable shall be increased as

                                       47
<PAGE>

may be  necessary  so that  after  making  all  required  deductions  (including
deductions  applicable to additional  sums payable under this SECTION 2.16) such
Lender or the Administrative Agent (as the case may be) receives an amount equal
to the sum it would have  received had no such  deductions  been made,  (ii) the
Borrower  shall  make such  deductions,  (iii) the  Borrower  shall pay the full
amount  deducted  to  the  relevant  taxing  authority  or  other  authority  in
accordance  with  applicable  law,  and (iv) the Borrower  shall  deliver to the
Administrative Agent evidence of such payment.

          (b) In  addition,  the  Borrower  agrees to pay any  present or future
stamp or  documentary  taxes or any other excise or property  taxes,  charges or
similar levies of the United States or any political  subdivision thereof or any
applicable foreign jurisdiction, and all liabilities with respect thereto, which
arise from any  payment  made  under any Loan  Document  or from the  execution,
delivery or  registration  of, or otherwise  with respect to, any Loan  Document
(collectively, "OTHER TAXES").

          (c) The  Borrower will indemnify  each Lender  and the  Administrative
Agent for the full amount of Taxes and Other Taxes (including any Taxes or Other
Taxes imposed by any  jurisdiction  on amounts  payable under this SECTION 2.16)
paid by such  Lender  or the  Administrative  Agent (as the case may be) and any
liability (including for penalties,  interest and expenses) arising therefrom or
with respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally  asserted.  This  indemnification  shall be made within 30 days from the
date such Lender or the Administrative  Agent (as the case may be) makes written
demand therefor.

          (d) Within  30 days  after the  date of any  payment of Taxes or Other
Taxes,  the Borrower will furnish to the  Administrative  Agent,  at its address
referred to in SECTION  11.8,  the  original  or a  certified  copy of a receipt
evidencing payment thereof.

          (e) Without  prejudice  to the survival of any other  agreement of the
Borrower hereunder,  the agreements and obligations of the Borrower contained in
this SECTION 2.16 shall survive the payment in full of the Obligations.

          (f) Prior to the  Closing  Date  in the case of each  Non-U.S.  Lender
that is a signatory  hereto,  and on the date of the  Assignment  and Acceptance
pursuant to which it becomes a Lender in the case of each other Non-U.S.  Lender
and  from  time  to  time  thereafter  if  requested  by  the  Borrower  or  the
Administrative  Agent, each Non-U.S.  Lender that is entitled at such time to an
exemption from United States  withholding tax, or that is subject to such tax at
a reduced rate under an applicable tax treaty,  shall provide the Administrative
Agent and the Borrower with two completed copies of either IRS Form 4224 or Form
1001,  or in the case of a Non-U.S.  Lender  claiming  exemption  under  Section
871(h) or 881(c) of the Code with respect to "portfolio interest," a Form W-8 or
Form W-9, or other  applicable form,  certificate or document  prescribed by the
IRS certifying as to such Non-U.S.  Lender's  entitlement to such exemption from
United States withholding tax or reduced rate with respect to all payments to be
made to such Non-U.S.  Lender under the Loan Documents.  Unless the Borrower and
the Administrative Agent have received forms or other documents  satisfactory to
them  indicating  that  payments  under any Loan  Document  to or for a Non-U.S.
Lender are not subject to United States  withholding  tax or are subject to such
tax  at a  rate  reduced  by an  applicable  tax  treaty,  the  Borrower  or the
Administrative  Agent shall  withhold taxes from such payments at the applicable
statutory rate.

          (g) Any Lender  claiming  any additional  amounts payable  pursuant to
this SECTION 2.16 shall use its reasonable efforts (consistent with its internal
policy and legal and



                                       48
<PAGE>

regulatory  restrictions) to change the  jurisdiction of its Applicable  Lending
Office if the making of such a change  would  avoid the need for,  or reduce the
amount of, any such additional  amounts which would be payable or may thereafter
accrue and would not, in the sole  determination  of such  Lender,  be otherwise
disadvantageous to such Lender.

          SECTION  2.17.      SUBSTITUTION  OF  LENDERS.  In the  event that (a)
(i) any Lender makes a claim under  SECTION 2.14 (C) or SECTION 2.15, or (ii) it
becomes  illegal for any Lender to continue to fund or make any Eurodollar  Rate
Loan and such Lender notifies the Borrower pursuant to SECTION 2.14(D), or (iii)
the  Borrower is required to make any payment  pursuant to SECTION  2.16 that is
attributable to any Lender, or (iv) any Lender is a Non-Funding  Lender,  (b) in
the case of clause (a)(i) above,  as a consequence of increased costs in respect
of which such claim is made,  the  effective  rate of  interest  payable to such
Lender under this  Agreement  with respect to its Loans  materially  exceeds the
effective average annual rate of interest payable to the Requisite Lenders under
this  Agreement  and (c) Lenders  holding at least 75% of the  Revolving  Credit
Commitments  are not subject to such increased  costs or illegality,  payment or
proceedings (any such Lender, an "AFFECTED LENDER"), the Borrower may substitute
another  financial   institution  for  such  Affected  Lender  hereunder,   upon
reasonable  prior written  notice (which  written notice must be given within 90
days following the occurrence of any of the events  described in CLAUSES (A)(I),
(II),  (III)  or (IV))  by the  Borrower  to the  Administrative  Agent  and the
Affected  Lender  that the  Borrower  intends to make such  substitution,  which
substitute  financial  institution  must be an Eligible  Assignee  and, if not a
Lender,  reasonably acceptable to the Administrative Agent;  PROVIDED,  HOWEVER,
that if more than one Lender  claims  increased  costs,  illegality  or right to
payment  arising from the same act or condition  and such claims are received by
the Borrower  within 30 days of each other then the Borrower may substitute all,
but not (except to the extent the Borrower has already  substituted  one of such
Affected  Lenders before the Borrower's  receipt of the other Affected  Lenders'
claim) less than all, Lenders making such claims. In the event that the proposed
substitute financial institution or other entity is reasonably acceptable to the
Administrative  Agent and the  written  notice was  properly  issued  under this
SECTION  2.17,  the  Affected  Lender  shall sell and the  substitute  financial
institution  or other  entity  shall  purchase,  pursuant to an  Assignment  and
Acceptance,  all  rights  and  claims  of such  Affected  Lender  under the Loan
Documents and the substitute financial  institution or other entity shall assume
and the Affected  Lender shall be relieved of its Revolving  Credit  Commitments
and all other prior  unperformed  obligations  of the Affected  Lender under the
Loan  Documents  (other than in respect of any damages  (other than exemplary or
punitive  damages,  to the extent permitted by applicable law) in respect of any
such unperformed obligations). Upon the effectiveness of such sale, purchase and
assumption (which, in any event shall be conditioned upon the payment in full by
the Borrower to the Affected Lender in cash of all fees,  unreimbursed costs and
expenses and indemnities  accrued and unpaid through such effective  date),  the
substitute  financial  institution  or other  entity  shall  become  a  "LENDER"
hereunder  for  all  purposes  of  this  Agreement  having  a  Revolving  Credit
Commitment in the amount of such Affected  Lender's  Revolving Credit Commitment
assumed by it and such Revolving Credit  Commitment of the Affected Lender shall
be terminated,  provided that all  indemnities  under the Loan  Documents  shall
continue in favor of such Affected Lender.

                                       49
<PAGE>

                                  ARTICLE III

                    CONDITIONS TO LOANS AND LETTERS OF CREDIT

          SECTION 3.1.        CONDITIONS PRECEDENT TO INITIAL LOANS  AND LETTERS
OF CREDIT.  The obligation of each Lender to make the Loans requested to be made
by it on the Closing Date and the  obligation of each Issuer to issue Letters of
Credit  on  the  Closing  Date  is  subject  to the  satisfaction  of all of the
following conditions precedent:

          (a) CERTAIN  DOCUMENTS.  The Administrative Agent shall have  received
on the Closing  Date each of the  following,  each dated the Closing Date unless
otherwise  indicated  or  agreed  to by the  Administrative  Agent,  in form and
substance  satisfactory to the Administrative Agent and in sufficient copies for
each Lender:

                    (i)      this  Agreement, duly executed and delivered by the
                  Borrower  and, for the account of each Lender  requesting  the
                  same, a Revolving Credit Note or Revolving Credit Notes of the
                  Borrower conforming to the requirements set forth herein;

                    (ii)     the Guaranty,  duly  executed  by  each  Subsidiary
                  Guarantor;

                    (iii)    the Pledge  and Security  Agreement,  duly executed
                  by the Borrower and each Subsidiary Guarantor, together with:

                              (A)  evidence  satisfactory to the  Administrative
                  Agent that the  Administrative  Agent (for the  benefit of the
                  Secured  Parties)  has a valid and  perfected  first  priority
                  security  interest in the  Collateral  (subject  to  Customary
                  Permitted  Liens),  including (x) such documents duly executed
                  by each Loan  Party as the  Administrative  Agent may  request
                  with respect to the  perfection  of its security  interests in
                  the Collateral  (including financing statements under the UCC,
                  patent,  trademark and copyright security  agreements suitable
                  for  filing  with  the  Patent  and  Trademark  Office  or the
                  Copyright Office and other applicable documents under the laws
                  of any  jurisdiction  with respect to the  perfection of Liens
                  created by the Pledge and Security  Agreement)  and (y) copies
                  of  UCC  search  reports  as  of a  recent  date  listing  all
                  effective  financing  statements  that name any Loan  Party as
                  debtor,  together  with copies of such  financing  statements,
                  none of which  shall  cover the  Collateral  except  for those
                  which shall be terminated on the Closing Date);

                              (B)  share   certificates   representing  all   of
                  certificated  Pledged  Stock  being  pledged  pursuant to such
                  Pledge and Security  Agreement and stock powers for such share
                  certificates executed in blank;

                              (C)  all  instruments  representing Pledged  Notes
                  being pledged  pursuant to such Pledge and Security  Agreement
                  duly  endorsed  in  favor  of the  Administrative  Agent or in
                  blank; and

                              (D)  Control  Account Letters from all  securities
                  intermediaries  with  respect to all  securities  accounts and
                  securities  entitlements  of the Borrower and such  Subsidiary
                  Guarantor.

                                       50
<PAGE>

                    (iv)     a  favorable  opinion  of  (A) Alston  &  Bird LLP,
                  counsel  to the Loan  Parties,  in  substantially  the form of
                  EXHIBIT G, (B) Catherine O. Hasbrouck,  general counsel to the
                  Loan  Parties,  (C)  counsel to the Loan  Parties in New York,
                  Georgia,  Pennsylvania,  Texas, South Carolina and California,
                  in each case  addressed  to the  Administrative  Agent and the
                  Lenders  and  addressing  such  other  matters  as any  Lender
                  through the  Administrative  Agent may reasonably  request and
                  (C)   counsel   to  the   Administrative   Agent   as  to  the
                  enforceability  of the  Credit  Agreement  and the other  Loan
                  Documents to be executed on the Closing Date;

                    (v)      a copy of each Related Document  certified as being
                  complete and correct by a Responsible Officer of the Borrower;

                    (vi)     a copy  of the  Disclosure Statement,  certified by
                  the Secretary or an Assistant Secretary of the Borrower (A) to
                  be a true, complete and correct copy of such document,  (B) to
                  have been duly authorized by the Borrower's Board of Directors
                  and to have been duly  executed by the Borrower and filed with
                  the Bankruptcy Court and (C) not to have been amended from the
                  form so certified, or rescinded;

                    (vii)    a  certificate  of the  Secretary or  an  Assistant
                  Secretary of the Borrower certifying (A) that attached thereto
                  is a true, correct and complete copy of the Confirmation Order
                  (including  the  Plan  of   Reorganization   attached  to  the
                  Confirmation  Order)  and (B) that no  appeal  or  motion  for
                  rehearing has been filed in connection with such  Confirmation
                  Order;

                    (viii)   a   copy   of  the   articles  or  certificate   of
                  incorporation (or equivalent organizational documents) of each
                  Loan Party,  certified as of a recent date by the Secretary of
                  State  of the  state  of  incorporation  of such  Loan  Party,
                  together with  certificates of such official  attesting to the
                  good standing of each such Loan Party;

                    (ix)     a  certificate  of  the  Secretary or  an Assistant
                  Secretary of each Loan Party certifying (A) the names and true
                  signatures  of each  officer  of such Loan  Party who has been
                  authorized  to execute and deliver any Loan  Document or other
                  document required hereunder to be executed and delivered by or
                  on behalf of such Loan Party,  (B) the by-laws (or  equivalent
                  Constituent  Document)  of such Loan Party as in effect on the
                  date of such  certification,  (C) the resolutions of such Loan
                  Party's  Board of Directors  (or  equivalent  governing  body)
                  approving  and   authorizing   the  execution,   delivery  and
                  performance  of this Agreement and the other Loan Documents to
                  which it is a party and (D) that there have been no changes in
                  the certificate of  incorporation  (or equivalent  Constituent
                  Document)  of  such  Loan  Party  from  the   certificate   of
                  incorporation (or equivalent  Constituent  Document) delivered
                  pursuant to the immediately preceding clause;

                    (x)      a certificate of the Chief Financial Officer of the
                  Borrower,  stating that the  Borrower is Solvent  after giving
                  effect  to the  initial  Loans  and  Letters  of  Credit,  the
                  application of the proceeds thereof in accordance with SECTION
                  7.9 and the payment of all  estimated  legal,  accounting  and
                  other fees related hereto and thereto;

                                       51
<PAGE>

                    (xi)     a  certificate  of a  Responsible  Officer  to  the
                  effect that (A) the condition set forth in SECTION  3.2(B) has
                  been  satisfied and (ii) no litigation  not listed on SCHEDULE
                  4.7 shall have been commenced against any Loan Party or any of
                  its Subsidiaries which, if adversely determined,  would have a
                  Material Adverse Effect;

                    (xii)    (A) monthly  Projections  through December 31, 2000
                  prepared by the Chief  Financial  Officer of the  Borrower and
                  (B) financial  models prepared by the Chief Financial  Officer
                  of the Borrower for the period  commencing on the Closing Date
                  and ending on the last day of the  Borrower's  Fiscal Year end
                  in 2003, in the form approved by the Board of Directors of the
                  Borrower,    reflecting   the   financial   effects   of   the
                  Reorganization on the Borrower and its Subsidiaries;

                    (xiii)   evidence satisfactory  to the  Administrative Agent
                  that the  insurance  policies  required by SECTION 7.5 and any
                  Collateral  Document  are in full force and  effect,  together
                  with endorsements  naming the Administrative  Agent, on behalf
                  of the Secured Parties,  as an additional  insured and/or loss
                  payee  under all  insurance  policies  to be  maintained  with
                  respect   to  the   properties   of  the   Borrower   and  its
                  Subsidiaries; and

                    (xiv)    such other certificates,  documents, agreements and
                  information  respecting  any Loan Party as any Lender  through
                  the Administrative Agent may reasonably request.

          (b) CASH MANAGEMENT. The Administrative Agent shall be satisfied that,
as of the Closing Date, the procedures with respect to cash management  required
by SECTION  7.12 and the  Collateral  Documents  have been  established  and are
currently  being  maintained  by each Loan  Party,  together  with copies of all
executed  Blocked  Account  Letters  executed  by such Loan Party in  connection
therewith.

          (c) FEES AND  EXPENSES  PAID.  There  shall  have  been  paid  to  the
Administrative  Agent,  for the  account  of the  Administrative  Agent  and the
Lenders,  as applicable,  all fees due and payable on or before the Closing Date
(including all such fees described in the Fee Letter),  and all expenses due and
payable on or before the Closing Date.

          (d) RELATED DOCUMENTS.  The Administrative  Agent  shall be  satisfied
that: (i) the terms and conditions of the Related  Documents shall not have been
amended,  waived or modified  without the approval of the  Administrative  Agent
(other than  non-material  amendments,  waivers and  modifications to such terms
that do not in the aggregate  materially  adversely  affect the interests of the
Administrative Agent and the Lenders), and (ii) the Related Documents shall have
been  approved by all  corporate  action of the  Borrower  and each of the other
parties  thereto,  shall be in full force and  effect  and there  shall not have
occurred and be continuing any material breach or default thereunder.

          (e) CONSENTS, ETC.  Each of the  Borrower and its  Subsidiaries  shall
have received all consents and authorizations  required pursuant to any material
Contractual  Obligation  with any other  Person  and  shall  have  obtained  all
consents and  authorizations  of, and effected all notices to and filings  with,
any Governmental  Authority,  in each case, as may be necessary to allow each of
the Borrower and its Subsidiaries lawfully (A) to execute,  deliver and perform,
in all material  respects,  their  respective  obligations  hereunder,  the Loan
Documents and the Related Documents


                                       52
<PAGE>

to which  each of them,  respectively,  is, or shall be, a party and each  other
agreement  or  instrument  to  be  executed  and  delivered  by  each  of  them,
respectively, pursuant thereto or in connection therewith, and (B) to create and
perfect  the Liens on the  Collateral  to be owned by each of them in the manner
and for the purpose contemplated by the Loan Documents.

          (f)  PLAN OF  REORGANIZATION.  (i)  The  terms and  conditions  of the
Plan of Reorganization  shall not have been amended or modified from the form of
the Plan of  Reorganization  attached  to the  Confirmation  Order  without  the
approval  of  the  Requisite  Lenders;  (ii)  all  conditions  precedent  to the
effectiveness of the Plan of Reorganization shall have been satisfied (or waived
with the consent of the Requisite  Lenders);  (iii) the Confirmation Order shall
have become a Final Order; (iv) the Administrative Agent shall be satisfied that
the Bankruptcy  Court's retention of jurisdiction  under the Confirmation  Order
will not govern the  enforcement  of the Loan  Documents;  and (v) the Effective
Date of Reorganization shall have occurred.

          (g)  FIELD EXAMINATION.  The  Administrative Agent  shall be satisfied
with the results of a field  examination  of the Borrower  and its  Subsidiaries
conducted by  Citicorp's  internal  auditors no more than two weeks prior to the
Closing Date.

          (h) ENVIRONMENTAL  ASSESSMENTS.  For  each   material  piece  of  real
property owned by the Borrower or any of its  Subsidiaries,  the  Administrative
Agent shall have received an environmental  site assessment report prepared by a
consultant  acceptable  to the  Administrative  Agent  and in a form  and  scope
satisfactory  to the  Administrative  Agent,  that  demonstrates,  to  the  sole
satisfaction of the Lenders, the absence of Environmental  Liabilities and Costs
in excess of $1,000,000 in the aggregate and no significant risk thereof.

          SECTION 3.2.        CONDITIONS  PRECEDENT  TO  EACH LOAN AND LETTER OF
CREDIT.  The obligation of each Lender on any date  (including the Closing Date)
to make any Loan and of each Issuer on any date  (including the Closing Date) to
issue  any  Letter  of  Credit  is  subject  to the  satisfaction  of all of the
following conditions precedent:

          (a) REQUEST  FOR  BORROWING OR  ISSUANCE OF  LETTER  OF  CREDIT.  With
respect  to any Loan,  the  Administrative  Agent  shall  have  received  a duly
executed  Notice of Borrowing  or, in the case of Swing Loans,  a duly  executed
Swing Loan Request, and with respect to any Letter of Credit, the Administrative
Agent and the  Issuer  shall  have  received  a duly  executed  Letter of Credit
Request.

          (b) REPRESENTATIONS  AND  WARRANTIES;  NO  DEFAULTS.   The   following
statements  shall be true on the date of such Loan or issuance,  both before and
after giving effect thereto and, in the case of such Loan, to the application of
the proceeds therefrom:

                    (i)      The  representations  and warranties  set  forth in
                  ARTICLE IV and in the other Loan  Documents  shall be true and
                  correct  on and as of the  Closing  Date and shall be true and
                  correct in all  material  respects  on and as of any such date
                  after the Closing  Date with the same effect as though made on
                  and as of such date, except to the extent such representations
                  and warranties expressly relate to an earlier date;

                    (ii)     no Default or Event of Default  has occurred and is
                  continuing; and

                                       53
<PAGE>

                    (iii)    the  Borrower  shall  have delivered  the Borrowing
                  Base Certificate  required by SECTION 6.1(H).

          (c)  BORROWING  BASE.  After  giving  effect  to the Loans or  Letters
of  Credit  requested  to be made or  issued  on any  such  date  and the use of
proceeds thereof,  the Revolving Credit Obligations shall not exceed the Maximum
Credit at such time.

          (d) NO LEGAL IMPEDIMENTS.  The making  of the  Loans or  the  issuance
of such Letter of Credit on such date does not violate any Requirement of Law on
the date of or immediately  following such Loan or issuance and is not enjoined,
temporarily, preliminarily or permanently.

          (e) TITLE/LIEN  PRIORITY.  In jurisdictions  where a  revolving credit
endorsement is not available,  the Administrative Agent shall have received such
endorsements to Mortgagee's Title Insurance Policies for each parcel of Eligible
Real Property, in form and substance satisfactory to the Administrative Agent in
its sole discretion, as the Administrative Agent shall require, including "bring
down  endorsements"  to insure that,  after giving effect to such advance of the
Loan or Letter of Credit,  the Liens  created by the  applicable  Mortgages  and
insured by such  Mortgagee's  Title Insurance  Policies  constitute  valid first
priority Liens on such parcels of Real  Property,  free and clear of all defects
and  encumbrances,  except those referred to in such Mortgagee's Title Insurance
Policies at the time such policies were originally issued to the mortgagee,  and
that each  Mortgagee's  Title  Insurance  Policy  is in an  amount  equal to the
Mortgage  Value of the  applicable  parcel of Eligible  Real  Property as of the
closing date of such Loan or Letter of Credit.

          (f)  ADDITIONAL MATTERS.  The Administrative Agent shall have received
such  additional  information  and  materials  as the  Administrative  Agent may
reasonably request.

Each  submission  by the  Borrower  to the  Administrative  Agent of a Notice of
Borrowing  or a Swing Loan  Request and the  acceptance  by the  Borrower of the
proceeds of each Loan requested therein,  and each submission by the Borrower to
an Issuer  of a Letter of Credit  Request  and the  issuance  of each  Letter of
Credit requested  therein,  shall be deemed to constitute a  representation  and
warranty by the Borrower as to the matters  specified  in SECTION  3.2(B) on the
date of the making of such Loan or the issuance of such Letter of Credit.

          SECTION 3.3.        CONDITIONS  TO   INCREASED   FIXED  ASSET   AMOUNT
AVAILABILITY. The obligation of each Lender to make Loans (and of each Issuer to
issue Letters of Credit) to the Borrower based upon the eligibility criteria set
forth in clause (B) of the  definition of "FIXED ASSET AMOUNT" is subject to the
receipt by the Administrative Agent within 60 days after the Closing Date of the
following  documents  in  form  and  substance  reasonably  satisfactory  to the
Administrative Agent (with sufficient copies for each lender):

          (a) Mortgages  covering  the  Borrower's  Real  Property  located   in
Gaffney,  South Carolina,  Macon, Georgia,  Waco, Texas,  Norcross,  Georgia and
Harmony,  Pennsylvania,  together with current as-built surveys,  zoning letters
(if  reasonably   available)  and   certificates  of  occupancy  (if  reasonably
available),  in each case  reasonably  satisfactory in form and substance to the
Administrative  Agent; (B) Mortgagee's  Title Insurance  Policies  insuring such
Mortgages  sufficient  to create a valid and  enforceable  first  priority  Lien
(subject to Liens permitted under SECTION 8.2) on property  described therein in
favor of the Administrative  Agent for the benefit of the Secured Parties (or in
favor of such other trustee as may be required or desired under local



                                       54
<PAGE>

law);  and (C) an opinion of counsel in each state in which any such Mortgage is
to be recorded opining as to the  enforceability of such Mortgage and addressing
such other matters as any Lender through the Administrative Agent may reasonably
request,  subject to typical or reasonable  qualifications  and  assumptions and
otherwise in form and substance and from counsel reasonably  satisfactory to the
Administrative Agent.

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

                  To induce the  Lenders,  the  Issuers  and the  Administrative
Agent to enter into this Agreement,  the Borrower represents and warrants to the
Lenders, the Issuers and the Administrative Agent that, on and as of the Closing
Date, after giving effect to the  Reorganization and the making of the Loans and
other financial accommodations on the Closing Date and on and as of each date as
required by SECTION 3.2(B)(I):

          SECTION 4.1.        CORPORATE EXISTENCE; COMPLIANCE WITH LAW.  Each of
the Borrower and its Subsidiaries (a) is duly organized, validly existing and in
good standing under the laws of the  jurisdiction of its  incorporation;  (b) is
duly qualified as a foreign  corporation  and in good standing under the laws of
each  jurisdiction  where such  qualification  is  necessary,  except  where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect;  (c) has all  requisite  power and authority and the legal right to own,
pledge,  mortgage and operate its properties,  to lease the property it operates
under  lease and to conduct  its  business  as now or  currently  proposed to be
conducted;  (d) is in  compliance  with  its  Constituent  Documents;  (e) is in
compliance  with all applicable  Requirements of Law except where the failure to
be in compliance would not in the aggregate have a Material Adverse Effect;  and
(f) has all necessary licenses,  permits,  consents or approvals from or by, has
made all necessary  filings with,  and has given all necessary  notices to, each
Governmental  Authority  having  jurisdiction,  to the extent  required for such
ownership,  operation  and  conduct,  except for  licenses,  permits,  consents,
approvals or filings which can be obtained or made by the taking of  ministerial
action to secure the grant or transfer  thereof or the failure to obtain or make
would not in the aggregate have a Material Adverse Effect.

          SECTION 4.2.        CORPORATE   POWER;   AUTHORIZATION;    ENFORCEABLE
OBLIGATIONS.

          (a) The execution, delivery and performance  by each Loan Party of the
Loan Documents to which it is a party and the  consummation of the  transactions
contemplated thereby:

                    (i)      are  within  such Loan  Party's  corporate, limited
                  liability company, partnership or other powers;

                    (ii)     have  been  or, at the  time  of  delivery  thereof
                  pursuant to ARTICLE III will have been duly  authorized by all
                  necessary   corporate   action,   including   the  consent  of
                  shareholders where required;

                    (iii)    do not and will not (A) contravene any Loan Party's
                  or any of its Subsidiaries'  respective Constituent Documents,
                  (B) violate any other  Requirement  of Law  applicable  to any
                  Loan Party  (including  Regulations  T, U and X of the Federal
                  Reserve  Board),  or any order or  decree of any  Governmental
                  Authority  or  arbitrator



                                       55
<PAGE>

                  applicable  to any Loan Party,  (C) conflict with or result in
                  the breach of, or constitute a default under,  or result in or
                  permit the  termination or  acceleration  of, any  Contractual
                  Obligation  of any Loan Party or any of its  Subsidiaries,  or
                  (D) result in the creation or  imposition of any Lien upon any
                  of the property of any Loan Party or any of its  Subsidiaries,
                  other than those in favor of the Secured  Parties  pursuant to
                  the Collateral Documents; and

                    (iv)     do not  require the consent of,  authorization  by,
                  approval of, notice to, or filing or  registration  with,  any
                  Governmental  Authority or any other Person,  other than those
                  listed on SCHEDULE  4.2 and which have been or will be,  prior
                  to the Closing  Date,  obtained or made,  copies of which have
                  been or will be delivered to the Administrative Agent pursuant
                  to SECTION  3.1, and each of which on the Closing Date will be
                  in full force and effect and, with respect to the  Collateral,
                  filings   required  to  perfect  the  Liens   created  by  the
                  Collateral Documents.

          (b) This Agreement has been, and each of the other Loan Documents will
have been upon delivery  thereof  pursuant to the terms of this Agreement,  duly
executed and delivered by each Loan Party party thereto.  This Agreement is, and
the other Loan Documents will be, when delivered hereunder, the legal, valid and
binding  obligation of each Loan Party party thereto,  enforceable  against such
Loan Party in accordance with its terms.

          SECTION 4.3.        OWNERSHIP OF BORROWER; SUBSIDIARIES.

          (a) The  authorized  capital  stock   of  the   Borrower  consists  of
25,000,000 shares of common stock, $.01 par value per share, of which 11,891,000
shares are issued and  outstanding,  and 5,000,000 shares of preferred stock, of
which no shares are issued and outstanding. All of the outstanding capital stock
of the Borrower has been validly issued,  is fully paid and  non-assessable.  No
Stock of the Borrower is subject to any option,  warrant, right of conversion or
purchase or any similar  right  (other  than the Option  Agreement,  the Warrant
Agreement,  any shareholder agreements or stock option plans with respect to the
Borrower).  There are no agreements or understandings to which the Borrower is a
party with respect to the voting, sale or transfer of any shares of Stock of the
Borrower or any agreement  restricting the transfer or hypothecation of any such
shares (other than the Option Agreement,  the Warrant Agreement, any shareholder
agreements or stock option plans with respect to the Borrower).

          (b) Set forth on SCHEDULE 4.3  hereto is a complete  and accurate list
showing,  as of the Closing Date,  all  Subsidiaries  of the Borrower and, as to
each such  Subsidiary,  the  jurisdiction  of its  incorporation,  the number of
shares of each class of Stock authorized (if applicable), the number outstanding
on the Closing Date and the number and percentage of the  outstanding  shares of
each such class owned (directly or indirectly) by the Borrower.  No Stock of any
Subsidiary of the Borrower is subject to any outstanding option,  warrant, right
of conversion or purchase or any similar right. All of the outstanding  Stock of
each  Subsidiary of the Borrower owned  (directly or indirectly) by the Borrower
has been validly issued,  is fully paid and  non-assessable  and is owned by the
Borrower or a  Subsidiary  of the  Borrower,  free and clear of all Liens (other
than the Lien in favor of the Secured Parties created pursuant to the Pledge and
Security Agreement). Neither the Borrower nor any such Subsidiary is a party to,
or has knowledge of, any agreement  restricting the transfer or hypothecation of
any Stock of any such  Subsidiary,  other than the Loan  Documents or the Senior
Subordinated  Note  Indenture.  The



                                       56
<PAGE>

Borrower does not own or hold,  directly or indirectly,  any Stock of any Person
other than such Subsidiaries and Investments permitted by SECTION 8.3.

          SECTION 4.4.        FINANCIAL STATEMENTS.

          (a)  The  consolidated   balance  sheet   of  the   Borrower  and  its
Subsidiaries as at December 28, 1998, and the related consolidated statements of
income,  retained  earnings and cash flows of the Borrower and its  Subsidiaries
for the fiscal  year then  ended,  certified  by Arthur  Andersen  LLP,  and the
consolidated balance sheets of the Borrower and its Subsidiaries as at September
26, 1999, and the related consolidated  statements of income,  retained earnings
and cash flows of the  Borrower  and its  Subsidiaries  for the nine months then
ended,  copies of which have been  furnished  to each  Lender,  fairly  present,
subject,  in the case of said balance  sheets as at September 26, 1999, and said
statements of income,  retained earnings and cash flows for the nine months then
ended, to the absence of footnote disclosure and normal recurring year-end audit
adjustments,  the  consolidated  financial  condition  of the  Borrower  and its
Subsidiaries as at such dates and the consolidated  results of the operations of
the Borrower  and its  Subsidiaries  for the period ended on such dates,  all in
conformity with GAAP.

          (b)  Except as disclosed  on SCHEDULE  4.8,  as of the  Closing  Date,
neither the Borrower nor any of its  Subsidiaries  has any material  obligation,
contingent liability or liability for taxes, long-term leases or unusual forward
or  long-term  commitment  which is not  reflected in the  Financial  Statements
referred  to in CLAUSE (A) above or in the notes  thereto or  permitted  by this
Agreement.

          (c) The Projections have been prepared by the Borrower in light of the
past  operations of its  business,  and reflect  projections  for the three year
period  beginning on January 1, 2000 on a month by month basis.  The Projections
are based  upon  estimates  and  assumptions  stated  therein,  all of which the
Borrower  believes to be reasonable and fair in light of current  conditions and
current  facts known to the Borrower  and, as of the Closing  Date,  reflect the
Borrower's  good  faith  and  reasonable   estimates  of  the  future  financial
performance of the Borrower and its  Subsidiaries  and of the other  information
projected therein for the periods set forth therein.

          SECTION 4.5.     MATERIAL ADVERSE CHANGE.  Since  September 30,  1999,
there has been no  Material  Adverse  Change  and  there  have been no events or
developments that in the aggregate have had a Material Adverse Effect.

          SECTION 4.6.     SOLVENCY.  After giving  effect to (a)  the Loans and
Letter of Credit  Obligations to be made or extended on the Closing Date or such
other date as Loans and Letter of Credit  Obligations  requested  hereunder  are
made or extended, (b) the disbursement of the proceeds of such Loans pursuant to
the instructions of the Borrower, (c) the Reorganization and the consummation of
the other  financing  transactions  contemplated  hereby and (d) the payment and
accrual of all  transaction  costs in connection  with the foregoing,  each Loan
Party is Solvent.

          SECTION  4.7.  LITIGATION.  There are no pending  or, to the knowledge
of the Borrower, threatened actions, investigations or proceedings affecting the
Borrower, or any of its Subsidiaries before any court, Governmental Authority or
arbitrator  other  than those  that in the  aggregate  would not have a Material
Adverse Effect. The performance of any action by any Loan


                                       57
<PAGE>


Party  required  or  contemplated  by any of the Loan  Documents  or the Related
Documents is not restrained or enjoined  (either  temporarily,  preliminarily or
permanently).  SCHEDULE 4.7 lists all litigation  pending against any Loan Party
at the date hereof which, if adversely determined, would have a Material Adverse
Effect.

          SECTION 4.8.      TAXES.

          (a) All  federal,  state,  local  and  foreign  income  and  franchise
and other material tax returns, reports and statements  (collectively,  the "TAX
RETURNS") required to be filed by the Borrower or any of its Tax Affiliates have
been filed with the appropriate Governmental Authorities in all jurisdictions in
which such Tax Returns are  required to be filed,  all such Tax Returns are true
and  correct  in all  material  respects,  and  all  taxes,  charges  and  other
impositions  reflected therein or otherwise due and payable have been paid prior
to the date on which any fine,  penalty,  interest,  late  charge or loss may be
added  thereto  for  non-payment  thereof  except  where  such Tax  Returns  are
contested  in good faith and by  appropriate  proceedings  if adequate  reserves
therefor  have  been  established  on the  books  of the  Borrower  or such  Tax
Affiliate in  conformity  with GAAP.  Except as disclosed on SCHEDULE 4.8, as of
the Closing Date no Tax Return is under audit or examination by any Governmental
Authority and no notice of such an audit or  examination or any assertion of any
claim for Taxes has been given or made by any Governmental Authority. Proper and
accurate  amounts  have  been  withheld  by the  Borrower  and  each  of its Tax
Affiliates  from  their  respective   employees  for  all  periods  in  material
compliance with the tax, social security and unemployment withholding provisions
of applicable Requirements of Law and such withholdings have been timely paid to
the respective Governmental Authorities.

          (b) As of the Closing Date and except as listed on SCHEDULE  4.8, none
of the Borrower or any of its Tax  Affiliates has (i) executed or filed with the
IRS  or any  other  Governmental  Authority  any  agreement  or  other  document
extending,  or having the effect of extending,  the period for the filing of any
Tax Return or the  assessment or collection of any charges;  (ii) any obligation
under any tax  sharing  agreement  or  arrangement  other than that to which the
Administrative Agent has a copy prior to the date hereof; or (iii) been a member
of an  affiliated,  combined or unitary  group other than the group of which the
Borrower (or its Tax Affiliate) is the common parent.

          SECTION 4.9.      FULL  DISCLOSURE.  The   information   prepared   or
furnished  by or on behalf of the Borrower and its  Subsidiaries  in  connection
with  this  Agreement  or  the  Related  Documents  or the  consummation  of the
financing  and the  Reorganization  taken as a whole does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements  contained  therein or herein not misleading.  All facts known to
the Borrower which are material to an understanding of the financial  condition,
business,  properties or prospects of the Borrower and its Subsidiaries taken as
one enterprise have been disclosed to the Lenders.

          SECTION 4.10.     MARGIN REGULATIONS.  The Borrower  is not engaged in
the  business  of  extending  credit for the purpose of  purchasing  or carrying
margin stock (within the meaning of Regulation U of the Federal  Reserve Board),
and no  proceeds of any  Borrowing  will be used to purchase or carry any margin
stock or to extend  credit to others for the purpose of  purchasing  or carrying
any margin stock in contravention of Regulation T, U or X of the Federal Reserve
Board.

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<PAGE>

          SECTION 4.11.     NO BURDENSOME RESTRICTIONS; NO DEFAULTS.

          (a)  Neither  the Borrower  nor any of its Subsidiaries (i) is a party
to any  Contractual  Obligation the compliance  with which would have a Material
Adverse   Effect  or  the   performance   of  which  by  any   thereof,   either
unconditionally  or upon the happening of an event, would result in the creation
of a Lien (other than a Lien  permitted  under  SECTION  8.2) on the property or
assets of any thereof or (ii) is subject to any charter or corporate restriction
which would have a Material Adverse Effect.

          (b)  Neither the  Borrower nor any of its  Subsidiaries is  in default
under or with  respect  to any  Contractual  Obligation  owed by it and,  to the
knowledge of the Borrower, no other party is in default under or with respect to
any Contractual Obligation owed to any Loan Party or to any Subsidiary of a Loan
Party,  other than, in either case,  those defaults which in the aggregate would
not have a Material Adverse Effect.

          (c) No Default or Event of Default has occurred and is continuing.

          (d) To the  best knowledge  of the Borrower,  there is no  Requirement
of Law applicable to any Loan Party the compliance with which by such Loan Party
would have a Material Adverse Effect.

          SECTION  4.12.     INVESTMENT  COMPANY  ACT;  PUBLIC  UTILITY  HOLDING
COMPANY  ACT.  Neither  the  Borrower  nor  any  of its  Subsidiaries  is (a) an
"INVESTMENT  COMPANY" or an "AFFILIATED  PERSON" of, or "PROMOTER" or "PRINCIPAL
UNDERWRITER"  for,  an  "INVESTMENT  COMPANY,"  as such terms are defined in the
Investment  Company Act of 1940,  as amended or (b) a "HOLDING  COMPANY,"  or an
"AFFILIATE"  or a "HOLDING  COMPANY"  or a  "SUBSIDIARY  COMPANY"  of a "HOLDING
COMPANY,"  as each such term is defined and used in the Public  Utility  Holding
Act of 1935, as amended.

          SECTION  4.13.    USE OF  PROCEEDS. The  proceeds of the Loans and the
Letters of Credit are being used by the Borrower  solely as follows:  (a) to pay
any  administrative,  priority,  secured and unsecured claims of the Borrower in
connection with the Reorganization,  to pay professional fees and to pay related
transaction  costs,  fees and expenses  and (b) for working  capital and general
corporate purposes.

          SECTION 4.14.     INSURANCE.  All policies of insurance of any kind or

nature of the Borrower or any of its Subsidiaries,  including  policies of life,
fire,  theft,  product  liability,  public  liability,  property  damage,  other
casualty,  employee  fidelity,  workers'  compensation  and employee  health and
welfare insurance,  are in full force and effect and are of a nature and provide
such coverage as is sufficient  and as is  customarily  carried by businesses of
the  size and  character  of such  Person.  None of the  Borrower  or any of its
Subsidiaries has been refused  insurance for any material  coverage which it had
applied or had any policy of insurance terminated (other than at its request).

          SECTION 4.15.     LABOR MATTERS.

          (a) There are  no  strikes,  work  stoppages,  slowdowns  or  lockouts
pending  or  threatened  against  or  involving  the  Borrower  or any of  their
respective Subsidiaries,  other than those which in the aggregate would not have
a Material Adverse Effect.

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<PAGE>

          (b) There  are no unfair  labor practices,  grievances  or  complaints
pending,  or, to the Borrower's  knowledge,  threatened against or involving the
Borrower or any of it Subsidiaries, nor are there any arbitrations or grievances
threatened  involving the Borrower or any of its Subsidiaries,  other than those
which,  in the  aggregate,  if  resolved  adversely  to  the  Borrower  or  such
Subsidiary, would not have a Material Adverse Effect.

          (c) Except  as set  forth  on SCHEDULE  4.15, as of the Closing  Date,
there is no collective bargaining agreement covering any of the employees of the
Borrower or its Subsidiaries.

          (d)  SCHEDULE  4.15 sets  forth  as of the date hereof,  all  material
consulting agreements,  executive employment agreements,  executive compensation
plans,  deferred  compensation  agreements,  employee  stock  purchase and stock
option plans and severance plans of the Borrower and any of its Subsidiaries.

          SECTION 4.16.     ERISA.

          (a)  SCHEDULE  4.16  separately  identifies  as  of  the  date  hereof
all Title IV Plans,  all  Multiemployer  Plans and all of the  employee  benefit
plans  within the meaning of Section  3(3) of ERISA to which the Borrower or any
of its Subsidiaries has any obligation or liability, contingent or otherwise.

          (b) Each  employee  benefit  plan  of  the  Borrower  or  any  of  its
Subsidiaries  which is intended to qualify under Section 401 of the Code does so
qualify,  and any  trust  created  thereunder  is  exempt  from  tax  under  the
provisions  of  Section  501 of the Code,  except  where  such  failures  in the
aggregate would not have a Material Adverse Effect.

          (c) Each Title IV  Plan is in compliance in all material respects with
applicable  provisions of ERISA,  the Code and other  Requirements of Law except
for  non-compliances  that in the  aggregate  would not have a Material  Adverse
Effect.

          (d) There has been no,  nor  is there  reasonably  expected  to occur,
any ERISA Event which would have a Material Adverse Effect.

          (e) Except  to the  extent  set  forth  on SCHEDULE 4.16,  none of the
Borrower,  any of the Borrower's  Subsidiaries or any ERISA Affiliate would have
any  Withdrawal  Liability as a result of a complete  withdrawal  as of the date
hereof from any Multiemployer Plan.

          SECTION 4.17.     ENVIRONMENTAL MATTERS.

          (a) The  operations of the Borrower and each of its Subsidiaries  have
been and are in compliance with all Environmental Laws,  including obtaining and
complying with all required environmental, health and safety Permits, other than
non-compliances that in the aggregate would not have a Material Adverse Effect.

          (b)  None  of the  Borrower  or any of its  Subsidiaries  or any  Real
Property  currently  or, to the  knowledge of the  Borrower,  previously  owned,
operated or leased by or for the Borrower or any of its  Subsidiaries is subject
to any pending or, to the knowledge of the Borrower,  threatened,  claim, order,
agreement,  notice of violation, notice of potential liability or is the subject
of any pending or threatened proceeding or governmental investigation under or

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<PAGE>

pursuant to Environmental  Laws other than those that in the aggregate would not
have a Material Adverse Effect.

          (c) Except as disclosed on SCHEDULE 4.17,  none of the Borrower or any
of its  Subsidiaries is a treatment,  storage or disposal  facility  requiring a
permit under the Resource  Conservation  and Recovery Act, 42 U.S.C.ss.  6901 ET
SEQ., the regulations thereunder or any state analog.

          (d) There are no facts, circumstances or conditions  arising out of or
relating to the  operations  or ownership of real  property  owned,  operated or
leased by the  Borrower or any of its  Subsidiaries  which are not  specifically
included in the financial  information furnished to the Lenders other than those
that in the aggregate would not have a Material Adverse Effect.

          (e) As of the date hereof,  no Environmental Lien has  attached to any

property of the Borrower or any of its Subsidiaries and, to the knowledge of the
Borrower,  no facts,  circumstance or conditions  exist that could reasonably be
expected to result in any such Lien attaching to any such property.

          (f) The  Borrower  and each  of  its  Subsidiaries  has  provided  the
Lenders  with copies of all  environmental,  health or safety  audits,  studies,
assessments,  inspections,  investigations  or other  environmental  health  and
safety  reports  relating  to  the  operations  of  the  Borrower  or any of its
Subsidiaries or any of their real property that are in the  possession,  custody
or control of the Borrower or any of its Subsidiaries.

          SECTION  4.18.      INTELLECTUAL  PROPERTY.  Other  than  Intellectual
Property (as defined in the Pledge and Security  Agreement) owned or licensed by
customers of the Borrower or any of its Subsidiaries and used by the Borrower or
any of its Subsidiaries at the direction of such customers, the Borrower and its
Subsidiaries  own or license or  otherwise  have the right to use all  licenses,
permits, valid patents, patent applications, trademarks, trademark applications,
service marks,  trade names,  copyrights,  copyright  applications,  franchises,
authorizations   and  other   intellectual   property   rights   (including  all
Intellectual  Property as defined in the Pledge and Security Agreement) that are
necessary for the operations of their  respective  businesses as such businesses
are currently being conducted,  without  infringement  upon or conflict with the
rights of any other  Person  with  respect  thereto,  including  all trade names
associated  with  any  private  label  brands  of  the  Borrower  or  any of its
Subsidiaries,  other  than  any  such  infringements  or  conflicts  that in the
aggregate  have no Material  Adverse  Effect.  To the Borrower's  knowledge,  no
slogan or other advertising device, product, process, method, substance, part or
component,  or other material now employed,  or now contemplated to be employed,
by the  Borrower  or  any  of its  Subsidiaries  materially  infringes  upon  or
conflicts with any rights  including any of the  Intellectual  Property owned by
any other  Person,  and no claim or  litigation  regarding  any of the foregoing
including  Intellectual  Property is pending or threatened,  other than any such
infringements  or  conflicts  which do not (in the  aggregate)  have a  Material
Adverse Effect.

          SECTION 4.19.     TITLE; REAL PROPERTY.

          (a)  Each of the Borrower and its  Subsidiaries has  good,  marketable
and indefeasible fee simple title to, or valid leasehold  interests in, all Real
Property  and good title to all personal  property  purported to be owned by it,
including those reflected on the most recent Financial  Statements  delivered by
the Borrower,  free and clear of any liens,  encumbrances and charges whatsoever
except Liens permitted under SECTION 8.2. The Borrower and its Subsidiaries


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<PAGE>

have received all deeds,  assignments,  waivers,  consents,  non-disturbance and
recognition or similar agreements,  bills of sale and other documents,  and have
duly effected all recordings,  filings and other actions necessary to establish,
protect  and perfect  the  Borrower's  and its  Subsidiaries'  right,  title and
interest in and to all such property.

          (b) Set forth  on SCHEDULE  4.19 hereto  is a  complete  and  accurate
list of all Real Property owned by each Loan Party and its Subsidiaries  showing
as  of  the  Closing  Date  the  street   address,   county  or  other  relevant
jurisdiction, state, and record owner.

          (c) All  components  of all  improvements  included  within  the  Real
Property  owned  or  leased  by any  Loan  Party  or  any  of  its  Subsidiaries
(collectively,  "IMPROVEMENTS"),  including  the roofs and  structural  elements
thereof and the heating,  ventilation, air conditioning,  plumbing,  electrical,
mechanical,  sewer,  waste  water,  storm water,  paving and parking  equipment,
systems and facilities  included  therein,  are maintained in good working order
and repair,  ordinary  wear and tear  excepted,  except  where the failure to so
maintain would not have a Material Adverse Effect.  All water, gas,  electrical,
steam,  compressed air,  telecommunication,  sanitary and storm sewage lines and
systems and other similar  systems  serving the real property owned or leased by
any Loan Party or any of its  Subsidiaries  are  installed and operating and are
sufficient  to enable  the Real  Property  owned or leased by such Loan Party or
Subsidiary  to continue to be used and  operated in the manner  currently  being
used  and  operated,  and no  Loan  Party  nor any of its  Subsidiaries  has any
knowledge of any factor or condition  that could  result in the  termination  or
material impairment of the furnishing thereof,  other than any such terminations
or impairments  which do not in the aggregate have a Material Adverse Effect. No
Improvement or portion thereof is dependent for its access, operation or utility
on any land,  building or other  Improvement  not included in the Real  Property
owned or leased by any Loan Party or any of its Subsidiaries.

          (d) As of the Closing Date,  no portion of any Real Property  owned or
leased by any Loan Party or any of its  Subsidiaries  has  suffered any material
damage by fire or other casualty loss which has not heretofore  been  completely
repaired  and  restored to its  original  condition.  Except as set forth in the
surveys,  no portion of any Real  Property  owned or leased by any Loan Party or
any of its  Subsidiaries is located in a special flood hazard area as designated
by any federal Governmental Authority.

          (e) All Permits required to have been issued or  appropriate to enable
all real property owned or leased by the Borrower or any of its  Subsidiaries to
be  lawfully  occupied  and  used for all of the  purposes  for  which  they are
currently  occupied and used have been lawfully issued and are in full force and
effect,  other  than  those  which in the  aggregate  would not have a  Material
Adverse Effect.

          (f) None of the  Borrower or any of  its Subsidiaries has received any
notice,  or has  any  knowledge,  of any  pending,  threatened  or  contemplated
condemnation  proceeding  affecting  any Real  Property  owned or  leased by the
Borrower or any of its Subsidiaries or any part thereof,  except those which, in
the aggregate, would not have a Material Adverse Effect.

          SECTION 4.20.     RELATED DOCUMENTS.

          (a) The  execution, delivery and performance by each Loan Party of the
Related  Documents  to  which  it  is  a  party  and  the  consummation  of  the
transactions contemplated thereby by such Loan Party:

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<PAGE>

                    (i)      are within such  Loan Party's respective corporate,
                  limited liability company, partnership or other powers;

                    (ii)     have   been   duly  authorized  by  all   necessary
                  corporate   or  other   action,   including   the  consent  of
                  stockholders where required;

                    (iii)    do not  and will not (A) contravene or violate  any
                  Loan   Party's   or  any  of  its   Subsidiaries'   respective
                  Constituent  Documents,  (B) violate any other  Requirement of
                  Law  applicable  to any Loan Party,  or any order or decree of
                  any Governmental Authority or arbitrator, (C) conflict with or
                  result in the breach of, or  constitute  a default  under,  or
                  result in or permit the  termination or  acceleration  of, any
                  Contractual  Obligation  of  any  Loan  Party  or  any  of its
                  Subsidiaries, except for those that in the aggregate would not
                  have a Material  Adverse  Effect or (D) result in the creation
                  or imposition of any Lien upon any of the property of any Loan
                  Party or any of its Subsidiaries; and

                    (iv)     do not  require the consent of,  authorization  by,
                  approval of, notice to, or filing or  registration  with,  any
                  Governmental  Authority or any other Person,  other than those
                  which will have been  obtained  at the Closing  Date,  each of
                  which will be in full force and effect on the Closing Date and
                  none of  which  will on the  Closing  Date  impose  materially
                  adverse  conditions  upon  the  exercise  of  control  by  the
                  Borrower  over any of its  Subsidiaries  or those which in the
                  aggregate, if not obtained,  would not have a Material Adverse
                  Effect.

          (b) Each of the Related Documents has been or at the Closing Date will
have been duly  executed and  delivered by each Loan Party party  thereto and at
the Closing Date will be the legal,  valid and binding  obligation  of each Loan
Party party thereto,  enforceable against such Loan Party in accordance with its
terms.

          (c) None of the Related Documents has been  amended or modified in any
respect and no  provision  therein has been  waived,  except in each case to the
extent permitted by SECTION 8.11, and each of the representations and warranties
therein are true and correct in all  material  respects  and no default or event
which with the giving of notice or lapse of time or both would be a default  has
occurred thereunder.

          (d) The Obligations constitute "Senior Indebtedness" as defined in the
Senior Subordinated Note Indenture.

          SECTION 4.21. YEAR 2000 COMPLIANCE.     The business and operations of
the Borrower and its Subsidiaries  have not been adversely  affected by the risk
that computer  applications used by the Borrower and its Subsidiaries may not be
Year 2000 Compliant.

                                   ARTICLE V

                               FINANCIAL COVENANTS

                  As long as there are any Revolving Credit  Outstandings or the
Revolving Credit  Commitments remain  outstanding,  unless the Requisite Lenders
otherwise  consent in  writing,  the  Borrower  agrees  with the Lenders and the
Administrative Agent that:

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<PAGE>

          SECTION 5.1.  MAXIMUM  LEVERAGE  RATIO.   The Borrower  will  maintain
a Leverage  Ratio,  as determined as of the last day of each Fiscal  Quarter set
forth below,  for the four Fiscal Quarters ending on such day (which  compliance
shall  be  maintained  from  the  beginning  of  the  first  day  of  such  four
fiscal-quarter  period  through the end of the last day of such period),  of not
more than the maximum ratio set forth opposite such Fiscal Quarter:

        FISCAL QUARTER ENDING             MAXIMUM LEVERAGE RATIO
--------------------------------------- ---------------------------
            April 1, 2001                       4.75 to 1
             July 1, 2001                       4.75 to 1
          September 30, 2001                    4.75 to 1
          December 30, 2001                     4.50 to 1
            March 31, 2002                      4.50 to 1
            June 30, 2002                       4.50 to 1
          September 29, 2002                    4.50 to 1
          December 29, 2002                     4.00 to 1


          SECTION 5.2.   MINIMUM FIXED CHARGE COVERAGE RATIO.  The Borrower will
maintain a Fixed Charge Coverage Ratio, as determined as of the last day of each
Fiscal Quarter set forth below, for the four Fiscal Quarters ending on such day,
of at least the minimum ratio set forth opposite such Fiscal Quarter:

        FISCAL QUARTER ENDING              MINIMUM FIXED
                                         CHARGE  COVERAGE
                                              RATIO
--------------------------------------- ---------------------------
            April 1, 2001                       1.00 to 1
             July 1, 2001                       1.00 to 1
          September 30, 2001                    1.00 to 1
          December 30, 2001                     1.00 to 1
            March 31, 2002                      1.00 to 1
            June 30, 2002                       1.00 to 1
          September 29, 2002                    1.00 to 1
          December 29, 2002                     1.00 to 1


          SECTION 5.3.       MINIMUM EBITDA.  The Borrower will have,  as of the
last day of each  Fiscal  Quarter  set forth  below,  EBITDA for the four Fiscal
Quarters ending on such day (or with respect to the Fiscal Quarters ending on or
before December 31,2000, the period commencing on the Closing Date and ending on
the last day of such Fiscal Quarter) of not less than the following:

       FISCAL QUARTER ENDING                 MINIMUM EBITDA
------------------------------------- -----------------------------
           March 26, 2000                      $3,000,000
            June 25, 2000                      $13,000,000



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<PAGE>

         September 24, 2000                    $23,000,000
          December 31, 2000                    $34,000,000


SECTION 5.4.  MAINTENANCE  OF TANGIBLE NET WORTH.  The  Borrower  will  maintain
during each Fiscal Quarter set forth below a Tangible Net Worth of not less than
the minimum amount set forth opposite such Fiscal Quarter:

        FISCAL QUARTER ENDING             MINIMUM TANGIBLE
                                              NET WORTH
--------------------------------------- --------------------------
            March 26, 2000                     $95,000,000
            June 25, 2000                      $95,000,000
          September 24, 2000                   $95,000,000
          December 31, 2000                    $97,500,000
            April 1, 2001                     $100,000,000
             July 1, 2001                     $102,500,000
          September 30, 2001                  $106,250,000
          December 30, 2001                   $110,000,000
            March 31, 2002                    $111,250,000
            June 30, 2002                     $118,000,000
          September 29, 2002                  $123,000,000
          December 29, 2002                   $129,000,000

SECTION  5.5.  CAPITAL  EXPENDITURES.  The  Borrower  will  not  permit  Capital
Expenditures  to be made or incurred  during each of the Fiscal  Years set forth
below to be in excess of the  maximum  amount  set forth  below for such  Fiscal
Year:

             FISCAL YEAR                     MAXIMUM CAPITAL
                                               EXPENDITURES
--------------------------------------- --------------------------
                 2000                          $30,000,000
                 2001                          $30,000,000
                 2002                          $34,000,000


PROVIDED,  HOWEVER,  that to the extent that actual Capital Expenditures for any
such Fiscal Year shall be less than the maximum  amount set forth above for such
Fiscal Year (without giving effect to the carryover  permitted by this proviso),
the  difference  between  said stated  maximum  amount and such  actual  Capital
Expenditures  shall, in addition,  be available for Capital  Expenditures in the
next succeeding Fiscal Year.

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<PAGE>

                                   ARTICLE VI

                               REPORTING COVENANTS

                  As  long as any of the  Obligations  or the  Revolving  Credit
Commitments remain  outstanding,  unless the Requisite Lenders otherwise consent
in writing,  the Borrower agrees with the Lenders and the  Administrative  Agent
that:

          SECTION 6.1.      FINANCIAL STATEMENTS.  The Borrower shall furnish to
the  Administrative  Agent (with sufficient  copies for each of the Lenders) the
following Financial Statements:

          (a) MONTHLY  REPORTS.  Within  30 days  after  the  end of each Fiscal
Month in each Fiscal Year, financial  information regarding the Borrower and its
Subsidiaries consisting of consolidated unaudited balance sheets as of the close
of such month and the related  statements of income and cash flow for such month
and that  portion  of the  current  Fiscal  Year  ending as of the close of such
month,  setting  forth in  comparative  form the figures  for the  corresponding
period in the prior year and, for the first year following the Closing Date, the
figures  contained  in the  monthly  Projections,  and  thereafter,  the figures
contained  in the  annual  business  plan (as  described  in CLAUSE  (E) of this
SECTION  6.1),  for the  current  Fiscal  Year,  in  each  case  certified  by a
Responsible  Officer  of the  Borrower  as fairly  presenting  the  consolidated
financial  position  of the  Borrower  and  its  Subsidiaries  as at  the  dates
indicated  and the  results of their  operations  and cash flow for the  periods
indicated in accordance with GAAP (subject to the absence of footnote disclosure
and normal year-end audit adjustments).

          (b) QUARTERLY  REPORTS.  Within 45 days  after the end of  each Fiscal
Quarter of each Fiscal Year,  financial  information  regarding the Borrower and
its Subsidiaries  consisting of consolidated and consolidating unaudited balance
sheets as of the close of such quarter and the related  statements of income and
cash flow for such  quarter and that portion of the Fiscal Year ending as of the
close of such  quarter,  setting forth in  comparative  form the figures for the
corresponding  period  in the  prior  year  and  the  figures  contained  in the
Projections for the current Fiscal Year, in each case certified by a Responsible
Officer of the Borrower as fairly  presenting the consolidated and consolidating
financial  position  of the  Borrower  and  its  Subsidiaries  as at  the  dates
indicated  and the  results of their  operations  and cash flow for the  periods
indicated in accordance with GAAP (subject to the absence of footnote disclosure
and normal year-end audit adjustments).

          (c) ANNUAL REPORTS.  Within 90 days after the end of each Fiscal Year,
financial information regarding the Borrower and its Subsidiaries  consisting of
consolidated  and   consolidating   balance  sheets  of  the  Borrower  and  its
Subsidiaries  as of the end of such year and  related  statements  of income and
cash flows of the  Borrower  and its  Subsidiaries  for such  Fiscal  Year,  all
prepared in conformity with GAAP and certified, in the case of such consolidated
financial  statements,  without  qualification  as to the  scope of the audit by
Arthur  Andersen  LLP or other  independent  public  accountants  of  recognized
national  standing  acceptable to the  Administrative  Agent,  together with the
report of such accounting firm stating that (i) such financial statements fairly
present the consolidated financial position of the Borrower and its Subsidiaries
as at the dates indicated and the results of their  operations and cash flow for
the periods indicated in conformity with GAAP applied on a basis consistent with
prior years  (except for changes with which such  independent  certified  public
accountants shall concur and which


                                       66
<PAGE>

shall have been  disclosed in the notes to the financial  statements),  and (ii)
the  examination  by such  accountants  in  connection  with  such  consolidated
financial  statements  has  been  made in  accordance  with  generally  accepted
auditing standards,  and accompanied by a certificate stating that in the course
of the regular audit of the business of the Borrower and its  Subsidiaries  such
accounting  firm has obtained no knowledge that a Default or Event of Default in
respect of the  financial  covenants  contained in ARTICLE V has occurred and is
continuing, or, if in the opinion of such accounting firm, a Default or Event of
Default has occurred and is continuing, a statement as to the nature thereof.

          (d)  COMPLIANCE  CERTIFICATE.  Together  with  each  delivery  of  any
financial  statement  pursuant  to CLAUSES  (B) and (C) of this  SECTION  6.1, a
certificate  of a  Responsible  Officer of the  Borrower  (each,  a  "COMPLIANCE
CERTIFICATE")  (i)  showing  in  reasonable  detail  the  calculations  used  in
determining  the Leverage  Ratio (for  purposes of  determining  the  Applicable
Margin)  and  demonstrating  compliance  with  each of the  financial  covenants
contained  in ARTICLE V which is tested on a  quarterly  basis and (ii)  stating
that no Default or Event of Default  has  occurred  and is  continuing  or, if a
Default or an Event of Default  has  occurred  and is  continuing,  stating  the
nature  thereof and the action which the Borrower  proposes to take with respect
thereto.

          (e) BUSINESS  PLAN.  Not later than  30 days  prior to the end of each
Fiscal Year, and  containing  substantially  the types of financial  information
contained in the  Projections,  (i) the annual business plan of the Borrower for
the next  succeeding  Fiscal  Year  approved  by the Board of  Directors  of the
Borrower,  (ii) forecasts prepared by management of the Borrower for each fiscal
month in the next  succeeding  Fiscal  Year,  and (iii)  forecasts  prepared  by
management of the Borrower for each of the  succeeding  Fiscal Years through the
Fiscal Year in which the  Revolving  Credit  Termination  Date is  scheduled  to
occur,  including,  in each  instance  described in CLAUSE (II) and CLAUSE (III)
above, (A) a projected year-end  consolidated balance sheet and income statement
and  statement  of  cash  flows  and  (B) a  statement  of all  of the  material
assumptions on which such forecasts are based.

          (f) MANAGEMENT LETTERS,  ETC.  Within five Business Days after receipt
thereof by any Loan Party, copies of each management letter, exception report or
similar  letter  or report  received  by such Loan  Party  from its  independent
certified public accountants.

          (g)  INTERCOMPANY  LOAN  BALANCES.  Together with each delivery of any
financial statement pursuant to CLAUSE (A) of this SECTION 6.1, a summary of the
outstanding  balance of all intercompany  Indebtedness as of the last day of the
fiscal month  covered by such  financial  statement,  certified by a Responsible
Officer.

          (h) BORROWING BASE CERTIFICATES.  No later than the tenth Business Day
of each Fiscal Month, a Borrowing  Base  Certificate as of the first day of such
month executed by a Responsible Officer of the Borrower; PROVIDED, HOWEVER, that
if at any time the aggregate  Revolving  Credit  Outstandings  exceed 50% of the
lesser of (i)  $95,000,000  and (ii) the Available  Credit,  the Borrower  shall
deliver a Borrowing Base  Certificate on the last Business Day of the first week
ending  after such time and on the last  Business  Day of each  two-week  period
ending  thereafter  until such time as such  bi-weekly  certificate is no longer
required hereunder.

          (i) ADDITIONAL INFORMATION.  Promptly, from time to time,  such  other
information  regarding the operations,  including information regarding specific
product  categories and lines of business of the Borrower and its  Subsidiaries,
business  affairs  and  financial  condition  of  the



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<PAGE>

Borrower or any of its  Subsidiaries,  or compliance  with the terms of any Loan
Document, as the Administrative Agent or any Lender may reasonably request.

          SECTION 6.2.  DEFAULT NOTICES.      As soon as practicable, and in any
event within five Business  Days after a  Responsible  Officer of any Loan Party
has actual knowledge of the existence of any Default,  Event of Default or other
event  which has had a  Material  Adverse  Effect  or which  has any  reasonable
likelihood of causing or resulting in a Material  Adverse  Change,  the Borrower
shall give the Administrative Agent notice specifying the nature of such Default
or Event of Default or other event,  including the  anticipated  effect thereof,
which notice, if given by telephone,  shall be promptly  confirmed in writing on
the next Business Day.

          SECTION 6.3. LITIGATION.     Promptly after the commencement  thereof,
the  Borrower  shall  give  the  Administrative  Agent  written  notice  of  the
commencement  of all  actions,  suits and  proceedings  before any  domestic  or
foreign Governmental  Authority or arbitrator,  affecting the Borrower or any of
its  Subsidiaries,  which in the  reasonable  judgment  of the  Borrower or such
Subsidiary,  expose the  Borrower or such  Subsidiary  to liability in an amount
aggregating  $100,000 or more or which,  if adversely  determined,  would have a
Material Adverse Effect.

          SECTION 6.4.  NOTICES UNDER  RELATED  DOCUMENTS.  Promptly  after  the
sending or filing  thereof,  the Borrower  shall send the  Administrative  Agent
copies of all material notices,  certificates or reports  delivered  pursuant to
any Related Document.

          SECTION 6.5. SEC FILINGS;  PRESS RELEASES.      Promptly   after   the
sending or filing  thereof,  the Borrower  shall send the  Administrative  Agent
copies of (a) all  reports  which the  Borrower  sends to its  Security  holders
generally, (b) all reports and registration statements which the Borrower or any
of its  Subsidiaries  files with the Securities  and Exchange  Commission or any
national  or  foreign  securities  exchange  or  the  National   Association  of
Securities  Dealers,  Inc., (c) all press releases and (d) all other  statements
concerning  material  changes or developments in the business of such Loan Party
made available by any Loan Party to the public.

          SECTION 6.6.      LABOR  RELATIONS.  Promptly  after becoming aware of
the same, the Borrower shall give the Administrative Agent written notice of (a)
any material labor dispute to which the Borrower of any of its  Subsidiaries  is
or may  become  a party,  including  any  strikes,  lockouts  or other  material
disputes relating to any of such Person's plants and other  facilities,  and (b)
any Worker  Adjustment  and  Retraining  Notification  Act or  related  material
liability incurred with respect to the closing of any plant or other facility of
any of such Person.

          SECTION  6.7.     TAX  RETURNS.  Upon   the  request  of  any  Lender,
through the  Administrative  Agent,  the  Borrower  will  provide  copies of all
federal,  state, local and foreign tax returns and reports filed by the Borrower
or any of its  Subsidiaries  in respect of taxes  measured by income  (excluding
sales, use and like taxes).

          SECTION 6.8.      INSURANCE.  As  soon  as is  practicable  and in any
event  within 90 days  after the end of each  Fiscal  Year,  the  Borrower  will
furnish the Administrative  Agent (in sufficient copies for each of the Lenders)
with  (a) a  report  in  form  and  substance  reasonably  satisfactory  to  the
Administrative  Agent and the Lenders outlining all material  insurance coverage
maintained  as of the date of such report by the Borrower  and its  Subsidiaries
and the duration of

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<PAGE>

such coverage and (b) an insurance broker's statement that all premiums then due
and payable with respect to such coverage have been paid.

          SECTION 6.9.       ERISA  MATTERS.  The  Borrower  shall  furnish  the
Administrative Agent (with sufficient copies for each of the Lenders):

          (a)  promptly  and  in any event  within  30 days after the  Borrower,
any of its  Subsidiaries or any ERISA Affiliate knows or has reason to know that
any ERISA Event has occurred;

          (b)  promptly  and in  any event  within  10 days after the  Borrower,
any of its  Subsidiaries or any ERISA Affiliate knows or has reason to know that
a request for a minimum  funding  waiver under  Section 412 of the Code has been
filed  with  respect  to any  Title IV Plan or  Multiemployer  Plan,  a  written
statement of a Responsible  Officer of the Borrower  describing such ERISA Event
or waiver request and the action,  if any, which the Borrower,  its Subsidiaries
and ERISA  Affiliates  propose to take with  respect  thereto  and a copy of any
notice filed with the PBGC or the IRS pertaining thereto;

          (c) simultaneously  with  the  date  that  the  Borrower,  any  of its
Subsidiaries  or any ERISA  Affiliate  files a notice of intent to terminate any
Title  IV  Plan,  if  such  termination   would  require   material   additional
contributions  in order to be  considered  a  standard  termination  within  the
meaning of Section 4041(b) of ERISA, a copy of each notice.

          SECTION 6.10.     ENVIRONMENTAL MATTERS.  The  Borrower  shall provide
the  Administrative  Agent  promptly and in any event within 10 Business Days of
the Borrower or any Subsidiary learning of any of the following,  written notice
of any of the following:

          (a) that any Loan Party is or may be liable to any  Person as a result
of a Release or threatened Release which could reasonably be expected to subject
such Loan Party to Environmental Liabilities and Costs of $1,000,000 or more;

          (b) the  receipt by any  Loan Party  of notification  that any real or
personal property of such Loan Party is or is reasonably likely to be subject to
any Environmental Lien;

          (c) the receipt by any  Loan Party of any  notice of  violation  of or
potential  liability  under, or knowledge by such Loan Party that there exists a
condition  which could  reasonably  be  expected to result in a violation  of or
liability under any Environmental Law, except for violations and liabilities the
consequence  of which in the aggregate  would have no  reasonable  likelihood of
subjecting the Loan Parties collectively to Environmental  Liabilities and Costs
of $1,000,000 or more;

          (d)  the commencement of  any judicial  or  administrative  proceeding
or  investigation  alleging a violation of or liability under any  Environmental
Law, which in the aggregate,  if adversely  determined,  would have a reasonable
likelihood  of  subjecting  the  Loan  Parties   collectively  to  Environmental
Liabilities and Costs of $1,000,000 or more;

          (e) any proposed  acquisition of stock,  assets or real estate, or any
proposed  leasing of  property,  or any other action by any Loan Party or any of
its  Subsidiaries  other than those the  consequences  of which in the aggregate
have  reasonable  likelihood  of  subjecting  the Loan Parties  collectively  to
Environmental Liabilities and Costs of $1,000,000 or more;

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<PAGE>

          (f) any proposed  action by any Loan Party or any of its  Subsidiaries
or any  proposed  change in  Environmental  Laws which in the  aggregate  have a
reasonable  likelihood  of  requiring  the Loan  Parties  to  obtain  additional
environmental,  health or safety Permits or make additional capital improvements
to obtain  compliance with  Environmental  Laws that in the aggregate would cost
$1,000,000  or more or  subject  the Loan  Parties to  additional  Environmental
Liabilities and Costs of $1,000,000 or more; and

          (g) upon  written  request by  any Lender  through the  Administrative
Agent, a report providing an update of the status of any  environmental,  health
or safety  compliance,  hazard or liability  issue  identified  in any notice or
report delivered pursuant to this Agreement.

          SECTION 6.11.     BORROWING BASE DETERMINATION.

          (a) The Borrower shall conduct, or shall cause to be conducted, at its
expense,  and upon  request  of the  Administrative  Agent,  and  present to the
Administrative Agent for approval,  such appraisals,  investigations and reviews
as the  Administrative  Agent shall request for the purpose of  determining  the
Borrowing  Base, all upon notice and at such times during normal  business hours
and as often as may be reasonably  requested;  PROVIDED,  HOWEVER,  that for the
purposes  of  determining  the Fixed  Asset  Amount,  such  appraisals  shall be
obtained in accordance with SECTION  6.11(D).  The Borrower shall furnish to the
Administrative   Agent  any  information  which  the  Administrative  Agent  may
reasonably  request regarding the determination and calculation of the Borrowing
Base  including  correct  and  complete  copies  of  any  invoices,   underlying
agreements,  instruments  or other  documents  and the  identity  of all Account
Debtors in respect of Accounts referred to therein.

          (b) The Borrower  shall promptly  notify the  Administrative  Agent in
writing in the event that at any time the Borrower  receives or otherwise  gains
knowledge  that (i) the Borrowing  Base is less than 90% of the  Borrowing  Base
reflected in the most recent  Borrowing Base Certificate  delivered  pursuant to
SECTION 6.1(H) or that (ii) the outstanding Revolving Credit Outstandings exceed
the  Borrowing  Base as a result of a decrease  therein,  and the amount of such
excess.

          (c) The  Administrative Agent may,  at the Borrower's  sole  cost  and
expense,  make test verifications of the Accounts and physical  verifications of
the Inventory in any manner and through any medium that the Administrative Agent
considers  advisable,  and the Borrower  shall furnish all such  assistance  and
information as the Administrative Agent may require in connection therewith.

          (d) For  the  purposes  of  determining  the  Fixed  Asset  Amount  in
effect on the Closing Date, (i) the orderly  liquidation value of the Borrower's
Eligible  Equipment  shall be determined  using the  valuations set forth in the
appraisal dated July 16, 1999 by MB Valuations and (ii) the Fair Market Value of
the Borrower's  Eligible Real Property shall be determined  using the valuations
set forth in the  appraisal  dated  July 28,  1999 by  Cushman &  Wakefield,  as
reflected in the  Borrowing  Base  Certificate  delivered to the  Administrative
Agent prior to the Closing Date. The Fixed Asset Amount shall be adjusted by the
Administrative  Agent (A) on the first  anniversary  of the Closing Date,  based
upon revised  "desktop"  valuations  of the  Borrower's  Eligible  Equipment and
Eligible Real Property  undertaken by Citicorp's  internal auditors and notified
to the  Borrower  not less than 30 days  prior to the first  anniversary  of the
Closing Date,  (B) on the second  anniversary  of the Closing  Date,  based upon
third party  appraisals from MB Valuations and Cushman & Wakefield (or any other
appraiser  reasonably  satisfactory  to the



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Administrative  Agent)  obtained by Citicorp at the Borrower's  expense not more
than 90 nor less than 30 days prior to the  second  anniversary  of the  Closing
Date,  (C) upon any sale of Equipment or Real Property  (other than the Excluded
Property),  by reducing the Fixed Asset Amount by 75% of the orderly liquidation
value of the  Equipment  or 50% of the Fair  Market  Value of the Real  Property
which is the  subject  of any such sale,  and (D) by the amount of any  reserves
then in effect  with  respect  to such  Eligible  Equipment  and  Eligible  Real
Property.

          SECTION 6.12.       OTHER  INFORMATION.  The Borrower will provide the
Administrative  Agent or any Lender with such other  information  respecting the
business,  properties,  condition,  financial or otherwise, or operations of the
Borrower or any of its  Subsidiaries  as any Lender  through the  Administrative
Agent may from time to time reasonably request.

                                  ARTICLE VII

                              AFFIRMATIVE COVENANTS

                  As long as the Obligations or the Revolving Credit Commitments
remain  outstanding,  unless the Requisite Lenders otherwise consent in writing,
the Borrower agrees with the Lenders and the Administrative Agent that:

          SECTION 7.1.        PRESERVATION  OF  CORPORATE  EXISTENCE,  ETC.  The
Borrower  shall,  and shall  cause each of its  Subsidiaries  to,  preserve  and
maintain its corporate existence, rights (charter and statutory) and franchises,
except (i) as permitted by SECTIONS 8.3 and 8.4 and (ii) where the failure to do
so could not reasonably be expected to cause a Material Adverse Effect.

          SECTION 7.2.        COMPLIANCE WITH LAWS, ETC. The Borrower shall, and
shall cause each of its Subsidiaries to, comply with all applicable Requirements
of Law,  Contractual  Obligations  and  Permits,  except where the failure so to
comply would not in the aggregate have a Material Adverse Effect.

          SECTION 7.3.        CONDUCT OF BUSINESS.  The  Borrower   shall,   and
shall cause each of its  Subsidiaries  to, (a) conduct its  business  consistent
with past practice and (b) use its reasonable  efforts,  in the ordinary  course
and consistent with past practice, to preserve its business and the goodwill and
business of the  customers,  advertisers,  suppliers and others having  business
relations  with the  Borrower  or any of its  Subsidiaries,  except in each case
where the  failure to comply with the  covenants  in each of clauses (a) and (b)
above would not in the aggregate have a Material Adverse Effect.

          SECTION 7.4.        PAYMENT OF TAXES,  ETC.  The  Borrower  shall, and
shall cause each of its Subsidiaries to, pay and discharge before the same shall
become delinquent,  all lawful governmental claims, taxes, assessments,  charges
and levies,  except where  contested in good faith,  by proper  proceedings  and
adequate reserves therefor have been established on the books of the Borrower or
the appropriate Subsidiary in conformity with GAAP.

          SECTION 7.5.        MAINTENANCE  OF INSURANCE.  The Borrower shall (i)
maintain, and cause to be maintained for each of its Subsidiaries insurance with
responsible  and reputable  insurance  companies or associations in such amounts
and covering such risks as is usually carried


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<PAGE>

by companies engaged in similar  businesses and owning similar properties in the
same general areas in which the Borrower or such Subsidiary  operates,  and such
other insurance as may be reasonably requested by the Requisite Lenders, and, in
any event, all insurance required by any Collateral Documents and (ii) cause all
such insurance to name the Administrative Agent on behalf of the Secured Parties
as  additional  insured or loss payee,  as  appropriate,  and to provide that no
cancellation,  material  addition in amount or material change in coverage shall
be effective  until after 30 days' written notice thereof to the  Administrative
Agent.

          SECTION  7.6.  ACCESS.        The  Borrower shall  from  time  to time
permit   the   Administrative   Agent  and  the   Lenders,   or  any  agents  or
representatives  thereof, within two Business Days after written notification of
the same (except  that during the  continuance  of an Event of Default,  no such
notice shall be required) to (a) examine and make copies of and  abstracts  from
the records and books of account of the Borrower  and each of its  Subsidiaries,
(b) visit the  properties  of the  Borrower  and each of its  Subsidiaries,  (c)
discuss the  affairs,  finances  and  accounts of the  Borrower  and each of its
Subsidiaries  with  any of  their  respective  officers  or  directors,  and (d)
communicate   directly  with  the  Borrower's   independent   certified   public
accountants.  The Borrower  shall  authorize its  independent  certified  public
accountants  to disclose to the  Administrative  Agent or any Lender any and all
financial  statements and other  information of any kind, as the  Administrative
Agent or any  Lender  reasonably  requests  from the  Borrower  and  which  such
accountants may have with respect to the business,  financial condition, results
of operations or other affairs of the Borrower or any of its Subsidiaries.

          SECTION 7.7.        KEEPING OF BOOKS.  The  Borrower shall,  and shall
cause each of its Subsidiaries to keep,  proper books of record and account,  in
which full and  correct  entries  shall be made in  conformity  with GAAP of all
financial transactions and the assets and business of the Borrower and each such
Subsidiary.

          SECTION 7.8.       MAINTENANCE OF PROPERTIES, ETC. The Borrower shall,
and shall cause each of its Subsidiaries  to, maintain and preserve,  (a) all of
its  properties  which are  necessary  in the  conduct of its  business  in good
working order and condition,  ordinary wear and tear  excepted,  (b) all rights,
permits,  licenses,  approvals and privileges  (including all Permits) which are
used  or  useful  or  necessary  in the  conduct  of its  business,  and (c) all
registered patents,  trademarks,  trade names, copyrights and service marks with
respect to its  business;  except in each case where the  failure to so maintain
and preserve would not in the aggregate have a Material Adverse Effect.

          SECTION 7.9.      APPLICATION OF PROCEEDS.  The Borrower shall use the
entire amount of the proceeds of the Loans as provided in SECTION 4.13.

          SECTION 7.10. ENVIRONMENTAL.  The Borrower shall,  and shall cause any
Subsidiary  to comply in all  material  respects  with  Environmental  Laws and,
without  limiting  the  foregoing,  the  Borrower  shall,  at its sole  cost and
expense,  upon receipt of any notification or otherwise  obtaining  knowledge of
any Release or other event that has any  reasonable  likelihood  of the Borrower
and its Subsidiaries incurring Environmental  Liabilities and Costs in excess of
$1,000,000,  (a) conduct or pay for consultants to conduct, tests or assessments
of  environmental  conditions at such  operations or  properties,  including the
investigation  and testing of subsurface  conditions  and (b) take such Remedial
Action,  investigational or other action as required by Environmental Laws or as
any  Governmental  Authority  requires or as is appropriate  and consistent with
good business practice to address the Release or event.

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<PAGE>

          SECTION 7.11.      ADDITIONAL COLLATERAL AND GUARANTIES. To the extent
not delivered to the  Administrative  Agent on or before the Closing  Date,  the
Borrower agrees promptly to (i) execute and deliver to the Administrative  Agent
such amendments to the Collateral  Documents as the  Administrative  Agent deems
necessary or advisable in order to grant to the  Administrative  Agent,  for the
benefit of the Secured Parties,  a perfected first priority security interest in
the Stock and  Stock  Equivalents  and other  debt  Securities  of any  Material
Subsidiary  which  are  owned by the  Borrower  or any of its  Subsidiaries  and
requested to be pledged by the Administrative Agent; PROVIDED,  HOWEVER, that in
no event shall the Borrower or any of its  Subsidiaries be required to pledge in
excess of 65% of the outstanding Stock of any Material  Subsidiary that is not a
Domestic  Subsidiary,  (ii) deliver to the Administrative Agent the certificates
(if  any)   representing  such  Stock  and  Stock  Equivalents  and  other  debt
Securities,  together with (A) in the case of such certificated  Stock and Stock
Equivalents, undated stock powers endorsed in blank, and (B) in the case of such
certificated  debt  Securities,  endorsed in blank,  in each case  executed  and
delivered by a Responsible  Officer of the Borrower or such  Subsidiary,  as the
case  may be,  (iii)  in the  case of any  such  Material  Subsidiary  that is a
Domestic  Subsidiary cause such new Material Subsidiary (A) to become a party to
the  Guaranty  and the  applicable  Collateral  Documents  and (B) to take  such
actions  necessary  or advisable  to grant to the  Administrative  Agent for the
benefit of the Secured Parties a perfected  security  interest in the Collateral
described  in the  Collateral  Documents  with  respect  to  such  new  Material
Subsidiary, including the filing of Uniform Commercial Code financing statements
in such  jurisdictions as may be required by the Collateral  Documents or by law
or as may be  reasonably  requested  by the  Administrative  Agent  and  (iv) if
requested by the Administrative Agent, deliver to the Administrative Agent legal
opinions  relating to the matters  described  above,  which opinions shall be in
form and substance, and from counsel, reasonably satisfactory to the Agent.

          SECTION 7.12.      CONCENTRATION ACCOUNT AND CASH MANAGEMENT SYSTEM.

          (a) The Borrower  has  established  the  following cash  concentration
account with Citibank in New York, New York:

   ACCOUNT NO.                   ACCOUNT TITLE
   30422415                      Paragon Trade Brands Concentration
                                 Account (the "CONCENTRATION ACCOUNT")

          (b) The  Administrative Agent shall  possess sole dominion and control
over the  Concentration  Account.  As long as  there  are any  Revolving  Credit
Outstandings  or  all  of  the  Revolving  Credit   Commitments  have  not  been
terminated,  neither the Borrower nor any Person or entity  claiming by, through
or under the Borrower  shall have any control over the use of the  Concentration
Account.

          (c) The  Borrower shall  instruct its  Account  Debtors  to mail their
remittances  to a  Blocked  Account  and the  Borrower  agrees to take all steps
necessary or desirable,  in the Administrative Agent's sole discretion exercised
reasonably,  to cause its  Account  Debtors  to mail their  remittances  to such
Blocked Account.  The Borrower shall mail to the Blocked Account any remittances
received  directly by it as soon as possible (but in any event no later than the
Business Day immediately following receipt).

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<PAGE>

          (d) Each  Blocked  Account  Letter shall  provide  (i) for  all  funds
received  by the  Borrower to be  deposited  in a Blocked  Account  covered by a
Blocked  Account  Letter and (ii) daily deposit of  remittances  received in any
lockboxes to the Blocked Account.

          (e) On any day  on  which the aggregate Revolving Credit  Outstandings
exceed 50% of the lesser of (i) $95,000,000 and (ii) the Available  Credit (such
event being a "CASH SWEEP EVENT"),  the  Administrative  Agent shall immediately
notify each  Blocked  Account  Bank by sending a notice in the form  attached as
ANNEX A to the  Blocked  Account  Letter.  Upon  receipt of such notice and on a
daily basis thereafter until otherwise notified by the Administrative Agent, all
available funds in the Concentration  Account shall be applied in the manner set
forth in Section  2.9(D).  Notwithstanding  anything to the  contrary  contained
herein,  all cash and Cash  Equivalents  of the Borrower in excess of $2,000,000
shall be deposited in the Cash Collateral Account.

          SECTION 7.13.     REAL PROPERTY.

          (a) The  Borrower  shall,  within 30  days after the Closing  Date (or
such later date as shall be acceptable to the  Administrative  Agent in its sole
discretion)  deliver such  Landlord  Lien  Waivers and  Bailee's  Waivers as the
Administrative Agent shall request in its sole discretion exercised reasonably.

          (b) The Borrower shall,  and shall cause each  of its Subsidiaries to,
(i) comply in all respects with all of their respective obligations under all of
their respective  Leases now or hereafter held respectively by them with respect
to Real Property,  including the Leases set forth in SCHEDULE 4.19, except where
the  failure to do so would not in the  aggregate  result in a Material  Adverse
Effect;  (ii) not  modify,  amend,  cancel,  extend or  otherwise  change in any
materially adverse manner any of the terms,  covenants or conditions of any such
Leases,  except where such action would not result in a Material Adverse Effect;
(iii) not assign or sublet any other Lease if such  assignment  or sublet  would
have a Material  Adverse Effect;  (iv) provide the  Administrative  Agent with a
copy of each notice of default  under any Lease  received by the Borrower or any
Subsidiary of the Borrower  immediately  upon receipt thereof and deliver to the
Administrative  Agent a copy of each notice of default  sent by the  Borrower or
any Subsidiary of the Borrower under any Lease  simultaneously with its delivery
of such notice  under such  Lease;  and (v) notify the  Administrative  Agent at
least 14 days prior to the date the Borrower or any Subsidiary  takes possession
of, or becomes  liable  under,  any new leased  premises or Lease,  whichever is
earlier.

          (c) If, at any time, the Borrower  or any of its Subsidiaries acquires
a fee interest in any Real  Property not covered by a mortgage,  the Borrower or
such  Subsidiary  promptly  shall  execute,  deliver and record a first priority
Mortgage  in favor of the  Administrative  Agent on behalf  and for the  ratable
benefit of the Secured Parties covering such Real Property  (subordinate only to
such Liens as are permitted  hereunder),  in form and substance  satisfactory to
the  Administrative   Agent,  and  provide  the  Administrative   Agent  with  a
Mortgagee's  Title  Insurance  Policy  covering  such Real Property in an amount
equal to the purchase price of such Real Property, a current ALTA survey thereof
and  a  surveyor's  certificate  in  form  and  substance  satisfactory  to  the
Administrative  Agent and such other  information  reasonably  requested  by the
Administrative Agent.

          (d) At least  fifteen  (15) Business Days  prior to  entering into any
Lease  (other than a renewal of an existing  Lease) for the  principal  place of
business  and chief  executive  office of the  Borrower or any other  Subsidiary
Guarantor or any other Lease (including any renewal) in


                                       74
<PAGE>

which the annual rental payments are anticipated to equal or exceed  $1,500,000,
at the request of the  Administrative  Agent the Borrower shall, and shall cause
such Subsidiary  Guarantor to, execute and deliver to the Administrative  Agent,
for the benefit of the Secured Parties,  immediately upon the acquisition of any
such  Lease,  a  mortgage,  deed  of  trust,  assignment  or  other  appropriate
instrument  evidencing  a Lien upon any such  Lease,  together  with such  title
policies, certified surveys, and local counsel opinions with respect thereto and
such other agreements,  documents and instruments which the Administrative Agent
deems necessary or desirable,  the same to be in form and substance satisfactory
to the Administrative  Agent and to be subject only to (i) Liens permitted under
SECTION 8.2 and (ii) such other Liens as the Administrative Agent may reasonably
approve.

                                  ARTICLE VIII

                               NEGATIVE COVENANTS

                  As long as there are any Revolving Credit  Outstandings or the
Revolving Credit Commitments remain outstanding,  without the written consent of
the  Requisite   Lenders,   the  Borrower   agrees  with  the  Lenders  and  the
Administrative Agent that:

          SECTION 8.1.        INDEBTEDNESS.  The Borrower will not, and will not
permit any of its Subsidiaries to, directly or indirectly create,  incur, assume
or otherwise become or remain directly or indirectly  liable with respect to any
Indebtedness except:

          (a)  the Secured Obligations;

          (b)  Indebtedness existing on the date of this Agreement and disclosed
on SCHEDULE 8.1;

          (c)  Guaranty Obligations incurred  by the Borrower  or any Subsidiary
Guarantor in respect of Indebtedness of the Borrower or any Subsidiary Guarantor
otherwise permitted by this SECTION 8.1;

          (d) Capital Lease Obligations and purchase money Indebtedness incurred
by the Borrower or a Subsidiary  of the Borrower to finance the  acquisition  of
fixed  assets  in an  aggregate  outstanding  principal  amount  not  to  exceed
$20,000,000 at any time; PROVIDED, HOWEVER, that the Capital Expenditure related
thereto is otherwise permitted by SECTION 5.5;

          (e) Renewals, extensions,  refinancings and refundings of Indebtedness
permitted by CLAUSES (B),  (D) OR (J) of this  SECTION 8.1;  PROVIDED,  HOWEVER,
that any such  renewal  extension,  refinancing  or refunding is in an aggregate
principal  amount not greater than the  principal  amount of, and is on material
terms no less  favorable  to the  Borrower or such  Subsidiary,  including as to
weighted  average  maturity,  than the  Indebtedness  being  renewed,  extended,
refinanced or refunded;

          (f) Indebtedness arising from intercompany loans (i) from the Borrower
to any Subsidiary  Guarantor or from any Subsidiary Guarantor to the Borrower or
any other  Subsidiary  Guarantor or from any  Subsidiary  to the Borrower or any
Subsidiary  Guarantor and (ii) from the Borrower or any Subsidiary  Guarantor to
any  Subsidiary  of the Borrower that is not a Subsidiary  Guarantor;  PROVIDED,
HOWEVER,  that the  Investment in the  intercompany  loan to such  Subsidiary is
permitted under SECTION 8.3;

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          (g) Indebtedness arising under  any performance or surety bond entered
into in the ordinary course of business;

          (h)  Indebtedness  in respect of the Senior  Subordinated  Notes in  a
aggregate  principal  amount not in excess of  $146,000,000  plus the  aggregate
principal  amount of any Secondary  Securities  issued by the Borrower under the
Senior  Subordinated  Note Indenture  pursuant to the provisions of SECTION 2.11
thereof.

          (i)  Obligations  under Interest  Rate Contracts  required by  SECTION
7.12; and

          (j) unsecured  Indebtedness not otherwise permitted under this SECTION
8.1 in an aggregate  outstanding  principal amount not to exceed  $15,000,000 at
any time.

          SECTION 8.2.      LIENS,  ETC.  The Borrower  will not,  and  will not
permit any of its  Subsidiaries  to, create or suffer to exist, any Lien upon or
with respect to any of its properties or assets,  whether now owned or hereafter
acquired,  or assign, or permit any of its Subsidiaries to assign,  any right to
receive income, except for:

          (a)  Liens created pursuant to the Loan Documents;

          (b)  Liens  existing on the  date of this  Agreement and  disclosed on
SCHEDULE 8.2;

          (c)  Customary Permitted Liens of the Borrower and its Subsidiaries;

          (d)  purchase money  Liens  granted by the Borrower or any  Subsidiary
of the Borrower  (including  the interest of a lessor under a Capital  Lease and
Liens to which any  property  is subject at the time of the  Borrower's  or such
Subsidiary's  acquisition thereof) securing Indebtedness permitted under SECTION
8.1(d) and limited in each case to the property  purchased  with the proceeds of
such purchase money Indebtedness or subject to such Capital Lease;

          (e) any Lien securing the renewal, extension, refinancing or refunding
of any  Indebtedness  secured by any Lien  permitted by CLAUSES (B), (D), (E) or
(G) of this SECTION 8.2 without any change in the assets subject to such Lien;

          (f) Liens in favor of lessors securing operating leases; and

          (g) Liens not  otherwise  permitted by the  foregoing  clauses of this
SECTION 8.2 securing  obligations or other liabilities (other than Indebtedness)
of any Loan Party;  PROVIDED,  however, that the aggregate outstanding amount of
such  obligations  and  liabilities  secured  by such  Liens  shall  not  exceed
$2,000,000 at any time.

          SECTION 8.3.      INVESTMENTS.  The  Borrower will not,  and will  not
permit any of its  Subsidiaries  to, directly or indirectly make or maintain any
Investment except:

          (a) Investments  existing on the date of this  Agreement and disclosed
on SCHEDULE 8.3;

          (b)  Investments  in cash  and Cash  Equivalents  held (i) in the Cash
Collateral  Account or in any other accounts  maintained by the Borrower and the
Subsidiary  Guarantors in


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an aggregate  principal  amount (for all accounts other than the Cash Collateral
Account) not to exceed  $2,000,000 or (ii) a securities  account with respect to
which the  Administrative  Agent for the  benefit of the  Secured  Parties has a
first priority perfected Lien;

          (c)  Investments in accounts,  contract rights and chattel paper (each
as defined in the Uniform  Commercial Code),  notes receivable and similar items
arising or acquired in the ordinary course of business  consistent with the past
practice of the Borrower and its Subsidiaries;

          (d)  Investments received in settlement of amounts due to the Borrower
or any Subsidiary of the Borrower effected in the ordinary course of business;

          (e)  Investments  by (i) the  Borrower in  any  Subsidiary  Guarantor,
or by  any  Subsidiary  Guarantor  in  the  Borrower  or  any  other  Subsidiary
Guarantor,  and (ii) a  Subsidiary  that is not a  Subsidiary  Guarantor  in the
Borrower or any other Subsidiary,  PROVIDED,  HOWEVER, that no Investments shall
be made by the Borrower or any other Subsidiary in PTB Holdings, Inc.;

          (f) loans  or  advances to  employees of the  Borrower  or  any of its
Subsidiaries in the ordinary course of business,  which loans and advances shall
not exceed the aggregate outstanding principal amount of $2,000,000 at any time;

          (g)  Investments made after the Closing Date  pursuant to the exercise
of the Mabesa Option;  PROVIDED,  HOWEVER,  that immediately  prior to and after
giving effect thereto (i) no Default or Event of Default shall have occurred and
be  continuing,  (ii) the  Borrower  shall be in pro forma  compliance  with the
financial   covenants  specified  in  ARTICLE  V  of  this  Agreement  (and  the
Administrative  Agent shall have received a certificate  of the Chief  Financial
Officer  of the  Borrower  at least 10  Business  Days  prior to making any such
Investment demonstrating such pro forma compliance),  (iii) the Available Credit
shall equal or exceed  $25,000,000  and (iv) the  Borrower's  accounts and trade
payables shall be current in accordance with its usual business practices; and

          (h)  Investments   not  otherwise   permitted   hereby in an aggregate
outstanding  amount not to exceed  $25,000,000 at any time;  PROVIDED,  HOWEVER,
that  immediately  prior to and after  making any such  investment  in excess of
$5,000,000  (i) no  Default  or Event of  Default  shall  have  occurred  and be
continuing,  (ii)  the  Borrower  shall  be in pro  forma  compliance  with  the
financial   covenants  specified  in  ARTICLE  V  of  this  Agreement  (and  the
Administrative  Agent shall have received a certificate  of the Chief  Financial
Officer of the  Borrower at least five days prior to making any such  Investment
demonstrating such pro forma compliance).

          SECTION 8.4.  SALE OF ASSETS.  The  Borrower will not,  and  will  not
permit any of its Subsidiaries to, sell,  convey,  transfer,  lease or otherwise
dispose of, any of its assets or any  interest  therein  (including  the sale or
factoring at maturity or collection of any accounts) to any Person, or permit or
suffer any other  Person to acquire any interest in any of its assets or, in the
case of any Subsidiary,  issue or sell any shares of such Subsidiary's  Stock or
Stock Equivalent (any such disposition being an "ASSET SALE"), except:

          (a) the  sale or  disposition of  inventory in the  ordinary course of
business;

          (b) the sale or  disposition  of equipment  which has  become obsolete
or are replaced in the ordinary course of business;  PROVIDED, HOWEVER, that (i)
the aggregate Fair Market



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Value of all such  equipment  disposed  of in any  Fiscal  Year shall not exceed
$1,500,000 and (ii) following any such disposition, the Fixed Asset Amount shall
be adjusted to the extent required by SECTION 6.11(D);

          (c) the lease or sublease of real property not constituting a sale and
leaseback, to the extent not otherwise prohibited by this Agreement;

          (d) assignments and licenses of intellectual property of the  Borrower
and its Subsidiaries in the ordinary course of business;

          (e) any Asset Sale to the Borrower or any Subsidiary Guarantor  (other
than to PTB Holdings Inc.);

          (f) the sale of (i) the Borrower's manufacturing  facility located  in
Brampton,  Ontario and (ii) the Borrower's tampon  manufacturing  equipment line
(the "Excluded Property");

          (g) as long as no Default or Event of Default  is  continuing or would
result  therefrom,  any other  Asset  Sale for its Fair  Market  Value  thereof,
payable in cash upon such sale; PROVIDED, HOWEVER, that with respect to any such
sale pursuant to this CLAUSE (G), (i) the aggregate  consideration  received for
the sale of all assets sold  during any Fiscal Year shall not exceed  $5,000,000
and (ii)following any such disposition, the Fixed Asset Amount shall be adjusted
to the extent required by SECTION 6.11(D); and

          (h) the sale of all or  a portion  of the Borrower's  equity in Mabesa
or all or a portion of the Mabesa  Option,  in each case  concurrently  with the
exercise of the Mabesa Option.

          SECTION 8.5.      RESTRICTED PAYMENTS. The Borrower will not, and will
not permit any of its Subsidiaries to, directly or indirectly,  declare,  order,
pay, make or set apart any sum for any Restricted Payment, except (i) Restricted
Payments by any  Subsidiary  of the Borrower to the  Borrower or any  Subsidiary
Guarantor  and  by the  Borrower  to  any  Subsidiary  Guarantor  and  (ii)  the
repurchase, redemption or other acquisition or retirement for value of any Stock
or Stock Equivalents held by any member of the Borrower's management or Board of
Directors pursuant to any management or directors' equity subscription agreement
or stock option agreement.

          SECTION 8.6.     RESTRICTION ON FUNDAMENTAL CHANGES. The Borrower will
not, and will not permit any of its  Subsidiaries  to (a) merge with any Person,
(b)  consolidate  with any Person,  (c) except in connection  with an investment
permitted by Section 8.3, acquire all or substantially all of the Stock or Stock
Equivalents of any Person, (d) except in connection with an investment permitted
by Section 8.3, acquire all or substantially  all of the assets of any Person or
all or substantially all of the assets  constituting the business of a division,
branch or other unit operation of any Person,  (e) except in connection with any
Investment permitted by SECTION 8.3, enter into any joint venture or partnership
with any Person or (f) acquire or create any  Subsidiary  unless,  after  giving
effect  thereto,  the Borrower is in  compliance  with SECTION  7.11;  PROVIDED,
HOWEVER,  that the  provisions  of this  Section  8.6 shall not apply to (i) any
transfer of the assets of a  Subsidiary  to the  Borrower or another  Subsidiary
Guarantor  (other than to PTB Holdings Inc.), or (ii) any merger of a Subsidiary
Guarantor  into the  Borrower,  or (iii) any merger of any  Subsidiary  into the
Borrower or any Subsidiary Guarantor.

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<PAGE>

          SECTION 8.7.      CHANGE IN NATURE OF BUSINESS. The Borrower will not,
and will not permit any of its  Subsidiaries to, make any material change in the
nature or conduct of its business as carried on at the date hereof.

          SECTION 8.8.      TRANSACTIONS WITH AFFILIATES. The Borrower will not,
and will not permit any of its  Subsidiaries  to, except as otherwise  expressly
permitted  herein,  do any of the  following:  (a)  make  any  Investment  in an
Affiliate of the Borrower  which is not a Subsidiary  of the Borrower  except as
permitted by SECTION 8.3; (b) transfer, sell, lease, assign or otherwise dispose
of any asset to any  Affiliate of the Borrower  which is not a Subsidiary of the
Borrower;  (c) merge into or consolidate with or purchase or acquire assets from
any Affiliate of the Borrower  which is not a Subsidiary  of the  Borrower;  (d)
repay  any  Indebtedness  to  any  Affiliate  of  the  Borrower  which  is not a
Subsidiary of the Borrower;  or (e) enter into any other transaction directly or
indirectly with or for the benefit of any Affiliate of the Borrower which is not
a Subsidiary Guarantor  (including  guaranties and assumptions of obligations of
any such  Affiliate),  except for (i)  transactions  in the  ordinary  course of
business  on a basis  no  less  favorable  to the  Borrower  or such  Subsidiary
Guarantor  than those that could be obtained at the time of such  transaction in
arm's length dealings with a Person who is not such an Affiliate,  (ii) salaries
and other employee  compensation to officers or directors of the Borrower or any
of  its  Subsidiaries  commensurate  with  current  compensation  levels,  (iii)
transactions  contemplated  by Existing  Foreign Joint Venture  Agreements,  the
Option Agreement and the Warrant  Agreement (as such agreements are in effect on
the Closing Date) to the extent such payments are otherwise  permitted under the
Loan Documents and (iv) between the Borrower or any Subsidiary, on the one hand,
and each of The Procter & Gamble Company and Kimberly Clark Corporation,  on the
other, relating to technology licenses.

          SECTION 8.9.       RESTRICTIONS ON SUBSIDIARY  DISTRIBUTIONS;  NO  NEW
NEGATIVE  PLEDGE.  Other  than  pursuant  to the Loan  Documents  and the Senior
Subordinated  Note  Indenture and any  agreements  governing any purchase  money
Indebtedness or Capital Lease  Obligations  permitted by clause (B), (D), (E) or
(J) of SECTION 8.1 (in which latter case, any  prohibition  or limitation  shall
only be effective against the assets financed  thereby),  the Borrower will not,
and will not  permit  any of its  Subsidiaries  to,  (a) agree to enter  into or
suffer to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of such  Subsidiary  to pay  dividends or make any other
distribution  or  transfer  of funds or assets or make loans or  advances  to or
other Investments in, or pay any Indebtedness owed to, the Borrower or any other
Subsidiary  of the  Borrower  or (b)  enter  into or  suffer  to exist or become
effective any agreement which prohibits or limits the ability of the Borrower or
any Subsidiary to create,  incur, assume or suffer to exist any Lien upon any of
its property,  assets or revenues,  whether now owned or hereafter acquired,  to
secure  the   Obligations,   including  any  agreement   which   requires  other
Indebtedness  or Contractual  Obligation to be equally and ratably  secured with
the Obligations.

          SECTION 8.10.      MODIFICATION OF CONSTITUENT DOCUMENTS. The Borrower
will not,  and will not permit any of its  Subsidiaries  to,  change its capital
structure  (including in the terms of its outstanding  Stock) or otherwise amend
its  Constituent  Documents,  except for  changes  and  amendments  which do not
materially and adversely affect the rights and privileges of the Borrower or any
of its Subsidiaries,  or the interests of the Administrative  Agent, the Lenders
and the Issuers under the Loan Documents or in the Collateral.

          SECTION 8.11.       MODIFICATION  OF RELATED  DOCUMENTS. The  Borrower
will not, and will not permit any of its  Subsidiaries  to, (a) alter,  rescind,
terminate, amend, supplement,



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waive or otherwise  modify any provision of any Related Document (other than the
Senior  Subordinated  Notes,  the  Senior  Subordinated  Note  Indenture  or any
agreement  entered  into in  connection  therewith)  or (b) permit any breach or
default to exist under any  Related  Document or take or fail to take any action
thereunder, if (in each case) to do so would have a Material Adverse Effect.

          SECTION 8.12.       MODIFICATION  OF  SENIOR  SUBORDINATED  NOTES; The
Borrower  will not, and will not permit any of its  Subsidiaries  to,  change or
amend the terms of the Senior  Subordinated  Notes, the Senior Subordinated Note
Indenture or any agreement  entered into in connection  therewith) if the effect
of such  amendment  is to:  (a)  increase  the  interest  rate  on  such  Senior
Subordinated  Notes;  (b) change the dates upon which  payments of  principal or
interest  are due on such  Senior  Subordinated  Notes other than to extend such
dates; (c) amend any provisions  thereof  describing default or event of default
other than to delete or make less restrictive any default provision therein,  or
add any covenant with respect to such Senior  Subordinated Notes; (d) change the
redemption or prepayment provisions of such Senior Subordinated Notes other than
to extend the dates  therefor or to reduce the  premiums  payable in  connection
therewith;  or (e)  change or amend any other term if such  change or  amendment
could reasonably be expected to have a Material Adverse Effect.

          SECTION 8.13.      ACCOUNTING CHANGES;  FISCAL YEAR. The Borrower will
not, and will not permit any of its  Subsidiaries  to, change its (a) accounting
treatment and reporting practices or tax reporting treatment, except as required
by  GAAP  or any  Requirement  of Law  and  disclosed  to the  Lenders  and  the
Administrative Agent or (b) Fiscal Year.

          SECTION 8.14.      MARGIN  REGULATIONS.  The  Borrower  will  not, and
will not  permit  any of its  Subsidiaries  to,  use all or any  portion  of the
proceeds of any credit extended hereunder to purchase or carry Margin Stock.

          SECTION 8.15.     OPERATING LEASES; SALE/LEASEBACKS.

          (a) The Borrower will not, and will not permit any of its Subsidiaries
to,  become or remain liable as lessee or guarantor or other surety with respect
to any  operating  lease,  unless  that  aggregate  amount of all rents  paid or
accrued  under all such  operating  leases  shall not exceed  $3,000,000  in any
Fiscal Year.

          (b) The Borrower will not, and will not permit any of its Subsidiaries
to, enter into any sale and leaseback  transaction covering any property with an
aggregate Fair Market Value in excess of $2,000,000.

          SECTION 8.16.        CANCELLATION  OF  INDEBTEDNESS  OWED  TO  IT. The
Borrower  will not, and will not permit any of its  Subsidiaries  to, cancel any
claim or  Indebtedness  owed to it except  in the  ordinary  course of  business
consistent with past practice (other than any such  cancellation of Indebtedness
or  claims  among  the  Borrower  and the  Subsidiary  Guarantors  or among  the
Subsidiary Guarantors).

          SECTION 8.17.       NO  SPECULATIVE  TRANSACTIONS.  The  Borrower will
not, and will not permit any of its  Subsidiaries  to, engage in any speculative
transaction or in any transaction  involving  Hedging  Contracts  except for the
sole  purpose of hedging in the normal  course of business and  consistent  with
industry practices.

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<PAGE>

          SECTION 8.18.       COMPLIANCE WITH ERISA. The Borrower will not,  and
will not  permit  any of its  Subsidiaries  to,  or cause or  permit  any  ERISA
Affiliate  to,  cause or permit to occur (a) an event which could  result in the
imposition  of a Lien under  Section  412 of the IRC or  Section  302 or 4068 of
ERISA or (b) an ERISA Event that would have a Material Adverse Effect.

          SECTION 8.19.       ENVIRONMENTAL. The Borrower will not, and will not
permit  any of its  Subsidiaries  to,  allow a  Release  of any  Contaminant  in
violation of any Environmental Law; PROVIDED,  HOWEVER,  that the Borrower shall
not be deemed in violation of this  SECTION 8.19 if, as the  consequence  of all
such Releases,  such Loan Party would not incur  Environmental  Liabilities  and
Costs in excess of $1,000,000 in the aggregate.

                                   ARTICLE IX

                                EVENTS OF DEFAULT

          SECTION 9.1.     EVENTS OF DEFAULT. Each of the following events shall
be an Event of Default:

          (a)      The Borrower shall  fail to pay any  principal of any Loan or
any Reimbursement Obligation when the same becomes due and payable; or

          (b) The Borrower  shall fail to pay any interest on any Loan,  any fee
under any of the Loan Documents or any other Obligation (other than one referred
to in clause  (a) above) and such  non-payment  continues  for a period of three
Business Days after the due date therefor;

          (c) any  representation  or warranty made  or deemed made by any  Loan
Party in any Loan  Document  or by any Loan  Party (or any of its  officers)  in
connection  with any Loan  Document  shall prove to have been  incorrect  in any
material respect when made or deemed made; or

          (d) any  Loan Party  shall  fail to perform  or observe  (i) any term,
covenant or agreement  contained in ARTICLE V, SECTION 6.1, 6.2, 7.1, 7.6, 7.11,
7.12,  or 7.13 or ARTICLE  VIII,  or (ii) any other term,  covenant or agreement
contained in this  Agreement or in any other Loan Document if such failure under
this clause (ii) shall  remain  unremedied  for 30 days after the earlier of the
date on which (A) a  Responsible  Officer of the Borrower  becomes aware of such
failure or (B) written  notice  thereof shall have been given to the Borrower by
the Administrative Agent or any Lender; or

          e) (i) the Borrower or any of its  ubsidiaries  shall fail to make any
payment on any Indebtedness  (other than the Obligations) of the Borrower or any
such  Subsidiary (or any Guaranty  Obligation in respect of  Indebtedness of any
other Person)  having a principal  amount of  $1,000,000 or more,  when the same
becomes due and payable  (whether by scheduled  maturity,  required  prepayment,
acceleration,  demand or  otherwise);  or (ii) any other  event  shall  occur or
condition  shall exist under any  agreement or  instrument  relating to any such
Indebtedness,  if the effect of such event or condition is to accelerate,  or to
permit the acceleration of, the maturity of such Indebtedness; or (iii) any such
Indebtedness  shall become or be declared to be due and payable,  or required to
be  prepaid  or  repurchased  (other  than  by a  regularly  scheduled  required
prepayment), prior to the stated maturity thereof; or

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<PAGE>

          (f) the Borrower or  any of the Subsidiary  Guarantors shall generally
not pay its debts as such  debts  become  due,  or shall  admit in  writing  its
inability to pay its debts generally, or shall make a general assignment for the
benefit of creditors,  or any  proceeding  shall be instituted by or against the
Borrower or any of the Subsidiary  Guarantor seeking to adjudicate it a bankrupt
or insolvent, or seeking liquidation,  winding up, reorganization,  arrangement,
adjustment,  protection,  relief or composition of it or its debts under any law
relating to bankruptcy,  insolvency or reorganization  or relief of debtors,  or
seeking  the entry of an order for  relief or the  appointment  of a  custodian,
receiver,  trustee or other similar  official for it or for any substantial part
of its property and, in the case of any such proceedings  instituted against the
Borrower or any of the Subsidiary  Guarantors (but not instituted by it), either
such proceedings shall remain undismissed or unstayed for a period of 30 days or
any of the actions sought in such  proceedings  shall occur;  or the Borrower or
any of the Subsidiary  Guarantors  shall take any corporate  action to authorize
any of the actions set forth above in this SUBSECTION (F); or

          (g) one  or  more judgments  or  orders  (or  other  similar  process)
involving,  in any  single  case or in the  aggregate,  an  amount  in excess of
$1,000,000  in the  case of a money  judgment,  to the  extent  not  covered  by
insurance,  shall  be  rendered  against  one or  more of the  Borrower  and its
Subsidiaries; or

          (h)  an ERISA Event shall occur  and  the  amount of  all  liabilities
and  deficiencies  resulting  therefrom,   whether  or  not  assessed,   exceeds
$1,000,000 in the aggregate; (i) any provision of any Collateral Document or any
Guaranty  after  delivery  thereof  pursuant to this Agreement or any other Loan
Document  shall for any reason  cease to be valid and  binding,  or  enforceable
against,  on any Loan Party party  thereto,  or any Loan Party shall so state in
writing; or

          (j) any  Collateral  Document shall for  any reason  cease  to  create
a valid Lien on any of the Collateral  purported to be covered thereby or except
as permitted by the Loan Documents,  such Lien shall cease to be a perfected and
first priority Lien or any Loan Party shall so state in writing; or

          (k)  there shall occur any Change of Control; or

          (l)  there shall occur a Material Adverse Change; or

          (m) one  or more  of the Borrower  and  its  Subsidiaries  shall  have
entered into one or more consent or settlement  decrees or agreements or similar
arrangements  with a Governmental  Authority or one or more  judgments,  orders,
decrees or similar  actions  shall have been entered  against one or more of the
Borrower  and its  Subsidiaries  based on or arising  from the  violation  of or
pursuant to any Environmental Law, or the generation,  storage,  transportation,
treatment,  disposal or Release of any  Contaminant  and, in connection with all
the  foregoing,   the  Borrower  and  its   Subsidiaries  are  likely  to  incur
Environmental  Liabilities  and Costs in excess of  $1,000,000  in the aggregate
that were not reflected in the Projections or the Financial Statements delivered
pursuant to SECTION 4.4; or

          (n) the Plan of  Reorganization shall  have been  amended or  modified
in any material respect after the Closing Date without the prior written consent
of the Requisite Lenders; or

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<PAGE>

          (o) the Borrower  shall  fail to satisfy  the  conditions set forth in
Section 3.3 within 60 days following the Closing Date.

          SECTION  9.2.       REMEDIES.  During the continuance  of any Event of
Default,  the  Administrative  Agent (a) may,  and shall at the  request  of the
Requisite Lenders,  by notice to the Borrower declare that all or any portion of
the Revolving Credit Commitments be terminated, whereupon the obligation of each
Lender  to make any Loan and each  Issuer to issue  any  Letter of Credit  shall
immediately terminate,  and/or (b) may and shall at the request of the Requisite
Lenders, by notice to the Borrower,  declare the Loans, all interest thereon and
all other amounts and  Obligations  payable under this Agreement to be forthwith
due and payable, whereupon the Loans, all such interest and all such amounts and
Obligations shall become and be forthwith due and payable,  without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower; PROVIDED, HOWEVER, that upon the occurrence of the Event
of Default  specified  in  subparagraph  (d)  above,  (i) the  Revolving  Credit
Commitments  of each Lender to make Loans and of each Lender and Issuer to issue
or participate in Letters of Credit shall  automatically  be terminated and (ii)
the  Loans,  all  such  interest  and all such  amounts  and  Obligations  shall
automatically  become  and be due  and  payable,  without  presentment,  demand,
protest or any notice of any kind, all of which are hereby  expressly  waived by
the Borrower.  In addition to the remedies set forth above,  the  Administrative
Agent may  exercise any remedies  provided  for by the  Collateral  Documents in
accordance  with the terms thereof or any other remedies  provided by applicable
law.

          SECTION 9.3.        ACTIONS IN RESPECT OF LETTERS OF CREDIT.  Upon the
Revolving Credit  Termination Date, the Borrower shall pay to the Administrative
Agent in  immediately  available  funds  at the  Administrative  Agent's  office
referred to in SECTION  12.3,  for deposit in the Cash  Collateral  Account,  an
amount equal to 105% of the sum of all outstanding Letter of Credit Obligations.
The Administrative Agent may, from time to time after funds are deposited in the
Cash Collateral Account, apply funds then held in the Cash Collateral Account to
the payment of any amounts,  in accordance with SECTION  2.13(F),  as shall have
become or shall become due and payable by the Borrower to the Issuers or Lenders
in respect of the Letter of Credit Obligations.  The Administrative  Agent shall
promptly give written notice of any such application;  PROVIDED,  HOWEVER,  that
the  failure  to  give  such  written  notice  shall  not  invalidate  any  such
application.  Neither  the  Borrower  nor any  Person  claiming  on behalf of or
through the  Borrower  shall have any right to withdraw any of the funds held in
the  Cash  Collateral  Account  at any  time  prior  to the  termination  of all
outstanding  Letters of Credit and the  payment in full of all then  outstanding
and payable monetary Obligations.

          SECTION  9.4.       RESCISSION.  If at any time after  termination  of
the Revolving  Credit  Commitments  and/or  acceleration  of the maturity of the
Loans,  the  Borrower  shall pay all  arrears of  interest  and all  payments on
account of principal of the Loans and Reimbursement Obligations which shall have
become due otherwise  than by  acceleration  (with interest on principal and, to
the extent permitted by law, on overdue interest, at the rates specified herein)
and all Events of Default and Defaults  (other than  non-payment of principal of
and  accrued  interest  on the  Loans  due  and  payable  solely  by  virtue  of
acceleration)  shall be remedied or waived  pursuant to SECTION 11.1,  then upon
the written consent of the Requisite Lenders and written notice to the Borrower,
the termination of the Revolving Credit  Commitments and/or the acceleration and
their  consequences  may be rescinded  and  annulled;  but such action shall not
affect any subsequent  Event of Default or Default or impair any right or remedy
consequent thereon. The provisions of the preceding sentence are intended merely
to bind the Lenders and


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the Issuers to a decision  which may be made at the  election  of the  Requisite
Lenders;  they are not  intended  to benefit  the  Borrower  and do not give the
Borrower  the right to require the Lenders to rescind or annul any  acceleration
hereunder, even if the conditions set forth herein are met.

                                   ARTICLE X

                            THE ADMINISTRATIVE AGENT

          SECTION 10.1.     AUTHORIZATION AND ACTION.

          (a) Each  Lender and each  Issuer  hereby  appoints  Citicorp  as  the
Administrative  Agent  hereunder and each Lender and each Issuer  authorizes the
Administrative  Agent to take such action as agent on its behalf and to exercise
such powers under this  Agreement and the other Loan  Documents as are delegated
to the Administrative Agent under such agreements and to exercise such powers as
are reasonably incidental thereto.  Without limiting the foregoing,  each Lender
and each  Issuer  hereby  authorizes  the  Administrative  Agent to execute  and
deliver,  and to perform its  obligations  under,  each of the Loan Documents to
which the Administrative Agent is a party and to exercise all rights, powers and
remedies that the Administrative Agent may have under such Loan Documents.

          (b) As to any matters not expressly provided for by this Agreement and
the  other  Loan   Documents   (including   enforcement  or   collection),   the
Administrative  Agent shall not be required to exercise any  discretion  or take
any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Requisite  Lenders,  and such instructions shall be binding upon all Lenders
and each Issuer;  PROVIDED,  HOWEVER, that the Administrative Agent shall not be
required  to take any action  which (i) the  Administrative  Agent in good faith
believes  exposes  it to  personal  liability  unless the  Administrative  Agent
receives an indemnification  satisfactory to it from the Lenders and the Issuers
with respect to such action or (ii) is contrary to this  Agreement or applicable
law.  The  Administrative  Agent  agrees to give to each  Lender and each Issuer
prompt notice of each notice given to it by any Loan Party pursuant to the terms
of this Agreement or the other Loan Documents.

          (c) In  performing  its  functions  and  duties  hereunder  and  under
the Loan Documents,  the Administrative  Agent is acting solely on behalf of the
Lenders and the Issuers and its duties are  entirely  administrative  in nature.
The Administrative Agent does not assume and shall not be deemed to have assumed
any  obligation  other than as expressly  set forth herein and in the other Loan
Documents or any other relationship as the agent, fiduciary or trustee of or for
any Lender,  Issuer or holder of any other Obligation.  The Administrative Agent
may perform any of its duties under any of the Loan  Documents by or through its
agents or employees.

          SECTION 10.2.       ADMINISTRATIVE AGENT'S RELIANCE,  ETC. Neither the
Administrative  Agent  nor  any of  its  Affiliates  or  any  of the  respective
directors, officers, agents or employees of the Administrative Agent or any such
Affiliate  shall be liable  for any  action  taken or omitted to be taken by it,
him, her or them under or in  connection  with this  Agreement or the other Loan
Documents,  except for its,  his, her or their own gross  negligence  or willful
misconduct.  Without limiting the foregoing,  the  Administrative  Agent (a) may
treat the payee of any Revolving  Credit Note as its holder until such Revolving
Credit Note has been assigned in accordance  with SECTION 11.2;  (b) may rely on
the Register to the extent set forth in SECTION


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11.2(C);  (c) may consult with legal counsel  (including counsel to the Borrower
or any other Loan  Party),  independent  public  accountants  and other  experts
selected  by it and shall not be liable  for any  action  taken or omitted to be
taken  in good  faith  by it in  accordance  with the  advice  of such  counsel,
accountants or experts; (d) makes no warranty or representation to any Lender or
Issuer and shall not be responsible to any Lender or Issuer for any  statements,
warranties or representations made by or on behalf of the Borrower or any of its
Subsidiaries  in or in connection  with this  Agreement or any of the other Loan
Documents;  (e) shall not have any duty to ascertain or to inquire  either as to
the  performance  or observance of any of the terms,  covenants or conditions of
this Agreement or any of the other Loan Documents or the financial  condition of
any Loan Party,  or the existence or possible  existence of any Default or Event
of  Default;  (f) shall not be  responsible  to any Lender or Issuer for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or any of the other Loan Documents or any other  instrument or
document furnished pursuant hereto or thereto;  and (g) shall incur no liability
under or in respect of this  Agreement  or any of the other  Loan  Documents  by
acting upon any notice,  consent,  certificate  or other  instrument  or writing
(which may be by telecopy) or any telephone message believed by it to be genuine
and signed or sent by the proper party or parties.

          SECTION 10.3. THE ADMINISTRATIVE AGENT INDIVIDUALLY   With  respect to
its Ratable  Portion,  Citicorp  shall have and may exercise the same rights and
powers  hereunder and is subject to the same  obligations and liabilities as and
to the extent set forth  herein for any other  Lender.  The terms  "LENDERS"  or
"REQUISITE  LENDERS"  or any similar  terms  shall,  unless the context  clearly
otherwise indicates, include the Administrative Agent in its individual capacity
as a Lender or as one of the Requisite Lenders.  Citicorp and its Affiliates may
accept  deposits  from,  lend  money  to,  and  generally  engage in any kind of
banking, trust or other business with any Loan Party as if it were not acting as
the Administrative Agent.

          SECTION 10.4. LENDER CREDIT  DECISION.  Each  Lender  and each  Issuer
acknowledges  that  it  shall,  independently  and  without  reliance  upon  the
Administrative   Agent  or  any  other  Lender   conduct  its  own   independent
investigation  of the  financial  condition and affairs of the Borrower and each
other Loan Party in connection  with the making and continuance of the Loans and
with the  issuance  of the  Letters of Credit.  Each Lender and each Issuer also
acknowledges  that  it  will,   independently  and  without  reliance  upon  the
Administrative  Agent  or any  other  Lender  and  based on such  documents  and
information as it shall deem  appropriate at the time,  continue to make its own
credit  decisions in taking or not taking action under this  Agreement and other
Loan Documents.

          SECTION 10.5.     INDEMNIFICATION.  Each Lender  agrees  to  indemnify
the  Administrative  Agent  and  each  of its  Affiliates,  and  each  of  their
respective directors,  officers,  employees,  agents and advisors (to the extent
not  reimbursed  by the  Borrower),  from and against  such  Lender's  aggregate
Ratable  Portion  of any  and all  liabilities,  obligations,  losses,  damages,
penalties,   actions,   judgments,  suits,  costs,  expenses  and  disbursements
(including  fees and  disbursements  of  legal  counsel)  of any kind or  nature
whatsoever  which may be imposed  on,  incurred  by, or  asserted  against,  the
Administrative Agent or any of its Affiliates,  directors,  officers, employees,
agents and advisors in any way  relating to or arising out of this  Agreement or
the other Loan  Documents or any action  taken or omitted by the  Administrative
Agent under this Agreement or the other Loan Documents;  PROVIDED, HOWEVER, that
no Lender  shall be liable  for any  portion of such  liabilities,  obligations,
losses,  damages,  penalties,  actions,  judgments,  suits,  costs,  expenses or
disbursements resulting from the Administrative Agent's or such Affiliate's


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gross negligence or willful  misconduct.  Without  limiting the foregoing,  each
Lender agrees to reimburse the Administrative Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including fees and disbursements of
legal  counsel)  incurred by the  Administrative  Agent in  connection  with the
preparation,  execution, delivery,  administration,  modification,  amendment or
enforcement (whether through  negotiations,  legal proceedings or otherwise) of,
or legal  advice in  respect  of its  rights  or  responsibilities  under,  this
Agreement  or the other Loan  Documents,  to the extent that the  Administrative
Agent is not reimbursed for such expenses by the Borrower or another Loan Party.

          SECTION 10.6.     SUCCESSOR ADMINISTRATIVE AGENT.  The  Administrative
Agent may resign at any time by giving written notice thereof to the Lenders and
the Borrower.  Upon any such  resignation,  the Requisite Lenders shall have the
right  to  appoint  a   successor   Administrative   Agent.   If  no   successor
Administrative  Agent shall have been so appointed by the Requisite Lenders, and
shall  have  accepted  such  appointment,  within  30 days  after  the  retiring
Administrative  Agent's  giving  of  notice of  resignation,  then the  retiring
Administrative  Agent  may,  on  behalf  of the  Lenders,  appoint  a  successor
Administrative  Agent,  selected  from among the Lenders.  In either case,  such
appointment  shall be  subject to the prior  written  approval  of the  Borrower
(which approval may not be unreasonably  withheld and shall not be required upon
the  occurrence  and during the  continuance  of an Event of Default).  Upon the
acceptance  of  any   appointment  as   Administrative   Agent  by  a  successor
Administrative  Agent, such successor  Administrative Agent shall succeed to and
become vested with all the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring  Administrative Agent shall be discharged
from its  duties  and  obligations  under  this  Agreement  and the  other  Loan
Documents. Prior to any retiring Administrative Agent's resignation hereunder as
Administrative  Agent, the retiring  Administrative Agent shall take such action
as may be reasonably  necessary to assign to the Successor  Administrative Agent
its  rights  as  Administrative  Agent  under  the Loan  Documents.  After  such
resignation,  the  retiring  Administrative  Agent  shall  continue  to have the
benefit of this  ARTICLE X as to any actions  taken or omitted to be taken by it
while it was  Administrative  Agent  under  this  Agreement  and the other  Loan
Documents.

          SECTION 10.7.  CONCERNING THE COLLATERAL AND THE COLLATERAL DOCUMENTS.

          (a)  Each Lender and each Issuer agrees that any action  taken by  the
Administrative Agent or the Requisite Lenders (or, where required by the express
terms of this Agreement, a greater proportion of the Lenders) in accordance with
the  provisions  of this  Agreement  or of the  other  Loan  Documents,  and the
exercise by the  Administrative  Agent or the  Requisite  Lenders (or,  where so
required,  such greater  proportion)  of the powers set forth herein or therein,
together with such other powers as are reasonably  incidental thereto,  shall be
authorized  and  binding  upon all of the  Lenders,  Issuers  and other  Secured
Parties.  Without limiting the generality of the foregoing,  the  Administrative
Agent shall have the sole and  exclusive  right and  authority to (i) act as the
disbursing and collecting  agent for the Lenders and the Issuers with respect to
all  payments  and  collections  arising  in  connection  herewith  and with the
Collateral  Documents;  (ii)  execute and deliver each  Collateral  Document and
accept  delivery of each such agreement  delivered by the Borrower or any of its
Subsidiaries; (iii) act as collateral agent for the Lenders, the Issuers and the
other Secured  Parties for purposes of the perfection of all security  interests
and Liens created by such  agreements  and all other  purposes  stated  therein;
PROVIDED, HOWEVER, that the Administrative Agent hereby appoints, authorizes and
directs  each  Lender  and  Issuer  to  act  as  collateral  sub-agent  for  the
Administrative Agent, the Lenders and the Issuers for purposes of the perfection
of all  security  interests  and Liens with  respect to the


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Borrower's and its Subsidiaries'  respective  deposit accounts  maintained with,
and cash and Cash Equivalents held by, such Lender or such Issuer;  (iv) manage,
supervise and  otherwise  deal with the  Collateral;  (v) take such action as is
necessary or desirable to maintain the  perfection  and priority of the security
interests  and Liens  created  or  purported  to be  created  by the  Collateral
Documents;  and (vi) except as may be otherwise  specifically  restricted by the
terms hereof or of any other Loan  Document,  exercise all remedies given to the
Administrative  Agent,  the Lenders,  the Issuers and the other Secured  Parties
with  respect  to the  Collateral  under the Loan  Documents  relating  thereto,
applicable law or otherwise.

          (b) Each of the Lenders and the Issuers hereby  directs, in accordance
with the terms hereof, the  Administrative  Agent to release (or, in the case of
clause (ii) below,  release or subordinate) any Lien held by the  Administrative
Agent for the benefit of the Lenders and the Issuers:

                    (i)       against all of  the  Collateral, upon  termination
                  of  the   Revolving   Credit   Commitments   and  payment  and
                  satisfaction in full of all Loans,  Reimbursement  Obligations
                  and all other  Obligations  which have  matured  and which the
                  Administrative Agent has been notified in writing are then due
                  and payable (and,  in respect of  contingent  Letter of Credit
                  Obligations,  with respect to which cash  collateral  has been
                  deposited or a back-up  letter of credit has been  issued,  in
                  either case on terms satisfactory to the Administrative  Agent
                  and the applicable Issuers);

                    (ii)     against  any assets  that are  subject  to  a  Lien
                  permitted by SECTION 8.2(D) or (E); and

                    (iii)     against  any  part  of   the  Collateral  sold  or
                  disposed  of by a Loan  Party if such sale or  disposition  is
                  permitted by this Agreement (or permitted pursuant to a waiver
                  or  consent  of a  transaction  otherwise  prohibited  by this
                  Agreement)  or, if not  pursuant to such sale or  disposition,
                  against  Collateral with a book value of up to $5,000,000,  if
                  such release is consented to by the Requisite Lenders,  or any
                  part of the  Collateral  in  excess  of such  amount,  if such
                  release is consented to by all the Lenders.

Each of the Lenders and the Issuers hereby directs the  Administrative  Agent to
execute and deliver or file such termination and partial release  statements and
do such other things as are necessary to release  Liens to be released  pursuant
to this SECTION 10.7 promptly upon the effectiveness of any such release.

          SECTION 10.8.      COLLATERAL MATTERS RELATING TO RELATED OBLIGATIONS.
The  benefit  of the Loan  Documents  and of the  provisions  of this  Agreement
relating to the  Collateral  shall  extend to and be available in respect of any
Secured Obligation which arises under any Hedging Contract or which is otherwise
owed to Persons other than the Administrative Agent, the Lenders and the Issuers
(collectively, "RELATED OBLIGATIONS") solely on the condition and understanding,
as among the Administrative Agent and all Secured Parties,  that (i) the Related
Obligations  shall be  entitled  to the  benefit of the Loan  Documents  and the
Collateral  to the extent  expressly  set forth in this  Agreement and the other
Loan Documents and to such extent the Administrative  Agent shall hold, and have
the right and power to act with respect to, the Guaranty and the  Collateral  on
behalf of and as agent  for the  holders  of the  Related  Obligations,  but the
Administrative Agent is otherwise acting solely as agent for the Lenders and the
Issuers and shall


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have no fiduciary  duty,  duty of loyalty,  duty of care,  duty of disclosure or
other  obligation  whatsoever  to any  holder of Related  Obligations;  (ii) all
matters,  acts  and  omissions  relating  in any  manner  to the  Guaranty,  the
Collateral,  or the omission,  creation,  perfection,  priority,  abandonment or
release  of any  Lien,  shall  be  governed  solely  by the  provisions  of this
Agreement and the other Loan  Documents and no separate  Lien,  right,  power or
remedy  shall  arise or exist in favor of any Secured  Party under any  separate
instrument or agreement or in respect of any Related Obligation;  and (iii) each
Secured Party shall be bound by all actions taken or omitted, in accordance with
the  provisions  of  this  Agreement  and  the  other  Loan  Documents,  by  the
Administrative  Agent and the Requisite Lenders,  each of whom shall be entitled
to act at its sole  discretion and exclusively in its own interest given its own
Revolving Credit Commitments and its own interest in the Loans, Letter of Credit
Obligations  and other  Obligations  to it arising  under this  Agreement or the
other Loan  Documents,  without any duty or liability to any other Secured Party
or as to any  Related  Obligation  and  without  regard to whether  any  Related
Obligation  remains  outstanding or is deprived of the benefit of the Collateral
or becomes unsecured or is otherwise  affected or put in jeopardy  thereby;  and
(iv) no holder of Related  Obligations  and no other  Secured  Party (except the
Administrative  Agent,  the Lenders and the Issuers,  to the extent set forth in
this Agreement) shall have any right to be notified of, or to direct, require or
be heard  with  respect  to,  any  action  taken or  omitted  in  respect of the
Collateral or under this Agreement or the Loan  Documents;  and (v) no holder of
any Related  Obligation  shall  exercise any right of setoff,  banker's  lien or
similar right except as expressly provided in SECTION 11.6.

                                   ARTICLE XI

                                  MISCELLANEOUS

          SECTION 11.1.     AMENDMENTS, WAIVERS, ETC.

          (a) No amendment or waiver of any provision  of this  Agreement or any
other Loan  Document nor consent to any  departure  by any Loan Party  therefrom
shall in any event be  effective  unless the same shall be in writing and signed
by the Requisite Lenders, and then any such waiver or consent shall be effective
only in the  specific  instance  and for the  specific  purpose for which given;
PROVIDED, HOWEVER, that no amendment, waiver or consent shall, unless in writing
and signed by each Lender, in addition to the Requisite  Lenders,  do any of the
following:

                    (i)       waive any of the conditions  specified  in Section

                  3.1 or 3.2  except  with  respect  to a  condition  based upon
                  another  provision  hereof,  the waiver of which requires only
                  the concurrence of the Requisite Lenders;

                    (ii)     increase  the  Revolving Credit  Commitments of the
                  Lenders or subject the Lenders to any additional obligations;

                    (iii)     extend the scheduled  final  maturity of any Loan,
                  or waive,  reduce or postpone any scheduled date fixed for the
                  payment or reduction of principal (it being  understood that a
                  Section  2.9 does not provide  for  scheduled  dates fixed for
                  payment) or of the Revolving Credit Commitments;

                    (iv)     reduce  the   principal   amount  of  any  Loan  or
                  Reimbursement   Obligation  (other  than  by  the  payment  or
                  prepayment thereof);

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                    (v)       reduce  the  rate  of interest  on  any  Loan   or
                  Reimbursement Obligations or any fee payable hereunder;

                    (vi)      postpone  any  scheduled  date fixed  for  payment
                  of such interest or fees;

                    (vii)     change  the  aggregate  Ratable  Portions  of  the
                  Lenders which shall be required for the Lenders or any of them
                  to take any action hereunder;

                    (viii)  increase the Advance Rates above the rates set forth
                  in the definition thereof;

                    (ix)      release any of the  Collateral  except as provided
                  in Section  10.7(b) or release any  Subsidiary  Guarantor from
                  its  obligations  under the Guaranty except in connection with
                  sale or other  disposition  permitted  by this  Agreement  (or
                  permitted  pursuant  to a waiver or consent  of a  transaction
                  otherwise prohibited by this Agreement); or

                    (x)       amend Section  10.7(b) or this Section 11.1 or the
                  definition  of  the  terms   "REQUISITE   LENDERS",   "RATABLE
                  PORTION",   "FIXED  ASSET   AMOUNT",   "ELIGIBLE   INVENTORY",
                  "ELIGIBLE  EQUIPMENT",  "ELIGIBLE  REAL  PROPERTY",  "ELIGIBLE
                  RECEIVABLE",   "ELIGIBLE   FINISHED   GOODS",   "ELIGIBLE  RAW
                  MATERIALS", ELIGIBLE WORK-IN-PROCESS", "ELIGIBLE SUPPLIES" and
                  "ELIGIBLE PARTS".

and PROVIDED,  FURTHER,  that no amendment,  waiver or consent shall,  unless in
writing  and  signed by the  Administrative  Agent in  addition  to the  Lenders
required  above  to take  such  action,  affect  the  rights  or  duties  of the
Administrative Agent under this Agreement or the other Loan Documents.

          (b) The  Administrative  Agent may,  but shall have no obligation  to,
with the written concurrence of any Lender,  execute amendments,  modifications,
waivers or consents  on behalf of that  Lender.  Any waiver or consent  shall be
effective only in the specific  instance and for the specific  purpose for which
it was given.  No notice to or demand on the Borrower in any case shall  entitle
the  Borrower  to any other or  further  notice or  demand in  similar  or other
circumstances.

          SECTION 11.2.     ASSIGNMENTS AND PARTICIPATIONS.

          (a) Each Lender may sell, transfer, negotiate or assign to one or more
Eligible  Assignees  all or a portion of its rights  and  obligations  hereunder
(including  all of its  rights and  obligations  with  respect to the  Revolving
Credit  Loans,  the Swing Loans and the Letters of Credit);  PROVIDED,  HOWEVER,
that (i) such  assignment  shall  cover  the same  percentage  of such  Lender's
Revolving  Credit  Outstandings  and  Revolving  Credit  Commitment,   (ii)  the
aggregate amount being assigned pursuant to each such assignment  (determined as
of the date of the Assignment and  Acceptance  with respect to such  assignment)
shall in no event (if less than the  Assignor's  entire  interest)  be less than
$5,000,000 or an integral  multiple of $1,000,000 in excess thereof,  except, in
either case, (A) with the consent of the Borrower and the  Administrative  Agent
or (B) if such  assignment is being made to a Lender or an Affiliate or Approved
Fund of such Lender,  and (iii) if such Eligible  Assignee is not,  prior to the
date of such assignment,  a Lender or an Affiliate or Approved Fund of a Lender,
such assignment shall be subject to the prior consent


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<PAGE>

of the  Administrative  Agent  and the  Borrower  (which  consent  shall  not be
unreasonably withheld or delayed);  PROVIDED,  HOWEVER, that notwithstanding any
other  provision of this SECTION 11.2,  the consent of the Borrower shall not be
required for any  assignment  which occurs when any Event of Default  shall have
occurred and be continuing.

          (b)  The  parties to each  assignment shall execute and deliver to the
Administrative  Agent,  for its  acceptance  and  recording,  an Assignment  and
Acceptance,  together with any Revolving Credit Note (if the assigning  Lender's
Loans are evidenced by a Revolving Credit Note) subject to such assignment. Upon
such  execution,  delivery,  acceptance  and  recording  and the  receipt by the
Administrative  Agent from the  assignee of an  assignment  fee in the amount of
$3,500  from and after the  effective  date  specified  in such  Assignment  and
Acceptance,  (i) the assignee thereunder shall become a party hereto and, to the
extent that rights and  obligations  under the Loan Documents have been assigned
to such assignee pursuant to such Assignment and Acceptance, have the rights and
obligations  of a Lender,  and if such  Lender  were an Issuer,  of such  Issuer
hereunder and thereunder,  and (ii) the assignor thereunder shall, to the extent
that  rights and  obligations  under this  Agreement  have been  assigned  by it
pursuant to such Assignment and Acceptance,  relinquish its rights (except those
which survive the payment in full of the  Obligations)  and be released from its
obligations  under the Loan  Documents,  other than those  relating to events or
circumstances  occurring  prior  to  such  assignment  (and,  in the  case of an
Assignment and Acceptance  covering all or the remaining portion of an assigning
Lender's  rights and  obligations  under the Loan  Documents,  such Lender shall
cease to be a party hereto).

          (c) The Administrative Agent shall maintain at its address referred to
in  SECTION  11.3 a copy of each  Assignment  and  Acceptance  delivered  to and
accepted by it and a register for the  recording  of the names and  addresses of
the Lenders and the Revolving Credit  Commitments of and principal amount of the
Loans and Letter of Credit  Obligations  owing to each  Lender from time to time
(the  "REGISTER").  The entries in the Register  shall be conclusive and binding
for  all  purposes,   absent   manifest  error,   and  the  Loan  Parties,   the
Administrative  Agent  and the  Lenders  may treat  each  Person  whose  name is
recorded in the  Register as a Lender for all  purposes of this  Agreement.  The
Register shall be available for inspection by the Borrower,  the  Administrative
Agent or any Lender at any reasonable time and from time to time upon reasonable
prior notice.

          (d) Upon its receipt of an Assignment  and  Acceptance  executed by an
assigning  Lender and an  assignee,  the  Administrative  Agent  shall,  if such
Assignment  and Acceptance has been  completed,  (i) accept such  Assignment and
Acceptance,  (ii) record the information  contained  therein in the Register and
(iii) give prompt  notice  thereof to the  Borrower.  Within five  Business Days
after its receipt of such notice,  the Borrower,  at its own expense,  shall, if
requested by such assignee, execute and deliver to the Administrative Agent, new
Revolving  Credit Notes to the order of such  assignee in an amount equal to the
Revolving  Credit  Commitments  assumed by it  pursuant to such  Assignment  and
Acceptance and, if the assigning  Lender has  surrendered  any Revolving  Credit
Note for exchange in connection  with the assignment and has retained  Revolving
Credit  Commitments  hereunder,  new Revolving  Credit Notes to the order of the
assigning Lender in an amount equal to the Revolving Credit Commitments retained
by it hereunder. Such new Revolving Credit Notes shall be dated the same date as
the  surrendered  Revolving  Credit  Notes and be in  substantially  the form of
EXHIBIT B.

          (e) In  addition  to  the other  assignment  rights  provided  in this
SECTION 11.2,  each Lender may assign,  as  collateral or otherwise,  any of its
rights  under this  Agreement  (including  rights to  payments of  principal  or
interest on the Loans) to (i) any Federal Reserve Bank pursuant


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to Regulation A of the Federal Reserve Board without notice to or consent of the
Borrower or the Administrative Agent and (ii) any trustee for the benefit of the
holders of such Lender's Securities;  PROVIDED, HOWEVER, that no such assignment
shall release the assigning Lender from any of its obligations hereunder.

          (f) Each Lender may  sell participations to one or  more Persons in or
to all or a portion  of its  rights  and  obligations  under the Loan  Documents
(including all its rights and obligations with respect to Revolving Credit Loans
and Letters of Credit). The terms of such participation shall not, in any event,
require  the  participant's   consent  to  any  amendments,   waivers  or  other
modifications  of any  provision  of any  Loan  Documents,  the  consent  to any
departure by any Loan Party  therefrom,  or to the exercising or refraining from
exercising  any powers or rights  which such Lender may have under or in respect
of the Loan  Documents  (including  the right to enforce the  obligations of the
Loan Parties),  except if any such  amendment,  waiver or other  modification or
consent would (i) reduce the amount,  or postpone any date fixed for, any amount
(whether of principal,  interest or fees) payable to such participant  under the
Loan Documents, to which such participant would otherwise be entitled under such
participation or (ii) result in the release of all or  substantially  all of the
Collateral  other than in accordance with SECTION  10.7(B).  In the event of the
sale of any participation by any Lender, (A) such Lender's obligations under the
Loan  Documents  shall remain  unchanged,  (B) such Lender  shall remain  solely
responsible to the other parties for the  performance of such  obligations,  (C)
such Lender shall remain the holder of such Obligations for all purposes of this
Agreement,  and (D) the Borrower, the Administrative Agent and the other Lenders
shall  continue to deal solely and directly with such Lender in connection  with
such Lender's rights and  obligations  under this  Agreement.  Each  participant
shall be entitled to the  benefits of SECTIONS  2.14(D),  2.15 and 2.16 as if it
were  a  Lender;  PROVIDED,  HOWEVER,  that  anything  herein  to  the  contrary
notwithstanding, the Borrower shall not, at any time, be obligated to pay to any
participant of any interest of any Lender, under SECTION 2.13, 2.14(D),  2.13 or
2.15,  any sum in excess of the sum which the Borrower would have been obligated
to pay to such Lender in respect of such  interest  had such  participation  not
been sold.

          (g) Any  Issuer may  at any time  assign  its  rights and  obligations
hereunder  to  any  other  Lender  by  an   instrument  in  form  and  substance
satisfactory to the Borrower,  the  Administrative  Agent,  such Issuer and such
Lender.  If  any  Issuer  ceases  to be a  Lender  hereunder  by  virtue  of any
assignment made pursuant to this SECTION 11.2, then, as of the effective date of
such cessation, such Issuer's obligations to issue Letters of Credit pursuant to
SECTION 2.04 shall  terminate and such Issuer shall be an Issuer  hereunder only
with respect to outstanding Letters of Credit issued prior to such date.

          SECTION 11.3.     COSTS AND EXPENSES.

          (a) The  Borrower  agrees  upon  demand  to  pay,  or   reimburse  the
Administrative Agent for, all of the Administrative  Agent's reasonable internal
and external audit, legal,  appraisal,  valuation,  filing, document duplication
and  reproduction  and  investigation  expenses  and  for all  other  reasonable
out-of-pocket  costs and expenses of every type and nature  (including,  without
limitation,   the   reasonable   fees,   expenses  and   disbursements   of  the
Administrative Agent's counsel, Weil, Gotshal & Manges LLP, local legal counsel,
auditors,  accountants,   appraisers,   printers,  insurance  and  environmental
advisers, and other consultants and agents) incurred by the Administrative Agent
in connection with (i) the Administrative Agent's audit and investigation of the
Borrower and its  Subsidiaries in connection with the  preparation,  negotiation
and execution of the Loan  Documents  and the  Administrative  Agent's  periodic
audits of the


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Borrower  and its  Subsidiaries,  as the  case  may be;  (ii)  the  preparation,
negotiation,  execution and interpretation of this Agreement (including, without
limitation,  the satisfaction or attempted satisfaction of any of the conditions
set  forth in  ARTICLE  III),  the Loan  Documents  and any  proposal  letter or
commitment  letter  issued in  connection  therewith and the making of the Loans
hereunder;  (iii) the creation,  perfection or protection of the Liens under the
Loan Documents (including,  without limitation, any reasonable fees and expenses
for local counsel in various jurisdictions);  (iv) the ongoing administration of
this  Agreement  and  the  Loans,   including  consultation  with  attorneys  in
connection  therewith and with respect to the Administrative  Agent's rights and
responsibilities   hereunder  and  under  the  other  Loan  Documents;  (v)  the
protection,  collection  or  enforcement  of  any  of  the  Obligations  or  the
enforcement  of any of the Loan  Documents;  (vi) the  commencement,  defense or
intervention in any court proceeding relating in any way to the Obligations, any
Loan Party, any of the Borrower's Subsidiaries, the Reorganization,  the Related
Documents, this Agreement or any of the other Loan Documents; (vii) the response
to, and  preparation  for, any subpoena or request for document  production with
which the  Administrative  Agent is served or deposition or other  proceeding in
which the Administrative  Agent is called to testify,  in each case, relating in
any way to the Obligations,  any Loan Party, any of the Borrowers' Subsidiaries,
the  Reorganization,  the Related Documents,  this Agreement or any of the other
Loan  Documents;  and (viii) any  amendments,  consents,  waivers,  assignments,
restatements,  or supplements to any of the Loan Documents and the  preparation,
negotiation, and execution of the same.

          (b) The Borrower further agrees to pay or reimburse the Administrative
Agent and each of the  Lenders and  Issuers  upon  demand for all  out-of-pocket
costs and expenses,  including,  without limitation,  reasonable attorneys' fees
(including  allocated  costs of  internal  counsel  and  costs  of  settlement),
incurred by the  Administrative  Agent, such Lenders or Issuers (i) in enforcing
any Loan  Document or  Obligation  or any  security  therefor or  exercising  or
enforcing any other right or remedy  available by reason of an Event of Default;
(ii)  in  connection  with  any  refinancing  or  restructuring  of  the  credit
arrangements  provided  hereunder  in  the  nature  of a  "work-out"  or in  any
insolvency  or  bankruptcy  proceeding;   (iii)  in  commencing,   defending  or
intervening in any litigation or in filing a petition, complaint, answer, motion
or other pleadings in any legal proceeding relating to the Obligations, any Loan
Party,  any of the Borrowers'  Subsidiaries and related to or arising out of the
transactions  contemplated  hereby  or by any of the  other  Loan  Documents  or
Related Documents; and (iv) in taking any other action in or with respect to any
suit or proceeding  (bankruptcy  or otherwise)  described in CLAUSES (I) through
(III) above.

          SECTION 11.4.     INDEMNITIES.

          (a)  The  Borrower  agrees   to  indemnify   and  hold   harmless  the
Administrative  Agent,  each Lender and each Issuer and each of their respective
Affiliates,   and  each  of  the   directors,   officers,   employees,   agents,
representative,  attorneys,  consultants  and  advisors  of or  to  any  of  the
foregoing  (including  those  retained in connection  with the  satisfaction  or
attempted  satisfaction of any of the conditions set forth in ARTICLE III) (each
such Person being an "INDEMNITEE") from and against any and all claims, damages,
liabilities,  obligations,  losses, penalties, actions, judgments, suits, costs,
disbursements   and  expenses  of  any  kind  or  nature   (including  fees  and
disbursements  of  counsel  to any such  Indemnitee)  which may be  imposed  on,
incurred  by or asserted  against  any such  Indemnitee  in  connection  with or
arising out of any investigation,  litigation or proceeding,  whether or not any
such Indemnitee is a party thereto,  whether direct,  indirect, or consequential
and whether based on any federal, state or local law or


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other statutory regulation, securities or commercial law or regulation, or under
common  law or in  equity,  or on  contract,  tort or  otherwise,  in any manner
relating  to or arising  out of this  Agreement,  any other Loan  Document,  any
Obligation,  any  Letter  of  Credit,  the  Disclosure  Statement,  any  Related
Document, the Plan of Reorganization or any act, event or transaction related or
attendant  to any  thereof,  or the use or intended  use of the  proceeds of the
Loans or  Letters  of  Credit or in  connection  with any  investigation  of any
potential  matter  covered hereby  (collectively,  the  "INDEMNIFIED  MATTERS");
PROVIDED,  HOWEVER,  that the Borrower shall not have any obligation  under this
SECTION 11.4 to an Indemnitee with respect to any  Indemnified  Matter caused by
or resulting from the gross negligence or willful misconduct of that Indemnitee,
as determined  by a court of competent  jurisdiction  in a final  non-appealable
judgment or order.  Without limiting the foregoing,  Indemnified Matters include
(i) all  Environmental  Liabilities and Costs arising from or connected with the
past,  present or future  operations of the Borrower or any of its  Subsidiaries
involving any property  subject to a Collateral  Document,  or damage to real or
personal  property  or  natural  resources  or harm or  injury  alleged  to have
resulted from any Release of Contaminants  on, upon or into such property or any
contiguous  real estate;  (ii) any costs or  liabilities  incurred in connection
with any Remedial  Action  concerning  the Borrower or any of its  Subsidiaries;
(iii) any costs or  liabilities  incurred in connection  with any  Environmental
Lien; (iv) any costs or liabilities incurred in connection with any other matter
under any  Environmental  Law,  including  CERCLA and applicable  state property
transfer laws, whether,  with respect to any of such matters, such Indemnitee is
a mortgagee pursuant to any leasehold mortgage,  a mortgagee in possession,  the
successor in interest to the Borrower or any of its Subsidiaries,  or the owner,
lessee or operator of any property of the Borrower or any of its Subsidiaries by
virtue of  foreclosure,  except,  with respect to those  matters  referred to in
CLAUSES (I), (II),  (III) and (IV) above, to the extent  incurred  following (A)
foreclosure  by the  Administrative  Agent,  any  Lender or any  Issuer,  or the
Administrative  Agent,  any Lender or any Issuer  having become the successor in
interest to the Borrower or any of its Subsidiaries, and (B) attributable solely
to acts of the Administrative  Agent, such Lender or such Issuer or any agent on
behalf of the Administrative Agent or such Lender.

          (b) The Borrower shall indemnify the Administrative Agent, the Lenders
and each Issuer for,  and hold the  Administrative  Agent,  the Lenders and each
Issuer harmless from and against, any and all claims for brokerage  commissions,
fees and other compensation made against the  Administrative  Agent, the Lenders
and the  Issuers  for any  broker,  finder or  consultant  with  respect  to any
agreement,  arrangement or understanding  made by or on behalf of any Loan Party
or any of its Subsidiaries in connection with the  transactions  contemplated by
this Agreement.

          (c) The  Administrative  Agent, each Lender and each Issuer agree that
in the event that any such investigation,  litigation or proceeding set forth in
subparagraph  (b) above is  asserted  or  threatened  in writing  or  instituted
against it or any other  Indemnitee,  or any Remedial Action, is requested of it
or any of its officers,  directors,  Administrative  Agents and  employees,  for
which any Indemnitee may desire indemnity or defense hereunder,  such Indemnitee
shall promptly notify the Borrower in writing.

          (d) The  Borrower,  at the  request of  any Indemnitee, shall have the
obligation  to defend  against such  investigation,  litigation or proceeding or
requested Remedial Action and the Borrower, in any event, may participate in the
defense thereof with legal counsel of the Borrower's  choice.  In the event that
such  Indemnitee  requests  the Borrower to defend  against such  investigation,
litigation or proceeding or requested Remedial Action, the Borrower shall

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promptly do so and such Indemnitee shall have the right to have legal counsel of
its choice participate in such defense.  No action taken by legal counsel chosen
by such Indemnitee in defending  against any such  investigation,  litigation or
proceeding or requested Remedial Action,  shall vitiate or in any way impair the
Borrower's  obligation  and duty  hereunder to indemnify  and hold harmless such
Indemnitee.

          (e) The  Borrower  agrees that any indemnification or other protection
provided to any  Indemnitee  pursuant to this Agreement  (including  pursuant to
this SECTION 11.4) or any other Loan Document shall (i) survive  payment in full
of the  Obligations  and (ii) inure to the  benefit of any Person who was at any
time an Indemnitee under this Agreement or any other Loan Document.

          SECTION 11.5.       LIMITATION OF LIABILITY. The Borrower  agrees that
no Indemnitee shall have any liability (whether direct or indirect, in contract,
tort or otherwise) to any Loan Party or any of their respective  Subsidiaries or
any of  their  equity  holders  or  creditors  for  or in  connection  with  the
transactions  contemplated  hereby and in the other Loan  Documents  and Related
Documents, except to the extent such liability is found in a final judgment by a
court of competent  jurisdiction to have resulted from such  Indemnitee's  gross
negligence or willful misconduct.  In no event,  however,  shall any Indemnified
Party  be  liable  on  any  theory  of  liability  for  any  special,  indirect,
consequential or punitive  damages and the Borrower hereby waives,  releases and
agrees (for itself and on behalf of its  Subsidiaries)  not to sue upon any such
claim for any such  damages,  whether or not accrued and whether or not known or
suspected to exist in its favor.

          SECTION 11.6.       RIGHT OF SET-OFF.  Upon the  occurrence and during
the  continuance  of any Event of Default  each Lender and each  Affiliate  of a
Lender is hereby  authorized  at any time and from time to time,  to the fullest
extent  permitted by law, to set off and apply any and all deposits  (general or
special,  time or  demand,  provisional  or  final)  at any time  held and other
indebtedness  at any time owing by such Lender or its  Affiliates  to or for the
credit or the account of the Borrower against any and all of the Obligations now
or  hereafter  existing  whether or not such  Lender  shall have made any demand
under this  Agreement or any other Loan Document and although  such  Obligations
may be unmatured.  Each Lender agrees  promptly to notify the Borrower after any
such set-off and application  made by such Lender or its  Affiliates;  PROVIDED,
HOWEVER,  that the failure to give such notice  shall not affect the validity of
such set-off and application.  The rights of each Lender under this SECTION 11.6
are in addition to the other  rights and  remedies  (including  other  rights of
set-off) which such Lender may have.

          SECTION 11.7.     SHARING OF PAYMENTS, ETC.

          (a)  If  any  Lender  shall  obtain any  payment  (whether  voluntary,
involuntary,  through  the  exercise  of any right of set-off or  otherwise)  on
account of the Revolving Loans made by it (other than pursuant to SECTIONS 2.14,
2.15 or 2.16) in excess of its Ratable  Portion of payments  obtained by all the
Lenders on account of such  Obligations,  such  Lender (a  "PURCHASING  LENDER")
shall forthwith  purchase from the other Lenders (each, a "SELLING LENDER") such
participations  in their Loans or other  Obligations  as shall be  necessary  to
cause such  Purchasing  Lender to share the excess payment  ratably with each of
them.

          (b) If all or any  portion of any  payment  received  by a  Purchasing
Lender is thereafter  recovered from such Purchasing Lender,  such purchase from
each Selling Lender shall


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be rescinded and such Selling  Lender shall repay to the  Purchasing  Lender the
purchase  price to the extent of such recovery  together with an amount equal to
such Selling  Lender's  ratable share  (according  to the  proportion of (i) the
amount of such Selling Lender's  required  repayment to (ii) the total amount so
recovered  from the  Purchasing  Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.

          (c) The  Borrower agrees that any  Purchasing  Lender so  purchasing a
participation  from a Selling  Lender  pursuant to this SECTION 11.7 may, to the
fullest extent permitted by law,  exercise all its rights of payment  (including
the right of set-off)  with  respect to such  participation  as fully as if such
Lender  were  the  direct  creditor  of the  Borrower  in  the  amount  of  such
participation.

          SECTION  11.8.      NOTICES, ETC.  All notices, demands,  requests and
other  communications  provided for in this Agreement shall be given in writing,
or by any  telecommunication  device capable of creating a written  record,  and
addressed to the party to be notified as follows:

                  (a) if to the Borrower:

                           Paragon Trade Brands, Inc.
                           180 Technology Parkway
                           Norcross, GA 30092
                           Attention:
                           Telecopy no:

                  (b) if to any Lender, at its Domestic Lending Office specified
opposite  its name on SCHEDULE  II or on the  signature  page of any  applicable
Assignment and Acceptance;

                  (c) if to any Issuer, at the address set forth under its name
on SCHEDULE II; and

                  (d) if to the Administrative Agent:
                           Citicorp USA, Inc.
                           399 Park Avenue
                           New York, NY 10043
                           Attention:
                           Telecopy no:

                           with a copy to:

                           Weil, Gotshal & Manges LLP
                           767 Fifth Avenue,
                           New York, New York 10153-0119
                           Attention:  Daniel S. Dokos, Esq.
                           Telecopy no: (212) 310-8007

or at such other  address as shall be notified in writing (i) in the case of the
Borrower and the Administrative Agent, to the other parties and (ii) in the case
of all other parties,  to the Borrower and the  Administrative  Agent.  All such
notices  and  communications  shall be  effective  upon  personal  delivery  (if
delivered by hand,  including any overnight courier service),  when deposited


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in the mails  (if sent by  mail),  or when  properly  transmitted  (if sent by a
telecommunications  device); PROVIDED,  HOWEVER, that notices and communications
to the  Administrative  Agent pursuant to Article II or X shall not be effective
until received by the Administrative Agent.

          SECTION 11.9.       NO WAIVER; REMEDIES. No failure on the part of any
Lender,  Issuer  or the  Administrative  Agent  to  exercise,  and no  delay  in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or  partial  exercise  of any such  right  preclude  any other or further
exercise  thereof  or the  exercise  of any other  right.  The  remedies  herein
provided are cumulative and not exclusive of any remedies provided by law.

          SECTION 11.10.      BINDING EFFECT.  This   Agreement   shall   become
effective   when  it  shall  have  been   executed  by  the   Borrower  and  the
Administrative  Agent and when the Administrative Agent shall have been notified
by each Lender that such Lender has executed it and thereafter  shall be binding
upon and inure to the benefit of the Borrower, the Administrative Agent and each
Lender and their  respective  successors  and assigns,  except that the Borrower
shall not have the right to assign its rights  hereunder or any interest  herein
without the prior written consent of the Lenders.

          SECTION 11.11.      GOVERNING LAW.  This Agreement and the  rights and
obligations  of the parties  hereto  shall be  governed  by, and  construed  and
interpreted in accordance with, the law of the State of New York.

          SECTION 11.12.       SUBMISSION TO JURISDICTION; SERVICE OF PROCESS.

          (a) Any legal action or proceeding  with respect to this  Agreement or
any other Loan Document may be brought in the courts of the State of New York or
of the United States of America for the Southern  District of New York,  and, by
execution and delivery of this Agreement, the Borrower hereby accepts for itself
and in respect of its property, generally and unconditionally,  the jurisdiction
of the  aforesaid  courts.  The  parties  hereto  hereby  irrevocably  waive any
objection,  including  any  objection  to the  laying  of  venue or based on the
grounds of FORUM NON CONVENIENS,  which any of them may now or hereafter have to
the bringing of any such action or proceeding in such respective jurisdictions.

          (b)  The  Borrower  hereby   irrevocably   designates,   appoints  and
empowers Corporation Service Company (telecopy no: (212) 728-8111) (the "PROCESS
AGENT"),  in the case of any suit,  action or  proceeding  brought in the United
States of America as its designee,  appointee  and agent to receive,  accept and
acknowledge  for and on its behalf,  and in respect of its property,  service of
any and all legal process,  summons, notices and documents that may be served in
any action or proceeding  arising out of or in connection with this Agreement or
any Loan  Document.  Such  service  may be made by  mailing  (by  registered  or
certified  mail,  postage  prepaid) or  delivering a copy of such process to the
Borrower in care of the Process Agent at the Process Agent's above address,  and
the Borrower  hereby  irrevocably  authorizes  and directs the Process  Agent to
accept such  service on its behalf.  As an  alternative  method of service,  the
Borrower  irrevocably consents to the service of any and all process in any such
action or proceeding by the mailing (by  registered or certified  mail,  postage
prepaid) of copies of such  process to the Process  Agent or the Borrower at its
address  specified in SECTION 11.8. The Borrower 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.
The  Borrower  hereby  irrevocably  consents to the service of any and all legal
process,


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summons,  notices and documents in any suit, action or proceeding brought in the
United States of America  arising out of or in connection with this Agreement or
any of the other Loan Documents by the mailing (by registered or certified mail,
postage  prepaid) or delivering of a copy of such process to the Borrower at its
address  specified in SECTION 11.8. The Borrower 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.

          (c)  Nothing contained  in this SECTION  11.12 shall  affect the right
of the  Administrative  Agent or any Lender to serve process in any other manner
permitted by law or commence legal  proceedings or otherwise proceed against the
Borrower or any other Loan Party in any other jurisdiction.

          (d) If for the  purposes  of  obtaining  judgment  in any  court it is
necessary to convert a sum due hereunder in Dollars into another  currency,  the
parties  hereto agree,  to the fullest  extent that they may  effectively do so,
that the rate of exchange used shall be that at which in accordance  with normal
banking  procedures the  Administrative  Agent could purchase  Dollars with such
other currency at the spot rate of exchange quoted by the  Administrative  Agent
at 11:00 a.m. (New York time) on the Business Day preceding  that on which final
judgment is given,  for the purchase of Dollars,  for delivery two Business Days
thereafter.

          SECTION  11.13.     WAIVER OF JURY TRIAL.  EACH OF THE  ADMINISTRATIVE
AGENT,  THE LENDERS,  THE ISSUERS AND THE BORROWER  IRREVOCABLY  WAIVES TRIAL BY
JURY IN ANY ACTION OR  PROCEEDING  WITH  RESPECT TO THIS  AGREEMENT OR ANY OTHER
LOAN DOCUMENT.

          SECTION 11.14.      MARSHALING;  PAYMENTS  SET  ASIDE.   None  of  the
Administrative  Agent, any Lender or any Issuer shall be under any obligation to
marshal any assets in favor of the  Borrower or any other party or against or in
payment of any or all of the Obligations.  To the extent that the Borrower makes
a payment or payments to the Administrative Agent, the Lenders or the Issuers or
any of such Persons  receives  payment from the  proceeds of the  Collateral  or
exercise their rights of setoff, and such payment or payments or the proceeds of
such  enforcement  or setoff or any part thereof are  subsequently  invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, receiver or any other party, then to the extent of such recovery, the
obligation or part thereof originally  intended to be satisfied,  and all Liens,
right and remedies  therefor,  shall be revived and  continued in full force and
effect as if such  payment had not been made or such  enforcement  or setoff had
not occurred.

          SECTION 11.15.      SECTION TITLES.  The  Section titles  contained in
this  Agreement are and shall be without  substantive  meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.

          SECTION 11.16.      EXECUTION IN COUNTERPARTS.  This  Agreement may be
executed  in any number of  counterparts  and by  different  parties in separate
counterparts,  each of which when so executed  shall be deemed to be an original
and all of which taken  together shall  constitute  one and the same  agreement.
Signature pages may be detached from multiple separate counterparts and attached
to a single  counterpart  so that all  signature  pages are attached to the same
document.

                                       97
<PAGE>

          SECTION 11.17.      ENTIRE AGREEMENT.  This Agreement,  together  with
all of the other Loan  Documents and all  certificates  and documents  delivered
hereunder  or  thereunder,  embodies  the entire  agreement  of the  parties and
supersedes  all prior  agreements  and  understandings  relating  to the subject
matter hereof.

          SECTION 11.18.    CONFIDENTIALITY.  Each Lender and the Administrative
Agent agree to keep  information  obtained  by it pursuant  hereto and the other
Loan  Documents  confidential  in accordance  with its  customary  practices and
agrees  that  it  will  only  use  such   information  in  connection  with  the
transactions  contemplated  by  this  Agreement  and  not  disclose  any of such
information other than (a) to such Lender's or the  Administrative  Agent's,  as
the case may be, employees,  representatives  and agents who are or are expected
to be involved in the  evaluation of such  information  in  connection  with the
transactions  contemplated  by  this  Agreement  and  who  are  advised  of  the
confidential  nature of such  information,  (b) to the extent  such  information
presently is or hereafter becomes available to such Lender or the Administrative
Agent, as the case may be, on a non-confidential  basis from a source other than
the Borrower,  (c) to the extent  disclosure  is required by law,  regulation or
judicial order or requested or required by bank  regulators or auditors,  or (d)
to assignees or participants or potential assignees or participants who agree to
be bound by the provisions of this SECTION 11.18.

                                       98
<PAGE>


                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.

                                      PARAGON TRADE BRANDS, INC.


                                      By:   /S/ ALAN J. CYRON
                                            ---------------------------
                                            Name:  Alan J. Cyron
                                            Title:  Chief Financial Officer


                                      CITICORP U.S.A., INC.
                                           as Administrative Agent


                                       By:   /S/ SHAPLEIGH B. SMITH
                                            ---------------------------
                                             Name:  Shapleigh Smith
                                             Title:  Managing Director -
                                                      Global Structural Products


                                       LENDERS

                                       CITIBANK, N.A.


                                       By:   /S/ SHAPLEIGH B. SMITH
                                            ---------------------------
                                             Name:  Shapleigh Smith
                                             Title:  Managing Director -
                                                      Global Structural Products


                                       HELLER FINANCIAL, INC.


                                       By:   /S/ ALBERT J. FORZANO
                                            ---------------------------
                                             Name:  Albert J. Forzano
                                             Title:  Vice President


                                       IBJ WHITEHALL BUSINESS CREDIT CORPORATION


                                       By:   /S/ RUSSELL KASOW
                                            ---------------------------
                                             Name:  Russell Kasow
                                             Title:  A.V.P.


                                       NATIONAL CITY COMMERCIAL FINANCE, INC.


                                       By:   /S/ GREGORY A. GODEC
                                            ---------------------------
                                             Name:  Gregory A. Godec
                                             Title:  Sr. V.P.


                                       FLEET CAPITAL CORPORATION


                                       By:   /S/ FRANK DICEGLIE
                                             Name:  Frank Diceglie
                                             Title:  S.V.P.


                                       SUMMIT COMMERCIAL/GIBRALTAR CORP.


                                       By:   /S/ PETER J. HOLLITSCHER
                                            ---------------------------
                                             Name:  Peter J. Hollitscher
                                             Title:  Vice President


                                       THE CIT GROUP/BUSINESS CREDIT


                                       By:   /S/ PATRICK LEE
                                            ---------------------------
                                       Name:  Patrick Lee
                                       Title:  Vice President