$40,000,000 REVOLVING CREDIT FACILITY



                           REVOLVING CREDIT AGREEMENT
                                  by and among
                             TB WOOD'S INCORPORATED
                                       and
                       PLANT ENGINEERING CONSULTANTS, INC.
                                       and
                           GRUPO BLAJU, S.A., de C.V.
                                       and
                             TB WOOD'S CANADA, LTD.
                                       and
                             THE BANKS PARTY HERETO
                                       and
                    PNC BANK, NATIONAL ASSOCIATION, as Agent



                          Dated as of October 10, 1996


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                                TABLE OF CONTENTS

Section                                                                     Page
-------                                                                     ----

1. CERTAIN DEFINITIONS ........................................................1

    1.1  Certain Definitions ..................................................1

    1.2  Construction ........................................................16
     1.2.1  Number; Inclusion ................................................16
     1.2.2  Determination ....................................................16
     1.2.3  Agent's Discretion and Consent ...................................17
     1.2.4  Documents Taken as a Whole .......................................17
     1.2.5  Headings .........................................................17
     1.2.6  Implied References to this Agreement .............................17
     1.2.7  Persons ..........................................................17
     1.2.8  Modifications to Documents .......................................17
     1.2.9  From, To and Through .............................................17
     1.2.10 Shall; Will ......................................................18

    1.3  Accounting Principles ...............................................18

2. REVOLVING CREDIT FACILITY .................................................18

    2.1  Commitments .........................................................18
     2.1.1  Loans ............................................................18
     2.1.2  Voluntary Reduction of Commitment ................................18

    2.2  Nature of Banks' Obligations with Respect to Loans ..................19

    2.3  Commitment Fees .....................................................19

    2.4  Revolving Credit Facility Fee .......................................20

    2.5  Loan Requests .......................................................20

    2.6  Making Loans ........................................................20

    2.7  Notes ...............................................................21

    2.8  Use of Proceeds .....................................................21

    2.9  Letter of Credit Subfacility ........................................21
     2.9.1  Issuance of Letters of Credit ....................................21
     2.9.2  Letter of Credit Fees ............................................22
     2.9.3  Disbursements, Reimbursement .....................................22
     2.9.4  Repayment of Participation Advances ..............................23
     2.9.5  Documentation ....................................................23
     2.9.6  Determinations to Honor Drawing Requests .........................24
     2.9.7  Nature of Participation and Reimbursement Obligations ............24



                                       i
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                                TABLE OF CONTENTS

Section                                                                     Page
-------                                                                     ----

      2.9.8  Indemnity .......................................................25
      2.9.9  Liability for Acts and Omissions ................................26

    2.10 Extension by Banks of the Expiration Date ...........................26
      2.10.1  Requests; Approval by All Banks ................................26
      2.10.2  Approval by Required Banks .....................................27

3. [RESERVED] ................................................................27

4. INTEREST RATES ............................................................27

     4.1 Interest Rate Options ...............................................27
      4.1.1  Revolving Credit Interest Rate Options ..........................27
      4.1.2  Rate Quotations .................................................28

     4.2 Interest Periods ....................................................29
      4.2.1  Ending Date and Business Day ....................................29
      4.2.2  Amount of Borrowing Tranche .....................................29
      4.2.3  Termination Before Expiration Date ..............................29
      4.2.4  Renewals ........................................................29

     4.3 Interest After Default ..............................................29
      4.3.1  Letter of Credit Fees, Interest Rate ............................29
      4.3.2  Other Obligations ...............................................30
      4.3.3  Acknowledgment ..................................................30

     4.4 Euro-Rate  Unascertainable;  Illegality;  Increased Costs;
         Deposits Not Available 30 4.4.1 Unascertainable .....................30
      4.4.2  Illegality; Increased Costs; Deposits Not Available .............30
      4.4.3  Agent's and Bank's Rights .......................................31
      4.4.4  Uniform Application .............................................31

     4.5 Selection of Interest Rate Options ..................................31

5. PAYMENTS ..................................................................32

     5.1 Payments ............................................................32

     5.2 Pro Rata Treatment of Banks .........................................32

     5.3 Interest Payment Dates ..............................................32

     5.4 Voluntary Prepayments ...............................................33
      5.4.1  Right to Prepay .................................................33
      5.4.2  Change of Lending Office ........................................34


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                                TABLE OF CONTENTS

Section                                                                     Page
-------                                                                     ----
     5.5 [RESERVED] ..........................................................34

     5.6 Additional Compensation in Certain Circumstances ....................34
      5.6.1  Increased Costs or Reduced Return Resulting From Taxes,
             Reserves, Capital Adequacy Requirements, Expenses, Etc. .........34
      5.6.2  Indemnity .......................................................35

     5.7 Special Provisions Concerning Foreign Borrowers .....................36

6. REPRESENTATIONS AND WARRANTIES ............................................36

     6.1 Representations and Warranties ......................................36
      6.1.1  Organization and Qualification ..................................36
      6.1.2  Capitalization and Ownership ....................................36
      6.1.3  Subsidiaries ....................................................36
      6.1.4  Power and Authority .............................................37
      6.1.5  Validity and Binding Effect .....................................37
      6.1.6  No Conflict .....................................................37
      6.1.7  Litigation ......................................................38
      6.1.8  Title to Properties .............................................38
      6.1.9  Financial Statements ............................................38
      6.1 10 Use of Proceeds; Margin Stock ...................................39
      6.1.11 Full Disclosure .................................................39
      6.1.12 Taxes ...........................................................39
      6.1.13 Consents and Approvals ..........................................40
      6.1.14 No Event of Default; Compliance with Instruments ................40
      6.1.15 Patents, Trademarks, Copyrights, Licenses, Etc. .................40
      6.1.16 Insurance .......................................................40
      6.1.17 -Compliance with Laws ...........................................40
      6.1.18 Material Contracts; Burdensome Restrictions .....................41
      6.1.19 Investment Companies; Regulated Entities ........................41
      6.1.20 Plans and Benefit Arrangements ..................................41
      6.1.21 Employment Matters ..............................................42
      6.1.22 Environmental Matters ...........................................43
      6.1.23 Senior Debt Status ..............................................44

7. CONDITIONS OF LENDING .....................................................44

     7.1 First Loans .........................................................44
      7.1.1  Officer's Certificate ...........................................44
      7.1.2  Secretary's Certificate .........................................45
      7.1.3  Delivery of Loan Documents ......................................45
      7.1.4  Opinion of Counsel ..............................................45
      7.1.5  Legal Details ...................................................45
      7.1.6  Payment of Fees .................................................46
      7.1.7  Lien Searches and Fleet Payoff ..................................46
      7.1.8  [RESERVED] ......................................................46

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                                TABLE OF CONTENTS

Section                                                                    Page
-------                                                                    ----

      7.1.9  Consents ........................................................46
      7.1.10 Officer's Certificate Regarding MACs ............................46
      7.1.11 No Violation of Laws ............................................46
      7.1.12 No Actions or Proceedings .......................................46
      7.1.13 Insurance Policies; Certificates of Insurance; Endorsements .....47

     7.2 Each Additional Loan ................................................47

8. COVENANTS .................................................................47

     8.1 Affirmative Covenants ...............................................47
      8.1.1  Preservation of Existence, Etc. .................................47
      8.1.2  Payment of Liabilities, Including Taxes, Etc. ...................48
      8.1.3  Maintenance of Insurance ........................................48
      8.1.4  Maintenance of Properties and Leases ............................48
      8.1.5  Maintenance of Patents, Trademarks, Etc. ........................48
      8.1.6  Visitation Rights ...............................................49
      8.1.7  Keeping of Records and Books of Account .........................49
      8.1.8  Plans and Benefit Arrangements ..................................49
      8.1.9  Compliance with Laws ............................................49
      8.1.10 Use of Proceeds .................................................50
      8.1.11 Further Assurances ..............................................50
      8.1.12 Subordination of Intercompany Loans .............................50

     8.2 Negative Covenants ..................................................50
      8.2.1 Indebtedness .....................................................51
      8.2.2 Liens ............................................................51
      8.2.3 Guaranties .......................................................51
      8.2.4 Loans and Investments ............................................52
      8.2.5 Dividends and Related Distributions ..............................52
      8.2.6 Liquidations, Mergers, Consolidations, Acquisitions ..............53
      8.2.7 Dispositions of Assets or Subsidiaries ...........................54
      8.2.8 Affiliate Transactions ...........................................55
      8.2.9 Subsidiaries, Partnerships and Joint Ventures ....................55
      8.2.10 Continuation of or Change in Business ...........................55
      8.2.11 Plans and Benefit Arrangements ..................................55
      8.2.12 Fiscal Year .....................................................56
      8.2.13 Issuance of Stock ...............................................56
      8.2.14 Changes in Organizational Documents .............................57
      8.2.15 Capital Expenditures and Leases .................................57
      8.2.16 Minimum Interest Coverage Ratio .................................57
      8.2.17 Minimum Tangible Net Worth ......................................57
      8.2.18 Maximum Leverage Ratio ..........................................58
      8.2.19 Operating Assets; Acquisitions ..................................58
      8.2.20 Outside Investment Limit ........................................58

     8.3 Reporting Requirements ..............................................58

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                                TABLE OF CONTENTS

Section                                                                     Page
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      8.3.1  [RESERVED] ......................................................58
      8.3.2  Quarterly Financial Statements ..................................58
      8.3.3  Annual Financial Statements .....................................58
      8.3.4  Certificate of the Borrower .....................................59
      8.3.5  Notice of Default ...............................................59
      8.3.6  Notice of Litigation ............................................59
      8.3.7  Certain Events ..................................................59
      8.3.8  Budgets, Forecasts, Other Reports and Information ...............60
      8.3.9  Notices Regarding Plans and Benefit Arrangements ................60
      8.3.10 Material Venture Investments ....................................62

9. DEFAULT ...................................................................62

     9.1 Events of Default ...................................................62
      9.1.1  Payments Under Loan Documents ...................................62
      9.1.2  Breach of Warranty ..............................................62
      9.1.3  Breach of Negative Covenants or Visitation Rights ...............63
      9.1.4  Breach of Other Covenants .......................................63
      9.1.5  Defaults in Other Agreements or Indebtedness ....................63
      9.1.6  Final Judgments or Orders .......................................63
      9.1.7  Loan Document Unenforceable .....................................63
      9.1.8  Uninsured Losses; Proceedings Against Assets ....................64
      9.1.9  Notice of Lien or Assessment ....................................64
      9.1.10 Insolvency ......................................................64
      9.1.11 Events Relating to Plans and Benefit Arrangements ...............64
      9.1.12 Cessation of Business ...........................................65
      9.1.13 Change of Control ...............................................65
      9.1.14 Involuntary Proceedings .........................................65
      9.1.15 Voluntary Proceedings ...........................................65

     9.2 Consequences of Event of Default ....................................66
      9.2.1  Events of Default Other Than Bankruptcy, Insolvency or
             Reorganization Proceedings ......................................66

      9.2.2  Bankruptcy, Insolvency or Reorganization Proceedings ............66
      9.2.3  Set-off .........................................................66
      9.2.4  Suits, Actions, Proceedings .....................................67
      9.2.5  Application of Proceeds .........................................67
      9.2.6  Other Rights and Remedies .......................................68

10. THE AGENT ................................................................68

     10.1 Appointment ........................................................68

     10.2 Delegation of Duties ...............................................68

     10.3 Nature of Duties; Independent Credit Investigation .................68

     10.4 Actions in Discretion of Agent; Instructions from the Banks ........69

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                                TABLE OF CONTENTS

Section                                                                     Page
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     10.5 Reimbursement and Indemnification of Agent by the Borrower .........69

     10.6 Exculpatory Provisions; Limitation of Liability ....................70

     10.7 Reimbursement and Indemnification of Agent by Banks ................71

     10.8 Reliance by Agent ..................................................71

     10.9 Notice of Default ..................................................71

     10.10 Notices ...........................................................71

     10.11 Banks in Their Individual Capacities ..............................72

     10.12 Holders of Notes ..................................................72

     10.13 Equalization of Banks .............................................72

     10.14 Successor Agent ...................................................73

     10.15 Agent's Fee .......................................................73

     10.16 Availability of Funds .............................................73

     10.17 Calculations ......................................................74

     10.18 Beneficiaries .....................................................74

11. MISCELLANEOUS ............................................................74

     11.1 Modifications, Amendments or Waivers ...............................74
       11.1.1 Increase of Commitment; Extension or Expiration Date ...........74
       11.1.2 Extension of Payment; Reduction of Principal Interest or
              Fees; Modification of Terms of Payment. ........................74
       11.1.3 Release of Guarantor ...........................................75
       11.1.4 Miscellaneous ..................................................75

     11.2 No Implied Waivers; Cumulative Remedies; Writing Required ..........75

     11.3 Reimbursement and Indemnification of Banks by the Borrower; Taxes   75

     11.4 Holidays ...........................................................76

     11.5 Funding by Branch, Subsidiary or Affiliate .........................77
       11.5.1 Notional Funding ...............................................77
       11.5.2 Actual Funding .................................................77

     11.6 Notices ............................................................77


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                                TABLE OF CONTENTS

Section                                                                     Page
-------                                                                     ----

     11.7 Severability .......................................................78

     11.8 Governing Law ......................................................78

     11.9 Prior Understanding ................................................78

     11.10 Duration; Survival ................................................78

     11.11 Successors and Assigns ............................................79

     11.12 Confidentiality ...................................................80

     11.13 Counterparts ......................................................80

     11.14 Agent's or Bank's Consent .........................................80

     11.15 Exceptions ........................................................80

     11.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL ............................81

     11.17 Tax Withholding Clause ............................................81

     11.18 Joinder of Borrowers ..............................................82


                                       vii
<PAGE>
                         LIST OF SCHEDULES AND EXHIBITS

SCHEDULE

SCHEDULE 1.1(B)      -       COMMITMENTS OF BANKS AND ADDRESSES FOR
                             NOTICES
SCHEDULE 1.1(P)      -       PERMITTED LIENS
SCHEDULE 6.1.1       -       QUALIFICATIONS TO DO BUSINESS
SCHEDULE 6.1.2       -       CAPITALIZATION
SCHEDULE 6.1.3       -       BORROWERS/SUBSIDIARIES EXCEPTIONS
SCHEDULE 6.1.16      -       INSURANCE POLICIES
SCHEDULE 6.1.20      -       EMPLOYEE BENEFIT PLAN DISCLOSURES
SCHEDULE 6.1.22      -       ENVIRONMENTAL DISCLOSURES
SCHEDULE 8.2.1       -       PERMITTED INDEBTEDNESS

EXHIBITS

EXHIBIT 1.1(A)       -       ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 1.1(B)       -       BORROWER AGENCY AGREEMENT
EXHIBIT 1.1(C)       -       COLLATERAL ASSIGNMENT
EXHIBIT 1.1 (J)      -       JOINDER
EXHIBIT 1.1(G)       -       GUARANTY AGREEMENT
EXHIBIT 1.1(1)       -       INTERCOMPANY SUBORDINATION AGREEMENT
EXHIBIT 1.1(R)       -       NOTE
EXHIBIT 2.5          -       LOAN REQUEST
EXHIBIT 8.2.6        -       ACQUISITION COMPLIANCE CERTIFICATE
EXHIBIT 8.3.4        -       QUARTERLY COMPLIANCE CERTIFICATE


                                       viii
<PAGE>

                           REVOLVING CREDIT AGREEMENT

     THIS REVOLVING CREDIT AGREEMENT is dated as of October 10, 1996 and is made
by and among TB WOOD'S INCORPORATED,  a Pennsylvania corporation (the "Company")
and PLANT ENGINEERING CONSULTANTS,  INC., a Tennessee corporation,  GRUPO BLAJU,
S.A.,  de C.V., a Mexican  corporation  and TB WOOD'S  CANADA,  LTD., an Ontario
corporation (such Persons,  together with the Company, being the "Borrowers" and
each being a "Borrower"),  TB WOOD'S  CORPORATION,  a Delaware  corporation,  as
Guarantor,   the  BANKS  (as  hereinafter  defined),   and  PNC  BANK,  NATIONAL
ASSOCIATION,  in its  capacity  as agent  for the  Banks  under  this  Agreement
(hereinafter referred to in such capacity as the "Agent").

                                   WITNESSETH:

     WHEREAS, the Borrowers have requested the Banks to provide revolving credit
facility  to the  Borrowers  in an  aggregate  principal  amount  not to  exceed
$40,000,000  including a sublimit for  approved  letters of credit not to exceed
$5,000,000; and

     WHEREAS,  the revolving credit shall be used to refinance  existing secured
indebtedness   and  for  general   corporate   purposes,   including   permitted
acquisitions; and

     WHEREAS,  the Banks are  willing to provide  such credit upon the terms and
conditions hereinafter set forth;

     NOW,  THEREFORE,  the parties  hereto,  in  consideration  of their  mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, covenant and agree as follows:

                             1. CERTAIN DEFINITIONS

          1.1 Certain Definitions.

     In addition to words and terms  defined  elsewhere in this  Agreement,  the
following  words and terms  shall  have the  following  meanings,  respectively,
unless the context hereof clearly requires otherwise:


     Affiliate as to any Person  shall mean any other Person (i) which  directly
or indirectly  controls,  is controlled by, or is under common control with such
Person,  (ii)  which  beneficially  owns or holds 5% or more of any class of the
voting or other  equity  interests  of such  Person,  or (iii) 5% or more of any
class of voting  interests  or other equity  interests of which is  beneficially
owned or held, directly or indirectly,  by such Person. Control, as used in this
definition,  shall mean the possession,  directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting
<PAGE>


securities, by contract or otherwise, including the power to elect a majority of
the directors or trustees of a corporation or trust, as the case may be.

     Agent shall mean PNC Bank,  National  Association,  and its  successors and
assigns.

     Agent's Fees shall have the meaning assigned to that term in Section 10.15.

     Agent's  Letter  shall have the  meaning  assigned  to that term in Section
10.15.

     Agreement shall mean this Revolving  Credit  Agreement,  as the same may be
supplemented or amended from time to time, including all schedules and exhibits.

     Annual  Statements  shall have the meaning assigned to that term in Section
6.1.9(i).

     Applicable  Margin shall have the meaning  assigned to that term in Section
4.1.1.

     Assignee  Bank  shall  have the  meaning  assigned  to such term in Section
2.10.2.

     Assignment and Assumption Agreement shall mean an Assignment and Assumption
Agreement by and among a Purchasing  Bank, a Transferor  Bank and the Agent,  as
Agent and on behalf of the remaining Banks, substantially in the form of Exhibit
1.1(A).

     Authorized  Officer  shall mean those  individuals,  designated  by written
notice to the Agent from the Borrowers,  authorized to execute notices,  reports
and other  documents  on  behalf of the Loan  Parties  required  hereunder.  The
Borrower may amend such list of individuals  from time to time by giving written
notice of such amendment to the Agent.

     Bank to be  Terminated  shall  have the  meaning  assigned  to such term in
Section 2.10.2.

     Banks shall mean the financial  institutions  named on Schedule 1.1 (B) and
their respective successors and assigns as permitted hereunder, each of which is
referred to herein as a Bank.

     Base  Rate  shall  mean the  greater  of (i) the  interest  rate per  annum
announced  from  time to time by the Agent at its  Principal  Office as its then
prime rate, which rate may not be the lowest rate then being charged  commercial
borrowers by the Agent,  or (ii) the Federal Funds Effective Rate plus 1/2 % per
annum.


                                       2
<PAGE>

     Base Rate Option  shall mean the option of the  Borrower to have Loans bear
interest at the rate and under the terms and  conditions set forth in Section 4.
1.1 (i).

     Benefit  Arrangement  shall mean an  "employee  benefit  plan,"  within the
meaning of Section 3(3) of ERISA,  which is neither a Plan, a Multiple  Employer
Plan nor a  Multiemployer  Plan and which is maintained,  sponsored or otherwise
contributed to by any member of the ERISA Group.

     Borrower  shall mean any of the  Company,  Plant  Engineering  Consultants,
Inc., a Tennessee corporation, Grupo Blaju, S.A., de C.V., a Mexican corporation
and TB Wood's Canada,  Ltd., an Ontario corporation and Borrowers shall mean all
of such Persons together.

     Borrower  Agency  Agreement  shall mean that  certain  agreement  among the
Borrowers,  substantially  in the form of Exhibit  1.1 (B)  hereto,  pursuant to
which the  Borrowers  authorize  and appoint the Company to act on behalf of the
Borrowers  to take any and all  actions  that may be required to be taken by any
Borrower or the  Borrowers  hereunder,  including,  without  limitation,  making
requests for and borrowing any Loan.

     Borrowing  Date shall  mean,  with  respect  to any Loan,  the date for the
making  thereof  or the  renewal  or  conversion  thereof at or to the same or a
different Interest Rate Option, which shall be a Business Day.

     Borrowing  Tranche shall mean  specified  portions of Loans  outstanding as
follows:  (i) any Loans to which a Euro-Rate Option applies which become subject
to the same Interest Rate Option under the same Loan Request by the Borrower and
which have the same Interest Period shall constitute one Borrowing Tranche,  and
(ii)  all  Loans  to which a Base  Rate  Option  applies  shall  constitute  one
Borrowing Tranche.

     Business  Day shall mean any day other than a Saturday or Sunday or a legal
holiday on which  commercial  banks are  authorized or required to be closed for
business in Camp Hill, Pennsylvania.

     Closing  Date shall mean the  Business Day on which the first Loan shall be
made, which shall be the date hereof. The closing shall take place at 10:30 a.m.
on  the  Closing  Date  at  the  offices  of  Buchanan  Ingersoll   Professional
Corporation in Philadelphia, Pennsylvania or at such other time and place as the
parties agree.

     Closing Fees shall mean the fees referred to in Sections 2.4.

     Commercial  Letter of Credit  shall  mean any  Letter of Credit  which is a
commercial  letter  of credit  issued in  respect  of the  purchase  of goods or
services  by one or  more of the  Borrowers  in the  ordinary  course  of  their
business.

                                       3
<PAGE>
     Commitment shall mean, as to any Bank at any time, the amount initially set
forth  opposite  its name on Schedule  1.1(B) in the column  labeled  "Amount of
Commitment  for  Loans,"  and  thereafter  on  Schedule  I to  the  most  recent
Assignment and Assumption  Agreement,  and Commitments  shall mean the aggregate
Commitments of all of the Banks.

     Commitment Fee shall have the meaning assigned to that term in Section 2.3.

     Commitment  Fee Applicable  Margin shall have the meaning  assigned to that
term in Section 2.3.

     Company shall mean TB Wood's Incorporated, a Pennsylvania corporation.

     Consideration  shall mean with respect to any  Permitted  Acquisition,  the
aggregate of (i) the cash paid by any of the Parent, directly or indirectly,  to
the seller in connection therewith, (ii) the Indebtedness incurred or assumed by
any of the Loan Parties, whether in favor of the seller or otherwise and whether
fixed or  contingent,  (iii) any Guaranty given or incurred by any Loan Party in
connection  therewith,  and (iv) any  other  consideration  given or  obligation
incurred by any of the Loan Parties in connection therewith.

     Consolidated  Tangible Net Worth shall mean as of any date of determination
total stockholders' equity of the Parent less intangible assets of the Parent as
of such date determined and consolidated in accordance with GAAP.

     Dollar,  Dollars,  U.S. Dollars and the symbol $ shall mean lawful money of
the United States of America.

     Domestic  shall  mean,  when  used  with  reference  to  a  Borrower  or  a
Subsidiary, a Borrower or Subsidiary organized under the laws of, and conducting
operations in, the United States of America,  a state  thereof,  the District of
Columbia, Puerto Rico or the United States Virgin Islands.

     Drawing,  Date shall  have the  meaning  assigned  to that ten-n in Section
2.9.3.2.

     EBIT shall mean net income before extraordinary items, interest expense and
income tax  expense  calculated  in  respect  of the prior four (4)  consecutive
fiscal  quarters  in  each  case  of the  Parent  on a  consolidated  basis  and
determined and  consolidated in accordance with GAAP and (x) shall be calculated
to include the operation of any business acquired in a Permitted  Acquisition if
either (1) the Borrower  provides to the Banks audited  financial  statements of
such business, and such business ( if it is a legal entity) becomes a Loan Party
contemporaneously  with such Permitted  Acquisitions  or (2) Required Banks have
consented to such  inclusions and (y) shall be calculated to exclude any portion
of the net earnings of any Subsidiary which is not a Borrower or that, by reason
of any contract or charter restriction or


                                       4
<PAGE>

applicable  law or regulation,  is  unavailable  for payment of dividends to any
Loan Party or any  portion  of the net  earnings  of any Loan Party that  cannot
freely be converted into Dollars in the ordinary course of business.

     EBITDA  shall mean net income  before  extraordinary  items,  depreciation,
amortization,  interest expense and income tax expense  calculated in respect of
the prior four (4)  consecutive  fiscal quarters in each case of the Parent on a
consolidated  basis and determined and  consolidated in accordance with GAAP and
(x) shall be calculated  to include the operation of any business  acquired in a
Permitted  Acquisition if either (1) the Borrower  provides to the Banks audited
financial  statements  of such  business,  and such  business  (if it is a legal
entity) becomes a Loan Party  contemporaneously  with such Permitted Acquisition
or (2)  Required  Banks  have  consented  to such  inclusions  and (y)  shall be
calculated to exclude any portion of the net earnings of any Subsidiary  that is
not a Borrower  or that,  by reason of any  contract or charter  restriction  or
applicable  law or regulation,  is  unavailable  for payment of dividends to any
Loan Party or any  portion  of the net  earnings  of any Loan Party that  cannot
freely be converted into Dollars in the ordinary course of business.

     Environmental  Complaint shall mean any written  complaint  setting forth a
cause of action for  personal  injury or  property  damage or  natural  resource
damage or equitable relief,  order, notice of violation,  citation,  request for
information  issued  pursuant to any  Environmental  Laws by an  Official  Body,
subpoena or other  written  notice of any type  relating to,  arising out of, or
issued  pursuant  to,  any  of  the  Environmental  Laws  or  any  Environmental
Conditions, as the case may be.

     Environmental  Conditions  shall mean any  conditions  of the  environment,
including  the  workplace,  the ocean,  natural  resources  (including  flora or
fauna), soil, surface water, groundwater, any actual or potential drinking water
supply sources,  substrata or the ambient air, relating to or arising out of, or
caused  by,  the  use,  handling,  storage,  treatment,  recycling,  generation,
transportation  release,  spilling,  leaking,  pumping,  emptying,  discharging,
injecting,  escaping,  leaching,  disposal, dumping, threatened release or other
management or mismanagement of Regulated  Substances  resulting from the use of,
or operations on, any Property.

     Environmental  Laws shall mean all  applicable  federal,  state,  local and
foreign Laws and  regulations,  including  pen-nits,  licenses,  authorizations,
bonds, orders,  judgments, and consent decrees issued, or entered into, pursuant
thereto,  relating to pollution or protection of human health or the environment
or employee safety in the workplace.

     ERISA shall mean the Employee  Retirement  Income  Security Act of 1974, as
the same may be amended or  supplemented  from time to time,  and any  successor
statute of similar  import,  and the rules and regulations  thereunder,  as from
time to time in effect.

     ERISA  Group shall mean the Loan  Parties  and all members of a  controlled
group of corporations and all trades or businesses (whether or not incorporated)
under common


                                       5
<PAGE>

control  and all other  entities  which,  together  with the Loan  Parties,  are
treated as a single employer under Section 414 of the Internal Revenue Code.

     Euro-Rate  shall mean,  with respect to the Loans  comprising any Borrowing
Tranche to which the  Euro-Rate  Option  applies for any  Interest  Period,  the
interest  rate per annum  determined  by the Agent by  dividing  (the  resulting
quotient  rounded upward to the nearest 1/100th of 1% per annum) (i) the rate of
interest  determined by the Agent in accordance with its usual procedures (which
determination  shall be  conclusive  absent  manifest  error)  to be the  London
interbank  offered rate of interest per annum appearing on Telerate display page
3750 or such other display page on the Telerate  System as may replace such page
(or  appropriate  successor  or,  if the  British  Bankers'  Association  or its
successor ceases to provide such quotes, a comparable  replacement determined by
the Agent) at approximately 11:00 a.m., London time, two (2) Business Days prior
to the first  day of such  Interest  Period  for an  amount  comparable  to such
Borrowing Tranche and having a borrowing date and a maturity  comparable to such
Interest  Period  by (ii) a number  equal to 1.00  minus the  Euro-Rate  Reserve
Percentage. The Euro-Rate may also be expressed by the following formula:

         Euro-Rate =       Telerate page 3750 quoted by British Bankers'
                           Association or appropriate successor
                           1.00 - Euro-Rate Reserve Percentage

The Euro-Rate shall be adjusted with respect to any Euro-Rate Option outstanding
on the effective  date of any change in the Euro-Rate  Reserve  Percentage as of
such  effective  date. The Agent shall give prompt notice to the Borrower of the
Euro-Rate as determined or adjusted in accordance herewith,  which determination
shall be conclusive absent manifest error.

     Euro-Rate  Option  shall mean the option of the Borrower to have Loans bear
interest at the rate and under the terms and  conditions set forth in Section 4.
1.1 (ii).

     Euro-Rate Reserve Percentage shall mean the maximum  percentage  (expressed
as a decimal  rounded  upward to the nearest  1/100 of 1%) as  determined by the
Agent which is in effect during any relevant period,  as prescribed by the Board
of Governors of the Federal  Reserve System (or any  successor) for  determining
the reserve requirements (including supplemental, marginal and emergency reserve
requirements)  with respect to eurocurrency  funding  (currently  referred to as
"Eurocurrency Liabilities") of a member bank in such System.

     Event of Default shall mean any of the events  described in Section 9.1 and
referred to therein as an "Event of Default."

     Expiration  Date shall mean, with respect to the  Commitments,  October 10,
2001, as such date may be extended in accordance with Section 2. 10.

     Extending  Bank shall  have the  meaning  assigned  to such term in Section
2.10.2.


                                       6
<PAGE>
     Federal  Funds  Effective  Rate for any day  shall  mean the rate per annum
(based on a year of 360 days and actual days  elapsed and rounded  upward to the
nearest 1/100 of 1%)  announced by the Federal  Reserve Bank of New York (or any
successor)  on such day as being the weighted  average of the rates on overnight
federal  funds  transactions  arranged by federal  funds brokers on the previous
trading  day, as computed and  announced  by such  Federal  Reserve Bank (or any
successor)  in  substantially  the same  manner  as such  Federal  Reserve  Bank
computes and announces the weighted  average it refers to as the "Federal  Funds
Effective  Rate" as of the date of this  Agreement;  provided,  if such  Federal
Reserve  Bank (or its  successor)  does not  announce  such rate on any day, the
"Federal Funds Effective Rate" for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.

     Financial  Projections  shall  have the  meaning  assigned  to that term in
Section 6.1.9(ii).

     Foreign shall mean, when used with reference to a Borrower or a Subsidiary,
a  Borrower  or  Subsidiary  that  is  not a  Domestic  Borrower  or a  Domestic
Subsidiary.

     GAAP shall mean generally accepted  accounting  principles as are in effect
from time to time,  subject to the  provisions  of Section 1.3, and applied on a
consistent basis both as to classification of items and amounts.

     Governmental  Acts shall have the meaning  assigned to that term in Section
2.9.8.

     Guarantor  shall mean the Parent and each of the parties to this  Agreement
which may after the Closing Date be designated as a "Guarantor".

     Guaranty  of  any  Person  shall  mean  any   obligation   of  such  Person
guaranteeing or in effect  guaranteeing any liability or obligation of any other
Person in any manner, whether directly or indirectly, including any agreement to
indemnify  or hold  harmless any other  Person,  any  performance  bond or other
suretyship  arrangement  and any other form of assurance  against  loss,  except
endorsement of negotiable or other  instruments for deposit or collection in the
ordinary course of business.

     Guaranty  Agreement  shall mean the  Guaranty and  Suretyship  Agreement in
substantially the form of Exhibit 1.1(G) executed and delivered by the Guarantor
to the Agent for the benefit of the Banks.

     Historical  Statements  shall  have the  meaning  assigned  to that term in
Section 6.1.9(i).

     Indebtedness  shall  mean,  as to any  Person  at any  time,  any  and  all
indebtedness,   obligations  or  liabilities   (whether  matured  or  unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several)  of such  Person for or in respect  of.- (i)  borrowed  money,  (ii)
amounts raised under or liabilities in respect of any note

                                       7
<PAGE>
purchase  or  acceptance  credit  facility,   (iii)  reimbursement   obligations
(contingent or otherwise) under any letter of credit, (iv) any other transaction
(including  forward  sale  or  purchase   agreements,   capitalized  leases  and
conditional  sales  agreements)  having the commercial  effect of a borrowing of
money  entered  into by  such  Person  to  finance  its  operations  or  capital
requirements  (but not including trade payables and accrued expenses incurred in
the ordinary  course of business which are not  represented by a promissory note
or other  evidence of  indebtedness),  or (v) any Guaranty of  Indebtedness  for
borrowed money.

     Ineligible  Security shall mean any security which may not be  underwritten
or dealt in by member banks of the Federal  Reserve  System under  Section 16 of
the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.

     Insolvency  Proceeding  shall mean,  with respect to any Person,  (a) case,
action or  proceeding  with  respect to such  Person (i) before any court or any
other Official Body under any bankruptcy,  insolvency,  reorganization  or other
similar  Law now or  hereafter  in  effect,  or (ii)  for the  appointment  of a
receiver, liquidator,  assignee, custodian, trustee,  sequestrator,  conservator
(or similar  official) of any Loan Party or otherwise  relating to  liquidation,
dissolution,  winding-up or relief of such Person, or (b) any general assignment
for the benefit of creditors,  composition,  marshaling of assets for creditors,
or other, similar arrangement in respect of such Person's creditors generally or
any substantial portion of its creditors undertaken under any Law.

     Intercompany  Subordination  Agreement shall mean a Subordination Agreement
among the Loan Parties in the form attached hereto as Exhibit 1.1 (1).

     Interest  Period  shall have the  meaning  assigned to such term in Section
4.2.

     Interest Rate Option shall mean any Euro-Rate Option or Base Rate Option.

     Interim  Statements shall have the meaning assigned to that term in Section
6.1.9(i).

     Internal  Revenue Code shall mean the Internal Revenue Code of 1986, as the
same may be amended or supplemented from time to time, and any successor statute
of similar  import,  and the rules and regulations  thereunder,  as from time to
time in effect.

     Joinder shall mean a joinder by a Person as a Borrower under this Agreement
and the other Loan Documents in the form of Exhibit 1.1 (J).

     Labor Contracts shall mean all employment agreements, employment contracts,
collective  bargaining  agreements and other  agreements among any Loan Party or
Subsidiary of a Loan Party and its employees.

                                       8
<PAGE>
     Law shall  mean any law  (including  common  law),  constitution,  statute,
treaty,   regulation,   rule,  ordinance,   opinion,   release,  ruling,  order,
injunction, writ, decree or award of any Official Body.

     Letter of Credit  shall have the  meaning  assigned to that term in Section
2.9. 1,

     Letter of Credit Borrowing shall mean an extension of credit resulting from
a drawing under any Letter of Credit which shall not have been reimbursed on the
date  when made and shall not have  been  converted  into a Loan  under  Section
2.9.3.2.

     Letter  of Credit  Fee  shall  have the  meaning  assigned  to that term in
Section 2.9.2.

     Letters  of Credit  Outstanding  shall  mean at any time the sum of (i) the
aggregate  undrawn  face  amount of  outstanding  Letters of Credit and (ii) the
aggregate amount of all unpaid and outstanding Reimbursement Obligations.

     Leverage Ratio shall mean the ratio of (x) Total Debt to (y) EBITDA.

     Lien  shall  mean any  mortgage,  deed of  trust,  pledge,  lien,  security
interest,  charge or other  encumbrance  or security  arrangement  of any nature
whatsoever,   whether   voluntarily  or  involuntarily   given,   including  any
conditional  sale or title retention  arrangement,  and any assignment,  deposit
arrangement  or lease  intended  as, or having the effect of,  security  and any
filed  financing  statement or other notice of any of the foregoing  (whether or
not a lien or other encumbrance is created or exists at the time of the filing).

     Loan Documents shall mean this Agreement,  the Agent's Letter, the Guaranty
Agreement,  the  Intercompany  Subordination  Agreement,  the  Notes,  any other
instruments,  certificates  or  documents  (including  reimbursement  agreements
relating to the Letters of Credit)  delivered  or  contemplated  to be delivered
hereunder or thereunder or in connection herewith or therewith,  as the same may
be  supplemented  or  amended  from  time to -time  in  accordance  herewith  or
therewith, and Loan Document shall mean any of the Loan Documents.

     Loan Parties  shall mean the Borrowers  and the  Guarantors  and Loan Party
shall mean any Borrower or Guarantor.

     Loan Request shall have the meaning given to such term in Section 2.5.

     Loans shall mean  collectively  and Loan shall mean separately all Loans or
any Loan  made by the  Banks or one of the  Banks to the  Borrower  pursuant  to
Section 2.1 or 2.9.3.

                                       9
<PAGE>
     Material Adverse Change shall mean any set of circumstances or events which
(a) has or could  reasonably  be expected to have any  material  adverse  effect
whatsoever  upon the validity or  enforceability  of this Agreement or any other
Loan Document, (b) is or could reasonably be expected to be material and adverse
to the business,  properties, assets, financial condition, results of operations
or prospects of the Loan Parties  taken as a whole,  (c) impairs  materially  or
could  reasonably  be  expected  to impair  materially  the  ability of the Loan
Parties  taken as a whole to duly and  punctually  pay or perform-n any material
part of  their  aggregate  Indebtedness,  or (d)  impairs  materially  or  could
reasonably be expected to impair  materially  the ability of the Agent or any of
the Banks, to the extent permitted,  to enforce their legal remedies pursuant to
this Agreement or any other Loan Document.

     Material Venture  Investment shall mean any investment in or loan,  advance
or capital  contribution  to any Person by a Loan Party, or any commitment to do
so, having a value of $2,000,000 or more.

     Month, with respect to an Interest Period under the Euro-Rate Option, shall
mean the interval  between the days in consecutive  calendar months  numerically
corresponding  to the  first  day of  such  Interest  Period.  If any  Euro-Rate
Interest  Period  begins on a day of a  calendar  month  for  which  there is no
numerically  corresponding  day in the month in which such Interest Period is to
end, the final month of such Interest  Period shall be deemed to end on the last
Business Day of such final month.

     Multiemployer  Plan  shall  mean  any  employee  benefit  plan  which  is a
"multiemployer  plan"  within the  meaning of  Section  4001(a)(3)  of ERISA and
either  (i) to which  any  member of the ERISA  Group is making or  accruing  an
obligation to make  contributions  or (ii) within the  preceding  five years any
entity  which at such time was a member of the ERISA  Group,  has made or had an
obligation to make such  contributions and with respect to which the Borrower is
reasonably likely to have liability under Subtitle E of Title IV of ERISA.

     Multiple  Employer  Plan shall mean an employee  pension  benefit plan (but
excluding  any  Multiemployer  Plan) which is covered by Title IV of ERISA or is
subject to the minimum  funding  standards  under  Section  412 of the  Internal
Revenue  Code and which has two or more  contributing  sponsors  (including  the
Borrower  or any  member of the ERISA  Group) at least two of whom are not under
common control, as such a plan is described in Sections 4063 and 4064 of ERISA.

     Notes shall mean  collectively and Note shall mean separately all the Notes
of the  Borrower in the form of Exhibit 1.1 (R)  evidencing  the Loans  together
with  all  amendments,  extensions,  renewals,  replacements,   refinancings  or
refundings thereof in whole or in part.

     notices shall have the meaning assigned to that term in Section 1 1.6.

     Obligation  shall  mean  any  obligation  or  liability  of any of the Loan
Parties  to the  Agent  or  any of the  Banks,  howsoever  created,  arising  or
evidenced, whether direct or



                                       10
<PAGE>

indirect, absolute or contingent, now or hereafter existing, or due or to become
due,  under or in  connection  with this  Agreement,  the Notes,  the Letters of
Credit, the Agent's Letter or any other Loan Document.

     Official  Body  shall mean any  national,  federal,  state,  local or other
government or political subdivision or any agency,  authority,  bureau,  central
bank,  commission,  department  or  instrumentality  of  either,  or any  court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.

     Outside  Investment  Amount  shall mean the sum of the dollar  value of (i)
outstanding  Guarantees  of Persons in which  investments  are  permitted  under
Section 8.2.9; (ii) investments made under Section 8.2.9; (iii) investments made
under  Section  8.2.4(vi);   (iv)  Permitted  Acquisitions  made  under  Section
8.2.6(xi),  (v) asset sales made under clause (B) of Section 8.2.7(iii) and (vi)
investments in Persons who are not Borrowers which are made under Section 8.2.9,
each as made or (as to  Guarantees  referred to in Clause (i)  hereof)  existing
from time to time after the Closing Date.

     Outside Investment Limit shall mean $7,500,000.

     Parent shall mean TB Wood's Corporation, a Delaware corporation, which owns
100% of the issued and outstanding capital stock of the Company and which is the
Guarantor hereunder.

     Participation  Advance  shall mean,  with respect to any Bank,  such Bank's
payment  in  respect  of its  participation  in a  Letter  of  Credit  Borrowing
according to its Ratable Share pursuant to Section 2.9.4.

     PBGC  shall  mean the  Pension  Benefit  Guaranty  Corporation  established
pursuant to Subtitle A of Title IV of ERISA or any successor statute.

     Permitted  Acquisitions  shall have the  meaning  assigned to such ten-n in
Section 8.2.6.

     Permitted  Amount  shall have the meaning  assigned to such term in Section
8.2.15.

     Permitted Investments shall mean:

          (i) direct  obligations  of the United States of America or any agency
     or  instrumentality  thereof  or  obligations  backed by the full faith and
     credit of the United  States of America  maturing in twelve (I 2) months or
     less from the date of acquisition;

          (ii)  commercial  paper  maturing  in 180 days or less rated not lower
     than A- 1, by Standard & Poor's or P-1 by Moody's Investors  Service,  Inc.
     on the date of acquisition; and

                                       11
<PAGE>

          (iii)  demand  deposits,  time  deposits  or  certificates  of deposit
     maturing  within  one  year  in any  Bank  or any  commercial  banks  whose
     obligations  are rated A-1,  A or the  equivalent  or better by  Standard &
     Poor's on the date of acquisition.

     Permitted Liens shall mean:

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

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

          (iii) Liens of  mechanics,  materialmen,  warehousemen,  carriers,  or
     other like Liens,  securing  obligations incurred in the ordinary course of
     business  that are not yet due and payable and Liens of landlords  securing
     obligations  to pay lease  payments  that are not yet due and payable or in
     default;

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

          (v) Encumbrances consisting of zoning restrictions, easements or other
     restrictions on the use of real property,  none of which materially impairs
     the use of such  property  or the  value  thereof,  and  none of  which  is
     violated in any material respect by existing or proposed structures or land
     use;

          (vi) Liens, security interests and mortgages in favor of the Agent for
     the benefit of the Banks;

          (vii) Liens on property  leased by any Loan Party or  Subsidiary  of a
     Loan Party under capital and operating  leases  permitted in Section 8.2.15
     securing  obligations  of such Loan Party or Subsidiary to the lessor under
     such leases;

          (viii) Any Lien  existing on the date of this  Agreement and described
     on Schedule 1.1 (P),  provided that the principal amount secured thereby is
     not hereafter  increased,  and no additional  assets become subject to such
     Lien;

          (ix) Purchase  Money Security  Interests,  provided that the aggregate
     amount  of loans and  deferred  payments  secured  by such  Purchase  Money
     Security  Interests shall not exceed $2,500,000  (excluding for the purpose
     of this  computation  any  loans  or  deferred  payments  secured  by Liens
     described on Schedule 1.1(P));

                                       12
<PAGE>
          (x) - The  following,  (A) if the validity or amount  thereof is being
     contested in good faith by appropriate  and lawful  proceedings  diligently
     conducted  so long as levy and  execution  thereon  have  been  stayed  and
     continue  to be  stayed  or (B) if a final  judgment  is  entered  and such
     judgment is discharged within thirty (30) days of entry, and in either case
     they do not  materially  impair the ability of any Loan Party to  perform-n
     its Obligations hereunder or under the other Loan Documents:

               (1) Claims or Liens for  taxes,  assessments  or charges  due and
          payable  and  subject  to  interest  or  penalty,  provided  that  the
          applicable  Loan Party  maintains  such reserves or other  appropriate
          provisions  as shall  be  required  by GAAP  and pays all such  taxes,
          assessments or charges  forthwith upon the commencement of proceedings
          to foreclose any such Lien;

               (2) Claims,  Liens or encumbrances upon, and defects of title to,
          real or personal  property,  including  any  attachment of personal or
          real  property  or other  legal  process  prior to  adjudication  of a
          dispute on the merits;

               (3)  Claims  or Liens of  mechanics,  materialmen,  warehousemen,
          carriers, or other statutory nonconsensual Liens;

               (4) Liens resulting from final  judgments or orders  described in
          Section 9.1.6, and

          (xi) Liens which are  outstanding on any fixed assets at the time such
     fixed  assets are  acquired by a Borrower or which are  outstanding  on any
     fixed asset of an entity  acquired by a Borrower at the time such entity is
     acquired;  provided  that  such  Liens do not  extend to or cover any other
     property or assets.

     Permitted  Transferee  shall  mean (i) any person  controlled  by Thomas C.
Foley (the term "control" having the same meaning as such term in the definition
of "Affiliate"),  (ii) any director or executive officer of any Person described
in clause (i) above as of one year prior to the date of determination, (iii) any
heir, executor,  administrator,  testamentary trustee,  legatee,  beneficiary or
distributes of Thomas C. Foley and (iv) any trust,  the  beneficiaries  of which
include only Thomas C. Foley and any Person described in clause (iii) above.

     Person  shall  mean  any  individual,  corporation,   partnership,  limited
liability  company,  association,  joint-stock  company,  trust,  unincorporated
organization,  joint  venture,  government  or political  subdivision  or agency
thereof, or any other entity.

     Plan  shall  mean an  employee  pension  benefit  plan (but  excluding  any
Multiple  Employer Plan or  Multiemployer  Plan) which is covered by Title IV of
ERISA or is subject to the minimum  funding  standards  under Section 412 of the
Internal  Revenue Code and either (i) is  maintained  by any member of the ERISA
Group for  employees  of any  member of the ERISA  Group or (ii) has at any time
within the preceding five years been  maintained by any entity which was at such
time a member of the ERISA Group for employees of any entity which

                                       13
<PAGE>
was at such time a member of the ERISA  Group and with  respect  to which a Loan
Party is reasonably likely to have liability under Section 4062, 4063 or 4064 of
ERISA.

     PNC Bank shall mean PNC Bank,  National  Association,  its  successors  and
assigns.

     Potential  Default  shall mean any event or  condition  which with  notice,
passage of time or a  determination  by the Agent or the Required  Banks, or any
combination of the foregoing, would constitute an Event of Default.

     Principal  Office shall mean the main  banking  office of the Agent in Camp
Hill, Pennsylvania.

     Prohibited  Transaction shall mean any prohibited transaction as defined in
Section  4975 of the  Internal  Revenue  Code or Section  406 of ERISA for which
neither an individual nor a class exemption has been issued by the United States
Department of Labor.

     Property shall mean all real property,  both owned and leased,  of any Loan
Party or Subsidiary of a Loan Party.

     Purchase  Money Security  Interest shall mean Liens upon tangible  personal
property  securing  loans to any Loan  Party or  Subsidiary  of a Loan  Party or
deferred  payments  by such Loan Party or  Subsidiary  for the  purchase of such
tangible personal property.

     Purchasing  Bank shall mean a Bank which becomes a party to this  Agreement
by executing an Assignment and Assumption Agreement.

     Ratable Share shall mean the proportion that a Bank's  Commitment  bears to
the Commitments of all of the Banks.

     Regulated Substances shall mean any substance, including any solid, liquid,
semisolid, gaseous, thermal, thoriated or radioactive material, refuse, garbage,
wastes,  chemicals,  petroleum products,  by-products,  coproducts,  impurities,
dust,  scrap,  heavy metals,  defined as a "hazardous  substance,"  "pollutant,"
"pollution," "contaminant," "hazardous or toxic substance," "extremely hazardous
substance,"  "toxic chemical,"  "toxic waste,"  "hazardous  waste,"  "industrial
waste,"  "residual  waste,"  "solid  waste,"  "municipal  waste," "mixed waste,"
"infectious  waste,"  "chemotherapeutic  waste,"  "medical waste," or "regulated
substance"  or any related  materials,  substances or wastes as now or hereafter
defined pursuant to any Environmental Laws,  ordinances,  rules,  regulations or
other directives of any Official Body, the generation, manufacture,  extraction,
processing,  distribution,  treatment, storage, disposal, transport,  recycling,
reclamation,   use,  reuse,  spilling,  leaking,  dumping,  injection,  pumping,
leaching,   emptying,   discharge,   escape,  release  or  other  management  or
mismanagement of which is regulated by the Environmental Laws.


                                       14
<PAGE>
     Regulation U shall mean Regulation U, T, G or X as promulgated by the Board
of Governors of the Federal Reserve System, as amended from time to time.

     Reimbursement  Obligation  shall have the meaning  assigned to such term in
Section 2.9.3.2.

     Reportable Event shall mean a reportable event described in Section 4043 of
ERISA and regulations thereunder with respect to a Plan or Multiemployer Plan.

     Required Banks shall mean

          (i) if there  are no  Loans,  Reimbursement  Obligations  or Letter of
     Credit Borrowings  outstanding,  Banks whose Commitments aggregate at least
     66-2/3% of the Commitments of all of the Banks, or

          (ii) if there  are  Loans,  Reimbursement  Obligations,  or  Letter of
     Credit Borrowings outstanding, any Bank or group of Banks if the sum of the
     Loans,  Reimbursement  Obligations and Letter of Credit  Borrowings of such
     Banks then  outstanding  aggregates at least 66-2/3% of the total principal
     amount of all of the Loans,  Reimbursement Obligations and Letter of Credit
     Borrowings then outstanding. Reimbursement Obligations and Letter of Credit
     Borrowings shall be deemed, for purposes of this definition, to be in favor
     of the  Agent  and not a  participating  Bank if such Bank has not made its
     Participation Advance in respect thereof and shall be deemed to be in favor
     of such Bank to the extent of its Participation  Advance if it has made its
     Participation Advance in respect thereof.

     Revolving  Facility  Usage  shall  mean at any  time  the sum of the  Loans
outstanding and the Letters of Credit Outstanding.

     Section 20 Subsidiary shall mean the Subsidiary of the bank holding company
controlling any Bank, which Subsidiary has been granted authority by the Federal
Reserve Board to underwrite and deal in certain Ineligible Securities.

     Shares shall have the meaning assigned to that term in Section 6.1.2.

     Standard & Poor's shall mean Standard & Poor's Ratings Services, a division
of The McGraw-Hill Companies, Inc.

     Standby  Letter of Credit  shall mean a Letter of Credit  issued to support
obligations of one or more of the Loan Parties,  contingent or otherwise,  which
finance the working  capital and business needs of the Loan Parties  incurred in
the ordinary course of business.

     Subsidiary  of any  Person at any time shall  mean (i) any  corporation  or
trust of which  50% or more (by  number  of  shares  or  number of votes) of the
outstanding  capital stock or shares of beneficial interest normally entitled to
vote for the election of one or more

                                       15
<PAGE>
directors or trustees  (regardless of any contingency  which does or may suspend
or dilute the voting  rights) is at such time owned  directly or  indirectly  by
such Person or one or more of such Person's  Subsidiaries,  (ii) any partnership
of which  such  Person  is a  general  partner  or of  which  50% or more of the
partnership interests is at the time directly or indirectly owned by such Person
or one or  more of such  Person's  Subsidiaries,  (iii)  any  limited  liability
company of which such  Person is a member or of which 50% or more of the limited
liability  company interests is at the time directly or indirectly owned by such
Person or one or more of such  Person's  Subsidiaries  or (iv) any  corporation,
trust,  partnership,   limited  liability  company  or  other  entity  which  is
controlled or capable of being  controlled by such Person or one or more of such
Person's Subsidiaries.

     Syndications  Period shall mean the period between the Closing Date and the
date which is sixty (60) days after the Closing Date.

     TB Wood's  Incorporated shall mean TB Wood's  Incorporated,  a Pennsylvania
corporation and a "Borrower" and the "Company" hereunder.

     Total Debt shall mean  long-term and short term  Indebtedness  for borrowed
money of the Parent on a consolidated basis including subordinated debt on which
interest  is  contractually   payable  and  obligations  under  capital  leases,
guarantees and letters of credit (including the Letters of Credit).

     Transferor  Bank shall mean the selling Bank pursuant to an Assignment  and
Assumption Agreement.

          1.2 Construction.

          Unless the context of this Agreement  otherwise clearly requires,  the
     following rules of  construction  shall apply to this Agreement and each of
     the other Loan Documents:

               1.2.1 Number; Inclusion.

               references to the plural  include the singular,  the plural,  the
          part and the whole; "or" has the inclusive meaning  represented by the
          phrase  "and/or," and "including"  has the meaning  represented by the
          phrase "including without limitation";

               1.2.2 Determination.

               references  to  "determination"  of or by the  Agent or the Banks
          shall be deemed to include  good-faith  estimates  by the Agent or the
          Banks  (in the case of  quantitative  determinations)  and  good-faith
          beliefs  by the  Agent  or the  Banks  (in  the  case  of  qualitative
          determinations)  and such  determination  shall be  conclusive  absent
          manifest error;

                                       16
<PAGE>
               1.2.3 Agent's Discretion and Consent.

               whenever  the Agent or the Banks are granted the right  herein to
          act in its or their sole  discretion  or to grant or withhold  consent
          such right shall be exercised in good faith;

               1.2.4 Documents Taken as a Whole.

               the words "hereof," "herein,"  "hereunder,"  "hereto" and similar
          terms in this  Agreement  or any  other  Loan  Document  refer to this
          Agreement  or such  other  Loan  Document  as a  whole  and not to any
          particular provision of this Agreement or such other Loan Document;

               1.2.5 Headings.

               the section and other  headings  contained  in this  Agreement or
          such other Loan Document and the Table of Contents (if any), preceding
          this Agreement or such other Loan Document are for reference  purposes
          only  and  shall  not  control  or  affect  the  construction  of this
          Agreement or such other Loan Document or the interpretation thereof in
          any respect;

               1.2.6 Implied References to this Agreement.

               article,  section,  subsection,   clause,  schedule  and  exhibit
          references are to this  Agreement or other Loan Document,  as the case
          may be, unless otherwise specified;

               1.2.7 Persons.

               reference to any Person  includes  such Person's  successors  and
          assigns but, if  applicable,  only if such  successors and assigns are
          permitted by this Agreement or such other Loan  Document,  as the case
          may be, and  reference to a Person in a particular  capacity  excludes
          such Person in any other capacity;

               1.2.8 Modifications to Documents.

               reference to any  agreement  (including  this  Agreement  and any
          other Loan Document together with the schedules and exhibits hereto or
          thereto),  document or instrument  means such  agreement,  document or
          instrument as amended, modified, replaced, substituted for, superseded
          or restated;

               1.2.9 From, To and Through.

               relative to the determination of any period of time, "from" means
          "from and  including,"  "to" means "to but  excluding,"  and "through"
          means "through and including"; and


                                       17
<PAGE>
               1.2.10 Shall; Will.

               references  to "shall"  and "will" are  intended to have the same
          meaning.

          1.3 Accounting Principles.

          Except as otherwise  provided in this Agreement,  all computations and
     determinations  as to  accounting  or financial  matters and all  financial
     statements  to be delivered  pursuant to this  Agreement  shall be made and
     prepared in accordance  with GAAP  (including  principles of  consolidation
     where  appropriate),  and all accounting or financial  terms shall have the
     meanings  ascribed  to such  terms by  GAAP;  provided,  however,  that all
     accounting  terms used in Section  8.2 (and all  defined  terms used in the
     definition  of any  accounting  term used in  Section  8.2  shall  have the
     meaning given to such terms (and defined  terms) under GAAP as in effect on
     the date hereof applied on a basis  consistent with those used in preparing
     the Annual Statements referred to in Section 6.1.9(i).  In the event of any
     change  after the date hereof in GAAP,  and if such change  would result in
     the  inability to determine  compliance  with the  financial  covenants set
     forth in Section 8.2 based upon the Parent's  regularly  prepared financial
     statements by reason of the  preceding  sentence,  then the parties  hereto
     agree to  endeavor,  in good  faith,  to agree  upon an  amendment  to this
     Agreement that would adjust such financial covenants in a manner that would
     not affect the substance thereof,  but would allow compliance  therewith to
     be determined in accordance with the Loan Parties' financial  statements at
     that time.



                          2. REVOLVING CREDIT FACILITY

          2.1 Commitments.

               2.1.1 Loans.

               Subject to the terms and  conditions  hereof and relying upon the
          representations  and  warranties  herein set forth each Bank severally
          agrees to make Loans to the Borrowers at any time or from time to time
          on or after the Closing  Date to the  Expiration  Date  provided  that
          after giving  effect to such Loan the  aggregate  amount of Loans from
          such Bank shall not exceed  such Bank's  Commitment  minus such Bank's
          Ratable Share of the Letters of Credit Outstanding. Within such limits
          of time  and  amount  and  subject  to the  other  provisions  of this
          Agreement,  the Borrowers may borrow,  repay and reborrow  pursuant to
          this Section 2. 1.

               2.1.2 Voluntary Reduction of Commitment.

               The  Borrowers  shall have the right at any time and from time to
          time upon five (5) Business Days' prior written notice to the Agent to
          permanently  reduce,  in a  minimum  amount of $  1,000,000  and whole
          multiples  of $100,000 of  principal,  or  terminate  the  Commitment,
          without penalty or premium except as hereinafter  set forth,  provided
          that  any such  reduction  or  termination  shall  be  accompanied  by
          prepayment of the Notes, together with the full


                                       18
<PAGE>
          amount of interest accrued on the principal sum to be prepaid (and all
          amounts  referred to in Section 5.6.2 hereof),  to the extent that the
          aggregate amount thereof then outstanding exceeds the Commitment as so
          reduced or terminated.

          2.2 Nature of Banks' Obligations with Respect to Loans.

          Each Bank shall be obligated to  participate in each request for Loans
     pursuant to Section 2.5 in accordance with its Ratable Share. The aggregate
     of each Bank's Loans  outstanding  hereunder  to the  Borrowers at any time
     shall never exceed its Commitment  minus its Ratable Share of the Letter of
     Credit  Outstandings.  The  obligations of each Bank hereunder are several.
     The  failure of any Bank to perform  its  obligations  hereunder  shall not
     affect the  Obligations  of the  Borrowers to any other party nor shall any
     other  party  be  liable  for the  failure  of such  Bank  to  perform  its
     obligations  hereunder.  The Banks shall have no  obligation  to make Loans
     hereunder on or after the Expiration Date.

          2.3 Commitment Fees.

          Accruing from the date hereof until the Expiration Date, the Borrowers
     agree to pay to the Agent for the  account of each Bank,  as  consideration
     for such Bank's Commitment hereunder,  a nonrefundable  commitment fee (the
     "Commitment  Fee") computed using the rate per annum (the  "Commitment  Fee
     Applicable  Margin") set forth below  measured in respect of the Borrowers'
     Leverage Ratio as of the end of each fiscal quarter:

          (a) if the  Borrowers'  Leverage Ratio is less than or equal to 1.0 to
     1.0, then the Commitment Fee Applicable Margin shall be .20%; and

          (b) if the  Borrowers'  Leverage  Ratio is greater than 1.0 to 1.0 but
     less than or equal to 1.5 to 1.0, then the Commitment Fee Applicable Margin
     shall be .25%; and

          (c) if the  Borrower's  Leverage  Ratio is greater than 1.5 to 1.0 but
     less than or equal to 2.0 to 1.0, then the Commitment Fee Applicable Margin
     shall be .30%; and

          (d) if the  Borrower's  Leverage  Ratio is greater than 2.0 to 1.0 but
     less than or equal to 2.5 to 1.0, then the Commitment Fee Applicable Margin
     shall be .3 5 %; and

          (e) if the Borrower's  Leverage Ratio is greater than 2.5 to 1.0, then
     the Commitment Fee Applicable Margin shall be .40%.

The  Commitment Fee shall be computed on the basis of a year of 365 or 366 days,
as the case may be, and actual  days  elapsed on the  average  daily  difference
between the amount of such Bank's Commitment as the same may be constituted from
time to time and the Revolving Facility Usage. Any changes in the Commitment Fee
pursuant to the  provisions of this Section 2.3 shall become  effective from the
fifth day after the Agent shall have received the Certificate delivered pursuant
to Section 8.3.4 in respect of such fiscal quarter; provided, that, in the event
that the Certificate  delivered pursuant to Section 8.3.4 for any fiscal quarter
is not delivered

                                       19
<PAGE>
within ten (10) days of the date required by Section 8.3 (no waiver by the Agent
being implied thereby), then the Commitment Fee shall be calculated on the basis
of the  percentage  set forth in item (e) above  commencing  as of the date such
certificate was required to be delivered until the delivery of such certificate.
All  Commitment  Fees shall be payable in arrears on the first  Business  Day of
each  January,  April,  July  and  October  after  the  date  hereof  and on the
Expiration  Date or upon  acceleration  of the Notes.  Notwithstanding  anything
herein to the contrary, the Commitment Fee Applicable Margin prior to the end of
the first fiscal quarter ending after the Closing Date shall be .25%.

          2.4 Revolving, Credit Facility Fee.

          The  Borrowers  agree to pay on the Closing  Date to the Agent for the
     account  of each Bank,  as  consideration  for such  Bank's  Commitment,  a
     nonrefundable closing fee equal to .I% of each Bank's Commitment.

          2.5 Loan Requests.

          Except as otherwise  provided  herein,  the Borrowers may from time to
     time prior to the Expiration Date request the Banks to make Loans, or renew
     or convert the Interest Rate Option  applicable to existing  Loans pursuant
     to Section 4.2, by delivering to the Agent, not later than 11:00 a.m., Camp
     Hill time, (i) three (3) Business Days prior to the proposed Borrowing Date
     with respect to the making of Loans to which the Euro-Rate  Option  applies
     or the conversion to or the renewal of the Euro-Rate  Option for any Loans;
     and (ii) the Business Day of the  proposed  Borrowing  Date with respect to
     the making of a Loan to which the Base Rate Option  applies or the last day
     of the preceding Interest Period with respect to the conversion to the Base
     Rate  Option  for  any  Loan,  of  a  duly   completed   request   therefor
     substantially  in the  form  of  Exhibit  2.5  or a  request  by  telephone
     immediately confirmed in writing by letter, facsimile or telex in such form
     (each, a "Loan  Request"),  it being  understood that the Agent may rely on
     the authority of any individual  making such a telephonic  request  without
     the  necessity of receipt of such written  confirmation.  Each Loan Request
     shall be  irrevocable  and shall specify (i) the proposed  Borrowing  Date;
     (ii) the aggregate  amount of the proposed Loans  comprising each Borrowing
     Tranche, which shall be in integral multiples of $100,000 and not less than
     $  1,000,000  for each  Borrowing  Tranche  to which the  Euro-Rate  Option
     applies  and not less than the lesser of  $500,000  or the  maximum  amount
     available  for  Borrowing  Tranches to which the Base Rate Option  applies;
     (iii) whether the  Euro-Rate  Option or Base Rate Option shall apply to the
     proposed Loans comprising the applicable Borrowing Tranche; and (iv) in the
     case of a  Borrowing  Tranche to which the  Euro-Rate  Option  applies,  an
     appropriate   Interest  Period  for  the  proposed  Loans  comprising  such
     Borrowing Tranche.

          2.6 Making, Loans.

          The  Agent  shall,  promptly  after  receipt  by it of a Loan  Request
     pursuant  to  Section  2.5,  notify  the Banks of its  receipt of such Loan
     Request specifying: (i) the proposed Borrowing Date and the time and method
     of disbursement of the Loans requested thereby;

                                       20
<PAGE>
     (ii) the  amount  and type of each  such Loan and the  applicable  Interest
     Period (if any); and (iii) the apportionment  among the Banks of such Loans
     as determined by the Agent in accordance  with Section 2.2. Each Bank shall
     remit the principal amount of each Loan to the Agent such that the Agent is
     able to,  and the Agent  shall,  to the  extent  the Banks  have made funds
     available  to it for such  purpose  and subject to Section  7.2,  fund such
     Loans to the Borrower in U.S.  Dollars and  immediately  available funds at
     the Principal  Office prior to 2:00 p.m., Camp Hill time, on the applicable
     Borrowing Date,  provided that if any Bank fails to remit such funds to the
     Agent in a timely  manner,  the Agent may elect in its sole  discretion  to
     fund with its own funds the Loans of such Bank on such Borrowing  Date, and
     such Bank shall be subject to the repayment obligation in Section 10. 16.

          2.7 Notes.

          The  Obligation  of  the  Borrowers  to  repay  the  aggregate  unpaid
     principal  amount  of the  Loans  made to it by each  Bank,  together  with
     interest  thereon,  shall be  evidenced  by a Note dated the  Closing  Date
     payable to the order of such Bank in a face amount equal to the  Commitment
     of such Bank.

          2.8 Use of Proceeds.

          The  proceeds  of the  Loans  shall  be  used  to  refinance  existing
     indebtedness and for general corporate purposes, including making Permitted
     Acquisitions and in accordance with Section 8.1.10.

          2.9 Letter of Credit Subfacility.

               2.9.1 Issuance of Letters of Credit.

               The  Borrowers  may  request  the  issuance of a letter of credit
          (each a "Letter of Credit") on behalf of itself or another  Loan Party
          by delivering to the Agent a completed  application  and agreement for
          letters of credit in such form as the Agent may  specify  from time to
          time by no later than 10:00 a.m.,  Camp Hill time,  at least three (3)
          Business  Days,  or such  shorter  period  as may be  agreed to by the
          Agent,  in advance of the proposed  date of issuance.  Promptly  after
          such request,  the Agent shall notify each Bank of such request.  Each
          Letter  of  Credit  shall be  either a  Standby  Letter of Credit or a
          Commercial  Letter of  Credit.  Subject  to the  terms and  conditions
          hereof and in reliance on the  agreements of the other Banks set forth
          in this Section 2.9, the Agent will issue a Letter of Credit  provided
          that each Letter of Credit shall (A) have a maximum maturity of twelve
          (12) months from the date of issuance and shall be renewable for up to
          twelve (I 2) more  months  at the  Agent's  discretion,  and (B) in no
          event expire later than one Business Day prior to the Expiration  Date
          and  providing  that in no  event  shall  (i) the  Letters  of  Credit
          Outstanding exceed, at any one time,  $5,000,000 or (ii) the Revolving
          Facility Usage exceed, at any one time, the Commitments.

                                       21
<PAGE>
               2.9.2 Letter of Credit Fees.

               The Borrowers  shall pay (i) to the Agent for the ratable account
          of  the  Banks  a fee  (the  "Letter  of  Credit  Fee")  equal  to the
          Applicable  Margin,  and  (ii) to the  Agent  for its  own  account  a
          fronting fee equal to 1/8% per annum,  which fees shall be computed on
          the daily average  Letters of Credit  Outstanding and shall be payable
          quarterly in arrears  commencing  with the first  Business Day of each
          January,  April, July and October following issuance of each Letter of
          Credit and on the  Expiration  Date and  calculated  on the basis of a
          year of 365/365 days.  The  Borrowers  shall also pay to the Agent for
          the Agent's sole account the Agent's then in effect customary fees and
          administrative  expenses payable with respect to the Letters of Credit
          as the  Agent  may  generally  charge  or incur  from  time to time in
          connection  with the  issuance,  maintenance,  modification  (if any),
          assignment or transfer (if any),  negotiation,  and  administration of
          Letters of Credit.

               2.9.3 Disbursements, Reimbursement.

                    2.9.3.1  Immediately  upon the  Issuance  of each  Letter of
               Credit,  each Bank shall be deemed to, and hereby irrevocably and
               unconditionally   agrees   to,   purchase   from   the   Agent  a
               participation   in  such  Letter  of  Credit  and  each   drawing
               thereunder in an amount equal to such Bank's Ratable Share of the
               maximum amount  available to be drawn under such Letter of Credit
               and the amount of such drawing, respectively.

                    2.9.3.2 In the event of any  request  for a drawing  under a
               Letter of Credit by the  beneficiary or transferee  thereof,  the
               Agent will promptly notify the Borrowers.  Provided that it shall
               have received such notice,  the Borrowers  shall  reimburse (such
               obligation to reimburse the Agent shall  sometimes be referred to
               as a  "Reimbursement  Obligation") the Agent prior to 12:00 noon,
               Camp  Hill  time on each date that an amount is paid by the Agent
               under any Letter of Credit (each such date, an "Drawing Date") in
               an amount equal to the amount so paid by the Agent.  In the event
               the Borrower  fails to reimburse the Agent for the full amount of
               any drawing  under any Letter of Credit by 12:00 noon,  Camp Hill
               time,  on the Drawing Date,  the Agent will promptly  notify each
               Bank thereof, and the Borrowers shall be deemed to have requested
               that Loans be made by the Banks  under the Base Rate Option to be
               disbursed  on the  Drawing  Date  under  such  Letter of  Credit,
               subject to the amount of the unutilized portion of the Commitment
               and subject to the conditions set forth in Section 7.2 other than
               any notice  requirements.  Any notice given by the Agent pursuant
               to this Section  2.9.3.2 may be oral if immediately  confirmed in
               writing; provided that the lack of such an immediate confirmation
               shall not affect  the  conclusiveness  or binding  effect of such
               notice.

                    2.9.3.3 Each Bank shall upon any notice  pursuant to Section
               2.9.3.2  make  available  to the Agent an  amount in  immediately
               available  funds equal to its Ratable  Share of the amount of the
               drawing,  whereupon  the  participating  Banks shall  (subject to
               Section  2.9.3.4)  each be deemed  to have made a Loan  under the
               Base Rate Option to the Borrowers in that amount.  If any Bank so
               notified  fails to make available to the Agent for the account of
               the Agent the amount of such Bank's  Ratable Share of such amount
               by no later than

                                       22
<PAGE>
               2:00 p.m.,  Camp Hill time on the  Drawing  Date,  then  interest
               shall accrue on such Bank's obligation to make such payment, from
               the  Drawing  Date to the  date on which  such  Bank  makes  such
               payment, at a rate per annum equal to the Federal Funds Effective
               Rate in effect from time to time during  such  period.  The Agent
               will promptly give notice of the  occurrence of the Drawing Date,
               but  failure of the Agent to give any such  notice on the Drawing
               Date or in  sufficient  time to enable  any Bank to  effect  such
               payment  on such  date  shall  not  relieve  such  Bank  from its
               obligation under this Section 2.9.3.3.

                    2.9.3.4 With respect to any unreimbursed drawing that is not
               converted  into Loans under the Base Rate Option to the Borrowers
               in whole or in part as contemplated by Section  2.9.3.2,  because
               of the Borrowers'  failure to satisfy the conditions set forth in
               Section 7.2 other than any notice  requirements  or for any other
               reason,  the Borrowers  shall be deemed to have incurred from the
               Agent a Letter of Credit Borrowing in the amount of such drawing.
               Such  Letter  of Credit  Borrowing  shall be due and  payable  on
               demand  (together  with  interest) and shall bear interest at the
               rate per  annum  applicable  to the  Loans  under  the Base  Rate
               Option.  Each  Bank's  payment to the Agent  pursuant  to Section
               2.9.3.3  shall  be  deemed  to be a  payment  in  respect  of its
               participation  in such  Letter  of  Credit  Borrowing  and  shall
               constitute a Participation Advance from such Bank in satisfaction
               of its participation obligation under this Section 2.9.3.

               2.9.4 Repayment of Participation Advances.

                    2.9.4.1  Upon (and only  upon)  receipt by the Agent for its
               account of immediately  available funds from the Borrowers (i) in
               reimbursement  of any payment  made by the Agent under the Letter
               of Credit with respect to which any Bank has made a Participation
               Advance to the Agent,  or (ii) in payment of  interest  on such a
               payment  made by the Agent  under  such a Letter of  Credit,  the
               Agent will pay to each Bank, in the same funds as those  received
               by the Agent,  the amount of such  Bank's  Ratable  Share of such
               funds,  except the Agent  shall  retain the amount of the Ratable
               Share of such funds of any Bank that did not make a Participation
               Advance in respect of such payment by Agent.

                    2.9.4.2  If the Agent is  required  at any time to return to
               any Loan Party, or to a trustee, receiver, liquidator, custodian,
               or any official in any Insolvency Proceeding,  any portion of the
               payments made by any Loan Party to the Agent  pursuant to Section
               2.9.4.1 in  reimbursement  of a payment  made under the Letter of
               Credit or interest or fee thereon,  each Bank shall, on demand of
               the  Agent,  forthwith  return  to the  Agent  the  amount of its
               Ratable  Share of any  amounts  so  returned  by the  Agent  plus
               interest  thereon  from the date such  demand is made to the date
               such  amounts are  returned by such Bank to the Agent,  at a rate
               per annum equal to the  Federal  Funds  Effective  Rate in effect
               from time to time.

               2.9.5 Documentation.

               Each Loan  Party  agrees to be bound by the terms of the  Agent's
          application  and  agreement  for  letters  of credit  and the  Agent's
          written  regulations  and customary  practices  relating to letters of
          credit, though such interpretation may be different from the such

                                       23
<PAGE>
          Loan Party's own. In the event of a conflict  between such application
          or agreement and this Agreement,  this Agreement  shall govern.  It is
          understood and agreed that,  except in the case of gross negligence or
          willful  misconduct,  the Agent  shall not be  liable  for any  error,
          negligence  and/or  mistakes,  whether of omission or  commission,  in
          following  any Loan  Party's  instructions  or those  contained in the
          Letters  of Credit or any  modifications,  amendments  or  supplements
          thereto.

               2.9.6 Determinations to Honor Drawing Requests.

               In determining whether to honor any request for drawing under any
          Letter of  Credit  by the  beneficiary  thereof,  the  Agent  shall be
          responsible  only to determine  that the  documents  and  certificates
          required  to be  delivered  under  such  Letter  of  Credit  have been
          delivered and that they comply on their face with the  requirements of
          such Letter of Credit.

               2.9.7 Nature of Participation and Reimbursement Obligations.

               Each Bank's  obligation in accordance with this Agreement to make
          the Loans or Participation Advances, as contemplated by Section 2.9.3,
          as a result of a drawing under a Letter of Credit, and the Obligations
          of the  Borrowers to reimburse the Agent upon a draw under a Letter of
          Credit, shall be absolute, unconditional and irrevocable, and shall be
          performed  strictly in  accordance  with the terms of this Section 2.9
          under all circumstances, including the following circumstances:

                    (i) any set-off, counterclaim,  recoupment, defense or other
               right which such Bank may have against the Agent,  the  Borrowers
               or any other Person for any reason whatsoever;

                    (ii) the  failure of any Loan  Party or any other  Person to
               comply, in connection with a Letter of Credit Borrowing, with the
               conditions  set  forth  in  Section  2.1,  2.5,  2.6 or 7.2 or as
               otherwise  set forth in this  Agreement for the making of a Loan,
               it being  acknowledged  that such conditions are not required for
               the making of a Letter of Credit  Borrowing and the obligation of
               the Banks to make Participation Advances under Section 2.9.3;

                    (iii) any lack of validity or  enforceability  of any Letter
               of Credit;

                    (iv) the existence of any claim,  set-off,  defense or other
               right  which  any  Loan  Party  or any  Bank may have at any time
               against a beneficiary  or any  transferee of any Letter of Credit
               (or any Persons for whom any such transferee may be acting),  the
               Agent or any Bank or any other Person or,  whether in  connection
               with this Agreement, the transactions  contemplated herein or any
               unrelated  transaction   (including  any  underlying  transaction
               between  any Loan Party or  Subsidiaries  of a Loan Party and the
               beneficiary for which any Letter of Credit was procured);

                                       24
<PAGE>
                    (v)  any  draft,  demand,   certificate  or  other  document
               presented  under  any  Letter  of Credit  proving  to be  forged,
               fraudulent,  invalid  or  insufficient  in  any  respect  or  any
               statement  therein being untrue or inaccurate in any respect even
               if the Agent has been notified thereof,

                    (vi) payment by the Agent under any Letter of Credit against
               presentation of a demand,  draft or certificate or other document
               which does not comply with the terms of such Letter of Credit;

                    (vii)  any  adverse  change  in  the  business,  operations,
               properties,   assets,   condition  (financial  or  otherwise)  or
               prospects of any Loan Party or Subsidiaries of a Loan Party;

                    (viii)  any  breach  of this  Agreement  or any  other  Loan
               Document by any party thereto;

                    (ix)  the   occurrence  or   continuance  of  an  Insolvency
               Proceeding with respect to any Loan Party;

                    (x) the fact that an Event of Default or a Potential Default
               shall have occurred and be continuing;

                    (xi) the fact that the Expiration  Date shall have passed or
               this  Agreement  or the  Commitments  hereunder  shall  have been
               terminated; and

                    (xii)  any  other  circumstance  or  happening   whatsoever,
               whether or not  similar to any of the  foregoing;  provided  that
               each Bank's  obligation  to make Loans under  Section  2.9.3.3 is
               subject to the conditions set forth in Section 7.2.

               2.9.8 Indemnity.

               In addition to amounts  payable as provided in Section 10.5,  the
          Borrowers  hereby agree to protect,  indemnify,  pay and save harmless
          the Agent from and against any and all claims,  demands,  liabilities,
          damages,  losses,  costs,  charges and expenses (including  reasonable
          fees,  expenses and  disbursements  of counsel and allocated  costs of
          internal  counsel)  which the Agent  may incur or be  subject  to as a
          consequence,  direct or indirect, of (i) the issuance of any Letter of
          Credit,  other than as a result of (A) the gross negligence or willful
          misconduct of the Agent as  determined by a final  judgment of a court
          of competent jurisdiction or (B) subject to the following clause (ii),
          the wrongful dishonor by the Agent of a proper demand for payment made
          under any Letter of Credit,  or (ii) the failure of the Agent to honor
          a drawing  under  any such  Letter of Credit as a result of any act or
          omission,  whether  rightful or wrongful,  of any present or future de
          jure or de facto  government or governmental  authority (all such acts
          or omissions herein called "Governmental Acts").

                                       25
<PAGE>
               2.9.9 Liability for Acts and Omissions.

               As between any Loan Party and the Agent,  such Loan Party assumes
          all risks of the acts and  omissions  of, or misuse of the  Letters of
          Credit by, the respective  beneficiaries of such Letters of Credit. In
          furtherance  and not in limitation of the  foregoing,  the Agent shall
          not be responsible for: (i) the form, validity, sufficiency, accuracy,
          genuineness or legal effect of any document  submitted by any party in
          connection  with the application for an issuance of any such Letter of
          Credit,  even if it should in fact prove to be in any or all  respects
          invalid, insufficient,  inaccurate,  fraudulent or forged (even if the
          Agent  shall  have  been  notified  thereof);  (ii)  the  validity  or
          sufficiency of any instrument  transferring or assigning or purporting
          to  transfer  or assign  any such  Letter  of Credit or the  rights or
          benefits  thereunder or proceeds  thereof,  in whole or in part, which
          may prove to be  invalid  or  ineffective  for any  reason;  (iii) the
          failure of the beneficiary of any such Letter of Credit,  or any other
          party to which  such  Letter of Credit may be  transferred,  to comply
          fully with any  conditions  required in order to draw upon such Letter
          of Credit or any other claim of any Loan Party against any beneficiary
          of such  Letter of  Credit,  or any such  transferee,  or any  dispute
          between or among any Loan Party and any  beneficiary  of any Letter of
          Credit or any such transferee;  (iv) errors, omissions,  interruptions
          or delays in transmission or delivery of any messages, by mail, cable,
          telegraph,  telex or otherwise,  whether or not they be in cipher; (v)
          errors in interpretation of technical terms; (vi) any loss or delay in
          the  transmission  or otherwise  of any document  required in order to
          make a  drawing  under any such  Letter  of Credit or of the  proceeds
          thereof-,  (vii) the  misapplication  by the  beneficiary  of any such
          Letter of Credit of the  proceeds of any drawing  under such Letter of
          Credit;  or (viii) any  consequences  arising  from causes  beyond the
          control of the Agent, including any Governmental Acts, and none of the
          above  shall  affect or impair,  or prevent the vesting of, any of the
          Agent's rights or powers hereunder.

               In  furtherance  and  extension  and  not  in  limitation  of the
          specific  provisions  set forth above,  any action taken or omitted by
          the Agent under or in connection  with the Letters of Credit issued by
          it or any documents and certificates delivered thereunder, if taken or
          omitted  in good  faith  and not  resulting  from  the  Agent's  gross
          negligence,  shall not put the Agent under any resulting  liability to
          the Borrowers or any Bank.

               2.10 Extension by Banks of the Expiration Date.

                    2.10.1 Requests-, Approval by All Banks.

                    Upon or promptly after the first  anniversary of the Closing
               Date  or any  subsequent  anniversary  of  theClosing  Date,  the
               Borrowers may request a one-year extension of the Expiration Date
               by written notice to the Banks, and the Banks agree to respond to
               the  Borrower's  request  for an  extension  by sixty  (60)  days
               following  receipt of the request;  provided,  however,  that the
               failure of any Bank to respond  within such time period shall not
               in any manner  constitute an agreement by such Bank to extend the
               Expiration  Date.  If all Banks elect to extend,  the  Expiration
               Date shall be extended  for a period of one year.  If one or more
               Banks decline to extend or do not respond to Borrower's  request,
               the provisions of Section 2.10.2 shall apply.

                                       26
<PAGE>
                    2.10.2 Approval by Required Banks.

                    In the event  that one or more  Banks do not agree to extend
               the Expiration  Date or do not respond to Borrowers'  request for
               an extension  within the time required under Section 2.10.1 (each
               a "Bank to be Terminated"),  but the Required Banks agree to such
               extension  within such time then,  the Banks which have agreed to
               such  extension  within the time required  under  Section  2.10.1
               (each an "Extending  Bank") may, with the prior written  approval
               of the Borrowers and the Agent, arrange to have one or more other
               banks (each an "Assignee  Bank")  purchase all of the outstanding
               Loans,  if any, of the Bank to be  Terminated  and succeed to and
               assume  the  Commitments  and all  other  rights,  interests  and
               obligations of the Bank to be Terminated under this Agreement and
               the other Loan Documents.  Any such purchase and assumption shall
               be (1) pursuant to an Assignment  and Assumption  Agreement,  (2)
               subject  to and in  accordance  with  Section  I 1. I 1,  and (3)
               effective on the last day of the Interest Period if any Loans are
               outstanding under the Euro-Rate  Option.  The Borrowers shall pay
               all amounts due and payable to the Bank to be  Terminated  on the
               effective date of such  Assignment and Assumption  Agreement.  In
               the event that the Agent  shall  become a Bank to be  Terminated,
               the  provisions  of this Section 2.10 shall be subject to Section
               l0.14.  In the event that the Loans and  Commitments of a Bank to
               be  Terminated  are not fully  assigned  and assumed  pursuant to
               Section  2.10.2  within  120 days  following  the  receipt of the
               request to extend, then the Expiration Date shall not be extended
               for any Bank.

                                  3 [RESERVED]

                                4. INTEREST RATES

     4.1 Interest Rate Options.

     The  Borrowers  shall pay  interest  in respect of the  outstanding  unpaid
principal  amount of the Loans as  selected  by it from the Base Rate  Option or
Euro-Rate  Option set forth below  applicable to the Loans, it being  understood
that,  subject to the  provisions  of this  Agreement,  the Borrowers may select
different  Interest  Rate  Options  and  different  Interest  Periods  to  apply
simultaneously  to the Loans  comprising  different  Borrowing  Tranches and may
convert to or renew one or more Interest Rate Options with respect to all or any
portion of the Loans comprising any Borrowing Tranche, provided that there shall
not be at any one time outstanding more than four (4) Borrowing  Tranches in the
aggregate among all of the Loans accruing  interest at a Euro-Rate Option. If at
any time the  designated  rate  applicable  to any Loan made by any Bank exceeds
such Bank's  highest lawful rate, the rate of interest on such Bank's Loan shall
be limited to such Bank's highest lawful rate.

          4.1.1 Revolving Credit Interest Rate Options.

          The  Borrowers  shall  have the  right to  select  from the  following
     Interest Rate Options applicable to the Loans:

                                       27
<PAGE>
               (i) Base Rate Option:  A fluctuating  rate per annum (computed on
          the basis of a year of 365 or 366 days, as the case may be, and actual
          days  elapsed)  equal to the Base Rate,  such  interest rate to change
          automatically  from time to time effective as of the effective date of
          each change in the Base Rate;

               (ii)  Revolving  Credit  Euro-Rate   Option:  A  rate  per  annum
          (computed on the basis of a year of 360 days and actual days  elapsed)
          equal  to the  Euro-Rate  plus the rate  per  annum  (the  "Applicable
          Margin")  described  below  measured  in  respect  of  the  Borrowers'
          Leverage Ratio as of the end of each fiscal quarter:

                    (a) if the  Borrowers'  Leverage Ratio is less than or equal
               to 1.0 to 1.0, then the Applicable Margin shall be .75%; and

                    (b) if the Borrowers'  Leverage Ratio is greater than 1.0 to
               1.0 but less  than or equal  to 1.5 to 1.0,  then the  Applicable
               Margin shall be 1.00%; and

                    (c) if the Borrowers'  Leverage Ratio is greater than 1.5 to
               1.0 but less  than or equal  to 2.0 to 1.0,  then the  Applicable
               Margin shall be 1.25%; and

                    (d) if the Borrowers'  Leverage Ratio is greater than 2.0 to
               1.0 but less  than or equal  to 2.5 to 1.0,  then the  Applicable
               Margin shall be 1.375%; and

                    (e) if the Borrowers'  Leverage Ratio is greater than 2.5 to
               1.0, then the Applicable Marginshall be 1.50%.

                    Any  changes  in  the  Applicable  Margin  pursuant  to  the
               provisions  of this Section 4.1 (a)(ii)  shall  become  effective
               from the  fifth  day after the  Agent  shall  have  received  the
               Certificate  delivered  pursuant  to Section  8.3.4 in respect of
               such  fiscal  quarter;  provided,  that,  in the  event  that the
               Certificate  delivered  pursuant to Section  8.3.4 for any fiscal
               quarter is not timely delivered, then the Applicable Margin shall
               be the  amount set forth in item (e) above  commencing  as of the
               date such  certificate  was  required to be  delivered  until the
               delivery of such certificate.

               (iii)Notwithstanding   anything  herein  to  the  contrary,   any
          Euro-Rate  Loan made before the end of the first full  fiscal  quarter
          beginning  after the Closing Date shall have an  Applicable  Margin of
          1.0%.

          4.1.2 Rate Quotations.

          The Borrowers may call the Agent on or before the date on which a Loan
     Request is to be  delivered to receive an  indication  of the rates then in
     effect, but it is acknowledged that such projection shall not be binding on
     the Agent or the Banks nor affect the rate of interest which  thereafter is
     actually in effect when the election is made.

                                       28
<PAGE>
     4.2 Interest Periods.

     At any  time  when  the  Borrowers  shall  select,  convert  to or  renew a
Euro-Rate  Option,  the Borrowers  shall notify the Agent thereof at least three
(3)  Business  Days  prior to the  effective  date of such  Euro-Rate  Option by
delivering  a Loan  Request.  The notice shall  specify an interest  period (the
"Interest  Period")  during which such  Interest  Rate Option shall apply,  such
Interest  Period to be (i) one Month if Borrower  selects the  Euro-Rate  Option
during the  Syndications  Period and (ii) one,  two,  three or six Months in the
event Borrower selects the Euro-Rate  Option after the  Syndications  Period has
ended.  Notwithstanding the preceding sentence,  the following  provisions shall
apply to any selection of, renewal of, or conversion to a Euro-Rate Option:

          4.2.1 Ending Date and Business Day

          any Interest Period which would otherwise end on a date which is not a
     Business Day shall be extended to the next  succeeding  Business Day unless
     such  Business  Day falls in the next  calendar  month,  in which case such
     Interest Period shall end on the next preceding Business Day;

          4.2.2 Amount of Borrowing Tranche.

          each  Borrowing  Tranche  of  Euro-Rate  Loans  shall  be in  integral
     multiples of $ 1 00,000 and not less than $1,000,000;

          4.2.3 Termination Before Expiration Date.

          the Borrowers shall not select, convert to or renew an Interest Period
     for any portion of the Loans that would end after the Expiration Date; and

          4.2.4 Renewals.

          in the case of the  renewal  of a  Euro-Rate  Option  at the end of an
     Interest Period, the first day of the new Interest Period shall be the last
     day of the preceding  Interest  Period,  without  duplication in payment of
     interest for such day.

     4.3 Interest After Default.

     To the extent  permitted by Law, upon the occurrence of an Event of Default
and until such time such Event of Default shall have been cured or waived:

          4.3.1 Letter of Credit Fees, Interest Rate.

          the  Letter  of  Credit  Fees and the rate of  interest  for each Loan
     otherwise   applicable   pursuant  to  Section   2.9.2  or  Section  4.  1,
     respectively, shall be increased by 2.0% per annum; and

                                       29
<PAGE>
          4.3.2 Other Obligations.

          each  other  Obligation  hereunder  if not paid  when due  shall  bear
     interest  at a rate per  annum  equal  to the sum of the  rate of  interest
     applicable  under the Base Rate Option plus an  additional  2.0 % per annum
     from the time such Obligation  becomes due and payable and until it is paid
     in full.

          4.3.3 Acknowledgment.

          The Borrowers  acknowledge  that the increase in rates  referred to in
     this Section 4.3 reflects,  among other things, the fact that such Loans or
     other amounts have become a substantially  greater risk given their default
     status and that the Banks are entitled to additional  compensation for such
     risk;  and all such interest  shall be payable by Borrowers  upon demand by
     Agent.

     4.4 Euro-Rate Unascertainable,  Illegality,  increased Costs-, Deposits Not
Available

          4.4.1 Unascertainable.

          If on any date on which a Euro-Rate would otherwise be determined, the
     Agent shall have determined that:

               (i) adequate and reasonable  means do not exist for  ascertaining
          such Euro-Rate, or

               (ii) a contingency  has occurred  which  materially and adversely
          affects the secondary  market for negotiable  certificates  of deposit
          maintained  by dealers of recognized  standing  relating to the London
          interbank eurodollar market relating to the Euro-Rate, the Agent shall
          have the rights specified in Section 4.4.3.

          4.4.2 Illegality;  Increased Costs, Deposits Not Available.

          If at any time any Bank shall have  determined  that:

               (i) the  making,  maintenance  or  funding of any Loan to which a
          Euro-Rate  Option applies has been made  impracticable  or unlawful by
          compliance   by  such  Bank  in  good   faith  with  any  Law  or  any
          interpretation or application thereof by any Official Body or with any
          request or directive of any such  Official Body (whether or not having
          the force of Law), or

               (ii) such Euro-Rate Option will not adequately and fairly reflect
          the cost to such Bank of the  establishment or maintenance of any such
          Loan, or

               (iii)  after  making  all  reasonable  efforts,  deposits  of the
          relevant amount in Dollars for the relevant Interest Period for a Loan
          to which a Euro-Rate

                                       30
<PAGE>
          Option applies are not available to such Bank at the effective cost of
          funding a proposed Loan in the London interbank market,

          then the Agent shall have the rights specified in Section 4.4.3.

          4.4.3 Agent's and Bank's Rights.

          In the case of any event  specified in Section 4.4.1 above,  the Agent
     shall  promptly so notify the Banks and the Borrowers  thereof,  and in the
     case of an event specified in Section 4.4.2 above, such Bank shall promptly
     so notify  the Agent and  endorse a  certificate  to such  notice as to the
     specific  circumstances  of such notice,  and the Agent shall promptly send
     copies of such notice and certificate to the other Banks and the Borrowers.
     Upon such date as shall be  specified  in such notice  (which  shall not be
     earlier  than the date such  notice is given),  the  obligation  of (A) the
     Banks,  in the case of such notice given by the Agent, or (B) such Bank, in
     the case of such  notice  given by such  Bank,  to allow the  Borrowers  to
     select, convert to or renew a Euro-Rate Option shall be suspended until the
     Agent  shall have later  notified  the  Borrowers,  or such Bank shall have
     later  notified the Agent,  of the Agent's or such Bank's,  as the case may
     be,  determination  that the  circumstances  giving  rise to such  previous
     determination   no  longer  exist.  If  at  any  time  the  Agent  makes  a
     determination  under  Section  4.4.1  and  the  Borrowers  have  previously
     notified  the Agent of its  selection  of,  conversion  to or  renewal of a
     Euro-Rate  Option  and such  Interest  Rate  Option  has not yet gone  into
     effect,  such  notification  shall be deemed to provide for  selection  of,
     conversion to or renewal of the Base Rate Option  otherwise  available with
     respect to such Loans.  If any Bank  notifies the Agent of a  determination
     under  Section  4.4.2,  the  Borrowers  shall,  subject  to the  Borrowers'
     indemnification Obligations under Section 5.6.2, as to any Loan of the Bank
     to which a Euro-Rate  Option applies,  on the date specified in such notice
     either convert such Loan to the Base Rate Option  otherwise  available with
     respect to such Loan or prepay such Loan in  accordance  with  Section 5.4.
     Absent due notice from the Borrowers of conversion or prepayment, such Loan
     shall  automatically  be  converted  to  the  Base  Rate  Option  otherwise
     available with respect to such Loan upon such specified date.

          4.4.4 Uniform Application.

          Notwithstanding  any other  provision of this Section 4.4.1 or Section
     4.4.2,  the Agent and the Banks shall not apply the  provisions  of thereof
     with  respect to the  Borrowers  if it shall not at the time be the general
     policy  or  practice  of  the  Agent  of the  Bank  exercising  its  rights
     thereunder  to apply the  provisions  similar to those of Section  4.4.1 or
     4.4.2 to other  borrowers  in  substantially  similar  circumstances  under
     substantially comparable provisions of other credit agreements.

     4.5 Selection of Interest Rate Options.

     If the  Borrowers  fail to  select a new  Interest  Period  to apply to any
Borrowing  Tranche of Loans under the Euro-Rate  Option at the  expiration of an
existing Interest Period applicable to such Borrowing Tranche in accordance with
the provisions of Section 4.2, the

                                       31
<PAGE>
Borrowers  shall be deemed to have converted such Borrowing  Tranche to the Base
Rate Option commencing upon the last day of the existing Interest Period.


                                   5. PAYMENTS

     5.1 Payments.

     All payments and prepayments to be made in respect of principal,  interest,
Commitment Fees,  Closing Fees, Letter of Credit Fees, Agent's Fee or other fees
or amounts due from the  Borrowers  hereunder  shall be payable  prior to I 1:00
a.m., Camp Hill time, on the date when due without presentment,  demand, protest
or  notice  of any  kind,  all of  which  are  hereby  expressly  waived  by the
Borrowers,  and without set-off,  counterclaim or other deduction of any nature,
and an action therefor shall immediately  accrue. Such payments shall be made to
the Agent at the  Principal  Office for the  ratable  accounts of the Banks with
respect to the Loans in U.S. Dollars and in immediately available funds, and the
Agent  shall  promptly  distribute  such  amounts  to the  Banks in  immediately
available  funds,  provided  that in the event  payments  are received by I 1:00
a.m.,  Camp Hill time,  by the Agent with respect to the Loans and such payments
are not  distributed  to the Banks on the same day  received  by the Agent,  the
Agent shall pay the Banks the Federal Funds  Effective  Rate with respect to the
amount of such  payments for each day held by the Agent and not  distributed  to
the Banks.  The Agent's and each Bank's  statement  of account,  ledger or other
relevant  record shall,  in the absence of manifest  error, be conclusive as the
statement  of the amount of  principal  of and  interest  on the Loans and other
amounts owing under this Agreement.

     5.2 Pro Rata Treatment of Banks.

     Each  borrowing  shall be allocated  to each Bank  according to its Ratable
Share,  and each  selection  of,  conversion  to or renewal of any Interest Rate
Option  and  each  payment  or  prepayment  by the  Borrowers  with  respect  to
principal,  interest,  Commitment Fees,  Closing Fees, Letter of Credit Fees, or
other  fees  (except  for the  Agent's  Fee) or  amounts  due from the  Borrower
hereunder to the Banks with respect to the Loans,  shall  (except as provided in
Section  4.4.3 in the case of an  event  specified  in  Section  4.4  [Euro-Rate
Unascertainable];  or 5.6 [Additional Compensation in Certain Circumstances]) be
made in proportion to the applicable Loans outstanding from each Bank and, if no
such Loans are then  outstanding,  in  proportion  to the Ratable  Share of each
Bank.

     5.3 Interest Payment Dates.

     Interest  on Loans to which the Base Rate Option  applies  shall be due and
payable in arrears on the first  Business Day of each January,  April,  July and
October after the date hereof and on the Expiration Date or upon acceleration of
the Notes.  Interest on Loans to which the Euro-Rate Option applies shall be due
and payable on the last day of each Interest Period for those Loans and, if such
Interest  Period is longer than three (3)  Months,  also on the 90th day of such
Interest Period. Interest on the principal amount of each Loan or other monetary
Obligation

                                       32
<PAGE>
shall be due and payable on demand after such principal amount or other monetary
Obligation  becomes due and payable  (whether on the stated  maturity date, upon
acceleration or otherwise).

                5.4        Voluntary Prepayments.

                    5.4.1 Right to Prepay.

                    The  Borrowers  shall have the right at its option from time
               to time to prepay the Loans in whole or part  without  premium or
               penalty (except as provided in Section 5.6):

                         (I) at any time with  respect  to any Loan to which the
                    Base Rate Option applies,

                         (ii) on the last day of the applicable  Interest Period
                    with respect to Loans to which a Euro-Rate Option applies,

                         (iii) on the  date  specified  in a notice  by any Bank
                    pursuant to Section  4.4  [Euro-Rate  Unascertainable]  with
                    respect to any Loan to which a Euro-Rate Option applies.

                    Whenever  the  Borrowers  desire to  prepay  any part of the
               Loans,  it shall  provide a prepayment  notice to the Agent on or
               before I 1:00 a.m. (Camp Hill time) at least one (1) Business Day
               prior  to the  date of  prepayment  of Loans  setting  forth  the
               following information:

                    (x) the date,  which  shall be a Business  Day, on which the
               proposed prepayment is to be made;

                    (y) a statement indicating the application of the prepayment
               between the Loans; and

                    (z) the total principal  amount of such  prepayment- 9 which
               shall not be less than $ 1 00,000.

                    All prepayment  notices shall be irrevocable.  The principal
               amount  of the  Loans  for  which a  prepayment  notice is given,
               together  with  interest  on such  principal  amount  except with
               respect to Loans to which the Base Rate Option applies,  shall be
               due and payable on the date specified in such  prepayment  notice
               as the  date on  which  the  proposed  prepayment  is to be made.
               Except as provided in Section  4.4.3,  if the Borrowers  prepay a
               Loan but fail to specify the applicable  Borrowing  Tranche which
               the  Borrowers are  prepaying,  the  prepayment  shall be applied
               first to Loans to which the Base  Rate  Option  applies,  then to
               Loans to which  the  Euro-Rate  Option  applies.  Any  prepayment
               hereunder  shall  be  subject  to the  Borrowers'  Obligation  to
               indemnify the Banks under Section 5.6.2.

                                       33
<PAGE>
                    5.4.2 Change of Lending Office.

                    Each  Bank  agrees  that  upon the  occurrence  of any event
               giving rise to increased  costs or other special  payments  under
               Section 4.4.2 [Illegality, etc.] or 5.6.1 [Increased Costs, etc.]
               with respect to such Bank, it will if requested by the Borrowers,
               use reasonable efforts (subject to overall policy  considerations
               of such Bank) to designate  another  lending office for any Loans
               or Letters of Credit  affected by such event,  provided that such
               designation  is made on such terms that such Bank and its lending
               office suffer no economic, legal or regulatory disadvantage, with
               the object of avoiding the  consequence  of the event giving rise
               to the operation of such  Section.  Nothing is this Section 5.4.2
               shall affect or postpone any of the  Obligations of the Borrowers
               or any other  Loan  Party or the  rights of the Agent or any Bank
               provided in this Agreement.

     5.5 [RESERVED]

     5.6 Additional Compensation in Certain Circumstances.

          5.6.1  Increased  Costs  or  Reduced  Return   Resulting  From  Taxes,
     Reserves, Capital Adequacy Requirements, Expenses, Etc.

          If any change in any Law,  guideline or  interpretation or application
     thereof  by  any  Official   Body  charged  with  the   interpretation   or
     administration thereof or compliance with any request or directive (whether
     or not having the force of Law) of any central bank or other Official Body:

               (i) subjects any Bank to any tax or changes the basis of taxation
          with respect to this  Agreement,  the Notes,  the Loans or payments by
          the Borrower of principal, interest, Commitment Fees, or other amounts
          due from the Borrowers  hereunder or under the Notes (except for taxes
          on the overall net income of such Bank),

               (ii) imposes,  modifies or deems applicable any reserve,  special
          deposit or similar  requirement  against  credits  or  commitments  to
          extend  credit  extended  'by, or assets  (funded or  contingent)  of,
          deposits  with or for the account of, or other  acquisitions  of funds
          by, any Bank, or -

               (iii) imposes,  modifies or deems applicable any capital adequacy
          or similar  requirement  (A) against assets (funded or contingent) of,
          or letters of credit,  other credits or  commitments  to extend credit
          extended by, any Bank, or (B) otherwise  applicable to the obligations
          of any Bank under this Agreement,

          and the result of any of the  foregoing  is to  increase  the cost to,
          reduce the income receivable by, or impose any expense (including loss
          of margin) upon any Bank with respect to this Agreement,  the Notes or
          the  making,  maintenance  or funding of any part of the Loans (or, in
          the case of any capital adequacy or similar  requirement,  to have the
          effect of reducing  the rate of return on any Bank's  capital,  taking
          into  consideration  such Bank's  customary  policies  with respect to
          capital

                                       34
<PAGE>
          adequacy) by an amount which such Bank in its sole discretion deems to
          be  material,  such Bank shall from time to time notify the  Borrowers
          and the  Agent of the  amount  determined  in good  faith  (using  any
          averaging and attribution methods employed in good faith) by such Bank
          to be necessary  to  compensate  such Bank for such  increase in cost,
          reduction  of income,  additional  expense or reduced  rate of return.
          Such notice  shall set forth in  reasonable  detail the basis for such
          determination.  Such amount shall be due and payable by the  Borrowers
          to such Bank ten (10) Business Days after such notice is given.

          Notwithstanding  any other provision of this Section 5.6. 1, the Agent
          and the Banks shall not apply the provisions of hereof with respect to
          the  Borrowers  if it shall not at the time be the  general  policy or
          practice of the Agent or the Bank  exercising its rights  hereunder to
          apply the  provisions  similar to those of this Section 5.6.1 to other
          borrowers in substantially  similar  circumstances under substantially
          comparable provisions of other credit agreements.

          5.6.2 Indemnity.

          In  addition  to the  compensation  required  by Section  5.6.  1, the
     Borrowers  shall  indemnify  each Bank against all  liabilities,  losses or
     expenses  (including  loss of  margin,  any  loss or  expense  incurred  in
     liquidating  or  employing  deposits  from  third  parties  and any loss or
     expense  incurred in  connection  with funds  acquired by a Bank to find or
     maintain  Loans subject to a Euro-Rate  Option) which such Bank sustains or
     incurs as a consequence of any

               (i)  payment,  prepayment,  conversion  or renewal of any Loan to
          which a Euro-Rate  Option  applies on a day other than the last day of
          the  corresponding  Interest  Period  (whether or not such  payment or
          prepayment  is  mandatory,  voluntary or automatic  and whether or not
          such payment or prepayment is then due),

               (ii)  attempt by the  Borrowers  to revoke  (expressly,  by later
          inconsistent  notices or otherwise) in whole or part any Loan Requests
          under  Section  2.5 or Section 4.2 or notice  relating to  prepayments
          under Section 5.4, or

               (iii)default by the Borrowers in the performance or observance of
          any  covenant or condition  contained  in this  Agreement or any other
          Loan  Document,  including any failure of the Borrower to pay when due
          (by acceleration or otherwise) any principal, interest, Commitment Fee
          or any other amount due hereunder.

          If any Bank sustains or incurs any such loss or expense, it shall from
     time to time notify the Borrowers of the amount determined in good faith by
     such Bank (which determination may include such assumptions, allocations of
     costs and expenses and averaging or attribution  methods as such Bank shall
     deem  reasonable)  to be necessary to indemnify  such Bank for such loss or
     expense.  Such notice  shall set forth in  reasonable  detail the basis for
     such  determination.  Such amount shall be due and payable by the Borrowers
     to such Bank ten (10) Business Days after such notice is given.

                                       35
<PAGE>
     5.7 Special Provisions Concerning Foreign Borrowers.

     Notwithstanding  the joint and  several  liability  of the  Borrowers  with
respect to the  Obligations,  the liability of a Foreign  Borrower on account of
the principal and interest on the Loans shall be limited to the principal amount
advanced to such Borrower and interest and costs of collection thereon.

                        6. REPRESENTATIONS AND WARRANTIES

     6.1 Representations and Warranties.

     The Loan Parties, jointly and severally, represent and warrant to the Agent
and each of the Banks as follows:

          6.1.1 Organization and Qualification.

          Each  Loan  Party  and  each  Subsidiary  of  each  Loan  Party  is  a
     corporation,  partnership  or limited  liability  company  duly  organized,
     validly existing and in good standing under the laws of its jurisdiction of
     organization.  Each Loan Party and each  Subsidiary  of each Loan Party has
     the  lawful  power to own or lease  its  properties  and to  engage  in the
     business it presently conducts or proposes to conduct.  Each Loan Party and
     each  Subsidiary  of each Loan Party is duly  licensed or qualified  and in
     good  standing  in each  jurisdiction  listed on Schedule 6. 1.1 and in all
     other  jurisdictions where the property owned or leased by it or the nature
     of  the  business  transacted  by  it  or  both  makes  such  licensing  or
     qualification  necessary  except  where the  failure to be so  licensed  or
     qualified would not result in a Material Adverse Change.

          6.1.2 Capitalization and Ownership.

          The  authorized  capital  stock of each  Borrower  and the  issued and
     outstanding  shares thereof (referred to herein as the "Shares") are as set
     forth on Schedule 6.1.2. All of the Shares have been validly issued and are
     fully  paid and  nonassessable.  There are no  options,  warrants  or other
     rights  outstanding  to purchase  any such shares  except as  indicated  on
     Schedule 6.1.2.

          6.1.3 Subsidiaries.

               6.1.3.1 Borrower Subsidiaries.

               The Borrowers have no Subsidiaries  which are not Borrowers other
          than those  represented by investments  permitted by Section 8.2.4(vi)
          or 8.2.6(xi), or as shown on Schedule 6.1.3.

               6.1.3.2 Affiliates and Subsidiaries of the Parent.

                                       36
<PAGE>
               The Parent has no  Subsidiaries,  direct or indirect,  other than
          the Borrowers,  those Persons represented by investments  permitted by
          Section 8.2.4(vi) or 8.2.6(xi), or as shown on Schedule 6.1.3.


               6.1.4 Power and Authority

               Each Loan Party has full power to enter  into,  execute,  deliver
          and carry out this  Agreement and the other Loan Documents to which it
          is a  party,  to  incur  the  Indebtedness  contemplated  by the  Loan
          Documents and to perform its  Obligations  under the Loan Documents to
          which it is a party, and all such actions have been duly authorized by
          all necessary proceedings on its part.

               6.1.5 Validity and Binding Effect.

               This  Agreement has been duly and validly  executed and delivered
          by each Loan Party,  and each other Loan Document which any Loan Party
          is  required  to execute  and deliver on or after the date hereof will
          have been  duly  executed  and  delivered  by such  Loan  Party on the
          required date of delivery of such Loan  Document.  This  Agreement and
          each other Loan Document constitutes, or will constitute, legal, valid
          and binding obligations of each Loan Party which is or will be a party
          thereto on and after its date of delivery thereof, enforceable against
          such Loan Party in  accordance  with its  terms,  except to the extent
          that  enforceability  of any of such Loan  Document  may be limited by
          bankruptcy,  insolvency,  reorganization,  moratorium or other similar
          laws affecting the  enforceability  of creditors'  rights generally or
          limiting the right of specific performance.

               6.1.6 No Conflict.

               Neither the execution and delivery of this Agreement or the other
          Loan  Documents  by  any  Loan  Party  nor  the  consummation  of  the
          transactions  herein or therein  contemplated  or compliance  with the
          terms and  provisions  hereof or thereof by any of them will  conflict
          with,  constitute  a default  under or result in any breach of (i) the
          terms and  conditions of the  certificate  of  incorporation,  bylaws,
          certificate of limited partnership, partnership agreement, certificate
          of   formation,   limited   liability   company   agreement  or  other
          organizational  documents  of any  Loan  Party  or (ii) any Law or any
          material agreement or instrument or order, writ, judgment,  injunction
          or  decree  to which any Loan  Party or any of its  Subsidiaries  is a
          party or by which it or any of its  Subsidiaries  is bound or to which
          it is subject,  or result in the creation or  enforcement of any Lien,
          charge or encumbrance  whatsoever  upon any property (now or hereafter
          acquired)  of any Loan Party or any of its  Subsidiaries  (other  than
          Liens granted under the Loan Documents).

                                       37
<PAGE>
               6.1.7 Litigation.

               There  are  no  actions,  suits,  proceedings  or  investigations
          pending or, to the  knowledge  of any Loan Party,  threatened  against
          such Loan Party or any  Subsidiary of such Loan Party at law or equity
          before any Official  Body which  individually  or in the aggregate may
          result in any Material Adverse Change. None of the Loan Parties or any
          Subsidiaries  of any Loan Party is in  violation  of any order,  writ,
          injunction  or any decree of any  Official  Body which would result in
          any Material Adverse Change.

               6.1.8 Title to Properties.

               Each Loan Party and each  Subsidiary  of each Loan Party has good
          and marketable title to or valid leasehold interest in all properties,
          assets and other rights which it purports to own or lease or which are
          reflected as owned or leased on its books and records,  free and clear
          of all Liens and  encumbrances  except Permitted Liens, and subject to
          the terms and  conditions  of the  applicable  leases.  All  leases of
          property are in full force and effect  without the  necessity  for any
          consent which has not previously  been obtained upon  consummation  of
          the transactions contemplated hereby.

               6.1.9 Financial Statements.

                    (i) Historical  Statements.  The Borrowers have delivered to
               the Agent copies of the Parent's  audited  consolidated  year-end
               financial  statements  for and as of the end of the three  fiscal
               years ended  December  31,  1995 (the  "Annual  Statements").  In
               addition,  the Borrower has  delivered to the Agent copies of its
               unaudited  consolidated  interim  financial  statements  for  the
               fiscal year to date and as of the end of the fiscal quarter ended
               June 30, 1996 (the "Interim  Statements") (the Annual and Interim
               Statements  being  collectively  referred  to as the  "Historical
               Statements").  The Historical  Statements  were compiled from the
               books and records  maintained  by the  Parent's  management,  are
               correct and complete in accordance with GAAP and fairly represent
               the  consolidated  financial  condition  of the  Parent's and its
               Subsidiaries  as of their dates and the results of operations for
               the  fiscal   periods  then  ended  and  have  been  prepared  in
               accordance  with  GAAP,  subject  (in  the  case  of the  Interim
               Statements) to normal year-end audit adjustments.

                    (ii) Financial Projections.  The Borrowers have delivered to
               the Agent  financial  projections  of the  Company for the period
               ended  December 31, 2001 derived from various  assumptions of the
               Borrower's   management   (the  "Financial   Projections").   The
               Financial  Projections  represent a reasonable  range of possible
               results in light of the  history  of the  business,  present  and
               foreseeable  conditions  and  the  intentions  of the  Borrower's
               management.  The  Financial  Projections  accurately  reflect the
               liabilities   of  the   Borrowers   upon   consummation   of  the
               transactions contemplated hereby as of the Closing Date.

                    (iii)Accuracy  of  Financial  Statements.  As of the Closing
               Date, the Borrowers have no liabilities, contingent or otherwise,
               or forward or long-term commitments that are not disclosed in the
               Historical Statements or in the notes thereto, and

                                       38
<PAGE>
               except  as  disclosed   therein   there  are  no   unrealized  or
               anticipated  losses from any  commitments of the Borrowers  which
               may cause a Material Adverse Change.  Since December 31, 1995, no
               Material Adverse Change has occurred.

               6.1.10 Use of Proceeds-, Margin Stock.

               The Loan  Parties  intend  to use the  proceeds  of the  Loans in
          accordance  with Sections 2.8, and 8. 1. I 0. None of the Loan Parties
          or any  Subsidiaries  of any Loan  Party  engages or intends to engage
          principally, or as one of its important activities, in the business of
          extending  credit  for  the  purpose,  immediately,   incidentally  or
          ultimately, of purchasing or carrying margin stock (within the meaning
          of Regulation U). No part of the proceeds of any Loan has been or will
          be used, immediately, incidentally or ultimately, to purchase or carry
          any  margin  stock or to extend  credit to others  for the  purpose of
          purchasing  or  carrying  any margin  stock or to refund  Indebtedness
          originally incurred for such purpose, or for any purpose which entails
          a violation of or which is  inconsistent  with the  provisions  of the
          regulations of the Board of Governors of the Federal  Reserve  System.
          None of the Loan Parties or any  Subsidiary of any Loan Party holds or
          intends to hold margin stock in such amounts that more than 25% of the
          reasonable  value of the assets of any Loan Party or Subsidiary of any
          Loan Party are or will be represented by margin stock.

               6.1.11 Full Disclosure.

               Neither  this  Agreement  nor any other  Loan  Document,  nor any
          certificate,  statement, agreement or other documents furnished to the
          Agent or any Bank in connection  herewith or  therewith,  contains any
          untrue  statement of a material fact or omits to state a material fact
          necessary  in  order  to make  the  statements  contained  herein  and
          therein, in light of the circumstances under which they were made, not
          misleading.  There is no fact known to any Loan Party which materially
          adversely affects the business, property, assets, financial condition,
          results of  operations  or prospects  of the Loan  Parties  taken as a
          whole  which  has not  been  set  forth  in this  Agreement  or in the
          certificates,  statements,  agreements or other documents furnished in
          writing to the Agent and the Banks  prior to or at the date  hereof in
          connection with the transactions contemplated hereby.

               6.1.12 Taxes.

               All federal,  state, local and other tax returns required to have
          been filed with respect to each Loan Party and each Subsidiary of each
          Loan Party have been filed, and payment or adequate provision has been
          made  for the  payment  of all  taxes,  fees,  assessments  and  other
          governmental  charges  which have or may become due  pursuant  to said
          returns or to  assessments  received,  except to the extent  that such
          taxes, fees, assessments and other charges are being contested in good
          faith by appropriate  proceedings  diligently  conducted and for which
          such  reserves or other  appropriate  provisions,  if any, as shall be
          required by GAAP shall have been made. As of the Closing  Date,  there
          are no  agreements  or  waivers  extending  the  statutory  period  of
          limitations  applicable  to any federal  income tax return of any Loan
          Party or Subsidiary of any Loan Party for any period.

                                       39
<PAGE>

               6.1.13 Consents and Approvals.

               No consent, approval,  exemption, order or authorization of, or a
          registration  or filing with, any Official Body or any other Person is
          required by any Law or any agreement in connection with the execution,
          delivery  and  carrying  out of  this  Agreement  and the  other  Loan
          Documents by any Loan Party.

               6.1.14 No Event of Default; Compliance with Instruments.

               No event has occurred and is continuing  and no condition  exists
          or  will  exist  after  giving  effect  to  the  borrowings  or  other
          extensions  of credit to be made on the Closing Date under or pursuant
          to the  Loan  Documents  which  constitutes  an Event  of  Default  or
          Potential Default. None of the Loan Parties or any Subsidiaries of any
          Loan  Party  is in  violation  of (i) any term of its  certificate  of
          incorporation, bylaws, certificate of limited partnership, partnership
          agreement,   certificate  of  formation,   limited  liability  company
          agreement  or other  organizational  documents  or (ii)  any  material
          agreement or  instrument  to which it is a party or by which it or any
          of its properties  may be subject or bound where such violation  would
          constitute a Material Adverse Change.

               6.1.15 Patents, Trademarks, Copyrights, Licenses, Etc.

               Each Loan  Party and each  Subsidiary  of each Loan Party owns or
          possesses all the material patents,  trademarks,  service marks, trade
          names, copyrights,  licenses,  registrations,  franchises, permits and
          rights necessary to own and operate its properties and to carry on its
          business as  presently  conducted  and planned to be conducted by such
          Loan Party or Subsidiary,  without known  possible,  alleged or actual
          conflict with the rights of others.

               6.1.16 Insurance.

               Schedule  6.1.16 lists all insurance  policies and other bonds to
          which any Loan Party or  Subsidiary of any Loan Party is a party as of
          the Closing Date, all of which are valid and in full force and effect.
          No notice has been given or claim made and no grounds  exist to cancel
          or avoid  any of such  policies  or bonds or to  reduce  the  coverage
          provided  thereby.  Such policies and bonds provide adequate  coverage
          from reputable and financially sound insurers in amounts sufficient to
          insure the assets and risks of each Loan Party and each  Subsidiary of
          each Loan Party in accordance  with prudent  business  practice in the
          industry of the Loan Parties and their Subsidiaries.

               6.1.17 Compliance with Laws.

               The Loan Parties and their  Subsidiaries are in compliance in all
          material  respects with all applicable Laws (other than  Environmental
          Laws  which are  specifically  addressed  in  Section  6.1.22)  in all
          jurisdictions  in which any Loan Party or Subsidiary of any Loan Party
          is presently or will be doing business  except where the failure to do
          so would not constitute a Material Adverse Change.

                                       40
<PAGE>
               6.1.18 Material Contracts-, Burdensome Restrictions.

               All material contracts of each Loan Party are valid,  binding and
          enforceable upon such Loan Party and each of the other parties thereto
          in accordance  with their  respective  terms,  and there is no default
          thereunder,  to the Loan Parties'  knowledge,  with respect to parties
          other than such Loan Party except where such failure  would not result
          in a  Material  Adverse  Change.  None of the  Loan  Parties  or their
          Subsidiaries is bound by any contractual obligation, or subject to any
          restriction in any  organization  document,  or any requirement of Law
          which would result in a Material Adverse Change.

               6.1.19 Investment Companies-, Regulated Entities.

               None of the Loan Parties or any Subsidiaries of any Loan Party is
          an "investment  company" registered or required to be registered under
          the  Investment  Company  Act of 1940 or  under  the  "control"  of an
          "investment  company"  as such  terms are  defined  in the  Investment
          Company Act of 1940 and shall not become such an "investment  company"
          or under such "control." None of the Loan Parties or any  Subsidiaries
          of any Loan  Party is subject to any other  Federal  state  statute or
          regulation  limiting  its ability to incur  Indebtedness  for borrowed
          money.

               6.1.20 Plans and Benefit Arrangements.

               Except as set forth on Schedule 6.1.20:


                    (i) The  Borrowers  and each other member of the ERISA Group
               are in  compliance in all material  respects with any  applicable
               provisions  of ERISA with  respect to all  Benefit  Arrangements,
               Plans, Multiple Employer Plans and Multiemployer Plans. There has
               been  no  Prohibited  Transaction  with  respect  to any  Benefit
               Arrangement  or  any  Plan  or,  to  the  best  knowledge  of the
               Borrowers,  with  respect to any  Multiemployer  Plan or Multiple
               Employer  Plan,  which could result in any material  liability of
               the  Borrower  or any  other  member  of  the  ERISA  Group.  The
               Borrowers and all other members of the ERISA Group have made when
               due any and all payments  required to be made under any agreement
               relating to a Multiemployer  Plan or a Multiple  Employer Plan or
               any  Law  pertaining  thereto.  With  respect  to each  Plan  and
               Multiemployer  Plan,  the  Borrower  and each other member of the
               ERISA Group (i) have  fulfilled  in all material  respects  their
               obligations  under the minimum funding  standards of ERISA,  (ii)
               have not incurred any  liability to the PBGC,  and (iii) have not
               had asserted  against them any penalty for failure to fulfill the
               minimum funding requirements of ERISA.

                    (ii)  To  the  best  of  the  Borrowers'   knowledge,   each
               Multiemployer  Plan  and  Multiple  Employer  Plan is able to pay
               benefits thereunder when due.

                    (iii)Neither the Borrowers nor any other member of the ERISA
               Group has  instituted  or intends  to  institute  proceedings  to
               terminate any Plan.

                                       41
<PAGE>
                    (iv) No event  requiring  notice to the PBGC  under  Section
               302(0(4)(A)  of ERISA has occurred or is  reasonably  expected to
               occur with respect to any Plan,  and no amendment with respect to
               which  security is required  under  Section 307 of ERISA has been
               made or is reasonably expected to be made to any Plan.

                    (v) The  aggregate  actuarial  present  value of all benefit
               liabilities  (whether or not vested) under each Plan,  determined
               on a plan termination  basis, as disclosed in, and as of the date
               of, the most  recent  actuarial  report  for such Plan,  does not
               exceed  the  aggregate  fair  market  value of the assets of such
               Plan.

                    (vi) Neither the Borrowers nor any other member of the ERISA
               Group has  incurred or  reasonably  expects to incur any material
               withdrawal  liability  under ERISA to any  Multiemployer  Plan or
               Multiple  Employer  Plan.  Neither  the  Borrowers  nor any other
               member of the ERISA Group has been notified by any  Multiemployer
               Plan or Multiple  Employer Plan that such  Multiemployer  Plan or
               Multiple  Employer Plan has been terminated within the meaning of
               Title IV of ERISA and, to the best knowledge of the Borrowers, no
               Multiemployer  Plan  or  Multiple  Employer  Plan  is  reasonably
               expected to be reorganized  or terminated,  within the meaning of
               Title IV of ERISA.

                    (vii)To the extent that any Benefit  Arrangement is insured,
               the Borrower  and all other  members of the ERISA Group have paid
               when due all premiums required to be paid for all periods through
               the Closing Date. To the extent that any Benefit  Arrangement  is
               funded  other than with  insurance,  the  Borrower  and all other
               members of the ERISA  Group have made when due all  contributions
               required to be paid for all periods through the Closing Date.

                    (viii) All Plans,  Benefit  Arrangements,  Multiple Employer
               Plans and Multiemployer  Plans have been administered in material
               compliance with their terms and applicable Law.

               6.1.21 Employment Matters.

               Each of the Loan  Parties  and each of their  Subsidiaries  is in
          compliance with the Labor Contracts and all applicable federal,  state
          and local labor and employment  Laws including  those related to equal
          employment   opportunity  and  affirmative  action,  labor  relations,
          minimum wage, overtime,  child labor, medical insurance  continuation,
          worker  adjustment and relocation  notices,  immigration  controls and
          worker  and  unemployment  compensation,  where the  failure to comply
          would constitute a Material  Adverse Change.  There are no outstanding
          grievances, arbitration awards or appeals therefrom arising out of the
          Labor   Contracts  or  current  or  threatened   strikes,   picketing,
          handbilling  or other work stoppages or slowdowns at facilities of any
          of the Loan  Parties  which in any case  would  constitute  a Material
          Adverse Change.


                                       42
<PAGE>
               6.1.22 Environmental Matters.

               Except  as  disclosed  on  Schedule  6.1.22  and  except  for (i)
          individual   matters  involving  in  any  one  (1)  year  liabilities,
          expenditures  or other  dollar  amounts  not in  excess of one and one
          quarter  percent (1.25%) of the Parent's  consolidated  assets or (ii)
          matters which do not constitute or would not cause a Material  Adverse
          Change:

                    (i) None of the Loan Parties has received any  Environmental
               Complaint from any Official Body or private Person  alleging that
               such Loan  Party or any prior or  subsequent  owner of any of the
               Property   is  a   potentially   responsible   party   under  the
               Comprehensive  Environmental Response, Cleanup and Liability Act,
               42 U.S.C. section 960 1, et IM. with respect to the Property, and
               none  of the  Loan  Parties  reasonably  believes  that  such  an
               Environmental  Complaint is likely to be  received.  There are no
               pending  or,  to  any  Loan  Party's   knowledge,   Environmental
               Complaints  which  have been  threatened  in  writing to any Loan
               Party or, to any Loan Party's knowledge,  any prior or subsequent
               owner of any of the  Property  pertaining  to, or arising out of,
               any Environmental Conditions on or at the Property.

                    (ii)  To  any  Loan   Party's   knowledge,   there   are  no
               circumstances at, on or under any of the Property that constitute
               a violation of or  non-compliance  with any of the  Environmental
               Laws  by any  Loan  Party,  and  there  are no  past  or  present
               Environmental  Conditions at, on or under any of the Property or,
               to any Loan Party's knowledge, at, on or under adjacent property,
               that prevent  compliance by any Loan Party with the Environmental
               Laws at any of the Property.

                    (iii)To  any  Loan  Party's  knowledge,  neither  any of the
               Property nor any structures,  improvements,  equipment, fixtures,
               activities  or facilities  thereon or  thereunder  contain or use
               Regulated  Substances  except in  compliance  with  Environmental
               Laws.  To any Loan  Party's  knowledge,  there are no  processes,
               facilities,  operations,  equipment or other activities at, on or
               under any of the Property, or, to any Loan Party's knowledge, at,
               on or under  adjacent  property,  that  currently  result  in the
               release or threatened release of Regulated Substances onto any of
               the  Property,  except  to  the  extent  that  such  releases  or
               threatened  releases  are  not a  breach  of or  otherwise  not a
               violation by any Loan Party of the Environmental Laws.

                    (iv) There are no  aboveground  storage  tanks,  underground
               storage tanks or underground  piping  associated with such tanks,
               used  for the  management  of  Regulated  Substances  by the Loan
               Parties at, on or under any of the Property that (a) do not have,
               to the extent required by Environmental  Laws, a full operational
               secondary  containment system in place, and (b) are not otherwise
               in compliance with all Environmental Laws. There are no abandoned
               underground  storage tanks or underground  piping associated with
               such  tanks,  previously  used for the  management  of  Regulated
               Substances  by any Loan Party at, on or under any of the Property
               that have not  either  been  closed in place in  accordance  with
               Environmental  Laws or removed in compliance  with all applicable
               Environmental  Laws  and,  to  any  Loan  Party's  knowledge,  no
               contamination associated with the use of such tanks exists on any
               of the Property that requires remediation by any Loan Party under
               any applicable Environmental Laws.

                                       43
<PAGE>
                    (v) Each Loan  Party  has all  material  permits,  licenses,
               authorizations,   plans  and   approvals   necessary   under  the
               Environmental  Laws for the conduct of the  business of such Loan
               Party as presently  conducted.  Each Loan Party has submitted all
               material  notices,  reports  and other  filings  required  by the
               Environmental  Laws to be  submitted  to an  Official  Body which
               pertain to current operations on any of the Property by such Loan
               Party.

                    (vi) To any Loan  Party's  knowledge,  all  present  on-site
               generation,    storage,   processing,    treatment,    recycling,
               reclamation,  disposal or other use or  management  of  Regulated
               Substances  by the Loan  Parties  at,  on,  or  under  any of the
               Property and all off-site  transportation,  storage,  processing,
               treatment,  recycling,  reclamation,  disposal  or  other  use or
               management of Regulated  Substances generated by the Loan Parties
               have been done in accordance with the Environmental Laws.

               6.1.23 Senior Debt Status.

               The  Obligations  of each Loan Party  under this  Agreement,  the
          Notes, the Guaranty  Agreement and each of the other Loan Documents to
          which  it is a party do rank and  will  rank at  least  pari  passu in
          priority  of payment  with all other  Indebtedness  of such Loan Party
          except  Indebtedness  of such  Loan  Party to the  extent  secured  by
          Permitted  Liens.  There is no Lien upon or with respect to any of the
          properties or income of any Loan Party or Subsidiary of any Loan Party
          which secures  indebtedness or other  obligations of any Person except
          for Permitted Liens.

                            7. CONDITIONS OF LENDING

               The  obligation  of each  Bank to make  Loans and of the Agent to
          issue  Letters of Credit  hereunder is subject to the  performance  by
          each of the Loan Parties of its Obligations to be performed  hereunder
          at or  prior to the  making  of any such  Loans  or  issuance  of such
          Letters of Credit and to the  satisfaction  of the  following  further
          conditions:

     7.1 First Loans.

     On the Closing Date:

          7.1.1 Officer's Certificate.

          The  representations  and  warranties  of  each  of the  Loan  Parties
     contained  in  Section 6 and in each of the other Loan  Documents  shall be
     true and  accurate  on and as of the  Closing  Date with the same effect as
     though such  representations and warranties had been made on and as of such
     date (except  representations  and  warranties  which  relate  solely to an
     earlier date or time,  which  representations  and warranties shall be true
     and correct on and as of the specific  dates or times referred to therein),
     and each of the Loan Parties  shall have  performed  and complied  with all
     covenants  and  conditions  hereof  and  thereof,  no Event of  Default  or
     Potential Default shall have occurred and be continuing or shall exist; and
     there shall be delivered to the

                                       44
<PAGE>
     Agent  for the  benefit  of each  Bank a  certificate  of each of the  Loan
     Parties,  dated the Closing Date and signed by the Chief Executive Officer,
     President or Chief Financial  Officer of each of the Loan Parties,  to each
     such effect.

          7.1.2 Secretary's Certificate.

          There shall be  delivered  to the Agent for the benefit of each Bank a
     certificate  dated  the  Closing  Date and  signed by the  Secretary  or an
     Assistant Secretary of each of the Loan Parties,  certifying as appropriate
     as to:

               (i) all action taken by each Loan Party in  connection  with this
          Agreement and the other Loan Documents;

               (ii) the names of the officer or officers authorized to sign this
          Agreement and the other Loan Documents and the true signatures of such
          officer or officers and specifying the Authorized  Officers  permitted
          to act on behalf of each Loan Party for purposes of this Agreement and
          the true signatures of such officers, on which the Agent and each Bank
          may conclusively rely; and

               (iii)copies  of  its  organizational  documents,   including  its
          certificate   of   incorporation,   bylaws,   certificate  of  limited
          partnership,  partnership  agreement,  certificate  of formation,  and
          limited  liability  company agreement as in effect on the Closing Date
          certified by the  appropriate  state official where such documents are
          filed  in  a  state  office  together  with   certificates   from  the
          appropriate  state  officials as to the  continued  existence and good
          standing of each Loan Party  (dated not earlier  than thirty (30) days
          before the Closing Date) in each state where organized.

          7.1.3 Delivery of Loan Documents.

          The Guaranty Agreement,  Notes,  Intercompany  Subordination Agreement
     and other Loan Documents shall have been duly executed and delivered to the
     Agent for the benefit of the Banks.

          7.1.4 Opinion of Counsel.

          There shall be  delivered  to the Agent for the benefit of each Bank a
     written  opinion of Dechert,  Price & Rhoads,  counsel for the Loan Parties
     (who may rely on the opinions of such other counsel as may be acceptable to
     the Agent),  dated the Closing Date and in form and substance  satisfactory
     to  the  Agent  and  its  counsel  as  to  such  matters  incident  to  the
     transactions contemplated herein as the Agent may reasonably request.

          7.1.5 Legal Details.

          All legal details and proceedings in connection with the  transactions
     contemplated  by this  Agreement and the other Loan  Documents  shall be in
     form and substance

                                       45
<PAGE>
     satisfactory  to the Agent and counsel  for the Agent,  and the Agent shall
     have  received all such other  counterpart  originals or certified or other
     copies  of  such  documents  and   proceedings  in  connection   with  such
     transactions,  in form and  substance  satisfactory  to the  Agent and said
     counsel, as the Agent or said counsel may reasonably request.

          7.1.6 Payment of Fees.

          The  Borrower  shall  have  paid or caused to be paid to the Agent for
     itself and for the account of the Banks to the extent not  previously  paid
     the Closing Fees, all other  commitment and other fees accrued  through the
     Closing  Date and the costs and  expenses for which the Agent and the Banks
     are entitled to be reimbursed.

          7.1.7 Lien Searches and Fleet Payoff.

          The Borrowers  shall have delivered UCC,  judgment and tax lien search
     concerning the Loan Parties which are satisfactory to the Agent as to form,
     content and scope and all outstanding obligations of all Loan Parties owing
     to Fleet  Financial  Corp.  shall be paid and satisfied in full,  all liens
     released  and  all  releases,   UCC-3  termination   statements,   mortgage
     satisfactions and other lien release documents shall have been executed and
     delivered on the Closing Date.

          7.1.8 [RESERVED].

          7.1.9 Consents.

          All  material   consents   required  to  effectuate  the  transactions
     contemplated  hereby  as set  forth on  Schedule  6.1.13  shall  have  been
     obtained.

          7.1.10 Officer's Certificate Regarding, MACS.

          Since  December  31,  1996,  no  Material  Adverse  Change  shall have
     occurred;  prior to the  Closing  Date,  there  shall have been no material
     change in the management of any Loan Party or Subsidiary of any Loan Party;
     and there  shall have been  delivered  to the Agent for the benefit of each
     Bank a certificate dated the Closing Date and signed by the Chief Executive
     Officer,  President or Chief  Financial  Officer of each Loan Party to each
     such effect.

          7.1.11 No Violation of Laws.

          The  making of the Loans and the  issuance  of the  Letters  of Credit
     shall not  contravene  any Law  applicable  to any Loan Party or any of the
     Banks.

          7.1.12 No Actions or Proceedings.

          No action, proceeding, investigation,  regulation or legislation shall
     have been instituted, threatened or proposed before any court, governmental
     agency or legislative  body to enjoin,  restrain or prohibit,  or to obtain
     damages in respect of, this Agreement, the other

                                       46
<PAGE>
     Loan Documents or the consummation of the transactions  contemplated hereby
     or  thereby  or  which,  in the  Agent's  sole  discretion,  would  make it
     inadvisable to consummate the  transactions  contemplated by this Agreement
     or any of the other Loan Documents.

          7.1.13 Insurance Policies-, Certificates of Insurance; Endorsements.

          The Loan Parties shall have delivered evidence acceptable to the Agent
     that adequate  insurance in compliance  with Section 8.1.3 is in full force
     and effect and that all premiums then due thereon have been paid,  together
     with a certified  copy of each Loan Party's  casualty  insurance  policy or
     policies evidencing coverage reasonably satisfactory to the Agent.

     7.2 Each Additional Loan.

     At the time of making any Loans or issuing any Letters of Credit other than
Loans made or  Letters of Credit  issued on the  Closing  Date and after  giving
effect to the proposed  extensions of credit: the representations and warranties
of the Loan  Parties  contained  in Section 6 and in the other  Loan  Documents,
including  the  Schedules  thereto,  shall be true on and as of the date of such
additional  Loan or  Letter  of  Credit  with the same  effect  as  though  such
representations and warranties had been made, and such Schedules  delivered,  on
and as of such date  (except  representations  and  warranties  which  expressly
relate solely to an earlier date or time, which  representations  and warranties
shall be true and correct on and as of the specific  dates or times  referred to
therein)  and the Loan  Parties  shall  have  performed  and  complied  with all
covenants and conditions  hereof, no Event of Default or Potential Default shall
have  occurred  and be  continuing  or shall  exist;  the making of the Loans or
issuance of such Letter of Credit shall not contravene any Law applicable to any
Loan Party or Subsidiary of any Loan Party or any of the Banks; and the Borrower
shall have  delivered to the Agent a duly executed and completed Loan Request or
application for a Letter of Credit as the case may be.

                                  8. COVENANTS

     8.1 Affirmative Covenants.

     The Loan  Parties,  jointly and  severally,  covenant  and agree that until
payment in full of the  Loans,  Reimbursement  Obligations  and Letter of Credit
Borrowings,  and interest  thereon,  expiration or termination of all Letters of
Credit,  satisfaction  of all of the Loan Parties' other  Obligations  under the
Loan Documents and termination of the Commitments, the Loan Parties shall comply
at all times with the following affirmative covenants:

          8.1.1 Preservation of Existence, Etc.

          Each Loan Party shall,  and shall cause each of its  Subsidiaries  to,
     maintain  its legal  existence as a  corporation,  limited  partnership  or
     limited  liability  company  and its  license  or  qualification  and  good
     standing in each jurisdiction in which its ownership or lease of


                                       47
<PAGE>
     property or the nature of its business makes such license or  qualification
     necessary, except as otherwise expressly permitted in Section 8.2.6.

          8.1.2 Payment of Liabilities, Including, Taxes, Etc.

          Each Loan Party shall,  and shall cause each of its  Subsidiaries  to,
     duly pay and discharge all  liabilities to which it is subject or which are
     asserted  against it,  promptly  as and when the same shall  become due and
     payable,  including all taxes, assessments and governmental charges upon it
     or any of its properties,  assets, income or profits,  prior to the date on
     which penalties attach thereto, except to the extent that such liabilities,
     including taxes,  assessments or charges, are being contested in good faith
     and by  appropriate  and lawful  proceedings  diligently  conducted and for
     which such  reserve or other  appropriate  provisions,  if any, as shall be
     required by GAAP shall have been made,  but only to the extent that failure
     to  discharge  any such  liabilities  would not  result  in any  additional
     liability which would  adversely  affect to a material extent the financial
     condition of the Loan  Parties  taken as a whole or which would affect in a
     materially adverse manner the material property of the Borrowers;  provided
     that the Loan Parties and their  Subsidiaries will pay all such liabilities
     forthwith upon the  commencement of proceedings to foreclose any Lien which
     may have attached as security therefor.

          8.1.3 Maintenance of Insurance.

          Each Loan Party shall,  and shall cause each of its  Subsidiaries  to,
     insure its  properties  and assets  against loss or damage by fire and such
     other  insurable  hazards as such assets are  commonly  insured  (including
     fire, extended coverage,  property damage,  workers'  compensation,  public
     liability  and business  interruption  insurance)  and against  other risks
     (including errors and omissions) in such amounts as similar  properties and
     assets are insured by prudent companies in similar  circumstances  carrying
     on similar  businesses,  and with reputable and financially sound insurers,
     including  self-insurance  to the extent  customary.  At the request of the
     Agent,  the Loan Parties  shall  deliver to the Agent and each of the Banks
     from time to time a summary schedule indicating all insurance then in force
     with respect to each of the Loan Parties.

          8.1.4 Maintenance of Properties and Leases.

          Each Loan Party shall,  and shall cause each of its  Subsidiaries  to,
     maintain in good repair,  working  order and condition  (ordinary  wear and
     tear excepted) in accordance with the general  practice of other businesses
     of similar  character and size, all of those properties useful or necessary
     to its business,  and from time to time, such Loan Party will make or cause
     to be made all appropriate repairs, renewals or replacements thereof.

          8.1.5 Maintenance of Patents, Trademarks, Etc.

          Each Loan Party shall,  and shall cause each of its  Subsidiaries  to,
     maintain in full force and effect all patents,  trademarks,  service marks,
     trade  names,   copyrights,   licenses,   franchises,   permits  and  other
     authorizations necessary for the ownership and operation of its

                                       48
<PAGE>
     properties  and  business  if the  failure  so to  maintain  the same would
     constitute a. Material Adverse Change.

          8.1.6 Visitation Rights.

          Each Loan Party shall,  and shall cause each of its  Subsidiaries  to,
     permit any of the officers or authorized  employees or  representatives  of
     the Agent or any of the Banks to visit and  inspect  any of its  properties
     and to examine and make excerpts from its books and records and discuss its
     business  affairs,  finances and accounts  with its  officers,  all in such
     detail  and at such  times and as often as any of the Banks may  reasonably
     request,  provided that each Bank shall provide the Borrowers and the Agent
     with reasonable notice prior to any visit or inspection.

          8.1.7 Keeping of Records and Books of Account.

          The  Borrowers  shall  maintain  and keep  proper  books of record and
     account which enable the  Borrowers,  or the Loan Parties,  as the case may
     be, to issue financial  statements in accordance with GAAP and as otherwise
     required by applicable Laws of any Official Body having  jurisdiction  over
     the Borrowers and in which full,  true and correct entries shall be made in
     all  material  respects of all its  dealings  and  business  and  financial
     affairs.

          8.1.8 Plans and Benefit Arrangements.

          The  Borrower  shall,  and shall cause each other  member of the ERISA
     Group to, comply with ERISA, the Internal Revenue Code and other applicable
     Laws  applicable  to Plans  and  Benefit  Arrangements  except  where  such
     failure,  alone or in conjunction with any other failure,  would not result
     in a Material  Adverse  Change.  Without  limiting  the  generality  of the
     foregoing,  the  Borrowers  shall  cause  all  their  Plans  and all  Plans
     maintained by any member of the ERISA Group to be funded in accordance with
     the minimum  funding  requirements  of ERISA and shall make, and cause each
     member of the ERISA Group to make, in a timely  manner,  all  contributions
     due  to  Plans,   Benefit   Arrangements,   Multiple   Employer  Plans  and
     Multiemployer Plans.

          8.1.9 Compliance with Laws.

          Each Loan Party shall comply with all applicable  Laws,  including all
     Environmental  Laws, in all respects,  provided that it shall not be deemed
     to be a violation of this  Section  8.1.9 if any failure to comply with any
     Law would not result in fines, penalties,  remediation costs, other similar
     liabilities or injunctive  relief which in the aggregate would constitute a
     Material Adverse Change.

                                       49
<PAGE>
          8.1.10 Use of Proceeds.

               8.1.10.1 General.

               The Loan  Parties will use the Letters of Credit and the proceeds
          of the Loans only for (i) general  corporate  purposes and for working
          capital, (ii) to finance Permitted Acquisitions, or (iii) to repay and
          terminate  Indebtedness   outstanding  under  the  Loan  and  Security
          Agreement  dated March 31, 1993 between the Company and Fleet  Capital
          Corporation  (successor  in interest  to  Barclay's  Business  Credit,
          Inc.),  as  amended.  The Loan  Parties  shall not use the  Letters of
          Credit  and  the  proceeds  of  the  Loans  for  any  purposes   which
          contravenes any applicable Law or any provision hereof.

               8.1.10.2 Margin Stock.

               The Loan  Parties  shall  not use the  proceeds  of the  Loans to
          purchase margin stock as more fully provided in Section 6. 1. I 0.

               8.1.10.3 Section 20 Subsidiaries.

               The Loan  Parties  will  not,  directly  or  indirectly,  use any
          portion of the  proceeds of the Loans (i)  knowingly  to purchase  any
          Ineligible  Securities from a Section 20 Subsidiary  during any period
          in which such Section 20 Subsidiary  makes a market in such Ineligible
          Securities,  (ii)  knowingly to purchase  during the  underwriting  or
          placement period Ineligible Securities being underwritten or privately
          placed  by a  Section  20  Subsidiary,  or (iii) to make  payments  of
          principal  or  interest  on  Ineligible  Securities   underwritten  or
          privately  placed by as Section 20 Subsidiary and issued by or for the
          benefit of any Loan Party or any Affiliate of any Loan Party.

          8.1.11 Further Assurances.

          Each Loan Party shall, from time to time, at its expense, do such acts
     and  things  as the  Agent in its sole  discretion  may deem  necessary  or
     advisable from time to time in order to exercise and enforce its rights and
     remedies thereunder.

          8.1.12 Subordination of Intercompany Loans.

          Each Loan Party shall cause any  intercompany  Indebtedness,  loans or
     advances owed by any Loan Party to any other Loan Party to be  subordinated
     pursuant to the terms of the Intercompany Subordination Agreement.

     8.2 Negative Covenants.

     The Loan  Parties,  jointly and  severally,  covenant  and agree that until
payment in full of the  Loans,  Reimbursement  Obligations  and Letter of Credit
Borrowings  and interest  thereon,  expiration or  termination of all Letters of
Credit, satisfaction of all of the Loan Parties'

                                       50
<PAGE>

other Obligations hereunder and termination of the Commitments, the Loan Parties
shall comply with the following negative covenants:


          8.2.1 Indebtedness.

          Each of the Loan  Parties  shall not,  and shall not permit any of its
     Subsidiaries to, at any time create,  incur,  assume or suffer to exist any
     Indebtedness, except:

               (i) Indebtedness under the Loan Documents;

               (ii)  Existing  Indebtedness  as  set  forth  on  Schedule  8.2.1
          (including  any extensions or renewals  thereof,  provided there is no
          increase  in the  amount  thereof or other  significant  change in the
          terms thereof unless otherwise specified on Schedule 8.2. 1;

               (iii)  Capitalized  and  operating  leases  as and to the  extent
          permitted under Section 8.2.15;

               (iv)  Indebtedness  secured by Purchase Money Security  Interests
          not exceeding the amount set forth in clause (ix) of the definition of
          Permitted Liens;

               (v)  Indebtedness  of a Loan Party to another Loan Party which is
          subordinated in accordance with the provisions of Section 8.1.12;

               (vi)  Indebtedness  not  exceeding  $2,000,000  in the  aggregate
          secured by Liens  described  under  clause (xi) of the  definition  of
          Permitted Liens; and

               (vii) (A) $2,000,000 of unsecured seller debt subordinated to the
          Obligations and (B) other seller debt subordinated on terms acceptable
          to Required  Banks having a maturity not earlier than, and on which no
          interest or principal  payments may be made before, 366 days after the
          Expiration Date and having an aggregate principal amount not in excess
          of $4,000,000 minus the principal amount of seller debt referred to in
          clause (A) hereof.

          8.2.2 Liens.

          Each of the Loan  Parties  shall not,  and shall not (x) permit any of
     its Subsidiaries to, at any time create,  incur,  assume or suffer to exist
     any Lien on any of its  property  or assets,  tangible or  intangible,  now
     owned or hereafter  acquired,  or agree or become  liable to do so,  except
     Permitted  Liens or (y) provide to any Person  other than the Agent and the
     Banks a  'negative  pledge"  or other  promise or  undertaking  to keep its
     property free of Liens,  claims or encumbrances  other than with respect to
     property on which Liens are permitted  pursuant to clauses (ix) and (xi) of
     the definition of Permitted Liens.

          8.2.3 Guaranties.

          Each of the Loan  Parties  shall not,  and shall not permit any of its
     Subsidiaries to, at any time,  directly or indirectly,  become or be liable
     in respect of any Guaranty,


                                       51
<PAGE>

     or assume, guarantee, become surety for, endorse or otherwise agree, become
     or remain  directly  or  contingently  liable  upon or with  respect to any
     obligation  or  liability of any other  Person,  except for  Guaranties  of
     Indebtedness  of the Loan Parties  permitted  hereunder or,  subject to the
     limitations  set forth in Section  8.2.20,  Guaranties  of Persons in which
     investments are permitted under Section 8.2.9.

          8.2.4 Loans and Investments.

          Each of the Loan  Parties  shall not,  and shall not permit any of its
     Subsidiaries to, at any time make or suffer to remain  outstanding any loan
     or advance  to, or  purchase,  acquire or own any  stock,  bonds,  notes or
     securities of, or any partnership  interest (whether general or limited) or
     limited  liability company interest in, or any other investment or interest
     in, or make any capital contribution to, any other Person, or agree, become
     or remain liable to do any of the foregoing, except,

               (i) trade  credit  extended on usual and  customary  terms in the
          ordinary course of business;

               (ii)  advances to  employees  to meet  expenses  incurred by such
          employees in the ordinary course of business;

               (iii) Permitted Investments;

               (iv) loans, advances and investments in other Loan Parties;

               (v) investments permitted under Sections 8.2.6 and 8.2.9; and

               (vi)  investments in Persons  engaged in a business  described in
          Section  8.2.10  provided  that if such Persons are not Loan  Parties,
          then such investments shall be subject to the limitations set forth in
          Section 8.2.20.

          8.2.5 Dividends and Related Distributions.

          While any Event of Default exists, each of the Loan Parties shall not,
     and shall not permit any of its  Subsidiaries  to, make or pay, or agree to
     become or remain liable to make or pay, any dividend or other  distribution
     of any nature  (whether in cash,  property,  securities  or  otherwise)  on
     account  of or in  respect  of its  shares of  capital  stock,  partnership
     interests  or  limited  liability  company  interests  on  account  of  the
     purchase,  redemption,  retirement or  acquisition of its shares of capital
     stock (or warrants,  options or rights therefor),  partnership interests or
     limited   liability   company   interests,   except   dividends   or  other
     distributions payable to another Loan Party.

                                       52
<PAGE>
          8.2.6 Liquidations, Mergers, Consolidations, Acquisitions.

          Each of the Loan  Parties  shall not, and shall not pen-nit any of its
     Subsidiaries  to, dissolve,  liquidate or wind-up its affairs,  or become a
     party to any merger or  consolidation,  or acquire  by  purchase,  lease or
     otherwise  all or  substantially  all of the assets or capital stock of any
     other Person, provided that

          (1) any Loan Party may  consolidate  or merge into  another Loan Party
     which is wholly-owned by one or more of the other Loan Parties, and

          (2) any Borrower may  acquire,  whether by purchase or by merger,  (A)
     all of the ownership  interests of another Person or (B)  substantially all
     of assets of another  Person or of a business or division of another Person
     (each an  "Permitted  Acquisition"),  provided  that each of the  following
     requirements is met:

               (i)  such  Person  has had for the  prior  fiscal  year  positive
          operating income (calculated in accordance with GAAP);

               (ii) the  Company  demonstrates  to the Banks pro forma  covenant
          compliance  over the next four (4) quarter  period taking into account
          the projected Total Debt immediately following such acquisitions;

               (iii) if the Loan Parties are acquiring  the ownership  interests
          in such  Person,  such  Person  shall  execute a Joinder and join this
          Agreement  as a Borrower  pursuant  to,  and  otherwise  comply  with,
          Section  II. 1 8 on or before the date of such  Permitted  Acquisition
          (unless it is subject to the provisions of clause (xi) hereof,

               (iv) the board of directors or other equivalent governing body of
          such Person shall have approved  such  Permitted  Acquisition  and the
          Company  shall have  delivered to the Banks  written  evidence of such
          approval prior to such Permitted Acquisition;

               (v) the  business  acquired,  or the  business  conducted  by the
          Person whose ownership  interests are being  acquired,  as applicable,
          shall  be  substantially  the  same as one or more  line or  lines  of
          business conducted by the Borrowers and shall comply with Section 8.2.
          1 0;

               (vi) no  Potential  Default  or  Event  of  Default  shall  exist
          immediately  prior  to and  after  giving  effect  to  such  Permitted
          Acquisition;

               (vii) the Company shall  demonstrate  that the Loan Parties shall
          be in  compliance  with the  covenants  contained in Sections  8.2.15,
          8.2.16 and 8.2.17 after giving effect to such Permitted Acquisition by
          delivering at least thirty (30) Business Days prior to such  Permitted
          Acquisition a certificate in the form of Exhibit 8.2.6 evidencing such
          compliance;

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<PAGE>
               (viii)  the   Consideration   paid  by  the  Borrowers  for  such
          Acquisition  shall not exceed  $8,000,000  and after giving  effect to
          such acquisition,  the Consideration  paid by the Loan Parties for all
          Permitted Acquisitions made during the current fiscal year of the Loan
          Parties shall not exceed an amount equal to (x)  $16,000,000  less (y)
          any amount added to the Outside Investment Amount in such fiscal year,
          unless Required Banks shall, in their sole discretion,  consent to the
          payment of more Consideration;

               (ix) the Company  shall  demonstrate,  on a pro forma basis after
          giving effect to such acquisition,  availability under the Commitments
          of not less than $2,500,000;

               (x) if the  Consideration  to be paid in any acquisition  exceeds
          $2,500,000,  then  the  Company  shall  have  delivered  to the  Agent
          financial  statements  of the Person  acquired  within sixty (60) days
          following such acquisition; and

               (xi) if the  Person  acquired  therein  will not be a  Subsidiary
          after the acquisition, then the Consideration paid in such acquisition
          shall be subject to the limitation set forth in Section 8.2.20.

          8.2.7 Dispositions of Assets or Subsidiaries.

          Each of the Loan  Parties  shall not,  and shall not permit any of its
     Subsidiaries to, sell, convey, assign, lease, abandon or otherwise transfer
     or dispose of,  voluntarily  or  involuntarily,  any of its  properties  or
     assets,  tangible or intangible  (including sale,  assignment,  discount or
     other disposition of accounts, contract rights, chattel paper, equipment or
     general intangibles with or without recourse or of capital stock, shares of
     beneficial  interest,  partnership  interests or limited  liability company
     interests of a Subsidiary of such Loan Party), except:

               (i) transactions  involving the sale of inventory in the ordinary
          course of business;

               (ii) any sale, transfer or lease of assets in the ordinary course
          of business  which are no longer  necessary or required in the conduct
          of such Loan Party's or such Subsidiary's business;

               (iii) (A) any  sale,  transfer  or lease of assets by any  wholly
          owned  Subsidiary  of such Loan  Party to  another  Loan Party or, (B)
          subject  to the  limitations  set  forth  in  Section  8.2.20,  to any
          Subsidiary  which  is  not a  Borrower  or any  Person  in  which  the
          Borrowers are permitted to invest under Section 8.2.9;

               (iv) any sale, transfer or lease of assets in the ordinary course
          of business which are replaced by substitute assets acquired or leased
          within the parameters of Section 8.2.15; and

                                       54
<PAGE>
               (v) sales of assets acquired pursuant to a transaction  permitted
          pursuant to Section  8.2.6 if such sale was reflected in the pro forma
          calculations provided by the Borrowers to the Agent in connection with
          such acquisition.

          8.2.8 Affiliate Transactions.

          Each of the Loan  Parties  shall not,  and shall not permit any of its
     Subsidiaries  to,  enter  into  or  carry  out any  transaction  (including
     purchasing property or services from or selling property or services to any
     Affiliate of any Loan Party or other Person) unless such transaction is not
     otherwise  prohibited  by this  Agreement,  is entered into in the ordinary
     course  of  business  upon  fair  and  reasonable  arm's-length  terms  and
     conditions which are fully disclosed to the Agent and is in accordance with
     all applicable Law.

          8.2.9 Subsidiaries, Partnerships and Joint Ventures.

          Each of the Loan  Parties  shall not,  and the Parent shall not permit
     any of its  Subsidiaries  to,  own or create  directly  or  indirectly  any
     Subsidiaries  other than (i) any Subsidiary which has joined this Agreement
     as a Borrower on the Closing Date and (ii) any Subsidiary  formed after the
     Closing Date which joins this  Agreement as a Borrower  pursuant to Section
     11.18.  Each of the Loan Parties  shall not become or agree to (1) become a
     general or limited  partner in any general or limited  partnership,  except
     that the Loan  Parties  may be general or  limited  partners  in other Loan
     Parties,  (2)  become a member or manager  of, or hold a limited  liability
     company  interest  in, a limited  liability  company,  except that the Loan
     Parties may be members or managers  of, or hold limited  liability  company
     interests in, other Loan Parties,  or (3) become a joint venturer or hold a
     joint venture  interest in any joint venture or any Subsidiary which is not
     a Borrower so long as any transaction described in clauses (1), (2) and (3)
     shall be subject to the limitations set forth in Section 8.2.20.

          8.2.10 Continuation of or Change in Business.

          Each of the Loan  Parties  shall not,  and shall not permit any of its
     Subsidiaries  to, engage in any business other than  activities  within the
     scope of SIC codes  beginning  with "356",  "362","336",  "3321" or "3322",
     substantially  as conducted  and operated by such Loan Party or  Subsidiary
     during the present fiscal year, and such Loan Party or Subsidiary shall not
     permit any material change in such business.

          8.2.11 Plans and Benefit Arrangements.

          Each of the Loan  Parties  shall not,  and shall not permit any of its
     Subsidiaries to:

               (i) fail to satisfy the minimum funding requirements of ERISA and
          the Internal Revenue Code with respect to any Plan;

                                       55
<PAGE>
               (ii) request a minimum  funding waiver from the Internal  Revenue
          Service with respect to any Plan;

               (iii) engage in a Prohibited  Transaction with any Plan,  Benefit
          Arrangement, Multiple Employer Plan or Multiemployer Plan which, alone
          or in conjunction with any other circumstances or set of circumstances
          resulting  in  liability  under  ERISA,  would  constitute  a Material
          Adverse Change;

               (iv) permit the aggregate  actuarial present value of all benefit
          liabilities  (whether or not vested) under each Plan,  determined on a
          plan  termination  basis,  as disclosed  in the most recent  actuarial
          report  completed  with  respect  to such Plan,  to exceed,  as of any
          actuarial  valuation date, the fair market value of the assets of such
          Plan;

               (v) fail to make when due any  contribution to any  Multiemployer
          Plan  that the  Borrower  or any  member  of the  ERISA  Group  may be
          required to make under any  agreement  relating to such  Multiemployer
          Plan, or any Law pertaining thereto;

               (vi) withdraw  (completely or partially)  from any  Multiemployer
          Plan or  withdraw  (or be deemed  under  Section  4062(e)  of ERISA to
          withdraw) from any Multiple  Employer Plan,  where any such withdrawal
          is likely to result in a material  liability  of the  Borrower  or any
          member of the ERISA Group;

               (vii) terminate, or institute proceedings to terminate, any Plan,
          where such termination is likely to result in a material  liability to
          the Borrower or any member of the ERISA Group;

               (viii)  make any  amendment  to any Plan  with  respect  to which
          security is required under Section 307 of ERISA: or

               (ix) fail to give any and all  notices  and make all  disclosures
          and governmental  filings required under ERISA or the Internal Revenue
          Code, where such failure is reasonably  likely to result in a Material
          Adverse Change.

          8.2.12 Fiscal Year.

          The Borrowers shall not change their fiscal year from the twelve-month
     period on the Friday closest to December 31.

          8.2.13 Issuance of Stock.

          Each of the  Borrowers  shall  not,  and shall not  permit  any of its
     Subsidiaries  to, issue any  additional  shares of its capital stock or any
     options,  warrants or other  rights in respect  thereof  except that a Loan
     Party may issue such property to any other Loan Party.

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<PAGE>
          8.2.14 Changes in Organizational Documents.

          Each of the Borrowers  shall not amend in any respect its  certificate
     of  incorporation  (including  any  provisions or  resolutions  relating to
     capital stock),  bylaws,  certificate of limited  partnership,  partnership
     agreement, certificate of formation, limited liability company agreement or
     other  organizational  documents without providing at least forty-five (45)
     calendar  days' prior written notice to the Agent and the Banks and, in the
     event such change would be adverse to the Banks as  determined by the Agent
     in its sole discretion, obtaining the prior written consent of the Required
     Banks.

          8.2.15 Capital Expenditures and Leases.

          Each of the Loan  Parties  shall not,  and shall not permit any of the
     Parent's  Subsidiaries  to, make any payments on account of the purchase or
     lease of any assets which if purchased  would  constitute  fixed assets the
     amount  of  which  (when  measured  over  the  term  of such  lease  or any
     applicable  purchase  agreement  without  taking into  account any interest
     component) exceeds 250% of the Loan Parties'  depreciation expenses for the
     prior fiscal year (the  "Permitted  Amount") in the aggregate in any fiscal
     year;  provided that any portion of the Permitted  Amount which exceeds the
     amount  of such  payments  made in any  fiscal  year  shall be  applied  to
     increase the Permitted Amount for the immediately following fiscal year and
     provided that all such capital  expenditures and leases shall be made under
     usual and  customary  terms and in the  ordinary  course of  business.  The
     Consideration paid in a Permitted  Acquisition shall not be included in, or
     applied to reduce,  the Permitted  Amount and the  depreciation  expense of
     Persons  whose  financial  results  are  set  forth  in  audited  financial
     statements  delivered  to the Agent and the Banks and who are  acquired  in
     Permitted  Acquisitions  shall  be  included  in  the  calculation  of  the
     Permitted Amount.

          8.2.16 Minimum Interest Coverage Ratio.

          The Loan  Parties  shall not permit the ratio of EBIT to  consolidated
     interest  expense of the Borrowers  calculated as of the end of each fiscal
     quarter for the four fiscal quarters then ended, to be less than 2.5 to 1.0

          8.2.17 Minimum Tangible Net Worth.

          The Borrowers shall not at any time permit  Consolidated  Tangible Net
     Worth to be less than the sum of  $7,500,000  plus (x) 50% of  consolidated
     net income of the  Borrowers  for each  fiscal year in which net income was
     earned (as opposed to a net loss) during the period from  December 31, 1995
     through  the  date of  determination  minus  (y) an  amount  not  exceeding
     $1,500,000 in 1996, $2,000,000 in 1997 or $2,500,000 in 1998 and 1999 equal
     to  the  portion  of  Consideration  paid  since  the  Closing  Date  which
     represents intangible assets,  calculated and determined in accordance with
     GAAP.

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<PAGE>
          8.2.18 Maximum Leverage Ratio.

          The  Borrowers  shall not permit at any time their  Leverage  Ratio to
     exceed 3.0 to 1.0.

          8.2.19 Operating- Assets, Acquisitions.

          Substantially all of the Loan Parties'  operating assets which are not
     represented  by  the  Outside  Investment  Amount  shall  be  owned  by the
     Borrowers.  All Permitted  Acquisitions  which are not  represented  by the
     Outside Investment Amount shall be made by a Borrower.

          8.2.20 Outside Investment Limit.

          The Loan Parties  shall not permit at any time the Outside  Investment
     Amount to exceed the Outside Investment Limit.

          8.3 Reporting Requirements.

          The Loan  Parties,  jointly and  severally,  covenant and agree that '
     until payment in full of the Loans, Reimbursement Obligations and Letter of
     Credit  Borrowings and interest  thereon,  expiration or termination of all
     Letters  of  Credit,  satisfaction  of  all  of  the  Loan  Parties'  other
     Obligations hereunder and under the other Loan Documents and termination of
     the Commitments,  the Loan Parties will furnish or cause to be furnished to
     the Agent and each of the Banks:

               8.3.1 [RESERVED]

               8.3.2 Quarterly Financial Statements.

               As soon as  available  and in any event  within  forty-five  (45)
          calendar days after the end of each of the first three fiscal quarters
          in  each  fiscal  year,  financial  statements  of  the  Loan  Parties
          consisting of a consolidated and consolidating balance sheet as of the
          end of such fiscal quarter and related  consolidated and consolidating
          statements  of  income,  stockholders'  equity  and cash flows for the
          fiscal  quarter then ended and the fiscal year through that date,  all
          in reasonable  detail and certified  (subject to normal year-end audit
          adjustments)  by the  Chief  Executive  Officer,  President  or  Chief
          Financial  Officer of the Loan  Parties  as having  been  prepared  in
          accordance  with GAAP,  consistently  applied,  and  setting  forth in
          comparative   form  the  respective   financial   statements  for  the
          corresponding date and period in the previous fiscal year.

               8.3.3 Annual Financial Statements.

               As soon as  available  and in any event  within  ninety (90) days
          after  the end of each  fiscal  year of the  Loan  Parties,  financial
          statements  of the  Loan  Parties  consisting  of a  consolidated  and
          consolidating  balance  sheet as of the end of such fiscal  year,  and
          related

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<PAGE>
          consolidated  and  consolidating  statements of income,  stockholders'
          equity  and  cash  flows  for  the  fiscal  year  then  ended,  all in
          reasonable  detail and setting forth in comparative form the financial
          statements as of the end of and for the preceding  fiscal year and, as
          to the consolidated  statements only, certified by Arthur Andersen LLP
          or  other  independent  certified  public  accountants  of  nationally
          recognized standing. The certificate or report of accountants shall be
          free of qualifications (other than any consistency  qualification that
          may result from a change in the method  used to prepare the  financial
          statements as to which such accountants concur) and shall not indicate
          the  occurrence  or existence of any event,  condition or  contingency
          which would  materially  impair the prospect of payment or performance
          of any  covenant,  agreement  or duty of the Loan  Parties  taken as a
          whole under any of the Loan Documents.

               8.3.4 Certificate of the Borrower.

               Concurrently with the financial statements furnished to the Agent
          and to the Banks  pursuant to Sections  8.3.1 and 8.3.3, a certificate
          of the Loan Parties signed by the Chief Executive  Officer,  President
          or Chief  Financial  Officer of the Borrowers,  in the form of Exhibit
          8.3.4,  to the effect that,  except as  described  pursuant to Section
          8.3.5,  (i)  the  representations  and  warranties  of  the  Borrowers
          contained in Section 6 and in the other Loan Documents are true on and
          as of the date of such certificate with the same effect as though such
          representations  and  warranties  had been made on and as of such date
          (except  representations  and warranties which expressly relate solely
          to an earlier date or time) and the Loan Parties  have  performed  and
          complied with all covenants and  conditions  hereof,  (ii) no Event of
          Default or Potential  Default  exists and is continuing on the date of
          such  certificate  and (iii)  containing  calculations  in  sufficient
          detail  to  demonstrate  compliance  as of the date of such  financial
          statements with all financial covenants contained in Section 8.2.

               8.3.5 Notice of Default.

               Promptly  after any  officer of any Loan Party has learned of the
          occurrence of an Event of Default or Potential  Default, a certificate
          signed by the Chief  Executive  Officer,  President or Chief Financial
          Officer of such Loan Party  setting forth the details of such Event of
          Default or Potential  Default and the action which the such Loan Party
          proposes to take with respect thereto.

               8.3.6 Notice of Litigation.

               Promptly after the commencement  thereof,  notice of all actions,
          suits, proceedings or investigations before or by any Official Body or
          any other  Person  against  any Loan Party or  Subsidiary  of any Loan
          Party which  involve a claim or series of claims in excess of $500,000
          or which if adversely  determined  would constitute a Material Adverse
          Change.

               8.3.7 Certain Events.

               Written notice to the Agent:

                                       59
<PAGE>
                    (i) at least thirty (30) calendar days prior  thereto,  with
               respect to any Permitted Acquisition; or

                    (ii) within the time limits set forth in Section 8.2.14, any
               amendment to the organizational documents of any Loan Party.

               8.3.8 Budgets, Forecasts, Other Reports and Information.

               Promptly upon their becoming available to the Borrowers:

                    (i) the annual  budget and any forecasts or  projections  of
               the  Borrowers,  to be  supplied  not later  than sixty (60) days
               prior to  commencement  of the  fiscal  year to which  any of the
               foregoing may be applicable,

                    (ii) any reports including  management  letters submitted to
               the  Borrowers or any Loan Party by  independent  accountants  in
               connection with any annual, interim or special audit,

                    (iii) any  reports,  notices or proxy  statements  generally
               distributed by the Borrower or any Loan Party to its stockholders
               on a date no later than the date supplied to such stockholders,

                    (iv) regular or periodic reports, including Forms 10-K, 10-Q
               and 8-K, registration  statements and prospectuses,  filed by any
               Loan Party with the Securities and Exchange Commission,

                    (v) a copy of any  order  in any  proceeding  to  which  any
               Borrower  is a party  issued by any  Official  Body if such order
               would result in a Material Adverse Change, and

                    (vi) such other reports and  information as any of the Banks
               may from time to time  reasonably  request.  The Borrowers  shall
               also notify the Banks  promptly of the  enactment  or adoption of
               any Law which may result in a Material Adverse Change.

               8.3.9 Notices Regarding- Plans and Benefit Arrangements.

                    8.3.9.1 Certain Events.

                    Promptly  upon  becoming  aware of the  occurrence  thereof,
               notice  (including  the nature of the event and, when known,  any
               action taken or threatened by the Internal Revenue Service or the
               PBGC with respect thereto) of-

                         (i) any Reportable Event with respect to any Loan Party
                    or any  other  member  of the  ERISA  Group  (regardless  of
                    whether the  obligation to report said  Reportable  Event to
                    the PBGC has been waived),

                                       60
<PAGE>
                         (ii) any Prohibited Transaction which could subject any
                    Loan  Party or any  other  member  of the  ERISA  Group to a
                    material civil penalty  assessed  pursuant to Section 502(i)
                    of ERISA or a material  tax  imposed by Section  4975 of the
                    Internal Revenue Code in connection with any Plan,  Multiple
                    Employer  Plan,  Benefit  Arrangement  or any trust  created
                    thereunder,

                         (iii) any  assertion  with respect to any Loan Party or
                    any other member of the ERISA Group, of material  withdrawal
                    liability with respect to any Multiemployer Plan,

                         (iv)  any  partial  or  complete   withdrawal   from  a
                    Multiemployer  Plan by any Loan Party or any other member of
                    the  ERISA  Group  under  Title  IV of ERISA  (or  assertion
                    thereof),  where  such  withdrawal  is  likely  to result in
                    material withdrawal liability,

                         (v) any cessation of  operations  (by any Loan Party or
                    any other  member of the ERISA  Group) at a facility  in the
                    circumstances described in Section 4062(e) of ERISA,

                         (vi)  withdrawal  by any Loan Party or any other member
                    of the ERISA Group from a Multiple Employer Plan,

                         (vii) a failure by any Loan  Party or any other  member
                    of the ERISA  Group to make a payment to a Plan  required to
                    avoid imposition of a Lien under Section 302(f) of ERISA,

                         (viii) the adoption of an amendment to a Plan requiring
                    the  provision of security to such Plan  pursuant to Section
                    307 of ERISA, or

                         (ix) any change in the actuarial assumptions or funding
                    methods  used for any Plan,  where the effect of such change
                    is to materially  increase or materially reduce the unfunded
                    benefit   liability   or   obligation   to   make   periodic
                    contributions.

                    8.3.9.2  Notices  of  Involuntary   Termination  and  Annual
               Reports.

                    Promptly  after receipt  thereof,  copies of (a) all notices
               received by the  Borrowers or any other member of the ERISA Group
               of the  PBGC's  intent  to  terminate  any Plan  administered  or
               maintained by the Borrowers or any member of the ERISA Group,  or
               to have a trustee  appointed to administer any such Plan; and (b)
               at the request of the Agent or any Bank each  annual  report (IRS
               Form 5500 series) and all accompanying schedules, the most recent
               actuarial   reports,   the  most  recent  financial   information
               concerning  the  financial  status of each Plan  administered  or
               maintained  by the  Borrowers  or any  other  member of the ERISA
               Group, and schedules showing the amounts contributed to each such
               Plan by or on behalf of the  Borrower or any other  member of the
               ERISA Group in which any of their personnel participate

                                       61
<PAGE>
               or from which  such  personnel  may  derive a  benefit,  and each
               Schedule B (Actuarial  Information) to the annual report filed by
               the  Borrowers  or any other  member of the ERISA  Group with the
               Internal Revenue Service with respect to each such Plan.

                    8.3.9.3 Notice of Voluntary Termination.

                    Promptly upon the filing  thereof,  copies of any Form 5 3 1
               0, or any  successor  or  equivalent  form to Form 5 3 1 0, filed
               with the PBGC in connection with the termination of any Plan.

               8.3.10 Material Venture Investments.

               Concurrently with the financial statements furnished to the Agent
          and to the  Banks  pursuant  to  Section  8.3.2  and  8.3.3,  a report
          describing all Material Venture  Investments and concurrently with the
          annual  statements   referred  to  in  Section  8.3.3,  the  financial
          statements  and a budget (of the type  described in Section 8.3.8) for
          each Material Venture Investment.

                                   9. DEFAULT

     9.1 Events of Default.

     An Event of Default  shall mean the  occurrence  or existence of any one or
more of the  following  events or conditions  (whatever the reason  therefor and
whether voluntary, involuntary or effected by operation of Law):

          9.1.1 Payments Under Loan Documents.

          Any  Borrower  (x)  shall  fail  to pay  any  principal  of  any  Loan
     (including scheduled installments, mandatory prepayments or the payment due
     at maturity), Reimbursement Obligation or Letter of Credit Borrowing or (y)
     shall fail to pay any  interest on any Loan,  Reimbursement  Obligation  or
     Letter of Credit  Borrowing when due in accordance with the terms hereof or
     any other amount owing hereunder or under the other Loan Documents and such
     failure  to pay  interest  or other  amount  shall  continue  for three (3)
     Business Days after such interest or other amount becomes due in accordance
     with the terms hereof or thereof;

          9.1.2 Breach of Warranty.

          Any  representation  or  warranty  made at any time by any of the Loan
     Parties herein or by any of the Loan Parties in any other Loan Document, or
     in any certificate, other instrument or statement furnished pursuant to the
     provisions  hereof or thereof , including with respect to Section 6.1.9 and
     irrespective of the actual  knowledge of any Borrower,  shall prove to have
     been false or misleading in any material respect as of the time it was made
     or furnished;

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<PAGE>
          9.1.3 Breach of Negative Covenants or Visitation Rights.

          Any of the Loan Parties shall default in the observance or performance
     of any covenant contained in Section 8.1.6 or Section 8.2;

          9.1.4 Breach of Other Covenants.

          Any of the Loan Parties shall default in the observance or performance
     of any other covenant,  condition or provision  hereof or of any other Loan
     Document and such default shall continue  unremedied for a period of twenty
     (20) Business Days after any officer of any Loan Party becomes aware of the
     occurrence  thereof (such grace period to be  applicable  only in the event
     such  default can be remedied by  corrective  action of the Loan Parties as
     determined by the Agent in its sole discretion);

          9.1.5 Defaults in Other Agreements or Indebtedness.

          A default or event of default  shall occur at any time under the terms
     of any other agreement  involving borrowed money or the extension of credit
     or any other  Indebtedness under which any Loan Party may be obligated as a
     borrower or  guarantor  in excess of $500,000  in the  aggregate,  and such
     breach,  default or event of default consists of the failure to pay (beyond
     any period of grace permitted with respect thereto,  whether waived or not)
     any indebtedness  when due (whether at stated maturity,  by acceleration or
     otherwise) or if such breach or default pen-nits or causes the acceleration
     of any  indebtedness  (whether or not such right shall have been waived) or
     the termination of any commitment to lend;

          9.1.6 Final Judgments or Orders.

          Any final  judgments  or orders for the  payment of money in excess of
     $500,000  in the  aggregate  shall be entered  against  any Loan Party by a
     court  having   jurisdiction  in  the  premises,   which  judgment  is  not
     discharged,  vacated,  bonded or stayed  pending  appeal within a period of
     thirty (30) days from the date of entry;

          9.1.7 Loan Document Unenforceable.

          Any of the Loan Documents  shall cease to be legal,  valid and binding
     agreements enforceable against the party executing the same or such party's
     successors  and  assigns  (as  permitted   under  the  Loan  Documents)  in
     accordance  with  the  respective  terms  thereof  or  shall  in any way be
     terminated  (except in accordance  with its terms) or become or be declared
     ineffective  or  inoperative or shall in any way be challenged or contested
     or cease to give or  provide  the  respective  Liens,  security  interests,
     rights, titles,  interests,  remedies,  powers or privileges intended to be
     created thereby;

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<PAGE>
          9.1.8 Uninsured Losses; Proceedings Against Assets.

          There shall occur any material  uninsured  damage to or loss, theft or
     destruction  of any of the  Borrowers'  tangible  property  in  excess of $
     1,000,000 or any other of the Loan  Parties' or any of their  Subsidiaries'
     assets are attached, seized, levied upon or subjected to a writ or distress
     warrant;  or such come  within the  possession  of any  receiver,  trustee,
     custodian  or  assignee  for the benefit of  creditors  and the same is not
     cured within thirty (30) days thereafter;

          9.1.9 Notice of Lien or Assessment.

          A notice of Lien or  assessment  in excess of $500,000  which is not a
     Permitted Lien is filed of record with respect to all or any part of any of
     the  Loan  Parties'  or any of their  Subsidiaries'  assets  by the  United
     States, or any department,  agency or  instrumentality  thereof,  or by any
     state, county,  municipal or other governmental agency, including the PBGC,
     or any taxes or debts  owing at any time or times  hereafter  to any one of
     these  becomes  payable  and the same is not paid  within  thirty (30) days
     after the same becomes payable;

          9.1.10 Insolvency.

          Any Loan Party or any  Subsidiary of a Loan Party ceases to be solvent
     or admits in writing its inability to pay its debts as they mature;

          9.1.11 Events Relating to Plans and Benefit Arrangements.

          Any of the following occurs: (i) any Reportable Event, which the Agent
     determines in good faith  constitutes  grounds for the  termination  of any
     Plan by the PBGC or the appointment of a trustee to administer or liquidate
     any Plan,  shall have occurred and be continuing;  (ii)  proceedings  shall
     have been  instituted  or other action taken to  terminate  any Plan,  or a
     termination  notice shall have been filed with respect to any Plan; (iii) a
     trustee shall be appointed to  administer  or liquidate any Plan;  (iv) the
     PBGC shall give notice of its intent to institute  proceedings to terminate
     any Plan or Plans or to appoint a trustee to  administer  or liquidate  any
     Plan; and, in the case of the occurrence of (i), (ii), (iii) or (iv) above,
     the Agent  determines  in good  faith  that the  amount  of the  Borrowers'
     liability  is likely to exceed 10% of their  Tangible  Net  Worth;  (v) any
     Borrower  or any  member  of  the  ERISA  Group  shall  fail  to  make  any
     contributions when due to a Plan or a Multiemployer Plan; (vi) the Borrower
     or any other  member of the ERISA Group shall make any  amendment to a Plan
     with  respect to which  security  is required  under  Section 307 of ERISA;
     (vii) any  Borrower or any other  member of the ERISA Group shall  withdraw
     completely or partially from a Multiemployer  Plan;  (viii) any Borrower or
     any other  member of the ERISA  Group  shall  withdraw  (or shall be deemed
     under Section 4062(e) of ERISA to withdraw) from a Multiple  Employer Plan;
     or (ix) any  applicable  Law is  adopted,  changed  or  interpreted  by any
     Official  Body with  respect to or otherwise  affecting  one or more Plans,
     Multiemployer Plans or Benefit Arrangements and, with respect to any of the
     events specified in (v), (vi), (vii),  (viii) or (ix), the Agent determines
     in good faith that

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     any such occurrence would be reasonably  likely to materially and adversely
     affect the total  enterprise  represented  by the  Borrowers  and the other
     members of the ERISA Group;

          9.1.12 Cessation of Business.

          Any Loan Party or  Subsidiary  of a Loan Party  ceases to conduct  its
     business as contemplated, except as expressly permitted under Section 8.2.6
     or 8.2.7,  or any Loan Party or  Subsidiary  of a Loan  Party is  enjoined,
     restrained  or in any way prevented by court order from  conducting  all or
     any material part of its business and such  injunction,  restraint or other
     preventive  order is not dismissed  within thirty (30) days after the entry
     thereof-,

          9.1.13 Change of Control.

          (i) Any person (other than Thomas C. Foley or a Permitted  Transferee)
     or group of persons  (within the meaning of Sections  13(a) or 14(a) of the
     Securities Exchange Act of 1934, as amended) shall have acquired beneficial
     ownership  of  (within  the  meaning  of  Rule  13d-3  promulgated  by  the
     Securities  and  Exchange  Commission  under  said  Act) 25% or more of the
     voting capital stock of the Parent;  or (ii) within a period of twelve (12)
     consecutive  calendar months,  individuals who were directors of the Parent
     on the first day of such period shall cease to constitute a majority of the
     board of directors of the Parent;

          9.1.14 Involuntary Proceedings.

          A proceeding shall have been instituted in a court having jurisdiction
     in the premises seeking a decree or order for relief in respect of any Loan
     Party or  Subsidiary  of a Loan  Party in an  involuntary  case  under  any
     applicable bankruptcy, insolvency,  reorganization or other similar law now
     or hereafter in effect,  or for the appointment of a receiver,  liquidator,
     assignee,  custodian,  trustee,   sequestrator,   conservator  (or  similar
     official)  of any  Loan  Party  or  Subsidiary  of a  Loan  Party  for  any
     substantial  part of its property,  or for the winding-up or liquidation of
     its affairs,  and such proceeding shall remain  undismissed or unstayed and
     in effect for a period of thirty (30)  consecutive days or such court shall
     enter  a  decree  or  order  granting  any of the  relief  sought  in  such
     proceeding; or

          9.1.15 Voluntary Proceedings.

          Any  Loan  Party  or  Subsidiary  of a Loan  Party  shall  commence  a
     voluntary case under any applicable bankruptcy, insolvency,  reorganization
     or other similar law now or hereafter in effect, shall consent to the entry
     of an order for relief in an involuntary  case under any such law, or shall
     consent to the appointment or taking possession by a receiver,  liquidator,
     assignee, custodian, trustee,  sequestrator,  conservator (or other similar
     official)  of itself or for any  substantial  part of its property or shall
     make a general  assignment  for the  benefit  of  creditors,  or shall fail
     generally  to pay its debts as they become due, or shall take any action in
     furtherance of any of the foregoing.

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     9.2 Consequences of Event of Default.

          9.2.1  Events  of  Default  Other  Than   Bankruptcy,   Insolvency  or
     Reorganization Proceedings.

          If an Event of Default  specified  under Sections 9.1.1 through 9.1.13
     shall  occur and be  continuing,  the Banks and the Agent shall be under no
     further  obligation to make Loans or issue  Letters of Credit,  as the case
     may be, and the Agent may,  and upon the  request  of the  Required  Banks,
     shall (i) by written notice to the Borrowers,  declare the unpaid principal
     amount of the Notes then outstanding and all interest accrued thereon,  any
     unpaid  fees and all  other  Indebtedness  of the  Borrowers  to the  Banks
     hereunder  and  thereunder  to be forthwith  due and payable,  and the same
     shall thereupon  become and be immediately due and payable to the Agent for
     the benefit of each Bank without presentment,  demand, protest or any other
     notice of any kind,  all of which are  hereby  expressly  waived,  and (ii)
     require the Borrowers to, and the Borrowers shall  thereupon,  deposit in a
     non-interest  bearing  account with the Agent,  as cash  collateral for its
     Obligations under the Loan Documents, an amount equal to the maximum amount
     currently  or  at  any  time  thereafter  available  to  be  drawn  on  all
     outstanding Letters of Credit, and the Borrowers hereby pledge to the Agent
     and the Banks, and grant to the Agent and the Banks a security interest in,
     all such cash as  security  for such  Obligations.  Upon the  curing of all
     existing Events of Default to the  satisfaction of the Required Banks,  the
     Agent shall return such cash collateral to the Borrowers; and

          9.2.2 Bankruptcy, Insolvency or Reorganization Proceedings

          If an Event of Default  specified under Section 9.1.14 or 9.1.15 shall
     occur,  the  Banks  shall be under no  further  obligations  to make  Loans
     hereunder and the unpaid principal amount of the Notes then outstanding and
     all interest accrued thereon, any unpaid fees and all other Indebtedness of
     the Borrowers to the Banks  hereunder and  thereunder  shall be immediately
     due and  payable,  without  presentment,  demand,  protest or notice of any
     kind, all of which are hereby expressly waived; and

          9.2.3 Set-off.

          If an Event of Default shall occur and be continuing, any Bank to whom
     any Obligation is owed by any Loan Party  hereunder or under any other Loan
     Document or any  participant of such Bank which has agreed in writing to be
     bound by the  provisions  of Section 10. 1 3 and any branch,  Subsidiary or
     Affiliate of such Bank or participant  anywhere in the world shall have the
     right,  in  addition  to all other  rights and  remedies  available  to it,
     without notice to such Loan Party, to set-off against and apply to the then
     unpaid balance of all the Loans and all other  Obligations of the Borrowers
     and the other Loan Parties  hereunder or under any other Loan  Document any
     debt owing to, and any other  funds held in any manner for the  account of,
     the  Borrowers or such other Loan Party by such Bank or  participant  or by
     such branch,  Subsidiary or  Affiliate,  including all funds in all deposit
     accounts  (whether  time  or  demand,  general  or  special,  provisionally
     credited or finally credited,  or otherwise) now or hereafter maintained by
     the  Borrowers  or such  other  Loan  Party  for its own  account  (but not
     including

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     funds held in custodian or trust accounts) with such Bank or participant or
     such branch, Subsidiary or Affiliate. Such right shall exist whether or not
     any Bank or the Agent shall have made any demand  under this  Agreement  or
     any other  Loan  Document,  whether or not such debt owing to or funds held
     for the account of the Borrowers or such other Loan Party is or are matured
     or unmatured and regardless of the existence or adequacy of any Guaranty or
     any other security, right or remedy available to any Bank or the Agent; and

          9.2.4 Suits, Actions, Proceedings.

          If an Event of Default shall occur and be  continuing,  and whether or
     not the Agent shall have  accelerated the maturity of Loans pursuant to any
     of the foregoing  provisions of this Section 9.2, the Agent or any Bank, if
     owed any  amount  with  respect to the Notes,  may  proceed to protect  and
     enforce  its  rights  by  suit  in  equity,  action  at  law  and/or  other
     appropriate  proceeding,  whether  for  the  specific  performance  of  any
     covenant or agreement  contained in this Agreement or the Notes,  including
     as permitted by applicable Law the obtaining of the ex parte appointment of
     a receiver,  and, if such amount shall have become due, by  declaration  or
     otherwise,  proceed to enforce  the  payment  thereof or any other legal or
     equitable right of the Agent or such Bank; and

          9.2.5 Application of Proceeds.

          From and after  the date on which  the  Agent  has  taken  any  action
     pursuant to this Section 9.2 and until all  Obligations of the Loan Parties
     have been paid in full, any and all proceeds received by the Agent from any
     sale or other  disposition  of the  property  of the  Borrower  or any part
     thereof, or the exercise of any other remedy by the Agent, shall be applied
     as follows:

               (i) first, to reimburse the Agent and the Banks for out-of pocket
          costs, expenses and disbursements, including reasonable attorneys' and
          paralegals'  fees and  legal  expenses,  incurred  by the Agent or the
          Banks in connection  with  collection of any Obligations of any of the
          Loan Parties under any of the Loan Documents,  including advances made
          by the  Banks  or any  one of  them or the  Agent  for the  reasonable
          maintenance,   preservation,   protection   or   enforcement   of,  or
          realization upon, the property of the Borrowers including advances for
          taxes,  insurance,  repairs  and  the  like  and  reasonable  expenses
          incurred to sell or otherwise realize on, or prepare for sale or other
          realization on, any of such property;

               (ii) second,  to the repayment of all  Indebtedness  then due and
          unpaid of the Loan Parties to the Banks  incurred under this Agreement
          or any of the other Loan  Documents,  whether of principal,  interest,
          fees, expenses or otherwise, in such manner as the Agent may determine
          in its discretion; and

               (iii) the balance, if any, as required by Law.

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          9.2.6 Other Rights and Remedies.

          In  addition  to all of the  rights  and  remedies  contained  in this
     Agreement or in any of the other Loan  Documents,  the Agent shall have all
     of the rights and remedies  available  under  applicable  Law, all of which
     rights and remedies  shall be cumulative and  non-exclusive,  to the extent
     permitted by Law. The Agent may, and upon the request of the Required Banks
     shall,  exercise all post-default rights granted to the Agent and the Banks
     under the Loan Documents or applicable Law.

                                  10. THE AGENT

     10.1 Appointment.

     Each Bank hereby irrevocably  designates,  appoints and authorizes PNC Bank
to act as Agent for such Bank under this Agreement and to execute and deliver or
accept on behalf of each of the Banks the other Loan Documents. Each Bank hereby
irrevocably authorizes,  and each holder of any Note by the acceptance of a Note
shall be deemed  irrevocably to authorize,  the Agent to take such action on its
behalf under the  provisions of this  Agreement and the other Loan Documents and
any other  instruments and agreements  referred to herein,  and to exercise such
powers and to perform-n such duties hereunder as are  specifically  delegated to
or required of the Agent by the terms  hereof,  together with such powers as are
reasonably  incidental thereto. PNC Bank agrees to act as the Agent on behalf of
the Banks to the extent provided in this Agreement.

     10.2 Delegation of Duties.

     The Agent may perform any of its duties  hereunder by or through  agents or
employees  (provided such delegation does not constitute a relinquishment of its
duties as Agent) and,  subject to Sections  10.5 and 10.6,  shall be entitled to
engage and pay for the advice or services of any attorneys, accountants or other
experts  concerning all matters  pertaining to its duties  hereunder and to rely
upon any advice so obtained.

     10.3 Nature of Duties; Independent Credit Investigation.

     The Agent shall have no duties or  responsibilities  except those expressly
set   forth   in  this   Agreement   and  no   implied   covenants,   functions,
responsibilities,  duties,  obligations,  or liabilities shall be read into this
Agreement or otherwise  exist.  The duties of the Agent shall be mechanical  and
administrative in nature; the Agent shall not have by reason of this Agreement a
fiduciary  or trust  relationship  in respect of any Bank;  and  nothing in this
Agreement,  expressed or implied,  is intended to or shall be so construed as to
impose upon the Agent any  obligations  in respect of this  Agreement  except as
expressly set forth herein.  Without  limiting the  generality of the foregoing,
the use of the term "agent" in this Agreement with reference to the Agent is not
intended to connote any  fiduciary  or other  implied (or  express)  obligations
arising under agency doctrine of any applicable Law. Instead,  such term is used
merely as a matter of market custom,

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and is intended to create or reflect only an administrative relationship between
independent  contracting parties. Each Bank expressly  acknowledges (i) that the
Agent has not made any  representations  or  warranties to it and that no act by
the Agent  hereafter  taken,  including  any review of the affairs of any of the
Loan Parties,  shall be deemed to constitute any  representation  or warranty by
the Agent to any Bank; (ii) that it has made and will continue to make,  without
reliance  upon the Agent,  its own  independent  investigation  of the financial
condition and affairs and its own appraisal of the  creditworthiness  of each of
the  Loan  Parties  in  connection  with  this  Agreement  and  the  making  and
continuance  of the Loans  hereunder;  and (iii)  except as  expressly  provided
herein, that the Agent shall have no duty or responsibility, either initially or
on a continuing  basis, to provide any Bank with any credit or other information
with respect  thereto,  whether coming into its possession  before the making of
any Loan or at any time or times thereafter.

     10.4 Actions in Discretion of Agent; Instructions from the Banks.

     The Agent agrees,  upon the written  request of the Required Banks, to take
or refrain  from  taking any action of the type  specified  as being  within the
Agent's rights,  powers or discretion herein,  provided that the Agent shall not
be required to take any action which exposes the Agent to personal  liability or
which is contrary to this  Agreement  or any other Loan  Document or  applicable
Law. In the  absence of a request by the  Required  Banks,  the Agent shall have
authority,  in its sole  discretion,  to take or not to take  any  such  action,
unless this Agreement specifically requires the consent of the Required Banks or
all of  the  Banks.  Any  action  taken  or  failure  to act  pursuant  to  such
instructions  or  discretion  shall be binding on the Banks,  subject to Section
10.6. Subject to the provisions of Section 10.6, no Bank shall have any right of
action  whatsoever  against  the  Agent  as a  result  of the  Agent  acting  or
refraining  from acting  hereunder in accordance  with the  instructions  of the
Required  Banks,  or in the  absence  of  such  instructions,  in  the  absolute
discretion of the Agent.

     10.5 Reimbursement and Indemnification of Agent by the Borrower.

     The Borrower  unconditionally agrees to pay or reimburse the Agent and hold
the Agent  harmless  against (a)  liability  for the  payment of all  reasonable
out-of-pocket costs, expenses and disbursements,  including fees and expenses of
counsel  (including  the  allocated  costs of  staff  counsel),  appraisers  and
environmental  consultants,  incurred  by the Agent (i) in  connection  with the
development,   negotiation,   preparation,   printing,  execution,  syndication,
interpretation  and  performance of this Agreement and the other Loan Documents,
(ii) relating to any requested  amendments,  waivers or consents pursuant to the
provisions hereof, (iii) in connection with the enforcement of this Agreement or
any other Loan  Document or collection of amounts due hereunder or thereunder or
the proof and  allowability  of any claim  arising  under this  Agreement or any
other Loan  Document,  whether in  bankruptcy  or  receivership  proceedings  or
otherwise,  and (iv) in any workout or  restructuring  or in connection with the
protection,  preservation, exercise or enforcement of any of the terms hereof or
of any rights  hereunder or under any other Loan Document or in connection  with
any foreclosure,  collection or bankruptcy proceedings, and (b) all liabilities,
obligations, losses, damages, penalties, actions, judgments,

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suits,  costs,  expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against the Agent, in its capacity as
such, in any way relating to or arising out of this  Agreement or any other Loan
Documents or any action taken or omitted by the Agent  hereunder or  thereunder,
provided  that  the  Borrower  shall  not be  liable  for  any  portion  of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses or  disbursements  if the same results  from the Agent's  gross
negligence or willful  misconduct,  or if the Borrowers were not given notice of
the subject claim and the opportunity to participate in the defense thereof,  at
its expense  (except that the  Borrowers  shall remain liable to the extent such
failure to give  notice does not result in a loss to the  Borrowers),  or if the
same results from a compromise or settlement  agreement entered into without the
consent of the Borrowers, which shall not be unreasonably withheld.

     10.6 Exculpatory Provisions; Limitation of Liability.

     Neither the Agent nor any of its directors,  officers,  employees,  agents,
attorneys or Affiliates  shall (a) be liable to any Bank for any action taken or
omitted to be taken by it or them hereunder, or in connection herewith including
pursuant  to  any  Loan  Document,  unless  caused  by its or  their  own  gross
negligence or willful misconduct, (b) be responsible in any manner to any of the
Banks for the effectiveness,  enforceability,  genuineness,  validity or the due
execution  of this  Agreement  or any other Loan  Documents  or for any recital,
representation,  warranty, document,  certificate, report or statement herein or
made or furnished  under or in connection  with this Agreement or any other Loan
Documents, or (c) be under any obligation to any of the Banks to ascertain or to
inquire as to the  performance  or observance of any of the terms,  covenants or
conditions  hereof or thereof on the part of the Loan Parties,  or the financial
condition of the Loan  Parties,  or the  existence or possible  existence of any
Event of Default or Potential  Default.  No claim may be made by any of the Loan
Parties, any Bank, the Agent or any of their respective Subsidiaries against the
Agent,  any  Bank or any of their  respective  directors,  officers,  employees,
agents,  attorneys or Affiliates,  or any of them, for any special,  indirect or
consequential  damages  or, to the  fullest  extent  permitted  by Law,  for any
punitive  damages in respect of any claim or cause of action  (whether  based on
contract,  tort, statutory liability, or any other ground) based on, arising out
of or related to any Loan Document or the  transactions  contemplated  hereby or
any act,  omission or event  occurring in  connection  therewith,  including the
negotiation, documentation,  administration or collection of the Loans, and each
of the Loan Parties, (for itself and on behalf of each of its Subsidiaries), the
Agent and each Bank hereby waive, releases and agree never to sue upon any claim
for any such  damages,  whether  such claim now exists or  hereafter  arises and
whether or not it is now known or  suspected  to exist in its  favor.  Each Bank
agrees that, except for notices,  reports and other documents expressly required
to be  furnished  to the Banks by the Agent  hereunder or given to the Agent for
the  account  of or with  copies  for  the  Banks,  the  Agent  and  each of its
directors,  officers,  employees, agents, attorneys or Affiliates shall not have
any  duty or  responsibility  to  provide  any  Bank  with an  credit  or  other
information concerning the business, operations,  property, condition (financial
or otherwise),  prospects or creditworthiness of the Loan Parties which may come
into the possession of the Agent or any of its directors,  officers,  employees,
agents, attorneys or Affiliates.

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     10.7 Reimbursement and Indemnification of Agent by Banks.

     Each Bank agrees to reimburse  and  indemnify  the Agent (to the extent not
reimbursed by the Borrowers and without limiting the Obligation of the Borrowers
to do so) in proportion  to its Ratable Share from and against all  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses  or   disbursements,   including   attorneys'  fees  and  disbursements
(including the allocated  costs of staff  counsel),  and costs of appraisers and
environmental consultants, of any kind or nature whatsoever which may be imposed
on,  incurred by or asserted  against the Agent, in its capacity as such, in any
way relating to or arising out of this  Agreement or any other Loan Documents or
any action taken or omitted by the Agent hereunder or thereunder,  provided that
no Bank  shall be  liable  for any  portion  of such  liabilities,  obligations,
losses,  damages,  penalties,  actions,  judgments,  suits,  costs,  expenses or
disbursements  (a) if the same  results  from the Agent's  gross  negligence  or
willful  misconduct,  or (b) if such  Bank was not given  notice of the  subject
claim and the opportunity to participate in the defense thereof,  at its expense
(except  that such Bank shall  remain  liable to the extent such failure to give
notice does not result in a loss to the Bank), or (c) if the same results from a
compromise  and  settlement  agreement  entered into without the consent of such
Bank, which shall not be unreasonably  withheld.  In addition,  each Bank agrees
promptly upon demand to reimburse the Agent (to the extent not reimbursed by the
Borrower  and  without  limiting  the  Obligation  of the  Borrower to do so) in
proportion  to its Ratable Share for all amounts due and payable by the Borrower
to the Agent in connection with the Agent's  periodic audit of the Loan Parties'
books, records and business properties.

     10.8 Reliance by Agent.

     The Agent shall be entitled to rely upon any  writing,  telegram,  telex or
teletype message, resolution,  notice, consent, certificate,  letter, cablegram,
statement,  order or other  document or  conversation  by telephone or otherwise
believed by it to be genuine and correct and to have been  signed,  sent or made
by the proper Person or Persons, and upon the advice and opinions of counsel and
other  professional  advisers  selected  by the Agent.  The Agent shall be fully
justified  in failing or refusing to take any action  hereunder  unless it shall
first be  indemnified  to its  satisfaction  by the  Banks  against  any and all
liability  and  expense  which  may be  incurred  by it by  reason  of taking or
continuing to take any such action.

     10.9 Notice of Default.

     The Agent shall not be deemed to have knowledge or notice of the occurrence
of any  Potential  Default  or Event of Default  unless  the Agent has  received
written  notice  from a Bank  or  the  Borrower  referring  to  this  Agreement,
describing  such  Potential  Default or Event of Default and  stating  that such
notice is a "notice of default."

     10.10 Notices.

     The Agent shall  promptly send to each Bank a copy of all notices  received
from the Borrowers  pursuant to the  provisions  of this  Agreement or the other
Loan Documents

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promptly upon receipt  thereof The Agent shall promptly  notify the Borrower and
the other Banks of each change in the Base Rate and the effective date thereof.

     10.11 Banks in Their Individual Capacities.

     With respect to its  Commitment,  the Loans made by it and any other rights
and  powers  given to it as a Bank  hereunder  or under  any of the  other  Loan
Documents,  the Agent  shall have the same  rights and powers  hereunder  as any
other Bank and may  exercise  the same as though it were not the Agent,  and the
term "Banks" shall, unless the context otherwise indicates, include the Agent in
its individual  capacity.  PNC Bank and its Affiliates and each of the Banks and
their  respective  Affiliates  may,  without  liability  to  account,  except as
prohibited herein, make loans to, accept deposits from, discount drafts for, act
as trustee under  indentures of, and generally  engage in any kind of banking or
trust business with, the Loan Parties and their  Affiliates,  in the case of the
Agent,  as though it were not acting as Agent  hereunder and in the case of each
Bank, as though such Bank were not a Bank hereunder. The Banks acknowledge that,
pursuant  to such  activities,  the  Agent  or its  Affiliates  may (i)  receive
information  regarding  the  Loan  Parties  (including  information  that may be
subject  to  confidentiality  obligations  in  favor of the  Loan  Parties)  and
acknowledge  that  the  Agent  shall  be under no  obligation  to  provide  such
information to them, and (ii) accept fees and other  consideration from the Loan
Parties for services in connection  with this  Agreement  and otherwise  without
having to account for the same to the Banks.

     10.12 Holders of Notes.

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

     10.13 Equalization of Banks.

     The Banks and the  holders of any  participations  in any Notes agree among
themselves  that,  with respect to all amounts  received by any Bank or any such
holder for  application on any  Obligation  hereunder or under any Note or under
any such  participation,  whether received by voluntary payment,  by realization
upon  security,  by the  exercise of the right of set-off or banker's  lien,  by
counterclaim or by any other non-pro rata source,  equitable  adjustment will be
made in the manner stated in the following sentence so that, in effect, all such
excess  amounts  will be shared  ratably  among the  Banks and such  holders  in
proportion to their  interests in payments under the Notes,  except as otherwise
provided in Section  4.4.3 or 5.6.  The Banks or any such holder  receiving  any
such amount shall  purchase for cash from each of the other Banks an interest in
such Bank's Loans in such amount as shall result in a ratable  participation  by
the Banks and each such holder in the  aggregate  unpaid amount under the Notes,
provided  that  if all or any  portion  of  such  excess  amount  is  thereafter
recovered from the Bank or

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the holder  making such  purchase,  such  purchase  shall be  rescinded  and the
purchase price  restored to the extent of such recovery,  together with interest
or other amounts,  if any, required by law (including court order) to be paid by
the Bank or the holder making such purchase.

     10.14 Successor Agent.

     If the Agent  shall  resign  under  this  Agreement,  then  either  (a) the
Required  Banks shall  appoint  from among the Banks a  successor  agent for the
Banks,  subject  to  the  consent  of  the  Borrowers,  such  consent  not to be
unreasonably withheld, or (b) if a successor agent shall not be so appointed and
approved  within the thirty (30) day period  following the Agent's notice to the
Banks of its resignation,  then the Agent shall appoint, with the consent of the
Borrower,  such consent not to be unreasonably  withheld,  a successor agent who
shall  serve as Agent  until such time as the  Required  Banks  appoint  and the
Borrower  consents to the appointment of a successor agent. Upon its appointment
pursuant to either clause (a) or (b) above,  such successor  agent shall succeed
to the rights,  powers and duties of the Agent,  and the term "Agent" shall mean
such successor  agent,  effective upon its  appointment,  and the former Agent's
rights,  powers and duties as Agent  shall be  terminated  without  any other or
further  act or deed on the part of such  former  Agent or any of the parties to
this Agreement.  After the resignation of any Agent hereunder, the provisions of
this  Section 10 shall inure to the benefit of such former Agent and such former
Agent  shall not by reason of such  resignation  be deemed to be  released  from
liability  for any actions  taken or not taken by it while it was an Agent under
this Agreement.

     10. 15 Agent's Fee.

     The Borrowers  shall pay to the Agent fees (the  "Agent's  Fees") under the
terms of a letter (the  "Agent's  Letter")  between  the  Company and Agent,  as
amended from time to time.

     10. 16 Availability of Funds.

     The Agent may assume that each Bank has made or will make the proceeds of a
Loan  available to the Agent  unless the Agent shall have been  notified by such
Bank on or before  the close of  Business  on the  Business  Day  preceding  the
Borrowing  Date with respect to such Loan (whether  using its own funds pursuant
to this Section 10. 1 6 or using proceeds  deposited with the Agent by the Banks
and  whether  such  finding  occurs  before or after the time on which Banks are
required to deposit the proceeds of such Loan with the Agent). The Agent may, in
reliance upon such  assumption (but shall not be required to), make available to
the Borrower a corresponding amount. If such corresponding amount is not in fact
made available to the Agent by such Bank, the Agent shall be entitled to recover
such  amount on demand from such Bank (or, if such Bank fails to pay such amount
forthwith upon such demand from the Borrowers)  together with interest  thereon,
in respect of each day during the period  commencing on the date such amount was
made  available to the Borrower and ending on the date the Agent  recovers  such
amount, at a rate per annum equal to the applicable  interest rate in respect of
the Loan.

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     10.17 Calculations.

     In the absence of gross negligence or willful  misconduct,  the Agent shall
not be liable for any error in computing the amount  payable to any Bank whether
in respect of the Loans,  fees or any other  amounts due to the Banks under this
Agreement.  In the event an error in computing any amount payable to any Bank is
made,  the Agent,  the Borrowers and each  affected Bank shall,  forthwith  upon
discovery of such error,  make such  adjustments as shall be required to correct
such error,  and any  compensation  therefor  will be  calculated at the Federal
Funds Effective Rate.

     10.18 Beneficiaries.

     Except as expressly  provided herein, the provisions of this Section 10 are
solely for the benefit of the Agent and the Banks,  and the Loan  Parties  shall
not have any  rights to rely on or  enforce  any of the  provisions  hereof.  In
performing  its functions and duties under this  Agreement,  the Agent shall act
solely as agent of the Banks and does not assume and shall not be deemed to have
assumed any obligation toward or relationship of agency or trust with or for any
of the Loan Parties.

                                11. MISCELLANEOUS

     11.1 Modifications, Amendments or Waivers.

     With the written consent of the Required Banks, the Agent, acting on behalf
of all the Banks,  and the  Borrowers,  on behalf of the Loan Parties,  may from
time to time enter into written agreements amending or changing any provision of
this Agreement or any other Loan Document or the rights of the Banks or the Loan
Parties  hereunder or thereunder,  or may grant written waivers or consents to a
departure  from the due  performance  of the  Obligations  of the  Loan  Parties
hereunder or thereunder.  Any such  agreement,  waiver or consent made with such
written  consent  shall be effective to bind all the Banks and the Loan Parties;
provided, that, without the written consent of all the Banks, no such agreement,
waiver or  consent  may be made  which  will:  11.1.1  Increase  of  Commitment;
Extension or Expiration Date.

     Increase the amount of the  Commitment of any Bank  hereunder or extend the
Expiration Date;

          11.1.2 Extension of Payment;  Reduction of Principal Interest or Fees;
     Modification of Terms of Payment.

          Whether or not any Loans are outstanding,  extend the time for payment
     of  principal  or  interest  of any  Loan  (excluding  the due  date of any
     mandatory  prepayment  of a Loan or any mandatory  Commitment  reduction in
     connection with such a mandatory prepayment

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     hereunder  except  for  mandatory  reductions  of  the  Commitments  on the
     Expiration  Date), the Commitment Fee or any other fee payable to any Bank,
     or reduce the principal amount of or the rate of interest borne by any Loan
     or reduce  the  Commitment  Fee or any other fee  payable  to any Bank,  or
     otherwise  affect the terms of payment of the  principal  of or interest of
     any Loan, the Commitment Fee or any other fee payable to any Bank;

          11.1.3 Release of Guarantor.

          Except for sales of assets  permitted  by Section  8.2.7,  release any
     Guarantor from its  Obligations  under the Guaranty  Agreement or any other
     security for any of the Loan Parties' Obligations; or

          11.1.4 Miscellaneous

          Amend  Section 5.2 [Pro Rata  Treatment of Banks],  10.6  [Exculpatory
     Provisions,  etc.] or 10.13  [Equalization  of Banks] or this Section 11.1,
     alter any provision  regarding the pro rata treatment of the Banks,  change
     the definition of Required Banks,  or change any requirement  providing for
     the Banks or the  Required  Banks to  authorize  the  taking of any  action
     hereunder;

     provided,  further, that no agreement, waiver or consent which would modify
     the interests,  rights or obligations of the Agent in its capacity as Agent
     or as the  issuer of  Letters  of Credit  shall be  effective  without  the
     written consent of the Agent

     11.2 No Implied Waivers; Cumulative Remedies-, Writing Required.

     No course of  dealing  and no delay or  failure of the Agent or any Bank in
exercising  any right,  power,  remedy or privilege  under this Agreement or any
other Loan Document shall affect any other or future exercise thereof or operate
as a waiver  thereof,  nor shall any single or partial  exercise  thereof or any
abandonment or discontinuance of steps to enforce such a right, power, remedy or
privilege  preclude any further exercise  thereof or of any other right,  power,
remedy or  privilege.  The rights and  remedies of the Agent and the Banks under
this  Agreement and any other Loan Documents are cumulative and not exclusive of
any rights or remedies  which they would  otherwise  have.  Any waiver,  permit,
consent  or  approval  of any kind or  character  on the part of any Bank of any
breach or default  under this  Agreement or any such waiver of any  provision or
condition of this  Agreement  must be in writing and shall be effective  only to
the extent specifically set forth in such writing.

     11.3 Reimbursement and Indemnification of Banks by the Borrower; Taxes.

     The Borrowers agree unconditionally upon demand to pay or reimburse to each
Bank (other than the Agent, as to which the Borrowers' Obligations are set forth
in Section  10.5) and to save such Bank  harmless  against (i) liability for the
payment of all  reasonable  out-of  pocket  costs,  expenses  and  disbursements
(including  fees and  expenses of counsel  (including  allocated  costs of staff
counsel) for each Bank except with respect to (a) and (b) below), incurred

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by such Bank (a) relating to any amendments, waivers or consents pursuant to the
provisions  hereof,  (b) in connection with the enforcement of this Agreement or
any other Loan Document, or collection of amounts due hereunder or thereunder or
the proof and  allowability  of any claim  arising  under this  Agreement or any
other Loan  Document,  whether in  bankruptcy  or  receivership  proceedings  or
otherwise,  and (c) in any workout or  restructuring  or in connection  with the
protection,  preservation, exercise or enforcement of any of the terms hereof or
of any rights  hereunder or under any other Loan Document or in connection  with
any foreclosure,  collection or bankruptcy proceedings, or (ii) all liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses or disbursements of any kind or nature  whatsoever which may be imposed
on,  incurred by or asserted  against such Bank, in its capacity as such, in any
way relating to or arising out of this  Agreement or any other Loan Documents or
any action taken or omitted by such Bank hereunder or thereunder,  provided that
the  Borrower  shall  not  be  liable  for  any  portion  of  such  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses  or  disbursements  (A) if the same  results  from  such  Bank's  gross
negligence or willful misconduct,  or (B) if the Borrowers were not given notice
of the subject claim and the opportunity to participate in the defense  thereof,
at its expense (except that the Borrowers shall remain liable to the extent such
failure to give  notice does not result in a loss to the  Borrowers),  or (C) if
the same results from a compromise or settlement  agreement entered into without
the consent of the  Borrowers,  which shall not be  unreasonably  withheld.  The
Banks will attempt to minimize  the fees and  expenses of legal  counsel for the
Banks  which  are  subject  to  reimbursement  by  the  Borrowers  hereunder  by
considering  the usage of one law fin-n to represent  the Banks and the Agent if
appropriate under the circumstances.  The Borrowers agree unconditionally to pay
all stamp,  document,  transfer,  recording  or filing taxes or fees and similar
impositions  now or hereafter  determined by the Agent or any Bank to be payable
in connection with this Agreement or any other Loan Document,  and the Borrowers
agree  unconditionally to save the Agent and the Banks harmless from and against
any and all present or future  claims,  liabilities or losses with respect to or
resulting  from any  omission to pay or delay in paying any such taxes,  fees or
impositions.

     11.4 Holidays.

     Whenever  payment of a Loan to be made or taken hereunder shall be due on a
day which is not a Business Day such payment  shall be due on the next  Business
Day and such extension of time shall be included in computing  interest and fee,
except that the Loans shall be due on the Business Day preceding the  Expiration
Date if the  Expiration  Date is not a Business  Day.  Whenever  any  payment or
action to be made or taken hereunder  (other than payment of the Loans) shall be
stated to be due on a day which is not a business  Day,  such  payment or action
shall be made or taken on the next following Business Day (except as provided in
Section 4.2 with respect to Interest  Periods under the Euro-Rate  Option),  and
such  extension of time shall not be included in computing  interest or fees, if
any, in connection with such payment or action. If, by operation of the previous
sentence  of this  Section 1 1.4,  any  payment in respect  of any  portion  any
relevant  period  (including any Interest  Period) is made or calculated on such
"next  following  Business Day", then such amounts shall be paid and included in
amounts paid in and for the period in which such "next  following  Business Day"
falls.

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     11.5 Funding by Branch, Subsidiary or Affiliate.

          11.5.1 Notional Funding.

          Each Bank shall have the right  from time to time,  without  notice to
     the Borrower,  to deem any branch,  Subsidiary or Affiliate  (which for the
     purposes of this Section  11.5 shall mean any  corporation  or  association
     which  is  directly  or  indirectly  controlled  by or is under  direct  or
     indirect common control with any corporation or association  which directly
     or indirectly controls such Bank) of such Bank to have made,  maintained or
     funded any Loan to which the Euro-Rate Option applies at any time, provided
     that immediately  following (on the assumption that a payment were then due
     from the  Borrower to such other  office),  and as a result of such change,
     the Borrower would not be under any greater financial  obligation  pursuant
     to  Section  5.6 than it would  have been in the  absence  of such  change.
     Notional  funding  offices may be selected by each Bank  without  regard to
     such Bank's actual  methods of making,  maintaining or funding the Loans or
     any sources of funding actually used by or available to such Bank.

          11.5.2 Actual Funding.

          Each Bank shall  have the right from time to time to make or  maintain
     any Loan by arranging for a branch, Subsidiary or Affiliate of such Bank to
     make or maintain  such Loan subject to the last  sentence of this Section 1
     1.5.2.  If any Bank causes a branch,  Subsidiary  or  Affiliate  to make or
     maintain any part of the Loans hereunder,  all terms and conditions of this
     Agreement shall,  except where the context clearly requires  otherwise,  be
     applicable  to such part of the Loans to the same  extent as if such  Loans
     were made or maintained by such Bank,  but in no event shall any Bank's use
     of such a branch,  Subsidiary  or Affiliate to make or maintain any part of
     the Loans hereunder cause such Bank or such branch, Subsidiary or Affiliate
     to incur any cost or expenses payable by the Borrower  hereunder or require
     the  Borrowers to pay any other  compensation  to any Bank  (including  any
     expenses incurred or payable pursuant to Section 5.6) which would otherwise
     not be incurred.

     11.6 Notices.

     All notices,  requests,  demands,  directions and other  communications (as
used in this Section 11.6,  collectively  referred to as "notices")  given to or
made upon any party hereto under the  provisions of this  Agreement  shall be by
telephone  or in writing  (including  telex or facsimile  communication)  unless
otherwise  expressly permitted hereunder and shall be delivered or sent by telex
or facsimile to the  respective  parties at the  addresses and numbers set forth
under their respective names on Schedule 1.1(B) hereof or in accordance with any
subsequent unrevoked written direction from any party to the others. All notices
shall,  except as otherwise  expressly herein provided,  be effective (a) in the
case of telex or facsimile,  when  received,  (b) in the case of  hand-delivered
notice,  when  hand-delivered,  (c) in the case of telephone,  when  telephoned,
provided,  however,  that in order to be effective,  telephonic  notices must be
confirmed  in writing no later than the next day by letter,  facsimile or telex,
(d) if given by mail, four (4) days after such communication is deposited in the
mail with first-class postage prepaid,

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<PAGE>
return receipt requested,  and (e) if given by any other means (including by air
courier),  when  delivered;  provided,  that  notices to the Agent  shall not be
effective until received at the addresses of the Agent shown on Schedule 1.1(B).
Any Bank  giving any notice to any Loan Party shall  simultaneously  send a copy
thereof to the Agent, and the Agent shall promptly notify the other Banks of the
receipt by it of any such notice.

     11.7 Severability.

     The  provisions  of this  Agreement  are intended to be  severable.  If any
provision of this Agreement shall be held invalid or  unenforceable  in whole or
in part in any jurisdiction,  such provision shall, as to such jurisdiction,  be
ineffective to the extent of such invalidity or unenforceability  without in any
manner   affecting  the  validity  or   enforceability   thereof  in  any  other
jurisdiction or the remaining provisions hereof in any jurisdiction.

     11.8 Governing Law.

     Each  Letter of Credit and  Section  2.9 shall be  subject  to the  Uniform
Customs and Practice for  Documentary  Credits  (1993  Revision),  International
Chamber of Commerce  Publication  No. 500, as the same may be revised or amended
from time to time, and to the extent not  inconsistent  therewith,  the internal
laws of the Commonwealth of Pennsylvania  without regard to its conflict of laws
principles  and the balance of this  Agreement  shall be deemed to be a contract
under the Laws of the Commonwealth of Pennsylvania and for all purposes shall be
governed by and construed  and enforced in accordance  with the internal laws of
the  Commonwealth  of  Pennsylvania  without  regard  to its  conflict  of  laws
principles.

     11.9 Prior Understanding.

     This   Agreement  and  the  other  Loan   Documents   supersede  all  prior
understandings  and  agreements,  whether  written or oral,  between the parties
hereto and thereto relating to the transactions provided for herein and therein,
including any prior confidentiality agreements and commitments.

     11.10 Duration; Survival.

     All  representations and warranties of the Loan Parties contained herein or
made in  connection  herewith  shall survive the making of Loans and issuance of
Letters of Credit and shall not be waived by the  execution and delivery of this
Agreement,  any  investigation  by the Agent or the Banks,  the making of Loans,
issuance of Letters of Credit,  or payment in full of the Loans.  All  covenants
and agreements of the Loan Parties contained in Sections 8.1, 8.2 and 8.3 herein
shall  continue  in full force and effect from and after the date hereof so long
as the  Borrower  may borrow or request  Letters of Credit  hereunder  and until
termination of the  Commitments  and payment in full of the Loans and expiration
or  termination  of all Letters of Credit.  All covenants and  agreements of the
Borrower  contained  herein  relating  to the  payment of  principal,  interest,
premiums,  additional  compensation or expenses and  indemnification,  including
those set forth in the Notes,  Section 5 and Sections 10.5, 10.7 and 11.3, shall
survive

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payment in full of the Loans, expiration or termination of the Letters of Credit
and termination of the Commitments.

     11.11 Successors and Assigns.

          (i) This  Agreement  shall be  binding  upon  and  shall  inure to the
     benefit of the Banks,  the Agent,  the Loan  Parties  and their  respective
     successors and assigns, except that none of the Loan Par-ties may assign or
     transfer  any of its  rights  and  Obligations  hereunder  or any  interest
     herein.  Each  Bank  may,  at its own  cost,  make  assignments  of or sell
     participations  in all or any part of its  Commitment and the Loans made by
     it to one or more banks or other  entities,  subject to the  consent of the
     Borrowers and the Agent with respect to any  assignee,  such consent not to
     be  unreasonably  withheld,  provided  that (1) no consent of the Borrowers
     shall be required in the case of an assignment by a Bank to an Affiliate of
     such  Bank,  and (2)  assignments  may not be made  in  amounts  less  than
     $5,000,000. In the case of an assignment,  upon receipt by the Agent of the
     Assignment and Assumption Agreement, the assignee shall have, to the extent
     of such assignment (unless otherwise  provided  therein),  the same rights,
     benefits and  obligations  as it would have if it had been a signatory Bank
     hereunder,  the  Commitments  shall  be  adjusted  accordingly,   and  upon
     surrender  of any Note  subject to such  assignment,  the  Borrowers  shall
     execute  and deliver a new Note to the  assignee in an amount  equal to the
     amount of the Commitment assumed by it and a new Note to the assigning Bank
     in an  amount  equal  to  the  Commitment  retained  by it  hereunder.  The
     assigning Bank shall pay to the Agent a service fee in the amount of $3,000
     for each assignment. In the case of a participation,  the participant shall
     only have the rights specified in Section 9.2.3 (the  participant's  rights
     against such Bank in respect of such participation to be those set forth in
     the agreement  executed by such Bank in favor of the  participant  relating
     thereto and not to include any voting rights except with respect to changes
     of the type referenced in Sections 11.1.1,  11.1.2, or 11.1.3,  all of such
     Bank's  obligations  under this  Agreement or any other Loan Document shall
     remain  unchanged,  and all amounts  payable by any Loan Party hereunder or
     thereunder  shall  be  determined  as  if  such  Bank  had  not  sold  such
     participation.

          (ii) Any assignee or participant  which is not incorporated  under the
     Laws of the United  States of America or a state  thereof  shall deliver to
     the  Borrowers and the Agent the form of  certificate  described in Section
     11.17 relating to federal income tax withholding. Each Bank may furnish any
     publicly   available   information   concerning   any  Loan  Party  or  its
     Subsidiaries  and any other  information  concerning  any Loan Party or its
     Subsidiaries  in the possession of such Bank from time to time to assignees
     and  participants   (including   prospective  assignees  or  participants),
     provided  that such  assignees  and  participants  agree to be bound by the
     provisions of Section 11.12.

          (iii) Notwithstanding any other provision in this Agreement,  any Bank
     may at any time  pledge or grant a security  interest in all or any portion
     of its rights under this  Agreement,  its Note and the other Loan Documents
     to any Federal  Reserve Bank in accordance  with Regulation A of the FRB or
     U.S. Treasury Regulation 31 CFR Section 203.14 without notice to or consent
     of the Borrower or the Agent. No such pledge or grant of a security

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     interest shall release the transferor Bank of its obligations  hereunder or
     under any other Loan Document.

     11.12 Confidentiality.

     The Agent and the Banks each  agree to keep  confidential  all  information
obtained  from  any Loan  Party  or its  Subsidiaries  which  is  nonpublic  and
confidential  or proprietary in nature  (including any information the Borrowers
specifically  designate as  confidential),  except as provided below, and to use
such information only in connection with their respective  capacities under this
Agreement  and for the  purposes  contemplated  hereby.  The Agent and the Banks
shall be permitted to disclose such  information  (i) to outside legal  counsel,
accountants and other professional advisors who need to know such information in
connection with the administration and enforcement of this Agreement, subject to
agreement of such Persons to maintain the confidentiality, (ii) to assignees and
participants as contemplated by Section 11.11,  (iii) to the extent requested by
any bank  regulatory  authority or, with notice to the  Borrowers,  as otherwise
required by applicable  Law or by any subpoena or similar legal  process,  or in
connection with any investigation or proceeding  arising out of the transactions
contemplated by this Agreement, (iv) if it becomes publicly available other than
as a result of a breach of this Agreement or becomes available from a source not
known to be subject to  confidentiality  restrictions,  or (v) if the  Borrowers
shall have consented to such disclosure.

     11.13 Counterparts.

     This Agreement may be executed by different parties hereto on any number of
separate counterparts,  each of which, when so executed and delivered,  shall be
an original,  and all such  counterparts  shall together  constitute one and the
same instrument.

     11.14 Agent's or Bank's Consent.

     Whenever the Agent's or any Bank's consent is required to be obtained under
this  Agreement or any of the other Loan Documents as a condition to any action,
inaction,  condition or event,  the Agent and each Bank shall be  authorized  to
give or  withhold  such  consent  in its sole  and  absolute  discretion  and to
condition its consent upon the giving of additional  collateral,  the payment of
money or any other matter.

     11.15 Exceptions.

     The  representations,  warranties and covenants  contained  herein shall be
independent of each other, and no exception to any  representation,  warranty or
covenant  shall  be  deemed  to be an  exception  to any  other  representation,
warranty or covenant contained herein unless expressly  provided,  nor shall any
such  exceptions  be deemed to permit  any action or  omission  that would be in
contravention of applicable Law.

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     11.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL.

     EACH  LOAN  PARTY   HEREBY   IRREVOCABLY   CONSENTS  TO  THE   NONEXCLUSIVE
JURISDICTION  OF THE COURT OF COMMON PLEAS OF  CUMBERLAND  COUNTY AND THE UNITED
STATES  DISTRICT  COURT FOR THE  MIDDLE  DISTRICT  OF  PENNSYLVANIA,  AND WAIVES
PERSONAL  SERVICE  OF ANY AND ALL  PROCESS  UPON IT AND  CONSENTS  THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO SUCH LOAN
PARTY AT THE ADDRESSES PROVIDED FOR IN SECTION 11.6 AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT  THEREOF.  EACH LOAN PARTY WAIVES ANY
OBJECTION  TO  JURISDICTION  AND VENUE OF ANY  ACTION  INSTITUTED  AGAINST IT AS
PROVIDED  HEREIN  AND  AGREES  NOT TO  ASSERT  ANY  DEFENSE  BASED  ON  LACK  OF
JURISDICTION  OR VENUE.  EACH LOAN PARTY,  THE AGENT AND THE BANKS  HEREBY WAIVE
TRIAL  BY JURY IN ANY  ACTION,  SUIT,  PROCEEDING  OR  COUNTERCLAIM  OF ANY KIND
ARISING  OUT OF OR RELATED TO THIS  AGREEMENT,  ANY OTHER LOAN  DOCUMENT  OR THE
COLLATERAL TO THE FULL EXTENT PERMITTED BY LAW.

     11.17 Tax Withholding Clause.

     Each Bank or assignee  or  participant  of a Bank that is not  incorporated
under the Laws of the United States of America or a state thereof agrees that it
will deliver to each of the Borrower and the Agent two (2) duly completed copies
of the following:  (i) Internal Revenue Service Form W-9, 4224 or 1001, or other
applicable form prescribed by the Internal Revenue Service, certifying that such
Bank,  assignee  or  participant  is  entitled  to receive  payments  under this
Agreement and the other Loan Documents  without  deduction or withholding of any
United States federal income taxes,  or is subject to such tax at a reduced rate
under an applicable  tax treaty,  or (ii) Internal  Revenue  Service Form W-8 or
other  applicable  form or a certificate  of such Bank,  assignee or participant
indicating  that no such  exemption or reduced rate is allowable with respect to
such payments.  Each Bank,  assignee or  participant  required to deliver to the
Borrowers and the Agent a form or certificate pursuant to the preceding sentence
shall  deliver  such form or  certificate  as follows:  (A) each Bank which is a
party hereto on the Closing Date shall deliver such form or certificate at least
five (5) Business Days prior to the first date on which any interest or fees are
payable  by the  Borrower  hereunder  for the  account  of such  Bank;  (B) each
assignee or participant shall deliver such form or certificate at least five (5)
Business Days before the  effective  date of such  assignment  or  participation
(unless  the  Agent  in its  sole  discretion  shall  permit  such  assignee  or
participant to deliver such form or certificate less than five (5) Business Days
before  such  date in which  case it shall be due on the date  specified  by the
Agent).  Each Bank,  assignee or participant  which so delivers a Form W-8, W-9,
4224 or 1001  further  undertakes  to deliver to each of the  Borrowers  and the
Agent two (2) additional  copies of such form (or a successor form) on or before
the date that such form expires or becomes  obsolete or after the  occurrence of
any event  requiring a change in the most recent  form so  delivered  by it, and
such amendments  thereto or extensions or renewals  thereof as may be reasonably
requested

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<PAGE>
by the Borrowers or the Agent,  either  certifying  that such Bank,  assignee or
participant  is entitled to receive  payments under this Agreement and the other
Loan  Documents  without  deduction or  withholding of any United States federal
income taxes or is subject to such tax at a reduced rate under an applicable tax
treaty or stating that no such exemption or reduced rate is allowable. The Agent
shall be entitled to withhold  United  States  federal  income taxes at the full
withholding  rate  unless  the Bank,  assignee  or  participant  establishes  an
exemption or that it is subject to a reduced rate as established pursuant to the
above provisions.

     11.18 Joinder of Borrowers.

     Any  Subsidiary of a Loan Party which is required to join this Agreement as
a Borrower  pursuant to Section 8.2.9 shall execute and deliver to the Agent (i)
a Joinder in  substantially  the form attached hereto as Exhibit 1.1(J) pursuant
to which it shall  join  (subject  to  Section  5.7) as a  Borrower  each of the
documents to which the  Borrowers are parties;  and (ii)  documents in the forms
described in Section 7.1 modified as appropriate  to relate to such  Subsidiary.
The Company shall deliver such Joinder and related documents to the Agent within
five (5)  Business  Days  after  the  date of the  filing  of such  Subsidiary's
articles of  incorporation  if the Subsidiary is a corporation,  the date of the
filing of its certificate of limited partnership if it is a limited partnership,
the date of its organization if it is an entity other than a limited partnership
or corporation or the date of its acquisitions by any Loan Party, as applicable.

     IN WITNESS WHEREOF,  the parties hereto,  by their officers  thereunto duly
authorized,  have  executed  this  Agreement  as of the day and year first above
written.


                                   TB WOOD'S INCORPORATED


                                         By:  /s/ David H. Halleen
                                              --------------------

                                       Title:  Vice President
                                               --------------

                                             
                                   PLANT ENGINEERING CONSULTANTS, INC.



                                         By:  /s/ David H. Halleen
                                              --------------------

                                       Title:  Vice President
                                               --------------



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<PAGE>
                                   GRUPO BLAJU, S.A., de C.V.



                                         By:  /s/ David H. Halleen
                                              --------------------

                                       Title:  Attorney-in-fact
                                               ----------------
 


                                   TB WOOD'S CANADA, LTD.



                                         By:  /s/ David H. Halleen
                                              --------------------

                                       Title:  Treasurer
                                               ---------

                                   GUARANTOR:

                                   TB WOOD'S CORPORATION


                                         By:  /s/ David H. Halleen
                                              --------------------

                                       Title:  Vice President
                                               --------------



                                   PNC BANK, NATIONAL ASSOCIATION,
                                   individually and as Agent



                                         By:  /s/ Frank M. Sajer
                                             -------------------

                                       Title:  Corporate Banmking Officer
                                               --------------------------

                                   NATIONAL CITY BANK OF PENNSYLVANIA



                                         By:  /s/ Hakan Erdinc
                                             -----------------

                                        Title:  Assistant Vice President
                                                ------------------------  


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