EXHIBIT 4.3

                                       [Conformed Copy with Exhibits G, H-1, H-2
                                              I-1 and I-2 Conformed as Executed]






                 AMENDED AND RESTATED CREDIT AGREEMENT


                                 among


                 HOSIERY CORPORATION OF AMERICA, INC.,


                     VARIOUS LENDING INSTITUTIONS,


                                  and


                        BANKERS TRUST COMPANY,

                               AS AGENT


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


                              $85,000,000



<PAGE>


                                                                 Page

SECTION 1.  Amount and Terms of Credit..............................  1
      1.01  Commitment..............................................  1
      1.02  Minimum Borrowing Amounts, etc..........................  3
      1.03  Notice of Borrowing.....................................  4
      1.04  Disbursement of Funds...................................  5
      1.05  Register................................................  5
      1.06  Conversions.............................................  6
      1.07  Pro Rata Borrowings.....................................  6
      1.08  Interest................................................  6
      1.09  Interest Periods........................................  7
      1.10  Increased Costs, Illegality, etc........................  8
      1.11  Compensation............................................ 10
      1.12  Change of Lending Office................................ 11
      1.13  Replacement of Banks.................................... 11

SECTION 2.  Letters of Credit....................................... 12
      2.01  Letters of Credit....................................... 12
      2.02  Minimum Stated Amount................................... 13
      2.03  Letter of Credit Requests; Notices of Issuance.......... 13
      2.04  Agreement to Repay Letter of Credit Drawings............ 14
      2.05  Letter of Credit Participations......................... 14
      2.06  Increased Costs......................................... 17

SECTION 3.  Fees; Commitments....................................... 18
      3.01  Fees.................................................... 18
      3.02  Voluntary Reduction of Commitments...................... 19
      3.03  Mandatory Adjustments of Commitments, etc............... 19

SECTION 4.  Payments................................................ 19
      4.01  Voluntary Prepayments................................... 19
      4.02  Mandatory Prepayments................................... 20
      4.03  Method and Place of Payment............................. 23
      4.04  Net Payments............................................ 24

SECTION 5.  Conditions Precedent.................................... 26
      5.01  Conditions Precedent to Restatement Effective Date...... 26
      (a)  Effectiveness; Notes..................................... 26
      (b)  Opinions of Counsel...................................... 26

                                      (i)
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                                                                   Page

      (c)  Corporate Proceedings.................................... 26
      (d)  Initial Borrowing Base Certificate....................... 27
      (e)  Original Credit Agreement................................ 27
      (f)  Subsidiary Guaranty...................................... 27
      (g)  Security Documents....................................... 27
      (h)  Solvency................................................. 28
      (i)  Insurance Policies....................................... 28
      (j)  Fees..................................................... 28
      (k)  Consent Letter........................................... 28

5.02  Conditions Precedent to All Credit Events..................... 28
      (a)  Notice of Borrowing; Letter of Credit Request............ 28
      (b)  No Default; Representations and Warranties............... 29

SECTION 6.  Representations, Warranties and Agreements.............. 29
      6.01  Corporate Status........................................ 29
      6.02  Corporate Power and Authority........................... 29
      6.03  No Violation............................................ 30
      6.04  Litigation.............................................. 30
      6.05  Use of Proceeds; Margin Regulations..................... 30
      6.06  Governmental Approvals.................................. 31
      6.07  Investment Company Act.................................. 31
      6.08  Public Utility Holding Company Act...................... 31
      6.09  True and Complete Disclosure............................ 31
      6.10  Financial Condition; Financial Statements............... 31
      6.11  Security Interests...................................... 32
      6.12  Tax Returns and Payments................................ 33
      6.13  Compliance with ERISA................................... 33
      6.14  Subsidiaries............................................ 34
      6.15  Patents, etc............................................ 34
      6.16  Pollution and Other Regulations......................... 34
      6.17  Properties.............................................. 35
      6.18  Labor Relations......................................... 35
      6.19  Senior Subordinated Notes............................... 36
      6.20  Existing Indebtedness................................... 36

SECTION 7.  Affirmative Covenants................................... 36
      7.01  Information Covenants................................... 36
              (a)  Annual Financial Statements...................... 36
              (b)  Quarterly Financial Statements................... 37

                                      (ii)
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                                                                   Page

              (c)  Monthly Reports.................................. 37
              (d)  Budgets; etc..................................... 37
              (e)  Officer's Certificates........................... 37
              (f)  Notice of Default or Litigation.................. 38
              (g)  Borrowing Base Certificates...................... 38
              (h)  Auditors' Reports................................ 38
              (i)  Environmental Matters............................ 38
              (j)  Other Information................................ 39
      7.02  Books, Records and Inspections.......................... 39
      7.03  Insurance............................................... 39
      7.04  Payment of Taxes........................................ 40
      7.05  Consolidated Corporate Franchises....................... 40
      7.06  Compliance with Statutes, etc........................... 40
      7.07  ERISA................................................... 40
      7.08  Good Repair............................................. 41
      7.09  End of Fiscal Years; Fiscal Quarters.................... 41
      7.10  Use of Proceeds......................................... 42
      7.11  Additional Security; Further Assurances................. 42
      7.12  Dividends on PIK Preferred Stock........................ 42
      7.13  Compliance with Environmental Laws...................... 42

SECTION 8.  Negative Covenants...................................... 43
      8.01  Changes in Business..................................... 43
      8.02  Consolidation, Merger, Sale or Purchase of Assets,
              etc................................................... 43
      8.03  Liens................................................... 45
      8.04  Indebtedness............................................ 46
      8.05  Capital Expenditures.................................... 47
      8.06  Advances, Investments and Loans......................... 48
      8.07  Leases.................................................. 49
      8.08  Prepayments of Indebtedness, etc........................ 49
      8.09  Dividends, etc.......................................... 49
      8.10  Transactions with Affiliates............................ 51
      8.11  Fixed Charge Coverage Ratio............................. 51
      8.12  Minimum Consolidated EBITDA............................. 52
      8.13  Leverage Ratio.......................................... 53
      8.14  Issuance of Stock....................................... 53

SECTION 9.  Events of Default....................................... 53
      9.01  Payments................................................ 53
      9.02  Representations, etc.................................... 53
      9.03  Covenants............................................... 53

                                     (iii)
<PAGE>






                                                                   Page

      9.04  Default Under Other Agreements.......................... 54
      9.05  Bankruptcy, etc......................................... 54
      9.06  ERISA................................................... 55
      9.07  Security Documents...................................... 55
      9.08  Subsidiary Guaranty..................................... 55
      9.09  Judgments............................................... 55

SECTION 10.  Definitions............................................ 56

SECTION 11.  The Agent.............................................. 80
      11.01  Appointment............................................ 80
      11.02  Nature of Duties....................................... 80
      11.03  Lack of Reliance on the Agent.......................... 80
      11.04  Certain Rights of the Agent............................ 81
      11.05  Reliance............................................... 81
      11.06  Indemnification........................................ 81
      11.07  The Agent in Its Individual Capacity................... 82
      11.08  Holders................................................ 82
      11.09  Resignation by the Agent............................... 82

SECTION 12.  Miscellaneous.......................................... 83
      12.01  Payment of Expenses, etc............................... 83
      12.02  Right of Setoff........................................ 83
      12.03  Notices................................................ 84
      12.04  Benefit of Agreement................................... 84
      12.05  No Waiver; Remedies Cumulative......................... 86
      12.06  Payments Pro Rata...................................... 86
      12.07  Calculations; Computations............................. 87
      12.08  Governing Law; Submission to Jurisdiction; Venue;
              Waiver of Jury Trial.................................. 87
      12.09  Counterparts........................................... 88
      12.10  Effectiveness.......................................... 88
      12.11  Headings Descriptive................................... 88
      12.12  Amendment or Waiver.................................... 88
      12.13  Survival............................................... 89
      12.14  Domicile of Loans...................................... 89
      12.15  Confidentiality........................................ 89
      12.16  Register............................................... 89

                                      (iv)
<PAGE>


ANNEX I       --   Commitments
ANNEX II      --   Bank Addresses
ANNEX III     --   Existing Letters of Credit
ANNEX IV      --   Government Approvals
ANNEX V       --   Subsidiaries
ANNEX VI      --   Properties
ANNEX VII     --   Existing Indebtedness
ANNEX VIII    --   Insurance Policies
ANNEX IX      --   Existing Liens
ANNEX X       --   Management Fees


EXHIBIT A    -- Form of  Notice  of  Borrowing
EXHIBIT B-1  -- Form of Term  Note
EXHIBIT B-2  -- Form of  Revolving  Note
EXHIBIT B-3  -- Form of  Swingline  Note
EXHIBIT C    -- Form of Letter of Credit Request
EXHIBIT D-1  -- Form of Opinion of Skadden, Arps, Slate, Meagher & Flom
EXHIBIT D-2  --  Form of Opinion of White & Case
EXHIBIT E    --  Form of Officers' Certificate
EXHIBIT F    --  Form of Borrowing Base Certificate
EXHIBIT G    --  Form of Subsidiary Guaranty
EXHIBIT H-1  --  Form of Borrower Pledge Agreement
EXHIBIT H-2  --  Form of Subsidiary Guarantor Pledge Agreement
EXHIBIT I-1  --  Form of Borrower Security Agreement
EXHIBIT I-2  --  Form of Subsidiary Guarantor Security Agreement
EXHIBIT J    --  Form of Solvency Certificate
EXHIBIT K    --  Form of Consent Letter
EXHIBIT L    --  Form of Assignment Agreement

                                      (v)
<PAGE>


            AMENDMENT AND RESTATEMENT,  dated as of November 20, 1997, to CREDIT
AGREEMENT,  dated as of October 17, 1994, among HOSIERY  CORPORATION OF AMERICA,
INC. (the "Borrower"),  a Delaware corporation,  the lending institutions listed
from  time to time on Annex I hereto  (each,  a "Bank"  and,  collectively,  the
"Banks"),  and BANKERS TRUST COMPANY,  as Agent (the "Agent").  Unless otherwise
defined herein,  all capitalized terms used herein and defined in Section 10 are
used herein as so defined.


                          W I T N E S S E T H :


            WHEREAS, the Borrower and certain financial institutions are parties
to a  Credit  Agreement,  dated  as of  October  17,  1994 (as the same has been
amended, modified or supplemented prior to the date hereof, the "Original Credit
Agreement"); and

            WHEREAS,  the parties  hereto wish to amend and restate the
Original Credit Agreement as herein provided;

            NOW,  THEREFORE,  the parties hereto agree that the Original  Credit
Agreement  shall be and  hereby is  amended  and  restated  in its  entirety  as
follows, provided if the Restatement Effective Date has not occurred on or prior
to the Expiration  Date, this amendment and restatement  shall be void and of no
further effect, with the Original Credit Agreement to remain in effect;


            NOW, THEREFORE, IT IS AGREED:

            SECTION 1.  Amount and Terms of Credit.

            1.01 Commitment. Subject to and upon the terms and conditions herein
set forth,  each Bank  severally  agrees to make a loan or loans (each, a "Loan"
and, collectively,  the "Loans") to the Borrower, which Loans shall be drawn, to
the  extent  such Bank has a  commitment  under  such  Facility,  under the Term
Facility and the Revolving Facility, as set forth below:

            (a)  Loans  under  the  Term  Facility  (each,  a "Term  Loan"  and,
      collectively,  the "Term  Loans")  (i) shall be made  pursuant to a single
      drawing  on the  Restatement  Effective  Date,  (ii) may be  incurred  and
      maintained as, and/or  converted into, Base Rate Loans or Eurodollar Loans
      provided  that all Term Loans  outstanding  as part of the same  Borrowing
      shall unless  specifically  provided herein,  consist of Term Loans of the
      same Type and (iii) shall not exceed in aggregate principal amount for any
      TF Bank at the time of incurrence thereof the Term Commitment of such Bank
      in effect on such date. Once repaid, Term Loans borrowed hereunder may not
      be reborrowed.


<PAGE>

            (b) Loans under the Revolving  Facility  (each,  a "Revolving  Loan"
      and,  collectively,  the "Revolving  Loans") (i) shall be made at any time
      and from  time to time on and  after the  Restatement  Effective  Date and
      prior to the Final  Maturity Date,  (ii) except as  hereinafter  provided,
      may, at the option of the Borrower,  be incurred and maintained as, and/or
      converted  into,  Base Rate Loans or Eurodollar  Loans,  provided that all
      Revolving Loans made as part of the same Borrowing shall, unless otherwise
      specifically provided herein, consist of Revolving Loans of the same Type,
      (iii) may be repaid  and  reborrowed  in  accordance  with the  provisions
      hereof,  (iv) shall not  exceed  for all RC Banks at any time  outstanding
      that aggregate  principal  amount which,  when combined with the aggregate
      principal  amount of all Swingline Loans then  outstanding,  the Borrowing
      Base at such  time and (v) shall  not  exceed  for any RC Bank at any time
      outstanding that aggregate  principal amount which, when combined with the
      aggregate  outstanding  principal  amount of all other  Revolving Loans of
      such Bank and such  Bank's  Adjusted RC  Percentage  of the sum of (x) the
      Letter of Credit  Outstandings  (exclusive  of Unpaid  Drawings  which are
      repaid with the proceeds of, and  simultaneously  with the  incurrence of,
      the  respective  incurrence  of Revolving  Loans) at such time and (y) the
      outstanding  principal  amount of Swingline Loans  (exclusive of Swingline
      Loans which are repaid with the proceeds of, and  simultaneously  with the
      incurrence of, the respective incurrence of Revolving Loans) at such time,
      equals  (1) if  such  RC  Bank  is a  Non-Defaulting  Bank,  the  Adjusted
      Revolving  Commitment of such RC Bank at such time and (2) if such RC Bank
      is a Defaulting  Bank,  the  Revolving  Commitment of such RC Bank at such
      time.

            (c) Subject to and upon the terms and  conditions  herein set forth,
      BTCo in its individual  capacity  agrees to make at any time and from time
      to time after the  Restatement  Effective  Date and prior to the Swingline
      Expiry Date, a loan or loans to the Borrower  (each,  a "Swingline  Loan",
      and, collectively, the "Swingline Loans"), which Swingline Loans (i) shall
      be made  and  maintained  as Base  Rate  Loans,  (ii)  may be  repaid  and
      reborrowed  in  accordance  with the  provisions  hereof,  (iii) shall not
      exceed  in  aggregate  principal  amount  at any  time  outstanding,  when
      combined with the aggregate  principal  amount of all Revolving Loans made
      by  Non-Defaulting  Banks  then  outstanding  and  the  Letter  of  Credit
      Outstandings  (exclusive  of Unpaid  Drawings  which are  repaid  with the
      proceeds of, and  simultaneously  with the  incurrence  of, the respective
      incurrence  of  Revolving  Loans) at such  time,  an  amount  equal to the
      Adjusted Total Revolving Commitment then in effect (after giving effect to
      any reductions to the Adjusted Total  Revolving  Commitment on such date),
      (iv)  shall  not  exceed  in  aggregate   principal  amount  at  any  time
      outstanding,  when  combined with the  aggregate  principal  amount of all
      Revolving Loans then outstanding,  the Borrowing Base at such time and (v)
      shall not exceed in aggregate principal amount at any time outstanding the
      Maximum Swingline Amount. BTCo will not make a Swingline Loan after it has
      received  written  notice from the Required  Banks that one or more of the
      applicable  conditions to Credit Events  specified in Section 5.02 are not
      then satisfied.

                                       2
<PAGE>


            (d) On any  Business  Day,  BTCo may, in its sole  discretion,  give
      notice  to the RC Banks  that its  outstanding  Swingline  Loans  shall be
      funded with a Borrowing of Revolving Loans (provided that each such notice
      shall be deemed to have been automatically given upon the occurrence of an
      Event of Default  under  Section  9.05 or upon the  exercise of any of the
      remedies  provided  in the last  paragraph  of Section 9), in which case a
      Borrowing  of  Revolving  Loans  constituting  Base Rate Loans  (each such
      Borrowing,  a  "Mandatory  Borrowing")  shall  be made on the  immediately
      succeeding  Business  Day by all RC Banks pro rata based on each RC Bank's
      Adjusted RC Percentage, and the proceeds thereof shall be applied directly
      to repay BTCo for such outstanding  Swingline  Loans.  Each RC Bank hereby
      irrevocably  agrees to make Base Rate Loans upon one Business Day's notice
      pursuant  to each  Mandatory  Borrowing  in the  amount  and in the manner
      specified in the preceding  sentence and on the date  specified in writing
      by BTCo notwithstanding (i) that the amount of the Mandatory Borrowing may
      not comply with the Minimum Borrowing Amount otherwise required hereunder,
      (ii) whether any conditions  specified in Section 5.02 are then satisfied,
      (iii)  whether  a  Default  or an Event of  Default  has  occurred  and is
      continuing,  (iv)  the  date  of  such  Mandatory  Borrowing  and  (v) any
      reduction  in  the  Total  Revolving  Commitment  or  the  Adjusted  Total
      Revolving  Commitment or the Borrowing Base after any such Swingline Loans
      were made. In the event that any Mandatory Borrowing cannot for any reason
      be  made  on  the  date  otherwise  required  above  (including,   without
      limitation,  as a result of the  commencement  of a  proceeding  under the
      Bankruptcy  Code in respect of the  Borrower),  each RC Bank  (other  than
      BTCo) hereby  agrees that it shall  forthwith  purchase from BTCo (without
      recourse or warranty) such assignment of the  outstanding  Swingline Loans
      as shall be  necessary  to cause  the RC Banks to share in such  Swingline
      Loans  ratably  based  upon  their  respective  Adjusted  RC  Percentages,
      provided that all interest payable on the Swingline Loans shall be for the
      account of BTCo until the date the respective assignment is purchased and,
      to the extent attributable to the purchased  assignment,  shall be payable
      to the RC Bank purchasing same from and after such date of purchase.

            1.02 Minimum Borrowing Amounts,  etc. The aggregate principal amount
of each Borrowing under a Facility shall not be less than the Minimum  Borrowing
Amount for such Facility.  The aggregate  principal  amount of each Borrowing of
Swingline Loans shall not be less than $100,000, and, if greater, shall be in an
integral  multiple of $50,000.  More than one  Borrowing  may be incurred on any
day,  provided  that at no time  shall  there be  outstanding  more  than  seven
Borrowings of Eurodollar Loans.

                                       3
<PAGE>


            1.03 Notice of Borrowing. (a) Whenever the Borrower desires to incur
Loans under any Facility (excluding  Borrowings of Swingline Loans and Mandatory
Borrowings),  it shall give the Agent at its Notice Office,  prior to 10:00 A.M.
(New York  time),  at least  three  Business  Days'  prior  written  notice  (or
telephonic notice promptly confirmed in writing) of each Borrowing of Eurodollar
Loans and at least one Business Day's prior written notice (or telephonic notice
promptly  confirmed in writing) of each  Borrowing of Base Rate Loans to be made
hereunder. Each such notice (each, a "Notice of Borrowing") shall be in the form
of  Exhibit  A and  shall be  irrevocable  and shall  specify  (i) the  Facility
pursuant to which such  Borrowing is being made,  (ii) the  aggregate  principal
amount of the Loans to be made  pursuant  to such  Borrowing,  (iii) the date of
Borrowing  (which  shall be a  Business  Day) and (iv)  whether  the  respective
Borrowing  shall  consist  of  Base  Rate  Loans  or (to the  extent  permitted)
Eurodollar  Loans and, if Eurodollar  Loans, the Interest Period to be initially
applicable  thereto.  The Agent shall promptly give each Bank written notice (or
telephonic notice promptly confirmed in writing) of each proposed Borrowing,  of
such Bank's  proportionate share thereof and of the other matters covered by the
Notice of Borrowing.

            (b)  (i)  Whenever  the  Borrower  desires  to make a  Borrowing  of
Swingline  Loans  hereunder,  it shall give BTCo,  prior to 10:00 A.M. (New York
time)  on the  day  such  Swingline  Loan  is to be  made,  written  notice  (or
telephonic  notice  promptly  confirmed in writing) of each Swingline Loan to be
made hereunder.  Each such notice shall be irrevocable and shall specify in each
case (x) the date of such Borrowing  (which shall be a Business Day) and (y) the
aggregate  principal  amount of the  Swingline  Loan to be made pursuant to such
Borrowing.

            (ii) Mandatory Borrowings shall be made upon the notice specified in
Section 1.01(d),  with the Borrower irrevocably  agreeing,  by its incurrence of
any Swingline  Loan, to the making of Mandatory  Borrowings as set forth in such
Section 1.01(d).

            (c) Without in any way  limiting the  obligation  of the Borrower to
confirm in writing any telephonic  notice permitted to be given  hereunder,  the
Agent,  BTCo (in the case of a Borrowing  of  Swingline  Loans) or the Letter of
Credit  Issuer (in the case of the  issuance of Letters of Credit),  as the case
may be, may prior to receipt of written  confirmation act without liability upon
the basis of such telephonic  notice,  believed by the Agent, BTCo or the Letter
of Credit Issuer in good faith to be from an Authorized Officer of the Borrower.
In each such case, the Borrower  hereby waives the right to dispute the Agent's,
BTCo's or the Letter of Credit  Issuer's  record of the terms of such telephonic
notice.

                                       4
<PAGE>



            1.04  Disbursement  of Funds.  (a) No later than 1:00 P.M. (New York
time) on the date specified in each Notice of Borrowing or each notice described
in Section  1.03(b)(i) or (ii), each Bank with a Commitment under the respective
Facility will make available its pro rata share of each  Borrowing  requested to
be made on such  date  (or in the  case of  Swingline  Loans,  BTCo  shall  make
available  the full  amount  thereof)  in the manner  provided  below.  All such
amounts  shall be made  available to the Agent in U.S.  dollars and  immediately
available funds at the Payment Office and the Agent promptly will make available
to the Borrower by depositing to its account at the Payment Office the aggregate
of the amounts so made available in the type of funds received. Unless the Agent
shall have been  notified by any Bank prior to the date of  Borrowing  that such
Bank does not intend to make available to the Agent its portion of the Borrowing
or Borrowings  to be made on such date,  the Agent may assume that such Bank has
made such  amount  available  to the Agent on such  date of  Borrowing,  and the
Agent, in reliance upon such assumption, may (in its sole discretion and without
any obligation to do so) make available to the Borrower a corresponding  amount.
If such corresponding  amount is not in fact made available to the Agent by such
Bank and the Agent has made available  same to the Borrower,  the Agent shall be
entitled to recover such corresponding  amount from such Bank. If such Bank does
not pay such  corresponding  amount  forthwith upon the Agent's demand therefor,
the Agent shall promptly notify the Borrower, and the Borrower shall immediately
pay such corresponding  amount to the Agent. The Agent shall also be entitled to
recover on demand from such Bank or the Borrower,  as the case may be,  interest
on such  corresponding  amount  in  respect  of each  day  from  the  date  such
corresponding amount was made available by the Agent to the Borrower to the date
such  corresponding  amount is recovered by the Agent, at a rate per annum equal
to (x) if paid by such Bank, the overnight  Federal Funds  Effective Rate or (y)
if paid by the Borrower,  the then  applicable  rate of interest,  calculated in
accordance with Section 1.08, for the respective Loans.

            (b)  Nothing  herein  shall be deemed to  relieve  any Bank from its
obligation to fulfill its commitments hereunder or to prejudice any rights which
the  Borrower  may have against any Bank as a result of any default by such Bank
hereunder.

            1.05 Register.  (a) The  Borrower's  obligation to pay the principal
of, and interest on, the Loans made to it by each Bank shall be set forth in the
Register  maintained by the Agent pursuant to Section 12.16 and, if requested by
any  Bank,  shall  be  evidenced  by  a  promissory  note  (each  a  "Note"  and
collectively,  the  "Notes")  (i) if Term  Loans,  substantially  in the form of
Exhibit B-1 with blanks appropriately  completed in conformity herewith, (ii) if
Revolving  Loans,   substantially  in  the  form  of  Exhibit  B-2  with  blanks
appropriately  completed in conformity herewith and (iii) if Swingline Loans, by
a  promissory  note  substantially  in the  form of  Exhibit  B-3,  with  blanks
appropriately completed in conformity herewith.

                                       5
<PAGE>


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

            1.06  Conversions.  The Borrower shall have the option to convert on
any  Business  Day all or a portion  at least  equal to the  applicable  Minimum
Borrowing  Amount of the outstanding  principal amount of the Loans owing (other
than Swingline Loans, which at all times shall be maintained as Base Rate Loans)
pursuant to a single  Facility into a Borrowing or  Borrowings  pursuant to such
Facility of another Type of Loan, provided that (i) except as otherwise provided
in Section 1.10(b),  Eurodollar Loans may be converted into Base Rate Loans only
on  the  last  day of an  Interest  Period  applicable  thereto  and no  partial
conversion  of a Borrowing  of  Eurodollar  Loans shall  reduce the  outstanding
principal amount of the Eurodollar Loans made pursuant to such Borrowing to less
than the Minimum Borrowing Amount applicable  thereto,  (ii) Base Rate Loans may
only be converted into Eurodollar  Loans if no Default or Event of Default is in
existence on the date of the conversion and (iii) Borrowings of Eurodollar Loans
resulting  from this  Section  1.06 shall be limited  in number as  provided  in
Section 1.02. Each such conversion  shall be effected by the Borrower giving the
Agent at its Notice Office,  prior to 10:00 A.M. (New York time), at least three
Business  Days' (or two Business  Days',  in the case of a conversion  into Base
Rate Loans) prior written notice (or  telephonic  notice  promptly  confirmed in
writing)  (each,  a  "Notice  of  Conversion")  specifying  the  Loans  to be so
converted, the Type of Loans to be converted into and, if to be converted into a
Borrowing of Eurodollar  Loans,  the Interest Period to be initially  applicable
thereto.  The Agent  shall  give each Bank  prompt  notice of any such  proposed
conversion affecting any of its Loans.

            1.07 Pro Rata Borrowings. All Loans under this Agreement (other than
Swingline  Loans) shall be made by the Banks pro rata on the basis of their Term
Commitments or Revolving Commitments,  as the case may be. It is understood that
no Bank shall be responsible for any default by any other Bank in its obligation
to make Loans  hereunder and that each Bank shall be obligated to make the Loans
provided to be made by it hereunder, regardless of the failure of any other Bank
to fulfill its commitments hereunder.

            1.08  Interest.  (a) The unpaid  principal  amount of each Base Rate
Loan shall bear interest from the date of the Borrowing  thereof until  maturity
(whether by  acceleration  or  otherwise) at a rate per annum which shall at all
times be the Applicable  Base Rate Margin plus the Base Rate in effect from time
to time.

            (b) The unpaid  principal  amount of each Eurodollar Loan shall bear
interest  from the date of the  Borrowing  thereof  until  maturity  (whether by
acceleration  or  otherwise) at a rate per annum which shall at all times be the
Applicable Eurodollar Margin plus the relevant Eurodollar Rate.

            (c) All  overdue  principal  and,  to the extent  permitted  by law,
overdue  interest in respect of each Loan and any other overdue  amount  payable
hereunder shall bear interest at a
                                       6
<PAGE>


rate per annum  equal to the Base Rate in effect  from time to time plus the sum
of (i) 2% and (ii) the Applicable Base Rate Margin,  provided that no Loan shall
bear interest after maturity  (whether by  acceleration  or otherwise) at a rate
per annum less than 2% plus the rate of interest applicable thereto at maturity.

            (d)  Interest  shall  accrue  from  and  including  the  date of any
Borrowing  to but  excluding  the date of any  repayment  thereof  and  shall be
payable (i) in respect of each Base Rate Loan,  quarterly in arrears on the last
Business Day of each March,  June,  September and  December,  (ii) in respect of
each Eurodollar Loan, on the last day of each Interest Period applicable thereto
and, in the case of an Interest  Period in excess of three months,  on each date
occurring at three month  intervals  after the first day of such Interest Period
and (iii) in respect of each Loan, on any  prepayment or conversion  (other than
the prepayment or conversion of any Revolving Loan that is a Base Rate Loan) (on
the amount  prepaid or  converted),  at  maturity  (whether by  acceleration  or
otherwise) and, after such maturity, on demand.

            (e)  All  computations  of  interest  hereunder  shall  be  made  in
accordance with Section 12.07(b).

            (f) The Agent,  upon determining the interest rate for any Borrowing
of Eurodollar Loans for any Interest Period,  shall promptly notify the Borrower
and the Banks thereof.

            1.09 Interest  Periods.  (a) At the time the Borrower gives a Notice
of Borrowing or Notice of  Conversion in respect of the making of, or conversion
into,  a Borrowing  of  Eurodollar  Loans (in the case of the  initial  Interest
Period  applicable  thereto) or prior to 10:00 A.M. (New York time) on the third
Business  Day prior to the  expiration  of an Interest  Period  applicable  to a
Borrowing of  Eurodollar  Loans,  it shall have the right to elect by giving the
Agent written notice (or telephonic notice promptly confirmed in writing) of the
Interest Period  applicable to such  Borrowing,  which Interest Period shall, at
the option of the Borrower,  be a one, two, three or six month,  or if available
to  all RC  Banks  or TF  Banks,  as the  case  may  be,  twelve  month  period.
Notwithstanding anything to the contrary contained above:

            (i) the initial  Interest  Period for any  Borrowing  of  Eurodollar
      Loans shall commence on the date of such Borrowing  (including the date of
      any  conversion  from a Borrowing  of Base Rate  Loans) and each  Interest
      Period occurring thereafter in respect of such Borrowing shall commence on
      the day on which the next preceding Interest Period expires;

                                       7

<PAGE>



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

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

           (iv) no  Interest  Period  shall  extend  beyond  the  Final
      Maturity Date;

            (v) no Interest  Period with respect to any  Borrowing of Term Loans
      may be elected  that would  extend  beyond any date upon which a Scheduled
      Repayment is required to be made if, after giving  effect to the selection
      of such  Interest  Period,  the aggregate  principal  amount of Term Loans
      maintained as Eurodollar  Loans with  Interest  Periods  ending after such
      date would exceed the aggregate  principal  amount of Term Loans permitted
      to be outstanding after such Scheduled Repayment; and

           (vi) no  Interest  Period may be elected at any time when a violation
      of Section  9.01 or an Event of Default is then in  existence if the Agent
      or the Required Banks have  determined  that such an election at such time
      would be disadvantageous to the Banks.

            (b) If upon the expiration of any Interest Period,  the Borrower has
failed  to (or may not)  elect a new  Interest  Period to be  applicable  to the
respective  Borrowing of Eurodollar  Loans as provided above, the Borrower shall
be deemed to have  elected to convert  such  Borrowing  into a Borrowing of Base
Rate Loans effective as of the expiration date of such current Interest Period.

            1.10 Increased Costs, Illegality,  etc. (a) In the event that (x) in
the case of clause (i) below,  the Agent or (y) in the case of clauses  (ii) and
(iii) below, any Bank shall have determined (which  determination  shall, absent
manifest error, be final and conclusive and binding upon all parties hereto):

            (i) on any date for determining the Eurodollar Rate for any Interest
      Period  that,  by reason  of any  changes  arising  after the date of this
      Agreement  affecting the interbank  Eurodollar  market,  adequate and fair
      means do not exist for  ascertaining  the applicable  interest rate on the
      basis provided for in the definition of Eurodollar Rate; or

                                       8
<PAGE>


           (ii) at any time,  that  such Bank  shall  incur  increased  costs or
      reductions in the amounts received or receivable hereunder with respect to
      any  Eurodollar  Loans (other than any increased  cost or reduction in the
      amount received or receivable resulting from the imposition of or a change
      in the rate of taxes or similar  charges)  because of (x) any change since
      the Restatement  Effective Date in any applicable law,  governmental rule,
      regulation, guideline or order (or in the interpretation or administration
      thereof and  including  the  introduction  of any new law or  governmental
      rule,  regulation,  guideline  or order)  (such as, for  example,  but not
      limited to, a change in official reserve requirements, but, in all events,
      excluding  reserves  required under Regulation D to the extent included in
      the  computation  of the Eurodollar  Rate) and/or (y) other  circumstances
      affecting  such Bank, the interbank  Eurodollar  market or the position of
      such Bank in such market; or

          (iii) at any time,  that the making or  continuance  of any Eurodollar
      Loan has become unlawful by compliance by such Bank in good faith with any
      law, governmental rule, regulation,  guideline (or would conflict with any
      such  governmental  rule,  regulation,  guideline  or order not having the
      force of law but with which such Bank customarily complies even though the
      failure  to  comply  therewith  would  not be  unlawful),  or  has  become
      impracticable as a result of a contingency occurring after the Restatement
      Effective  Date which  materially  and  adversely  affects  the  interbank
      Eurodollar market;

then,  and in any such event,  such Bank (or the Agent in the case of clause (i)
above)  shall (x) on such date and (y) within ten  Business  Days of the date on
which  such  event no longer  exists  give  notice (by  telephone  confirmed  in
writing) to the Borrower and to the Agent of such  determination  (which  notice
the Agent shall promptly transmit to each of the other Banks). Thereafter (x) in
the case of clause  (i) above,  Eurodollar  Loans  shall no longer be  available
until  such time as the  Agent  notifies  the  Borrower  and the Banks  that the
circumstances  giving rise to such notice by the Agent no longer exist,  and any
Notice of Borrowing or Notice of  Conversion  given by the Borrower with respect
to Eurodollar  Loans which have not yet been incurred shall be deemed  rescinded
by the Borrower, (y) in the case of clause (ii) above, the Borrower shall pay to
such Bank, upon written demand therefor, such additional amounts (in the form of
an  increased  rate of,  or a  different  method  of  calculating,  interest  or
otherwise  as such  Bank in its sole  discretion  shall  determine)  as shall be
required to  compensate  such Bank for such  increased  costs or  reductions  in
amounts receivable hereunder (a written notice as to the additional amounts owed
to such Bank,  showing the basis for the calculation  thereof,  submitted to the
Borrower by such Bank shall,  absent manifest error, be final and conclusive and
binding upon all parties hereto) and (z) in the case of clause (iii) above,  the
Borrower shall take one of the actions  specified in Section 1.10(b) as promptly
as possible and, in any event, within the time period required by law.

                                       9
<PAGE>

            (b)  At any  time  that  any  Eurodollar  Loan  is  affected  by the
circumstances  described in Section  1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii),  the
Borrower  shall) either (i) if the affected  Eurodollar  Loan is then being made
pursuant to a Borrowing,  cancel said  Borrowing by giving the Agent  telephonic
notice  (confirmed  promptly  in  writing)  thereof  on the same  date  that the
Borrower was notified by a Bank  pursuant to Section  1.10(a)(ii)  or (iii),  or
(ii) if the affected  Eurodollar Loan is then  outstanding,  upon at least three
Business  Days' notice to the Agent,  require the affected  Bank to convert each
such Eurodollar Loan into a Base Rate Loan,  provided that if more than one Bank
is  affected  at any time,  then all  affected  Banks must be  treated  the same
pursuant to this Section 1.10(b).

            (c) If any Bank shall  have  determined  that after the  Restatement
Effective  Date, the adoption or  effectiveness  of any applicable  law, rule or
regulation  regarding capital adequacy,  or any change therein, or any change in
the  interpretation  or  administration  thereof by any governmental  authority,
central  bank  or  comparable   agency  charged  with  the   interpretation   or
administration   thereof,   or  compliance  by  such  Bank  or  any  corporation
controlling such Bank with any request or directive  regarding  capital adequacy
(whether or not having the force of law) of any such authority,  central bank or
comparable  agency,  has or would have the effect of reducing the rate of return
on such Bank's or such  corporation's  capital or assets as a consequence of its
commitments  or  obligations  hereunder to a level below that which such Bank or
such  corporation  could have  achieved  but for such  adoption,  effectiveness,
change  or   compliance   (taking  into   consideration   such  Bank's  or  such
corporation's  policies  with  respect to capital  adequacy),  then from time to
time,  within 15 days after demand by such Bank (with a copy to the Agent),  the
Borrower  shall pay to such  Bank such  additional  amount  or  amounts  as will
compensate such Bank or such  corporation  for such  reduction.  Each Bank, upon
determining in good faith that any additional  amounts will be payable  pursuant
to this  Section  1.10(c),  will  give  prompt  written  notice  thereof  to the
Borrower,  which  notice  shall set forth the basis of the  calculation  of such
additional  amounts,  although  the  failure to give any such  notice  shall not
release or diminish any of the Borrower's  obligations to pay additional amounts
pursuant to this Section 1.10(c) upon the subsequent receipt of such notice.

            1.11 Compensation. (a) The Borrower shall compensate each Bank, upon
its written request (which request shall set forth the basis for requesting such
compensation),  for all reasonable losses,  expenses and liabilities (including,
without  limitation,  any loss,  expense or liability  incurred by reason of the
liquidation or  reemployment of deposits or other funds required by such Bank to
fund its  Eurodollar  Loans but  excluding in any event the loss of  anticipated
profits)  which  such Bank may  sustain:  (i) if for any  reason  (other  than a
default by
                                       10
<PAGE>

such Bank or the Agent) a Borrowing of Eurodollar Loans does not occur on a date
specified therefor in a Notice of Borrowing or Notice of Conversion  (whether or
not withdrawn by the Borrower or deemed withdrawn  pursuant to Section 1.10(a));
(ii) if any prepayment,  repayment or conversion of any of its Eurodollar  Loans
occurs  on a date  which is not the last day of an  Interest  Period  applicable
thereto;  (iii) if any prepayment of any of its Eurodollar  Loans is not made on
any date specified in a notice of prepayment given by the Borrower; or (iv) as a
consequence  of (x) any other  default by the  Borrower to repay its  Eurodollar
Loans when  required  by the terms of this  Agreement  or (y) an  election  made
pursuant to Section 1.10(b).

            (b) Notwithstanding  anything in this Agreement to the contrary,  to
the extent any notice  required  by Section  1.10,  2.06 or 4.04 is given by any
Bank more than 180 days after such Bank  obtained,  or  reasonably  should  have
obtained, knowledge of the occurrence of the event giving rise to the additional
costs of the type described in such Section,  such Bank shall not be entitled to
compensation  under  Section  1.10,  2.06 or 4.04 for any  amounts  incurred  or
accruing prior to the giving of such notice to the Borrower.

            1.12  Change of Lending  Office.  Each Bank  agrees  that,  upon the
occurrence of any event giving rise to the operation of Section  1.10(a)(ii)  or
(iii), 1.10(c), 2.06 or 4.04 with respect to such Bank, it will, if requested by
the Borrower,  use reasonable efforts (subject to overall policy  considerations
of such Bank) to designate another lending office for any Loans 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 any such  Section.  Nothing in this Section 1.12 shall affect or postpone any
of the  obligations of the Borrower or the right of any Bank provided in Section
1.10, 2.06 or 4.04.

            1.13  Replacement  of Banks.  (x) Upon the  occurrence  of any event
giving rise to the operation of Section  1.10(a)(ii) or (iii),  Section 1.10(c),
Section 2.06 or Section 4.04 with respect to any Bank which results in such Bank
charging to the  Borrower  increased  costs in excess of those  being  generally
charged by the other Banks,  (y) if a Bank becomes a Defaulting  Bank and/or (z)
in the case of a refusal  by a Bank to consent  to a  proposed  change,  waiver,
discharge or termination  with respect to this Agreement which has been approved
by the Required Banks as provided in Section 12.12,  the Borrower shall have the
right, if no Default or Event of Default then exists,  to replace such Bank (the
"Replaced Bank") with one or more other Eligible Transferee or Transferees, none
of whom  shall  constitute  a  Defaulting  Bank at the time of such  replacement
(collectively,  the  "Replacement  Bank")  reasonably  acceptable  to the Agent,
provided that (i) at the time of any replacement  pursuant to this Section 1.13,
the Replacement Bank shall enter into one or more Assignment Agreements pursuant
to Section 12.04(b) (and with all fees payable pursuant to said Section 12.04(b)
to be paid by the Replacement Bank) pursuant to which the Replacement Bank shall
acquire  all of the  Commitments  and  outstanding  Loans  of,  and in each case
participations in Letters of Credit by,

                                       11
<PAGE>




the Replaced  Bank and, in connection  therewith,  shall pay to (x) the Replaced
Bank in respect thereof an amount equal to the sum of (A) an amount equal to the
principal of, and all accrued interest on, all outstanding Loans of the Replaced
Bank,  (B) an amount equal to all Unpaid  Drawings that have been funded by (and
not reimbursed to) such Replaced  Bank,  together with all then unpaid  interest
with respect  thereto at such time and (C) an amount  equal to all accrued,  but
theretofore unpaid, Fees owing to the Replaced Bank pursuant to Section 3.01 and
(y) the  Letter of Credit  Issuer an  amount  equal to such  Replaced  Bank's RC
Percentage of any Unpaid Drawing (which at such time remains an Unpaid  Drawing)
to the extent such amount was not theretofore  funded by such Replaced Bank, and
(ii) all  obligations  of the Borrower  owing to the  Replaced  Bank (other than
those  specifically  described  in  clause  (i)  above in  respect  of which the
assignment  purchase price has been, or is  concurrently  being,  paid) shall be
paid in full to such Replaced Bank concurrently with such replacement.  Upon the
execution of the respective Assignment and Assumption Agreements, the payment of
amounts  referred  to in clauses  (i) and (ii)  above,  the  recordation  of the
assignment  in the Register as provided in Section 12.16 and, if so requested by
the Replacement  Bank,  delivery to the Replacement Bank of the appropriate Note
or Notes  executed by the  Borrower,  the  Replacement  Bank shall become a Bank
hereunder  and the Replaced  Bank shall cease to  constitute  a Bank  hereunder,
except with respect to  indemnification  provisions  applicable  to the Replaced
Bank under this Agreement, which shall survive as to such Replaced Bank.

            SECTION 2.  Letters of Credit.

            2.01  Letters  of  Credit.  (a)  Subject  to and upon the  terms and
conditions  herein set forth,  the  Borrower may request that a Letter of Credit
Issuer at any time and from time to time on or after the  Restatement  Effective
Date and  prior  to the date  which is five  Business  Days  prior to the  Final
Maturity Date issue, for the account of the Borrower and in support of (x) trade
obligations of the Borrower and/or its Subsidiaries  (each such letter of credit
a "Trade  Letter of Credit" and,  collectively,  the "Trade  Letters of Credit")
and/or (y) such other  obligations  of the Borrower  that are  acceptable to the
Agent  (each  such  letter  of  credit,   a  "Standby  Letter  of  Credit"  and,
collectively,  the  "Standby  Letters of  Credit"  and  together  with the Trade
Letters of Credit and the  Existing  Letters of Credit the  "Letters of Credit")
and, subject to and upon the terms and conditions  herein set forth, such Letter
of Credit  Issuer  agrees to issue  from time to time,  irrevocable  letters  of
credit  denominated in U.S. dollars and issued on a sight basis, in such form as
may be approved by such Letter of Credit Issuer and the Agent.

            (b) Notwithstanding the foregoing,  (i) no Letter of Credit shall be
issued,  the  Stated  Amount  of  which,  when  added to the  Letter  of  Credit
Outstandings  (exclusive of Unpaid Drawings which are repaid on the date of, and
prior to the issuance of, the respective  Letter of Credit) at such time,  would
exceed either (x) $5,000,000 or (y) when added to the aggregate
                                       12
<PAGE>


principal  amount of all Revolving  Loans made by  Non-Defaulting  Banks and all
Swingline Loans then  outstanding,  the Adjusted Total  Revolving  Commitment at
such time and (ii) (x) each  Standby  Letter of Credit shall have an expiry date
occurring  not  later  than one year  after  such  Letter  of  Credit's  date of
issuance,  provided  that  any such  Letter  of  Credit  may be  extendable  for
successive  periods  of up to 12 months  on terms  acceptable  to the  Letter of
Credit Issuer and in no event shall any Standby  Letter of Credit have an expiry
date  occurring  later than five Business Days prior to the Final  Maturity Date
and (y) each Trade Letter of Credit shall have an expiry date occurring no later
than the earlier of (a) 180 days after the issuance thereof or (b) 30 days prior
to the Final Maturity Date.

            (c)  Notwithstanding  the  foregoing,  in the  event a Bank  Default
exists, the Letter of Credit Issuer shall not be required to issue any Letter of
Credit  unless  the  Letter of  Credit  Issuer  has  entered  into  arrangements
satisfactory  to it and the Borrower to eliminate the Letter of Credit  Issuer's
risk with respect to the  participation  in Letters of Credit of the  Defaulting
Bank or Banks,  including  by cash  collateralizing  such  Defaulting  Bank's or
Banks' Revolving Percentage of the Letter of Credit Outstandings.

            (d) Annex III hereto contains a description of each letter of credit
issued under the Original Credit Agreement that is outstanding on, and that will
continue in effect after, the Restatement Effective Date and that is issued by a
Bank (each, an "Existing Letter of Credit"). Each such Existing Letter of Credit
shall  (x)  constitute  a Letter  of  Credit  issued  for all  purposes  of this
Agreement on the  Restatement  Effective  Date and (y) continue to have the same
expiry date as in effect on the Restatement  Effective Date,  subject to renewal
on a basis consistent with renewals permitted by Section 2.01(b).

            2.02 Minimum Stated Amount. The initial Stated Amount of each Letter
of Credit shall be not less than  $150,000 or such lesser  amount  acceptable to
the Letter of Credit Issuer.

            2.03 Letter of Credit Requests: Notices of Issuance. (a) Whenever it
desires that a Letter of Credit be issued, the Borrower shall give the Agent and
the  Letter of Credit  Issuer  written  notice  (including  by way of  facsimile
transmission)  in the form of  Exhibit  C thereof  prior to 1:00 P.M.  (New York
time) at least three  Business Days (or such shorter period as may be acceptable
to the Letter of Credit  Issuer) prior to the proposed  date of issuance  (which
shall be a Business Day) (each, a "Letter of Credit  Request"),  which Letter of
Credit  Request  shall  include any  documents  that the Letter of Credit Issuer
customarily requires in connection therewith.

            (b) Each Letter of Credit Issuer shall, promptly after each issuance
of a  Standby  Letter  of Credit  by it,  give the  Agent,  each RC Bank and the
Borrower written notice of the issuance of such Letter of Credit, accompanied by
a copy to the Agent of such Letter of
                                       13
<PAGE>


Credit or Letters of Credit  issued by it.  Each Letter of Credit  Issuer  shall
provide to the Agent a weekly summary describing each Trade Letter of Credit, if
any, issued by such Letter of Credit Issuer and then  outstanding.  Based on the
foregoing,  the Agent will send to each RC Bank,  upon such Letter of Credit fee
payment  date,  a report  setting  forth for the period  covered by such fee the
daily aggregate Letter of Credit Outstandings during such period.

            2.04 Agreement to Repay Letter of Credit Drawings.  (a) The Borrower
hereby agrees to reimburse the Letter of Credit Issuer, by making payment to the
Agent at the Payment Office,  for any payment or disbursement made by the Letter
of Credit  Issuer  under  any  Letter of  Credit  (each  such  amount so paid or
disbursed until reimbursed,  an "Unpaid Drawing")  immediately after, and in any
event on the date on which the  Borrower  is  notified  by the  Letter of Credit
Issuer of such payment or  disbursement  with  interest on the amount so paid or
disbursed by the Letter of Credit Issuer,  to the extent not reimbursed prior to
1:00 P.M. (New York time) on the date of such payment or disbursement,  from and
including the date paid or disbursed to but not including the date the Letter of
Credit  Issuer is  reimbursed  therefor  at a rate per annum  which shall be the
Applicable  Base Rate  Margin  plus the Base Rate as in effect from time to time
(plus an  additional 2% per annum if not  reimbursed  by the third  Business Day
after the date of such notice of payment or disbursement), such interest also to
be payable on demand.

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

            2.05  Letter  of Credit  Participations.  (a)  Immediately  upon the
issuance by the Letter of Credit  Issuer of any Letter of Credit,  the Letter of
Credit  Issuer  shall be deemed to have sold and  transferred  to each  other RC
Bank, and each such RC Bank (each, a "Participant")  shall be deemed irrevocably
and  unconditionally  to have  purchased and received from such Letter of Credit
Issuer,  without recourse or warranty,  an undivided interest and participation,
to the extent of such  Participant's  Adjusted RC Percentage,  in such Letter of
Credit,  each substitute letter of credit,  each drawing made thereunder and the
obligations of the Borrower under this Agreement with respect thereto  (although
the Letter of Credit Fee shall be
                                       14
<PAGE>


payable  directly  to the Agent for the  account of the RC Banks as  provided in
Section 3.01(b) and the Participants  shall have no right to receive any portion
of any Facing Fees) and any security  therefor or guaranty  pertaining  thereto.
Upon any change in the Revolving  Commitments  or Adjusted RC Percentages of the
RC Banks  pursuant  to Section  12.04(b)  or upon a Bank  Default,  it is hereby
agreed  that,  with  respect  to all  outstanding  Letters  of Credit and Unpaid
Drawings,  there shall be an automatic adjustment to the participations pursuant
to this Section 2.05 to reflect the new Adjusted RC Percentages of the assigning
and assignee RC Bank or of all RC Banks, as the case may be.

            (b) In  determining  whether to pay under any Letter of Credit,  the
Letter  of  Credit  Issuer  shall  not  have  any  obligation  relative  to  the
Participants other than to determine that any documents required to be delivered
under such Letter of Credit have been delivered and that they strictly comply on
their face with the  requirements of such Letter of Credit.  Any action taken or
omitted to be taken by the Letter of Credit Issuer under or in  connection  with
any Letter of Credit if taken or omitted in the absence of gross  negligence  or
willful  misconduct,  shall not  create  for the  Letter of  Credit  Issuer  any
resulting liability.

            (c) In the event that the Letter of Credit  Issuer makes any payment
under any  Letter of Credit  and the  Borrower  shall not have  reimbursed  such
amount in full to the Letter of Credit Issuer pursuant to Section  2.04(a),  the
Letter of Credit  Issuer shall  promptly  notify the Agent,  and the Agent shall
promptly notify each  Participant of such failure,  and each  Participant  shall
promptly and  unconditionally  pay to the Agent for the account of the Letter of
Credit Issuer, the amount of such  Participant's  Adjusted RC Percentage of such
payment  in U.S.  dollars  and in same day  funds;  provided,  however,  that no
Participant shall be obligated to pay to the Agent its Adjusted RC Percentage of
such  unreimbursed  amount for any wrongful payment made by the Letter of Credit
Issuer  under a Letter of Credit as a result of acts or  omissions  constituting
willful  misconduct  or gross  negligence  on the part of the  Letter  of Credit
Issuer.  If the Agent so  notifies  any  Participant  required to fund an Unpaid
Drawing  under a Letter of Credit  prior to 11:00  A.M.  (New York  time) on any
Business Day, such Participant shall make available to the Agent for the account
of the Letter of Credit Issuer such Participant's  Adjusted RC Percentage of the
amount of such  payment on such  Business  Day in same day funds.  If and to the
extent such Participant shall not have so made its Adjusted RC Percentage of the
amount of such  Unpaid  Drawing  available  to the Agent for the  account of the
Letter of Credit  Issuer,  such  Participant  agrees to pay to the Agent for the
account  of the  Letter of Credit  Issuer,  forthwith  on  demand  such  amount,
together with interest thereon,  for each day from such date until the date such
amount is paid to the Agent for the  account of the  Letter of Credit  Issuer at
the overnight  Federal Funds  Effective  Rate. The failure of any Participant to
make
                                       15
<PAGE>


available  to the Agent for the  account  of the  Letter  of Credit  Issuer  its
Adjusted RC  Percentage  of any Unpaid  Drawing under any Letter of Credit shall
not relieve any other Participant of its obligation  hereunder to make available
to the Agent for the  account of the Letter of Credit  Issuer  its  Adjusted  RC
Percentage  of any payment under any Letter of Credit on the date  required,  as
specified above, but no Participant  shall be responsible for the failure of any
other  Participant  to make available to the Agent for the account of the Letter
of Credit  Issuer such other  Participant's  Adjusted RC  Percentage of any such
payment.

            (d)  Whenever  the Letter of Credit  Issuer  receives a payment of a
reimbursement  obligation  as to which the Agent has received for the account of
the Letter of Credit  Issuer any  payments  from the  Participants  pursuant  to
clause (c) above,  the  Letter of Credit  Issuer  shall pay to the Agent and the
Agent shall  promptly  pay to each  Participant  which has paid its  Adjusted RC
Percentage  thereof,  in U.S.  dollars and in same day funds, an amount equal to
such  Participant's  Adjusted RC Percentage of the principal  amount thereof and
interest  thereon  accruing at the overnight  Federal Funds Effective Rate after
the purchase of the respective participations.

            (e) The  obligations  of the  Participants  to make  payments to the
Agent for the account of the Letter of Credit  Issuer with respect to Letters of
Credit shall be irrevocable  and not subject to  counterclaim,  set-off or other
defense or any other  qualification  or exception  whatsoever  (provided that no
Participant shall be required to make payments  resulting from the Agent's gross
negligence or willful misconduct) and shall be made in accordance with the terms
and conditions of this Agreement  under all  circumstances,  including,  without
limitation, any of the following circumstances:

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

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

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

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

                                       16
<PAGE>



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

            (f) To the extent the Letter of Credit Issuer is not  indemnified by
the Borrower, the Participants will reimburse and indemnify the Letter of Credit
Issuer,  in proportion to their respective  "percentages" of the Total Revolving
Commitment,  for  and  against  any and all  liabilities,  obligations,  losses,
damages, penalties, claims, actions, judgments, costs, expenses or disbursements
of  whatsoever  kind or nature  which may be  imposed  on,  asserted  against or
incurred by the Letter of Credit Issuer in performing its  respective  duties in
any way  relating  to or  arising  out of its  issuance  of  Letters  of Credit;
provided  that  no  Participants  shall  be  liable  for  any  portion  of  such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses or  disbursements  resulting from the Letter of Credit Issuer's
gross negligence or willful misconduct.

            2.06 Increased Costs. If at any time after the Restatement Effective
Date, the adoption or  effectiveness  of any applicable law, rule or regulation,
or any change therein,  or any change in the  interpretation  or  administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration  thereof,  or compliance by the Letter
of Credit Issuer or any  Participant  with any request or directive  (whether or
not having the force of law) by any such  authority,  central bank or comparable
agency shall either (i) impose, modify or make applicable any reserve,  deposit,
capital adequacy or similar  requirement against Letters of Credit issued by the
Letter of Credit Issuer or such  Participant's  participation  therein,  or (ii)
shall  impose  on the  Letter  of Credit  Issuer  or any  Participant  any other
conditions affecting this Agreement,  any Letter of Credit or such Participant's
participation therein; and the result of any of the foregoing is to increase the
cost to the Letter of Credit Issuer or such Participant of issuing,  maintaining
or  participating  in any Letter of  Credit,  or to reduce the amount of any sum
received  or  receivable  by the  Letter  of Credit  Issuer or such  Participant
hereunder  (other than any increased cost or reduction in the amount received or
receivable  resulting from the imposition of or a change in the rate of taxes or
similar  charges),  then,  upon  demand to the  Borrower by the Letter of Credit
Issuer or such  Participant  (a copy of which notice shall be sent by the Letter
of Credit Issuer or such  Participant  to the Agent),  the Borrower shall pay to
the  Letter  of Credit  Issuer or such  Participant  such  additional  amount or
amounts as will  compensate the Letter of Credit Issuer or such  Participant for
such increased cost or reduction. A certificate submitted to the Borrower by the
Letter of Credit Issuer or such Participant, as the case may be (a copy of which
certificate  shall be sent by the Letter of Credit Issuer or such Participant to
the Agent),  setting forth the basis for the  determination  of such  additional
amount or amounts  necessary to  compensate  the Letter of Credit Issuer or such
Participant as aforesaid  shall be conclusive and binding on the Borrower absent
manifest error,  although the failure to deliver any such certificate  shall not
release or diminish any of the Borrower's  obligations to pay additional amounts
pursuant to this Section 2.06 upon the subsequent receipt thereof.


                                       17
<PAGE>


            SECTION 3.  Fees;  Commitments.

            3.01 Fees. (a) The Borrower  agrees to pay to the Agent a commitment
commission ("Commitment Commission") for the account of each Non-Defaulting Bank
with a Revolving  Commitment  for the period from and including the  Restatement
Effective Date to, but not including,  the date the Total  Revolving  Commitment
has been  terminated,  computed  at a rate  for each day  equal to 1/2 of 1% per
annum on the daily average of such Bank's Unutilized Revolving Commitment.  Such
Commitment  Commission  shall be due and payable in arrears on the lst  Business
Day of each March,  June,  September and December and on the date upon which the
Total Revolving Commitment is terminated.

            (b) The Borrower  agrees to pay to the Agent for the account of each
RC Bank that is a  Non-Defaulting  Bank pro rata on the basis of its  respective
Adjusted RC  Percentage,  a fee in respect of each Letter of Credit (the "Letter
of Credit Fee") computed at the rate equal to the Applicable  Eurodollar  Margin
then in effect on the daily  Stated  Amount of such  Letter of  Credit.  Accrued
Letter of Credit Fees shall be due and payable  quarterly in arrears on the last
Business Day of each March, June, September and December of each year and on the
date upon which the Total Revolving Commitment is terminated.

            (c) The Borrower agrees to pay to each Letter of Credit Issuer a fee
in respect of each Letter of Credit issued by it (the "Facing Fee")  computed at
the rate of 1/4 of 1% per annum on the  daily  Stated  Amount of such  Letter of
Credit,  provided that in no event shall the annual Facing Fee be less than $500
per year per  Letter of Credit.  Accrued  Facing  Fees shall be due and  payable
quarterly in arrears on the last Business Day of each March, June, September and
December of each year and on the date upon which the Total Revolving  Commitment
is terminated.

            (d) The  Borrower  agrees to pay  directly  to the  Letter of Credit
Issuer upon each issuance of,  payment under,  and/or  amendment of, a Letter of
Credit  issued by such Letter of Credit  Issuer such amount as shall at the time
of such issuance,  payment or amendment be the administrative  charge which such
Letter of Credit Issuer is customarily charging for issuances of, payments under
or amendments of, letters of credit issued by it.

            (e) The  Borrower  shall  pay to the  Agent  (x) on the  Restatement
Effective  Date for its own account  and/or for  distribution  to the Banks such
fees as  heretofore  agreed  by the  Borrower  and the Agent and (y) for its own
account such other fees as agreed to between the  Borrower  and the Agent,  when
and as due.

            (f) All  computations  of Fees  shall  be  made in  accordance  with
Section 12.07(b).

                                       18
<PAGE>


            3.02  Voluntary  Reduction  of  Commitments.  Upon  at  least  three
Business Days' prior written notice (or telephonic  notice confirmed in writing)
to the  Agent at its  Notice  Office  (which  notice  the Agent  shall  promptly
transmit  to each of the  Banks),  the  Borrower  shall have the right,  without
premium or  penalty,  to  terminate  or  partially  reduce the Total  Unutilized
Revolving  Commitment,  provided  that (x) any such  termination  shall apply to
proportionately  and permanently  reduce the Revolving  Commitment of each Bank,
(y)  no  such  reduction  shall  reduce  any  Non-Defaulting   Bank's  Revolving
Commitment  to an  amount  that is  less  than  the  sum of (A) the  outstanding
Revolving  Loans of such Bank plus (B) such Bank's Adjusted RC Percentage of (i)
outstanding  Swingline Loans and (ii) Letter of Credit  Outstandings and (z) any
partial  reduction  pursuant to this  Section  3.02 shall be in the amount of at
least $1,000,000.

            3.03 Mandatory  Adjustments of Commitments,  etc. (a) The Total Term
Commitment  shall  terminate in its entirety on the  Restatement  Effective Date
(after giving effect to the making of Term Loans on such date).

            (b) The Total Revolving  Commitment (and the Revolving Commitment of
each RC Bank) shall  terminate  in its  entirety on the earlier of (i) the Final
Maturity Date and (ii) the date on which any Change of Control occurs.

            (c) The Total Revolving  Commitment  shall be reduced at the time of
any mandatory repayment of Term Loans pursuant to Section 4.02(A)(c),  (d), (e),
(f), (g) or (h) if Term Loans were then  outstanding,  in an amount,  if any, by
which the amount of such repayment (determined as if an unlimited amount of Term
Loans were then  outstanding)  exceeds the  aggregate  amount of Term Loans then
outstanding.

            (d)  Each  partial  reduction  of  the  Total  Revolving  Commitment
pursuant to this  Section  3.03 shall  apply  proportionately  to the  Revolving
Commitment of each RC Bank.

            SECTION 4.  Payments.

            4.01  Voluntary  Prepayments.  The Borrower  shall have the right to
prepay Loans in whole or in part, without premium or penalty,  from time to time
on the following terms and conditions:  (i) the Borrower shall give the Agent at
the Payment Office written notice (or telephonic  notice  promptly  confirmed in
writing) of its intent to prepay the Loans,  whether  such Loans are Term Loans,
Revolving  Loans or Swingline  Loans,  the amount of such prepayment and (in the
case of  Eurodollar  Loans) the  specific  Borrowing(s)  pursuant to which made,
which  notice  shall be given by the Borrower at least one Business Day prior to
the  date of such  prepayment  with  respect  to Base  Rate  Loans  (other  than
Swingline Loans,  with respect to which notice shall be given by the Borrower on
the day of prepayment)  and at least two Business Days prior to the date of such
prepayment with respect to Eurodollar Loans, which notice shall
                                       19
<PAGE>



promptly be transmitted by the Agent to each of the Banks; (ii) (x) each partial
prepayment of any Borrowing (other than a Borrowing of Swingline Loans) shall be
in an aggregate  principal  amount of at least  $1,000,000 and, if greater in an
integral  multiple of $100,000 and (y) each partial  prepayment of any Borrowing
of  Swingline  Loans  shall  be in an  aggregate  principal  amount  of at least
$100,000 and, if greater,  in an integral multiple of $50,000,  provided that no
partial prepayment of Eurodollar Loans made pursuant to a Borrowing shall reduce
the  aggregate  principal  amount  of the  Loans  outstanding  pursuant  to such
Borrowing  to an  amount  less  than the  Minimum  Borrowing  Amount  applicable
thereto;  (iii) at the time of any  prepayment of Eurodollar  Loans  pursuant to
this  Section  4.01 on any date other than the last day of the  Interest  Period
applicable  thereto,  the Borrower  shall pay the amounts  required  pursuant to
Section  1.11;  (iv) each  prepayment in respect of any Loans made pursuant to a
Borrowing  shall be applied  pro rata among such  Loans,  provided,  that at the
Borrower's  election  in  connection  with any  prepayment  of  Revolving  Loans
pursuant  to this  Section  4.01,  such  prepayment  shall not be applied to any
Revolving  Loans of a Defaulting  Bank;  and (v) each  prepayment  of Term Loans
pursuant to this Section 4.01 shall reduce the remaining Scheduled Repayments on
a pro rata basis (based upon the then  remaining  principal  amount of each such
Scheduled  Repayment),  provided that the amount of any such  prepayment that is
made with the Available Excess Cash Flow Amount at such time (determined  before
giving  effect to such  prepayment  made with such  Available  Excess  Cash Flow
Amount) may, at the Borrower's  direction,  reduce the then remaining  Scheduled
Repayments in the direct order of their maturity.

            4.02  Mandatory Prepayments.

            (A) Requirements:

            (a) (i) If on any  date  (i) the  sum of the  aggregate  outstanding
principal  amount of Revolving  Loans made by  Non-Defaulting  Banks,  Swingline
Loans  and the  Letter  of  Credit  Outstandings,  exceeds  the  Adjusted  Total
Revolving  Commitment  as  then in  effect  or (ii)  the  aggregate  outstanding
principal  amount of all Revolving  Loans and of all Swingline  Loans shall have
exceeded  the  Borrowing  Base at such time for any period of three  consecutive
Business  Days, the Borrower shall repay on such date the principal of Swingline
Loans, and if no Swingline Loans are or remain  outstanding,  Revolving Loans of
Non-Defaulting  Banks,  in an aggregate  amount equal to such excess.  If, after
giving effect to the repayment of all outstanding  Swingline Loans and Revolving
Loans of  Non-Defaulting  Banks,  the  aggregate  amount  of  Letter  of  Credit
Outstandings exceeds the Adjusted Total Revolving Commitment then in effect, the
Borrower shall pay to the Agent an amount in cash and/or Cash Equivalents  equal
to such excess (up to the aggregate amount of the Letter of Credit  Outstandings
at such  time) and the  Agent  shall  hold  such  payment  as  security  for the
obligations of the Borrower hereunder pursuant to a cash collateral agreement to
be entered  into in form and  substance  satisfactory  to the Agent (which shall
permit certain investments in Cash Equivalents  satisfactory to the Agent, until
the proceeds are applied to the secured obligations).

                                       20
<PAGE>




            (ii) If on any date the aggregate  outstanding  principal  amount of
the Revolving Loans made by a Defaulting  Bank exceeds the Revolving  Commitment
of such  Defaulting  Bank, the Borrower shall repay principal of Revolving Loans
of such Defaulting Bank in an amount equal to such excess.

            (b) On each date set forth below,  the Borrower shall be required to
repay the principal amount of Term Loans set forth opposite such date (each such
repayment,  as the same may be reduced as provided in Sections 4.01 and 4.02(B),
a "Scheduled Repayment"):

              Date                      Amount
              ----                      ------
March 31, 1998                            $750,000
June 30, 1998                             $750,000
September 30, 1998                        $750,000
December 31, 1998                         $750,000
March 31, 1999                          $1,875,000
June 30, 1999                           $1,875,000
September 30, 1999                      $1,875,000
December 31, 1999                       $1,875,000
March 31, 2000                          $3,250,000
June 30, 2000                           $3,250,000
September 30, 2000                      $3,250,000
December 31, 2000                       $3,250,000
March 31, 2001                          $5,000,000
June 30, 2001                           $5,000,000
September 30, 2001                      $5,000,000
December 31, 2001                       $5,000,000
Final Maturity Date                    $21,500,000


            (c) On the Business Day following the date of receipt thereof by the
Borrower  and/or any of its  Subsidiaries  of the Cash  Proceeds  from any Asset
Sale,  an amount  equal to 100% of the Net Cash  Proceeds  from such  Asset Sale
shall be applied as a mandatory
                                       21
<PAGE>



repayment of principal of the then outstanding  Term Loans,  provided that up to
an aggregate of  $2,000,000  of Net Cash  Proceeds from Asset Sales shall not be
required to be used to so repay Term Loans to the extent the Borrower elects, as
hereinafter  provided,  to cause  such Net Cash  Proceeds  to be  reinvested  in
Reinvestment Assets (a "Reinvestment  Election").  The Borrower may exercise its
Reinvestment   Election  (within  the  parameters  specified  in  the  preceding
sentence)  with  respect  to an Asset Sale if (x) no Default or Event of Default
exists and (y) the Borrower  delivers a Reinvestment  Notice to the Agent on the
Business Day  following the date of the  consummation  of the  respective  Asset
Sale,  with such  Reinvestment  Election being effective with respect to the Net
Cash Proceeds of such Asset Sale equal to the  Anticipated  Reinvestment  Amount
specified in such Reinvestment Notice.

            (d) On the date of the receipt thereof by the Borrower and/or any of
its  Subsidiaries,  an amount equal to 100% of the proceeds (net of underwriting
discounts and commissions and other reasonable  costs  associated  therewith) of
the incurrence of Indebtedness  by the Borrower  and/or any of its  Subsidiaries
(other  than  Indebtedness  permitted  by Section  8.04),  shall be applied as a
mandatory repayment of principal of the then outstanding Term Loans.

            (e) On the date of the receipt  thereof by the  Borrower,  an amount
equal to 100% of the proceeds (net of underwriting discounts and commissions and
other  reasonable  costs  associated  therewith)  of any sale or issuance of its
equity  (other than  equity  issued to  management  and other  employees  of the
Borrower and its  Subsidiaries as provided for in Section  8.09(a)(ii)) and 100%
of any amount of cash  received by the Borrower in  connection  with any capital
contributions shall be applied as a mandatory repayment of principal of the then
outstanding Term Loans.

            (f) On each date which is 90 days after the last day of each  fiscal
year of the  Borrower  (commencing  with the fiscal year ending on December  31,
1997), 50% of Excess Cash Flow (such amount, the "ECF Prepayment Amount") of the
Borrower  and its  Subsidiaries  for the fiscal  year then last  ended  shall be
applied as a mandatory  repayment  of  principal  of the then  outstanding  Term
Loans.

            (g)  On  the   Reinvestment   Prepayment  Date  with  respect  to  a
Reinvestment Election, an amount equal to the Reinvestment Prepayment Amount, if
any,  for such  Reinvestment  Election  shall be applied as a  repayment  of the
principal amount of the then outstanding Term Loans.

            (h) Notwithstanding  anything to the contrary contained elsewhere in
this Agreement, (i) all then outstanding Swingline Loans shall be repaid in full
on the Swingline Expiry Date and (ii) all other then outstanding  Loans shall be
repaid in full on the Final Maturity Date.

                                       22
<PAGE>



            (i) On  the  date  on  which  any  Change  of  Control  occurs,  the
outstanding  principal  amount of the Term Loans,  if any,  shall become due and
payable in full.

            (B) Application:

            (a) Each  mandatory  repayment  of Term  Loans  required  to be made
pursuant to Section  4.02(A)  (other than pursuant to clause (b) thereof)  shall
reduce the then remaining  Scheduled  Repayments on a pro rata basis (based upon
the then remaining principal amount of each such Scheduled Repayment).

            (b) With  respect to each  prepayment  of Loans  required by Section
4.02,  the Borrower may designate the Types of Loans which are to be prepaid and
the specific  Borrowing(s)  under the affected  Facility pursuant to which made,
provided that (i) Eurodollar Loans may so be designated for prepayment  pursuant
to this  Section  4.02  only on the last day of an  Interest  Period  applicable
thereto unless all Eurodollar Loans made pursuant to such Facility with Interest
Periods ending on such date of required  prepayment and all Base Rate Loans made
pursuant to such  Facility  have been paid in full;  (ii) if any  prepayment  of
Eurodollar   Loans  made  pursuant  to  a  single  Borrowing  shall  reduce  the
outstanding  Loans made  pursuant to such  Borrowing  to an amount less than the
Minimum Borrowing Amount for such Borrowing, such Borrowing shall be immediately
converted  into Base Rate Loans;  (iii) each  prepayment of any Revolving  Loans
made by  Non-Defaulting  Banks pursuant to a Borrowing shall be applied pro rata
among such Revolving Loans; and (iv) each prepayment of any Revolving Loans made
by Defaulting Banks pursuant to a Borrowing shall be applied pro rata among such
Revolving Loans. In the absence of a designation by the Borrower as described in
the  preceding  sentence,  the Agent  shall,  subject  to the  above,  make such
designation in its sole discretion  with a view, but no obligation,  to minimize
breakage costs owing under Section 1.11.

            4.03 Method and Place of Payment.  Except as otherwise  specifically
provided  herein,  all payments under this Agreement  shall be made to the Agent
for the  ratable  (based on its pro rata  share)  account of the Banks  entitled
thereto, not later than 1:00 P.M. (New York time) on the date when due and shall
be made in immediately  available funds and in lawful money of the United States
of America at the Payment Office, it being understood that written notice by the
Borrower to the Agent to make a payment from the funds in the Borrower's account
at the Payment Office shall  constitute the making of such payment to the extent
of such funds held in such account.  Any payments under this Agreement which are
made later than 1:00 P.M.  (New York time)  shall be deemed to have been made on
the next  succeeding  Business  Day.  Whenever any payment to be made  hereunder
shall be  stated to be due on a day which is not a  Business  Day,  the due date
thereof shall be extended to the next succeeding  Business Day and, with respect
to payments of principal, interest shall be payable during such extension at the
applicable rate in effect immediately prior to such extension.

                                       23
<PAGE>


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

            (b) Each Bank which is not a United  States  person (as such term is
defined in Section  7701(a)(30)  of the Code) for  Federal  income tax  purposes
agrees (i) that it will provide to the  Borrower on or prior to the  Restatement
Effective Date two original signed copies of Internal  Revenue Service Form 4224
or Form 1001 certifying to such Bank's  entitlement to a complete exemption from
United  States  withholding  tax with  respect to payments to be made under this
Agreement,  under any Note and under any other Credit  Document and (ii) that to
the extent  legally  entitled  to do so,  (x) with  respect to a Bank that is an
assignee or transferee of an
                                       24
<PAGE>



interest  under this  Agreement  pursuant to Section  12.04  hereof  (unless the
respective  Bank  was  already  a  Bank  hereunder  immediately  prior  to  such
assignment  or transfer),  upon the date of such  assignment or transfer to such
Bank,  and (y) with respect to any Bank which is not a United  States person (as
such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income
tax purposes (including,  without limitation, any assignee or transferee),  from
time to time, upon the reasonable request by the Borrower or the Agent after the
Restatement  Effective  Date, such Bank will provide to each of the Borrower and
the Agent two original  signed copies of Internal  Revenue  Service Form 4224 or
Form 1001 (or any successor  forms)  certifying to such Bank's  entitlement to a
complete  exemption  from, or reduction in, United States  withholding  tax with
respect to  payments to be made under this  Agreement,  under any Note and under
any other Credit Document, or (iii) if the Bank, assignee or transferee,  as the
case may be, is not a "bank" within the meaning of Section  881(c)(3)(A)  of the
Code and  cannot  deliver  either  Internal  Revenue  Service  Form 1001 or 4224
pursuant to clauses (i) or (ii) above (either initially or upon request,  as the
case may be),  such Bank  which is not a United  States  person (as such term is
defined in Section  7701(a)(30)  of the Code) agrees to provide two accurate and
complete  original  signed  copies  of  Internal  Revenue  Service  Form W-8 (or
successor form)  certifying to such Bank's  entitlement to a complete  exemption
from United  States  withholding  tax with respect to payments of interest to be
made under this  Agreement and under any Note.  Notwithstanding  anything to the
contrary  contained in Section 4.04(a),  the Borrower shall be entitled,  to the
extent it is required  to do so by law,  to deduct or  withhold  income or other
similar  taxes imposed by the United  States (or any  political  subdivision  or
taxing  authority  thereof or  therein)  from  interest,  fees or other  amounts
payable  hereunder  (without any  obligation  under  Section  4.04(a) to pay the
respective Bank such taxes or any additional  amounts with respect  thereto) for
the  account  of any Bank which is not a United  States  person (as such term is
defined in Section 7701(a)(30) of the Code) for United States federal income tax
purposes and which has not provided to the  Borrower  such forms  required to be
provided  to the  Borrower  by a Bank  pursuant  to the first  sentence  of this
Section  4.04(b),  provided that if the Borrower shall so deduct or withhold any
such taxes,  it shall  provide a statement  to the Agent and such Bank,  setting
forth the amount of such taxes so deducted or withheld,  the applicable rate and
any other  information or documentation  which such Bank may reasonably  request
for assisting such Bank in obtaining any allowable credits or deductions for the
taxes so deducted or withheld in the jurisdiction or jurisdictions in which such
Bank is subject to tax.  Notwithstanding  anything to the contrary  contained in
the preceding sentence, the Borrower agrees to indemnify each Bank in the manner
set forth in Section  4.04(a) in respect of any amounts  deducted or withheld by
it as described in the  previous  sentence as a result of any changes  after the
Restatement  Effective Date in any applicable law,  treaty,  governmental  rule,
regulation,  guideline or order, or in the interpretation  thereof,  relating to
the deducting or withholding of income or similar Taxes.

                                       25
<PAGE>



            SECTION 5.  Conditions Precedent.

            5.01  Conditions  Precedent  to  Restatement  Effective  Date.  This
Agreement shall become effective on the date (the "Restatement  Effective Date")
when each of the following conditions are first satisfied:

            (a)  Effectiveness  Notes. On or prior to the Restatement  Effective
Date,  (i) each  Borrower and each of the Banks shall have signed a copy of this
Agreement  (whether the same or different  copies) and shall have  delivered the
same to the Agent at its Notice Office or, in the case of the Banks,  shall have
given  to the  Agent  telephonic  (confirmed  in  writing),  written,  telex  or
facsimile  transmitted notice (actually  received) at its Notice Office that the
same has been signed and mailed to it.

            (b) Opinions of Counsel.  On the  Restatement  Effective  Date,  the
Agent shall have  received  opinions,  addressed  to the Agent,  and each of the
Banks and dated the Restatement  Effective Date, from (i) Skadden,  Arps, Slate,
Meagher & Flom LLP,  counsel to the  Borrower,  which  opinion  shall  cover the
matters contained in Exhibit D-1 hereto,  (ii) White & Case,  special counsel to
the Agent, which opinion shall cover the matters contained in Exhibit D-2 hereto
and (iii)  from such local  counsel,  if any,  satisfactory  to the Agent as the
Agent may request,  which  opinions  shall cover the  perfection of the security
interests  granted  pursuant to the Security  Documents  and such other  matters
incident to the  transactions  contemplated  herein as the Agent may  reasonably
request and shall be in form and substance satisfactory to the Agent.

            (c) Corporate  Proceedings.  (I) On the Restatement  Effective Date,
the Agent  shall  have  received  from the  Borrower  a  certificate,  dated the
Restatement Effective Date, signed by the President or any Vice-President of the
Borrower in the form of Exhibit E with  appropriate  insertions  and  deletions,
together with (x) copies of the certificate of  incorporation,  the by-laws,  or
other organizational documents of each Credit Party and (y) the resolutions,  or
such other  administrative  approval,  of each Credit Party  referred to in such
certificate  and  all of the  foregoing  (including  each  such  certificate  of
formation,  certificate of  incorporation  and by-laws) shall be satisfactory to
the Agent and (z) a statement that all of the applicable conditions set forth in
Sections 5.01(f) and (i) and 5.02 exist as of such date.

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

                                       26
<PAGE>


            (d) Initial Borrowing Base Certificate. On the Restatement Effective
Date,  the Agent  shall  have  received a  certificate  in the form of Exhibit F
hereto (a "Borrowing Base Certificate")  executed by the chief financial officer
of  the  borrower  setting  forth  the  Borrowing  Base  determined  as of the B
Determination Date in the preceding month.

            (e) Original Credit Agreement. On the Restatement Effective Date and
concurrently with the initial borrowing  hereunder,  the Borrower shall have (i)
repaid in full the  outstanding  principal  amount of all  Loans  under,  and as
defined in, the Original Credit Agreement, (ii) terminated all letters of credit
issued  thereunder  (other than  Existing  Letters of Credit) and (iii) paid all
accrued  but unpaid  interest  and fees  under the  Original  Credit  Agreement,
whether or not otherwise then due and payable.

            (f) Subsidiary  Guaranty.  On the  Restatement  Effective Date, each
Subsidiary  Guarantor  shall have duly  authorized,  executed  and  delivered an
amended  and  restated  Subsidiary  Guaranty in the form of Exhibit G hereto (as
modified, amended or supplemented from time to time in accordance with the terms
hereof and thereof,  the  "Subsidiary  Guaranty"),  and the Subsidiary  Guaranty
shall be in full force and effect.

            (g) Security Documents.  (I) On the Restatement Effective Date, each
of the Borrower and the Subsidiary  Guarantors  shall have each duly authorized,
executed and delivered an amended and restated  Pledge  Agreement in the form of
Exhibits H-1 and H-2,  respectively  (each as modified,  amended or supplemented
from time to time in  accordance  with the terms  thereof and hereof,  a "Pledge
Agreement"  and,  collectively,  the "Pledge  Agreements"),  and each shall have
delivered  to  the  Collateral  Agent,  as  pledgee   thereunder,   all  of  the
certificates  representing the Pledged Securities referred to therein,  endorsed
in blank or  accompanied  by executed and undated stock powers,  and each Pledge
Agreement shall be in full force and effect.

            (II) On the  Restatement  Effective  Date,  the  Borrower  and  each
Subsidiary Guarantor shall have each duly authorized,  executed and delivered an
amended and restated  Security  Agreement  substantially in the form of Exhibits
I-1 and I-2,  respectively (each as modified,  supplemented or amended from time
to time in accordance with the terms thereof and hereof, a "Security  Agreement"
and collectively, the "Security Agreements") covering all of such Credit Party's
present and future Security Agreement Collateral.

            (III) On the  Restatement  Effective  Date,  the  Agent  shall  have
received:

            (i)  fully  executed   counterparts  of  amendments  (the  "Mortgage
      Amendments"),  in form and  substance  satisfactory  to the Agent,  to the
      Existing Mortgages (the Existing
                                       27
<PAGE>

      Mortgages as so amended,  the  "Mortgages"),  together  with evidence that
      counterparts  of the Mortgage  Amendments have been delivered to the title
      company  insuring the Lien on the Existing  Mortgages for recording in all
      places to the  extent  necessary  or  desirable,  in the  judgment  of the
      Collateral  Agent,  effectively to maintain a valid and enforceable  first
      priority  mortgage  lien  on the  Mortgaged  Properties  in  favor  of the
      Collateral Agent for the benefit of the Banks; and

           (ii) endorsements of the authorized  issuing agent for title insurers
      reasonably  satisfactory to the Collateral Agent to each Existing Mortgage
      Policy  assuring the  Collateral  Agent that each  Mortgage is a valid and
      enforceable  first  priority  mortgage  lien on the  respective  Mortgaged
      Properties,  free  and  clear  of  all  defects  and  encumbrances  except
      Permitted Encumbrances.

            (h) Solvency.  On the Restatement Effective Date, the Borrower shall
have  delivered,  or shall cause to be delivered to the Agent, a solvency letter
in the form of Exhibit J hereto from the Chief Financial Officer of the Borrower
and acceptable in form and substance to the Agent.

            (i) Insurance  Policies.  On the  Restatement  Effective  Date,  the
Collateral  Agent shall have received  evidence of insurance  complying with the
requirements of Section 7.03 for the business and properties of the Borrower and
its  Subsidiaries,  in form and  substance  satisfactory  to the Agent and, with
respect to all casualty insurance,  naming the Collateral Agent as an additional
insured and loss payee.

            (j) Fees. On the Restatement Effective Date, the Borrower shall have
paid to the  Agent  and the  Banks  all Fees and  expenses  agreed  upon by such
parties to be paid on or prior to such date.

            (k) Consent  Letter.  On the  Restatement  Effective Date, the Agent
shall have received a letter from CT Corporation  System,  presently  located at
1633  Broadway,  New York,  New York,  substantially  in the form of  Exhibit K,
indicating  its consent to its  appointment  by each Credit Party as such Credit
Party's agent to receive service of process as specified in Section 12.08.

            5.02  Conditions  Precedent to All Credit Events.  The obligation of
each Bank to make Loans (including Loans made on the Restatement Effective Date)
and the obligation of a Letter of Credit Issuer to issue any Letter of Credit is
subject,  at the time of each such  Credit  Event,  to the  satisfaction  of the
following conditions:

            (a) Notice of Borrowing;  Letter of Credit Request.  The Agent shall
have  received a Notice of Borrowing  meeting the  requirements  of Section 1.02
with respect to the  incurrence of Loans or a Letter of Credit  Request  meeting
the  requirements  of Section  2.03 with  respect to the issuance of a Letter of
Credit.

                                       28
<PAGE>



            (b) No Default;  Representations and Warranties. At the time of each
Credit  Event and also after  giving  effect  thereto,  (i) there shall exist no
Default or Event of Default and (ii) all  representations and warranties made by
any Credit Party contained herein or in the other Credit Documents shall be true
and  correct  in all  material  respects  with the same  effect as  though  such
representations  and  warranties  had  been  made on and as of the  date of such
Credit  Event,  except to the extent that such  representations  and  warranties
expressly relate to an earlier date.

            The acceptance of the benefits of each Credit Event shall constitute
a representation and warranty by the Borrower to the Agent and each of the Banks
that all of the applicable  conditions specified in Section 5.01 (in the case of
the Credit Events  occurring on the Restatement  Effective Date) and/or 5.02, as
the case may be, exist as of that time. All of the certificates,  legal opinions
and other  documents and papers  referred to in Section 5.01,  unless  otherwise
specified,  shall be delivered to the Agent at its Notice Office for the account
of each of the Banks and, except for the Notes, in sufficient  counterparts  for
each of the Banks and shall be satisfactory in form and substance to the Agent.

            SECTION 6. Representations,  Warranties and Agreements.  In order to
induce  the Banks to enter into this  Agreement  and to make the Loans and issue
and/or  participate in Letters of Credit provided for herein, the Borrower makes
the following representations and warranties to, and agreements with, the Banks,
all of which shall survive the execution and delivery of this  Agreement and the
making of the Loans  (with the  making of each  Credit  Event  thereafter  being
deemed to constitute a representation and warranty that the matters specified in
this  Section 6 are true and correct in all  material  respects on and as of the
date of each such Credit Event unless such representation and warranty expressly
indicates that it is being made as of any specific date):

            6.01 Corporate Status. Each of the Borrower and its Subsidiaries (i)
is a duly organized and validly existing  corporation in good standing under the
laws of the  jurisdiction  of its  organization  and has the corporate power and
authority  to own its  property and assets and to transact the business in which
it is engaged and presently  proposes to engage and (ii) has duly  qualified and
is authorized to do business and is in good standing in all jurisdictions  where
it is required to be so qualified and where the failure to be so qualified would
have a Material Adverse Effect.

            6.02  Corporate  Power  and  Authority.  Each  Credit  Party has the
corporate  power and  authority to execute,  deliver and carry out the terms and
provisions  of the  Documents to which it is a party and has taken all necessary
corporate  action to authorize the  execution,  delivery and  performance of the
Credit Documents to which it is a party. Each Credit Party has duly executed and
delivered  each Credit  Document  to which it is a party and each such  Document
constitutes the legal,  valid and binding  obligation of such Person enforceable
in accordance with its terms.

                                       29
<PAGE>


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

            6.04 Litigation.  There are no actions, suits or proceedings pending
or threatened with respect to the Borrower or any of its  Subsidiaries  (i) that
are likely to have a Material  Adverse  Effect or (ii) that could  reasonably be
expected  to have a material  adverse  effect on the rights or  remedies  of the
Banks or on the ability of any Credit Party to perform its  obligations  to them
hereunder and under the other Credit Documents to which it is a party.

            6.05 Use of Proceeds;  Margin  Regulations.  (a) The proceeds of all
Term Loans shall be utilized on the Restatement  Effective Date (i) to refinance
Loans  under and as defined in the  Original  Credit  Agreement  and (ii) to pay
certain fees, premiums and expenses relating thereto.

            (b) The proceeds of all Revolving  Loans may be used for the general
corporate and working capital purposes of the Borrower and its Subsidiaries.

            (c) The  proceeds of all  Swingline  Loans shall be utilized for the
general  corporate  and  working  capital  purposes  of  the  Borrower  and  its
Subsidiaries.

            (d)  Neither  the making of any Loan  hereunder,  nor the use of the
proceeds  thereof,  will  violate  or be  inconsistent  with the  provisions  of
Regulation G, T, U or X of the Board of Governors of the Federal  Reserve System
and no part of the  proceeds  of any Loan will be used to  purchase or carry any
Margin Stock in violation of Regulation U or to extend credit for the purpose of
purchasing or carrying any Margin Stock.

                                       30
<PAGE>


            6.06  Governmental  Approvals.  Except for filings and recordings in
connection  with the Security  Documents,  SEC filings and those items listed on
Annex IV, no order, consent, approval, license, authorization, or validation of,
or filing,  recording or  registration  with,  or  exemption  by, any foreign or
domestic  governmental or public body or authority,  or any subdivision thereof,
is required to authorize or is required in  connection  with (i) the  execution,
delivery and performance of any Credit Document or (ii) the legality,  validity,
binding effect or enforceability of any Credit Document.

            6.07  Investment  Company  Act.  None of the Borrower nor any of its
Subsidiaries  is  an  "investment  company"  or a  company  "controlled"  by  an
"investment company",  within the meaning of the Investment Company Act of 1940,
as amended.

            6.08 Public Utility  Holding  Company Act.  Neither the Borrower nor
any of its Subsidiaries is a "holding company",  or a "subsidiary  company" of a
"holding company",  or an "affiliate" of a "holding company" or of a "subsidiary
company"  of a  "holding  company",  within the  meaning  of the Public  Utility
Holding Company Act of 1935, as amended.

            6.09 True and Complete Disclosure. All factual information (taken as
a whole)  heretofore  or  contemporaneously  furnished  by or on  behalf  of the
Borrower  or any of its  Subsidiaries  in  writing  to the Agent or any Bank for
purposes of or in connection with this Agreement or any transaction contemplated
herein is, and all other such factual  information  (taken as a whole) hereafter
furnished  by or on behalf of any such  Person in  writing  to any Bank will be,
true  and  accurate  in all  material  respects  on the  date as of  which  such
information  is dated or certified  and not  incomplete by omitting to state any
material  fact  necessary  to make  such  information  (taken  as a  whole)  not
misleading  at  such  time  in  light  of the  circumstances  under  which  such
information was provided.  The  projections and pro forma financial  information
contained in such  materials are based on good faith  estimates and  assumptions
believed by such Persons to be reasonable at the time made, it being  recognized
by the Banks that such  projections  as to future events are not to be viewed as
facts and that actual results  during the period or periods  covered by any such
projections may differ from the projected results. There is no fact known to the
Borrower  which  would  have a  Material  Adverse  Effect,  which  has not  been
disclosed  herein  or in  such  other  documents,  certificates  and  statements
furnished to the Banks for use in connection with the transactions  contemplated
hereby.

            6.10 (a) True and Complete Disclosure.  On and as of the Restatement
Effective  Date, on a pro forma basis after giving effect to the  refinancing of
all  Loans  under  and as  defined  in the  Original  Credit  Agreement  and all
Indebtedness incurred, and to be incurred, and Liens created, and to be created,
by each Credit Party in connection  therewith,  (x) the sum of the assets,  at a
fair  valuation,  of the  Borrower  and its  Subsidiaries  taken as a whole will
exceed its debts,  (y) the Borrower and its  Subsidiaries  taken as a whole will
not have incurred or intended to, or believe that they will,  incur debts beyond
their ability to pay
                                       31
<PAGE>


such debts as such debts mature and (z) the Borrower and its Subsidiaries  taken
as a whole will not have  unreasonably  small  capital with which to conduct its
business.  For purposes of this Section  6.10,  "debt" means any  liability on a
claim,  and  "claim"  means (i) right to payment  whether or not such a right is
reduced to  judgment,  liquidated,  unliquidated,  fixed,  contingent,  matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or (ii)
right to an equitable remedy for breach of performance if such breach gives rise
to a payment,  whether or not such  right to an  equitable  remedy is reduced to
judgment, fixed, contingent,  matured, unmatured,  disputed, undisputed, secured
or unsecured.

            (b) (i) The  consolidated  balance sheet of the Borrower at December
31, 1996 and June 30, 1997 and the related consolidated statements of operations
and cash flows of the Borrower for the fiscal year or the six-month  period,  as
the case may be, ended as of said dates,  which, in the case of the December 31,
1996  statements,  have been  examined  by  Deloitte & Touche  LLP,  independent
certified public  accountants,  who delivered an unqualified  opinion in respect
therewith,  and (ii) the pro forma consolidated balance sheet of the Borrower as
of June 30, 1997,  copies of which have  heretofore been furnished to each Bank,
present  fairly the  financial  position  of such  entities at the dates of said
statements and the results for the periods  covered  thereby (or, in the case of
the pro forma balance sheet,  presents a good faith estimate of the consolidated
pro forma financial condition of the Borrower at the date thereof) in accordance
with  GAAP,  except  to the  extent  provided  in the  notes  to said  financial
statements and, in the case of the June 30, 1997  statements,  subject to normal
and recurring  year-end audit adjustment.  All such financial  statements (other
than the aforesaid  pro forma  balance  sheets) have been prepared in accordance
with generally accepted accounting principles and practices consistently applied
except to the extent provided in the notes to said financial statements. Nothing
has  occurred  since  December  31,  1996  that has had or could  reasonably  be
expected to have a Material Adverse Effect.

            (c) Except as reflected in the  financial  statements  and the notes
thereto described in Section 6.10(b), there were as of the Restatement Effective
Date no liabilities  or  obligations  with respect to the Borrower or any of its
Subsidiaries of a nature (whether absolute, accrued, contingent or otherwise and
whether  or not  due)  which,  either  individually  or in  aggregate,  would be
material  to the  Borrower  and its  Subsidiaries  taken as a whole,  except  as
incurred in the  ordinary  course of  business  consistent  with past  practices
subsequent to December 31, 1996.

            6.11  Security  Interests.  On and after the  Restatement  Effective
Date, each of the Security  Documents  creates,  as security for the Obligations
purported to be secured  thereby,  a valid and  enforceable  perfected  security
interest in and Lien on all of the Collateral  subject thereto,  superior to and
prior to the rights of all third Persons and subject to no other Liens
                                       32
<PAGE>


(except  (x)  that the  Security  Agreement  Collateral  may be  subject  to the
security  interests  evidenced by Permitted  Liens relating  thereto and (y) the
Mortgaged Properties may be subject to Permitted Encumbrances relating thereto),
in favor of the  Collateral  Agent for the  benefit of the Banks.  No filings or
recordings are required in order to perfect the security interests created under
any Security  Document  except for filings or recordings  required in connection
with any such Security  Document (other than the Pledge  Agreement)  which shall
have  been  made  upon  or  prior  to  (or  are  the  subject  of  arrangements,
satisfactory  to the  Agent,  for filing on or  promptly  after the date of) the
execution and delivery thereof.

            6.12 Tax Returns and Payments.  Each of the Borrower and each of its
Subsidiaries has filed all federal income tax returns and all other material tax
returns,  domestic  and  foreign,  required  to be  filed by it and has paid all
material taxes and  assessments  payable by it which have become due, other than
those not yet  delinquent  and except for those  contested  in good  faith.  The
Borrower  and each of its  Subsidiaries  have paid,  or have  provided  adequate
reserves (in the good faith  judgment of the management of the Borrower) for the
payment of, all federal, state and foreign income taxes applicable for all prior
fiscal years and for the current fiscal year to the date hereof.

            6.13 Compliance with ERISA.  Each Plan is in substantial  compliance
with ERISA and the Code;  no  Reportable  Event has  occurred  with respect to a
Plan; no Plan is insolvent or in reorganization; no Plan has an Unfunded Current
Liability;  no  Plan  has an  accumulated  or  waived  funding  deficiency,  has
permitted  decreases  in its  funding  standard  account or has  applied  for an
extension of any  amortization  period  within the meaning of Section 412 of the
Code;  neither the  Borrower,  nor any  Subsidiary  nor any ERISA  Affiliate has
incurred any material  liability to or on account of a Plan  pursuant to Section
409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or
Section  401(a)(29),  4971,  4975 or 4980 of the Code or  expects  to incur  any
liability (including any indirect,  contingent or secondary liability) under any
of the foregoing  Sections with respect to any Plan;  no  proceedings  have been
instituted  to  terminate  or  appoint  a trustee  to  administer  any Plan;  no
condition  exists  which  presents  a  material  risk  to  the  Borrower  or any
Subsidiary or any ERISA Affiliate of incurring a liability to or on account of a
Plan pursuant to the foregoing provisions of ERISA and the Code; using actuarial
assumptions  and  computation  methods  consistent  with Part 1 of subtitle E of
Title  IV  of  ERISA,  the  aggregate   liabilities  of  the  Borrower  and  its
Subsidiaries and its ERISA Affiliates to all Plans which are multiemployer plans
(as  defined  in  Section  4001(a)(3)  of  ERISA)  in the  event  of a  complete
withdrawal  therefrom,  as of the close of the most  recent  fiscal year of each
such Plan ended prior to the date of the most  recent  Credit  Event,  would not
exceed $1,000,000;  no lien imposed under the Code or ERISA on the assets of the
Borrower or any Subsidiary or any ERISA  Affiliate  exists or is likely to arise
on account of any Plan; and the Borrower and its Subsidiaries do not maintain or
contribute to any employee  welfare  benefit plan (as defined in Section 3(1) of
ERISA) which provides benefits to retired employees (other than as required
                                       33
<PAGE>


by Section 601 of ERISA) or any  employee  pension  benefit  plan (as defined in
Section  3(2) of ERISA),  except to the extent that all events  described in the
preceding  clauses of this Section 6.13 and then in existence  would not, in the
aggregate,  have or be likely to have a Material Adverse Effect. With respect to
Plans that are multiemployer  plans (within the meaning of Section 4001(a)(3) of
ERISA) the  representations  and warranties in this Section 6.13 are made to the
best knowledge of the Borrower.

            6.14  Subsidiaries.  (a) Annex V hereto lists each Subsidiary of the
Borrower  (and the  direct  and  indirect  ownership  interest  of the  Borrower
therein),  in each case existing on the Restatement Effective Date. The Borrower
will at all times own directly the percentages  specified in said Annex V of the
outstanding  capital  stock  of all  of  said  entities,  except  to the  extent
otherwise permitted pursuant to Section 8.02.

            (b)  There  are  no  restrictions  on  the  Borrower  or  any of its
Subsidiaries  which prohibit or otherwise restrict the transfer of cash or other
assets  from  any  Subsidiary  of the  Borrower  to  the  Borrower,  other  than
prohibitions or restrictions  existing under or by reason of (i) this Agreement,
the other Credit  Documents and the Senior  Subordinated  Note  Documents,  (ii)
applicable law, (iii) customary  non-assignment  provisions  entered into in the
ordinary  course  of  business  and  consistent  with past  practices,  (iv) any
restriction or encumbrance  with respect to a Subsidiary of the Borrower imposed
pursuant to an agreement which has been entered into for the sale or disposition
of all or  substantially  all of the capital stock or assets of such Subsidiary,
so long as such sale or disposition is permitted under this  Agreement,  and (v)
any documents or instruments  governing the terms of any  Indebtedness  or other
obligations  secured by Liens  permitted  by Section  8.03,  provided  that such
prohibitions or restrictions apply only to the assets subject to such Liens.

            6.15 Patents,  etc. The Borrower and each of its  Subsidiaries  have
obtained  all  material  patents,   trademarks,   service  marks,  trade  names,
copyrights,  licenses and other rights, free from burdensome restrictions,  that
are  necessary  for the  operation  of  their  businesses  taken  as a whole  as
presently conducted and as proposed to be conducted.

            6.16 Pollution and Other  Regulations.  (a) Each of the Borrower and
its  Subsidiaries  is in  compliance  with  all  applicable  Environmental  Laws
governing  its business for which failure to comply is likely to have a Material
Adverse Effect,  and neither the Borrower nor any of its  Subsidiaries is liable
for any material penalties,  fines or forfeitures for failure to comply with any
of the  foregoing  in  the  manner  set  forth  above.  All  licenses,  permits,
registrations or approvals required for the business of the Borrower and each of
its Subsidiaries,  as conducted as of the Restatement  Effective Date, under any
Environmental   Law  have  been  secured  and  the  Borrower  and  each  of  its
Subsidiaries  is in  substantial  compliance  therewith,  except such  licenses,
permits, registrations or approvals the failure to secure or to comply therewith
is not likely to have a Material Adverse Effect. Neither the Borrower nor any of
its
                                       34
<PAGE>


Subsidiaries is in any respect in noncompliance with, breach of or default under
any  applicable  writ,  order,  judgment,  injunction,  or  decree  to which the
Borrower or such  Subsidiary is a party or which would affect the ability of the
Borrower  or such  Subsidiary  to  operate  any real  property  and no event has
occurred  and is  continuing  which,  with the  passage of time or the giving of
notice or both, would constitute noncompliance, breach of or default thereunder,
except in each such case,  such  noncompliance,  breaches or defaults as are not
likely to, in the aggregate, have a Material Adverse Effect. There are as of the
Restatement  Effective  Date no  Environmental  Claims  pending  or, to the best
knowledge of the Borrower,  threatened, which (a) question the validity, term or
entitlement of the Borrower or any of its Subsidiaries for any permit,  license,
order or  registration  required for the  operation  of any  facility  which the
Borrower  or any of its  Subsidiaries  currently  operates  and (b)  wherein  an
unfavorable  decision,  ruling or finding would be  reasonably  likely to have a
Material  Adverse  Effect.  There are no  facts,  circumstances,  conditions  or
occurrences  on any Real Property or, to the  knowledge of the Borrower,  on any
property  adjacent to any such Real Property  that could  reasonably be expected
(i) to form the basis of an Environmental Claim against the Borrower, any of its
Subsidiaries or any Real Property of the Borrower or any of its Subsidiaries, or
(ii) to cause  such Real  Property  to be  subject  to any  restrictions  on the
ownership,  occupancy,  use or  transferability  of such Real Property under any
Environmental  Law,  except  in each such  case,  such  Environmental  Claims or
restrictions that individually,  or in the aggregate,  are not reasonably likely
to have a Material Adverse Effect.

            (b)  Hazardous  Materials  have not at any time been (i)  generated,
used,  treated or stored on, or transported to or from, any Real Property of the
Borrower or any of its  Subsidiaries  or (ii) released on any Real Property,  in
each case where such  occurrence  or event  individually  or in the aggregate is
reasonably likely to have a Material Adverse Effect.

            6.17 Properties. The Borrower and each of its Subsidiaries have good
and  marketable  title to all properties  owned by them,  including all property
reflected in the consolidated balance sheet of the Borrower and its Subsidiaries
as referred to in Section 6.10(b),  free and clear of all Liens,  other than (i)
as referred to in the consolidated balance sheet or in the notes thereto or (ii)
otherwise  permitted by Section 8.03. Annex VI contains a true and complete list
of each Real Property owned or leased by the Borrower or any of its Subsidiaries
on the  Restatement  Effective  Date,  the type of interest  therein held by the
Borrower  or the  respective  Subsidiary  and  whether  such Real  Property is a
Mortgaged Property.

            6.18 Labor Relations. No Credit Party is engaged in any unfair labor
practice that could  reasonably be expected to have a Material  Adverse  Effect.
There is (i) no unfair labor practice complaint pending against any Credit Party
or threatened  against any of them,  before the National Labor Relations  Board,
and no grievance or arbitration proceeding
                                       35
<PAGE>


arising  out of or under  any  collective  bargaining  agreement  is so  pending
against any Credit  Party or  threatened  against  any of them,  (ii) no strike,
labor  dispute,  slowdown  or  stoppage  pending  against  any  Credit  Party or
threatened against any Credit Party and (iii) no union  representation  question
existing  with  respect  to the  employees  of any  Credit  Party  and no  union
organizing  activities  are  taking  place,  except  with  respect to any matter
specified in clause (i),  (ii) or (iii)  above,  either  individually  or in the
aggregate, such as is not reasonably likely to have a Material Adverse Effect.

            6.19  Senior  Subordinated   Notes.  The  subordination   provisions
contained in the Senior  Subordinated Notes are enforceable by the Banks against
the  Borrower  and  the  holders  of such  Senior  Subordinated  Notes,  and all
Obligations  of the  Borrower  are or will be within the  definition  of "Senior
Indebtedness"  included  in such  provisions  of the  Senior  Subordinated  Note
Documents.

            6.20 Existing Indebtedness. Annex VII sets forth a true and complete
list of all  Indebtedness of the Borrower and each of its Subsidiaries as of the
Restatement  Effective  Date and which is to  remain  outstanding  after  giving
effect to the  refinancing  of all Loans  under and as defined  in the  Original
Credit  Agreement  (excluding  the Loans,  the  Letters of Credit and the Senior
Subordinated  Notes,  the  "Existing  Indebtedness"),  in each case  showing the
aggregate  principal amount thereof and the name of the respective  borrower (or
issuer) and any other entity which directly or indirectly guaranteed such debt.

            SECTION 7. Affirmative Covenants.  The Borrower covenants and agrees
that  on the  Restatement  Effective  Date  and  thereafter  for so long as this
Agreement is in effect and until the Commitments have terminated,  no Letters of
Credit or Notes are outstanding and the Loans and Unpaid Drawings, together with
interest, Fees and all other Obligations incurred hereunder, are paid in full:

            7.01 Information Covenants. The Borrower will furnish to each Bank:

            (a) Annual Financial  Statements.  Within 90 days after the close of
each fiscal year of the Borrower, the consolidated balance sheet of the Borrower
and its  Subsidiaries,  as at the  end of  such  fiscal  year  and  the  related
consolidated  statements  of income and retained  earnings and of cash flows for
such fiscal year, in each case setting forth  comparative  consolidated  figures
for the preceding  fiscal year,  and examined by  independent  certified  public
accountants of recognized national standing whose opinion shall not be qualified
as to the scope of audit  and as to the  status  of the  Borrower  or any of its
Subsidiaries as a going concern,  together with a certificate of such accounting
firm  stating  that in the course of its  regular  audit of the  business of the
Borrower,  which audit was  conducted  in  accordance  with  generally  accepted
auditing  standards,  such  accounting  firm has  obtained no  knowledge  of any
Default or Event of Default which has occurred and is  continuing  or, if in the
opinion of such  accounting firm such a Default or Event of Default has occurred
and is continuing, a statement as to the nature thereof.

                                       36
<PAGE>



            (b) Quarterly Financial Statements.  As soon as available and in any
event  within  45 days  after the  close of each of the  first  three  quarterly
accounting  periods in each fiscal year, the  consolidated  balance sheet of the
Borrower and its  Subsidiaries,  as at the end of such quarterly  period and the
related  consolidated  statements  of income and  retained  earnings and of cash
flows for such quarterly  period and for the elapsed  portion of the fiscal year
ended with the last day of such quarterly period, and in each case setting forth
comparative  consolidated  figures for the related  periods in the prior  fiscal
year,  all of  which  shall be  certified  by the  chief  financial  officer  or
controller of the Borrower,  subject to changes  resulting from audit and normal
year-end audit adjustments.

            (c) Monthly Reports. As soon as practicable, and in any event within
30 days,  after the end of each  monthly  accounting  period of each fiscal year
(other  than the  last  monthly  accounting  period  in such  fiscal  year)  the
consolidated  balance sheet of the Borrower and its Subsidiaries,  as at the end
of such period, and the related  consolidated  statements of income and retained
earnings  for  such  period,   setting   forth   comparative   figures  for  the
corresponding  period of the previous  year,  all of which shall be certified by
the chief  financial  officer or controller  of the Borrower  subject to changes
resulting from audit and normal year-end audit adjustments.

            (d) Budgets;  etc. Not more than 60 days after the  commencement  of
each fiscal year of the Borrower,  a budget of the Borrower and its Subsidiaries
in reasonable detail for each of the twelve months of such fiscal year. Together
with each delivery of  consolidated  financial  statements  pursuant to Sections
7.01(a), (b) and (c), a comparison of the current year-to-date financial results
against the budgets  required to be submitted  pursuant to this clause (d) shall
be presented.

            (e)  Officer's  Certificates.  At the  time of the  delivery  of the
financial   statements  provided  for  in  Sections  7.01(a),  (b)  and  (c),  a
certificate  of the chief  financial  officer,  controller  or other  Authorized
Officer of the Borrower to the effect that no Default or Event of Default exists
or, if any  Default or Event of Default  does exist,  specifying  the nature and
extent thereof,  which  certificate,  in the case of the  certificate  delivered
pursuant to Sections 7.01(a) and (b), shall set forth the calculations  required
to establish  (I) the MRD Ratios for the Relevant Test Period ending on the last
day of such  fiscal  year or  period  and  (II)  whether  the  Borrower  and its
Subsidiaries  were in compliance  with the  provisions of Sections  8.05,  8.07,
8.09(a)  (but only to the  extent the  Borrower  has made  payments  of the type
described in clause (ii) thereof in such period or year),  8.11,  8.12, 8.13 and
8.14 as at the end of such fiscal period or year, as the case may be.

                                       37
<PAGE>


            (f)  Notice of  Default or  Litigation.  Promptly,  and in any event
within three Business Days after the Borrower obtains knowledge thereof,  notice
of (x) the  occurrence  of any event  which  constitutes  a Default  or Event of
Default which notice shall specify the nature  thereof,  the period of existence
thereof and what action the Borrower  proposes to take with respect  thereto and
(y) the  commencement  of or any  significant  development  in any litigation or
governmental  proceeding pending against the Borrower or any of its Subsidiaries
which is  likely  to have a  Material  Adverse  Effect  or is  likely  to have a
material  adverse  effect on the ability of the  Borrower or any Credit Party to
perform its obligations hereunder or under any other Credit Document.

            (g) Borrowing Base  Certificates.  Promptly after  determining same,
and in any event within five days following the BB  Determination  Date for each
calendar  month, a Borrowing Base  Certificate  executed by the chief  financial
officer  or  controller  of  the  Borrower  setting  forth  the  Borrowing  Base
determined as of such BB Determination  Date (together with reasonable detail as
to the computation thereof).

            (h) Auditors' Reports. Promptly upon receipt thereof, a copy of each
other final  report or  "management  letter"  submitted  to the  Borrower by its
independent  accountants in connection with any annual, interim or special audit
made by it of the books of the Borrower.

            (i) Environmental Matters. Promptly after obtaining knowledge of any
of the  following  (but  only to the  extent  that  any of the  following  could
reasonably  be  expected  to  (x)  have  a  Material   Adverse  Effect,   either
individually  or in the  aggregate,  or (y)  result  in a  remedial  cost to the
Borrower or any of its Subsidiaries in excess of $2,000,000), written notice of:

            (i) any  pending  or  threatened  Environmental  claim  against  the
      Borrower or any of its Subsidiaries or any Real Property owned or operated
      by the Borrower or any of its Subsidiaries;

            (ii) any  condition  or  occurrence  on any Real  Property  owned or
      operated by the  Borrower or any of its  Subsidiaries  that (x) results in
      noncompliance  by  the  Borrower  or  any of  its  Subsidiaries  with  any
      applicable  Environmental  Law or (y) could  reasonably be  anticipated to
      form the basis of an  Environmental  claim  against the Borrower or any of
      its Subsidiaries or any such Real Property;

            (iii) any  condition or  occurrence  on any Real  Property  owned or
      operated by the Borrower or any of its Subsidiaries  that could reasonably
      be  anticipated  to  cause  such  Real  Property  to  be  subject  to  any
      restrictions on the ownership,  occupancy,  use or  transferability by the
      Borrower or its  Subsidiary,  as the case may be, of its  interest in such
      Real Property under any Environmental Law; and

                                       38
<PAGE>


            (iv) the taking of any removal or remedial action in response to the
      actual or alleged presence of any Hazardous  Material on any Real Property
      owned or operated by the Borrower or any of its Subsidiaries.

All such notices shall  describe in  reasonable  detail the nature of the claim,
investigation,  condition,  occurrence  or  removal or  remedial  action and the
Borrower's  response or proposed  response  thereto.  In addition,  the Borrower
agrees to provide the Banks with copies of all  material  communications  by the
Borrower or any of its Subsidiaries with any Person,  government or governmental
agency relating to any of the matters set forth in clauses  (i)-(iv) above,  and
such  detailed  reports  relating  to any of the  matters  set forth in  clauses
(i)-(iv)  above as may  reasonably  be  requested  by the Agent or the  Required
Banks.

            (j) Other  Information.  Promptly  upon  transmission  thereof,  (i)
copies of any filings and registrations with, and reports to, the Securities and
Exchange  Commission or any successor thereto (the "SEC") by the Borrower or any
of its  Subsidiaries,  (ii) copies of any material  complaints or correspondence
received  from the  Federal  Trade  Commission  and/or  the postal  service  (x)
regarding  compliance  with the  Federal  Trade  Commission  Act, as amended (15
U.S.C.   Subsection  45)  or  (y)  in  connection  with  advertising   materials
distributed by the Borrower,  and (iii) with reasonable  promptness,  such other
information or documents (financial or otherwise) as the Agent on its own behalf
or on behalf of the Required Banks may reasonably request from time to time.

            7.02 Books,  Records and  Inspections.  The Borrower  will, and will
cause its Subsidiaries to, permit, upon reasonable notice to the chief financial
officer, controller or any other Authorized Officer of the Borrower (x) officers
and designated  representatives  of the Agent or the Required Banks to visit and
inspect  any  of  the  properties  or  assets  of the  Borrower  and  any of its
Subsidiaries in whomsoever's possession,  and to examine the books of account of
the Borrower and any of its Subsidiaries  and discuss the affairs,  finances and
accounts of the Borrower and of any of its Subsidiaries  with, and be advised as
to the same by, its and their officers and independent accountants,  all at such
reasonable times and intervals and to such reasonable extent as the Agent or the
Required  Banks may desire  and (y) not more than once per year the Agent,  or a
third party designated by the Agent, to conduct,  at the Borrower's  expense, an
audit  of the  accounts  receivable  and  inventories  of the  Borrower  and its
Subsidiaries at such times as the Agent shall reasonably require.

            7.03  Insurance.  The  Borrower  will,  and will  cause  each of its
Subsidiaries  to, at all times  maintain in full force and effect  insurance  in
such amounts,  covering such risks and liabilities and with such  deductibles or
self-insured  retentions as are in  accordance  with normal  industry  practice,
provided that in no event will any such deductible or self-insured  retention in
respect of liability  claims or in respect of casualty damage,  exceed,  in each
such case, (i) $150,000 per  occurrence or (ii)  $3,000,000 in the aggregate per
fiscal year. At any time that
                                       39
<PAGE>


insurance at the levels  described in Annex VIII is not being  maintained by the
Borrower and its  Subsidiaries,  the  Borrower  will notify the Banks in writing
thereof and, if  thereafter  notified by the Agent to do so, the Borrower  will,
and will cause its  Subsidiaries  to,  obtain  insurance at such levels at least
equal to those set forth in Annex VIII to the extent  then  generally  available
(but in any event within the deductible or  self-insured  retention  limitations
set forth in the  preceding  sentence)  or otherwise  as are  acceptable  to the
Agent. The Borrower will, and will cause each of its Subsidiaries to, furnish on
the Restatement Effective Date and annually thereafter to the Agent a summary of
the insurance carried together with certificates of insurance and other evidence
of such insurance,  if any, naming the Collateral Agent as an additional insured
and/or loss payee.

            7.04 Payment of Taxes. The Borrower will pay and discharge, and will
cause each of its Subsidiaries to pay and discharge,  all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which penalties attach
thereto,  and all lawful claims which, if unpaid,  might become a Lien or charge
upon any  properties of the Borrower or any of its  Subsidiaries,  provided that
neither the Borrower nor any  Subsidiary  shall be required to pay any such tax,
assessment,  charge, levy or claim which is being contested in good faith and by
proper  proceedings  if it has maintained  adequate  reserves (in the good faith
judgment of the management of the Borrower)  with respect  thereto in accordance
with GAAP.

            7.05 Consolidated  Corporate  Franchises.  The Borrower will do, and
will cause each  Subsidiary to do, or cause to be done, all things  necessary to
preserve and keep in full force and effect its  existence,  material  rights and
authority,  provided  that any  transaction  permitted  by Section 8.02 will not
constitute a breach of this Section 7.05.

            7.06  Compliance  with  Statutes,  etc. The Borrower  will, and will
cause each Subsidiary to, comply with all applicable  statutes,  regulations and
orders of, and all applicable  restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property other than those the non-compliance  with which would not have a
Material  Adverse  Effect or would  not have a  material  adverse  effect on the
ability of any Credit Party to perform its obligations under any Credit Document
to which it is party.

            7.07 ERISA.  As soon as possible  and, in any event,  within 10 days
after the Borrower or any of its Subsidiaries knows or has reason to know of the
occurrence  of any of the  following,  the Borrower  will deliver to each of the
Banks a certificate of the chief financial officer of the Borrower setting forth
details as to such occurrence and such action, if any, which the Borrower,  such
Subsidiary  or such ERISA  Affiliate  is required or proposes to take,  together
with any  notices  required  or  proposed to be given to or filed with or by the
Borrower,  the Subsidiary,  the ERISA  Affiliate,  the PBGC, a Plan  participant
(other than notices relating to an individual
                                       40
<PAGE>



participant's  benefits) or the Plan administrator with respect thereto:  that a
Reportable Event has occurred;  that an accumulated  funding deficiency has been
incurred or an  application  is reasonably  likely to be or has been made to the
Secretary of the Treasury for a waiver or  modification  of the minimum  funding
standard  (including any required  installment  payments) or an extension of any
amortization period under Section 412 of the Code with respect to a Plan; that a
Plan which has an  Unfunded  Current  Liability  has been or may be  terminated,
reorganized,  partitioned or declared  insolvent under Title IV of ERISA; that a
Plan has an Unfunded Current Liability and there is a failure to make a required
contribution,  which  gives  rise  to a  lien  under  ERISA  or the  Code;  that
proceedings  are reasonably  likely to be or have been instituted to terminate a
Plan  which  has an  Unfunded  Current  Liability;  that a  proceeding  has been
instituted pursuant to Section 515 of ERISA to collect a delinquent contribution
to a Plan; that the Borrower,  any Subsidiary or any ERISA Affiliate will or may
incur any liability (including,  any contingent or secondary liability) to or on
account of the  termination  of or  withdrawal  from a Plan under  Section 4062,
4063,  4064,  4069,  4201, 4204 or 4212 of ERISA or with respect to a Plan under
Section  401(a)(29),  4971,  4975 or 4980 of the Code or Section 409,  502(l) or
502(l) of ERISA or that the  Borrower or any  Subsidiary  may incur any material
liability  pursuant to any employee  welfare benefit plan (as defined in Section
3(1) of ERISA) that  provides  benefits  to retired  employees  or other  former
employees  (other  than as  required  by Section  601 of ERISA) or any  employee
pension  benefit plan (as defined in Section  3(2) of ERISA).  Upon request of a
Bank,  the  Borrower  will  deliver to such Bank a  complete  copy of the annual
report (Form 5500) of each Plan  required to be filed with the Internal  Revenue
Service.  In  addition to any  certificates  or notices  delivered  to the Banks
pursuant  to the first  sentence  hereof,  copies of any annual  reports and any
other material  notices  received by the Borrower or any Subsidiary with respect
to a Plan shall be  delivered to the Banks no later than 10 days after the later
of the date such notice has been filed with the Internal  Revenue Service or the
PBGC, given to Plan  participants  (other than notices relating to an individual
participant's benefits) or received by the Borrower or such Subsidiary.

            7.08 Good  Repair.  The  Borrower  will,  and will cause each of its
Subsidiaries  to, ensure that its properties and equipment used or useful in its
business  in  whomsoever's  possession  they may be,  are  kept in good  repair,
working order and  condition,  normal wear and tear  excepted,  and,  subject to
Section  8.05,  that from time to time  there  are made in such  properties  and
equipment all needful and proper repairs,  renewals,  replacements,  extensions,
additions, betterments and improvements thereto, to the extent and in the manner
useful or customary for companies in similar businesses.

            7.09 End of Fiscal Years;  Fiscal  Quarters.  The Borrower will, for
financial  reporting  purposes,   cause  (i)  each  of  its,  and  each  of  its
Subsidiaries'  fiscal  years to end on December 31 of each year and (ii) each of
its, and each of its Subsidiaries' fiscal quarters to end on a Quarter End Date.

                                       41
<PAGE>


            7.10 Use of  Proceeds.  All  proceeds  of the Loans shall be used as
provided in Section 6.05.

            7.11 Additional Security; Further Assurances. (a) The Borrower will,
and will cause its  Domestic  Subsidiaries  to,  grant to the  Collateral  Agent
security interests and mortgages (each, an "Additional  Mortgage") in such owned
Real Property of the Borrower and its Subsidiaries  that is not owned or subject
to a Mortgage on the Restatement Effective Date as may be requested from time to
time by the Agent. All such mortgages shall be granted pursuant to documentation
reasonably  satisfactory in form and substance to the Agent and shall constitute
valid and  enforceable  Liens  superior  to and prior to the rights of all third
Persons and subject to no other Liens except as are  permitted by Section  8.03.
The  Additional  Mortgages or instruments  related  thereto shall have been duly
recorded or filed in such  manner and in such  places as are  required by law to
establish,  perfect,  preserve and protect the Liens in favor of the  Collateral
Agent required to be granted pursuant to the Additional Mortgages and all taxes,
fees and other charges  payable in connection  therewith shall have been paid in
full.

      (b) The Borrower will, and will cause its Domestic Subsidiaries to, at the
expense of the  Borrower,  make,  execute,  endorse,  acknowledge,  file  and/or
deliver  to the  Collateral  Agent  from time to time such  vouchers,  invoices,
schedules, confirmatory assignments, conveyances, financing statements, transfer
endorsements,  powers of attorney,  certificates, real property surveys, reports
and other  assurances or instruments and take such further steps relating to the
collateral  covered by any of the Security Documents as the Collateral Agent may
reasonably require. Furthermore, the Borrower shall cause to be delivered to the
Collateral  Agent such  opinions of counsel,  title  insurance and other related
documents  as may be  requested  by the  Agent to  assure  themselves  that this
Section 7.11 has been complied with.

            (c) The  Borrower  agrees  that each action  required  above by this
Section 7.11 shall be completed as soon as possible,  but in no event later than
60 days after such action is  requested to be taken by the Agent or the Required
Banks,  provided  that in no event  shall the  Borrower  be required to take any
action, other than using its reasonable  commercial efforts without any material
expenditure,  to  obtain  consents  from  third  parties  with  respect  to  its
compliance with this Section 7.11.

            7.12  Dividends on PIK Preferred  Stock.  The Borrower  shall to the
maximum  extent  permitted by the terms  thereof,  pay all  dividends on the PIK
Preferred Stock through the issuance of additional  shares of such PIK Preferred
Stock in respect of which dividends are to be paid, rather than in cash.

            7.13   Compliance   with   Environmental   Laws.   (i)  The
Borrower  will  comply,  and will  cause  each of its  Subsidiaries  to
comply, with all Environmental Laws applicable to the

                                       42
<PAGE>


ownership,  lease or use of all Real Property now or hereafter owned,  leased or
operated by the  Borrower or any  Subsidiary,  will  promptly pay or cause to be
paid all costs and expenses  incurred in connection  with such  compliance,  and
will keep or cause to be kept all such Real Property free and clear of any Liens
imposed  pursuant to such  Environmental  Laws and (ii) neither the Borrower nor
any of its Subsidiaries will generate, use, treat, store, release or dispose of,
or permit the  generation,  use,  treatment,  storage,  release or  disposal  of
Hazardous  Materials  on any Real  Property now or  hereafter  owned,  leased or
operated by the Company or any of its  Subsidiaries,  or transport or permit the
transportation of Hazardous Materials to or from any such Real Property,  except
to the extent  that the  failure to comply with the  requirements  specified  in
clause (i) or (ii) above,  either  individually  or in the aggregate,  would not
reasonably be expected to have a Material Adverse Effect.

            SECTION 8. Negative  Covenants.  The Borrower  hereby  covenants and
agrees that as of the  Restatement  Effective Date and thereafter for so long as
this  Agreement  is in effect  and until the  Commitments  have  terminated,  no
Letters of Credit or Notes are  outstanding  and the Loans and Unpaid  Drawings,
together with interest,  Fees and all other Obligations incurred hereunder,  are
paid in full:

            8.01  Changes in Business.  (a) The Borrower  will not, and will not
permit  any of its  Subsidiaries  to,  materially  alter  the  character  of the
business  of the  Borrower  and its  Subsidiaries  from  that  conducted  at the
Restatement  Effective Date,  provided that this Section 8.01 shall not restrict
the making of any investment expressly permitted by Section 8.06.

            (b) Borrower  shall cause HCE to engage in no  significant  business
and at no time to have assets or liabilities  with an aggregate  value in excess
of $50,000.

            8.02  Consolidation,  Merger,  Sale or Purchase of Assets,  etc. The
Borrower will not, and will not permit any Subsidiary to, wind up,  liquidate or
dissolve its affairs,  or enter into any transaction of merger or consolidation,
sell or otherwise  dispose of all or any part of its  property or assets  (other
than inventory or obsolete equipment or excess equipment no longer needed in the
conduct of the business in the ordinary  course of business) or purchase,  lease
or  otherwise  acquire  all or any part of the  property or assets of any Person
(other than purchases or other acquisitions of inventory,  leases, materials and
equipment  in  the  ordinary  course  of  business)  or  agree  to do any of the
foregoing at any future time, except that the following shall be permitted:

            (a) any  Subsidiary  of the Borrower  may be merged or  consolidated
      with  or  into,  or be  liquidated  into,  the  Borrower  or a  Subsidiary
      Guarantor  (so long as the  Borrower or such  Subsidiary  Guarantor is the
      surviving corporation), or all or any part of its business, properties and
      assets may be conveyed, leased, sold or transferred to the
                                       43
<PAGE>


      Borrower or any Subsidiary  Guarantor (or any other Subsidiary),  provided
      that neither the Borrower nor any  Subsidiary  Guarantor may be a party to
      any merger,  consolidation  or  liquidation  otherwise  permitted  by this
      clause (a) involving a Subsidiary that is not a Wholly-Owned Subsidiary;

            (b)  capital   expenditures   to  the  extent   within  the
      limitations set forth in Section 8.05 hereof;

            (c)  the   investments,   acquisitions   and  transfers  or
      dispositions of properties permitted pursuant to Section 8.06;

            (d) each of the Borrower and the Subsidiary Guarantors may lease (as
      lessee) real or personal  property in the ordinary  course of business (so
      long as such lease  does not create a  Capitalized  Lease  Obligation  not
      otherwise permitted by Section 8.04(d));

            (e)  licenses or  sublicenses  by the  Borrower  and its  Subsidiary
      Guarantors of software,  customer lists, trademarks and other intellectual
      property in the ordinary course of business,  provided, that such licenses
      or  sublicenses  shall not interfere  with the business of the Borrower or
      any Subsidiary Guarantor;

            (f) other sales or  dispositions of assets in the ordinary course of
      business,  provided that (w) the aggregate Net Cash Proceeds received from
      all such sales and dispositions  shall not exceed $1,500,000 in any fiscal
      year of the  Borrower,  (x) each such sale  shall be in an amount at least
      equal to the fair  market  value  thereof (as  determined  by the Board of
      Directors of the Borrower in the case of sales in excess of $500,000)  and
      for  proceeds  consisting  solely  of not  less  than (A) 80% cash and (B)
      seller  indebtedness  evidenced by  promissory  notes which notes shall be
      pledged and  delivered to the  Collateral  Agent  pursuant to the Borrower
      Pledge  Agreement,  and (y) the Net Cash  Proceeds  of any  such  sale are
      applied to repay the Loans to the extent  required by Section  4.02(A)(c),
      and provided further, that the sale or disposition of the capital stock of
      (i) the Borrower or any Subsidiary  Guarantor shall be prohibited and (ii)
      any Subsidiary of the Borrower (other than a Subsidiary  Guarantor)  shall
      be  prohibited  unless it is for all of the  outstanding  capital stock of
      such Subsidiary owned by the Borrower;

            (g) other sales or dispositions of assets in each case to the extent
      the Required Banks have  consented in writing  thereto and subject to such
      conditions as may be set forth in such consent;

            (h) any  Subsidiary  may be  liquidated  into the  Borrower
      or a Subsidiary Guarantor; and

                                       44
<PAGE>


            (i)  acquisitions   and  dispositions  of  Permitted   Acquisitions,
      Permitted  Investments  and Permitted  Joint  Ventures in accordance  with
      Section 8.06(g).

            8.03 Liens.  The  Borrower  will not, and will not permit any of its
Subsidiaries to, create,  incur, assume or suffer to exist any Lien upon or with
respect to any  property  or assets of any kind (real or  personal,  tangible or
intangible)  of the  Borrower  or any  such  Subsidiary  whether  now  owned  or
hereafter  acquired,  or  sell  any  such  property  or  assets  subject  to  an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts  receivable or notes with recourse to the
Borrower or any of its  Subsidiaries) or assign any right to receive income,  or
file or permit the filing of any financing  statement under the UCC or any other
similar notice of Lien under any similar recording or notice statute, except:

            (a) Liens for taxes not yet due or Liens for taxes  being  contested
      in good faith and by appropriate  proceedings for which adequate  reserves
      (in the good faith  judgment of the  management of the Borrower) have been
      established;

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

            (c) Liens  created  by or  pursuant  to this  Agreement  or
      the other Credit Documents;

            (d) Liens on assets of the Borrower and each Subsidiary  existing on
      the  Restatement  Effective  Date and listed on Annex IX  hereto,  without
      giving effect to any subsequent extensions or renewals thereof;

            (e)  Liens  arising  from  judgments,   decrees  or  attachments  in
      circumstances  not  constituting  an Event of Default  under  Section 9.09
      provided, that no cash or property is deposited or delivered to secure any
      respective  judgment  or award (or any  appeal  bond in  respect  thereof,
      except as permitted by the following clause (f));

            (f)  Liens  (other  than any Lien  imposed  by  ERISA)  incurred  or
      deposits  made in the  ordinary  course of  business  in  connection  with
      workers'  compensation,  unemployment  insurance and other types of social
      security, or to secure the performance of tenders,  statutory obligations,
      surety and appeal bonds, bids, leases,
                                       45
<PAGE>


      government  contracts,  performance  and  return-of-money  bonds and other
      similar obligations incurred in the ordinary course of business (exclusive
      of  obligations  in respect of the payment for borrowed  money),  provided
      that the aggregate  amount of deposits at any time pursuant to this clause
      (f) shall not exceed $5,000,000;

            (g) leases or  subleases  granted to others not  interfering  in any
      material  respect  with  the  business  of  the  Borrower  or  any  of its
      Subsidiaries;

            (h)  easements,   rights-of-way,   restrictions,  minor  defects  or
      irregularities  in title and other  similar  charges or  encumbrances  not
      interfering  in any  material  respect  with the  ordinary  conduct of the
      business of the Borrower or any of its Subsidiaries;

            (i) Liens arising from UCC  financing  statements  regarding  leases
      permitted by this Agreement;

            (j) purchase money Liens securing payables arising from the purchase
      by the Borrower or any  Subsidiary  Guarantor of any equipment or goods in
      the normal  course of  business,  provided  that such  payables  shall not
      constitute Indebtedness;

            (k) any  interest  or  title of a lessor  under  any  lease
      permitted by this Agreement;

            (l) Liens arising  pursuant to purchase money  mortgages or security
      interests securing Indebtedness  representing the purchase price of assets
      acquired by the Borrower or any  Subsidiary  Guarantor,  provided that any
      such Liens attach only to the assets so acquired and that all Indebtedness
      secured  by Liens  created  pursuant  to this  clause (l) shall not exceed
      $7,000,000 at any time outstanding;

            (m) Liens  created  pursuant  to Capital  Leases  permitted
      pursuant to Section 8.04(d); and

            (n) Liens securing  Indebtedness  not in excess of $2,500,000 at any
      time outstanding.

            8.04 Indebtedness. The Borrower will not, and will not permit any of
its  Subsidiaries  to, contract,  create,  incur,  assume or suffer to exist any
Indebtedness, except:

            (a)  Indebtedness  incurred  pursuant to this Agreement and
      the other Credit Documents;

                                       46
<PAGE>



            (b)  Indebtedness  owing by (i) any Subsidiary  Guarantor to another
      Subsidiary Guarantor or the Borrower, (ii) any other Subsidiary to another
      Subsidiary  that is not a Subsidiary  Guarantor  and (iii) the Borrower to
      any Subsidiary Guarantor;

            (c)   Indebtedness   of  the   Borrower   evidenced  by  the  Senior
      Subordinated   Notes,  in  an  aggregate  principal  amount  at  any  time
      outstanding not to exceed $70,000,000;

            (d)  Capitalized   Lease   Obligations  of  the  Borrower  and  each
      Subsidiary  Guarantor,  provided  that  the  aggregate  Capitalized  Lease
      Obligations  under all  Capital  Leases  entered  into  after  Restatement
      Effective Date shall not exceed
      $10,500,000;

            (e) Existing  Indebtedness,  without giving effect to any subsequent
      extension, renewal or refinancing thereof;

            (f)  Indebtedness  under  Interest Rate  Agreements  relating to the
      Loans on terms and  conditions  satisfactory  to the  Agent to the  extent
      determined,  in good  faith  by the  Borrower,  to be  non-speculative  in
      nature;

            (g)  Indebtedness of the Borrower  represented by the obligations of
      the  Borrower  to  make  payments  with  respect  to the  cancellation  or
      repurchase of certain stock of officers, employees and directors (or their
      estates) of the Borrower and its Subsidiaries,  to the extent permitted by
      Section 8.09;

            (h)  Indebtedness   incurred  pursuant  to  purchase  money
      mortgages permitted by Section 8.03(l); and

            (i)  additional  Indebtedness  of the  Borrower  and the  Subsidiary
      Guarantors  not to exceed an  aggregate  outstanding  principal  amount of
      $5,000,000 at any time.

            8.05 Capital  Expenditures.  (a) The Borrower will not, and will not
permit any of its  Subsidiaries  to, incur  Consolidated  Capital  Expenditures,
provided that the Borrower and the Subsidiary  Guarantors may make  Consolidated
Capital Expenditures of up to $3,000,000 in any fiscal year.

            (b) In the event that the maximum  amount  which is  permitted to be
expended in respect of Consolidated  Capital Expenditures during any fiscal year
pursuant to Section  8.05(a)  (without  giving effect to this clause (b)) is not
fully expended during such fiscal year, the maximum amount which may be expended
during the immediately  succeeding fiscal year pursuant to Section 8.05(a) shall
be increased by such  unutilized  amount,  provided that such increase shall not
exceed $1,000,000 in any fiscal year.

                                       47
<PAGE>



            (c) In addition to the foregoing, the Borrower may make Consolidated
Capital  Expenditures  in amounts in excess of those  permitted  under  Sections
8.05(a)  and (b),  provided  that the  amount  of such  additional  Consolidated
Capital  Expenditures  shall not exceed the Available Excess Cash Flow Amount at
the time of such additional  Consolidated Capital Expenditure (determined before
giving   effect  to  the  making  of  such   additional   Consolidated   Capital
Expenditure).

            8.06  Advances,  Investments  and Loans.  The Borrower will not, and
will not  permit  any of its  Subsidiaries  to,  lend  money or  credit  or make
advances  to any  Person,  or  purchase  or acquire  any stock,  obligations  or
securities of, or any other interest in, or make any capital contribution to any
Person, except:

            (a) the  Borrower  or any  Subsidiary  may  invest  in cash
      and Cash Equivalents;

            (b) the Borrower and any Subsidiary may acquire and hold receivables
      owing to them,  if created or acquired in the ordinary  course of business
      and payable or dischargeable in accordance with customary trade terms;

            (c) the  intercompany  Indebtedness  described  in  Section
      8.04(b) shall be permitted;

            (d)  loans and  advances  to  employees  in the  ordinary  course of
      business in an aggregate  principal  amount not to exceed  $500,000 at any
      time outstanding shall be permitted;

            (e) the Borrower and each  Subsidiary  Guarantor may acquire and own
      investments  (including debt obligations)  received in connection with the
      bankruptcy or  reorganization of suppliers and customers and in settlement
      of  delinquent  obligations  of, and other  disputes  with,  customers and
      suppliers arising in the ordinary course of business;

            (f)   Interest   Rate   Agreements   permitted  by  Section
      8.04(f) shall be permitted;

            (g) the  Borrower or any  Subsidiary  Guarantor  may make  Permitted
      Acquisitions,  Permitted  Investments (in accordance with the requirements
      contained in the definition  thereof) and/or make investments in Permitted
      Joint  Ventures not to exceed  $1,000,000  (plus  amounts  returned to the
      Borrower as a result of sales of such investment or pursuant to a dividend
      payment  thereunder),  in the  aggregate  for all the  foregoing  plus the
      Available  Excess  Cash  Flow  Amount  at the time of the  making  thereof
      (before giving effect thereto);

                                       48
<PAGE>



            (h)  the  Borrower  may  make  contributions  to an  employee  stock
      ownership plan, provided such contributions are in Common Stock; and

            (i)  the  Borrower  may  hold  the  promissory   notes  acquired  in
      accordance with Section 8.02(f).

            8.07 Leases.  The Borrower  will not permit the  aggregate  payments
(including,  without limitation, any property taxes paid by the Borrower and its
Subsidiaries  as  additional  rent or lease  payments)  by the  Borrower and its
Subsidiaries  on a  consolidated  basis  under  agreements  in  effect as of the
Restatement  Effective Date and/or entered into after the Restatement  Effective
Date   (including  any  such  agreement  that  is  an  extension,   replacement,
substitution,  or renewal of any  agreement  entered into prior to such date) to
rent or lease any real or personal  property  (exclusive  of  Capitalized  Lease
Obligations) to exceed $3,000,000 in any fiscal year of the Borrower.

            8.08  Prepayments  of  Indebtedness  etc. The Borrower will not, and
will not permit any of its Subsidiaries to:

            (a) make (or give any notice in respect  thereof)  any  voluntary or
      optional  payment or prepayment or redemption or acquisition  for value of
      (including, without limitation, by way of depositing with the trustee with
      respect  thereto money or securities  before due for the purpose of paying
      when due) or exchange  of the Senior  Subordinated  Notes or any  Existing
      Indebtedness;

            (b) amend or modify, or permit the amendment or modification of, any
      provisions of any Senior Subordinated Note Documents; and/or

            (c) amend,  modify or change in any manner  adverse to the interests
      of  the  Banks  the  certificate  of  incorporation  (including,   without
      limitation, by the filing of any certificate of designation) or by-laws of
      the Borrower or any agreement entered into by the Borrower with respect to
      its capital stock or enter into any new agreement in any manner adverse to
      the  interests  of the Banks  with  respect  to the  capital  stock of the
      Borrower.

            8.09 Dividends,  etc. (a) The Borrower will not, and will not permit
any of its  Subsidiaries  to, declare or pay any dividends (other than dividends
payable  solely in capital  stock of such  Person) or return any capital to, its
stockholders or authorize or make any other distribution, payment or delivery of
property or cash to its  stockholders  as such, or redeem,  retire,  purchase or
otherwise acquire,  directly or indirectly,  for a consideration,  any shares of
any class of its capital stock now or hereafter outstanding (or any warrants for
or options or stock  appreciation  rights in respect of any of such shares),  or
set aside any funds
                                       49
<PAGE>



for any of the foregoing purposes, or permit any of its Subsidiaries to purchase
or otherwise  acquire for  consideration  any shares of any class of the capital
stock of the  Borrower  or any  other  Subsidiary,  as the  case may be,  now or
hereafter  outstanding (or any options or warrants or stock appreciation  rights
issued by such Person with respect to its capital  stock) (all of the  foregoing
"Dividends"), except that:

            (i) any  Subsidiary  of the Borrower  may pay  dividends to
      the Borrower or to a Subsidiary Guarantor; and

           (ii) the Borrower may redeem or  repurchase  Common Stock (or options
      to purchase such Common Stock) from (1) officers,  employees and directors
      (or their  estates) upon the death,  permanent  disability,  retirement or
      termination  of  employment  of any such Person or otherwise in accordance
      with (x) the  Stockholders  Agreement and (y) any stock option plan or any
      employee stock ownership plan, or (2) other  stockholders of the Borrower,
      so long as the  purpose of such  purchase is to acquire  Common  Stock for
      reissuance to new officers,  employees and directors (or their estates) of
      the  Borrower  to the  extent  so  reissued  within  12 months of any such
      purchase,  provided  that in all such  cases  (A) no  Default  or Event of
      Default  is  then  in  existence  or  would  arise  therefrom  and (B) the
      aggregate  amount  of all  cash  paid in  respect  of all such  shares  so
      redeemed or  repurchased  in any calendar year does not exceed  $2,500,000
      plus (I)  proceeds of key-man  life  insurance  used for the  purposes set
      forth in subclause (2) and (II) the  Available  Excess Cash Flow Amount at
      the time of any such  redemption  and  repurchase  (before  giving  effect
      thereto)  and,  provided  further,  that in the  event  that the  Borrower
      subsequently resells to any member of its, or any Subsidiary  Guarantors',
      management  any shares  redeemed  or  repurchased  pursuant to this clause
      (ii),  the amount of  repurchases  the Borrower  may make from  Management
      Investors  pursuant to this clause  (ii) shall be  increased  by an amount
      equal to any cash received by the Borrower upon the resale of such shares;
      and

          (iii) the Borrower may pay  regularly  scheduled  Dividends on the PIK
      Preferred  Stock  pursuant to the terms  thereof  through the  issuance of
      additional shares of such PIK Preferred Stock.

            (b)  The  Borrower  will  not,  and  will  not  permit  any  of  its
Subsidiaries to, create or otherwise cause or suffer to exist any encumbrance or
restriction  which  prohibits  or  otherwise  restricts  (A) the  ability of any
Subsidiary  to (a)  pay  dividends  or  make  other  distributions  or  pay  any
Indebtedness owed to the Borrower or any Subsidiary,  (b) make loans or advances
to the Borrower or any  Subsidiary,  or (c) transfer  any of its  properties  or
assets to the Borrower or any  Subsidiary  or (B) the ability of the Borrower or
any other Subsidiary of the Borrower to create, incur, assume or suffer to exist
any Lien upon its  property  or assets to secure  the  Obligations,  other  than
prohibitions or restrictions existing under or by reason of:

                                       50
<PAGE>



            (i) this  Agreement,  the other  Credit  Documents  and the
      Senior Subordinated Note Documents;

           (ii) applicable law;

          (iii) customary non-assignment provisions entered into in the ordinary
      course of business and consistent with past practices;

           (iv) any  restriction or encumbrance  with respect to a Subsidiary of
      the Borrower  imposed pursuant to an agreement which has been entered into
      for the sale or  disposition  of all or  substantially  all of the capital
      stock or assets of such Subsidiary, so long as such sale or disposition is
      permitted under this Agreement; and

            (v)  Liens  permitted  under  Section  8.03  and  any  documents  or
      instruments  governing the terms of any Indebtedness or other  obligations
      secured by any such Liens, provided that such prohibitions or restrictions
      apply only to the assets subject to such Liens.

            8.10 Transactions  with Affiliates.  The Borrower will not, and will
not  permit  any  Subsidiary  to,  enter  into  any  transaction  or  series  of
transactions after the Restatement Effective Date whether or not in the ordinary
course of  business,  with any  Affiliate  other  than on terms  and  conditions
substantially  as  favorable  to the  Borrower  or such  Subsidiary  as would be
obtainable  by the  Borrower  or such  Subsidiary  at the  time in a  comparable
arm's-length  transaction  with a Person other than an Affiliate,  provided that
the  foregoing  restrictions  shall  not  apply  to (i)  transactions  with  its
Affiliates set forth in Annex X hereto,  (ii)  employment  arrangements  entered
into in the ordinary  course of business  with  officers of the Borrower and its
Subsidiaries,  (iii) customary fees paid to members of the Board of Directors of
the Borrower and of its  Subsidiaries and (iv) the payment of management fees to
Kelso in an amount not to exceed  $300,000 in any fiscal year plus  expenses and
indemnity payments.

            8.11 Fixed Charge Coverage  Ratio.  The Borrower will not permit the
ratio of (i) Consolidated EBITDA to (ii) Consolidated Fixed Charges for any Test
Period ending at the end of any fiscal  quarter of the Borrower set forth below,
to be less than the ratio set forth opposite such fiscal quarter:

                                       51
<PAGE>


Fiscal Quarter                                              Ratio

Fiscal quarter ended in December, 1997                      1.15 to 1
Fiscal quarter ended in March, 1998                         1.15 to 1
Fiscal quarter ended in June, 1998                          1.05 to 1
Fiscal quarter ended in September, 1998                     1.05 to 1

Fiscal quarter ended in December, 1998                      1.05 to 1
Fiscal quarter ended in March, 1999                         1.05 to 1
Fiscal quarter ended in June, 1999                          1.15 to 1
Fiscal quarter ended in September, 1999                     1.15 to 1

Each fiscal quarter ended thereafter                        1.15 to 1

            8.12  Minimum  Consolidated  EBITDA.  The  Borrower  will not permit
Consolidated  EBITDA for any Test Period ending at the end of any fiscal quarter
of the  Borrower  set forth below to be less than the amount set forth  opposite
such fiscal quarter:

Fiscal Quarter
Amount

Fiscal quarter ended in December, 1997                 $28,000,000
Fiscal quarter ended in March, 1998                    $26,500,000
Fiscal quarter ended in June, 1998                     $29,000,000
Fiscal quarter ended in September, 1998                $32,500,000

Fiscal quarter ended in December, 1998                 $35,000,000
Fiscal quarter ended in March, 1999                    $35,000,000
Fiscal quarter ended in June, 1999                     $37,500,000
Fiscal quarter ended in September, 1999                $38,500,000

Fiscal quarter ended in December, 1999                 $41,500,000
Fiscal quarter ended in March, 2000                    $42,500,000
Fiscal quarter ended in June, 2000                     $43,500,000
Fiscal quarter ended in September, 2000                $45,500,000

Fiscal quarter ended in December, 2000                 $49,500,000
Fiscal quarter ended in December, 2001                 $50,000,000

Each fiscal quarter ended thereafter
$50,000,000

                                       52
<PAGE>



            8.13 Leverage Ratio. The Borrower will not permit the Leverage Ratio
as of the end of any  fiscal  quarter  of the  Borrower  set forth  below of the
Borrower to be more than the ratio set forth opposite such fiscal quarter:

Fiscal Quarter                                               Ratio

Fiscal quarter ended in December, 1997                      2.75 to 1
Fiscal quarter ended in March, 1998                         3.00 to 1
Fiscal quarter ended in June, 1998                          2.75 to 1
Fiscal quarter ended in September, 1998                     2.75 to 1

Fiscal quarter ended in December, 1998                      2.50 to 1
Fiscal quarter ended in March, 1999                         2.50 to 1
Fiscal quarter ended in June, 1999                          2.25 to 1
Fiscal quarter ended in September, 1999                     2.25 to 1
Fiscal quarter ended in December, 1999                      2.25 to 1

Each fiscal quarter ended thereafter                        2.00 to 1

            8.14  Issuance  of Stock.  The  Borrower  will not permit any of its
Subsidiaries  directly or indirectly to issue, sell, assign, pledge or otherwise
encumber or dispose of any shares of its capital stock or other  securities  (or
warrants,  rights or options to acquire  shares or other equity  securities)  of
such  Subsidiary,  except,  to the  extent  permitted  by Section  8.06,  to the
Borrower or to qualify directors if required by applicable law.

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

            9.01  Payments.  The Borrower  shall (i) default in the payment when
due of any  principal  of the  Loans or (ii)  default,  and such  default  shall
continue for five or more days,  in the payment when due of any Unpaid  Drawing,
any interest on the Loans or any Fees or any other  amounts  owing  hereunder or
under any other Credit Document; or

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

            9.03  Covenants.  Any  Credit  Party  shall (a)  default  in the due
performance or observance by it of any term,  covenant or agreement contained in
Section 7.11 or 8, or (b) default in the due  performance or observance by it of
any term,  covenant or agreement  (other than those referred to in Section 9.01,
9.02 or clause (a) of this Section  9.03)  contained in this  Agreement and such
default shall continue  unremedied for a period of at least 30 days after notice
to the defaulting party by the Agent or the Required Banks; or

                                       53
<PAGE>


            9.04 Default Under Other Agreements.  (a) The Borrower or any of its
Subsidiaries  shall (i) default in any payment with respect to any  Indebtedness
(other  than the  Obligations)  beyond the period of grace,  if any,  applicable
thereto or (ii) default in the  observance  or  performance  of any agreement or
condition  relating to any such  Indebtedness  or contained in any instrument or
agreement  evidencing,  securing or relating  thereto,  or any other event shall
occur or  condition  exist,  the  effect  of  which  default  or other  event or
condition is to cause,  or to permit the holder or holders of such  Indebtedness
(or a trustee or agent on behalf of such  holder or  holders)  to cause any such
Indebtedness  to  become  due  prior  to its  stated  maturity;  or (b) any such
Indebtedness of the Borrower or any of its Subsidiaries  shall be declared to be
due and payable,  or required to be prepaid other than by a regularly  scheduled
required  prepayment,  prior to the stated  maturity  thereof,  provided that it
shall not  constitute  an Event of Default  pursuant to this Section 9.04 unless
the principal amount of any one issue of such Indebtedness exceeds $3,500,000 or
the  aggregate  amount of all  Indebtedness  referred  to in clauses (a) and (b)
above exceeds $4,500,000 at any one time; or

            9.05   Bankruptcy,   etc.  The  Borrower  or  any  of  its  Material
Subsidiaries shall commence a voluntary case concerning itself under Title 11 of
the United States Code entitled "Bankruptcy",  as now or hereafter in effect, or
any  successor  thereto  (the  "Bankruptcy  Code");  or an  involuntary  case is
commenced  against the  Borrower  or any of its  Material  Subsidiaries  and the
petition is not controverted within 10 days, or is not dismissed within 60 days,
after  commencement  of the case; or a custodian  (as defined in the  Bankruptcy
Code) is  appointed  for, or takes  charge of, all or  substantially  all of the
property of the Borrower or any of its Material Subsidiaries; or the Borrower or
any of its  Material  Subsidiaries  commences  any  other  proceeding  under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency  or  liquidation  or similar law of any  jurisdiction  whether now or
hereafter in effect relating to or any of its Material Subsidiaries; or there is
commenced  against the  Borrower or any of its  Material  Subsidiaries  any such
proceeding which remains undismissed for a period of 60 days; or the Borrower or
any of its Material  Subsidiaries is adjudicated  insolvent or bankrupt;  or any
order of relief or other order approving any such case or proceeding is entered;
the Borrower or any of its Material  Subsidiaries suffers any appointment of any
custodian or the like for it or any substantial part of its property to continue
undischarged  or unstayed for a period of 60 days; or the Borrower or any of its
Material  Subsidiaries  makes a general assignment for the benefit of creditors;
or any  corporate  action  is  taken  by  the  Borrower  or any of its  Material
Subsidiaries for the purpose of effecting any of the foregoing; or

                                       54
<PAGE>



            9.06 ERISA. (a) A  single-employer  plan (as defined in Section 4001
of ERISA)  established  by the Borrower,  any of its  Subsidiaries  or any ERISA
Affiliate  shall fail to  maintain  the  minimum  funding  standard  required by
Section  412 of the Code  for any plan  year or a  waiver  of such  standard  or
extension of any  amortization  period is sought or granted under Section 412 of
the Code or shall  provide  security  to induce the  issuance  of such waiver or
extension,  (b) any Plan is or shall have been or is likely to be  terminated or
the subject of  termination  proceedings  under  ERISA or an event has  occurred
entitling the PBGC to terminate a Plan under Section  4042(a) of ERISA,  (c) any
Plan  shall  have  an  Unfunded  Current  Liability  or (d)  the  Borrower  or a
Subsidiary or any ERISA  Affiliate has incurred or is likely to incur a material
liability to or on account of a termination of or a withdrawal from a Plan under
Section 515, 4062,  4063,  4064,  4201 or 4204 of ERISA;  and there shall result
from any such event or events described in the preceding clauses of this Section
9.06 the imposition of a Lien upon the assets of the Borrower or any Subsidiary,
the  granting  of a security  interest,  or a  liability  or a material  risk of
incurring a liability to the PBGC or a Plan or a trustee  appointed  under ERISA
or a penalty  under  Section 4971 of the Code, in each case which would have, in
the opinion of the Required Banks a Material Adverse Effect; or

            9.07 Security Documents.  Any Security Document shall cease to be in
full force and  effect,  or shall  cease to give the  Collateral  Agent any Lien
encumbering  assets with an aggregate  fair market value in excess of $1,000,000
(and, if  encumbering  assets with a fair market value of less than  $5,000,000,
for a period greater than thirty or more days), or any material  rights,  powers
and privileges  purported to be created thereby in favor of the Collateral Agent
or any Credit Party shall default in any material respect in the due performance
or observance of any term,  covenant or agreement on its part to be performed or
observed pursuant to any such Security Document; or

            9.08 Subsidiary  Guaranty.  The Subsidiary Guaranty or any provision
thereof shall cease to be in full force or effect,  or any Subsidiary  Guarantor
or any Person acting by or on behalf of any such Subsidiary Guarantor shall deny
or disaffirm such guarantor's  obligations under such Subsidiary Guaranty or any
such Subsidiary  Guarantor shall default in the due performance or observance of
any material term, covenant or agreement on its part to be performed or observed
by it pursuant to the Subsidiary Guaranty; or

            9.09  Judgments.  One or more  judgments or decrees shall be entered
against  the  Borrower  or any of its  Subsidiaries  involving  a  liability  of
$3,500,000 or more in the case of any one such judgment or decree and $4,500,000
or more in the aggregate for all such judgments and decrees for the Borrower and
its  Subsidiaries  (not paid or to the extent not covered by insurance)  and any
such  judgments or decrees shall not have been vacated,  discharged or stayed or
bonded pending appeal within 60 days from the entry thereof;

                                       55
<PAGE>



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

            SECTION 10.  Definitions.  As used herein, the following terms shall
have the  meanings  herein  specified  unless the  context  otherwise  requires.
Defined terms in this Agreement  shall include in the singular number the plural
and in the plural the singular:

            "Additional  Mortgages"  shall have the meaning provided in
Section 7.11.

            "Adjusted Cash Flow" for any fiscal year shall mean Consolidated Net
Income for such fiscal year (after  provision  for taxes) plus the amount of all
net non-cash charges (including, without limitation,  depreciation, deferred tax
expense,   non-cash   interest   expense,   amortization  of  deferred  customer
acquisition costs write-downs of inventory and other non-cash charges) that were
deducted in arriving at  Consolidated  Net Income for such fiscal year minus the
total amount of deferred  customer  acquisition  costs  capitalized  during such
period,  minus the amount of all  non-cash  gains and gains from sales of assets
(other than sales of inventory  and  equipment in the normal course of business)
that were added in arriving at Consolidated Net Income for such fiscal year.

                                       56
<PAGE>


            "Adjusted  RC  Percentage"  shall  mean  (x) at a time  when no Bank
Default exists, for each RC Bank such RC Bank's Revolving  Percentage and (y) at
a time when a Bank  Default  exists  (i) for each RC Bank  that is a  Defaulting
Bank,  zero  and  (ii)  for  each RC Bank  that is a  Non-Defaulting  Bank,  the
percentage  determined by dividing such RC Bank's  Revolving  Commitment at such
time  by the  Adjusted  Total  Revolving  Commitment  at  such  time,  it  being
understood that all references herein to Revolving  Commitments and the Adjusted
Total  Revolving  Commitment  at a time when the Total  Revolving  Commitment or
Adjusted Total  Revolving  Commitment,  as the case may be, has been  terminated
shall  be  references  to the  Revolving  Loan  Commitments  or  Adjusted  Total
Revolving  Commitment,  as the case may be, in effect  immediately prior to such
termination,  provided that (A) no RC Bank's Adjusted RC Percentage shall change
upon the occurrence of a Bank Default from that in effect  immediately  prior to
such Bank Default if, after giving effect to such Bank Default and any repayment
of  Revolving  Loans  and  Swingline  Loans at such  time  pursuant  to  Section
4.02(A)(a) or  otherwise,  the sum of (i) the  aggregate  outstanding  principal
amount of Revolving  Loans of all  Non-Defaulting  Banks plus (ii) the aggregate
outstanding  principal amount of Swingline Loans plus (iii) the Letter of Credit
Outstandings,  exceeds the Adjusted  Total  Revolving Loan  Commitment;  (B) the
changes to the Adjusted RC Percentage that would have become  effective upon the
occurrence  of a Bank  Default but that did not become  effective as a result of
the  preceding  clause (A) shall  become  effective  on the first date after the
occurrence  of the relevant  Bank Default on which the sum of (i) the  aggregate
outstanding  principal amount of the Revolving Loans of all Non-Defaulting Banks
plus (ii) the aggregate outstanding principal amount of the Swingline Loans plus
(iii) the Letter of Credit  Outstandings  is equal to or less than the  Adjusted
Total Revolving  Commitment;  and (C) if (i) a Non-Defaulting Bank's Adjusted RC
Percentage  is  changed  pursuant  to the  preceding  clause  (B) and  (ii)  any
repayment of such Bank's  Revolving Loans, or of Unpaid Drawings with respect to
Letters  of Credit or of  Swingline  Loans,  that were made  during  the  period
commencing after the date of the relevant Bank Default and ending on the date of
such change to its Adjusted RC Percentage  must be returned to any Borrower as a
preferential or similar payment in any bankruptcy or similar  proceeding of such
Borrower,  then the change to such Non-Defaulting  Bank's Adjusted RC Percentage
effected  pursuant to said clause (B) shall be reduced to that positive  change,
if any,  as would  have  been made to its  Adjusted  RC  Percentage  if (x) such
repayments  had not been  made and (y) the  maximum  change to its  Adjusted  RC
Percentage  would  have  resulted  in the sum of the  outstanding  principal  of
Revolving Loans made by such Bank plus such Bank's new Adjusted RC Percentage of
the  outstanding  principal  amount of  Swingline  Loans and of Letter of Credit
Outstandings equalling such Bank's Revolving Commitment at such time.

            "Adjusted  Revolving   Commitment"  for  each  RC  Bank  that  is  a
Non-Defaulting  Bank  shall  mean at any  time  the  product  of such RC  Bank's
Adjusted RC Percentage and the Adjusted Total Revolving
Commitment.

            "Adjusted  Total  Revolving  Commitment"  shall mean at any time the
Total  Revolving  Commitment  less the aggregate  Revolving  Commitments  of all
Defaulting Banks.

                                       57
<PAGE>




            "Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly  controlling  (including but not limited to all directors
and officers of such Person),  controlled by, or under direct or indirect common
control with such Person.  A Person shall be deemed to control a corporation  if
such Person possesses, directly or indirectly, the power (i) to vote 10% or more
of the securities  having ordinary voting power for the election of directors of
such  corporation or (ii) to direct or cause the direction of the management and
policies  of  such   corporation,   whether  through  the  ownership  of  voting
securities, by contract or otherwise.

            "Agent"  shall have the meaning  provided in the first  paragraph of
this Agreement and shall include any successor to the Agent  appointed  pursuant
to Section 11.09.

            "Agreement"  shall mean this  Credit  Agreement,  as the same may be
from time to time further modified, amended and/or supplemented.

            "Anticipated  Reinvestment  Amount" shall mean,  with respect to any
Reinvestment Election, the amount specified in the Reinvestment Notice delivered
by the Borrower in  connection  therewith as the amount of the Net Cash Proceeds
from the  related  Asset  Sale that the  Borrower  intends  to use to  purchase,
construct or otherwise acquire Reinvestment Assets.

            "Applicable  Base Rate  Margin"  shall  mean  0.50%  less the Margin
Reduction Discount, if any.

            "Applicable  Eurodollar  Margin"  shall  mean  1.50% less the Margin
Reduction Discount, if any.

            "Asset Sale" shall mean the sale,  transfer or other  disposition by
the  Borrower or any  Subsidiary  to any Person  other than the  Borrower or any
Subsidiary Guarantor of any asset of the Borrower or such Subsidiary (other than
sales,  transfers or other  dispositions  in the ordinary  course of business of
inventory and/or obsolete or excess equipment).

            "Authorized  Officer"  shall mean any senior officer of the Borrower
designated  as such in writing to the Agent by the  Borrower in each case to the
extent acceptable to the Agent.

            "Available  Excess  Cash Flow  Amount"  shall  mean at any time,  an
amount equal to 50% of (A) the aggregate  Excess Cash Flow  determined  for each
fiscal year of the Borrower  (commencing with the fiscal year ending on December
31,  1997)  then  ended  less  (B) the sum of (w) the  aggregate  amount  of the
Available Excess Cash Flow Amount with which the
                                       58
<PAGE>


Borrower has therefore made Permitted Acquisitions, Permitted Investments and/or
investments in Permitted Joint Ventures in accordance with Section 8.06(g),  (x)
the aggregate  amount of  Consolidated  Capital  Expenditures  theretofore  made
pursuant to Section 8.05(c) hereof,  (y) the aggregate amount of redemptions and
repurchases of the Borrower's  Common Stock theretofore made pursuant to Section
8.09(a)(ii)(B)(II)  and (z) the Available Excess Cash Flow Amount with which the
Borrower has therefore  made voluntary  prepayments  in accordance  with Section
4.01 that have been applied pursuant to the last proviso in such Section.

            "BB  Determination  Date" shall mean for any month, the 15th of such
month, or if not a Business Day, the next succeeding Business Day.

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

            "Bank  Default"  shall  mean  (i) the  refusal  (which  has not been
retracted) of a Bank to make available its portion of any incurrence of Loans or
to fund its portion of any unreimbursed  payment under Section 2.05(c) or (ii) a
Bank having  notified the Agent  and/or the Borrower  that it does not intend to
comply with the obligations under Section 1.01 or under Section 2.05(c),  in the
case of either clause (i) or (ii) as a result of the  appointment  of a receiver
or  conservator  with  respect to such Bank at the  direction  or request of any
regulatory agency or authority.

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

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

            "Base Rate Loan" shall mean each Loan bearing  interest at the rates
provided in Section 1.08(a).

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

            "Borrowing"  shall mean the incurrence of (i) Swingline Loans by the
Borrower from BTCo on a given date or (ii) one Type of Loan pursuant to a single
Facility by the Borrower from all of the Banks having  Commitments  with respect
to such  Facility  on a pro  rata  basis  on a given  date  (or  resulting  from
conversions  on a given date),  having in the case of Eurodollar  Loans the same
Interest  Period;  provided  that Base Rate Loans  incurred  pursuant to Section
1.10(b) shall be considered part of any related Borrowing of Eurodollar Loans.

                                       59
<PAGE>



            "Borrowing  Base" shall mean, at any time, the sum of (x) 80% of the
book  value  of the  accounts  receivable  of the  Borrower  and the  Subsidiary
Guarantors  plus (y) 50% of the book value of the  inventory of the Borrower and
the  Subsidiary  Guarantors,  in each  determined  on a  consolidated  basis  in
accordance  with GAAP and as set forth in the last  Borrowing  Base  Certificate
delivered by the Borrower pursuant to Section 5.01(d) or 7.01(g) as the case may
be,  provided that the  Borrowing  Base shall be zero at any time when a Default
under 7.01(g) has occurred and is continuing.

            "Borrowing  Base   Certificate"   shall  have  the  meaning
provided in Section 5.01(d).

            "BTCo" shall mean Bankers Trust  Company in its  individual
capacity.

            "Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day excluding Saturday, Sunday and any day which shall
be in  the  City  of  New  York  a  legal  holiday  or a day  on  which  banking
institutions  are authorized by law or other  governmental  actions to close and
(ii) with respect to all notices and  determinations  in  connection  with,  and
payments of  principal  and interest on,  Eurodollar  Loans,  any day which is a
Business Day  described in clause (i) and which is also a day for trading by and
between banks in U.S. dollar deposits in the interbank Eurodollar market.

            "Capital Lease" as applied to any Person shall mean any lease of any
property  (whether real,  personal or mixed) by that Person as lessee which,  in
conformity  with GAAP,  is accounted for as a capital lease on the balance sheet
of that Person.

            "Capitalized  Lease  Obligations"  shall mean all obligations  under
Capital Leases of the Borrower or any of its  Subsidiaries in each case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.

            "Cash  Equivalents" shall mean (i) securities issued or directly and
fully  guaranteed  or insured  by the United  States of America or any agency or
instrumentality  thereof  (provided that the full faith and credit of the United
States of America is pledged in support  thereof) having  maturities of not more
than six months from the date of acquisition,  (ii) U.S. dollar denominated time
deposits,  certificates of deposit and bankers' acceptances of (x) any Bank, (y)
any domestic  commercial bank of recognized  standing having capital and surplus
in excess of  $500,000,000  or (z) any bank (or the parent company of such bank)
whose  short-term  commercial  paper  rating  from  Standard  &  Poor's  Ratings
Services,  a  division  of  McGraw-Hill,  Inc.  ("S&P")  is at least  A-1 or the
equivalent  thereof or from Moody's Investors  Service,  Inc.  ("Moody's") is at
least P-1 or the equivalent thereof (any such bank, an "Approved Bank"), in each
case with  maturities of not more than six months from the date of  acquisition,
(iii)  repurchase  obligations  with a term of not  more  than  seven  days  for
underlying securities of the
                                       60
<PAGE>


types  described  in clause (i) above  entered  into with any bank  meeting  the
qualifications  specified in clause (ii) above,  (iv) commercial paper issued by
any Bank or Approved Bank or by the parent  company of any Bank or Approved Bank
and  commercial  paper issued by, or guaranteed  by, any industrial or financial
company  with a  short-term  commercial  paper  rating  of at  least  A-1 or the
equivalent  thereof by S&P or at least P-1 or the equivalent  thereof by Moody's
(any such company,  an "Approved  Company"),  or  guaranteed  by any  industrial
company  with a long  term  unsecured  debt  rating  of at least A or A2, or the
equivalent of each thereof, from S&P or Moody's, as the case may be, and in each
case  maturing  within  six  months  after  the  date  of  acquisition  and  (v)
investments  in  money  market  funds  substantially  all of  whose  assets  are
comprised of securities of the type described in clauses (i) through (iv) above.

            "Cash  Proceeds"  shall mean,  with  respect to any Asset Sale,  the
aggregate cash payments  (including any cash received by way of deferred payment
pursuant to a note receivable  issued in connection with such Asset Sale,  other
than the portion of such deferred payment constituting interest, but only as and
when so received) received by the Borrower and/or any Subsidiary from such Asset
Sale.

            "CERCLA"   shall  mean  the   Comprehensive   Environmental
Response,  Compensation,  and  Liability  Act of 1980,  as amended,  42
U.S.C. ss. 9601 et seq.

            "Change of Control" shall mean (a) prior to the  Borrower's  initial
public  offering of common  stock (it being  understood  that the term  "initial
public  offering" shall not include any  registration of Common Stock under Form
S-4 or Form  S-8 in  connection  with a  transfer  otherwise  permitted  by this
Agreement), the Permitted Holders cease to be the "beneficial owner" (as defined
in Rules  13d-3 and 13d-5  under  the  Exchange  Act as  currently  in  effect),
directly or indirectly, of a majority in the aggregate of the total voting power
of the Voting  Stock of the  Borrower,  whether as a result of the  issuance  of
securities  of  the  Borrower,   any  merger,   consolidation,   liquidation  or
dissolution  of the Borrower,  any direct or indirect  transfer of securities or
otherwise  (for purposes of this clause (a) and clause (b) below,  the Permitted
Holders  shall be deemed to  beneficially  own any Voting Stock of a corporation
(the  "specified  corporation")  held  by any  other  corporation  (the  "parent
corporation") so long as the Permitted Holders beneficially own (as so defined),
directly or  indirectly,  in the aggregate a majority of the voting power of the
Voting Stock of the parent corporation),  (b) any "person" (as such term is used
in  Sections  13(d)  and  14(d) of the  Exchange  Act),  other  than one or more
Permitted  Holders,  is or becomes the "beneficial  owner" (as defined in clause
(a) above),  directly or indirectly,  of more than 30% of the total voting power
of the Voting Stock of the Borrower unless the Permitted  Holders  "beneficially
own" (as defined in clause (a) above), directly or indirectly,  in the aggregate
a  greater  percentage  of the total  voting  power of the  Voting  Stock of the
Borrower  than such other person,  (c)  occupation of a majority of the seats of
the Board of Directors of the Borrower by Persons whose  nomination for election
by the stockholders of the Borrower was not approved by either (i) a majority of
the Permitted  Holders or (ii) a majority of the directors of the Borrower whose
election  or  nomination  for  election  was  previously  so approved or (d) any
"Change of Control or similar  term as defined in the Senior  Subordinated  Note
Indenture.

                                       61
<PAGE>




            "Co-Agent"  shall have the  meaning  provided  in the first
paragraph of this Agreement.

            "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and the regulations  promulgated and the rulings issued thereunder.
Section  references to the Code are to the Code, as in effect at the Restatement
Effective Date and any subsequent  provisions of the Code,  amendatory  thereof,
supplemental thereto or substituted therefor.

            "Collateral"  shall mean all of the  Collateral  as defined
in each of the Security Documents.

            "Collateral   Agent"   shall  mean  the  Agent   acting  as
collateral agent for the Banks.

            "Commitment" shall mean, with respect to each Bank, such Bank's Term
Commitment and Revolving Commitment.

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

            "Common   Stock"   shall  mean  the  common  stock  of  the
Borrower.

            "Consolidated  Capital Expenditures" shall mean, for any period, the
aggregate of all  expenditures  (whether paid in cash or accrued as  liabilities
and including in all events all amounts  expended or  capitalized  under Capital
Leases  but  excluding  any amount  representing  capitalized  interest)  by the
Borrower and its Subsidiaries  during that period that, in conformity with GAAP,
are or are required to be included in the property, plant or equipment reflected
in the consolidated balance sheet of the Borrower and its Subsidiaries, provided
that Consolidated  Capital  Expenditures shall in any event include the purchase
price paid in connection with the acquisition of any Person  (including  through
the purchase of all of the capital  stock or other  ownership  interests of such
Person or through merger or  consolidation) to the extent allocable to property,
plant and equipment,  provided further,  that Consolidated  Capital Expenditures
shall only include the amount thereof actually paid in cash during such period.

            "Consolidated  Cash Interest  Expense"  shall mean,  for any period,
Consolidated  Interest  Expense,  but excluding,  however,  interest expense not
payable in cash and amortization of discount and deferred issuance and financing
costs.

            "Consolidated  Current  Assets"  shall mean, as to any Person at any
time, the current assets (other than cash and Cash  Equivalents)  of such Person
and its Subsidiaries determined on a consolidated basis in accordance with GAAP.

                                       62
<PAGE>




            "Consolidated  Current  Liabilities" shall mean, as to any Person at
any time, the current liabilities of such Person and its Subsidiaries determined
on a  consolidated  basis in accordance  with GAAP, but excluding all short-term
Indebtedness  for  borrowed  money  and the  current  portion  of any  long-term
Indebtedness  of such  Person or its  Subsidiaries,  in each case to the  extent
otherwise included therein.

            "Consolidated  EBIT" shall mean, for any period,  (A) the sum of the
amounts for such period of (i)  Consolidated  Net Income,  (ii)  provisions  for
taxes based on income, (iii) Consolidated Interest Expense, (iv) amortization or
write-off  of deferred  financing  costs to the extent  deducted in  determining
Consolidated  Net Income and (v) losses on sales of assets  (excluding  sales in
the ordinary  course of business)  and other  extraordinary  losses less (B) the
amount  for such  period  of gains on sales of  assets  (excluding  sales in the
ordinary course of business) and other extraordinary gains, all as determined on
a consolidated basis in accordance with GAAP.

            "Consolidated  EBITDA"  shall mean,  for any period,  the sum of the
amounts for such period of (i)  Consolidated  EBIT, (ii)  depreciation  expense,
(iii)  amortization  expense and (iv) (x)  amortization of deferred  acquisition
cost  minus  (y)  the  total  amount  of  deferred  customer  acquisition  costs
capitalized  during such period,  all as determined on a  consolidated  basis in
accordance with GAAP.

            "Consolidated  Fixed Charges"  shall mean, for any period,  the sum,
without  duplication,  of the amounts for such period of (i)  Consolidated  Cash
Interest  Expense,  and (ii)  scheduled  payments on the Term Loans and Existing
Indebtedness, all as determined on a consolidated basis for the Borrower and its
Subsidiaries in accordance with GAAP.

            "Consolidated  Interest  Expense" shall mean, for any period,  total
interest  expense  (including that  attributable to Capital Leases in accordance
with GAAP) of the Borrower and its  Subsidiaries  on a  consolidated  basis with
respect to all outstanding  Indebtedness  of the Borrower and its  Subsidiaries,
including,  without  limitation,  all commissions,  discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance financing
and net costs under Interest Rate Agreements.

            "Consolidated Net Income" shall mean for any period,  the net income
(or loss) of the Borrower and its Subsidiaries on a consolidated  basis for such
period taken as a single  accounting  period determined in conformity with GAAP,
provided  that there  shall be  excluded  (i) the income (or loss) of any Person
(other than  Subsidiaries of the Borrower) in which any other Person (other than
the Borrower or any of its  Subsidiaries)  has a joint  interest,  except to the
extent of the amount of dividends or other  distributions  actually  paid to the
Borrower or any of its Subsidiaries by such Person during such period,  (ii) the
income (or loss) of any Person accrued prior to the date it becomes a Subsidiary
of the  Borrower or is merged into or  consolidated  with the Borrower or any of
its  Subsidiaries or that Person's assets are acquired by the Borrower or any of
its Subsidiaries, (iii) the income of any Subsidiary of the Borrower to the
                                       63
<PAGE>



extent that the declaration or payment of dividends or similar  distributions by
that  Subsidiary of that income is not at the time permitted by operation of the
terms of its charter or any  agreement,  instrument,  judgment,  decree,  order,
statute,  rule or governmental  regulation  applicable to that Subsidiary,  (iv)
Transaction Expenses and (v) compensation expense resulting from the issuance of
capital stock, stock options or stock  appreciation  rights issued to employees,
including officers,  of the Borrower or any Subsidiary,  or the exercise of such
options or rights, in each case to the extent the obligation (if any) associated
therewith  is not  expected to be settled by the payment of cash by the Borrower
or any Affiliate of the Borrower and  compensation  expense  resulting  from the
repurchase of any such capital stock, options and rights.

            "Consolidated   Senior   Debt"  shall  mean,   as  at  any  date  of
determination,  the aggregate stated balance sheet amount of all Indebtedness of
the Borrower and its  Subsidiaries  on a  consolidated  basis as  determined  in
accordance  with GAAP  other  than such  indebtedness  in  respect of the Senior
Subordinated Notes or any Indebtedness ranked pari passu with or subordinated to
the Senior Subordinated Notes.

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

            "Credit  Documents"  shall  mean  this  Agreement,  the  Notes,  the
Security  Documents and the  Subsidiary  Guaranty and any documents  executed in
connection therewith.

                                       64
<PAGE>



            "Credit  Event"  shall mean and  include the making of a Loan or the
issuance of a Letter of Credit.

            "Credit  Party" shall mean the Borrower and the  Subsidiary
Guarantors.

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

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

            "Designated  Affiliate" shall mean any Affiliate of Kelso other than
any  corporation  or other Person  (except for any  corporation  or other Person
engaged in a business similar, complementary or related to the nature or type of
the  business  of the  Borrower  and its  Subsidiaries)  controlled  by,  or any
investment  fund  (other  than  Kelso  Investment  Associates  V,  L.P.  or  any
investment fund that is not solely comprised of current and former professionals
of Kelso) managed by, Kelso.

            "Dividends"  shall  have the  meaning  provided  in Section 8.09.

            "Domestic  Subsidiary"  shall mean each  Subsidiary  of the Borrower
incorporated  or  organized  in the  United  States  or any  state or  territory
thereof.

            "Environmental Claims" means any and all administrative,  regulatory
or judicial actions, suits, demands,  demand letters,  claims, liens, notices of
noncompliance or violation, investigations (other than internal reports prepared
by the Borrower or any of its Subsidiaries solely in the ordinary course of such
Person's  business  and not in response to any third party  action or request of
any kind) or  proceedings  relating in any way to any  Environmental  Law or any
permit  issued,  or  any  approval  given,  under  any  such  Environmental  Law
(hereafter,  "Claims"), including, without limitation, (a) any and all Claims by
governmental  or  regulatory  authorities  for  enforcement,  cleanup,  removal,
response,  remedial  or other  actions or  damages  pursuant  to any  applicable
Environmental  Law,  and (b)  any and all  Claims  by any  third  party  seeking
damages,   contribution,   indemnification,   cost  recovery,   compensation  or
injunctive relief resulting from Hazardous Materials arising from alleged injury
or threat of injury to health, safety or the environment.

                                       65
<PAGE>


            "Environmental Law" means any applicable Federal,  state, foreign or
local statute, law, rule, regulation, ordinance, code, guide, policy and rule of
common  law now or  hereafter  in effect  and in each case as  amended,  and any
judicial or  administrative  interpretation  thereof,  including any judicial or
administrative  order, consent decree or judgment,  relating to the environment,
health, safety or Hazardous Materials,  including,  without limitation,  CERCLA;
RCRA; the Federal Water Pollution Control Act, as amended, 33 U.S.C. ss. 1251 et
seq.; the Toxic  Substances  Control Act, 15 U.S.C.  ss. 7401 et seq.; the Clean
Air Act, 42 U.S.C.  ss. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. ss.
3808 et seq.; the Oil Pollution Act of 1990, 33 U.S.C.  ss. 2701 et seq. and any
applicable state and local or foreign counterparts or equivalents.

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

            "ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with the Borrower, a Subsidiary or a Credit Party would
be deemed to be a "single employer" within the meaning of Sections 414(b),  (c),
(m) and (o) of the Code.

            "Eurodollar  Loans"  shall mean each Loan  bearing  interest  at the
rates provided in Section 1.08(b).

            "Eurodollar  Rate" shall mean with respect to each  Interest  Period
for a Eurodollar  Loan, (i) the offered  quotation to  first-class  banks in the
interbank  Eurodollar market by the Agent for dollar deposits of amounts in same
day funds comparable to the outstanding  principal amount of the Eurodollar Loan
of the Agent for which an interest rate is then being determined with maturities
comparable  to the Interest  Period to be applicable  to such  Eurodollar  Loan,
determined  as of 10:00 A.M.  (New York time) on the date which is two  Business
Days prior to the  commencement  of such  Interest  Period  divided (and rounded
upward to the next whole  multiple of 1/16 of 1%) by (ii) a percentage  equal to
100% minus the then stated maximum rate of all reserve  requirements  (including
without  limitation  any  marginal,  emergency,  supplemental,  special or other
reserves) applicable to any member bank of the Federal Reserve System in respect
of  Eurocurrency  liabilities  as  defined  in  Regulation  D (or any  successor
category of liabilities under Regulation D).

                                       66
<PAGE>



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

            "Excess Cash Flow" shall mean, for any fiscal year, the remainder of
(i) the sum of (x)  Adjusted  Cash  Flow for such  fiscal  year and  (y)(I)  the
decrease,  if any, in Working  Capital  less (II) the  decrease,  if any, in the
principal amount of Revolving Loans, in each case from the first day to the last
day of such fiscal year, plus (ii) to the extent not included in (i) above,  any
amounts  received by the Borrower and its  Subsidiaries  in settlement of, or in
payment of any judgments  resulting  from,  actions,  suits or proceedings  with
respect to the Borrower and/or its  Subsidiaries  from the first day to the last
day of such fiscal year, plus (iii) to the extent not included in (i) above, any
amounts  received by the Borrower and/or its Subsidiaries in connection with the
repayment or redemption of any long-term promissory notes and/or preferred stock
of  other  Persons  held by  them,  minus  (iv)  the sum of (w)  the  amount  of
Consolidated  Capital  Expenditures  (except to the extent financed  through the
incurrence  of  Indebtedness)  made during such fiscal year (x) the  capitalized
software  costs and  capitalized  cost for  mailing  list  rights and (y)(I) the
increase,  if any, in Working  Capital  less (II) the  increase,  if any, in the
principal amount of Revolving Loans, in each case from the first day to the last
day of such fiscal year and (z) any  repayments or  prepayments of the principal
amount of Term Loans,  except  prepayments of the principal amount of Term Loans
made pursuant to Sections 4.02(A)(c), (d), (e), (f), (g) and/or (i).

            "Existing  Indebtedness"  shall have the  meaning  provided
in Section 6.20.

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

            "Existing Mortgage Policies" shall mean the Mortgage Policies under,
and as defined in, the Original Credit Agreement.

            "Existing  Mortgages"  shall mean all the  Mortgages  under,  and as
defined in, the Original Credit Agreement.

            "Expiration Date" shall mean December 31, 1997.

            "Facility" shall mean any of the credit facilities established under
this Agreement, i.e., the Term Facility or the Revolving Facility.

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

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

                                       67
<PAGE>



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

            "Final Maturity Date" shall mean February 1, 2002.

            "GAAP" shall mean generally  accepted  accounting  principles in the
United  States of America as in effect on the date of this  Agreement;  it being
understood and agreed that  determinations  in accordance with GAAP for purposes
of Section 8,  including  defined  terms as used  therein,  are  subject (to the
extent provided therein) to Section 12.07(a).

            "Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive  materials,  asbestos in any form that is or could  become  friable,
urea  formaldehyde  foam  insulation,   transformers  or  other  equipment  that
contained,  electric fluid containing levels of polychlorinated  biphenyls,  and
radon gas; (b) any chemicals,  materials or substances defined as or included in
the  definition  of  "hazardous  substances",   "hazardous  waste",   "hazardous
materials",  "extremely hazardous waste",  "restricted  hazardous waste", "toxic
substances",  "toxic pollutants",  "contaminants",  or "pollutants", or words of
similar  import,  under  any  applicable  Environmental  Law;  and (c) any other
chemical,  material or substance,  exposure to which is  prohibited,  limited or
regulated by any governmental authority.

            "HCA  Holdings"  shall mean HCA Holdings,  Inc., a Delaware
corporation.

            "HCE"  shall  mean  Hosiery  Corporation   Enterprises,   a
Delaware corporation.

            "Indebtedness" of any Person shall mean,  without  duplication,  (i)
all indebtedness of such Person for borrowed money,  (ii) the deferred  purchase
price of assets or services which in accordance  with GAAP would be shown on the
liability side of the balance sheet of such Person, (iii) the face amount of all
letters  of  credit  issued  for  the  account  of  such  Person  and,   without
duplication,  all drafts drawn  thereunder,  (iv) all  Indebtedness  of a second
Person secured by any Lien on any property  owned by such first Person,  whether
or not such indebtedness has been assumed, (v) all Capitalized Lease Obligations
of such Person,  (vi) all obligations of such Person to pay a specified purchase
price  for  goods or  services  whether  or not  delivered  or  accepted,  i.e.,
take-or-pay  and similar  obligations,  (vii) all net obligations of such Person
under Interest Rate  Agreements  and (viii) all  Contingent  Obligations of such
Person,  (other than  Contingent  Obligations  arising from the guaranty by such
Person of the obligations of the Borrower and/or its  Subsidiaries to the extent
such  guaranteed  obligations do not constitute  Indebtedness  and are otherwise
permitted  hereunder),  provided  that  Indebtedness  shall  not  include  trade
payables and accrued  expenses,  in each case arising in the ordinary  course of
business.

                                       68
<PAGE>


            "Interest  Period"  with respect to any Loan shall mean the interest
period applicable thereto, as determined pursuant to Section 1.09.

            "Interest  Rate  Agreement"   shall  mean  any  interest  rate  swap
agreement,  any interest rate cap agreement,  any interest rate collar agreement
or other similar  agreement or  arrangement  designed to protect the Borrower or
any Subsidiary against fluctuations in interest rates.

            "Kelso"  shall  mean  Kelso &  Company,  L.P.,  a  Delaware  limited
partnership doing business as Kelso & Company, Inc.

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

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

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

            "Letter of Credit  Issuer"  shall mean BTCo or any Bank which at the
request of the Borrower and with the consent of the Agent agrees, in such Bank's
sole  discretion,  to become a Letter of Credit  Issuer for  purposes of issuing
Letters of Credit pursuant to Section 2.

            "Letter of Credit Outstandings" shall mean, at any time, the sum of,
without duplication,  (i) the aggregate Stated Amount of all outstanding Letters
of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all
Letters of Credit.

            "Letter  of  Credit   Request"   shall  have  the   meaning
provided in Section 2.03(a).

            "Leverage Ratio" shall mean, at any date of determination, the ratio
of  Consolidated  Senior Debt on such date to  Consolidated  EBITDA for the Test
Period most recently ended (taken as one  accounting  period) and ending on such
date.

            "Lien"  shall  mean  any  mortgage,   pledge,   security   interest,
encumbrance,  lien or charge of any kind (including any agreement to give any of
the foregoing,  any conditional  sale or other title retention  agreement or any
lease in the nature thereof).

                                       69
<PAGE>

            "Loan" shall have the meaning provided in Section 1.01.

            "Management  Investor" means the executive  officers of the Borrower
(i) on the  Restatement  Effective  Date and any  persons  who become  executive
officers of the Borrower at a time when Kelso and its  Affiliates  "beneficially
own" (as  defined in clause (a) of the  definition  of  ("Change  of  Control"),
directly  or  indirectly,  more  than a  majority  of the  capital  stock of the
Borrower and (ii) who own capital stock of the Borrower.

            "Mandatory  Borrowing"  shall have the meaning  provided in
Section 1.01(d).

            "Margin  Reduction  Discount"  shall  mean zero,  provided  that the
Margin Reduction Discount shall be increased to [1/4 of 1% or 1/2 of 1%], as the
case may be, as specified in clauses (i) or (ii) below,  at any time on or after
the Restatement Effective Date, when, and for so long as, the ratio set forth in
such clause has been satisfied as at the end of the then Relevant Test Periods:

            (i) the Margin  Reduction  Discount  shall be 1/4 of 1% in the event
      that as at the end of the  Relevant  Test  Period  the  Leverage  Ratio is
      greater than 1.25 to 1 but less than or equal to 1.75 to 1; or

           (ii) the Margin  Reduction  Discount  shall be 1/2 of 1% in the event
      that as at the end of the Relevant Test Period the Leverage  Ratio is less
      than or equal to 1.25 to 1.

The MRD Ratios shall be determined for the Relevant Test Period,  by delivery of
an  officer's  certificate  of the  Borrower  to the Banks  pursuant  to Section
7.01(e),  which  certificate  shall set forth the calculation of the MRD Ratios.
The Margin  Reduction  Discount so determined  shall apply,  except as set forth
below,  from  five  Business  Days  after  the  date  on  which  such  officer's
certificate  is  delivered  to the Agent to the earlier of (x) the date on which
the next  certificate is delivered to the Agent pursuant to Section  7.01(e) and
(y) the 45th day  following  the end of the  fiscal  quarter in which such first
certificate was delivered to the Agent. Notwithstanding anything to the contrary
contained above, the Margin Reduction Discount shall be zero (x) if no officer's
certificate  has been delivered to the Banks  pursuant to Section  7.01(e) which
sets  forth  the MRD  Ratios  for the  Relevant  Test  Period  or the  financial
statements upon which any such  calculations  are based have not been delivered,
until such a certificate  and/or  financial  statements are delivered and (y) at
all times when there  shall  exist a  violation  of Section  9.01 or an Event of
Default.  It is  understood  and agreed  that the Margin  Reduction  Discount as
provided  above shall in no event be  cumulative  and only the Margin  Reduction
Discount  available  pursuant to either clause (i) or (ii), if any, contained in
this definition shall be applicable.

                                       70
<PAGE>



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

            "Material  Adverse  Effect" shall mean a material  adverse effect on
the business, property, assets, liabilities, operations, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole.

            "Material Subsidiary" shall mean, at any time, any Subsidiary of the
Borrower  that  (x)  has  assets  at  such  time  comprising  5% or  more of the
consolidated  assets of the Borrower and its  Subsidiaries or (y) had net income
in the most recently ended fiscal year of the Borrower  comprising 5% or more of
the consolidated net income of the Borrower and its Subsidiaries for such fiscal
year.

            "Maximum Swingline Amount" shall mean $5,000,000.

            "Minimum  Borrowing  Amount"  shall  mean  (i) for  Term  Loans  and
Revolving Loans maintained as Base Rate Loans,  $1,000,000,  (ii) for Term Loans
and Revolving  Loans  maintained as Eurodollar  Loans,  $5,000,000 and (iii) for
Swingline Loans, $100,000.

            "Mortgage  Amendments"  shall have the meaning  provided in
Section 5.01(g)(III).

            "Mortgaged  Properties" shall mean all Real Property of the Borrower
subject to the Existing Mortgages.

            "Mortgages"  shall  have the  meaning  provided  in Section
5.01(g)(III).

            "MRD  Ratio"  shall  mean at any time the  ratio  that is  correctly
specified  in the then  latest  officer's  certificate  delivered  to the  Banks
pursuant to Section  7.01(e) as the  Leverage  Ratio,  as at the end of the Test
Period  ended as of the last day of the fiscal  quarter or year with  respect to
which such officer's certificate has been delivered.

            "Murphy" shall mean Mr. Joseph A. Murphy.

            "Net Cash Proceeds"  shall mean, with respect to any Asset Sale, the
Cash Proceeds resulting  therefrom net of expenses of sale (including payment of
principal,  premium  and  interest  of  Indebtedness  secured  by the assets the
subject of the Asset Sale and  required  to be, and which is,  repaid  under the
terms  thereof as a result of such Asset Sale),  and  incremental  taxes paid or
payable as a result thereof.

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

                                       71
<PAGE>


            "Note" shall have the meaning provided in Section 1.05.

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

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

            "Notice  Office"  shall mean the office of the Agent at 130  Liberty
Street,  New York,  New York or such other office as the Agent may  designate to
the Borrower from time to time.

            "Obligations" shall mean all amounts, direct or indirect, contingent
or absolute,  of every type or description,  and at any time existing,  owing to
the  Agent,  the  Collateral  Agent or any Bank  pursuant  to the  terms of this
Agreement or any other Credit Document.

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

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

            "Payment  Office"  shall mean the office of the Agent at 130 Liberty
Street,  New York,  New York or such other office as the Agent may  designate to
the Borrower from time to time.

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

            "Permitted  Acquisition"  shall mean any  acquisition of property or
assets  of a  nature  or type or  which  will  be  used in a  business  similar,
complementary or related to the nature or type of the property and assets of, or
the business of, the Borrower and its Subsidiaries  existing on the date of such
investment  (as  determined  in good  faith  by the  Board of  Directors  of the
Borrower).

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

            "Permitted  Holders"  means Kelso,  the Designated  Affiliates,  the
Management  Investors,  Murphy, any employee stock ownership plan established by
the Borrower for the benefit of the employees of the Borrower or any  Subsidiary
and their Permitted Transferees.

                                       72
<PAGE>


            "Permitted  Investment" shall mean any investment in a Person having
property  and assets of a nature or type,  or engaged  in a  business,  similar,
complementary or related to the nature or type of the property and assets of, or
the business of, the Borrower and its Subsidiaries  existing on the date of such
investment  (as  determined  in good  faith  by the  Board of  Directors  of the
Borrower),  if as result of such investment (i) such Person becomes a Subsidiary
of the  Borrower  in which  case  such  Subsidiary  shall  become  a  Subsidiary
Guarantor and shall deliver and become party to all Security  Documents pursuant
to the  requirements set forth in Section 7.11(b) or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys  substantially
all of its  assets to, or is  liquidated  into,  the  Borrower  or a  Subsidiary
Guarantor.

            "Permitted  Joint  Venture"  shall  mean any  Person  (other  than a
Subsidiary) in which the Borrower or any Subsidiary  Guarantor  shall invest for
the  purpose of engaging in the direct  marketing  of products  other than those
currently offered by the Borrower and its Subsidiaries.

            "Permitted  Liens" shall mean Liens  described in clauses (a),  (b),
(d), (f), (h), (j) and (l) of Section 8.03.

            "Permitted  Transferees"  means  (i) in the case of  Kelso,  (A) any
Designated  Affiliate,  (B) any  managing  director,  general  partner,  limited
partner,  director,  officer or  employee of Kelso or any  Designated  Affiliate
(collectively,  "Kelso Associates"),  (C) the heirs, executors,  administrators,
testamentary trustees,  legatees or beneficiaries of any Kelso Associate and (D)
any trust,  the  beneficiaries  of which, or a corporation or  partnership,  the
stockholders or partners of which,  include only a Kelso  Associate,  his or her
spouse,  parents,  siblings,  direct lineal descendants or adopted children, and
(ii) in the case of any  Management  Investors  and  Murphy,  (A) his  executor,
administrator,  testamentary trustee,  legatee or beneficiaries,  (B) his or her
spouse, parents,  siblings, direct lineal descendants or adopted children or (C)
a trust,  the  beneficiaries  of which,  or a corporation  or  partnership,  the
stockholders  or  partners of which,  include  only the  Management  Investor or
Murphy,  as the case may be, and his or her spouse,  parents,  siblings,  direct
lineal descendants and/or adopted children.

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

                                       73
<PAGE>


            "PIK  Preferred   Stock"  shall  mean  the  Borrower's   pay-in-kind
preferred stock issued  pursuant to the  Certificate of the Designation  Powers,
Preferences and Rights of Pay-In-Kind Preferred
Stock, dated October 17, 1994.

            "Plan"  shall mean any  multi-employer  or  single-employer  plan as
defined in Section 4001 of ERISA,  which is maintained or  contributed to by (or
to which there is an obligation to contribute of) the Borrower,  a Subsidiary or
an ERISA  Affiliate,  and each such plan for the five  year  period  immediately
following  the latest  date on which the  Borrower,  a  Subsidiary,  or an ERISA
Affiliate maintained,  contributed to or had an obligation to contribute to such
plan.

            "Pledge  Agreements"  shall have the  meaning  provided  in
Section 5.01(g)(I).

            "Pledged  Securities"  shall  mean  all the  Pledged  Securities  as
defined in the relevant Pledge Agreement.

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

            "Quarter End Date" shall mean December 31 of each year and (i) March
28, June 27 and September 26 in 1998; (ii) March 27, June 26 and September 25 in
1999; (iii) April 1, July 1 and September 30 in 2000; and (iv) March 31, June 30
and September 29 in 2001.

            "RCRA"  shall mean the Resource  Conservation  and Recovery
Act, as amended, 42 U.S.C. ss. 6901 et seq.

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

            "RC Banks" shall mean each Bank with Revolving Commitment.

            "Register"  shall  have the  meaning  provided  in  Section 12.16.

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

                                       74
<PAGE>



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

            "Reinvestment  Assets"  shall mean any assets to be  employed in the
business of the Borrower  and its  Subsidiaries  as  described in Section  8.01,
provided all such assets may be acquired  pursuant to Section 4.10 of the Senior
Subordinated Note Indenture so long as such Section is in effect.

            "Reinvestment  Election"  shall have the  meaning  provided
in Section 4.02(A)(c).

            "Reinvestment  Notice"  shall  mean a  written  notice  signed by an
Authorized  Officer of the Borrower  stating that the  Borrower,  in good faith,
intends and expects to use all or a specified  portion of the Net Cash  Proceeds
of an Asset  Sale to  purchase,  construct  or  otherwise  acquire  Reinvestment
Assets.

            "Reinvestment  Prepayment  Amount"  shall mean,  with respect to any
Reinvestment Election,  the amount, if any, on the Reinvestment  Prepayment Date
relating thereto by which (a) the Anticipated  Reinvestment Amount in respect of
such Reinvestment  Election exceeds (b) the aggregate amount thereof expended by
the Borrower and its Subsidiaries to acquire Reinvestment Assets.

            "Reinvestment  Prepayment  Date"  shall  mean,  with  respect to any
Reinvestment  Election,  the  earliest of (i) the date,  if any,  upon which the
Agent,  on  behalf  of the  Required  Banks,  shall  have  delivered  a  written
termination notice to the Borrower,  provided that such notice may only be given
while an Event of Default  exists,  (ii) the date  occurring one year after such
Reinvestment  Election  and  (iii)  the date on which the  Borrower  shall  have
determined not to, or shall have otherwise ceased to, proceed with the purchase,
construction  or other  acquisition  of  Reinvestment  Assets  with the  related
Anticipated Reinvestment Amount.

            "Relevant  Test  Period"  shall mean,  at any time,  the Test Period
ending on the last day of the then most  recently  ended  fiscal  quarter of the
Borrower with respect to which an officer's  certificate  has been  delivered to
the Banks pursuant to Section 7.01(e).

            "Reportable  Event" shall mean an event described in Section 4043(b)
of ERISA with respect to a Plan as to which the 30-day  notice  requirement  has
not been waived by the PBGC.

            "Required Banks" shall mean  Non-Defaulting  Banks whose outstanding
Term  Loans  and  Revolving  Commitments  (or,  if  after  the  Total  Revolving
Commitment has been  terminated,  Revolving Loans and Adjusted RC Percentages of
Letter of Credit Outstandings) constitute greater than 50% of the sum of (i) the
total outstanding Term Loans of Non-Defaulting Banks and (ii) the Adjusted Total
Revolving  Commitment  (or,  if after the Total  Revolving  Commitment  has been
terminated,  the  aggregate  outstanding  Revolving  Loans and  Letter of Credit
Outstandings).

                                       75
<PAGE>



            "Restatement   Effective   Date"  shall  have  the  meaning
provided in Section 5.01.

            "Revolving  Commitment"  shall mean,  with respect to each Bank, the
amount set forth opposite such Bank's name in Annex I hereto  directly below the
column entitled "Revolving Commitment",  as the same may be reduced from time to
time pursuant to Section  3.02,  3.03 and/or 9 or (y) adjusted from time to time
as a result of assignments to or from such Bank pursuant to Section 12.04.

            "Revolving  Facility" shall mean the Facility  evidenced by
the Total Revolving Commitment.

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

            "Revolving  Percentage"  shall mean at any time for each Bank with a
Revolving Commitment,  the percentage obtained by dividing such Bank's Revolving
Commitment  by the  Total  Revolving  Commitment,  provided  that  if the  Total
Revolving Commitment has been terminated,  the Revolving Percentage of each Bank
shall be  determined by dividing such Bank's  Revolving  Commitment  immediately
prior to such termination by the Total Revolving Commitment immediately prior to
such termination.

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

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

            "SEC Regulation D" shall mean Regulation D as promulgated  under the
Securities  Act of 1933,  as amended,  as the same may be in effect from time to
time.

            "Security  Agreement  Collateral"  shall  mean all  "Collateral"  as
defined in the relevant Security Agreement.

            "Security  Agreement"  shall have the  meaning  provided in
Section 5.01(g)(II).

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

            "Senior  Subordinated Note Documents" shall mean and include each of
the documents,  instruments  (including the Senior Subordinated Notes) and other
agreements  entered into by the Borrower  (including,  without  limitation,  the
Senior  Subordinated Note Indenture) relating to the issuance by the Borrower of
the Senior  Subordinated  Notes, as in effect on the Restatement  Effective Date
and as the same may be  supplemented,  amended or modified  from time to time in
accordance with the terms hereof and thereof.

                                       76
<PAGE>


            "Senior  Subordinated  Note  Indenture"  shall  mean  the  Indenture
entered into by and between the Borrower and United  States Trust Company of New
York, as trustee thereunder, with respect to the Senior Subordinated Notes as in
effect  on the  Restatement  Effective  Date and as the  same  may be  modified,
amended or  supplemented  from time to time in accordance  with the terms hereof
and thereof.

            "Senior Subordinated Notes" shall mean the Senior Subordinated Notes
due 2002 issued by the Borrower under the Senior Subordinated Note Indenture, as
in effect on the Restatement Effective Date and as the same may be supplemented,
amended or modified from time to time in  accordance  with the terms thereof and
hereof.

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

            "Stated  Amount" of each  Letter of Credit  shall  mean the  maximum
available  to be drawn  thereunder  (regardless  of whether any  conditions  for
drawing could then be met).

            "Stonebury"  shall mean The Stonebury  Group  Incorporated,
a Nevada corporation.

            "Subsidiary"   of  any  Person   shall  mean  and  include  (i)  any
corporation  more than 50% of whose stock of any class or classes  having by the
terms thereof ordinary voting power to elect a majority of the directors of such
corporation  (irrespective  of  whether or not at the time stock of any class or
classes of such  corporation  shall have or might have voting power by reason of
the happening of any  contingency)  is at the time owned by such Person directly
or indirectly through Subsidiaries and (ii) any partnership,  association, joint
venture or other  entity in which such  Person  directly or  indirectly  through
Subsidiaries,  has more than a 50% equity interest at the time. Unless otherwise
expressly  provided,   all  references  herein  to  "Subsidiary"  shall  mean  a
Subsidiary of the Borrower.

            "Subsidiary  Guarantors" shall mean each Domestic  Subsidiary of the
Borrower on the Restatement Effective Date other than HCE.

            "Subsidiary  Guaranty"  shall have the meaning  provided in
Section 5.01(f).

            "Swingline  Expiry Date" shall mean the date which is five  Business
Days prior to the Final Maturity Date.

            "Swingline   Loan"  shall  have  the  meaning  provided  in
Section 1.01(c).

                                       77
<PAGE>


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

            "Term Commitment" shall mean, with respect to each Bank, the amount,
if any, set forth opposite such Bank's name on Annex I hereto directly below the
column  entitled  "Term  Commitment"  as the same may be terminated  pursuant to
Section 3.03.

            "Term  Facility"  shall mean the Facility  evidenced by the
Total Term Commitment.

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

            "Test Period" shall mean for any  determination the four consecutive
fiscal  quarters  of the  Borrower  then last  ended  (taken  as one  accounting
period).

            "TF Bank"  shall  mean at any time each Bank with a Term  Commitment
(or if the Total Term Commitment has been terminated, outstanding Term Loans) at
such time.

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

            "Total  Commitment"  shall mean the sum of the Total Term Commitment
and the Total Revolving Commitment.

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

            "Total Unutilized Revolving Commitment" shall mean, at any time, (i)
the Total  Revolving  Commitment at such time less (ii) the sum of the aggregate
principal  amount of all Revolving  Loans and Swingline  Loans at such time plus
the Letter of Credit Outstandings at such time.

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

            "Transaction  Expenses"  shall mean (i)  "Transaction  Expenses"  as
defined in the Original Credit Agreement and (ii) all fees and expenses incurred
in connection with, and payable prior to or substantially  concurrently with the
closing of, the  refinancing  of the Loans under and as defined in the  Original
Credit Agreement,  and including all fees paid to any of the Banks and the Agent
hereunder,  all fees paid to Kelso & Company,  Inc.  or its  Affiliates  and all
attorney's fees,  accountants' fees and consultant fees, paid in connection with
the  transactions  contemplated  by this Agreement.  Transaction  Expenses shall
include the  amortization of any such fees and expenses that are capitalized and
not classified as an expense on the date incurred.

                                       78
<PAGE>


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

            "UCC" shall mean the Uniform Commercial Code.

            "Unfunded  Current  Liability" of any Plan shall mean the amount, if
any, by which the actuarial present value of the accumulated plan benefits under
the Plan as of the close of its most recent plan year  determined  in accordance
with  Statement  of  Financial  Accounting  Standards  No.  35,  based  upon the
actuarial  assumptions  used by the  Plan's  actuary in the most  recent  annual
valuation  of the Plan,  exceeds  the fair market  value of the assets  thereof,
determined in accordance with Section 412 of the Code.

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

            "Unutilized  Revolving  Commitment"  for any Bank  with a  Revolving
Commitment at any time shall mean the excess of (i) the Revolving  Commitment of
such Bank over (ii) the sum of (x) the aggregate outstanding principal amount of
Revolving  Loans  made by such  Bank  plus (y) an  amount  equal to such  Bank's
Revolving Percentage of the Letter of Credit Outstandings at such time.

            "U.S.  Textile"  shall  mean U.S.  Textile  Corp.,  a North
Carolina corporation.

            "Voting  Stock"  shall mean,  with respect to any  corporation,  the
outstanding stock of all classes (or equivalent interests) which ordinarily,  in
the absence of contingencies,  entitles holders thereof to vote for the election
of directors (or Persons performing similar functions) of such corporation, even
though  the  right so to vote  has been  suspended  by the  happening  of such a
contingency.

            "Wholly-Owned Subsidiary" of any Person shall mean any Subsidiary of
such Person to the extent all of the capital stock or other ownership  interests
in such Subsidiary,  other than directors'  qualifying shares, is owned directly
or indirectly by such Person.

            "Working  Capital"  shall mean the  excess of  Consolidated
Current Assets over Consolidated Current Liabilities.

            "Written"   or  "in   writing"   shall  mean  any  form  of  written
communication  or a  communication  by means of telex,  facsimile  transmission,
telegraph or cable.

                                       79
<PAGE>


            SECTION 11.  The Agent.

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

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

            11.03 Lack of  Reliance  on the  Agent.  Independently  and  without
reliance upon the Agent, each Bank and the holder of each Note, to the extent it
deems  appropriate,  has made and shall continue to make (i) its own independent
investigation  of the  financial  condition  and affairs of the Borrower and its
Subsidiaries  in connection with the making and the continuance of the Loans and
the taking or not taking of any action in  connection  herewith and (ii) its own
appraisal of the  creditworthiness  of the Borrower  and its  Subsidiaries  and,
except as  expressly  provided in this  Agreement,  the Agent shall not have any
duty or  responsibility,  either initially or on a continuing  basis, to provide
any Bank or the  holder of any Note with any  credit or other  information  with
respect  thereto,  whether coming into its  possession  before the making of the
Loans or at any time or times thereafter.  The Agent shall not be responsible to
any Bank or the holder of any Note for any  recitals,  statements,  information,
representations  or warranties  herein or in any document,  certificate or other
writing delivered in connection herewith or for
                                       80
<PAGE>



the execution, effectiveness, genuineness, validity, enforceability, perfection,
collectibility,  priority or  sufficiency  of this Agreement or any other Credit
Document or the financial  condition of the Borrower and its  Subsidiaries or be
required to make any inquiry  concerning either the performance or observance of
any of the terms, provisions or conditions of this Agreement or any other Credit
Document, or the financial condition of the Borrower and its Subsidiaries or the
existence or possible existence of any Default or Event of Default.

            11.04  Certain  Rights  of the  Agent.  If the Agent  shall  request
instructions  from  the  Required  Banks  with  respect  to any  act  or  action
(including failure to act) in connection with this Agreement or any other Credit
Document,  the Agent shall be  entitled to refrain  from such act or taking such
action  unless and until the Agent  shall have  received  instructions  from the
Required Banks;  and the Agent shall not incur liability to any Person by reason
of so  refraining.  Without  limiting  the  foregoing,  neither any Bank nor the
holder of any Note shall have any right of action  whatsoever  against the Agent
as a result of the Agent acting or refraining from acting hereunder or under any
other Credit Document in accordance with the instructions of the Required Banks.

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

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

                                       81
<PAGE>


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

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

            11.09  Resignation  by the Agent.  (a) The Agent may resign from the
performance  of all its  functions and duties  hereunder  and/or under the other
Credit Documents at any time by giving 15 Business Days' prior written notice to
the  Borrower  and the  Banks.  Such  resignation  shall  take  effect  upon the
appointment  of a  successor  Agent  pursuant to clauses (b) and (c) below or as
otherwise provided below.

      (b) Upon any such  notice  of  resignation,  the  Banks  shall  appoint  a
successor  Agent hereunder or thereunder who shall be a commercial bank or trust
company reasonably acceptable to the Borrower.

            (c) If a  successor  Agent shall not have been so  appointed  within
such 15 Business Day period, the Agent, with the consent of the Borrower,  shall
then appoint a successor  Agent who shall serve as Agent hereunder or thereunder
until such time,  if any,  as the Banks  appoint a  successor  Agent as provided
above.

            (d) If no successor Agent has been appointed  pursuant to clause (b)
or (c) above by the 20th Business Day after the date such notice of  resignation
was given by the Agent, the Agent's  resignation  shall become effective and the
Required Banks shall  thereafter  perform all the duties of the Agent  hereunder
and/or under any other  Credit  Document  until such time,  if any, as the Banks
appoint a successor Agent as provided above.

                                       82
<PAGE>



            SECTION 12.  Miscellaneous.

            12.01 Payment of Expenses,  etc. The Borrower agrees to: (i) whether
or not the transactions herein contemplated are consummated,  pay all reasonable
out-of-pocket   costs  and  expenses  of  the  Agent  in  connection   with  the
negotiation, preparation, execution and delivery of the Credit Documents and the
documents  and  instruments  referred  to therein and any  amendment,  waiver or
consent relating thereto (including, without limitation, the reasonable fees and
disbursements  of  White & Case)  and of the  Agent  and  each of the  Banks  in
connection  with the  enforcement of the Credit  Documents and the documents and
instruments referred to therein (including,  without limitation,  the reasonable
fees and disbursements of counsel for the Agent and for each of the Banks); (ii)
pay and hold each of the Banks harmless from and against any and all present and
future stamp and other similar  taxes with respect to the foregoing  matters and
save each of the Banks  harmless from and against any and all  liabilities  with
respect to or  resulting  from any delay or  omission  (other than to the extent
attributable  to such Bank) to pay such  taxes;  and (iii)  indemnify  each Bank
(including in its capacity as the Agent, Co-Agent or a Letter of Credit Issuer),
its officers,  directors,  employees,  representatives  and agents from and hold
each of them harmless against any and all losses,  liabilities,  claims, damages
or expenses incurred by any of them as a result of, or arising out of, or in any
way  related  to, or by reason of, (a) any  investigation,  litigation  or other
proceeding  (whether  or not the  Agent,  any  Co-Agent  or any  Bank is a party
thereto  and  whether  or  not  any  such  investigation,  litigation  or  other
proceeding  is between or among the Agent,  any Co-Agent,  any Bank,  any Credit
Party or any third  Person or  otherwise)  related to the  entering  into and/or
performance of any Document or the use of the proceeds of any Loans hereunder or
the  consummation of any transactions  contemplated in any Credit Document,  and
(b) any such  investigation,  litigation  or other  proceeding  relating  to the
violation of,  noncompliance  with or liability  under,  any  Environmental  Law
applicable to the  operations of the Borrower,  any of its  Subsidiaries  or any
Real Property  owned or operated by them,  or the actual or alleged  presence or
release of Hazardous  Materials  on, under or from any Real Property at any time
owned or  operated  by  Holdings  or any of its  Subsidiaries,  and in each case
including,  without limitation, the reasonable fees and disbursements of counsel
incurred  in  connection  with  any  such  investigation,  litigation  or  other
proceeding  (but  excluding  any such losses,  liabilities,  claims,  damages or
expenses  to the extent  incurred by reason of the gross  negligence  or willful
misconduct of the Person to be indemnified).

            12.02 Right of Setoff.  In  addition to any rights now or  hereafter
granted under  applicable law or otherwise,  and not by way of limitation of any
such rights, if an Event of Default then exists,  each Bank is hereby authorized
at any time or from time to time, without presentment,  demand, protest or other
notice of any kind to any Credit Party or to any other  Person,  any such notice
being hereby expressly  waived,  to set off and to appropriate and apply any and
all deposits (general or special) and any other Indebtedness at any time held or
owing by such Bank (including,  without limitation,  by branches and agencies of
such Bank  wherever  located)  to or for the credit or the account of any Credit
Party against and on account of the
                                       83
<PAGE>


Obligations  and  liabilities  of such  Credit  Party to such  Bank  under  this
Agreement  or  under  any of the  other  Credit  Documents,  including,  without
limitation,  all interests in Obligations of such Credit Party purchased by such
Bank  pursuant  to  Section  12.06(b),  and all other  claims  of any  nature or
description  arising out of or connected with this Agreement or any other Credit
Document,  irrespective  of  whether or not such Bank shall have made any demand
hereunder and although said Obligations,  liabilities or claims, or any of them,
shall be contingent or unmatured.

            12.03 Notices.  Except as otherwise  expressly  provided herein, all
notices and other  communications  provided  for  hereunder  shall be in writing
(including  telegraphic,  telex,  telecopier or cable communication) and mailed,
telegraphed,  telexed, telecopied, cabled or delivered, if to a Credit Party, at
the address  specified  opposite its  signature  below or in the other  relevant
Credit  Documents,  as the case may be; if to any Bank, at its address specified
for  such  Bank on  Annex II  hereto;  or,  at such  other  address  as shall be
designated  by any party in a written  notice to the other parties  hereto.  All
such  notices  and  communications  shall  be  mailed,   telegraphed,   telexed,
telecopied,  or cabled or sent by overnight courier, and shall be effective when
received.

            12.04 Benefit of Agreement. (a) This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective  successors and
assigns of the parties  hereto,  provided  that the  Borrower  may not assign or
transfer any of its rights or  obligations  hereunder  without the prior written
consent of the Banks.  Each Bank may at any time grant  participations in any of
its rights hereunder or under any of the Notes to another financial institution,
provided that in the case of any such  participation,  the participant shall not
have any rights under this  Agreement or any of the other Credit  Documents (the
participant's  rights against such Bank in respect of such  participation  to be
those  set  forth  in the  agreement  executed  by  such  Bank in  favor  of the
participant  relating thereto) and all amounts payable by the Borrower hereunder
shall be determined as if such Bank had not sold such participation, except that
the  participant  shall be entitled to the benefits of Sections 1.10 and 4.04 of
this  Agreement to the extent that such Bank would be entitled to such  benefits
if the  participation  had not been entered into or sold, and,  provided further
that no Bank shall transfer,  grant or assign any participation  under which the
participant  shall have  rights to approve  any  amendment  to or waiver of this
Agreement or any other Credit  Document  except to the extent such  amendment or
waiver  would (i) extend the final  scheduled  maturity of any Loan or Letter of
Credit  (unless such Letter of Credit is not extended  beyond the Final Maturity
Date) in which such participant is  participating  (it being understood that any
waiver of the  application of any prepayment or the method of any application of
any  prepayment to, the  amortization  of the Term Loans shall not constitute an
extension of the final maturity  date), or reduce the rate or extend the time of
payment of interest or Fees thereon  (except in connection  with a waiver of the
applicability  of any post-default  increase in interest  rates),  or reduce the
principal amount thereof, or increase such participant's  participating interest
in any Commitment over the amount thereof then in
                                       84
<PAGE>


effect (it being  understood that a waiver of any Default or Event of Default or
of a mandatory  reduction in the Total  Commitment,  or a mandatory  prepayment,
shall not constitute a change in the terms of any Commitment),  (ii) release any
Subsidiary  Guarantor from its obligations under the Subsidiary  Guaranty except
in accordance with the terms thereof,  (iii) release all or substantially all of
the Collateral or (iv) consent to the assignment or transfer by any Credit Party
of any of its rights and  obligations  under this  Agreement or any other Credit
Document.

            (b) Notwithstanding the foregoing,  (x) any Bank may assign all or a
portion of its outstanding Term Loans and/or Revolving Commitment and its rights
and obligations hereunder to another Bank, and (y) with the consent of the Agent
(which consent shall not be unreasonably withheld), any Bank may assign all or a
portion of its outstanding Term Loans and/or Revolving Commitment and its rights
and  obligations  hereunder to one or more  commercial  banks or other financial
institutions  (including  one or more  Banks).  No  assignment  pursuant  to the
immediately preceding sentence shall to the extent such assignment represents an
assignment to an institution  other than one or more Banks  hereunder,  be in an
aggregate  amount  less than  $5,000,000  unless  the entire  Commitment  of the
assigning Bank is so assigned.  If any Bank so sells or assigns all or a part of
its rights  hereunder or under the Notes, any reference in this Agreement or the
Notes to such  assigning  Bank  shall  thereafter  refer to such Bank and to the
respective  assignee  to the  extent  of  their  respective  interests  and  the
respective  assignee  shall  have,  to the  extent  of such  assignment  (unless
otherwise provided therein), the same rights and benefits as it would if it were
such assigning Bank. Each assignment  pursuant to this Section 12.04(b) shall be
effected by the  assigning  Bank and the assignee  Bank  executing an Assignment
Agreement substantially in the form of Exhibit L (appropriately  completed).  At
the time of any such  assignment,  (i) either the assigning or the assignee Bank
shall pay to the Agent a  nonrefundable  assignment fee of $3,500,  (ii) Annex I
shall be deemed to be  amended  to  reflect  the  Commitment  of the  respective
assignee  (which shall result in a direct  reduction  to the  Commitment  of the
assigning  Bank)  and of the other  Banks,  and (iii)  upon the  request  of the
assignee and/or  assigning Bank, the Borrower will issue Notes to the respective
assignee  and/or to the assigning Bank in conformity  with the  requirements  of
Section  1.05.  Each  Bank and the  Borrower  agree to  execute  such  documents
(including without limitation  amendments to this Agreement and the other Credit
Documents) as shall be necessary to effect the foregoing. Nothing in this clause
(b) shall  prevent or prohibit  any Bank from  pledging  its Notes or Loans to a
Federal  Reserve  Bank in  support  of  borrowings  made by such  Bank from such
Federal Reserve Bank.

              (c) Notwithstanding any other provisions of this Section 12.04, no
transfer or assignment of the interests or  obligations of any Bank hereunder or
any  grant  of  participation  therein  shall  be  permitted  if such  transfer,
assignment or grant would require the Borrower to file a registration  statement
with the SEC or to qualify the Loans under the "Blue Sky" laws of any State.

                                       85
<PAGE>


            (d) Each Bank initially party to this Agreement  hereby  represents,
and each Person that became a Bank pursuant to an  assignment  permitted by this
Section 12 will, upon its becoming party to this Agreement, represent that it is
a commercial lender, other financial  institution or other "accredited" investor
(as defined in SEC Regulation D) which makes loans in the ordinary course of its
business  and that it will  make or  acquire  Loans for its own  account  in the
ordinary course of such business, provided that subject to the preceding clauses
(a) and (b), the  disposition of any promissory  notes or other  evidences of or
interests  in  Indebtedness  held by such Bank  shall at all times be within its
exclusive control.

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

            12.06  Payments Pro Rata.  (a) The Agent agrees that promptly  after
its receipt of each  payment from or on behalf of any Credit Party in respect of
any Obligations of such Credit Party hereunder, it shall distribute such payment
to the Banks (other than any Bank that has expressly waived its right to receive
its pro rata share thereof) pro rata based upon their respective shares, if any,
of the Obligations with respect to which such payment was received.

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

                                       86
<PAGE>



            (c)  Notwithstanding  anything to the contrary contained herein, the
provisions  of the preceding  Sections  12.06(a) and (b) shall be subject to the
express  provisions  of this  Agreement  which  require,  or  permit,  differing
payments to be made to Non-Defaulting Banks as opposed to Defaulting Banks.

            12.07 Calculations; Computations. (a) The financial statements to be
furnished to the Banks pursuant  hereto shall be made and prepared in accordance
with GAAP  consistently  applied  throughout the periods involved (except as set
forth in the notes thereto or as otherwise  disclosed in writing by the Borrower
to the  Banks),  provided  that (x) except as  otherwise  specifically  provided
herein,  all  computations  determining  compliance  with  Section 8,  including
definitions used therein,  shall utilize  accounting  principles and policies in
effect at the time of the  preparation  of, and in conformity with those used to
prepare,  the December 31, 1996 historical  financial statements of the Borrower
delivered to the Banks pursuant to Section 6.10(b),  (y) that if at any time the
computations determining compliance with Section 8 utilize accounting principles
different  from those  utilized in the  financial  statements  furnished  to the
Banks,  such  financial   statements  shall  be  accompanied  by  reconciliation
work-sheets and (z) all accounting  computations  will be made on the basis that
the  Stock  Repurchase  is  accounted  for as a  recapitalization  and  not as a
purchase.

            (b) All computations of interest and Fees hereunder shall be made on
the actual number of days elapsed over a year of 360 days.

            12.08 Governing Law;  Submission to Jurisdiction;  Venue;  Waiver of
Jury Trial. (a) This Agreement and the other Credit Documents and the rights and
obligations  of the parties  hereunder  and  thereunder  shall be  construed  in
accordance  with and be governed by the law of the state of New York.  Any legal
action or proceeding with respect to this Agreement or any other Credit Document
may be brought  in the  courts of the State of New York or of the United  States
for the Southern  District of New York,  and, by execution  and delivery of this
Agreement,  each  Credit  Party  hereby  irrevocably  accepts  for itself and in
respect of its property, generally and unconditionally,  the jurisdiction of the
aforesaid courts. Each Credit Party further irrevocably  consents to the service
of  process  out of any of the  aforementioned  courts  in any  such  action  or
proceeding by the mailing of copies  thereof by  registered  or certified  mail,
postage prepaid,  to each Credit Party located outside New York City and by hand
delivery to each Credit Party  located  within New York City, at its address for
notices  pursuant to Section  12.03,  such  service to become  effective 30 days
after such mailing. Each Credit Party hereby irrevocably designates appoints and
empowers CT Corporation  System, with offices on the date hereof located at 1633
Broadway,  New York,  New York  10019,  as its agent for  service  of process in
respect of any such action or proceeding.  Nothing herein shall affect the right
of the Agent,  any Bank to serve process in any other manner permitted by law or
to commence legal  proceedings or otherwise  proceed against any Credit Party in
any other jurisdiction.

                                       87
<PAGE>


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

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

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

            12.10. Effectiveness. The Agent will give the Borrower and each Bank
prompt written notice of the occurrence of the Restatement Effective Date.

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

            12.12  Amendment  or Waiver.  Neither this  Agreement  nor any other
Credit  Document  nor any  terms  hereof  or  thereof  may be  changed,  waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the Borrower and the Required Banks,  provided that no such
change, waiver, discharge or termination shall, without the consent of each Bank
(other than a Defaulting Bank) directly affected  thereby,  (i) extend the Final
Maturity Date, (it being  understood  that any waiver of the  application of any
prepayment of or the method of application of any prepayment to the amortization
of, the Loans shall not  constitute any such  extension),  or reduce the rate or
extend the time of payment of  interest  (other  than as a result of waiving the
applicability of any  post-default  increase in interest rates) or Fees thereon,
or reduce the principal  amount thereof,  or increase the Commitment of any Bank
over the amount thereof then in effect (it being understood that a waiver of any
Default or Event of Default or of a mandatory  reduction in the Total Commitment
shall not constitute a change in the terms of any Commitment of any Bank),  (ii)
release or permit the release of all or  substantially  all of the Collateral or
release any  Subsidiary  Guarantor  from the  Subsidiary  Guaranty (in each case
except as expressly  provided in the Credit Documents),  (iii) amend,  modify or
waive any provision of this Section, (iv) reduce the percentage specified in, or
otherwise  modify,  the  definition  of  Required  Banks or (v)  consent  to the
assignment  or  transfer by the  Borrower  of any of its rights and  obligations
under this Agreement. No provision of Section 2 or 11 may be amended without the
consent of the Letter of Credit Issuer or the Agent, respectively.

                                       88
<PAGE>



            12.13 Survival. All indemnities set forth herein including,  without
limitation,  in Section  1.10,  1.11,  4.04,  11.07 or 12.01  shall  survive the
execution  and delivery of this  Agreement  and the making and  repayment of the
Loans.

            12.14 Domicile of Loans.  Each Bank may transfer and carry its Loans
at, to or for the account of any branch office,  subsidiary or affiliate of such
Bank,  provided  that the Borrower  shall not be  responsible  for costs arising
under  Section  1.10 or 4.04  resulting  from any such  transfer  (other  than a
transfer  pursuant to Section  1.12) to the extent not  otherwise  applicable to
such Bank prior to such transfer.

            12.15  Confidentiality.  Subject to Section  12.04,  the Banks shall
hold all non-public  information  obtained  pursuant to the requirements of this
Agreement  which has been  identified as such by the Borrower in accordance with
its customary procedure for handling confidential information of this nature and
in accordance  with safe and sound  banking  practices and in any event may make
disclosure  reasonably  required by any bona fide  transferee or  participant in
connection with the contemplated  transfer of any Loans or participation therein
(so long as such transferee or participant  agrees to be bound by the provisions
of this Section 12.15) or as required or requested by any governmental agency or
representative  thereof or  pursuant to legal  process,  provided  that,  unless
specifically prohibited by applicable law or court order, each Bank shall notify
the Borrower of any request by any governmental agency or representative thereof
(other than any such request in connection  with an examination of the financial
condition of such Bank by such  governmental  agency) for disclosure of any such
non-public  information  prior to disclosure of such  information,  and provided
further  that in no event shall any Bank be  obligated or required to return any
materials furnished by the Borrower or any Subsidiary.

            12.16 Register. The Borrower hereby designates the Agent to serve as
its agent,  solely for  purposes of this Section  12.16,  to maintain a register
(the  "Register") on which it will record the  Commitments  from time to time of
each of the  Banks,  the Loans made by each of the Banks and each  repayment  in
respect of the principal  amount of the Loans of each Bank.  Failure to make any
such  recordation,  or any  error in such  recordation,  shall  not  affect  the
Borrower's  obligations in respect of such Loans.  With respect to any Bank, the
transfer  of any Term  Loan or the  Revolving  Commitment  of such  Bank and the
rights to the  principal  of, and  interest  on, any Loan made  pursuant to such
Revolving  Commitment  shall not be effective until such transfer is recorded on
the  Register  maintained  by the  Agent  with  respect  to  ownership  of  such
Commitment  and/or Loans and prior to such  recordation all amounts owing to the
transferor  with respect to such  Commitment  and/or Loans shall remain owing to
the transferor.
                                       89
<PAGE>

The  registration  of  assignment  or transfer of all or part of any  Commitment
and/or Loans shall be recorded by the Agent on the Bank  Register  only upon the
acceptance  by  the  Agent  of a  properly  executed  and  delivered  Assignment
Agreement  pursuant to Section  12.04(b).  The Borrower  agrees to indemnify the
Agent from and against any and all losses,  claims,  damages and  liabilities of
whatsoever  nature which may be imposed on, asserted  against or incurred by the
Agent in  performing  its  duties  under  this  Section  12.16  other than those
resulting from the Agent's willful misconduct or gross negligence.


                                  ************

                                      90
<PAGE>


IN WITNESS WHEREOF,  each of the parties hereto has caused a counterpart of this
Agreement to be duly executed and delivered as of the date first above written.



3369 Progress Drive                       HOSIERY CORPORATION OF AMERICA, INC.,
Bensalem, Pennsylvania  19020                as Borrower
Attention:  Arthur Hughes

Telephone:  (215) 244-9600                       /s/ Arthur Hughes
Facsimile:  (215) 244-9355                By________________________________
                                             Name:   Arthur Hughes
                                             Title:  Vice President, CFO
      with a copy to:

HCA Holdings, Inc.
c/o Kelso & Company, Inc.
305 Park Avenue
New York, New York  10022
Attention:  James J. Connors, II



                                          BANKERS TRUST COMPANY,
                                             Individually and as Agent

                                                 /s/ Mary Kay Coyle
                                          By________________________________
                                             Name:   Mary Kay Coyle
                                             Title:  Managing Director



                                          CORESTATES BANK, N.A.

                                                 /s/ Mark S. Supple
                                          By________________________________
                                             Name:   Mark S. Supple
                                             Title:  Vice President



                                          NATIONSBANK, N.A.

                                                 /s/ E. Phifer Helms
                                          By________________________________
                                             Name:   E. Phifer Helms
                                             Title:  Senior Vice President


<PAGE>

                                          NATIONAL WESTMINSTER BANK PLC
                                          NEW YORK and/or NASSAU BRANCH,

                                                /s/ Jacqueline L. Arambulo
                                          By________________________________
                                             Name:   Jacqueline L. Arambulo
                                             Title:  Vice President





<PAGE>


                                ANNEX I

                               Commitments



                           Term                    Revolving
       Bank                Commitment              Commitment
---------------------      -----------             ----------
Bankers Trust Company      $30,588,235             $ 9,411,765
CoreStates Bank, N.A.      $11,470,588             $ 3,529,412

National Westminster       $11,470,588             $ 3,529,412
Bank Plc
NationsBank of North       $11,470,588             $ 3,529,412
Carolina, N.A.

      Total:               $65,000,000             $20,000,000
                            ==========              ==========


<PAGE>

                               ANNEX II

                            Bank Addresses



Bankers Trust Company                   130 Liberty Street
                                        New York, New York  10006
                                        Attention:  Mary Kay Coyle
                                        Tel. No.:212-250-9094
                                        Fax  No.:212-250-7318


CoreStates Bank, N.A.                   1339 Chestnut Street,
                                        Fourth Floor
                                        Widener Building
                                        Philadelphia, Pennsylvania  19107
                                        Attention:  Richard Preskenis
                                        Tel. No.:215-973-3984
                                        Fax  No.:215-973-2633



National Westminster Bank Plc           660 Madison Avenue
                                        New York, New York  10021
                                        Attention:  Field Smith
                                        Tel. No.:212-418-4525
                                        Fax  No.:212-418-4598



NationsBank, N.A.                       100 North Tryon Street
                                        NC1-007-08-011
                                        Charlotte, North Carolina  28255
                                        Attention:  E. Phifer Helms
                                        Tel. No.:704-386-5358
                                        Fax  No.:704-386-1270



<PAGE>


                               ANNEX III

                         Existing Letters of Credit



      Letter of Credit issued to Branch  Banking and Trust  Company,  dated June
15, 1996 in the amount of $1,292,325.35.


<PAGE>


                               ANNEX IV

                         Government Approvals



                                 NONE


<PAGE>

                                ANNEX V

                             Subsidiaries



1.     U.S. Textile Corp. - North Carolina corporation

       Authorized: 100,000 Common Stock, par value $1.00 per share

       Issued and outstanding:  600 shares Common Stock issued to
                                Hosiery Corporation of America, Inc.

2.     The Stonebury Group Incorporated - Nevada corporation

       Authorized: 4,000,000 Class A Common Stock, par value $.01 per share
                   4,000,000 Class B Common Stock, par value $.01 per share

       Issued and outstanding:  1,000  shares  Class A Common Stock issued to
                                Hosiery Corporation of America, Inc.

3.     Hosiery Corporation International - Delaware corporation

       Authorized: 1,500 of Common Stock, no par value

       Issued and outstanding:  1,500  shares  Common  Stock issued to
                                Hosiery Corporation of America, Inc.

4.     Hosiery Corporation Enterprises - Delaware corporation (Inactive)

       Authorized: 1,500 shares of Common Stock, no par value

       Issued and outstanding:  1,500 shares Common Stock issued to
                                Hosiery Corporation of America, Inc.



<PAGE>

                                   ANNEX VI

                                  Properties


Not Mortgaged Property

Leased:

a.   Office space - 3369 Progress Drive, Bensalem, PA, pursuant to a lease dated
     May 27,  1983  between  HCA  and  Emerik  Properties  Corp.,  a  California
     corporation.

b.   Warehouse space - 354-56 Dunksferry Road, Bensalem, PA, pursuant to a lease
     dated March 15, 1995 between HCA and Albert T. Chadwick

c.   Office space - 3100 Mill Street,  Suite 214, Reno, NV,  pursuant to a lease
     dated  November  22,  1985  between  The  Stonebury  Group,  Inc.  and Mill
     International General Partnership.

d.   Office space - 182 Sefton Street,  Liverpool, UK, pursuant to a lease dated
     May 20, 1996  between HCI and The  Merseyside  Development  Corporation  of
     Royal Liver Building Pier Head.

e.   Warehouse  space - Harrington  Dock,  Liverpool,  pursuant to a lease dated
     November 26, 1996 between HCI and McIntyre and King Ltd.

f.   Office space - Pforzheime Strasse 176, 72275 Ettlinger,  Germany,  pursuant
     to a lease dated  October 1, 1996  between HCI and Media  Profil  Marketing
     Service.

Owned:

a.   Industrial - 155 Rowland Ave., Heath Springs,  SC, pursuant to a deed dated
     September 10, 1996 between US Textile Corp. and Lancaster  County  Economic
     Development Corporation.

Mortgaged Property

Owned:

a.   Industrial  - Lancaster,  SC,  pursuant to a deed dated May 7, 1992 between
     HCA and Murnel Associates, L.P.

b.   Industrial - Newland, SC, pursuant to a deed dated December 5, 1988 between
     U.S. Textile Corp. and Glen Raven Mills, Inc.

<PAGE>


                                  ANNEX VII
                            Existing Indebtedness

1.    South  Carolina  Economic  Development  Bonds - Serial Bonds issued by the
      South  Carolina Jobs  Economic  Development  Authority  maturing from 1995
      through 2004 with interest rates ranging from 5.8% to 7.1%.

2.    Capital Leases

      a.    Hosiery Corporation of America, Inc.

            Lessor                                     Balance as of 9/30/97
            ------                                     ---------------------
            EMC Corporation                                 $485,359
            IBM Credit Corporation                          $330,419
            PNC Leasing Corporation                          $25,646
            Siemens Credit Corporation                       $35,350
                                                            --------
                  Subtotal                                  $876,774
                                                            --------

      b.    U.S. Textile Corp.

            Lessor                                     Balance as of 9/30/97
            ------                                     ---------------------
            BancBoston                                       $58,205
            Ford Leasing                                     $23,659
            Meridian                                         $13,006
            Meridian                                          $8,132
            Meridian                                         $18,728
            Meridian                                         $68,152
            Meridian                                          $5,456
            Meridian                                          $4,084
            Meridian                                          $9,875
            Meridian                                        $344,708
            Meridian                                         $11,497
            Meridian                                         $19,805
            Meridian                                         $50,234
            Meridian                                        $291,356
            Metlife                                         $163,743
            NationsBanc                                     $134,498
            NationsBanc                                      $33,983
            NationsBanc                                      $91,053
            PNC Leasing                                     $244,610
            PNC Leasing                                     $159,828
            PNC Leasing                                     $282,693
            PNC Leasing                                     $266,813
            PNC Leasing                                     $127,315
            PNC Leasing                                     $151,637
            PNC Leasing                                     $290,745
            PNC Leasing                                     $336,894
            PNC Leasing                                     $246,636
            PNC Leasing                                      $87,097
            PNC Leasing                                     $485,016
            PNC Leasing                                     $524,305
            Sovran                                           $29,674
            USL Capital                                     $243,429
            USL Capital                                      $64,291
                                                          ----------
                  Subtotal                                $4,891,157
                                                          ----------
            Totals                                        $5,767,931
                                                          ==========


<PAGE>


                              ANNEX VIII

                          Insurance Policies



                             SEE ATTACHED


<PAGE>

                    HOSIERY CORPORATION OF AMERICA

                                Page: 9

PROPERTY                                  CURRENT           RENEWAL

Description:
Special Perils Subject to Policy
      Conditions and Exclusions                 Yes               Yes
      Collapse                                  Yes               Yes
      Back-Up of Sewers & Drains                Yes               Yes
Valuation:
      Building                                      Replacement Cost
      Inventory                                     Replacement Cost
      Finished Stock                                 Selling Price
      Other Personal Property                       Replacement Cost
Agreed Amount                                   Yes               Yes
Personal Property of Others                     Yes               Yes
Inflation Guard                                 Yes               Yes
Peak Season                                     No                No
Reporting Form                                  No                No
Brand & Labels                                  Yes               Yes
Improvements & Betterments                      Yes               Yes
Increased Cost of Construction                  Yes               Yes
Demolition Due to Building Laws                 Yes               Yes
Value of Undamaged Portion                      Yes               Yes
Increased Time to Rebuild (Time Element)        No                No
Extended Period of Indemnity                    Unlimited         Unlimited
Ordinary Payroll Included                       Yes               Yes
Contingent Time Element                         Yes               Yes
Loading & Unloading (Transit)                   Yes               Yes
Coverage & Limits:
Blanket Limit                                   92,061,000        See Below
Blanket Building                                Included          (1)43,855,000
Blanket Personal Property                       Included          Included
Blanket Stock                                   Included          Included
Demolition                                      Included          Included
Increased Cost of Construction                  Included          Included
Value Undamaged Portion                         Included          Included
Blanket Business Income                         Included          51,870,000
Blanket EDP                                     Included           2,676,000
Blanket Extra Expense                           Included          Included
Flood Annual Aggregate                          10,000,000        10,000,000
Earthquake Annual Aggregate                     10,000,000        10,000,000
Unnamed Locations                                   50,000            50,000
Valuable Papers                                    500,000           500,000
Transit                                            400,000           400,000
Bulk Mail Facility Included                     Yes               Yes
Contingent Business Income                         250,000           250,000

<PAGE>
                    HOSIERY CORPORATION OF AMERICA

                               Page: 10

PROPERTY Continued                              CURRENT           RENEWAL


Coinsurance/Monthly Limitations

Real & Personal Property                        Nil               Nil
Stock Reporter                                  Nil               Nil
Business Interruption                           Nil               Nil
Extra Expense                                   Nil               Nil

Deductibles:

Real & Personal Property                        10,000            10,000
Stock                                           Combined          Combined
Business Interruption                           Nil               Nil
Extra Expense                                   Nil               Nil
Demolition                                      Combined          Combined
Flood                                           25,000            25,000
Earthquake                                      25,000            25,000
Transit                                          5,000             5,000
EDP                                              5,000             5,000
Valuable Papers                                  5,000             5,000
Unnamed Locations                                5,000             5,000

(1)   Building  value for  Lancaster,  SC  increased to  $9,000,000  per Chubb's
      Marshall & Swift appraisal. If we kept Building limit at $4,000,000, Chubb
      would not provide  Agreed Amount  coverage and a coinsurance  clause would
      apply.


<PAGE>


                    HOSIERY CORPORATION OF AMERICA

                               Page: 11

COMMERCIAL GENERAL LIABILITY                   CURRENT           RENEWAL

Coverage Description & Limits

Bodily Injury & Property Damage
Each Occurrence Limit                          1,000,000         1,000,000
General Aggregate (Other Than
      Products/Completed Operations)           2,000,000         2,000,000
Products/Completed Operations Aggregate        1,000,000         1,000,000
Personal & Advertising Injury Aggregate        1,000,000         1,000,000
Fire Damage to Rented Property                 1,000,000         1,000,000
Medical Expense (any one person)                  10,000            10,000
Bodily Injury/Property Damage Deductible       None              None

Employee Benefit Liability (Claims Made)
      Each Claim                               1,000,000         1,000,000
      Aggregate                                1,000,000         1,000,000
      Deductible Each Claim                        1,000             1,000

Including:
      Premises Operations
      Limited Worldwide Products
      Contractual Liability
      Broad Form Property Damage
      Employees as Insureds
      Host Liquor Liability
      Extended Bodily Injury
      Nonowned Watercraft Liability
            Length Limit 25'
      Owners & Contractors Protective

Extensions of Coverage:

Incidental Malpractice                          Yes               Yes
Knowledge of Occurrence                         Yes               Yes
Unintentional Errors & Omissions                Yes               Yes
Vendors Coverage                                Blanket           Blanket
Blanket Additional Insureds                     Yes               Yes
Stop Gap Liability (Nevada)                     Yes               Yes

Exclusions include, but are not limited to, the following:

Pollution                                       Yes               Yes
Discrimination                                  Yes               Yes


<PAGE>


                    HOSIERY CORPORATION OF AMERICA

                               Page: 12

COMMERCIAL GENERAL LIABILITY cont'd            CURRENT           RENEWAL

Rating Basis:

Clothing Distribution Sales                      2,000,000         1,500,000
Clothing Manufacturing Sales                   150,000,000       157,675,000
Office Square Footage (Bensalem)                    62,138            62,138
Office Square Footage (Reno)                         1,500             1,500
Warehouse Square Footage (Montgomeryville)           2,000             2,000
Warehouse Square Footage (Bensalem)                 12,700            12,700
Warehouse Square Footage (Meadeville)               60,000            60,000
Mail Order Sales (Non-Hosiery)                  12,000,000        12,000,000
Building or Premises - LRO
      (Newland Trailer)                              2,520             2,520

Employee Benefits (# of Employees)                     860               980



<PAGE>


                    HOSIERY CORPORATION OF AMERICA

                               Page: 13

BOILER & MACHINERY                              CURRENT           RENEWAL

Coverages and Limits:

Combined Limit for Direct Damage and
      Business Interruption                     25,000,000        25,000,000

Direct Damage Limit                             Included          Included

Combined Business Interruption and
      Extra Expense Limit                       Included          Included

Consequential Damage Limit                         500,000           500,000

Expediting Expense                              Policy Limit      Policy Limit
Ammonia Contamination                              100,000           100,000
Water Damage                                    Policy Limit      Policy Limit
Hazardous Substance Removal                        100,000           100,000

Ordinance or Law Coverage                       Policy Limit      Policy Limit

Description:

Comprehensive Group Form                        Yes               Yes
Production Equipment                            Included          Included

Valuation:
      Direct Damage                                    Repair or Replace
      Business Interruption                              Actual Loss
Sustained

Property of Others Covered                       Yes              Yes
Consequential Damage Coverage                    Yes              Yes
Off Premises Power Service Interruption          Yes              Yes
      Coverage

Time Element Loss Reporting Provision            Yes              Yes

Coinsurance:

Direct Damage                                    Nil              Nil
Business Interruption                            Nil              Nil



<PAGE>


                    HOSIERY CORPORATION OF AMERICA

                               Page: 14

BOILER & MACHINERY cont'd                       CURRENT           RENEWAL

Deductibles:

Direct Damage                                     5,000             5,000
Business Interruption                           24 Hours          24 Hours
Consequential Damage                              5,000             5,000
Off Premises Service Interruption               24 Hours          24 Hours

Exclusions include, but are not limited to,
the following:
Testing                                         Yes               Yes
Ordinance or Law (Limited)                      No                No
Flood                                           No                No
Earthquake                                      No                No
Leakage at any seal, joint, fitting             Yes               Yes




Package Insurer:                                Chubb             Chubb

A.M. Best Rating:                               A++ (Superior)    A++ (Superior)

PACKAGE PREMIUM:                                $ 94,985          $ 98,316
(Property, General Liability, Boiler)

*Premium would be $95,466 using a limit of $4,000,000 for the
Lancaster, SC building.




<PAGE>



                    HOSIERY CORPORATION OF AMERICA

                               Page: 15

AUTOMOBILE                                      CURRENT           RENEWAL

Coverages and Limits

Each Accident (Combined Single Limit
     for Bodily Injury and Property Damage)     1,000,000         1,000,000
Under/Uninsured Motorists Limit                 1,000,000         1,000,000
First Party Benefits (PA)                       Basic             Basic
Combination First Party Benefits (PA)             277,500           277,500
Extraordinary Medical Benefits (PA)             1,000,000         1,000,000
Personal Injury Protection (NJ/SC)              Max by State      Max by State
Added PIP (nj)                                  Included          Included
Liability Deductible                            N/A               N/A

Hired Auto Liability                            Included          Included
     Auditable - Cost of Hire                   If any            If any
Non-Owned Auto Liability                        Included          Included
     Rating Basis; Number of Employees               900               900
Contractual Liability                           Yes               Yes
     Extended to Lease of Vehicle
Drive Other Car (Liability & Uninsured
     Motorists) and Broadened First
     Party Benefits)                            None              None

Physical Damage:                                   Actual Cash Value
     Comprehensive Deductible                        500              500
     Collision Deductible                          1,000            1,000
Hired Car Limit                                   25,000           25,000
     Comprehensive Deductible                        500              500
     Collision Deductible                          1,000            1,000

Extensions:


Fellow Employee Coverage                        Yes               Yes
     All Employees                              Yes               Yes
Mobile Phone Coverage                           No                No


<PAGE>


                    HOSIERY CORPORATION OF AMERICA

                               Page: 16

AUTOMOBILE cont'd                              CURRENT           RENEWAL


Extensions (cont'd):

Rental Reimbursement (Private Passenger)       Yes               Yes
      Daily Limit                              $30               $30
      Number of Days                            30                30
Towing and Labor (Private Passenger)           Yes               Yes
      Limit Per Disablement                    $50               $50

Exclusions include, but are not limited to,
the following:

Pollution                                      Yes               Yes

Rating basis: (Number of Units)

Private Passenger                               11                11
Light Trucks                                     3                 3
Medium Trucks                                    0                 0
Heavy Trucks                                     3                 3
Trailers                                        11                11
Total                                           28                28
Auditable                                      Yes               Yes

Insurer:                                       Chubb             Chubb

A.M. Best Rating:                              A++ (Superior)    A++(Superior)

Deposit Premium:                               $  34,040        $  35,985

PACKAGE & AUTO PREMIUM TOTAL:                    129,025          134,301

COHEN-SELTZER SERVICE FEE:                        36,000           33,000

TOTAL PACKAGE & AUTO:                          $ 165,025        $ 167,301



<PAGE>


                    HOSIERY CORPORATION OF AMERICA

                               Page: 17

CRIME                                          CURRENT           RENEWAL

Description & Limits

Blanket Employee Dishonesty                    350,000           *500,000
Monies & Securities
      On Premises                              300,000            300,000
      In Transit                               300,000            300,000
Depositors Forgery                             300,000            300,000
Computer Theft & Funds Transfer                300,000            300,000
Pension/Profit Sharing Plans Covered           Yes                Yes

Deductible:                                    10,000             10,000

Rating Basis:

      Sales                                     164,000,000       171,000,000
      # of Employees                            860       980

Insurer:                                        Federal           Federal

A.M. Best Rating:                               A++ (Superior)    A++ (Superior)

Annual Premium:                                 $ 2,570           $ 2,827

*     Increased  to  $500,000  for  renewal  to  be  in  compliance  with  ERISA
      requirements.  Required  to insure  up to 10% of  assets of plan,  but not
      required to carry higher than $500,000 limit.
      Plan assets are in excess of $5,000,000.

OPTIONS:     $750,000 Limit for Employee Dishonesty - $3,109 Annual
            Premium
             $1,000,000 Limit for Employee Dishonesty - $3,410 Annual
            Premium




<PAGE>


                    HOSIERY CORPORATION OF AMERICA

                               Page: 18

COMMERCIAL UMBRELLA LIABILITY                   CURRENT           RENEWAL

Coverage and Limits:

Each Occurrence                                 10,000,000        10,000,000
General Aggregate (Other than
      Products/Completed Operations)            20,000,000        20,000,000
Products/Completed Operations Aggregate         10,000,000        10,000,000
Retained Limit (Cov. B Ded.)                             0                 0

Employee Benefits Liability                     Included          Included
Foreign Liability                               Included          Included

60-Day Notice of Cancellation                   Yes               Yes
Auditable Policy                                No                No
First Dollar Defense                            Yes               Yes
Defense Cost Outside Limit                      Yes               Yes
Pay on Behalf                                   Yes               Yes

Exclusions include, but are not limited to,
the following:

Pollution                                       Yes               Yes
Asbesto                                         Yes               Yes
Discrimination                                  Partial           Partial

Care, Custody & Control for:
      Real Property                             Yes               Yes
      Personal Property                         Yes               Yes
ERISA                                           Yes               Yes

Insurer:                                        Chubb             Chubb

A.M. Best Rating:                               A++ (Superior)    A++ (Superior)

Annual Premium:                                 $ 22,000          $ 20,800



<PAGE>


                    HOSIERY CORPORATION OF AMERICA

                               Page: 19

WORKERS COMPENSATION                            CURRENT           RENEWAL

State/Classification                        Rate  Payroll      Rate  Payroll

PA Clerical Office Employees                .49  5,496,000     .36  5,700,000
      Experience Modification              1.101               .931

Employer's Liability
      Each Accident                               100,000             100,000
      Each Employee (Disease)                     100,000             100,000
      Policy Limit (Disease)                      500,000             500,000

Voluntary Compensation Endorsement                    Yes                Yes
US Longshoremen Harbor Workers Act                    No                 No
"Other States" Coverage                               Yes                Yes

Rating/Dividend Plan                                Slide Scale Dividend

Premium Discount                                      Stock             Stock
Insurer:                                              EBI/Orion       EBI/Orion
A.M. Best Rating:                                 A (Excellent)    A (Excellent)

Annual Premium:                                  $ 26,181            $ 16,860



<PAGE>


                    HOSIERY CORPORATION OF AMERICA

                               Page: 20

WORKERS COMPENSATION                      CURRENT           RENEWAL

State/Classification                   Rate  Payroll      Rate   Payroll

NC Hosiery Manufacturing              2.88   6,600,000    2.78   6,300,000
      Clerical Office Employees        .37     200,000     .32     200,000
      Experience Modification          .800                .800

SC Wholesale Clothing Store           2.14   2,200,000    2.14   3,000,000
      Clerical Office Employees        .29     500,000     .29     500,000
      Hosiery Manufacturing           1.27   3,678,000    1.27   5,036,000
      Experience Modification          .800                .800

Employer's Liability
      Each Accident                       100,000           100,000
      Each Employee (Disease)             100,000           100,000
      Policy Limit (Disease)              500,000           500,000

Voluntary Compensation Endorsement        Yes               Yes
U.S. Longshoremen Harbor Workers Act      No                No
Nevada Stop Gap Liability                 Yes               Yes

Rating/Dividend Plan                            Slide Scale Dividend

Premium Discount                          Stock             Stock
Insurer:                                  EBI/Orion         EBI/Orion
A.M. Best Rating:                         A (Excellent)     A (Excellent)
North Carolina Premium:                   $ 134,955         $ 124,264
South Carolina Premium:                   $  67,418         $  91,645




<PAGE>


                    HOSIERY CORPORATION OF AMERICA
                               Page: 21
97/98 DIVIDEND PLAN

      LOSS                                                  ESTIMATED
      RATIO                         % PAYOUT                   PAYOUT

    0 -    5%                         38.7                     89,966

   5.1 -  10%                         34.7                     80,667

   10.1 - 15%                         30.6                     71,136

   15.1 - 20%                         27.0                     62,767

   20.1 - 25%                         22.9                     53,235

   20.1 - 30%                         18.9                     43,937

   30.1 - 35%                         15.3                     35,568

   35.1 - 40%                         11.3                     26,269

   40.1 - 45%                          7.3                     16,970

   45.1 - 50%                          2.3                      5,347

   OVER 50%                            0.0                          0

This is the third year of your  three year  commitment  from  EBI/Orion.  Payout
percentage is the same as expiring.




<PAGE>


                    HOSIERY CORPORATION OF AMERICA

                               Page: 22

FIDUCIARY                                      CURRENT           RENEWAL

Plan(s) Covered:

HCA Retirement/401K Profit Sharing Plan
The United States Textile Corporation Employee Benefit Trust

Limits:

Each Loss                                      500,000           500,000
Each Policy Year                               500,000           500,000

Deductible:                                      5,000             5,000

Description:

Claims Made Form:                               Yes              Yes
Retroactive Date:                               08/01/91         08/01/91
Extended Discovery if Company Cancels           Yes              Yes
      Percentage of Premium for Option          25%/90 Days      25%/90 Days
Pay on Behalf                                   Yes              Yes
Defense Costs In Addition To Limit              No               No
Deductible Applies to Defense                   Yes              Yes

Rating Basis (Plan Assets):                     4,779,217        5,874,292

Insurer:                                        Fidelity & Deposit Company of MD

A.M. Best Rating:                               A+ (Superior)    A+ (Superior)

Annual Premium:                                 $ 1,381          $ 1,492

*Need to verify plan sponsors.




<PAGE>


                    HOSIERY CORPORATION OF AMERICA

                               Page: 23

FOREIGN PACKAGE                                CURRENT           RENEWAL

Property

Description:

Special Perils Subject to Exclusions           Yes               Yes
Valuation:
      Personal Property                             Replacement Cost
      Finished Stock & Stock Sold                   Selling Price
Agreed Amount                                  Yes               Yes
Personal Property of Others                    Yes               Yes
Brands & Labels                                Yes               Yes
Improvements & Betterments                     Yes               Yes
Business Income/Extra Expense                  No                *No

Coverage & Limits:

Suite 4, South Harrington Bldg.
182 Sefton Street
Liverpool, England
      Furniture & Fixtures                     50,000            50,000

Mclntyre & King Ltd.
Commercial Road
Liverpool, England
      Stock                                   150,000           150,000

MVS; Pforzheimer Strasse 176
76275 Ettlingen, Germany
      Furniture & Fixtures                     50,000            50,000
      Stock                                    50,000            50,000

Crawfords United Biscuits
Binns Road, Off Edge Lane
Liverpool, England
      Stock                                    50,000            50,000

MVS Fulfillment Center
Zone Industrielle SUD
Rue De L'Industrie
67167 Wissembourg, France
      Furniture & Fixtures                     75,000            75,000
      Stock                                   300,000           300,000


<PAGE>


                    HOSIERY CORPORATION OF AMERICA

                               Page: 24

FOREIGN PACKAGE Cont'd.                        CURRENT           RENEWAL

Coverage & Limits cont'd:

Mclntyre & King, Ltd.
Harrington Dock
Glacier Building
Liverpool, England
      Furniture & Fixtures                       220,000           220,000
      Stock                                    2,728,000         2,728,000

All Locations:

      Flood                                    1,000,000       1,000,000
      Earthquake                               1,000,000       1,000,000
      Transit                                  Included        Included

Exclusions include, but are not limited to the following:

Business Income/Extra Expense                  Yes             Yes
War & Military Action                          Yes             Yes
Disappearance                                  Yes             Yes

Coinsurance/MonthlyLimitations:

Personal Property                              Nil             Nil
Stock                                          Nil             Nil

Deductibles:

Personal Property                                  2,500           2,500
Stock                                              2,500           2,500
Flood                                             25,000          25,000
Earthquake                                        25,000          25,000

*Coverage is available. Need limit to add.



<PAGE>


                    HOSIERY CORPORATION OF AMERICA
                               Page: 25

FOREIGN PACKAGE                                 CURRENT           RENEWAL

Foreign General Liability DIC/Excess

Limit Per Occurrence for Bodily
      Injury & Property Damage Combined         1,000,000         1,000,000
Personal Injury & Advertising Injury            1,000,000         1,000,000

Product/Completed Operations
      Annual Aggregate                          1,000,000         1,000,000

Fire Legal Liability                              100,000           100,000

Medical Expense Aggregate                          10,000            10,000

Coverage Extensions:

      Premises Operations
      Contractual Liability
      Broad Form Vendors
      Host Liquor Liability
      Employees as Insureds
      Advertising Injury
      Personal Injury
      Nonowned watercraft - 50' Length Limit
      Incidental Malpractice
      Products Liability

Policy Territory                                    Worldwide excluding
                                                       the U.S., its
                                                        territories
                                                      and possessions

Exclusions include, but are not limited to the following:

Employment Related Practices                    Yes               Yes
Asbestos                                        Yes               Yes

Rating Basis (Sales):                           12,000,000        22,000,000



<PAGE>


                    HOSIERY CORPORATION OF AMERICA

                               Page: 26

FOREIGN PACKAGE cont'd                          CURRENT           RENEWAL

Foreign Auto DIC/Excess Liability

Combined Limit for Bodily Injury
and Property Damage Each Occurrence             1,000,000         1,000,000

Medical Payments                                   10,000            10,000

Foreign Voluntary Workers Compensation

Benefits Applicable: Statutory according to state of hire
Employers Liability                               100,000           100,000
Repatriation                                       25,000            25,000
24 Hour Coverage                                Yes               Yes
War/Terrorism                                   Yes               Yes



Insurer:                                        Chubb             Chubb

A.M. Best Rating:                               A++ (Superior)    A++ (Superior)

Annualized Premium:                             $ 13,644          $ 14,684

Note: The  Primary  General  Liability,   Automobile  and  Employers   Liability
      coverages must be purchased through an admitted carrier in the U.K. Please
      provide evidence that primary coverage has been placed.



<PAGE>


                               ANNEX IX

                            Existing Liens



                             SEE ATTACHED



<PAGE>



ATTACHMENT

<TABLE>
                                          Hosiery Corporation of America, Inc.
<CAPTION>


Secured Party/Lessor              Jurisdiction   Filing Type  Filing Number     Filing Date   Collateral Description
--------------------              ------------   -----------  -------------     -----------   ----------------------
<S>                               <C>            <C>          <C>               <C>           <C>

Meridian Leasing Inc.             PA-S/C         UCC-1        21440175          12/8/92        Equipment Lease

Meridian Leasing Inc.             PA-S/C         UCC-1        21471358          12/21/92       Equipment Lease

Meridian Leasing Inc.             PA-S/C         UCC-1        21810435          4/5/93         Equipment

Meridian Leasing Inc.             PA-S/C         UCC-1        21970884          5/27/93        Equipment

Meridian Leasing Inc.             PA-S/C         UCC-1        21850633          4/19/93        Equipment

NationsBanc Leasing Corporation   PA-S/C         UCC-1        20901875          6/16/92        Equipment

NationsBanc Leasing Corporation   PA-S/C         UCC-1        20901877          6/16/92        Equipment

NationsBanc Leasing Corporation   PA-S/C         UCC-3        22900720          3/8/94         Amendment refers to original
                                                 Amendment                                   file #: 20901877/Amending
                                                                                             equipment location

NationsBanc Leasing Corporation   PA-S/C         UCC-1        20901879          6/16/92        Equipment

NationsBanc Leasing Corporation   PA-S/C         UCC-3        22900721          3/8/94         Amendment refers to original
                                                 Amendment                                   file #:
                                                                                             20901879/Amending equipment
                                                                                             location

NationsBanc Leasing Corporation   PA-S/C         UCC-1        22750073          1/11/94        Equipment

NationsBanc Leasing Corporation   PA-S/C         UCC-1        21241381          10/2/92        Equipment

Triumphe Financial Corp. t/a      PA-S/C         UCC-1        17451843          7/3/89         Equipment
Triumphe Leasing
Company/Assignee: First
Pennsylvania Bank N.A.

Triumphe Financial Corp. t/a      PA-S/C         UCC-1        17171352          3/27/89        Equipment
Triumphe Leasing
Company/Assignee: First
Pennsylvania Bank N.A.

Triumphe Financial Corp. t/a      PA-S/C         UCC-1        17290683          5/2/89         Equipment
Triumphe Leasing
Company/Assignee: First
Pennsylvania Bank N.A.
</TABLE>


<PAGE>


<TABLE>
                                                   U.S. Textile Corp.


<CAPTION>
Secured Party/                                   Filing     Filing             Filing           Collateral
Lessor                            Jurisdiction   Type       Number             Date             Description
--------------------------------- -------------- ---------- ------------------ ---------------- ============================
<S>                               <C>            <C>        <C>                <C>              <C>

Carolina Recycling Inc.           NC-Mecklenburg UCC-1      006021             5/2/95           Equipment

Carolina Recycling Inc.           NC-Mecklenburg UCC-1      006081             4/11/97          Equipment
                                  Co.

CoreStates Leasing, Inc.          NC-Mecklenburg UCC-1      009845             6/17/97          Equipment Lease
                                  Co.

Independent Capital Corp./        SC-Lancaster   UCC-1      93-072             2/24/93          Computer Equipment
Assignee: Citicorp Leasing Inc.   Co.

Master Lease Div. of Tokai        NC-Mecklenburg UCC-1      017617             12/22/92         Computer Equipment Lease
Financial Services, Inc.          Co.

Meridian Leasing Inc.             SC-Lancaster   UCC-1      93-118             4/5/93           Equipment Lease

Meridian Leasing Inc.             SC-Lancaster   UCC-1      93-119             4/5/93           Equipment Lease

Meridian Leasing Inc.             SC-Lancaster   UCC-1      93-138             4/20/93          Equipment Lease

Meridian Leasing Inc.             SC-Lancaster   UCC-1      93-139             4/20/93          Equipment Lease

Meridian Leasing Inc.             SC-Lancaster   UCC-1      93-242             7/8/93           Equipment Lease

Meridian Leasing Inc.             SC-Lancaster   UCC-1      93-347             9/29/93          Equipment Lease

Triumphe Financial Corporation/   NC-Mecklenburg UCC-1      014801             10/22/90         Equipment Lease
Assignee: Ford Motor Credit       Co.            UCC-3*     006898             5/16/95
Company

Triumphe Financial Corporation/   NC-Mecklenburg UCC-1      005726             4/16/90          Equipment Lease
Assignee: Ford Motor Credit       Co.            UCC-3*     002074             2/10/95
Company

Triumphe Financial Corporation    NC-Mecklenburg UCC-1      010690             7/26/90          Equipment Lease
                                  Co.            UCC-3*     002073             2/10/95

Triumphe Financial Corporation/   NC-Mecklenburg UCC-1      007816             5/24/90          Equipment Lease
Assignee: Ford Motor Credit       Co.            UCC-3*     003034             3/2/95
Company

</TABLE>


The Stonebury Group Incorporated

None.


Hosiery Corporation International

None.

<PAGE>

                                              ANNEX X

                                           Management Fees



Employment Agreements:


1.   Employment Agreement between U.S. Textile Corp. and Hans Lengers,  dated as
     of August 29, 1980.

2.   Executive  Employment  Agreement between HCA and Robert J. Mooney, dated as
     of September 16, 1993.

3.   Executive Employment Agreement between HCA and Robert M. Henry, dated as of
     August 7, 1995.

4.   Executive  Employment  Agreement between HCA and Suzanne M. Roper, dated as
     of July 30, 1996.



<PAGE>

                                                   EXHIBIT A

                       FORM OF NOTICE OF BORROWING

                                                                 [Date]


Bankers Trust Company, as Agent
  for the Banks party to the
  Credit Agreement referred
  to below
One Bankers Trust Plaza
130 Liberty Street

New York, New York  10006

Ladies and Gentlemen:

            The  undersigned,   Hosiery   Corporation  of  America,   Inc.  (the
"Borrower"),  refers to the Amendment and Restatement,  dated as of November 20,
1997 amending and restating the Credit  Agreement,  dated as of October 17, 1994
(as  subsequently  amended,  modified  or  supplemented  from time to time,  the
"Credit  Agreement",  the terms  defined  therein  being used  herein as therein
defined), among the Borrower, the financial institutions from time to time party
thereto (the "Banks") and you, as Agent for such Banks, and, pursuant to Section
1.03(a) of the Credit  Agreement,  hereby gives you irrevocable  notice that the
undersigned hereby requests a Borrowing under the Credit Agreement,  and in that
connection  sets forth below the  information  relating to such  Borrowing  (the
"Proposed Borrowing") as required by Section 1.03(a) of the Credit Agreement:

       (i) The Proposed Borrowing is to consist of [Term Loans]
           [Revolving Loans].

      (ii) The aggregate principal amount of the Proposed Borrowing is $______.

     (iii) The Business Day of the Proposed Borrowing is [Date].1/

      (iv) The Loans to be made  pursuant  to the  Proposed  Borrowing  shall be
  initially maintained as [Base Rate Loans] [Eurodollar Loans].

      [(v) The initial Interest Period for the Proposed Borrowing is [one month]
  [three  months]  [six  months][,  subject  to  availability  of all Banks with
  Commitments  and/or  outstanding Loans under the respective  Facility,  twelve
  months,  and if such  Interest  Period  is  unavailable  [specify  alternative
  desired]].2/


<PAGE>



            The undersigned  hereby certifies that the following  statements are
true on the date hereof, and will be true on the date of the Proposed Borrowing:

            (A) the  representations  and  warranties  contained  in the  Credit
      Agreement and the other Credit  Documents are and will be true and correct
      in all  material  respects,  both  before and after  giving  effect to the
      Proposed  Borrowing and to the  application  of the proceeds  thereof,  as
      though made on such date,  unless  stated to relate to a specific  earlier
      date, in which case such  representations and warranties shall be true and
      correct in all material respects as of such earlier date; and

            (B) no Default or Event of Default has occurred  and is  continuing,
      or would result from such Proposed  Borrowing or from the  application  of
      the proceeds thereof.

                                    Very truly yours,

                                    HOSIERY CORPORATION OF
                                      AMERICA, INC.



                                    By:_______________________
                                        Name:
                                        Title:


<PAGE>


                                   EXHIBIT B-1



                            FORM OF TERM NOTE

$________                                           New York, New York
                                                   ----------- --- ----


            FOR VALUE RECEIVED, HOSIERY CORPORATION OF AMERICA, INC., a Delaware
corporation  (the   "Borrower"),   hereby  promises  to  pay  to  the  order  of
________________  (the "Bank"),  in lawful money of the United States of America
in  immediately  available  funds,  at the  Payment  Office  (as  defined in the
Agreement  referred to below) initially  located at One Bankers Trust Plaza, 130
Liberty Street, New York, New York 10006, on the Final Maturity Date (as defined
in the Agreement) the principal sum of ___________  DOLLARS  ($________)  or, if
less,  the then  unpaid  principal  amount of all Term Loans (as  defined in the
Agreement) made by the Bank pursuant to the Agreement.

            The Borrower also  promises to pay interest on the unpaid  principal
amount  hereof in like money at said office  from the date hereof  until paid at
the rates and at the times provided in Section 1.08 of the Agreement.

            This  Note is one of the  Notes  referred  to in the  Amendment  and
Restatement,  dated as of November 20, 1997,  amending and  restating the Credit
Agreement,  dated as of October 17,  1994 , among the  Borrower,  the  financial
institutions  from time to time party thereto  (including  the Bank) and Bankers
Trust Company,  as Agent (as from time to time in effect, the "Agreement"),  and
is  entitled  to the  benefits  thereof and of the other  Credit  Documents  (as
defined  in the  Agreement).  This  Note is  secured  pursuant  to the  Security
Documents (as defined in the Agreement). As provided in the Agreement, this Note
is subject to mandatory  repayment prior to the Final Maturity Date, in whole or
in part.

            In case an Event of  Default  (as  defined in the  Agreement)  shall
occur and be continuing,  the principal of and accrued interest on this Note may
be declared to be due and payable in the manner and with the effect  provided in
the Agreement.


<PAGE>


            The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.

            THIS NOTE SHALL BE CONSTRUED IN  ACCORDANCE  WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.

                                    HOSIERY CORPORATION OF
                                      AMERICA, INC.



                                          By____________________________
                                               Name:
                                               Title:


<PAGE>


                                   EXHIBIT B-2



                         FORM OF REVOLVING NOTE


$________                                           New York, New York
                                                  ------------ --- ----


            FOR VALUE RECEIVED, HOSIERY CORPORATION OF AMERICA, INC., a Delaware
corporation  (the   "Borrower"),   hereby  promises  to  pay  to  the  order  of
______________________  (the  "Bank"),  in lawful money of the United  States of
America in immediately available funds, at the Payment Office (as defined in the
Agreement  referred to below) initially  located at One Bankers Trust Plaza, 130
Liberty Street, New York, New York 10006, on the Final Maturity Date (as defined
in the Agreement the principal sum of __________________ DOLLARS ($________) or,
if less, the then unpaid  principal amount of all Revolving Loans (as defined in
the Agreement) made by the Bank pursuant to the Agreement.

            The Borrower also  promises to pay interest on the unpaid  principal
amount  hereof in like money at said office  from the date hereof  until paid at
the rates and at the times provided in Section 1.08 of the Agreement.

            This  Note is one of the  Notes  referred  to in the  Amendment  and
Restatement,  dated as of November 20, 1997,  amending and  restating the Credit
Agreement,  dated as of October 17,  1994,  among the  Borrower,  the  financial
institutions  from time to time party thereto  (including  the Bank) and Bankers
Trust Company,  as Agent (as from time to time in effect, the "Agreement"),  and
is  entitled  to the  benefits  thereof and of the other  Credit  Documents  (as
defined  in the  Agreement).  This  Note is  secured  pursuant  to the  Security
Documents (as defined in the Agreement). As provided in the Agreement, this Note
is subject to mandatory  repayment prior to the Final Maturity Date, in whole or
in part.

            In case an Event of  Default  (as  defined in the  Agreement)  shall
occur and be continuing,  the principal of and accrued interest on this Note may
be declared to be due and payable in the manner and with the effect  provided in
the Agreement.


<PAGE>


            The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.

            THIS NOTE SHALL BE CONSTRUED IN  ACCORDANCE  WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.


                                    HOSIERY CORPORATION OF
                                      AMERICA, INC.


                                          By____________________________
                                               Name:
                                               Title:


<PAGE>


                                   EXHIBIT B-3



                         FORM OF SWINGLINE NOTE


$_________                                          New York, New York
                                                   --------  -- -------


            FOR VALUE RECEIVED, HOSIERY CORPORATION OF AMERICA, INC., a Delaware
corporation  (the  "Borrower"),  hereby  promises to pay to the order of Bankers
Trust Company (the  "Bank"),  in lawful money of the United States of America in
immediately  available funds, at the Payment Office (as defined in the Agreement
referred to below)  initially  located at One Bankers  Trust Plaza,  130 Liberty
Street,  New York, New York 10006,  on the Swingline  Expiry Date (as defined in
the Agreement referred to below) the principal sum of _________________  DOLLARS
($_________)  or, if less,  the then unpaid  principal  amount of all  Swingline
Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement.

            The Borrower  promises also to pay interest on the unpaid  principal
amount  hereof in like money at said office  from the date hereof  until paid at
the rates and at the times provided in Section 1.08 of the Agreement.

            This  Note is one of the  Notes  referred  to in the  Amendment  and
Restatement,  dated as of November 20, 1997,  amending and  restating the Credit
Agreement,  dated as of October 17,  1994,  among the  Borrower,  the  financial
institutions  from time to time party thereto  (including  the Bank) and Bankers
Trust Company,  as Agent (as from time to time in effect, the "Agreement"),  and
is  entitled  to the  benefits  thereof and of the other  Credit  Documents  (as
defined  in the  Agreement).  This  Note is  secured  pursuant  to the  Security
Documents (as defined in the Agreement). As provided in the Agreement, this Note
is  subject  to  voluntary  prepayment  and  mandatory  repayment  prior  to the
Swingline Expiry Date, in whole or in part.

            In case an Event of  Default  (as  defined in the  Agreement)  shall
occur and be continuing,  the principal of and accrued interest on this Note may
be declared to be due and payable in the manner and with the effect  provided in
the Agreement.


<PAGE>


            The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.

            THIS NOTE SHALL BE CONSTRUED IN  ACCORDANCE  WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.


                                    HOSIERY CORPORATION OF
                                      AMERICA, INC.


                                          By____________________________
                                               Name:
                                               Title:


<PAGE>


                                                              EXHIBIT C




                    FORM OF LETTER OF CREDIT REQUEST



No.___3/                                        Dated ______ ___, ___4/


Bankers Trust Company, as Agent and Letter of Credit Issuer, [and __________, as
  Letter of Credit Issuer,] under the Credit Agreement referred to below
One Bankers Trust Plaza
130 Liberty Street
New York, New York  10006

Attention: ___________


Ladies and Gentlemen:

            The  undersigned,   Hosiery   Corporation  of  America,   Inc.  (the
"Borrower"),  refers to the Amendment and Restatement,  dated as of November 20,
1997 amending and restating the Credit  Agreement,  dated as of October 17, 1994
(as  subsequently  amended,  modified  or  supplemented  from time to time,  the
"Credit  Agreement",  the terms  defined  therein  being used  herein as therein
defined), among the Borrower, the financial institutions from time to time party
thereto (the "Banks") and Bankers Trust Company, as Agent for such Banks.

            The undersigned hereby requests that __________, as Letter of Credit
Issuer,  issue a  [Trade]  [Standby]  Letter of Credit  for the  account  of the
undersigned on ______ ___, ____ (the "Date of Issuance") in the aggregate amount
of $_______.5/


<PAGE>



            The   beneficiary  of  the  requested   Letter  of  Credit  will  be
__________,6/  and such Letter of Credit will be in support of  ______________7/
and will have a stated termination date of ____________.8/

            The undersigned  hereby certifies that the following  statements are
true on the date hereof, and will be true on the Date of Issuance:

            (A) the  representations  and  warranties  contained  in the  Credit
      Agreement and the other Credit  Documents are and will be true and correct
      in all material  respects,  before and after giving effect to the issuance
      of the Letter of Credit  requested  hereby,  as though made on the Date of
      Issuance,  unless  stated to relate to a specific  earlier  date, in which
      case such  representations and warranties shall be true and correct in all
      material respects as of such earlier date; and

            (B) no Default or Event of Default has occurred  and is  continuing,
      or would  result  after  giving  effect to the  issuance  of the Letter of
      Credit requested hereby.

            Copies  of  all   documentation   with  respect  to  the   supported
transaction are attached hereto.


                                    HOSIERY CORPORATION OF
                                      AMERICA, INC.



                                    By  _______________________
                                          Name:
                                          Title:


<PAGE>





                                    November 20, 1997



Bankers Trust Company,
  as Agent
130 Liberty Street
New York, NY 10006

The Financial Institutions listed
  on Schedule I hereto

                  Re:   Hosiery Corporation of America, Inc.

Ladies and Gentlemen:

            We have acted as special counsel to Hosiery  Corporation of America,
Inc., a Delaware  corporation  ("HCA"),  in  connection  with the  execution and
delivery of the Amendment and Restatement, dated as of November 20, 1997, to the
Credit Agreement,  dated as of October 17, 1994 (as so amended and restated, the
"Credit Agreement"),  among HCA, the lending institutions  identified on Annex I
thereto from time to time (the "Lenders") and Bankers Trust Company ("BTCo"), as
Agent (in such  capacity,  the "Agent")  for the Lenders.  We have also acted as
special counsel to The Stonebury Group Incorporated,  a Nevada corporation and a
wholly-owned  subsidiary  of HCA  ("Stonebury"),  U.S.  Textile  Corp.,  a North
Carolina corporation and a wholly-owned subsidiary of HCA ("U.S. Textile"),  and
Hosiery  Corporation  International,  a Delaware  corporation and a wholly-owned
subsidiary of HCA ("International" and together with Stonebury and U.S. Textile,
the "Subsidiary Guarantors").



<PAGE>


Bankers Trust Company
November 20, 1997
Page 2




            This opinion is being  delivered  pursuant to Section  5.01(b)(i) of
the Credit  Agreement.  Capitalized  terms used herein and not otherwise defined
herein  shall have the same  meanings  herein as ascribed  thereto in the Credit
Agreement.

            In rendering  the opinions set forth  herein,  we have  examined and
relied on originals or copies of the following:

            (a)  the Credit Agreement;

            (b) the Amendment and Restatement, dated as of November 20, 1997, to
the  Subsidiary  Guaranty,  dated as of  October  17,  1994 (as so  amended  and
restated, the "Subsidiary Guaranty"),  made by each of the Subsidiary Guarantors
in favor of the Agent for the benefit of the Creditors (as defined therein);

            (c) the  Amendment  and  Restatement,  dated as of November 20, 1997
(the "Pledge Agreement Amendment"), to the Pledge Agreement, dated as of October
17, 1994 (as so amended  and  restated by the Pledge  Agreement  Amendment,  the
"Pledge Agreement"),  made by HCA in favor of BTCo, as Collateral Agent (in such
capacity the "Collateral  Agent"),  for the benefit of the Secured Creditors (as
defined therein);

            (d) the  Amendment  and  Restatement,  dated as of November 20, 1997
(the "Security Agreement  Amendment"),  to the Security  Agreement,  dated as of
October  17,  1994  (as  so  amended  and  restated  by the  Security  Agreement
Amendment,  the "Security  Agreement"),  made by HCA in favor of the  Collateral
Agent for the
benefit of the Secured Creditors (as defined therein);

            (e) the  Amendment  and  Restatement,  dated as of November 20, 1997
(the "Subsidiary  Security  Agreement  Amendment"),  to the Security  Agreement,
dated as of October  17,  1994 (as so amended  and  restated  by the  Subsidiary
Security Agreement Amendment, the "Subsidiary Security Agreement"), made by each
of the Subsidiary Guarantors in favor of the Collateral Agent for the benefit of
the Secured Creditors (as defined therein);


<PAGE>


Bankers Trust Company
November 20, 1997
Page 3




            (f) the First Amendment to Mortgage, Security Agreement,  Assignment
of Leases,  Rents and Profits,  Financing Statement and Fixture Filing, dated as
of November  20,  1997 (the  "Mortgage  Amendment"),  by and between HCA and the
Collateral Agent;

            (g)  the  First  Amendment  to Deed of  Trust,  Security  Agreement,
Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing,
dated as of November 20, 1997 (the "Deed of Trust  Amendment"),  by U.S. Textile
to J. Christopher Oates, as Trustee for the benefit of the Collateral Agent;

            (h) the  certificate  executed by an officer of each of HCA and each
Subsidiary Guarantor  (collectively,  the "Loan Parties" and each individually a
"Loan Party"),  dated the date hereof,  a copy of which is attached as Exhibit A
hereto (the "Loan Parties' Certificate");

            (i)   certified copies of the Certificate of Incorporation and
copies of the By-laws of each Loan Party;

            (j) the stock certificate of International  listed on Annex A to the
Pledge  Agreement  Amendment,  together with an undated stock power attached and
executed in blank (collectively, the "International Certificate");

            (k) signed but unfiled form UCC-3  amendments  (copies of which have
been delivered to the  Collateral  Agent on or before the date hereof) under the
Uniform  Commercial  Code as in effect on the date hereof in the State of Nevada
naming Stonebury as debtor and the Collateral  Agent as secured party,  which we
understand will be filed in the office of the Secretary of State of the State of
Nevada and in the filing  office in Washoe county (the "Filing  Offices")  (such
UCC-3 amendments, the "UCC-3 Amendments"); and

            (l) such other documents as we have deemed  necessary or appropriate
as a basis for the opinions set forth below.


<PAGE>


Bankers Trust Company
November 20, 1997
Page 4



            The  agreements  referred  to in clauses  (a)  through (e) above are
referred to herein as the "Subject  Documents"  and  together  with the Mortgage
Amendment and the Deed of Trust Amendment, the "Financing Documents".

            In  our   examination  we  have  assumed  the   genuineness  of  all
signatures,  the legal  capacity of natural  persons,  the  authenticity  of all
documents submitted to us as originals,  the conformity to original documents of
all  documents  submitted  to us as  certified or  photostatic  copies,  and the
authenticity  of the originals of such copies.  As to any facts material to this
opinion which we did not independently  establish or verify, we have relied upon
statements and  representations of the Loan Parties and their officers and other
representatives  in the Subject Documents and the Loan Parties'  Certificate and
of public officials.

            Unless  otherwise  indicated,  references to the term "New York UCC"
shall mean the  Uniform  Commercial  Code as in effect on the date hereof in the
State of New York.  In addition,  references to the term (i)  "Applicable  Laws"
shall mean the General  Corporation Law of the State of Delaware and those laws,
rules  and  regulations  of the  State of New York and of the  United  States of
America (including,  without  limitation,  Regulations G, U and X of the Federal
Reserve  Board)  which,  in  our  experience,   are  ordinarily   applicable  to
transactions  of the kind  contemplated  by the  Subject  Documents,  each as in
effect on the date hereof;  (ii)  "Governmental  Authorities" shall mean any New
York or federal executive,  legislative,  judicial, administrative or regulatory
body; (iii) "Governmental Approval" shall mean any consent,  approval,  license,
authorization or validation of, or filing,  recording or registration  with, any
Governmental  Authority  pursuant to Applicable Laws; (iv)  "Applicable  Orders"
shall mean those  orders,  judgments  or  decrees  of  Governmental  Authorities
applicable to or binding upon the Loan Parties and  identified on Schedule II to
the Loan Parties' Certificate;  and (v) "Applicable  Contracts" shall mean those
agreements  and  instruments  set forth on  Schedule  II hereto  which have been
identified  to us on  Schedule  I of the Loan  Parties'  Certificate  as all the
agreements and instruments that are material to the business or operation of the
Loan Parties.


<PAGE>


Bankers Trust Company
November 20, 1997
Page 5





            We express no opinion as to the laws of any jurisdiction  other than
(i) the laws of the State of New York,  (ii) the General  Corporation Law of the
State of Delaware and (iii) the federal laws of the United  States of America to
the extent  specifically  referred to herein. To the extent that the opinion set
forth in paragraph 9 involves the laws of the State of Nevada,  please note that
we are not  admitted to practice  and are not expert in the laws of the State of
Nevada.  Therefore,  our opinion in paragraph 9, with your permission,  is based
solely on our review of Sections 9-401 and 9-402 of the Uniform  Commercial Code
of the State of Nevada as the same  appears in the  Secured  Transactions  Guide
published by Commerce  Clearing  House,  Inc.,  without  regard to cases decided
thereunder (such Sections of the Uniform  Commercial Code in effect in the State
of Nevada on the date hereof,  the "Nevada UCC").  In  particular,  we call your
attention  to the fact that we express no opinion  with respect to the effect on
the  opinions  herein  expressed of any tax or filing fee required to be paid in
connection with the filing of the UCC-3 Amendments.

            In rendering  the opinions set forth herein,  we have assumed,  with
your consent, that:

            (a) the  execution,  delivery and  performance by each Loan Party of
any of the  Financing  Documents  to which  it is a party  does not and will not
conflict with, contravene,  violate or constitute a default under (i) any lease,
indenture,  instrument  or other  agreement  to  which  such  Loan  Party or its
property is subject (other than the Applicable  Contracts as to which we express
our opinion in paragraph 4 herein),  (ii) any rule,  law or  regulation to which
such Loan Party is subject  (other than  Applicable  Laws as to which we express
our opinion in  paragraph  5 herein),  or (iii) any  judicial or  administrative
order or decree of any governmental  authority (other than the Applicable Orders
as to which we express our opinion in paragraph 7 herein); and


<PAGE>


Bankers Trust Company
November 20, 1997
Page 6




            (b) no  authorization,  consent or other  approval of,  notice to or
filing with any court,  governmental  authority or  regulatory  body (other than
Governmental Approvals as to which we express our opinion in paragraph 6 herein)
is  required to  authorize  or is required  in  connection  with the  execution,
delivery or performance by each Loan Party of any Financing Document to which it
is a party or the transactions contemplated thereby.

            Our  opinions  are also  subject to the  following  assumptions  and
qualifications:

            (a) each of the Subject Documents  constitutes the legal,  valid and
binding  obligation of each party to such Subject  Document (other than the Loan
Parties) enforceable against each such party in accordance with its terms;

            (b) we express no  opinion as to the effect on the  opinions  herein
stated of (i) the compliance or non-compliance of any party (other than the Loan
Parties)  to the  Subject  Documents  with any  state,  federal or other laws or
regulations  applicable  to it or (ii) the  legal or  regulatory  status  or the
nature of the business of any such party;

            (c) we  express  no  opinion  as to any  provision  in the  Security
Agreement,  the  Subsidiary  Security  Agreement  or the Pledge  Agreement  with
respect to governing  law to the extent that it purports to affect the choice of
law governing  perfection and the effect of perfection and non-perfection of the
security interests;

            (d) in rendering our opinions expressed below, we express no opinion
as to the  applicability or effect of any fraudulent  transfer or similar law on
the Subject Documents or any transactions contemplated thereby;

            (e)  enforcement  of  the  Subject   Documents  may  be  limited  by
applicable bankruptcy, insolvency,  reorganization,  moratorium or other similar
laws affecting  creditors' rights generally and by general  principles of equity
(regardless of whether enforcement is sought in equity or at law);


<PAGE>


Bankers Trust Company
November 20, 1997
Page 7




            (f) certain of the remedial  provisions with respect to the security
including  waivers  with  respect  to  the  exercise  of  remedies  against  the
collateral  contained  in  the  Security  Agreement,   the  Subsidiary  Security
Agreement,  the Pledge Agreement and the Subsidiary Guaranty (collectively,  the
"Security  Documents")  may be  unenforceable  in  whole  or in  part,  but  the
inclusion of such  provisions does not affect the validity of each such Security
Document,  taken as a whole, and each such Security Document,  taken as a whole,
together with applicable  law,  contains  adequate  provisions for the practical
realization of the benefits of the security created thereby;

            (g) we  advise  you that with  respect  to  collateral  in which the
Collateral  Agent for the  benefit  of the  Secured  Creditors  (as such term is
defined in the Security Agreement, the Subsidiary Security Agreement and each of
the Existing Mortgages,  respectively) is granted a security interest (i) by HCA
in both the Security  Agreement and the Existing Mortgage to which it is a party
(as  amended  by the  Mortgage  Amendment)  or (ii) by U.S.  Textile in both the
Subsidiary  Security  Agreement and the Existing Mortgage to which it is a party
(as amended by the Deed of Trust  Amendment),  a court may limit the  Collateral
Agent's right to choose among the remedies otherwise given to it with respect to
such collateral by such agreements;

            (h)  enforcement  of  the  Security  Agreement  and  the  Subsidiary
Security  Agreement with respect to the collateral  consisting of a Loan Party's
interest in instruments, leases, contracts or other agreements between such Loan
Party and the other parties to such agreements  ("Contracts")  may be subject to
the terms of such  Contracts,  the rights of such other parties  thereto and any
claims or defenses of such other  parties  against such Loan Party arising under
or outside such Contracts;

            (i) we express no opinion as to the  enforceability of any rights to
contribution or indemnification  provided for in the Subject Documents which are
violative of the public policy underlying any law, rule or regulation (including
any federal or state securities law, rule or regulation);


<PAGE>


Bankers Trust Company
November 20, 1997
Page 8




            (j) we have assumed for purposes of rendering the opinions set forth
herein that (x) the Subsidiary  Guaranty and the Subsidiary  Security  Agreement
have been duly  authorized,  executed and delivered by each of U.S.  Textile and
Stonebury pursuant to the laws of their respective states of incorporation,  (y)
each of U.S.  Textile and Stonebury is duly  incorporated  and validly  existing
under the laws of the state of its  incorporation  and (z) each of U.S.  Textile
and Stonebury has full power,  authority and legal right to make and perform its
obligations under the Subsidiary Guaranty and the Subsidiary Security Agreement.

            We  understand  that you are  separately  receiving  an opinion with
respect to certain of the  foregoing  from  Campbell & Rudisill,  special  North
Carolina counsel to U.S. Textile (the "Local Opinion"),  and we are advised that
such opinion  contains  qualifications.  Our opinions herein stated are based on
the assumptions and qualifications  specified above and we express no opinion as
to the effect on the opinions herein stated of the  qualifications  contained in
the Local Opinion.

            Based  upon  the   foregoing   and   subject  to  the   limitations,
qualifications,  exceptions  and  assumptions  set forth  herein,  we are of the
opinion that:

            1. HCA and  International  (the  "Delaware  Loan Parties") have each
been duly  incorporated  and are validly existing and in good standing under the
laws of the State of Delaware.

            2. Each Delaware  Loan Party has the  corporate  power and corporate
authority to execute,  deliver and perform all of its obligations  under each of
the  Financing  Documents to which it is a party.  The execution and delivery by
each  Delaware  Loan Party of each of the  Financing  Documents to which it is a
party and the  consummation  by each  Delaware  Loan  Party of the  transactions
contemplated thereby have been duly authorized by all requisite corporate action
on the part of such Delaware Loan Party.  Each of the Subject  Documents and the
Mortgage  Amendment  has been duly  executed and delivered by each Delaware Loan
Party which is a party thereto.


<PAGE>


Bankers Trust Company
November 20, 1997
Page 9




            3.  Each  Subject   Document   constitutes  the  valid  and  binding
obligation of each Loan Party which is a party thereto, enforceable against each
such Loan Party in accordance with its terms.

            4. The execution  and delivery by each Loan Party of each  Financing
Document to which it is a party and the  performance  by each such Loan Party of
its obligations under each such Financing Document,  each in accordance with its
terms, do not (a) conflict with the Certificate of  Incorporation  or By-laws of
such Delaware Loan Party,  (b)  constitute a violation of or a default under any
Applicable  Contract or (c) in the case of each Delaware  Loan Party,  cause the
creation of any security interest or lien (other than the liens granted under or
created by the Security  Documents and the Existing Mortgages (as amended by the
Mortgage Amendment and the Deed of Trust Amendment,  respectively))  upon any of
the property of such Loan Party pursuant to any Applicable Contracts.  We do not
express  any  opinion,  however,  as  to  whether  the  execution,  delivery  or
performance by each Loan Party of any Financing  Document to which it is a party
will  constitute a violation of or a default under any covenant,  restriction or
provision  with  respect  to  financial  ratios  or tests or any  aspect  of the
financial  condition or results of operations of such Loan Party,  to the extent
the   determination  of  such  violation  or  default  requires  a  quantitative
determination.

            5. Neither the execution,  delivery or performance by any Loan Party
of any of the Financing  Documents to which it is a party nor the  compliance by
any Loan  Party  with the terms and  provisions  thereof,  will  contravene  any
provision of any Applicable Law.

            5. No  Governmental  Approval,  which has not been obtained or taken
and is not in full force and effect,  is required to authorize or is required in
connection  with the execution,  delivery or performance of any of the Financing
Documents by any Loan Party except the filings and recordings  required by or in
connection with the Security Documents (as defined in the Credit Agreement).


<PAGE>


Bankers Trust Company
November 20, 1997
Page 10





            6. Neither the execution,  delivery or performance by any Loan Party
of its obligations under any of the Subject Documents to which it is a party nor
the  compliance  by such Loan Party with the terms thereof will  contravene  any
Applicable Order applicable to such Loan Party.

            7. The Security Agreement  Amendment does not, of itself,  adversely
affect the validity of the  security  interest of the  Collateral  Agent for the
benefit of the  Lenders  as  security  for the  Obligations  (as  defined in the
Security Agreement Amendment) in that portion of the collateral described in the
Security  Agreement  Amendment which is subject to Article 9 of the New York UCC
(the "Article 9 Collateral")  and after giving effect to the Security  Agreement
Amendment,  the security interest of the Collateral Agent for the benefit of the
Lenders as security for the  Obligations  in the Article 9 Collateral  will be a
valid security interest to the same extent to which it would otherwise have been
immediately  prior to giving  effect to the Security  Agreement  Amendment.  The
Subsidiary  Security Agreement  Amendment does not, of itself,  adversely affect
the validity of the security interest of the Collateral Agent for the benefit of
the  Lenders as  security  for the  Obligations  (as  defined in the  Subsidiary
Security  Agreement  Amendment)  in the Article 9  Collateral  and after  giving
effect to the Subsidiary Security Agreement Amendment,  the security interest of
the  Collateral  Agent  for the  benefit  of the  Lenders  as  security  for the
Obligations in the Article 9 Collateral will be a valid security interest to the
same extent to which it would  otherwise have been  immediately  prior to giving
effect to the Subsidiary Security Agreement Amendment.

            Our opinions in paragraph 8 are limited to Article 9 of the New York
UCC, and therefore such opinions do not address (i) laws of jurisdictions  other
than New York,  and of New York except for  Article 9 of the New York UCC,  (ii)
collateral  of a type not  subject to  Article 9 of the New York UCC,  and (iii)
under  Section  9-103 of the New York UCC,  what law governs  perfection  of the
security interest granted in the collateral covered by this opinion.


<PAGE>


Bankers Trust Company
November 20, 1997
Page 11



            8. The UCC-3  Amendments are in the  appropriate  form for filing in
the Filing Offices under the Nevada UCC. The Filing Offices are the  appropriate
filing  offices  in the State of Nevada  for filing  financing  statements  with
respect to that  portion of the Article 9  Collateral  which may be perfected by
the filing of a financing statement in the State of Nevada.

            9. The Pledge  Agreement  Amendment  does not of  itself,  adversely
affect the  validity,  perfection  or priority of the  security  interest of the
Collateral  Agent for the benefit of the Lenders as security for the Obligations
(as defined in the Pledge Agreement) in the certificates representing the shares
of U.S. Textile and Stonebury identified on Annex A to the Pledge Agreement (the
"Prior Pledged Securities").

            10. The  provisions of the Pledge  Agreement are effective to create
in favor of the Collateral  Agent for the benefit of the Lenders as security for
the Obligations (as defined in the Pledge  Agreement) a valid security  interest
in the  International  Certificate.  The delivery by HCA to the Collateral Agent
for the  benefit of the  Lenders  in the State of New York of the  International
Certificate  will perfect the security  interest of the Collateral  Agent in the
International  Certificate.  Upon such  delivery,  under  the New York  UCC,  no
interest of any creditor of HCA will be equal or prior to the security  interest
of the  Collateral  Agent for the  benefit of the  Lenders in the  International
Certificate.

            Our opinion in  paragraphs  10 and 11 are  subject to the  following
additional assumptions and qualifications:

                        (i) Our opinions in  paragraphs 10 and 11 are limited to
      Articles 8 and 9 of the New York UCC, and therefore,  such opinions do not
      address  (a) laws of  jurisdictions  other than New York,  and of New York
      except for Articles 8 and 9 of the New York UCC, (b)  collateral of a type
      not subject to Articles 8 and 9 of the New York UCC and (c) under  Section
      9-103 of the New York UCC,  what law governs  perfection  of the  security
      interest  granted  in  the  Prior  Pledged  Securities  and  International
      Certificate;


<PAGE>


Bankers Trust Company
November 20, 1997
Page 12



                        (ii) we have assumed that HCA has  sufficient  rights in
      the International  Certificate for the security interest of the Collateral
      Agent for the benefit of the Lenders to attach,  and we express no opinion
      as to the  nature or extent of any of HCA's  rights  in, or title to,  the
      International Certificate;

                        (iii) we have assumed that neither the Collateral  Agent
      nor any of the  Lenders  has notice  prior to or on the date  hereof of an
      adverse claim with respect to the International Certificate;

                        (iv) we express no opinion  with respect to the priority
      of the security  interest of the  Collateral  Agent for the benefit of the
      Lenders in the International  Certificate against a lien creditor (as such
      term is defined in Section  9-301(3) of the New York UCC) with  respect to
      future  advances  to the extent such  future  advances  do not  constitute
      advances made pursuant to a commitment as set forth in Section 9-301(4) of
      the New York UCC;

                        (v)  we express no opinion with respect to proceeds of,
      or distributions on, the International Certificate;

                        (vi)  we  have  assumed  that  (a)  the  Prior   Pledged
      Securities  were delivered to the Collateral  Agent for the benefit of the
      Lenders on October 17, 1994, (b) such securities have been continuously in
      the  possession  of the  Collateral  Agent in the State of New York  since
      October 17, 1994 through the date  hereof,  and (c) the  Collateral  Agent
      currently has possession of the Prior Pledged Securities; and

                        (vii) we express no opinion as to the security  interest
      of the  Collateral  Agent for the benefit of the Lenders in any portion of
      the Prior Pledged Securities,  the continuous  possession of which has not
      been maintained in the State of New York.


<PAGE>


Bankers Trust Company
November 20, 1997
Page 13


            11. No Loan Party is required  to be  registered  as an  "investment
company" under the Investment Company Act of 1940, as amended.

            12. No Loan  Party is a "holding  company"  as defined in the Public
Utility Holding Company Act of 1935, as amended.

            This opinion is being  furnished  only to you and is solely for your
benefit  in  connection  with  the  transactions  contemplated  by  the  Subject
Documents and is not to be used,  circulated,  quoted,  relied upon or otherwise
referred  to by any  other  Person or for any other  purpose  without  our prior
written  consent,  provided  that this opinion may be  furnished to  prospective
assignees  and  participants,  but only  Lenders  shall  have the  right to rely
hereon.


                                    Very truly yours,


<PAGE>


                                   Schedule I


                                    Lenders

Bankers Trust Company
130 Liberty Street
New York, New York 10006


CoreStates Bank, N.A.
1339 Chestnut Street
Fourth Floor
Widener Building
Philadelphia, Pennsylvania 19107


National Westminster Bank Plc
660 Madison Avenue
New York, New York 10021


NationsBank of North Carolina, N.A.
101 North Tryon Street
MS-NC1001-1505
Charlotte, North Carolina 28255


<PAGE>



                                   Schedule II

                         Applicable Contracts

1.   Loan  Agreement by and between  South  Carolina  Jobs-Economic  Development
     Authority as Issuer and Hosiery  Corporation of America,  Inc. as Borrower,
     dated as of June 1, 1992.

2.   Restructuring Agreements: Bill of Sale and Assignment,  dated as of October
     17, 1994 made by Hosiery  Corporation of America,  Inc. as Seller to Joseph
     A. Murphy;  Bill of Sale and Assignment,  dated as of October 17, 1994 made
     by U.S.  Textile  Corporation  as Seller to Joseph A. Murphy;  Agreement of
     Corporate  Separation,  dated as of October 17, 1994 by and between Hosiery
     Corporation of America, Inc. and Joseph A. Murphy;  Instrument and Transfer
     of Hosiery Corporation of America, Inc. rights, interest and title in Trust
     Adoption Agreement by and between Hosiery Corporation of America,  Inc. and
     Nationsbanc of Tennessee, N.A. to Burgundy Investments, Inc.

3.   Employment  Agreement  between U.S.  Textile Corp. and Hans Lengers,  dated
     August 29,  1980,  and an  Amendment  thereto by and between  U.S.  Textile
     Corp.,  Hosiery  Corporation  of  America,  Inc.  and Hans  Lengers,  dated
     September 12, 1994.

4.   Executive Employment Agreement between Hosiery Corporation of America, Inc.
     and Robert J. Mooney, dated September 16, 1993.

5.   Computer   Services   Agreement   between  AMS  and  New  Jersey  Insurance
     Underwriting Association dated as of August 15, 1990.

6.   Computer Services Agreement between AMS and Enchantress Hosiery Corporation
     of Canada,  Ltd. dated September 13, 1990 and Agreement  Amending  Computer
     Services Agreement dated February 15, 1993.

7.   Computer Services Agreement between AMS and RAM Technologies, Inc. dated as
     of April 1, 1994.

8.   Hosiery Supply Agreement  between U.S. Textile  Corporation and Enchantress
     Hosiery  Corporation of Canada Ltd. dated  September 13, 1990 and Agreement
     Amending Hosiery Supply Agreement dated as of February 15, 1993.

<PAGE>





9.    Real Property Lease Agreement (and Letter  Amendments  thereto) for Office
      space at 3369 Progress  Drive,  Bensalem,  Pennsylvania,  between  Hosiery
      Corporation  of America,  Inc. and Emerik  Properties  Corp., a California
      corporation, dated May 27, 1983.

10.   Lease Agreement for warehouse and storage space at 354-56 Dunksferry Road,
      Bensalem,  Pennsylvania  between Hosiery Corporation of America,  Inc. and
      Albert T. Chadwick,  dated March 15, 1995, and extended by Lease Extension
      Agreement, dated December 9, 1996.

11.   Real Property Lease Agreement for Office space at 3100 Mill Street,  Suite
      214,  Reno,   Nevada,   between  The  Stonebury   Group,   Inc.  and  Mill
      International, dated October 13, 1992.

12.   Letter  Agreement,  dated as of October 17, 1994,  Hosiery  Corporation of
      America,  Inc. and Kelso & Company,  Inc. providing for financial advisory
      services fees.


<PAGE>



              Exhibit A to Opinion of Special Counsel to
                 Hosiery Corporation of America, Inc.


                         Officer's Certificate

            The  undersigned,  John F. Biagini,  President  and Chief  Executive
Officer of Hosiery  Corporation of America,  Inc.  ("HCA"),  President and Chief
Executive  Officer  of  The  Stonebury  Group  Incorporated  ("Stonebury"),  and
President  of Hosiery  Corporation  International  ("HCI") and Arthur C. Hughes,
Assistant Secretary of U.S. Textile Corp. (together with HCA, Stonebury and HCI,
the "Loan  Parties")  understand  that  pursuant to Section  5.01(b)(i)  of that
certain Amendment and Restatement,  dated as of November 20, 1997, to the Credit
Agreement, dated as of October 17, 1994 (the "Credit Agreement"), among HCA, the
financial  institutions  listed  from  time  to time on  Annex  I  thereto  (the
"Lenders")  and Bankers  Trust  Company,  as agent for the Lenders  (all of such
parties other than HCA, the "Recipients"),  Skadden, Arps, Slate, Meagher & Flom
LLP is  rendering an opinion  dated  November  20, 1997 (the  "Opinion")  to the
Recipients.  Capitalized  terms used herein but not otherwise defined shall have
the  meanings  set forth in the Credit  Agreement.  We further  understand  that
Skadden,  Arps,  Slate,  Meagher  &  Flom  LLP  is  relying  on  this  officer's
certificate and the statements made herein in rendering such Opinion.

            With regard to the  foregoing,  on behalf of each of the  Subsidiary
Guarantors or Loan Parties, as the case may be, we certify (with respect to each
Loan Party of which we are an officer) that:

            1. Set forth on  Schedule  I hereto  are all of the  agreements  and
instruments to which the Loan Parties are party or by which they or any of their
assets are bound and which are material to the business or operation of the Loan
Parties.

            2. Set forth on Schedule II hereto are all of the orders,  judgments
and decrees,  known to us, of any governmental  authority which are specifically
applicable to each Loan Party.


<PAGE>


            3.  Less than 20  percent  of the  assets  of each  Loan  Party on a
consolidated  basis and on an  unconsolidated  basis consist of margin stock (as
such term is defined in  Regulation G or  Regulation U of the Board of Governors
of the Federal Reserve System).

            4. Each Loan Party (a) is primarily  engaged,  directly or through a
wholly-owned subsidiary or subsidiaries,  in a business or businesses other than
that of investing, reinvesting, owning, holding or trading in securities and (b)
is not  engaged and does not  propose to engage in the  business  of  investing,
reinvesting,  owning,  holding  or trading  in  securities,  and does not own or
propose to acquire investment securities having a value exceeding 40 per cent of
the value of such Loan Party's total assets (exclusive of government  securities
and cash items) on an unconsolidated basis.

            5. As of June 30,  1997,  the total value of  investment  securities
(other than  securities of majority or wholly-owned  subsidiaries)  of each Loan
Party represented less than 45 percent of the total assets of such Loan Party on
an  unconsolidated  basis and such securities  (other than as aforesaid) are not
expected  upon  consummation  of the  transactions  contemplated  by the  Credit
Agreement  and the Security  Documents to exceed 30 percent of such Loan Party's
total assets as defined in the Investment  Company Act of 1940, as amended.  For
purposes of this  certificate,  "investment  securities"  means any note, stock,
treasury  stock,  bond,  debenture,  evidence of  indebtedness,  certificate  of
interest or  participation  in any  profit-sharing  agreement,  collateral-trust
certificate,  preorganization  certificate or subscription,  transferable share,
investment  contract,  voting-trust  certificate,  certificate  of deposit for a
security,  fractional  undivided  interest in oil, gas, or other mineral rights,
any put,  call,  straddle,  option or  privilege  on any  security  (including a
certificate  of deposit) or on any group or index of securities  (including  any
interest  therein or based on the value  thereof),  or any put, call,  straddle,
option or privilege entered into on a national  securities  exchange relating to
foreign currency, or, in general, any interest or instrument commonly known as a
"security," or any  certificate of interest or  participation  in,  temporary or
interim  certificate  for,  receipt  for,  guarantee  of, or warrant or right to
subscribe to or purchase, any of the foregoing.

                                       2
<PAGE>




            6. None of the Loan Parties owns or operates facilities used for the
generation, transmission, or distribution of electric energy for sale ("electric
utility facilities").

            7. None of the Loan Parties owns or operates facilities used for the
distribution at retail of natural or manufactured  gas for heat,  light or power
("gas utility facilities").

            8. None of the Loan Parties  directly or indirectly,  or through one
or more intermediary companies,  owns, controls, or holds with power to vote (a)
10 percent or more of the outstanding  securities (such as notes, drafts, stock,
treasury stock, bonds, debentures,  certificates of interest or participation in
any profit  sharing  agreements or in oil,  gas, or other  mineral  royalties or
leases,   collateral  trust   certificates,   preorganization   certificates  or
subscriptions,   transferable   shares,   investment   contracts,   voting-trust
certificates,  certificates  of deposit for a security,  receiver's or trustee's
certificates,  or  including  any  instrument  commonly  known  as a  "security"
(including any certificate of interest or participation in, temporary or interim
certificate  for,  receipt for,  guaranty  of,  assumption  of liability  on, or
warrant or right to subscribe to or purchase  any of the  foregoing))  presently
entitling  the owner or holder  thereof to vote upon the direction of management
of, or any such instrument  issued under or pursuant to any trust,  agreement or
arrangement  whereby a trustee or  trustees  or agent or agents for the owner or
holder of such  instrument  is  presently  entitled to vote in the  direction or
management of, any corporation,  partnership,  association, joint-stock company,
joint venture or trust that owns or operates any electric utility  facilities or
gas utility  facilities,  or (b) any other interest  directly or indirectly,  or
through one or more intermediary entities, in (i) any corporation,  partnership,
association,  joint-stock company,  joint venture or trust that owns or operates
any electric utility  facilities or gas utility  facilities,  or (ii) any of the
foregoing  types of entities which have received notice of the sort described in
Paragraph 9 below.

            9. None of the Loan Parties has received  notice that the Securities
and Exchange Commission has determined,  or may determine,  that such Loan Party
exercises a  controlling  influence  over the  management  or  direction  of the
policies of a gas utility
                                       3
<PAGE>


company or an electric utility company as to make it subject to the obligations,
duties and  liabilities  imposed  upon holding  companies by the Public  Utility
Holding Company Act of 1935, as amended.


                                       4
<PAGE>



            IN  WITNESS  WHEREOF,  each of the  undersigned  has  executed  this
certificate this ____ day of November, 1997.




                                    -------------------------
                                    Name:  John F. Biagini
                                    Title: President & CEO,
                                              HCA and Stonebury
                                            President, HCI



                                    -------------------------
                                    Name:  Arthur C. Hughes
                                    Title: Assistant Secretary,
                                              U.S. Textile Corp.



                                       5
<PAGE>


                                   Schedule I

                              APPLICABLE CONTRACTS


1.   Loan  Agreement by and between  South  Carolina  Jobs-Economic  Development
     Authority as Issuer and Hosiery  Corporation of America,  Inc. as Borrower,
     dated as of June 1, 1992.

2.   Restructuring Agreements: Bill of Sale and Assignment,  dated as of October
     17, 1994 made by Hosiery  Corporation of America,  Inc. as Seller to Joseph
     A. Murphy;  Bill of Sale and Assignment,  dated as of October 17, 1994 made
     by U.S.  Textile  Corporation  as Seller to Joseph A. Murphy;  Agreement of
     Corporate  Separation,  dated as of October 17, 1994 by and between Hosiery
     Corporation of America, Inc. and Joseph A. Murphy;  Instrument and Transfer
     of Hosiery Corporation of America, Inc. rights, interest and title in Trust
     Adoption Agreement by and between Hosiery Corporation of America,  Inc. and
     Nationsbanc of Tennessee, N.A. to Burgundy Investments, Inc.

3.   Employment  Agreement  between U.S.  Textile Corp. and Hans Lengers,  dated
     August 29,  1980,  and an  Amendment  thereto by and between  U.S.  Textile
     Corp.,  Hosiery  Corporation  of  America,  Inc.  and Hans  Lengers,  dated
     September 12, 1994.

4.   Executive Employment Agreement between Hosiery Corporation of America, Inc.
     and Robert J. Mooney, dated September 16, 1993.

5.   Computer   Services   Agreement   between  AMS  and  New  Jersey  Insurance
     Underwriting Association dated as of August 15, 1990.

6.   Computer Services Agreement between AMS and Enchantress Hosiery Corporation
     of Canada,  Ltd. dated September 13, 1990 and Agreement  Amending  Computer
     Services Agreement dated February 15, 1993.

7.   Computer Services Agreement between AMS and RAM Technologies, Inc. dated as
     of April 1, 1994.

                                      I-1
<PAGE>



8.    Hosiery Supply Agreement between U.S. Textile  Corporation and Enchantress
      Hosiery  Corporation of Canada Ltd. dated September 13, 1990 and Agreement
      Amending Hosiery Supply Agreement dated as of February 15, 1993.

9.    Real Property Lease Agreement (and Letter  Amendments  thereto) for Office
      space at 3369 Progress  Drive,  Bensalem,  Pennsylvania,  between  Hosiery
      Corporation  of America,  Inc. and Emerik  Properties  Corp., a California
      corporation, dated May 27, 1983.

10.   Lease Agreement for warehouse and storage space at 354-56 Dunksferry Road,
      Bensalem,  Pennsylvania  between Hosiery Corporation of America,  Inc. and
      Albert T. Chadwick,  dated March 15, 1995 and extended by Lease  Extension
      Agreement dated December 9, 1996.

11.   Real Property Lease Agreement for Office space at 3100 Mill Street,  Suite
      214,  Reno,   Nevada,   between  The  Stonebury   Group,   Inc.  and  Mill
      International, dated October 13, 1992.

12.   Letter  Agreement,  dated as of October 17, 1994,  Hosiery  Corporation of
      America,  Inc. and Kelso & Company,  Inc. providing for financial advisory
      services fees.

                                      I-2
<PAGE>

                              Schedule II

                           APPLICABLE ORDERS


                                 None.


                                      II-1
<PAGE>



November 20, 1997

Bankers Trust Company,
as Agent
130 Liberty Street
New York, NY  10006
                                                VIA FACSIMILE

RE:  AMENDED AND RESTATED  SUBSIDIARY  AGREEMENTS  ENTERED INTO BY U.S.  TEXTILE
     CORPORATION  ON BEHALF OF HOSIERY  CORPORATION  OF  AMERICA,  INC. - CREDIT
     AGREEMENT WITH BANKERS TRUST COMPANY

Gentlemen:

      We have  served as counsel  to U.S.  Textile  corp.  ("U.S.  Textile),  in
connection with the Amendment and Restatement, dated as of November 20, 1997, to
Credit  Agreement,  dated as of October 17,  1994,  (as so amended,  the "Credit
Agreement") among Hosiery Corporation of America, Inc., the lending institutions
party  thereto (the  "Lenders")  and Bankers  Trust  Company,  as Agent (in such
capacity the "Agent") for the Lenders.  This opinion is being rendered  pursuant
to Section  5.01(b)(iii) of the Credit Agreement.  Capitalized terms used herein
and not  otherwise  defined  herein shall have the same meanings as set forth in
the Credit Agreement.

      In rendering this opinion,  we have prepared  and/or  examined each of the
following documents:

1.   Amendment and Restatement, dated as of November 20, 1997, to the Subsidiary
     Guaranty dated as of October 17, 1994,  made by each of The Stonebury Group
     Incorporated,   U.S.   Textile   and  Hosiery   Corporation   International
     (collectively,  the  "Guarantors") in favor of the Agent for the benefit of
     the Bank Creditors and Interest Rate Creditors (as defined therein).

2.   Amendment and Restatement, dated as of November 20, 1997, to the Subsidiary
     Security  Agreement,  dated as of  October  17,  1994,  made by each of the
     guarantors in favor of Bankers Trust Company,  as Collateral  Agent for the
     benefit of the Secured Creditors (as defined therein).


<PAGE>



Bankers Trust Company
November 20, 1997
Page Two



3.   First  Amendment  dated  November  20,  1997  to Deed  of  Trust,  Security
     Agreement,  Assignment of Lease, Rents and Profits, Financing Statement and
     Financing Statement and Fixture Filing dated October 17, 1994.

4.   Consent in lieu of meeting of the Board of Directors of U.S.  Textile dated
     November 20, 1997.

      Based upon the  foregoing  and our  further  investigation,  we are of the
opinion that:

1.   U.S. Textile has been duly incorporated and is validly existing and in good
     standing  under the laws of the State of North Carolina as evidenced by the
     attached  Certificate  of  Existence  issued  November  17,  1997,  by  the
     Secretary of State of North Carolina.

2.   U.S. Textile has the corporate power and authority to execute,  deliver and
     perform all of its obligations under each of the above documents.

3.   The execution and delivery by U.S. Textile of the subsidiary  documents and
     the consummation by it of all transactions  contemplated  thereby have been
     duly  authorized  by all  requisite  corporate  action  on the part of U.S.
     Textile.  Subject to confirmation to us by facsimile of the signature pages
     on the date of  closing,  that the  subsidiary  documents  have  been  duly
     executed and delivered by U.S. Textile.

ASSUMPTIONS

      Rendering this opinion, we have made the following assumptions:

a.   The  signatures  and  notary  acknowledgments  relating  to the  subsidiary
     documents are genuine and complete.

b.   The subsidiary documents were not executed or delivered under fraud, duress
     or mistake.


<PAGE>


Bankers Trust Company
November 20, 1997
Page Three


c.   The parties  executing  and  delivering  the  subsidiary  documents had the
     requisite mental capacity to do same.

d.   The copies of the documents which we examined were true and complete copies
     of the original documents.

QUALIFICATIONS

      The opinions  expressed above are subject to the following  qualifications
and limitations:

a.   The   effect   of   the   applicable   bankruptcy   insolvency   moratorium
     reorganization arrangement or other similar laws now or hereafter in effect
     affecting the rights of creditors generally.

b.   The opinion delivered herein is limited to matters of North Carolina law.

c.   Matters  expressly  stated  herein  and no opinion  is  inferred  or may be
     implied beyond the matters expressly stated.

      This  opinion is  furnished  to you pursuant to your request and is solely
for your benefit and may not be relied upon,  nor copies  delivered to any other
person without our prior written consent.

                                          Sincerely,



                                          John R. Campbell

JRC:emo
cc:   Mr. John Duncan
      U.S. Textile Corporation


<PAGE>




SJG:LAN                                               November 20, 1997




To:   The Agent and various lending institutions
      (collectively, the "Banks") party to the
      Credit Agreement referred to below


re    Amendment  and  Restatement,  dated  as of  November  20,  1997 to  Credit
      Agreement,  dated as of October 17, 1994,  among  Hosiery  Corporation  of
      America, Inc., (the "Borrower") and the Banks (the "Credit Agreement")

Ladies and Gentlemen:

            We have  acted as special  counsel to the Banks  party to the Credit
Agreement in connection with the execution and delivery of the Credit Agreement.
This opinion is delivered to you pursuant to Section  5.01(b)(ii)  of the Credit
Agreement.  Terms used herein  which are defined in the Credit  Agreement  shall
have the respective  meanings set forth in the Credit Agreement unless otherwise
defined herein.

            In connection with this opinion, we have examined the originals,  or
certified,  conformed  or  reproduction  copies,  of  all  records,  agreements,
instruments  and documents as we have deemed  relevant or necessary as the basis
for the opinions hereinafter expressed.  In stating our opinion, we have assumed
the  genuineness  of  all  signatures  on  original  or  certified  copies,  the
authenticity  of documents  submitted to us as originals  and the  conformity to
original or  certified  copies of all copies  submitted  to us as  certified  or
reproduction copies.



<PAGE>


            We have also assumed, for purposes of the opinions expressed herein,
that the parties to the Credit  Agreement have the corporate power and authority
to enter into and perform the Credit Agreement and that the Credit Agreement has
been duly authorized, executed and delivered by each such party.

            Based upon the foregoing,  and subject to the  limitations set forth
herein,  we are of the opinion that the Credit  Agreement  constitutes the valid
and binding obligation of the Borrower  enforceable in accordance with its terms
except to the extent that  enforcement may be limited by applicable  bankruptcy,
insolvency,  reorganization  or other similar laws affecting  creditors'  rights
generally and by equity principles  (regardless of whether enforcement is sought
in equity or at law).

            We have not been requested to render and, with your  permission,  we
express no opinion as to the  applicability  to the  obligations of the Borrower
under the Credit  Agreement of Section 548 of the Bankruptcy Code and Article 10
of the New York Debtor & Creditor  Law  relating  to  fraudulent  transfers  and
obligations.  We  understand,  without  independent  verification,  that, to the
extent they have deemed  necessary in the context of the  proposed  transaction,
the Banks have  satisfied  themselves on the basis of, among other  things,  the
financial  information  furnished to the Banks and their knowledge of the credit
facilities  available to the Borrower,  that neither the Borrower nor any of its
Subsidiaries  is  insolvent  and  that  neither  the  Borrower  nor  any  of its
Subsidiaries will be rendered insolvent by the transactions  contemplated by the
Credit Agreement and the other Credit Documents and that, after giving effect to
such transactions, neither the Borrower nor any of its Subsidiaries will be left
with unreasonably small capital with which to engage in its anticipated business
and that neither the Borrower nor any of its Subsidiaries  will have intended to
incur, or will have believed it has incurred, debts beyond its ability to pay as
such debts mature.

            This  opinion is limited to the federal law of the United  States of
America and the law of the State of New York.

                                    Very truly yours,



<PAGE>

                                                              EXHIBIT E



                      FORM OF OFFICER'S CERTIFICATE


            I,  the   undersigned,   [President][Vice   President]   of  Hosiery
Corporation  of America,  Inc., a corporation  organized and existing  under the
laws of the State of Delaware (the  "Company"),  do hereby  certify on behalf of
the Company that:

            1. This  Certificate  is  furnished  pursuant to the  Amendment  and
Restatement,  dated as of November 20, 1997,  amending and  restating the Credit
Agreement, dated October 17,1994, among the Company, the Banks from time to time
party thereto and Bankers Trust Company, as Agent (such Credit Agreement,  as in
effect  on the  date of this  Certificate,  being  herein  called  the "  Credit
Agreement").  Unless otherwise  defined herein,  capitalized  terms used in this
Certificate shall have the meanings set forth in the Credit Agreement.

            2. The following named individuals are elected or appointed officers
of the  Company  and the other  Credit  Parties,  each  holds the  office of the
Company or such other Credit Party set forth opposite his name and has held such
office since ______ ___,  19__.9/ The  signature  written  opposite the name and
title of each such officer is his genuine signature.

           Name10/          Office         Credit Party       Signature

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

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

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

            3.  Attached  hereto  as  Exhibit  A  is a  certified  copy  of  the
Certificate  of  Incorporation  of the Company and each other Credit  Party,  as
filed in the Office of the Secretary of State of the State of  incorporation  of
such Credit Party, together with all amendments thereto adopted through the date
hereof.


<PAGE>


                                                              EXHIBIT E
                                                                 Page 2



            4.  Attached  hereto as Exhibit B is a true and correct  copy of the
By-Laws of the Company and each other Credit Party which were duly adopted, were
in full force and effect on the date of adaption of the resolutions  referred to
in paragraph 5 hereof and are in full force and effect on the date hereof.

            5.  Attached  hereto  as  Exhibit  C is a true and  correct  copy of
resolutions  of the Company and each other  Credit Party which were duly adopted
on __________,  19__ [by unanimous  written consent of the Board of Directors of
the Company or such other Credit  Party] [by a meeting of the Board of Directors
of the  Company or such other  Credit  Party at which a quorum was  present  and
acting  throughout],  and said resolutions  have not been rescinded,  amended or
modified.  Except as  attached  hereto as  Exhibit C, no  resolutions  have been
adopted by the Board of Directors of the Company or any other Credit Party which
deal with the execution,  delivery or performance of any of the Credit Documents
to which any such Credit Party is party.

            6. On the date hereof, all of the applicable conditions set forth in
Sections 5.01(f) and (i) and 5.02 have been satisfied.

            7. On the date  hereof,  the  representations  and  warranties
contained in the Credit Agreement and in the other Credit Documents are true and
correct  in  all  material   respects  with  the  same  effect  as  though  such
representations and warranties had been made on the date hereof, both before and
after  giving  effect  to the  incurrence  of Loans on the date  hereof  and the
application  of the  proceeds  thereof,  unless  stated to relate to a  specific
earlier date, in which case such  representations  and warranties  were true and
correct in all material respects as of such earlier date.

            8. On the date  hereof,  no Default or Event of Default has occurred
and is continuing or would result from the Borrowing to occur on the date hereof
or from the application of the proceeds thereof.



<PAGE>



                                                              EXHIBIT E
                                                                 Page 3









            9. There is no proceeding for the  dissolution or liquidation of the
Company or threatening its existence.


            IN WITNESS  WHEREOF,  I have  hereunto set my hand this _____ day of
November, 1997.


                                    HOSIERY CORPORATION OF
                                       AMERICA, INC.



                                    By_______________________
                                         Name:
                                         Title:


<PAGE>

                                                                       EXHIBIT E
                                                                          PAGE 4


I, the undersigned,  [Secretary/Assistant  Secretary] of the Company,  do hereby
certify that:

            1. [Name of Person making above  certifications] is the duly elected
and qualified [President/Vice  President] of the Company and the signature above
is his genuine signature.

            2.  The  certifications   made  by  [name  of  Person  making  above
certifications] in Items 2, 3, 4, 5 and 9 above are true and correct.


            IN WITNESS  WHEREOF,  I have  hereunto  set my hand this __th day of
November, 1997.


                                    HOSIERY CORPORATION OF
                                       AMERICA, INC.


                                    By__________________________
                                         Name:
                                         Title:


<PAGE>

                                               EXHIBIT F



        FORM OF BORROWING BASE CERTIFICATE AS OF _________ ISSUED
         BY HOSIERY CORPORATION OF AMERICA, INC. (THE BORROWER")

                                                               Dollars ($)
                                                               in Thousands

I.    ADVANCE RATE ELIGIBILITY

      A.    GAAP BOOK VALUE OF ACCOUNTS RECEIVABLE OF
            THE BORROWER AND THE SUBSIDIARY GUARANTORS              $______

      B.    A X 80%                                                 $______

      C.    GAAP BOOK VALUE OF INVENTORY OF THE
            BORROWER AND THE SUBSIDIARY GUARANTORS                  $______

      D.    C X 50%                                                 $______

      E.    BORROWING BASE (B + D)                                  $______

      F.    REVOLVING LOANS AND SWINGLINE LOANS
            OUTSTANDING                                             $______

      G.    TOTAL BORROWING AVAILABILITY (E - F)                    $______


            I,  the  undersigned,  Vice  President  and  Controller  of  Hosiery
Corporation of America, Inc. do hereby certify that the figures stated above are
true and correct as of the date first above written.


            IN WITNESS  WHEREOF,  I have  hereunto  set my hand this ____ day of
_____________.


                              By:___________________________
                                 Arthur Hughes
                                 Vice President & Controller


<PAGE>

                                                       [EXHIBIT G CONFORMED
                                                       AS EXECUTED]

                               SUBSIDIARY GUARANTY


            AMENDMENT  AND  RESTATEMENT  dated as of November 20,  1997,  to the
SUBSIDIARY  GUARANTY,  dated as of October  17,  1994 (as  amended,  modified or
supplemented  from  time to  time,  the  "Guaranty"),  made  by each  Subsidiary
Guarantor of the Borrower whose name appears below (each Subsidiary  Guarantor a
"Guarantor" and  collectively  the  "Guarantors").  Except as otherwise  defined
herein, terms used herein and defined in the Credit Agreement (as defined below)
shall have their respective meanings as set forth therein.


                          W I T N E S S E T H :


            WHEREAS Hosiery Corporation of America,  Inc. (the "Borrower"),  the
financial institutions from time to time party thereto (the "Banks") and Bankers
Trust  Company,  as Agent  (the  "Agent"  and  together  with the  Banks and the
Collateral  Agent,  the "Bank  Creditors"),  have entered into an Amendment  and
Restatement,  dated as of November 20, 1997,  amending and  restating the Credit
Agreement  dated as of October 17, 1994 (as  amended,  modified or  supplemented
from time to time,  the "Credit  Agreement"),  providing for the making of Loans
and the issuance of, and  participation  in,  Letters of Credit as  contemplated
therein;

            WHEREAS,  the Borrower may from time to time be party to one or more
Interest Rate  Agreements  (each such Interest Rate  Agreement  with an Interest
Rate Creditor (as defined  below),  a "Secured  Interest Rate  Agreement")  with
Bankers  Trust  Company,  in its  individual  capacity  ("BTCo"),  any Bank or a
syndicate  of financial  institutions  organized by BTCo or an affiliate of BTCo
(even if BTCo or any such Bank  ceases to be a Bank under the  Credit  Agreement
for any reason), and any institution that participates therein, and in each case
their subsequent assigns (collectively,  the "Interest Rate Creditors",  and the
Interest Rate  Creditors  together  with the Bank  Creditors,  collectively  the
"Creditors");

            WHEREAS, each Guarantor is a wholly-owned direct Subsidiary of the
 Borrower;

            WHEREAS,  it is a condition  to the making of Loans and the issuance
of, and participation in, Letters of Credit under the Credit Agreement that each
Guarantor shall have executed and delivered this Guaranty; and

                                       1
<PAGE>



            WHEREAS,  each Guarantor will obtain benefits from the extensions of
credit to the Borrower  under the Credit  Agreement and entering into of Secured
Interest Rate  Agreements  and  accordingly  desires to execute this Guaranty in
order to satisfy the conditions described in the preceding paragraph;


            NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to each  Guarantor,  the receipt  and  sufficiency  of which are hereby
acknowledged,  each  Guarantor  hereby makes the following  representations  and
warranties to the  Creditors and hereby  covenants and agrees with each Creditor
as follows:

            1. Each Guarantor  irrevocably and unconditionally,  and jointly and
severally, guarantees:

      (i) to the Bank Creditors the full and prompt payment when due (whether at
   the stated maturity, by acceleration or otherwise) of:

            (a) the  principal  of and  interest on the Notes issued by, and the
   Loans made to, the Borrower under the Credit Agreement, (b) all reimbursement
   obligations  and Unpaid  Drawings  with  respect to Letters of Credit  issued
   under  the  Credit  Agreement,  and  (c)  all  other  obligations  (including
   obligations  which,  but for any automatic  stay under Section  362(a) of the
   Bankruptcy Code, would become due) and liabilities owing by the Borrower to a
   Bank Creditor under the Credit Agreement and the Credit Documents (including,
   without limitation,  indemnities,  Fees and interest thereon) now existing or
   hereafter  incurred  under,  arising out of or in connection  with the Credit
   Agreement or any other Credit Document and the due performance and compliance
   with  the  terms of the  Credit  Documents  (all  such  principal,  interest,
   liabilities and obligations, the "Credit Document Obligations"); and

      (ii) to each Interest  Rate Creditor the full and prompt  payment when due
   (whether  at the  stated  maturity,  by  acceleration  or  otherwise)  of all
   obligations  (including  obligations  which, but for any automatic stay under
   Section  362(a) of the  Bankruptcy  Code,  would become due) and  liabilities
   owing by the Borrower under any Secured Interest Rate Agreement,  whether now
   in existence or hereafter arising,  and the due performance and compliance by
   the Borrower with all terms, conditions and agreements contained therein (all
   such obligations and liabilities,  the "Interest Rate  Obligations",  and the
   Interest  Rate  Obligations  together with the Credit  Document  Obligations,
   collectively the "Guaranteed Obligations"); provided, that the maximum amount
   payable hereunder by
                                       2
<PAGE>

   each Guarantor with respect to the  Guaranteed  Obligations  shall at no time
   exceed the  Maximum  Amount (as  defined  below) of such  Guarantor.  As used
   herein,  Maximum  Amount  means an amount equal to 90% of the amount by which
   (i) the present fair saleable value of such  Guarantor's  assets exceeds (ii)
   the  total  liabilities  of such  Guarantor  (including  the  maximum  amount
   reasonably expected to come due in respect of contingent  liabilities,  other
   than  contingent  liabilities  of such  Guarantor  hereunder),  in each  case
   determined on the Restatement Effective Date or on the day any demand is made
   under this Guaranty,  whichever  date results in the higher  Maximum  Amount.
   Each  Guarantor  understands,  agrees and  confirms  that the  Creditors  may
   enforce  this  Guaranty up to the full amount of the  Guaranteed  Obligations
   against  each  Guarantor  (subject  to the  proviso in the  second  preceding
   sentence)  without  proceeding  against the  Borrower or any security for the
   Guaranteed Obligations, or under any other guaranty covering all or a portion
   of the  Guaranteed  Obligations.  All payments by each  Guarantor  under this
   Guaranty  shall be made on the same basis as payments by the  Borrower  under
   Sections 4.03 and 4.04 of the Credit Agreement.

            2.   Additionally,    each   Guarantor,    jointly   and   severally
unconditionally and irrevocably guarantees the payment of any and all Guaranteed
Obligations  (subject to the proviso  contained  above) upon the  occurrence  in
respect of the  Borrower  not a party of any of the events  specified in Section
9.05 of the Credit Agreement,  and unconditionally  and irrevocably  promises to
pay such Guaranteed Obligations to the Creditors on demand.

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

            4. The  obligations of each Guarantor  hereunder are  independent of
the obligations of any other Guarantor, any other guarantor or the Borrower, and
a  separate  action or  actions  may be  brought  and  prosecuted  against  each
Guarantor  whether or not action is brought  against  any other  Guarantor,  any
other  guarantor  or the Borrower  and whether or not any other  Guarantor,  any
other guarantor of the Borrower be joined in any such action or actions.

                                       3
<PAGE>


            5.  Each  Guarantor  hereby  waives  notice  of  acceptance  of this
Guaranty  and  notice  of any  liability  to  which  it may  apply,  and  waives
promptness,  diligence,  presentment,  demand  of  payment,  protest,  notice of
dishonor or nonpayment of any such  liabilities,  suit or taking of other action
by the Agent or any other Creditor  against,  and any other notice to, any party
liable  thereon  (including  each  Guarantor  or  any  other  guarantor  of  the
Borrower).

            6. Any  Creditor  may at any time and from time to time  without the
consent of, or notice to, each Guarantor,  without  incurring  responsibility to
each Guarantor, without impairing or releasing the obligations of each Guarantor
hereunder, upon or without any terms or conditions and in whole or in part:

            (i) change the manner,  place or terms of payment of,  and/or change
      or extend the time of payment of,  renew or alter,  any of the  Guaranteed
      Obligations,  any security therefor, or any liability incurred directly or
      indirectly in respect thereof, and the guaranty herein made shall apply to
      the Guaranteed Obligations as so changed, extended, renewed or altered;

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

          (iii)  exercise  or refrain  from  exercising  any rights  against the
      Borrower,  any other  guarantor or others or otherwise act or refrain from
      acting;

           (iv) settle or  compromise  any of the  Guaranteed  Obligations,  any
      security  therefor or any  liability  (including  any of those  hereunder)
      incurred  directly or  indirectly  in respect  thereof or hereof,  and may
      subordinate  the payment of all or any part  thereof to the payment of any
      liability  (whether  due or  not)  of the  Borrower  to  creditors  of the
      Borrower;

            (v) apply any sums by whomsoever  paid or howsoever  realized to any
      liability or  liabilities  of the Borrower to the Creditors  regardless of
      what liabilities of the Borrower remain unpaid;

           (vi)  consent  to or waive any  breach  of, or any act,  omission  or
      default  under,  any of the Credit  Documents,  the Secured  Interest Rate
      Agreements or any of the instruments or agreements referred to therein, or
      otherwise  amend,  modify or supplement any of the Credit  Documents,  the
      Secured  Interest  Rate  Agreements  or any of such other  instruments  or
      agreements; and/or

                                       4
<PAGE>


          (vii) act or fail to act in any manner  referred  to in this  Guaranty
      which may deprive such Guarantor of its right to  subrogation  against the
      Borrower to recover full  indemnity for any payments made pursuant to this
      Guaranty.

            7. No invalidity,  irregularity  or  unenforceability  of all or any
part of the  Guaranteed  Obligations  or of any security  therefor shall affect,
impair or be a defense to this  Guaranty,  and this  Guaranty  shall be primary,
absolute and  unconditional  notwithstanding  the occurrence of any event or the
existence of any other circumstances which might constitute a legal or equitable
discharge  of a surety or  guarantor  except  payment in full of the  Guaranteed
Obligations.

            8. This Guaranty is a continuing one and all liabilities to which it
applies or may apply under the terms  hereof shall be  conclusively  presumed to
have been  created in  reliance  hereon.  No failure or delay on the part of any
Creditor in exercising any right, power or privilege  hereunder shall operate as
a waiver thereof;  nor shall any single or partial exercise of any right,  power
or privilege  hereunder  preclude any other or further  exercise  thereof or the
exercise of any other right, power or privilege.  The rights and remedies herein
expressly  specified are  cumulative and not exclusive of any rights or remedies
which  any  Creditor  would  otherwise  have.  No  notice  to or  demand on each
Guarantor in any case shall entitle each  Guarantor to any other further  notice
or demand in similar or other circumstances or constitute a waiver of the rights
of any  Creditor  to any other or further  action in any  circumstances  without
notice or demand.  It is not  necessary  for any  Creditor  to inquire  into the
capacity or powers of the Borrower or any of its  Subsidiaries  or the officers,
directors, partners or agents acting or purporting to act on its behalf, and any
indebtedness  made or created in reliance  upon the  professed  exercise of such
powers shall be guaranteed hereunder.

            9. Any  indebtedness  of the Borrower now or hereafter  held by each
Guarantor  is hereby  subordinated  to the  indebtedness  of the Borrower to the
Creditors;  and such  indebtedness  of the  Borrower to each  Guarantor,  if the
Collateral Agent, after an Event of Default has occurred, so requests,  shall be
collected,  enforced and received by each Guarantor as trustee for the Creditors
and be paid over to the Creditors on account of the indebtedness of the Borrower
to the Creditors, but without affecting or impairing in any manner the liability
of each  Guarantor  under the other  provisions of this  Guaranty.  Prior to the
transfer by each Guarantor of any note or negotiable  instrument  evidencing any
indebtedness of the Borrower to each  Guarantor,  each Guarantor shall mark such
note or  negotiable  instrument  with a legend  that the same is subject to this
subordination.

                                       5
<PAGE>


            10. (a) Each  Guarantor  hereby waives any right (except as shall be
required by  applicable  statute and cannot be waived) to require the  Creditors
to: (i) proceed against the Borrower, any other guarantor of the Borrower or any
other  party;  (ii)  proceed  against  or  exhaust  any  security  held from the
Borrower,  any other  guarantor  of the  Borrower or any other  party;  or (iii)
pursue any other  remedy in the  Creditors'  power  whatsoever.  Each  Guarantor
waives any defense based on or arising out of any defense of the  Borrower,  any
other guarantor of the Borrower or any other party other than payment in full of
the Guaranteed Obligations,  including, without limitation, any defense based on
or arising out of the  disability  of the Borrower,  any other  guarantor of the
Borrower  or  any  other  party,  or  the  unenforceability  of  the  Guaranteed
Obligations or any part thereof from any cause,  or the cessation from any cause
of the  liability of the Borrower  other than payment in full of the  Guaranteed
Obligations.  The Creditors  may, at their  election,  foreclose on any security
held by the Agent,  the Collateral  Agent or the other  Creditors by one or more
judicial or nonjudicial  sales,  whether or not every aspect of any such sale is
commercially  reasonable  (to the extent such sale is  permitted  by  applicable
law),  or exercise any other right or remedy the  Creditors may have against the
Borrower or any other party, or any security,  without affecting or impairing in
any way the  liability  of each  Guarantor  hereunder  except to the  extent the
Guaranteed Obligations have been paid in full. Each Guarantor waives any defense
arising out of any such  election  by the Agent,  the  Collateral  Agent and the
Creditors,  even though such election operates to impair or extinguish any right
of  reimbursement  or  subrogation  or other  right or remedy of each  Guarantor
against the Borrower or any other party or any security.

            (b) Each Guarantor waives all presentments, demands for performance,
protests and notices, including, without limitation,  notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Guaranty,
and  notices  of the  existence,  creation  or  incurring  of new or  additional
indebtedness.  Each Guarantor assumes all  responsibility  for being and keeping
itself  informed of the Borrower's  financial  condition and assets,  and of all
other  circumstances  bearing  upon the  risk of  nonpayment  of the  Guaranteed
Obligations  and the nature,  scope and extent of the risks which each Guarantor
assumes and incurs  hereunder,  and agrees that the Creditors shall have no duty
to  advise  each  Guarantor  of   information   known  to  them  regarding  such
circumstances or risks.

            11. If and to the extent  that each  Guarantor  makes any payment to
any Creditor or to any other Person  pursuant to or in respect of this Guaranty,
any claim which each  Guarantor may have against the Borrower by reason  thereof
shall be subject and  subordinate to the prior payment in full of the Guaranteed
Obligations to each Creditor. Prior to the transfer by any Guarantor of any note
or negotiable  instrument  evidencing any  indebtedness  of the Borrower to such
Guarantor,  such Guarantor shall mark such note or negotiable  instrument with a
legend that the same is subject to this subordination.

                                       6
<PAGE>



            12. Each  Guarantor  covenants and agrees that on and after the date
hereof and until the Total  Commitment and all Secured  Interest Rate Agreements
have been  terminated,  no Loan or Letter of Credit remains  outstanding and all
Guaranteed  Obligations  have been paid in full,  such Guarantor  shall take, or
will refrain from taking,  as the case may be, all actions that are necessary to
be taken  or not  taken  so that no  violation  of any  provision,  covenant  or
agreement  contained in Section 7 or 8 of the Credit  Agreement,  and so that no
Event of  Default,  is caused by the  actions  of such  Guarantor  or any of its
Subsidiaries.

            13. Each Guarantor  hereby  jointly and severally  agrees to pay all
reasonable out-of-pocket costs and expenses (including,  without limitation, the
reasonable fees and disbursement of counsel) of each Creditor in connection with
the  enforcement  of this  Guaranty  and of the  Agent  in  connection  with any
amendment, waiver or consent relating hereto.

            14.  This  Guaranty  shall be binding  upon each  Guarantor  and its
successors and assigns and shall inure to the benefit of the Creditors and their
successors and assigns to the extent permitted under the Credit Agreement.

            15.  Neither this Guaranty nor any provision  hereof may be changed,
waived, discharged or terminated except with the written consent of the Required
Banks (or to the extent required by Section 12.12 of the Credit Agreement,  with
the written consent of each Bank) and each Guarantor  affected thereby (it being
understood  that the addition or release of any  Guarantor  hereunder  shall not
constitute a change,  waiver,  discharge or termination  affecting any Guarantor
other  than  the  Guarantor  so added or  released),  provided  that (x) no such
change,  waiver,  modification or variance shall be made to the last sentence of
Section 1 or to this Section 15 without the consent of each  Creditor  adversely
affected thereby and (y) any change, waiver,  modification or variance affecting
the rights and benefits of a single Class (as defined  below) of Creditors  (and
not all Creditors in a like or similar manner) shall require the written consent
of the Requisite  Creditors (as defined below) of such Class. For the purpose of
this  Guaranty,  the term  "Class"  shall  mean each class of  Creditors,  i.e.,
whether (i) the Bank Creditors as holders of the Credit Document  Obligations or
(ii) the Interest Rate  Creditors as holders of the Interest  Rate  Obligations.
For the purpose of this Guaranty,  the term  "Requisite  Creditors" of any Class
shall mean (a) with  respect to the Credit  Document  Obligations,  the Required
Banks and (b) with respect to the Interest Rate  Obligations,  the holders of at
least a  majority  of all  obligations  outstanding  from time to time under the
Secured Interest Rate Agreements.

            16. Each Guarantor acknowledges that an executed (or conformed) copy
of each of the  Credit  Documents  has  been  made  available  to its  principal
executive officers and such officers are familiar with the contents thereof.

                                       7
<PAGE>



            17.  In  addition  to any  rights  now or  hereafter  granted  under
applicable  law  (including,  without  limitation,  Section  151 of the New York
Debtor and Creditor Law) and not by way of  limitation of any such rights,  upon
the occurrence  and during the  continuance of an Event of Default (such term to
mean and include any "Event of  Default" as defined in the Credit  Agreement  or
any payment  default  under any Interest  Rate  Agreement  continuing  after any
applicable grace period), each Creditor is hereby authorized,  to the extent not
prohibited by applicable  law, at any time or from time to time,  without notice
to each  Guarantor  or to any other  Person,  any such  notice  being  expressly
waived, to set off and to appropriate and apply any and all deposits (general or
special) and any other  indebtedness  at any time held or owing by such Creditor
to or for the credit or the account of each Guarantor, against and on account of
the  obligations  and  liabilities of each Guarantor to such Creditor under this
Guaranty,  irrespective  of  whether  or not such  Creditor  shall have made any
demand hereunder and although said obligations, liabilities, deposits or claims,
or any of them,  shall be  contingent  or  unmatured.  Each  Creditor  agrees to
promptly notify each Guarantor after any such set off and application, provided,
however,  that the failure to give such notice  shall not affect the validity of
such set off and application.

            18. All notices,  requests, demands or other communications provided
for hereunder made in writing  (including  telegraphic,  telexed,  telecopier or
cable  communication)  shall be  deemed  to have  been  duly  given or made when
delivered  to the  Person  to  which  such  notice,  request,  demand  or  other
communication  is required or permitted to be given or made under this Guaranty,
addressed to such party at (i) in the case of any Bank Creditor,  as provided in
the Credit  Agreement,  (ii) in the case of each  Guarantor,  at its address set
forth  opposite its  signature  below and (iii) in the case of any Interest Rate
Creditor, at such address as such Interest Rate Creditor shall have specified in
writing to each  Guarantor;  or in any case at such other  address as any of the
Persons listed above may hereafter notify the others in writing.

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

                                       8
<PAGE>




            20.  (a)  THIS  GUARANTY  AND  THE  RIGHTS  AND  OBLIGATIONS  OF THE
CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding
with  respect to this  Guaranty may be brought in the courts of the State of New
York or of the United  States of America for the Southern  District of New York,
and,  by  execution  and  delivery  of  this  Guaranty,  each  Guarantor  hereby
irrevocably  accepts for itself and in respect of its  property,  generally  and
unconditionally, the jurisdiction of the aforesaid courts. Each Guarantor hereby
irrevocably designates, appoints and empowers CT Corporation System with offices
on the date  hereof at 1633  Broadway,  New York,  NY  10019,  as its  designee,
appointee and agent to receive,  accept and  acknowledge  for and on its behalf,
and in respect of its property,  service of any legal process,  summons, notices
and documents  which may be served in any such action or proceeding.  If for any
reason such designee,  appointee and agent shall cease to be available to act as
such, each Guarantor agrees to designate a new designee,  appointee and agent in
New York City on the terms and for the purposes of this  provision  satisfactory
to the Agent under this agreement.  Each Guarantor further irrevocably  consents
to the  service of process out of any of the  aforementioned  courts in any such
action or proceeding by the mailing of copies thereof by registered or certified
mail,  postage prepaid,  to each Guarantor at its address set forth opposite its
signature below, such service to become effective 30 days after such mailing and
appoints  the  Borrower  as its agent for  services of process in respect of any
such action or  proceeding.  Nothing herein shall affect the right of any of the
Creditors to serve  process in any other manner  permitted by law or to commence
legal  proceedings  or otherwise  proceed  against  each  Guarantor in any other
jurisdiction.

            (b) Each Guarantor hereby  irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid actions
or proceedings  arising out of or in connection  with this Guaranty or any other
Credit Document brought in the courts referred to in clause (a) above and hereby
further  irrevocably  waives  and agrees not to plead or claim in any such court
that such action or proceeding  brought in any such court has been brought in an
inconvenient forum.

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

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

                                       9
<PAGE>


            IN WITNESS  WHEREOF,  each  Guarantor has caused this Guaranty to be
executed and delivered as of the date first above written.


3100 Mill Street              THE STONEBURY GROUP INCORPORATED
Suite 214
Reno, Nevada 89502
Attention:  President                   By__________________________
                                        Name:  Arthur Hughes
                                        Title: Assistant Secretary


Chesterfield Avenue                     U.S. TEXTILE CORP.
RD SC 903
AIKIA 1792 Silkies Blvd.
Lancaster, South Carolina 92721
Attention:  President                   By__________________________
                                        Name:  H. Lengers
                                        Title: President


3369 Progress Drive                 HOSIERY CORPORATION INTERNATIONAL
Bensalem, Pennsylvania  19020
Attention:  President
                                    By__________________________
                                        Name:  John Biagini
                                        Title: President, CEO

Accepted and Agreed to:

BANKERS TRUST COMPANY,
  As Agent for



By________________________
  Name:  Mary Kay Coyle
  Title: Managing Director

                                       10
<PAGE>



                                                       [EXHIBIT H-1 Conformed
                                                         as Executed]

                            BORROWER PLEDGE AGREEMENT

            AMENDMENT AND  RESTATEMENT,  dated as of November 20, 1997 to PLEDGE
AGREEMENT,  dated as of October 17, 1994 (as amended,  modified or  supplemented
from time to time, "this  Agreement"),  made by HOSIERY  CORPORATION OF AMERICA,
INC., a Delaware corporation (the "Pledgor"), in favor of BANKERS TRUST COMPANY,
as Collateral  Agent (including any successor  collateral  agent, the "Pledgee")
for the benefit of (x) the Banks and the Agent  under,  and any other  financial
institutions from time to time party to, the Credit Agreement  referred to below
(such Banks,  the Agent and other lenders,  if any, are  hereinafter  called the
"Bank  Creditors")  and (y) Bankers Trust Company,  in its  individual  capacity
("BTCo"),  any Bank or syndicate of financial  institutions organized by BTCo or
an affiliate of BTCo (even if BTCo or any such Bank subsequently  ceases to be a
Bank  under the  Credit  Agreement  for any  reason)  and any  institution  that
participates  in one or more  Interest Rate  Agreements,  and in each case their
subsequent  assigns, if any (collectively,  the "Interest Rate Creditors",  and,
together with the Bank Creditors, the "Secured Creditors").  Except as otherwise
defined herein,  terms used herein and defined in the Credit  Agreement shall be
used herein as so defined.


                          W I T N E S S E T H :


            WHEREAS, the Pledgor,  the financial  institutions from time to time
party thereto (the "Banks") and Bankers Trust  Company,  as Agent (the "Agent"),
have entered into an Amendment and  Restatement,  dated as of November 20, 1997,
amending and  restating  the Credit  Agreement  dated as of October 17, 1994 (as
amended,  modified or supplemented  from time to time, the "Credit  Agreement"),
providing  for the making of Loans and the  issuance of, and  participation  in,
Letters of Credit as contemplated therein;

            WHEREAS,  the Borrower may from time to time be party to one or more
Interest Rate  Agreements  (each such Interest Rate  Agreement  with an Interest
Rate Creditor or Interest Rate Creditors, a "Secured Interest Rate Agreement");

            WHEREAS,  it is a condition precedent to the making of Loans and the
issuance of, and  participation in, Letters of Credit under the Credit Agreement
that  the  Pledgor  shall  have  executed  and  delivered  to the  Pledgee  this
Agreement;

            WHEREAS, the Pledgor desires to execute this Agreement to satisfy
the conditions Described in the preceding paragraph;

<PAGE>



            NOW,  THEREFORE,  in consideration  of the benefits  accruing to the
Pledgor,  the  receipt and  sufficiency  of which are hereby  acknowledged,  the
Pledgor hereby makes the following representations and warranties to the Pledgee
and hereby covenants and agrees with the Pledgee as follows:

            1.  SECURITY  FOR  OBLIGATIONS.  This  Agreement  is for (a) the
benefit of the  Secured Creditors to secure:

            (i) the full and  prompt  payment  when due  (whether  at the stated
      maturity,  by  acceleration  or  otherwise)  of (x) the  principal  of and
      interest on the Notes issued by, and the Loans made to, the Pledgor  under
      the  Credit  Agreement,  (y)  all  reimbursement  obligations  and  Unpaid
      Drawings  with  respect  to  Letters  of Credit  issued  under the  Credit
      Agreement  and (z) all  other  obligations  and  indebtedness  (including,
      without  limitation,  indemnities,  Fees  and  interest  thereon)  of  the
      Pledgor,  now existing or hereafter  incurred under,  arising out of or in
      connection  with the Credit  Agreement and the other Credit  Documents and
      the due  performance  of and  compliance  with  the  terms  of the  Credit
      Documents  (all such  obligations  and  liabilities  under this clause (i)
      being herein collectively called the "Credit Agreement Obligations");

           (ii) the full and  prompt  payment  when due of all  obligations  and
      liabilities of the Pledgor to the Interest Rate Creditors  pursuant to any
      Secured  Interest Rate Agreement,  whether now in existence or hereinafter
      incurred under,  arising out of or in connection with any Secured Interest
      Rate  Agreement,  and the due performance and compliance with the terms of
      the Secured  Interest Rate Agreements by the Pledgor (all such obligations
      and liabilities under this clause (iii) being herein  collectively  called
      the "Interest Rate Obligations");

          (iii) any and all sums  advanced  by the  Pledgee in order to preserve
      the  Collateral  (as  hereinafter  defined)  and/or its security  interest
      therein; and

            (iv)  in the  event  of any  proceeding  for the  collection  of the
Obligations (as defined below) or the  enforcement of this  Agreement,  after an
Event of Default (such term, as used in this Agreement,  shall mean any Event of
Default under, and as defined in, the Credit  Agreement,  or any payment default
after any  applicable  grace period under any Secured  Interest Rate  Agreement)
shall have  occurred and be  continuing,  the  reasonable  expenses of retaking,
holding,  preparing  for sale or lease,  selling or  otherwise  disposing  of or
realizing  on the  Collateral,  or of any  exercise by the Pledgee of its rights
hereunder, together with reasonable attorneys' fees and court costs;

                                       2
<PAGE>



all such  obligations,  liabilities,  sums and expenses set forth in clauses (i)
through (iv) of this Section 1 being collectively  called the "Obligations",  it
being acknowledged and agreed that the "Obligations" shall include extensions of
credit  described  above,  whether  outstanding on the date of this Agreement or
extended from time to time after the date of this Agreement.

            2. DEFINITION OF STOCK, NOTES, SECURITIES,  ETC. As used herein, (i)
the term "Stock" shall mean (x) with respect to corporations  incorporated under
the  laws of the  United  States  or any  State  or  territory  thereof  (each a
"Domestic Corporation") all of the issued and outstanding shares of stock at any
time owned by the Pledgor of any  Domestic  Corporation  and (y) with respect to
corporations not Domestic Corporations (each, a "Foreign  Corporation"),  all of
the issued and  outstanding  shares of stock at any time owned by the Pledgor of
any Foreign  Corporation and all  certificates  and  instruments  evidencing the
same,  provided that, (a) the Pledgor shall not be required to pledge  hereunder
more than 65% of the total combined voting power of all classes of capital stock
of any Foreign  Corporation  entitled to vote (herein called "Voting Stock") and
(b) the Pledgor  shall be required  to pledge  hereunder  100% of the issued and
outstanding shares of all capital stock which is not Voting Stock (herein called
"Non-Voting Stock") at any time owned by the Pledgor of any Foreign Corporation;
(ii) the term "Notes" shall mean all promissory  notes at any time issued to, or
held by, the Pledgor and (iii) the term "Securities" shall mean all of the Stock
and Notes. The Pledgor  represents and warrants that on the date hereof: (a) the
Stock consists of the number and type of shares of the stock of the  corporation
as  described  in Part I of Annex A  hereto;  (b) such  Stock  constitutes  that
percentage  of  the  issued  and  outstanding   capital  stock  of  the  issuing
corporation  as set forth in Part I of Annex A hereto;  (c) the Notes consist of
the promissory notes described in Part II of Annex A hereto;  (d) the Pledgor is
the holder of record and sole beneficial  owner of the Stock and Notes and there
exists no options or preemption  rights in respect of any of the Stock;  and (e)
on the date hereof, the Pledgor owns or possesses no other Securities.

            3.     PLEDGE OF SECURITIES, ETC.

            3.1 Plede.  To secure the Obligations and for the purposes set forth
in Section 1, the Pledgor hereby:  (i) grants to the Pledgee a security interest
in all of the Collateral; (ii) pledges and deposits as security with the Pledgee
all  Securities  owned by the Pledgor on the date  hereof;  and  delivers to the
Pledgee certificates or instruments therefor, duly endorsed in blank in the case
of  promissory  notes and  accompanied  by undated stock powers duly executed in
blank by the Pledgor (and  accompanied  by any  transfer tax stamps  required in
connection with the pledge of such  securities,  with  signatures  appropriately
guaranteed  to the  extent  required)  in the  case  of  Stock,  or  such  other
instruments  of transfer as are  acceptable  to the  Pledgee;  and (iii)  hereby
collaterally assigns, transfers, hypothecates,  mortgages, charges and sets over
to the Pledgee all of the  Pledgor's  right,  title and  interest in and to such
Securities  (and  in and to the  certificates  or  instruments  evidencing  such
Securities),  to be held by the Pledgee, upon the terms and conditions set forth
in this Agreement.

                                       3
<PAGE>




            3.2 Subsequently  Acquired Securities.  If the Pledgor shall acquire
(by purchase, stock dividend or otherwise) any additional Securities at any time
or from time to time after the date hereof,  the Pledgor will  forthwith  pledge
and deposit  such  Securities  as  security  with the Pledgee and deliver to the
Pledgee certificates  thereof,  duly endorsed in blank in the case of promissory
notes and  accompanied  by undated  stock  powers duly  executed in blank by the
Pledgor (and  accompanied by any transfer tax stamps required in connection with
the pledge of such Securities,  with signatures  appropriately guaranteed to the
extent required) in the case of Stock, or such other  instruments of transfer as
are  acceptable  to the Pledgee,  and will  promptly  thereafter  deliver to the
Pledgee a certificate  executed by a principal  executive officer of the Pledgor
describing  such  Securities and certifying that the same have been duly pledged
with the Pledgee hereunder. Without limiting the foregoing, the Pledgor shall be
required  to pledge  hereunder  any shares of stock at any time and from time to
time after the date hereof acquired by such Pledgor of any Foreign  Corporation,
provided  that (x) the  Pledgor  shall  not be  required  at any time to  pledge
hereunder more than 65% of the Voting Stock of any Foreign  Corporation  and (y)
the Pledgor shall be required to pledge  hereunder 100% of any Non-Voting  Stock
at any  time and from  time to time  acquired  by such  Pledgor  of any  Foreign
Corporation.

            3.3  Uncertificated  Securities.  Notwithstanding  anything  to  the
contrary  contained in Sections 3.1 and 3.2, if any  Securities  (whether or not
now owned or hereafter  acquired)  are  uncertificated  securities,  the Pledgor
shall promptly notify the Pledgee  thereof,  and shall promptly take all actions
required to perfect the security  interest of the Pledgee under  applicable  law
(including, in any event, under Sections 8-313 and 8-321 of the New York Uniform
Commercial Code if applicable).  The Pledgor further agrees to take such actions
as the Pledgee  deems  necessary  or desirable  to effect the  foregoing  and to
permit the Pledgee to exercise  any of its rights and  remedies  hereunder,  and
agrees to provide an opinion of counsel  reasonably  satisfactory to the Pledgee
with  respect to any such  pledge of  uncertificated  Securities  promptly  upon
request of the Pledgee.

            3.4 Definitions of Pledged Stock,  Pledged Notes;  Pledge Securities
and  Collateral.  All  Stock at any  time  pledged  or  required  to be  pledged
hereunder  is  hereinafter  called the  "Pledged  Stock";  all Notes at any time
pledged or required to be pledged hereunder are hereinafter  called the "Pledged
Notes",  all Pledged  Stock and Pledged  Notes  together are called the "Pledged
Securities"  and the Pledged  Securities,  together  with all proceeds  thereof,
including any securities and moneys received and at the time held by the Pledgee
hereunder, are hereinafter called the "Collateral".

            4. APPOINTMENT OF SUB-AGENTS;  ENDORSEMENTS,  ETC. The Pledgee shall
have the right to appoint one or more  sub-agents  for the purpose of  retaining
physical  possession  of the  Pledged  Securities,  which  may be  held  (in the
discretion  of the Pledgee) in the name of the Pledgor,  endorsed or assigned in
blank or in favor of the  Pledgee or any nominee or nominees of the Pledgee or a
sub-agent appointed by the Pledgee.

                                       4
<PAGE>



            5. VOTING,  ETC., WHILE NO EVENT OF DEFAULT.  Unless and until there
shall have  occurred  and be  continuing  an Event of Default and (except to the
extent an Event of Default as specified in Section 9.05 of the Credit  Agreement
has  occurred)  the Pledgor  shall be entitled  to  exercise  all voting  rights
attaching to any and all Pledged  Securities  owned by it, and to give consents,
waivers or ratifications in respect thereof, provided that no vote shall be cast
or any  consent,  waiver or  ratification  given or any action taken which would
violate, result in breach of any covenant contained in, or be inconsistent with,
any of the terms of this  Agreement,  the  Credit  Agreement,  any other  Credit
Document or any Secured Interest Rate Agreement (collectively, the "Secured Debt
Agreements"),  or which  would  have the  effect of  impairing  the value of the
Collateral  or any part  thereof or the  position or interests of the Pledgee or
any Secured  Creditor  therein.  All such rights of such  Pledgor to vote and to
give consents, waivers and ratifications shall cease in case an Event of Default
shall occur and be continuing and Section 7 hereof shall become applicable.

            6. DIVIDENDS AND OTHER  DISTRIBUTIONS.  Unless and until an Event of
Default shall have occurred and be  continuing,  all cash  dividends  payable in
respect of the Pledged  Stock and all  payments in respect of the Pledged  Stock
shall be paid to the Pledgor  provided that all dividends  payable in respect of
the Pledged  Securities  which are  determined  by the Pledgee,  in its absolute
discretion,  to represent in whole or in part an  extraordinary,  liquidating or
other  distribution  in  return  of  capital  shall be paid,  to the  extent  so
determined to represent an extraordinary,  liquidating or other  distribution in
return of capital,  to the Pledgee and retained by it as part of the  Collateral
(unless such cash  dividends  are applied to repay the  Obligations  pursuant to
Section 9 of this  Agreement).  The  Pledgee  shall also be  entitled to receive
directly, and to retain as part of the Collateral:

            (i) all other or additional  stock, or other  securities or property
      (other than cash) paid or  distributed  by way of dividend or otherwise in
      respect of the Pledged Stock.

           (ii) all other or  additional  stock or other  securities or property
      (including cash) paid or distributed in respect of the Pledged  Securities
      by way of stock-split, spin-off, split-up,  reclassification,  combination
      of shares or similar rearrangement; and

          (iii) all other or  additional  stock or other  securities or property
      (including  cash) which may be paid in respect of the Collateral by reason
      of any  consolidation,  merger,  exchange of stock,  conveyance of assets,
      liquidation or similar corporate reorganization.

                                       5
<PAGE>



Nothing  contained  in this  Section 6 shall  limit or  restrict  in any way the
Pledgee's  right  to  receive  the  proceeds  of the  Collateral  in any form in
accordance with Section 3 of this  Agreement.  All dividends,  distributions  or
other payments  which are received by the Pledgor  contrary to the provisions of
this  Section 6 or Section 7 shall be  received  in trust for the benefit of the
Pledgee,  shall be  segregated  from other  property or funds of the Pledgor and
shall be forthwith paid over to the Pledgee as Collateral in the same form as so
received (with any necessary endorsement).

            7.  REMEDIES  IN CASE OF AN  EVENT OF  DEFAULT.  In case an Event of
Default shall have occurred and be continuing,  the Pledgee shall be entitled to
exercise all of the rights,  powers and remedies  (whether  vested in it by this
Agreement or any other Secured Debt  Agreement or by law) for the protection and
enforcement  of its  rights in  respect of the  Collateral,  including,  without
limitation,  all the rights and remedies of a secured  party upon default  under
the Uniform  Commercial  Code of the State of New York, and the Pledgee shall be
entitled,  without  limitation,  to exercise any or all of the following rights,
which the Pledgor hereby agrees to be commercially reasonable:

            (i) to receive  all  amounts  payable  in respect of the  Collateral
      otherwise payable under Section 6 to the Pledgor;

           (ii) to transfer all or any part of the Collateral into the Pledgee's
      name or the name of its nominee or nominees;

          (iii) to  accelerate  any  Pledged  Note which may be  accelerated  in
      accordance  with its terms,  and take any other  lawful  action to collect
      upon any Pledged Note (including,  without limitation,  to make any demand
      for payment thereon);

           (iv) to vote all or any part of the  Pledged  Stock  (whether  or not
      transferred  into the name of the Pledgee) and give all consents,  waivers
      and  ratifications  in respect of the  Collateral  and  otherwise act with
      respect  thereto as though it were the outright owner thereof (the Pledgor
      hereby  irrevocably  constituting and appointing the Pledgee the proxy and
      attorney-in-fact  of the Pledgor,  with full power of  substitution  to do
      so); and

            (v) at any time or from time to time to sell, assign and deliver, or
      grant  options  to  purchase,  all or any part of the  Collateral,  or any
      interest  therein,  at any  public  or  private  sale,  without  demand of
      performance,  advertisement  or notice of intention to sell or of the time
      or place of sale or adjournment  thereof or to redeem or otherwise (all of
      which are hereby waived by the Pledgor),  for cash, on credit or for other
      property, for
                                       6
<PAGE>


      immediate or future  delivery  without any  assumption of credit risk, and
      for such price or prices and on such terms as the Pledgee in its  absolute
      discretion  may  determine,  provided that at least 10 days' notice of the
      time and place of any such sale shall be given to the Pledgor. The Pledgee
      shall  not be  obligated  to make such sale of  Collateral  regardless  of
      whether any such notice of sale has theretofore been given. Each purchaser
      at any such sale shall hold the property so sold  absolutely free from any
      claim or right on the part of the Pledgor,  and the Pledgor  hereby waives
      and releases to the fullest extent permitted by law any right or equity of
      redemption  with respect to the  Collateral,  whether before or after sale
      hereunder, all rights, if any, of marshalling the Collateral and any other
      security for the Obligations or otherwise, and all rights, if any, of stay
      and/or  appraisal  which it now has or may at any time in the future  have
      under rule of law or statute now  existing or  hereafter  enacted.  At any
      such sale,  unless  prohibited by applicable law, the Pledgee on behalf of
      all Secured  Creditors  (or certain of them) may bid for and  purchase (by
      bidding in  Obligations or otherwise) all or any part of the Collateral so
      sold free from any such right or equity of redemption. Neither the Pledgee
      nor any Secured Creditor shall be liable for failure to collect or realize
      upon any or all of the  Collateral  or for any delay in so doing nor shall
      it be under any  obligation  to take any  action  whatsoever  with  regard
      thereto.

            8. REMEDIES,  ETC., CUMULATIVE.  Each right, power and remedy of the
Pledgee  provided for in this Agreement or any other Secured Debt Agreement,  or
now or hereafter  existing at law or in equity or by statute shall be cumulative
and  concurrent  and shall be in addition  to every  other such right,  power or
remedy.  The  exercise or beginning of the exercise by the Pledgee of any one or
more of the rights,  powers or remedies  provided  for in this  Agreement or any
other Secured Debt Agreement or now or hereafter existing at law or in equity or
by statute or otherwise shall not preclude the simultaneous or later exercise by
the  Pledgee  or any  Secured  Creditor  of all such  other  rights,  powers  or
remedies,  and no  failure or delay on the part of the  Pledgee  or any  Secured
Creditor to exercise any such right,  power or remedy shall  operate as a waiver
thereof.  Unless  otherwise  required by the Credit  Documents,  no notice to or
demand on the  Pledgor  in any case  shall  entitle  it to any other or  further
notice or demand in similar other circumstances or constitute a waiver of any of
the rights of the Pledgee or any Secured Creditor to any other further action in
any circumstances without demand or notice.

            9. APPLICATION OF PROCEEDS. All moneys collected by the Pledgee upon
any sale or other  disposition of the  Collateral  pursuant to the terms of this
Agreement,  together  with all other moneys  received by the Pledgee  hereunder,
shall be applied to the payment of Obligations in the manner provided in Section
7.4 of the Borrower Security Agreement.

                                       7
<PAGE>



            10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
Pledgee  hereunder  (whether  by  virtue of the  power of sale  herein  granted,
pursuant to judicial  process or  otherwise),  the receipt of the Pledgee or the
officer  making the sale shall be a  sufficient  discharge  to the  purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the  application  of any part of the purchase  money paid
over  to the  Pledgee  or  such  officer  or be  answerable  in any  way for the
misapplication or nonapplication thereof.

            11. INDEMNITY. The Pledgor agrees (i) to indemnify and hold harmless
the  Pledgee  and the  Secured  Creditors  from and  against any and all claims,
demands, losses, judgments and liabilities (including liabilities for penalties)
of whatsoever kind or nature,  and (ii) to reimburse the Pledgee and the Secured
Creditors for all reasonable costs and expenses, including reasonable attorneys'
fees,  growing out of or  resulting  from this  Agreement or the exercise by the
Pledgee  of any  right or  remedy  granted  to it  hereunder  or under any other
Secured Debt Agreement  except,  with respect to clauses (i) and (ii) above, for
those arising from the Pledgee's gross negligence or willful  misconduct.  In no
event shall the Pledgee be liable, in the absence of gross negligence or willful
misconduct  on its  part,  for any  matter  or thing  in  connection  with  this
Agreement other than to account for moneys or other property  actually  received
by it in accordance with the terms hereof or thereof.  If and to the extent that
the obligations of the Pledgor under this Section 11 are  unenforceable  for any
reason,  the  Pledgor  hereby  agrees to make the  maximum  contribution  to the
payment  and  satisfaction  of  such  obligations  which  is  permissible  under
applicable law.

            12. FURTHER  ASSURANCES;  POWER OF ATTORNEY.  (a) The Pledgor agrees
that it will join with the  Pledgee  in  executing  and,  at the  Pledgor's  own
expense,  file and  refile  under the  Uniform  Commercial  Code such  financing
statements,  continuation  statements and other documents in such offices as the
Pledgee may deem necessary or appropriate and wherever  required or permitted by
law in order to perfect and  preserve  the  Pledgee's  security  interest in the
Collateral  hereunder  and  hereby  authorizes  the  Pledgee  to file  financing
statements and amendments  thereto relative to all or any part of the Collateral
without the  signature of the Pledgor  where  permitted by law, and agrees to do
such  further  acts and things and to execute and  deliver to the  Pledgee  such
additional conveyances,  assignments,  agreements and instruments as the Pledgee
may  reasonably  require or deem  advisable to carry into effect the purposes of
this  Agreement  or to further  assure and confirm  unto the Pledgee its rights,
powers and remedies hereunder or thereunder.

            (b)  The  Pledgor  hereby   appoints  the  Pledgee,   the  Pledgor's
attorney-in-fact,  with full authority in the place and stead of the Pledgor and
in the name of the Pledgor or otherwise,  from time to time after the occurrence
and during the continuance of an Event of Default,  in the Pledgee's  reasonable
discretion  to take any action and to execute any  instrument  which the Pledgee
may  reasonably  deem  necessary or advisable to accomplish the purposes of this
Agreement.

                                       8
<PAGE>


            13. THE PLEDGEE AS AGENT.  The Pledgee will hold in accordance  with
this  Agreement  all items of the  Collateral  at any time  received  under this
Agreement.  It is expressly  understood  and agreed that the  obligations of the
Pledgee as holder of the  Collateral  and interests  therein and with respect to
the disposition  thereof,  and otherwise  under this  Agreement,  are only those
expressly  set forth in this  Agreement.  The Pledgee shall act hereunder on the
terms and conditions set forth herein and in Section 11 of the Credit Agreement.

            14. TRANSFER BY THE PLEDGOR.  The Pledgor will not sell or otherwise
dispose of, grant any option with  respect to, or mortgage,  pledge or otherwise
encumber any of the  Collateral  or any interest  therein  (except in accordance
with the terms of this Agreement and the Credit Documents).

            15.   REPRESENTATIONS,   WARRANTIES  AND  COVENANTS  OF  THE
PLEDGOR.  (a)  The  Pledgor represents, warrants and covenants that:

            (i) it is, or at the time when pledged hereunder will be, the legal,
      beneficial and record owner of, and has (or will have) good and marketable
      title to, all  Securities  pledged by it hereunder,  subject to no pledge,
      lien, mortgage, hypothecation,  security interest, charge, option or other
      encumbrance whatsoever, except the liens and security interests created by
      this Agreement;

            (ii) it has full power,  authority and legal right to pledge all the
      Securities pledged by it pursuant to this Agreement; and

            (iii)  this  Agreement  has  been  duly  authorized,   executed  and
      delivered  by the  Pledgor  and  constitutes  a legal,  valid and  binding
      obligation of the Pledgor enforceable in accordance with its terms, except
      to the extent that the enforceability thereof may be limited by applicable
      bankruptcy, insolvency,  reorganization,  moratorium or other similar laws
      generally  affecting   creditors'  rights  and  by  equitable   principles
      (regardless of whether enforcement is sought in equity or at law);

            (iv) except to the extent  already  obtained or made,  no consent of
      any  other  party  (including,  without  limitation,  any  stockholder  or
      creditor  of the  Pledgor  or any of  its  Subsidiaries)  and no  consent,
      license,  permit,  approval or  authorization  of, exemption by, notice or
      report to, or registration,  filing or declaration  with, any governmental
      authority is required to be obtained by the Pledgor in connection with (a)
      the execution, delivery or performance of this Agreement, (b) the validity
      or enforceability of this Agreement,  (c) the perfection or enforceability
      of the  Pledgee's  security  interest in the  Collateral or (d) except for
      compliance with or as may be required by applicable  securities  laws, the
      exercise by the Pledgee of any of its rights or remedies provided herein;

                                       9
<PAGE>



            (v) the execution,  delivery and  performance of this Agreement will
      not violate any  provision of any  applicable  law or regulation or of any
      order,  judgment,  writ,  award or  decree  of any  court,  arbitrator  or
      governmental authority, domestic or foreign, applicable to the Pledgor, or
      of the  Certificate of  Incorporation  or By-Laws of the Pledgor or of any
      securities  issued by the  Pledgor or any of its  Subsidiaries,  or of any
      mortgage,  indenture,  lease,  loan agreement,  credit  agreement or other
      contract,  agreement or instrument or  undertaking to which the Pledgor or
      any of its  Subsidiaries  is a party or which  purports to be binding upon
      the  Pledgor or any of its  Subsidiaries  or upon any of their  respective
      assets  and will not  result  in the  creation  or  imposition  of (or the
      obligation  to create or  impose)  any lien or  encumbrance  on any of the
      assets of the Pledgor or any of its Subsidiaries except as contemplated by
      this Agreement;
            (vi) all the shares of the Stock have been duly and validly  issued,
      are  fully  paid and  non-assessable  and are  subject  to no  options  to
      purchase or similar rights;

            (vii) each of the Pledged Notes constitutes, or when executed by the
      obligor thereof will constitute,  the legal,  valid and binding obligation
      of such obligor,  enforceable in accordance with its terms,  except to the
      extent  that the  enforceability  thereof  may be  limited  by  applicable
      bankruptcy, insolvency,  reorganization,  moratorium or other similar laws
      generally  affecting   creditors'  rights  and  by  equitable   principles
      (regardless of whether enforcement is sought in equity or at law); and

            (viii) the pledge, collateral assignment and delivery to the Pledgee
      of the Securities (other than uncertificated  securities) pursuant to this
      Agreement  creates  a  valid  and  perfected  first  priority  Lien in the
      Securities,  and the proceeds thereof,  subject to no other Lien or to any
      agreement purporting to grant to any third party a Lien on the property or
      assets of the Pledgor which would include the Securities.

            (b) The  Pledgor  covenants  and  agrees  that it  will  defend  the
Pledgee's  right,  title and security  interest in and to the Securities and the
proceeds thereof against the claims and demands of all persons  whomsoever;  and
the  Pledgor  covenants  and agrees that it will have like title to and right to
pledge  any other  property  at any time  hereafter  pledged  to the  Pledgee as
Collateral  hereunder  and will  likewise  defend the right thereto and security
interest therein of the Pledgee and the Secured Creditors.

            (c) The  Pledgor  covenants  and agrees  that it will take no action
which would violate or be inconsistent with any of the terms of any Secured Debt
Agreement, or which would have the effect of impairing the position or interests
of the Pledgee or any Secured Creditor under any Secured Debt Agreement.

                                       10
<PAGE>



            16.  PLEDGOR'S  OBLIGATIONS  ABSOLUTE,  ETC. The  obligations of the
Pledgor  under this  Agreement  shall be absolute  and  unconditional  and shall
remain in full force and effect  without  regard to, and shall not be  released,
suspended, discharged,  terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation:

             (i) any  renewal,  extension,  amendment  or  modification  of,  or
      addition  or  supplement  to or  deletion  from  any of the  Secured  Debt
      Agreements,  or any other instrument or agreement referred to therein,  or
      any assignment or transfer of any thereof;

            (ii) any waiver, consent,  extension,  indulgence or other action or
      inaction  under or in respect of any such  agreement or instrument or this
      Agreement;

            (iii) any  furnishing of any  additional  security to the Pledgee or
      its assignee or any  acceptance  thereof or any release of any security by
      the Pledgee or its assignee;

            (iv) any limitation on any party's  liability or  obligations  under
      any such instrument or agreement or any invalidity or unenforceability, in
      whole or in part, of any such instrument or agreement or any term thereof;
      or

             (v)  any  bankruptcy,  insolvency,   reorganization,   composition,
      adjustment, dissolution,  liquidation or other like proceeding relating to
      the Pledgor or any  Subsidiary  of the  Pledgor,  or any action taken with
      respect to this Agreement by any trustee or receiver,  or by any court, in
      any such  proceeding,  whether or not the  Pledgor  shall  have  notice or
      knowledge of any of the foregoing.

            17.  REGISTRATION,  ETC.  (a) If an  Event  of  Default  shall  have
occurred and be continuing  and the Pledgor shall have received from the Pledgee
a  written  request  or  requests  that  the  Pledgor  cause  any  registration,
qualification or compliance under any Federal or state securities law or laws to
be effected with respect to all or any part of the Pledged Stock, the Pledgor as
soon as  practicable  and at its expense will use its best efforts to cause such
registration  to be  effected  (and be kept  effective)  and  will  use its best
efforts to cause such  qualification  and compliance to be effected (and be kept
effective) as may be so requested and as would permit or facilitate the sale and
distribution of such Pledged Stock, including, without limitation,  registration
under the Securities Act of 1933, as then in effect (or any similar statute then
in effect),  appropriate qualifications under applicable blue sky or other state
securities  laws  and  appropriate   compliance  with  any  other   governmental
requirements,  provided  that the  Pledgee  shall  furnish to the  Pledgor  such
information regarding the Pledgee as the Pledgor may request in
                                       11
<PAGE>


writing  and as shall be  required  in  connection  with any such  registration,
qualification  or  compliance.  The  Pledgor  will cause the  Pledgee to be kept
reasonably  advised  in writing as to the  progress  of each such  registration,
qualification  or compliance and as to the completion  thereof,  will furnish to
the Pledgee such number of prospectuses,  offering circulars and other documents
incident  thereto as the Pledgee from time to time may reasonably  request,  and
will indemnify the Pledgee and all others  participating  in the distribution of
such Stock  against all claims,  losses,  damages or  liabilities  caused by any
untrue  statement (or alleged  untrue  statement)  of a material fact  contained
therein (or in any related registration statement,  notification or the like) or
by any  omission  (or  alleged  omission)  to state  therein  (or in any related
registration statement, notification or the like) a material fact required to be
stated  therein or  necessary  to make the  statements  therein not  misleading,
except  insofar  as the same may have  been  caused by an  untrue  statement  or
omission  based upon  information  furnished  in  writing to the  Pledgor by the
Pledgee expressly for use therein.

            (b) If at any time when the Pledgee shall  determine to exercise its
right to sell all or any part of the Pledged  Securities  pursuant to Section 7,
and such  Pledged  Securities  or the part thereof to be sold shall not, for any
reason whatsoever,  be effectively  registered under the Securities Act of 1933,
as then in effect,  the Pledgee may, in its sole and absolute  discretion,  sell
such Pledged Securities or part thereof by private sale in such manner and under
such circumstances as Pledgee may deem necessary or advisable in order that such
sale may legally be effected  without such  registration.  Without  limiting the
generality  of the  foregoing,  in any such event the  Pledgee,  in its sole and
absolute  discretion,  (i) may proceed to make such private sale notwithstanding
that a  registration  statement  for the  purpose of  registering  such  Pledged
Securities or part thereof shall have been filed under such Securities Act, (ii)
may approach and negotiate with a single possible  purchaser to effect such sale
and (iii) may restrict  such sale to a purchaser  who will  represent  and agree
that such purchaser is purchasing for its own account,  for investment,  and not
with a view to the  distribution  or sale of  such  Pledged  Securities  or part
thereof.   In  the  event  of  any  such  sale,   the  Pledgee  shall  incur  no
responsibility  or  liability  for  selling  all or  any  part  of  the  Pledged
Securities  at a price which the Pledgee,  in its sole and absolute  discretion,
may in good faith deem reasonable under the circumstances,  notwithstanding  the
possibility that a substantially higher price might be realized if the sale were
deferred until the registration as aforesaid.

            18. TERMINATION; RELEASE. (a) After the Termination Date (as defined
below),  this Agreement shall terminate (provided that all indemnities set forth
herein  including,  without  limitation,  in Section 11 hereof shall survive any
such  termination)  and the Pledgee,  at the request and expense of the Pledgor,
will  execute  and  deliver to the Pledgor a proper  instrument  or  instruments
acknowledging the satisfaction and termination of this Agreement as
                                       12
<PAGE>



provided  above,  and will duly  assign,  transfer  and  deliver to the  Pledgor
(without  recourse  and  without any  representation  or  warranty)  such of the
Collateral as may be in the possession of the Pledgee and as has not theretofore
been sold or otherwise applied or released pursuant to this Agreement,  together
with any  moneys  at the time  held by the  Pledgee  hereunder.  As used in this
Agreement,  "Termination  Date"  shall  mean  the  date  upon  which  the  Total
Commitment and all Secured  Interest Rate  Agreements have been  terminated,  no
Letter of Credit,  Loan or Note is outstanding  and all other  Obligations  have
been paid in full.

      (b) In the event  that any part of the  Collateral  is sold in  connection
with a sale  permitted by Section  8.02 of the Credit  Agreement or is otherwise
released at the direction of the Required Banks (or all the Banks if required by
Section 12.12 of the Credit  Agreement),  and the proceeds of such sale or sales
or from such  release  are  applied in  accordance  with the terms of the Credit
Agreement to the extent required to be so applied,  the Pledgee,  at the request
and  expense of the  Pledgor  will duly  assign,  transfer  and  deliver to such
Pledgor (without  recourse and without any  representation  or warranty) such of
the  Collateral as is then being (or has been) so sold or released and as may be
in possession of the Pledgee and has not theretofore  been released  pursuant to
this Agreement.

            (c) At any time that a Pledgor  desires that  Collateral be released
as  provided in the  foregoing  Section  18(a) or (b),  it shall  deliver to the
Pledgee a certificate signed by its principal executive officer stating that the
release of the respective  Collateral is permitted  pursuant to Section 18(a) or
(b). If requested by the Pledgee  (although the Pledgee shall have no obligation
to make any such request),  the Pledgor shall furnish appropriate legal opinions
(from  counsel,  which may be in-house  counsel,  reasonably  acceptable  to the
Pledgee)  to the effect set forth in the  immediately  preceding  sentence.  The
Pledgee shall have no liability whatsoever to any Secured Creditor as the result
of any release of Collateral by it as permitted by this Section 18.

            19.  NOTICES,  ETC. All notices and other  communications  hereunder
shall be in  writing  and shall be  delivered  or mailed  by first  class  mail,
postage prepaid, addressed:

            (i) if to the Pledgor, at:

                Hosiery Corporation of America, Inc.
                3369 Progress Drive
                Bensalem, Pennsylvania  19020
                Attention:  Arthur Hughes

                                       13
<PAGE>



                With a copy to:

                HCA Holdings, Inc
                c/o Kelso & Company, Inc.
                305 Park Avenue
                New York, New York  10022
                Attention: James J. Connors, II

           (ii) if to the Pledgee, at:

                Bankers Trust Company
                One Bankers Trust Plaza
                130 Liberty Street
                New York, New York  10006
                Attention:  Mary Kay Coyle

          (iii) if to any Bank (other than the Pledgee), at such address as such
      Bank shall have specified in the Credit Agreement;

           (iv)  if to any  Interest  Rate  Creditor,  at such  address  as such
      Interest Rate Creditor  shall have specified in writing to the Pledgor and
      the Pledgee;

or at such  address  as shall  have been  furnished  in  writing  by any  Person
described above to the party required to give notice hereunder.

            20.  WAIVER;  AMENDMENT.  None of the terms and  conditions  of this
Agreement may be changed,  waived,  modified or varied in any manner  whatsoever
unless in writing duly signed by the Pledgor and the Collateral  Agent (with the
consent of the Required Banks or, to the extent required by Section 12.12 of the
Credit  Agreement,  all of the Banks),  provided  however  that no such  change,
waiver,  modification  or  variance  shall be made to  Section  9 hereof or this
Section 20 without  the  consent of each  Secured  Creditor  adversely  affected
thereby,  provided  further that any change,  waiver,  modification  or variance
affecting  the rights and benefits of a single Class of Secured  Creditors  (and
not all Secured Creditors in a like or similar manner) shall require the written
consent of the Requisite  Creditors of such Class of Secured Creditors.  For the
purpose of this  Agreement,  the term  "Class"  shall mean each class of Secured
Creditors,  i.e.,  whether  (x) the Bank  Creditors  as  holders  of the  Credit
Agreement  Obligations  or (y) the  Interest  Rate  Creditors  as holders of the
Interest  Rate  Obligations.  For  the  purpose  of  this  Agreement,  the  term
"Requisite  Creditors"  of any Class shall mean each of (x) with  respect to the
Credit  Agreement  Obligations,  the Required  Banks and (y) with respect to the
Interest Rate  Obligations,  the holders of 51% of all  obligations  outstanding
from time to time under the Secured Interest Rate Agreements.

                                       14
<PAGE>





            21. MISCELLANEOUS. This Agreement shall create a continuing security
interest  in the  Collateral  and shall (i)  remain  in full  force and  effect,
subject to  release  and/or  termination  as set forth in  Section  18,  (ii) be
binding upon the Pledgor, its successors and assigns;  provided,  however,  that
the Pledgor shall not assign any of its rights or obligations  hereunder without
the prior written  consent of the Pledgee (with the prior written consent of the
Required  Banks  or to the  extent  required  by  Section  12.12  of the  Credit
Agreement,  all of the Banks),  and (iii)  inure,  together  with the rights and
remedies of the Pledgee  hereunder,  to the benefit of the Pledgee,  the Secured
Creditors  and  their  respective  successors,  transferees  and  assigns.  THIS
AGREEMENT  SHALL BE CONSTRUED IN ACCORDANCE  WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK. The headings of the several  sections and subsections in this
Agreement  are for purposes of reference  only and shall not limit or define the
meaning  hereof.  This Agreement may be executed in any number of  counterparts,
each of which shall be an original,  but all of which together shall  constitute
one instrument. In the event that any provision of this Agreement shall prove to
be invalid or unenforceable, such provision shall be deemed to be severable from
the other provisions of this Agreement which shall remain binding on all parties
hereto.

            22. WAIVER OF JURY TRIAL. The Pledgor hereby  irrevocably waives all
right to a trial by jury in any action,  proceeding or counterclaim  arising out
of or relating to this agreement or the transactions contemplated hereby.

                                       15
<PAGE>



            IN WITNESS  WHEREOF,  the Pledgor  and the Pledgee  have caused this
Agreement to be executed by their duly elected  officers  duly  authorized as of
the date first above written.


                              HOSIERY CORPORATION OF AMERICA, INC.,
                                     as Pledgor


                              By_______________________________
                                    Name:   Arthur Hughes
                                    Title:  Vice President, CFO



                              BANKERS TRUST COMPANY,
                                as Collateral Agent and as Pledgee


                              By_____________________________
                                    Name:   Mary Kay Coyle
                                    Title:  Managing Director


<PAGE>



                                     ANNEX A

                                PART I

                             LIST OF STOCK

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

     Name of
     Issuing         Type of     Number of    Certificate    Percentage
   Corporation       Shares       Shares          No.           Owned
------------------ ------------ ------------ -------------- --------------
------------------ ------------ ------------ -------------- --------------

U.S. Textile         Common         600            5            100%
Corp.
------------------ ------------ ------------ -------------- --------------
------------------ ------------ ------------ -------------- --------------

The Stonebury        Class A       1,000          A-2           100%
Group                Common
Incorporated
------------------ ------------ ------------ -------------- --------------
------------------ ------------ ------------ -------------- --------------

Hosiery              Common        1,500           1            100%
Corporation
International
------------------ ------------ ------------ -------------- --------------




<PAGE>

                                     ANNEX A


                                     PART II

                                  LIST OF NOTES




        Amount              Maturity Date             Obligor
        -------             -------------             -------

        None.


<PAGE>

                                                          [EXHIBIT H-2 CONFORMED
                                                                    AS EXECUTED]

                  SUBSIDIARY GUARANTOR PLEDGE AGREEMENT


            AMENDMENT AND RESTATEMENT,  dated as of November 20, 1997, to PLEDGE
AGREEMENT,  dated as of October 17, 1994 (as amended,  modified or  supplemented
from time to time, "this  Agreement"),  made by each of the undersigned  (each a
"Pledgor"  and  collectively  as the  "Pledgors"),  in  favor of  BANKERS  TRUST
COMPANY,  as Collateral  Agent  (including any successor  collateral  agent, the
"Pledgee")  for the benefit of (x) the Banks and the Agent under,  and any other
financial institutions from time to time party to, the Credit Agreement referred
to below (such  Banks,  the Agent and other  lenders,  if any,  are  hereinafter
called the "Bank  Creditors")  and (y) Bankers Trust Company,  in its individual
capacity ("BTCo"),  any Bank or a syndicate of financial  institutions organized
by BTCo or an  affiliate  of BTCo (even if BTCo or any such Bank  ceases to be a
Bank  under the Credit  Agreement  for any  reason),  and any  institution  that
participates, and in each case their subsequent assigns, in one or more Interest
Rate Agreements (collectively,  the "Interest Rate Creditors", and together with
the Bank Creditors,  collectively, the "Secured Creditors"). Except as otherwise
defined herein,  terms used herein and defined in the Credit  Agreement shall be
used herein as therein defined.


                          W I T N E S S E T H :


            WHEREAS, Hosiery Corporation of America, Inc. (the "Borrower"),  the
financial institutions from time to time party thereto (the "Banks") and Bankers
Trust  Company,  as Agent (the  "Agent"),  have entered  into an  Amendment  and
Restatement,  dated as of November 20, 1997,  amending and  restating the Credit
Agreement  dated as of October 17, 1994 (as  amended,  modified or  supplemented
from time to time,  the "Credit  Agreement"),  providing for the making of Loans
and the issuance of, and  participation  in,  Letters of Credit as  contemplated
therein;

            WHEREAS,  the Borrower may from time to time be party to one or more
Interest Rate  Agreements  (each such Interest Rate  Agreement  with an Interest
Rate Creditor or Interest Rate Creditors, a "Secured Interest Rate Agreement");

            WHEREAS, each of the Pledgors is a Wholly-Owned Subsidiary of the
Borrower;

            WHEREAS,  pursuant to the Subsidiary Guaranty,  dated as of November
20,  1997  (as  amended,  modified  or  supplemented  from  time  to  time,  the
"Subsidiary Guaranty"), each Pledgor has guaranteed to the Secured Creditors the
payment when due of the  Guaranteed  Obligations  (as defined in the  Subsidiary
Guaranty);


<PAGE>



            WHEREAS,  it is a condition precedent to the making of Loans and the
issuance of, and  participation in, Letters of Credit under the Credit Agreement
that each  Pledgor  shall  have  executed  and  delivered  to the  Pledgee  this
Agreement;

            WHEREAS,  each Pledgor  desires to execute this Agreement to satisfy
the conditions described in the preceding paragraph;


            NOW,  THEREFORE,  in consideration of the benefits  accruing to each
Pledgor,  the receipt and  sufficiency  of which are hereby  acknowledged,  each
Pledgor hereby makes the following representations and warranties to the Pledgee
and hereby covenants and agrees with the Pledgee as follows:

            1.  SECURITY  FOR  OBLIGATIONS.  This  Agreement  is  for  the
benefit  of  the  Secured Creditors to secure:

            (i) the full and  prompt  payment  when due  (whether  at the stated
      maturity,   by  acceleration  or  otherwise)  of  all  of  each  Pledgor's
      obligations and liabilities (including,  without limitation,  indemnitees,
      fees and  interest  thereon) now  existing or  hereafter  incurred  under,
      arising out of or in connection  with the Subsidiary  Guaranty) in respect
      of (x) the principal of and interest on the Notes issued by, and the Loans
      made to, the Borrower under the Credit  Agreement,  (y) all  reimbursement
      obligations  and Unpaid  Drawings with respect to Letters of Credit issued
      under the Credit Agreement, and (z) all other obligations and indebtedness
      (including, without limitation, indemnities, Fees and interest thereon) of
      the Borrower,  now existing or hereafter incurred under, arising out of or
      in connection with the Credit Agreement and the other Credit Documents and
      the due  performance  of and  compliance  with  the  terms  of the  Credit
      Documents  by the Borrower  and each  Pledgor  (all such  obligations  and
      liabilities  under this clause (i) being  herein  collectively  called the
      "Credit Agreement Obligations");

           (ii) the full and prompt payment when due of all  obligations of each
      Pledgor's  obligations and liabilities now existing or hereafter  incurred
      under  (including,  without  limitation,  the  obligations of each Pledgor
      arising out of or in connection with the Subsidiary Guaranty),  in respect
      of all  obligations  and  liabilities  of the  Borrower,  now  existing or
      hereafter incurred under, arising out of or in connection with any Secured
      Interest Rate Agreement (whether now in existence or hereinafter  arising)
      and the due  performance  and  compliance  with the  terms of the  Secured
      Interest  Rate  Agreements  by the  Borrower  (all  such  obligations  and
      liabilities under this clause (iii) being herein  collectively  called the
      "Interest Rate Obligations");

                                       2
<PAGE>



           (iii) any and all sums  advanced  by the Pledgee in order to preserve
      the  Collateral  (as  hereinafter  defined)  and/or its security  interest
      therein; and

           (iv)  in the  event  of any  proceeding  for  the  collection  of the
      Obligations (as defined below) or the enforcement of this Agreement, after
      an Event of Default (such term, as used in this Agreement,  shall mean any
      Event of Default under,  and as defined in, the Credit  Agreement,  or any
      payment  default  after any  applicable  grace  period  under any  Secured
      Interest  Rate  Agreement)  shall have  occurred  and be  continuing,  the
      reasonable  expenses of retaking,  holding,  preparing  for sale or lease,
      selling or otherwise  disposing of or realizing on the  Collateral,  or of
      any  exercise  by the  Pledgee  of its  rights  hereunder,  together  with
      reasonable attorneys' fees and court costs;

all such  obligations,  liabilities,  sums and expenses set forth in clauses (i)
through (iv) of this Section 1 being collectively  called the "Obligations",  it
being acknowledged and agreed that the "Obligations" shall include extensions of
credit  described  above,  whether  outstanding on the date of this Agreement or
extended from time to time after the date of this Agreement.

            2. DEFINITION OF STOCK, NOTES, SECURITIES,  ETC. As used herein, (i)
the term "Stock" shall mean (x) with respect to corporations  incorporated under
the  laws of the  United  States  or any  State  or  territory  thereof  (each a
"Domestic Corporation") all of the issued and outstanding shares of stock at any
time owned by each Pledgor of any Domestic  Corporation  and (y) with respect to
corporations not Domestic Corporations (each, a "Foreign  Corporation"),  all of
the issued and outstanding  shares of stock at any time owned by each Pledgor of
any Foreign  Corporation and all  certificates  and  instruments  evidencing the
same,  provided  that,  (a) such  Pledgor  (to the extent  that it is a Domestic
Subsidiary of the Borrower) shall not be required to pledge  hereunder more than
65% of the total  combined  voting power of all classes of capital  stock of any
Foreign Corporation  entitled to vote (herein called "Voting Stock") and (b) the
Pledgor shall be required to pledge hereunder 100% of the issued and outstanding
shares of all capital stock which is not Voting Stock (herein called "Non-Voting
Stock") at any time owned by the  Pledgor of any Foreign  Corporation;  (ii) the
term "Notes" shall mean all promissory  notes at any time issued to, or held by,
each Pledgor;  and (iii) the term  "Securities"  shall mean all of the Stock and
Notes.  Each Pledgor  represents and warrants that on the date hereof:  (a) each
Subsidiary of each Pledgor, and the direct ownership thereof, is listed on Annex
A hereto;  (b) the Stock  consists of the number and type of shares of the stock
of the  corporations  as  described  in Annex B hereto;  (c) each Pledgor is the
holder of record and beneficial owner of such Stock; (d) such Stock  constitutes
that  percentage  of the issued and  outstanding  capital  stock of the  issuing
corporation  as is set  forth  in Annex B  hereto;  (e) the  Notes  held by each
Pledgor consist of the promissory notes described in Annex C hereto;  and (f) on
the date hereof, each Pledgor owns or possesses no other Securities.

                                       3
<PAGE>


            3.  PLEDGE OF SECURITIES, ETC.

            3.1 Pledge. To secure the Obligations and for the purposes set forth
in Section 1, each Pledgor hereby: (i) grants to the Pledgee a security interest
in all of the Collateral; (ii) pledges and deposits as security with the Pledgee
all  Securities  owned by each Pledgor on the date  hereof,  and delivers to the
Pledgee certificates or instruments therefor, duly endorsed in blank in the case
of Notes and  accompanied by undated stock powers duly executed in blank by each
Pledgor  in the  case of Stock  (and  accompanied  by any  transfer  tax  stamps
required  in  connection  with the pledge of such  securities,  with  signatures
appropriately  guaranteed to the extent required),  or such other instruments of
transfer  as are  acceptable  to the  Pledgee;  and  (iii)  assigns,  transfers,
hypothecates,  mortgages,  charges  and  sets  over to the  Pledgee  all of each
Pledgor's right, title and interest in and to such Securities (and in and to the
certificates  or  instruments  evidencing  such  Securities),  to be held by the
Pledgee, upon the terms and conditions set forth in this Agreement.

            3.2 Subsequently Acquired Securities.  If the Pledgors shall acquire
(by purchase, stock dividend or otherwise) any additional Securities at any time
or from time to time after the date hereof,  each Pledgor will forthwith  pledge
and deposit  such  Securities  as  security  with the Pledgee and deliver to the
Pledgee certificates or instruments thereof,  duly endorsed in blank in the case
of Notes and  accompanied  by undated stock powers duly executed in blank in the
case of Stock (and accompanied by any transfer tax stamps required in connection
with the pledge of such securities,  with signatures appropriately guaranteed to
the extent  required),  by each Pledgor or such other instruments of transfer as
are  acceptable  to the Pledgee,  and will  promptly  thereafter  deliver to the
Pledgee a certificate  executed by a principal executive officer of each Pledgor
describing  such  Securities and certifying that the same have been duly pledged
with the Pledgee hereunder.  Without limiting the foregoing,  each Pledgor shall
be required to pledge hereunder any shares of stock at any time and from time to
time after the date hereof acquired by such Pledgor of any Foreign  Corporation,
provided that (x) no Pledgor (to the extent that it is a Domestic  Subsidiary of
the Borrower) shall be required at any time to pledge hereunder more than 65% of
the  Voting  Stock of any  Foreign  Corporation  and (y) each  Pledgor  shall be
required to pledge  hereunder 100% of any Non-Voting  Stock at any time and from
time to time acquired by such Pledgor of any Foreign Corporation.

            3.3  Uncertificated  Securities.  Notwithstanding  anything  to  the
contrary  contained in Sections 3.1 and 3.2, if any  Securities  (whether or not
now owned or hereafter  acquired) are  uncertificated  securities,  each Pledgor
shall promptly notify the Pledgee  thereof,  and shall promptly take all actions
required to perfect the security  interest of the Pledgee under  applicable  law
(including, in any event, under Sections 8-313 and 8-321 of the New York
                                       4
<PAGE>


Uniform Commercial Code if applicable). Each Pledgor further agrees to take such
actions as the Pledgee deems  necessary or desirable to effect the foregoing and
to permit the Pledgee to exercise any of its rights and remedies hereunder,  and
agrees to provide an opinion of counsel  reasonably  satisfactory to the Pledgee
with  respect to any such  pledge of  uncertificated  Securities  promptly  upon
request of the Pledgee.

            3.4 Definitions of Pledged Stock,  Pledged Notes, Pledged Securities
and  Collateral.  All  Stock at any  time  pledged  or  required  to be  pledged
hereunder  is  hereinafter  called the  "Pledged  Stock;"  all Notes at any time
pledged or required to be pledged hereunder are hereinafter  called the "Pledged
Notes;" all Pledged  Stock and Pledged  Notes  together  are called the "Pledged
Securities",  and the Pledged  Securities,  together with all proceeds  thereof,
including any securities and moneys received and at the time held by the Pledgee
hereunder, are hereinafter called the "Collateral".

            4. APPOINTMENT OF SUB-AGENTS;  ENDORSEMENTS,  ETC. The Pledgee shall
have the right to appoint one or more  sub-agents  for the purpose of  retaining
physical  possession  of the  Pledged  Securities,  which  may be  held  (in the
discretion of the Pledgee) in the name of each Pledgor,  endorsed or assigned in
blank or in favor of the  Pledgee or any nominee or nominees of the Pledgee or a
sub-agent appointed by the Pledgee.

            5. VOTING,  ETC., WHILE NO EVENT OF DEFAULT.  Unless and until there
shall have  occurred  and be  continuing  an Event of Default and (except to the
extent an Event of Default as specified in Section 9.05 of the Credit  Agreement
has  occurred)  each  Pledgor  shall be entitled to exercise  all voting  rights
attaching to any and all Pledged  Securities  owned by it, and to give consents,
waivers or ratifications in respect thereof, provided that no vote shall be cast
or any  consent,  waiver or  ratification  given or any action taken which would
violate, result in breach of any covenant contained in, or be inconsistent with,
any of the terms of this  Agreement  any other  Credit  Document  or any Secured
Interest Rate Agreement (collectively,  the "Secured Debt Agreements"), or which
would  have the  effect of  impairing  the value of the  Collateral  or any part
thereof or the  position or  interests  of the  Pledgee or any Secured  Creditor
therein.  All such rights of such Pledgor to vote and to give consents,  waivers
and  ratifications  shall  cease in case an Event of Default  shall occur and be
continuing and Section 7 hereof shall become applicable.

            6. DIVIDENDS AND OTHER  DISTRIBUTIONS.  Unless and until an Event of
Default shall have occurred and be  continuing,  all cash  dividends  payable in
respect of the Pledged  Securities shall be paid to each Pledgor,  provided that
all dividends payable in respect of the Pledged  Securities which are determined
by the Pledgee, in its absolute discretion,  to represent in whole or in part an
extraordinary,  liquidating or other  distribution in return of capital shall be
paid, to the extent so determined to represent an extraordinary,  liquidating or
other  distribution  in return of capital,  to the Pledgee and retained by it as
part of the  Collateral  (unless  such cash  dividends  are applied to repay the
Obligations pursuant to Section 9 of this Agreement).  The Pledgee shall also be
entitled to receive directly, and to retain as part of the Collateral:

                                       5
<PAGE>


            (i) all other or additional  stock, or other  securities or property
      (other than cash) paid or  distributed  by way of dividend or otherwise in
      respect of the Pledged Stock;

           (ii) all other or  additional  stock or other  securities or property
      (including  cash) paid or  distributed  in respect of the Pledged Stock by
      way of stock-split, spin-off, split-up,  reclassification,  combination of
      shares or similar rearrangement; and

          (iii) all other or  additional  stock or other  securities or property
      (including  cash) which may be paid in respect of the Collateral by reason
      of any  consolidation,  merger,  exchange of stock,  conveyance of assets,
      liquidation or similar corporate reorganization.

Nothing  contained  in this  Section 6 shall  limit or  restrict  in any way the
Pledgee's right to receive  proceeds of the Collateral in any form in accordance
with Section 3 of this Agreement. All dividends, distributions or other payments
which are received by each Pledgor  contrary to the provisions of this Section 6
or Section 7 shall be received in trust for the benefit of the Pledgee, shall be
segregated  from other  property or funds of each Pledgor and shall be forthwith
paid over to the Pledgee as Collateral in the same form as so received (with any
necessary endorsement).

            7.  REMEDIES  IN CASE OF AN  EVENT OF  DEFAULT.  In case an Event of
Default shall have occurred and be continuing,  the Pledgee shall be entitled to
exercise all of the rights,  powers and remedies  (whether  vested in it by this
Agreement or any other Secured Debt  Agreement or by law) for the protection and
enforcement  of its  rights in  respect of the  Collateral,  including,  without
limitation,  all the rights and remedies of a secured  party upon default  under
the Uniform  Commercial  Code of the State of New York, and the Pledgee shall be
entitled,  without  limitation,  to exercise any or all of the following rights,
which each Pledgor hereby agrees to be commercially reasonable:

            (i) to receive  all  amounts  payable  in respect of the  Collateral
      otherwise payable under Section 6 to each Pledgor;

           (ii) to transfer all or any part of the Collateral into the Pledgee's
      name or the name of its nominee or nominees;

          (iii) to  accelerate  any  Pledged  Note which may be  accelerated  in
      accordance  with its terms,  and take any other  lawful  action to collect
      upon any Pledged Note (including,  without limitation,  to make any demand
      for payment thereon);

                                       6
<PAGE>


           (iv) to vote all or any part of the  Pledged  Stock  (whether  or not
      transferred  into the name of the Pledgee) and give all consents,  waivers
      and  ratifications  in respect of the  Collateral  and  otherwise act with
      respect thereto as though it were the outright owner thereof (each Pledgor
      hereby  irrevocably  constituting and appointing the Pledgee the proxy and
      attorney-in-fact  of each Pledgor,  with full power of  substitution to do
      so); and

            (v) at any time or from time to time to sell, assign and deliver, or
      grant  options  to  purchase,  all or any part of the  Collateral,  or any
      interest  therein,  at any  public  or  private  sale,  without  demand of
      performance,  advertisement  or notice of intention to sell or of the time
      or place of sale or adjournment  thereof or to redeem or otherwise (all of
      which are hereby waived by each Pledgor), for cash, on credit or for other
      property,  for  immediate or future  delivery  without any  assumption  of
      credit risk, and for such price or prices and on such terms as the Pledgee
      in its absolute discretion may determine.  Each purchaser at any such sale
      shall hold the property so sold absolutely free from any claim or right on
      the part of each Pledgor,  and each Pledgor  hereby waives and releases to
      the fullest extent permitted by law any right or equity of redemption with
      respect to the  Collateral,  whether before or after sale  hereunder,  all
      rights,  if any, of marshalling  the Collateral and any other security for
      the  Obligations  or  otherwise,  and all  rights,  if any, of stay and/or
      appraisal  which it now has or may at any time in the  future  have  under
      rule of law or statute now  existing  or  hereafter  enacted.  At any such
      sale,  unless  prohibited by applicable  law, the Pledgee on behalf of all
      Secured  Creditors  (or  certain  of them)  may bid for and  purchase  (by
      bidding in  Obligations or otherwise) all or any part of the Collateral so
      sold free from any such right or equity of redemption. Neither the Pledgee
      nor any Secured Creditor shall be liable for failure to collect or realize
      upon any or all of the  Collateral  or for any delay in so doing nor shall
      it be under any  obligation  to take any  action  whatsoever  with  regard
      thereto.

            8. REMEDIES,  ETC., CUMULATIVE.  Each right, power and remedy of the
Pledgee  provided for in this  Agreement or any other Secured Debt Agreement now
or hereafter  existing at law or in equity or by statute shall be cumulative and
concurrent and shall be in addition to every other such right,  power or remedy.
The  exercise or  beginning of the exercise by the Pledgee of any one or more of
the  rights,  powers or remedies  provided  for in this  Agreement  or any other
Secured Debt  Agreement  or now or hereafter  existing at law or in equity or by
statute or otherwise  shall not preclude the  simultaneous  or later exercise by
the  Pledgee  or any  Secured  Creditor  of all such  other  rights,  powers  or
remedies,  and no  failure or delay on the part of the  Pledgee  or any  Secured
Creditor to exercise any such right,  power or remedy shall  operate as a waiver
thereof.  Unless  otherwise  required by the Credit  Documents,  no notice to or
demand on the  Pledgor  in any case  shall  entitle  it to any other or  further
notice or demand in similar other circumstances or constitute a waiver of any of
the rights of the Pledgee or any Secured Creditor to any other further action in
any circumstances without demand or notice.

                                       7
<PAGE>



            9. APPLICATION OF PROCEEDS. All moneys collected by the Pledgee upon
any sale or other  disposition of the  Collateral  pursuant to the terms of this
Agreement,  together  with all other moneys  received by the Pledgee  hereunder,
shall be  applied  in  accordance  with  Section  7 of the  Subsidiary  Guaranty
Security Agreement.

            10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
Pledgee  hereunder  (whether  by  virtue of the  power of sale  herein  granted,
pursuant to judicial  process or  otherwise),  the receipt of the Pledgee or the
officer  making the sale shall be a  sufficient  discharge  to the  purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the  application  of any part of the purchase  money paid
over  to the  Pledgee  or  such  officer  or be  answerable  in any  way for the
misapplication or nonapplication thereof.

            11.  INDEMNITY.  Each  Pledgor  agrees  (i) to  indemnify  and  hold
harmless  the  Pledgee and the  Secured  Creditors  from and against any and all
claims,  demands,  losses,  judgments and liabilities (including liabilities for
penalties) of whatsoever  kind or nature,  and (ii) to reimburse the Pledgee and
the  Secured  Creditors  for  all  reasonable  costs  and  expenses,   including
reasonable  attorneys' fees,  growing out of or resulting from this Agreement or
the  exercise by the Pledgee of any right or remedy  granted to it  hereunder or
under any other Secured Debt Agreement  except,  with respect to clauses (i) and
(ii) above,  for those  arising from the Pledgee's  gross  negligence or willful
misconduct.  In no event  shall the  Pledgee be liable,  in the absence of gross
negligence  or  willful  misconduct  on its  part,  for any  matter  or thing in
connection  with  this  Agreement  other  than to  account  for  moneys or other
property actually received by it in accordance with the terms hereof or thereof.
If and to the extent that the  obligations of each Pledgor under this Section 11
are unenforceable for any reason, each Pledgor hereby agrees to make the maximum
contribution  to the  payment  and  satisfaction  of such  obligations  which is
permissible under applicable law.

            12.  FURTHER  ASSURANCES.  (a) Each Pledgor agrees that it will join
with the Pledgee in  executing  and, at each  Pledgor's  own  expense,  file and
refile under the Uniform Commercial Code such financing statements, continuation
statements and other documents in such offices as the Pledgee may deem necessary
or appropriate and wherever required or permitted by law in order to perfect and
preserve the Pledgee's security interest in the Collateral  hereunder and hereby
authorizes  the Pledgee to file  financing  statements  and  amendments  thereto
relative  to all or any part of the  Collateral  without the  signature  of each
Pledgor  where  permitted  by law, and agrees to do such further acts and things
and  to  execute  and  deliver  to  the  Pledgee  such  additional  conveyances,
assignments, agreements and instruments as the Pledgee may reasonably require or
deem advisable to carry into effect the purposes of this Agreement or to further
assure and confirm unto the Pledgee its rights, powers and remedies hereunder or
thereunder.

                                       8
<PAGE>



            (b)  Each  Pledgor  hereby  appoints  the  Pledgee,  each  Pledgor's
attorney-in-fact, with full authority in the place and stead of such Pledgor and
in the name of such Pledgor or otherwise, from time to time after the occurrence
and during the continuance of an Event of Default,  in the Pledgee's  reasonable
discretion  to take any action and to execute any  instrument  which the Pledgee
may  reasonably  deem  necessary or advisable to accomplish the purposes of this
Agreement.

            13. THE PLEDGEE AS AGENT.  The Pledgee will hold in accordance  with
this  Agreement  all items of the  Collateral  at any time  received  under this
Agreement.  It is expressly  understood  and agreed that the  obligations of the
Pledgee as holder of the  Collateral  and interests  therein and with respect to
the disposition  thereof,  and otherwise  under this  Agreement,  are only those
expressly  set forth in this  Agreement.  The Pledgee shall act hereunder on the
terms and conditions set forth herein and in Section 11 of the Credit Agreement.

            14.  TRANSFER  BY THE  PLEDGORS.  Each  Pledgor  will  not  sell  or
otherwise  dispose of, grant any option with respect to, or mortgage,  pledge or
otherwise  encumber any of the  Collateral  or any interest  therein  (except in
accordance with the terms of this Agreement and the Credit Documents).

            15.  REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGORS.
  (a)  Each  Pledgor represents, warrants and covenants that:

            (i) it is the legal,  beneficial  and record  owner of, and has good
      and marketable title to, all Securities  pledged by it hereunder,  subject
      to no pledge, lien, mortgage,  hypothecation,  security interest,  charge,
      option or other  encumbrance  whatsoever,  except  the liens and  security
      interests created by this Agreement;

           (ii) it has full power,  authority  and legal right to pledge all the
      Securities pledged by it pursuant to this Agreement;

          (iii) this Agreement has been duly authorized,  executed and delivered
      by such Pledgor and constitutes a legal,  valid and binding  obligation of
      such  Pledgor  enforceable  in  accordance  with its terms,  except to the
      extent  that the  enforceability  thereof  may be  limited  by  applicable
      bankruptcy, insolvency,  reorganization,  moratorium or other similar laws
      generally  affecting   creditors'  rights  and  by  equitable   principles
      (regardless of whether enforcement is sought in equity or at law);

           (iv) except to the extent already obtained or made, no consent of any
      other party (including, without limitation, any stockholder or creditor of
      such Pledgor or any of its Subsidiaries) and no consent,  license, permit,
      approval or
                                       9
<PAGE>


      authorization  of,  exemption  by,  notice or report to, or  registration,
      filing or declaration  with, any governmental  authority is required to be
      obtained by such Pledgor in connection with (a) the execution, delivery or
      performance of this Agreement,  (b) the validity or enforceability of this
      Agreement,  (c) the perfection or enforceability of the Pledgee's security
      interest in the Collateral or (d) except for compliance  with or as may be
      required by applicable securities laws, the exercise by the Pledgee of any
      of its rights or remedies provided herein;

            (v) the execution,  delivery and  performance of this Agreement will
      not violate any  provision of any  applicable  law or regulation or of any
      order,  judgment,  writ,  award or decree  of such  court,  arbitrator  or
      governmental authority,  domestic or foreign,  applicable to such Pledgor,
      or of the  Certificate of  Incorporation  or By-Laws of such Pledgor or of
      any securities issued by the Pledgor or any of its Subsidiaries, or of any
      mortgage,  indenture,  lease,  loan agreement,  credit  agreement or other
      contract,  agreement or instrument or undertaking to which such Pledgor or
      any of its  Subsidiaries  is a party or which  purports to be binding upon
      such Pledgor or any of its  Subsidiaries  or upon any of their  respective
      assets  and will not  result  in the  creation  or  imposition  of (or the
      obligation  to create or  impose)  any lien or  encumbrance  on any of the
      assets of such Pledgor or any of its  Subsidiaries  except as contemplated
      by this Agreement;

           (vi) all the shares of the Stock have been duly and  validly  issued,
      are  fully  paid and  non-assessable  and are  subject  to no  options  to
      purchase or similar rights;

          (vii) each of the Pledged Notes  constitutes,  or when executed by the
      obligor thereof will constitute,  the legal,  valid and binding obligation
      of such obligor,  enforceable in accordance with its terms,  except to the
      extent  that the  enforceability  thereof  may be  limited  by  applicable
      bankruptcy, insolvency,  reorganization,  moratorium or other similar laws
      generally  affecting   creditors'  rights  and  by  equitable   principles
      (regardless of whether enforcement is sought in equity or at law); and

         (viii) the pledge, collateral assignment and delivery to the Pledgee of
      the Securities  (other than  uncertificated  securities)  pursuant to this
      Agreement  creates  a  valid  and  perfected  first  priority  Lien in the
      Securities,  and the proceeds thereof,  subject to no other Lien or to any
      agreement purporting to grant to any third party a Lien on the property or
      assets of such Pledgor which would include the Securities.

                                       10
<PAGE>



            (b) Each  Pledgor  covenants  and  agrees  that it will  defend  the
Pledgee's  right,  title and security  interest in and to the Securities and the
proceeds thereof against the claims and demands of all persons  whomsoever;  and
each Pledgor  covenants  and agrees that it will have like title to and right to
pledge  any other  property  at any time  hereafter  pledged  to the  Pledgee as
Collateral  hereunder  and will  likewise  defend the right thereto and security
interest therein of the Pledgee and the Secured Creditors.

            (c) Each  Pledgor  covenants  and agrees that it will take no action
which would violate or be inconsistent with any of the terms of any Secured Debt
Agreement, or which would have the effect of impairing the position or interests
of the Pledgee or any Secured Creditor under any Secured Debt Agreement.

            16.  PLEDGOR'S  OBLIGATIONS  ABSOLUTE,  ETC. The obligations of each
Pledgor  under this  Agreement  shall be absolute  and  unconditional  and shall
remain in full force and effect  without  regard to, and shall not be  released,
suspended, discharged,  terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation:

            (i)  any  renewal,  extension,  amendment  or  modification  of,  or
      addition  or  supplement  to or  deletion  from  any of the  Secured  Debt
      Agreements,  or any other instrument or agreement referred to therein,  or
      any assignment or transfer of any thereof;

           (ii) any waiver,  consent,  extension,  indulgence or other action or
      inaction  under or in respect of any such  agreement or instrument or this
      Agreement;

          (iii) any furnishing of any additional  security to the Pledgee or its
      assignee or any  acceptance  thereof or any release of any security by the
      Pledgee or its assignee;

           (iv) any limitation on any party's liability or obligations under any
      such  instrument or agreement or any  invalidity or  unenforceability,  in
      whole or in part, of any such instrument or agreement or any term thereof;
      or

            (v)  any  bankruptcy,   insolvency,   reorganization,   composition,
      adjustment, dissolution,  liquidation or other like proceeding relating to
      each Pledgor or any  Subsidiary of each Pledgor,  or any action taken with
      respect to this Agreement by any trustee or receiver,  or by any court, in
      any such  proceeding,  whether or not each  Pledgor  shall have  notice or
      knowledge of any of the foregoing.

            17.  REGISTRATION,  ETC.  (a) If an  Event  of  Default  shall  have
occurred and be continuing and each Pledgor shall have received from the Pledgee
a written  request  or  requests  that  each  Pledgor  cause  any  registration,
qualification or compliance under any Federal or state securities law or laws to
be effected with respect to all or any part of the Securities each Pledgor
                                       11
<PAGE>


as soon as  practicable  and at its expense  will use its best  efforts to cause
such  registration  to be effected (and be kept effective) and will use its best
efforts to cause such  qualification  and compliance to be effected (and be kept
effective) as may be so requested and as would permit or facilitate the sale and
distribution of such Securities,  including,  without  limitation,  registration
under the Securities Act of 1933, as then in effect (or any similar statute then
in effect),  appropriate qualifications under applicable blue sky or other state
securities  laws  and  appropriate   compliance  with  any  other   governmental
requirements,  provided  that the Pledgee  shall  furnish to each  Pledgor  such
information  regarding the Pledgee as each Pledgor may request in writing and as
shall be required in connection  with any such  registration,  qualification  or
compliance. Each Pledgor will cause the Pledgee to be kept reasonably advised in
writing  as  to  the  progress  of  each  such  registration,  qualification  or
compliance  and as to the completion  thereof,  will furnish to the Pledgee such
number of prospectuses,  offering circulars and other documents incident thereto
as the Pledgee from time to time may reasonably request,  and will indemnify the
Pledgee and all others  participating  in the  distribution  of such  Securities
against  all  claims,  losses,  damages  or  liabilities  caused  by any  untrue
statement (or alleged untrue statement) of a material fact contained therein (or
in any  related  registration  statement,  notification  or the  like) or by any
omission (or alleged omission) to state therein (or in any related  registration
statement,  notification  or the like) a  material  fact  required  to be stated
therein or  necessary  to make the  statements  therein not  misleading,  except
insofar  as the same may have been  caused by an untrue  statement  or  omission
based upon  information  furnished  in writing  to each  Pledgor by the  Pledgee
expressly for use therein.

            (b) If at any time when the Pledgee shall  determine to exercise its
right to sell all or any part of the Pledged  Securities  pursuant to Section 7,
such Pledged Securities or the part thereof to be sold shall not, for any reason
whatsoever,  be effectively registered under the Securities Act of 1933, as then
in effect,  the Pledgee  may,  in its sole and  absolute  discretion,  sell such
Pledged Securities or part thereof by private sale in such manner and under such
circumstances as Pledgee may deem necessary or advisable in order that such sale
may legally be effected  without such  registration,  provided  that at least 10
days'  notice  of the time and  place  of any such  sale  shall be given to each
Pledgor. Without limiting the generality of the foregoing, in any such event the
Pledgee,  in its sole and  absolute  discretion,  (i) may  proceed  to make such
private sale  notwithstanding  that a registration  statement for the purpose of
registering such Pledged  Securities or part thereof shall have been filed under
such  Securities  Act,  (ii) may approach and negotiate  with a single  possible
purchaser  to effect such sale and (iii) may  restrict  such sale to a purchaser
who will  represent  and agree that such  purchaser  is  purchasing  for its own
account, for investment, and not with a view to the distribution or sale of such
Pledged  Securities or part thereof.  In the event of any such sale, the Pledgee
shall incur no  responsibility  or liability  for selling all or any part of the
Pledged  Securities  at a price  which  the  Pledgee,  in its sole and  absolute
discretion,   may  in  good  faith  deem  reasonable  under  the  circumstances,
notwithstanding  the  possibility  that a  substantially  higher  price might be
realized if the sale were deferred until the registration as aforesaid.

                                       12
<PAGE>



            18. TERMINATION; RELEASE. (a) After the Termination Date (as defined
below),  this Agreement shall terminate (provided that all indemnities set forth
herein  including,  without  limitation,  in Section 11 hereof shall survive any
such  termination) and the Pledgee,  at the request and expense of each Pledgor,
will  execute and deliver to each  Pledgor a proper  instrument  or  instruments
acknowledging  the  satisfaction  and  termination of this Agreement as provided
above,  and will duly  assign,  transfer  and deliver to each  Pledgor  (without
recourse and without any  representation  or warranty) such of the Collateral as
may be in the possession of the Pledgee and as has not theretofore  been sold or
otherwise  applied or released  pursuant to this  Agreement,  together  with any
moneys at the time held by the  Pledgee  hereunder.  As used in this  Agreement,
"Termination  Date" shall mean the date upon which the Total  Commitment and all
Secured Interest Rate Agreements have been terminated, no Letter of Credit, Loan
or Note is outstanding and all other Obligations have been paid in full.

            (b) In the  event  that  any  part  of the  Collateral  is  sold  in
connection  with a sale permitted by Section 8.02 of the Credit  Agreement or is
otherwise  released at the direction of the Required  Banks (or all the Banks if
required by Section  12.12 of the Credit  Agreement),  and the  proceeds of such
sale or sales or from such release are applied in  accordance  with the terms of
the Credit  Agreement to the extent required to be so applied,  the Pledgee,  at
the request and expense of such Pledgor  will duly assign,  transfer and deliver
to such Pledgor (without  recourse and without any  representation  or warranty)
such of the Collateral as is then being (or has been) so sold or released and as
may be in  possession  of the  Pledgee  and has not  theretofore  been  released
pursuant to this Agreement.

            (c) At any time that a Pledgor  desires that  Collateral be released
as  provided in the  foregoing  Section  18(a) or (b),  it shall  deliver to the
Pledgee a certificate signed by its principal executive officer stating that the
release of the respective  Collateral is permitted  pursuant to Section 18(a) or
(b). If requested by the Pledgee  (although the Pledgee shall have no obligation
to make any such request),  the relevant Pledgor shall furnish appropriate legal
opinions (from counsel, which may be in-house counsel,  reasonably acceptable to
the Pledgee) to the effect set forth in the immediately preceding sentence.  The
Pledgee shall have no liability whatsoever to any Secured Creditor as the result
of any release of Collateral by it as permitted by this Section 18.

            19.  NOTICES,  ETC. All notices and other  communications  hereunder
shall be in  writing  and shall be  delivered  or mailed  by first  class  mail,
postage prepaid, addressed:

                                       13
<PAGE>


            (i)   if to Stonebury, at:

                  The Stonebury Group Incorporated
                  3100 Mill Street
                  Suite 214
                  Reno, Nevada  89502
                  Attention:  President

                  With a copy to:

                  HCA Holdings, Inc.
                  c/o Kelso & Company, Inc.
                  305 Park Avenue
                  New York, New York 10022
                  Attention: James J. Connors, II

            (ii)  if to Hosiery Corporation International, at:

                  3369 Progress Drive
                  Bensalem, Pennsylvania  19020
                  Attention:  President

                  With a copy to:

                  HCA Holdings, Inc.
                  c/o Kelso & Company, Inc.
                  305 Park Avenue
                  New York, New York  10022
                  Attention: James J. Connors, II

            (iii) if to U.S. Textile, at:

                  U.S. Textile Corp.
                  Chesterfield Avenue
                  RD SC 903
                  a/k/a 1792 Silkies Blvd.
                  Lancaster, South Carolina 92721
                  Attention:  President

                  With a copy to:

                  HCA Holdings, Inc.
                  c/o Kelso & Company, Inc.
                  305 Park Avenue
                  New York, New York  10022

                                       14
<PAGE>


                  Attention: James J. Connors, II

            (iv)  if to the Pledgee, at:

                  Bankers Trust Company
                  One Bankers Trust Plaza
                  130 Liberty Street
                  New York, New York  10006
                  Attention:  Mary Kay Coyle


            (v) if to any Bank (other than the Pledgee), at such address as such
      Bank shall have specified in the Credit Agreement;

            (vi) if to any  Interest  Rate  Creditor,  at such  address  as such
      Interest Rate Creditor shall have specified in writing to each Pledgor and
      the Pledgee;

or at such  address  as shall  have been  furnished  in  writing  by any  Person
described above to the party required to give notice hereunder.

            20.  WAIVER;  AMENDMENT.  None of the terms and  conditions  of this
Agreement may be changed,  waived,  modified or varied in any manner  whatsoever
unless in writing duly signed by each Pledgor and the Collateral Agent (with the
consent of the Required Banks or, to the extent required by Section 12.12 of the
Credit Agreement,  all of the Banks);  provided,  however,  that no such change,
waiver,  modification  or  variance  shall be made to  Section  9 hereof or this
Section 20 without  the  consent of each  Secured  Creditor  adversely  affected
thereby,  provided further,  that any change,  waiver,  modification or variance
affecting  the rights and benefits of a single Class of Secured  Creditors  (and
not all Secured Creditors in a like or similar manner) shall require the written
consent of the Requisite  Creditors of such Class of Secured Creditors.  For the
purpose of this  Agreement,  the term  "Class"  shall mean each class of Secured
Creditors,  i.e.,  whether  (x) the Bank  Creditors  as  holders  of the  Credit
Agreement  Obligations  or (y) the  Interest  Rate  Creditors  as holders of the
Interest  Rate  Obligations.  For  the  purpose  of  this  Agreement,  the  term
"Requisite  Creditors"  of any Class shall mean each of (x) with  respect to the
Credit  Agreement  Obligations,  the Required  Banks and (y) with respect to the
Interest Rate  Obligations,  the holders of 51% of all  obligations  outstanding
from time to time under the Secured Interest Rate Agreements.
                                       15
<PAGE>

            21. MISCELLANEOUS. This Agreement shall create a continuing security
interest  in the  Collateral  and shall (i)  remain  in full  force and  effect,
subject to  release  and/or  termination  as set forth in  Section  18,  (ii) be
binding upon each Pledgor, its successors and assigns;  provided,  however, that
each Pledgor shall not assign any of its rights or obligations hereunder without
the prior written  consent of the Pledgee (with the prior written consent of the
Required  Banks  or to the  extent  required  by  Section  12.12  of the  Credit
Agreement,  all of the Banks),  and (iii)  inure,  together  with the rights and
remedies of the Pledgee  hereunder,  to the benefit of the Pledgee,  the Secured
Creditors  and  their  respective  successors,  transferees  and  assigns.  THIS
AGREEMENT  SHALL BE CONSTRUED IN ACCORDANCE  WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK. The headings of the several  sections and subsections in this
Agreement  are for purposes of reference  only and shall not limit or define the
meaning  hereof.  This Agreement may be executed in any number of  counterparts,
each of which shall be an original,  but all of which together shall  constitute
one instrument. In the event that any provision of this Agreement shall prove to
be invalid or unenforceable, such provision shall be deemed to be severable from
the other provisions of this Agreement which shall remain binding on all parties
hereto.

            22. WAIVER OF JURY TRIAL. Each Pledgor hereby irrevocably waives all
right to a trial by jury in any action,  proceeding or counterclaim  arising out
of or relating to this agreement or the transactions contemplated hereby.

                                       16
<PAGE>


            IN WITNESS  WHEREOF,  each  Pledgor and the Pledgee have caused this
Agreement to be executed by their duly elected  officers  duly  authorized as of
the date first above written.

                              THE STONEBURY GROUP INCORPORATED,
                                      as Pledgor


                              By____________________________
                                   Name:   Arthur Hughes
                                   Title:  Assistant Secretary


                              U.S. TEXTILE CORP.,
                                      as Pledgor


                              By____________________________
                                   Name:   H. Lengers
                                   Title:  President


                              HOSIERY CORPORATION INTERNATIONAL


                              By____________________________
                                   Name:   John Biagini
                                   Title:  President


                              BANKERS TRUST COMPANY,
                                      as Collateral Agent and as Pledgee


                              By____________________________
                                   Name:   Mary Kay Coyle
                                   Title:  Managing Director


<PAGE>



                                                                ANNEX A



                              LIST OF SUBSIDIARIES


                                  Jurisdiction
                                       of
     Name                         Incorporation
     ----                         -------------



     None.


<PAGE>


                                     ANNEX B



                                  LIST OF STOCK


Name of Issuing    Type of     Number of                        Percentage
  Corporation      Shares       Shares       Certificate No.      Owned
---------------    -------     ---------     ---------------    ----------



None.



<PAGE>

                                     ANNEX C



                                  LIST OF NOTES


    Issuer        Principal Amount        Interest Rate        Maturity Date
    ------        ----------------        -------------        -------------



    None.


<PAGE>

                                                          [EXHIBIT I-1 CONFORMED
                                                                    AS EXECUTED]



                                BORROWER
                           SECURITY AGREEMENT


                                 between


                   HOSIERY CORPORATION OF AMERICA, INC


                                   and


                         BANKERS TRUST COMPANY,

                           as Collateral Agent




                      Dated as of November 20, 1997



<PAGE>

                            TABLE OF CONTENTS


                                                                   Page

ARTICLE I      SECURITY INTERESTS...................................  2
      1.1  Grant of Security Interests..............................  2
      1.2  Power of Attorney........................................  2

ARTICLE II    GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS.....  3
      2.1  Necessary Filings........................................  3
      2.2  No Liens.................................................  3
      2.3  Other Financing Statements...............................  3
      2.4  Chief Executive Office; Records..........................  4
      2.5  Location of Inventory and Equipment......................  4
      2.6  Trade Names; Change of Name..............................  5
      2.7  Recourse.................................................  5

ARTICLE III    SPECIAL PROVISIONS CONCERNING
               RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS............  6
      3.1  Additional Representations and Warranties................  6
      3.2  Maintenance of Records...................................  6
      3.3  Modification of Terms; etc...............................  7
      3.4  Collection...............................................  7
      3.5  Direction to Account Debtors; etc........................  7
      3.6  Instruments..............................................  8
      3.7  Further Actions..........................................  8

ARTICLE IV     SPECIAL PROVISIONS CONCERNING TRADEMARKS.............  8
      4.1  Additional Representations and Warranties................  8
      4.2  Licenses and Assignments.................................  8
      4.3  Infringements............................................  8
      4.4  Preservation of Marks....................................  9
      4.5  Maintenance of Registration..............................  9
      4.6  Future Registered Marks..................................  9
      4.7  Remedies.................................................  9

ARTICLE V      SPECIAL PROVISIONS CONCERNING
               PATENTS AND COPYRIGHTS............................... 10
      5.1  Additional Representations and Warranties................ 10
      5.2  Licenses and Assignments................................. 10
      5.3  Infringements............................................ 10

                                      (i)
<PAGE>


      5.4  Maintenance of Patents................................... 11
      5.5  Prosecution of Patent Application........................ 11
      5.6  Other Patents and Copyrights............................. 11
      5.7  Remedies................................................. 11

ARTICLE VI     PROVISIONS CONCERNING ALL COLLATERAL................. 12
      6.1  Protection of Collateral Agent's Security................ 12
      6.2  Warehouse Receipts Non-negotiable........................ 12
      6.3  Further Actions.......................................... 12
      6.4  Financing Statements..................................... 13

ARTICLE VII    REMEDIES UPON OCCURRENCE OF EVENT OF
               DEFAULT.............................................. 13
      7.1  Remedies; Obtaining the Collateral Upon Default.......... 13
      7.2  Remedies; Disposition of the Collateral.................. 14
      7.3  Waiver of Claims......................................... 15
      7.4  Application of Proceeds.................................. 16
      7.5  Remedies Cumulative...................................... 17
      7.6  Discontinuance of Proceedings............................ 18

ARTICLE VIII   INDEMNITY............................................ 18
      8.1  Indemnity................................................ 18
      8.2  Indemnity Obligations Secured by Collateral; Survival.... 20

ARTICLE IX     DEFINITIONS.......................................... 20

ARTICLE X      MISCELLANEOUS........................................ 24
      10.1  Notices................................................. 24
      10.2  Waiver; Amendment....................................... 24
      10.3  Obligations Absolute.................................... 25
      10.4  Successors and Assigns.................................. 25
      10.5  Headings Descriptive.................................... 26
      10.6  Severability............................................ 26
      10.7  GOVERNING LAW........................................... 26
      10.8  Assignor's Duties....................................... 26
      10.9  Termination; Release.................................... 26
      10.10 Collateral Agent........................................ 27

ANNEX A     Schedule of Existing Financing Statements
ANNEX B     Schedule of Record Locations


                                      (ii)
<PAGE>


ANNEX C     Schedule of Equipment and Inventory Locations
ANNEX D     Schedule of Trade and Fictitious Names
ANNEX E     Schedule of Marks
ANNEX F     Schedule of Patents and Applications
ANNEX G     Schedule of Copyrights and Applications




                                     (iii)
<PAGE>

                           BORROWER SECURITY AGREEMENT


            AMENDMENT  AND  RESTATEMENT,  dated  as of  November  20,  1997,  to
Security  Agreement  dated as of  October  17,  1994 (as  amended,  modified  or
supplemented  from  time to time,  the  "Security  Agreement")  between  HOSIERY
CORPORATION  OF AMERICA,  INC.,  a Delaware  corporation  (the  "Assignor")  and
BANKERS TRUST  COMPANY,  as Collateral  Agent (the  "Collateral  Agent") for the
Secured  Creditors (as defined below).  Capitalized terms used herein shall have
the  meaning  specified  in  Article IX herein or, if not  defined  therein,  as
specified in the Credit Agreement.


                          W I T N E S S E T H :


            WHEREAS, the Assignor,  the financial institutions from time to time
party thereto (the "Banks") and Bankers Trust  Company,  as Agent (the "Agent"),
have entered into an Amendment and  Restatement,  dated as of November 20, 1997,
amending and  restating  the Credit  Agreement  dated as of October 17, 1994 (as
amended,  modified or supplemented  from time to time, the "Credit  Agreement"),
providing  inter  alia  for the  making  of  Loans,  and the  issuance  of,  and
participation in, Letters of Credit as contemplated therein (the Banks from time
to time party to the Credit  Agreement  and the Agent  being  herein  called the
"Bank Creditors");

            WHEREAS,  the Assignor may from time to time be party to one or more
Interest Rate  Agreements  (each such Interest Rate  Agreement  with an Interest
Rate Creditor (as defined  below),  a "Secured  Interest Rate  Agreement")  with
Bankers  Trust  Company,  in its  individual  capacity  ("BTCo"),  any Bank or a
syndicate  of financial  institutions  organized by BTCo or an affiliate of BTCo
(even if BTCo or any such Bank  ceases to be a Bank under the  Credit  Agreement
for any reason),  and any institution that participates,  and in each case their
subsequent  assigns,  (collectively,  the  "Interest  Rate  Creditors",  and the
Interest Rate  Creditors  together  with the Bank  Creditors,  collectively  the
"Secured Creditors");

            WHEREAS,  it is a condition precedent to the making of Loans and the
issuance of, and  participation in, Letters of Credit under the Credit Agreement
that the Assignor shall have executed and delivered to the Collateral Agent this
Agreement;

            WHEREAS,  the  Assignor  desires to execute  this  Agreement  to
satisfy  the  conditions described in the preceding paragraph;



<PAGE>



            NOW,  THEREFORE,  in  consideration  of the benefit  accruing to the
Assignor,  the receipt and  sufficiency  of which are hereby  acknowledged,  the
Assignor  hereby makes the following  representations  and warranties and hereby
covenants and agrees as follows:

                                    ARTICLE I

                               SECURITY INTERESTS

            1.1 Grant of Security Interests.  (a) As security for the prompt and
complete  payment  and  performance  when  due of all  of the  Obligations,  the
Assignor does hereby sell,  assign and transfer unto the Collateral  Agent,  and
does  hereby  grant to the  Collateral  Agent  for the  benefit  of the  Secured
Creditors a continuing security interest of first priority in, all of the right,
title and  interest  of the  Assignor  in,  to and  under all of the  following,
whether now existing or hereafter from time to time acquired: (i) each and every
Receivable,  (ii) all  Contracts,  together  with all  Contract  Rights  arising
thereunder,  (iii) all Inventory,  (iv) all Equipment,  (v) all Marks,  together
with the registrations  and right to all renewals  thereof,  and the goodwill of
the business of the Assignor  symbolized by the Marks,  (vi) the Cash Collateral
Account established for the Assignor and all monies,  securities and instruments
deposited or required to be deposited in such Cash Collateral Account, (vii) all
Patents and Copyrights and all reissues,  renewals or extensions thereof, (viii)
all  computer  programs of the  Assignor and all  intellectual  property  rights
therein and all other proprietary  information of the Assignor,  including,  but
not  limited to,  Trade  Secrets,  (ix) all other  Goods,  General  Intangibles,
Chattel Paper,  Documents and Instruments  (other than the Pledged  Securities),
and (x) all Proceeds and  products of any and all of the  foregoing  (all of the
above collectively, the "Collateral").

      (b) The security  interest of the  Collateral  Agent under this  Agreement
extends to all  Collateral  of the kind which is the  subject of this  Agreement
which the  Assignor  may  acquire at any time  during the  continuation  of this
Agreement.

            1.2 Power of Attorney.  The Assignor hereby constitutes and appoints
the Collateral Agent its true and lawful attorney,  irrevocably, with full power
after the  occurrence of and during the  continuance  of an Event of Default (in
the  name of the  Assignor  or  otherwise)  to act,  require,  demand,  receive,
compound and give  acquittance  for any and all monies and claims for monies due
or to become due to the  Assignor  under or arising  out of the  Collateral,  to
endorse any checks or other instruments or orders in connection therewith and to
file any  claims  or take any  action or  institute  any  proceedings  which the
Collateral  Agent may deem to be necessary or advisable in the  premises,  which
appointment as attorney is coupled with an interest.

                                       2
<PAGE>


                                   ARTICLE II

                GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS

            The   Assignor   represents,    warrants   and   covenants,    which
representations,  warranties and covenants shall survive  execution and delivery
of this Agreement, as follows:

            2.1 Necessary  Filings.  All filings,  registrations  and recordings
necessary or appropriate to create,  preserve,  protect and perfect the security
interest  granted by the Assignor to the  Collateral  Agent hereby in respect of
the Collateral have been  accomplished and the security  interest granted to the
Collateral Agent pursuant to this Agreement in and to the Collateral constitutes
a perfected  security  interest  therein superior and prior to the rights of all
other Persons therein (except that the Collateral may be subject to the security
interests evidenced by the financing statements disclosed on Annex A hereto (the
"Permitted Filings")) and subject to no other Liens (except Permitted Liens) and
is entitled to all the rights,  priorities and benefits  afforded by the Uniform
Commercial Code or other relevant law as enacted in any relevant jurisdiction to
perfected security interests.

            2.2 No Liens.  The Assignor is, and as to Collateral  acquired by it
from time to time after the date hereof the  Assignor  will be, the owner of all
Collateral free from any Lien,  security  interest,  encumbrance or other right,
title or interest  of any Person  (other than Liens  created  hereby,  permitted
under Sections 8.03 (a), (b) and (d) of the Credit Agreement or evidenced by the
Permitted Filings),  and Assignor shall defend the Collateral against all claims
and demands of all Persons at any time claiming the same or any interest therein
adverse to the Collateral Agent.

            2.3 Other Financing Statements.  There is no financing statement (or
similar   statement  or  instrument  of  registration   under  the  law  of  any
jurisdiction)  covering or  purporting  to cover any interest of any kind in the
Collateral  except  as  disclosed  in  Annex A hereto  and so long as the  Total
Commitment has not been  terminated or any Letter of Credit remains  outstanding
or any of the Obligations  remain unpaid or any Secured  Interest Rate Agreement
remains in effect, the Assignor will not execute or authorize to be filed in any
public  office any financing  statement  (or similar  statement or instrument of
registration  under the law of any  jurisdiction) or statements  relating to the
Collateral,  except financing  statements filed or to be filed in respect of and
covering the security  interests  granted hereby by the Assignor or as permitted
by the Credit Agreement.

            2.4 Chief Executive Office;  Records.  The chief executive office of
the Assignor is located at 3369 Progress Drive,  Bensalem,  Pennsylvania  19020.
The  Assignor  will not move  its  chief  executive  office  except  to such new
location as the Assignor may establish in  accordance  with the last sentence of
this Section 2.4. The originals of all documents evidencing all


                                       3
<PAGE>


Receivables  and Contract  Rights and Trade Secrets of the Assignor and the only
original books of account and records of the Assignor  relating thereto are, and
will continue to be, kept at such chief  executive  office and/or one or more of
the  locations  shown on Annex B, or at such new  locations  as the Assignor may
establish  in  accordance  with the  last  sentence  of this  Section  2.4.  All
Receivables  and Contract Rights and Trade Secrets of the Assignor are, and will
continue to be, maintained at, and controlled and directed  (including,  without
limitation,   for  general  accounting  purposes)  from,  the  office  locations
described  above,  or such  new  locations  as the  Assignor  may  establish  in
accordance  with the last  sentence of this Section 2.4. The Assignor  shall not
establish  new  locations  for such offices until (i) it shall have given to the
Collateral  Agent not less than 30 days'  prior  written  notice (or such lesser
notice  as  shall be  acceptable  to the  Collateral  Agent in the case of a new
record location to be established in connection  with newly acquired  Contracts)
of its intention so to do,  clearly  describing  such new location and providing
such other  information  in  connection  therewith as the  Collateral  Agent may
reasonably  request,  and (ii) with respect to such new location,  it shall have
taken all action, satisfactory to the Collateral Agent, to maintain the security
interest of the Collateral Agent in the Collateral intended to be granted hereby
at all times fully perfected and in full force and effect.

            2.5 Location of Inventory and Equipment. All Inventory and Equipment
held on the date hereof by the Assignor is located at one of the locations shown
on Annex C attached hereto. The Assignor agrees that all Inventory and Equipment
now  held or  subsequently  acquired  by it  shall  be kept at (or  shall  be in
transport to or from) any one of the locations shown on Annex C hereto,  or such
new location as the Assignor may establish in accordance  with the last sentence
of this  Section  2.5,  provided  that  Equipment  may be removed  from any such
location so long as (x) such  Equipment is returned to such  location  within 30
days after such removal and (y) the  replacement  value of all of the Assignor's
Equipment  which has been removed from one of the locations shown on Annex C, or
from a new location  established  in  accordance  with the last sentence of this
Section 2.5,  and has not been  returned to any such  location,  does not exceed
$100,000 in the  aggregate at any one time.  The  Assignor  may  establish a new
location  for  Inventory  and  Equipment  only if (i) it shall have given to the
Collateral  Agent not less than 30 days prior written notice of its intention so
to do, clearly describing such new location and providing such other information
in connection therewith as the Collateral Agent may reasonably request, and (ii)
with  respect to such new  location,  it shall have taken all action  reasonably
satisfactory  to the Collateral  Agent to maintain the security  interest of the
Collateral  Agent in the  Collateral  intended to be granted hereby at all times
fully perfected and in full force and effect.

            2.6 Trade  Names;  Change  of Name.  The  Assignor  does not have or
operate in any jurisdiction  under, or in the preceding 12 months has not had or
has not operated in any jurisdiction under, any trade names, fictitious names or
other names (including, without
                                       4
<PAGE>



limitation, any names of divisions or operations) except its legal name and such
other  trade,  fictitious  or other  names as are listed on Annex D hereto.  The
Assignor  has  only  operated  under  each  name  set  forth  in  Annex D in the
jurisdiction or jurisdictions  set forth opposite each such name on Annex D. The
Assignor  shall  not  change  its  legal  name  or  assume  or  operate  in  any
jurisdiction under any trade, fictitious or other name except those names listed
on Annex D hereto in the jurisdictions listed with respect to such names and new
names  (including,  without  limitation,  any names of divisions or  operations)
and/or  jurisdictions  established in accordance  with the last sentence of this
Section 2.6. The Assignor shall not assume or operate in any jurisdiction  under
any new trade,  fictitious  or other name or operate  under any existing name in
any  additional  jurisdiction  until (i) it shall have  given to the  Collateral
Agent not less than 30 days' prior  written  notice of its  intention  so to do,
clearly  describing such new name and/or  jurisdiction and, in the case of a new
name, the  jurisdictions in which such new name shall be used and providing such
other information in connection therewith as the Collateral Agent may reasonably
request,  and (ii) with  respect to such new name  and/or new  jurisdiction,  it
shall have taken all action to maintain the security  interest of the Collateral
Agent in the  Collateral  intended  to be  granted  hereby  at all  times  fully
perfected and in full force and effect.

            2.7  Recourse.  This  Agreement  is made with full  recourse  to the
Assignor  and  pursuant  to  and  upon  all  the  warranties,   representations,
covenants,  and agreements on the part of the Assignor  contained herein, in the
Secured Interest Rate Agreements and otherwise in writing in connection herewith
or therewith.


                                   ARTICLE III

                          SPECIAL PROVISIONS CONCERNING
                   RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS

            3.1 Additional  Representations and Warranties.  As of the time when
each of its accounts  receivable  arises,  the Assignor  shall be deemed to have
represented  and warranted  that such  receivable,  and all records,  papers and
documents  relating  thereto (if any) are genuine and in all respects  what they
purport to be, and that all papers and documents  (if any) relating  thereto (i)
will represent the genuine,  legal,  valid and binding obligation of the account
debtor,  subject to adjustments  customary in the business of the Assignor,  and
evidencing indebtedness unpaid and owed by the respective account debtor arising
out of the performance of labor or services or the sale or lease and delivery of
the merchandise listed therein, or both, (ii) will be the only original writings
evidencing  and embodying  such  obligation of the account  debtor named therein
(other than copies created for general accounting purposes), (iii) will evidence
true and valid  obligations,  enforceable  in accordance  with their  respective
terms,  subject to  adjustments  customary in the business of the Assignor,  and
(iv) will be in compliance and will conform with all applicable  federal,  state
and local laws and applicable laws of any relevant foreign jurisdiction.

                                       5
<PAGE>



            3.2  Maintenance of Records.  The Assignor will keep and maintain at
its own cost and expense  satisfactory  and complete  records of its Receivables
and Contracts, including, but not limited to, the originals of all documentation
(including  each  Contract)  with  respect  thereto,  records  of  all  payments
received,  all credits granted thereon,  all merchandise  returned and all other
dealings  therewith,  and the  Assignor  will  make  the same  available  to the
Collateral Agent for inspection,  at the Assignor's own cost and expense, at any
and all reasonable  times upon demand.  The Assignor  shall, at its own cost and
expense,  deliver all tangible  evidence of its  Receivables and Contract Rights
(including,   without  limitation,   copies  of  all  documents  evidencing  the
Receivables and all Contracts, such copies, if requested by the Collateral Agent
while an Event of Default is in existence,  to be certified as true and complete
by an  appropriate  officer of the  Assignor)  and such books and records to the
Collateral Agent or to its  representatives  (copies of which evidence and books
and records may be retained by the Assignor) at any time upon its demand. If the
Collateral  Agent so directs,  the  Assignor  shall  legend,  in form and manner
reasonably  satisfactory to the Collateral Agent, the Receivables and Contracts,
as well as books, records and documents of the Assignor evidencing or pertaining
to  the  Receivables  with  an  appropriate  reference  to  the  fact  that  the
Receivables  and Contracts have been assigned to the  Collateral  Agent and that
the Collateral Agent has a security interest therein.

            3.3  Modification  of Terms;  etc. The Assignor shall not rescind or
cancel any  indebtedness  evidenced by any Receivable or under any Contract,  or
modify any term thereof or make any adjustment with respect  thereto,  or extend
or renew the same, or compromise or settle any material dispute,  claim, suit or
legal  proceeding  relating  thereto,  or sell any  Receivable  or Contract,  or
interest  therein,  without the prior written  consent of the Collateral  Agent,
except (i) as  permitted  by Section  3.4 hereof and (ii) so long as no Event of
Default is then in existence in respect of which the Collateral  Agent has given
notice that this  exception  is no longer  applicable,  the Assignor may modify,
make  adjustments with respect to, extend or renew any Contracts in the ordinary
course of business.  The Assignor will duly fulfill all  obligations on its part
to be fulfilled  under or in connection  with the  Receivables and Contracts and
will do nothing to impair the rights of the Collateral  Agent in the Receivables
or Contracts.

            3.4 Collection. The Assignor shall endeavor to cause to be collected
from the account  debtor named in each of its  Receivables  or obligor under any
Contract,  as and when due  (including,  without  limitation,  amounts which are
delinquent,  such amounts to be collected in accordance with generally  accepted
lawful  collection  procedures) any and all amounts owing under or on account of
such  Receivable or Contract,  and apply forthwith upon receipt thereof all such
amounts as are so collected to the  outstanding  balance of such  Receivable  or
under  such  Contract,  except  that,  so long as no Event of Default is then in
existence  in respect of which the  Collateral  Agent has given notice that this
exception is no longer applicable, the Assignor may
                                       6
<PAGE>


allow in the ordinary  course of business as  adjustments to amounts owing under
its  Receivables  and Contracts (i) an extension or renewal of the time or times
of payment,  or  settlement  for less than the total unpaid  balance,  which the
Assignor finds appropriate in accordance with sound business judgment and (ii) a
refund  or  credit  due as a  result  of  returned  or  damaged  merchandise  or
improperly  performed  services.  The costs  and  expenses  (including,  without
limitation,  attorneys' fees) of collection, whether incurred by the Assignor or
the Collateral Agent, shall be borne by the Assignor.

            3.5  Direction to Account  Debtors;  etc.  Upon the  occurrence  and
during the  continuance of an Event of Default,  and if the Collateral  Agent so
directs the Assignor,  to the extent  permitted by applicable  law, the Assignor
agrees (x) to cause all payments on account of the  Receivables and Contracts to
be made directly to the Cash Collateral  Account,  (y) that the Collateral Agent
may, at its option, directly notify the obligors with respect to any Receivables
and/or any  Contracts  to make  payments  with  respect  thereto as  provided in
preceding clause (x) and (z) that the Collateral Agent may enforce collection of
any such Receivables  and/or any Contracts and may adjust,  settle or compromise
the amount of payment thereof. The Collateral Agent may apply any or all amounts
then in, or thereafter  deposited in, the Cash Collateral  Account in the manner
provided in Section 7.4 of this  Agreement.  The costs and  expenses  (including
attorneys'  fees)  of  collection,  whether  incurred  by  the  Assignor  or the
Collateral Agent, shall be borne by the Assignor.

            3.6  Instruments.  If the Assignor owns or acquires any  Instrument,
the Assignor will within 10 days notify the Collateral  Agent thereof,  and upon
request  by  the  Collateral  Agent  promptly  deliver  such  Instrument  to the
Collateral Agent appropriately  endorsed to the order of the Collateral Agent as
further security hereunder.

            3.7 Futher  Actions.  The Assignor  will, at its own expense,  make,
execute, endorse,  acknowledge, file and/or deliver to the Collateral Agent from
time to time  such  vouchers,  invoices,  schedules,  confirmatory  assignments,
conveyances,  financing statements,  transfer endorsements,  powers of attorney,
certificates,  reports and other assurances or instruments and take such further
steps relating to its Receivables,  Contracts, Instruments and other property or
rights covered by the security interest hereby granted,  as the Collateral Agent
may reasonably require to give effect to the purposes of this Agreement.

                                       7
<PAGE>



                                   ARTICLE IV

                    SPECIAL PROVISIONS CONCERNING TRADEMARKS

            4.1  Additional   Representations   and  Warranties.   The  Assignor
represents  and warrants that it is the true and lawful owner or licensee of the
Marks listed in Annex E attached  hereto and that said listed  Marks  constitute
all the marks  registered in the United States Patent and Trademark  Office that
the  Assignor now owns or uses in  connection  with its  business.  The Assignor
represents  and  warrants  that it owns or is  licensed to use all Marks that it
uses.  The Assignor  further  warrants  that it is aware of no third party claim
that any aspect of the Assignor's  present or contemplated  business  operations
infringes or will infringe any trademark or service mark in a manner which could
have a material effect on the financial  condition,  business or property of the
Assignor.

            4.2 Licenses and  Assignments.  The  Assignor  hereby  agrees not to
divest  itself of any right  under a Mark other than in the  ordinary  course of
business absent prior written approval of the Collateral Agent.

            4.3  Infringements.  The Assignor  agrees,  promptly  upon  learning
thereof,  to notify the Collateral  Agent in writing of the name and address of,
and to furnish such pertinent information that may be available with respect to,
any party who may be  infringing or otherwise  violating  any of the  Assignor's
rights in and to any  significant  Mark,  or with respect to any party  claiming
that the Assignor's use of any  significant  Mark violates any property right of
that  party,  to the extent that such  infringement  or  violation  could have a
material  effect  on  the  financial  condition,  business  or  property  of the
Assignor.  The  Assignor  further  agrees,  unless  otherwise  directed  by  the
Collateral Agent,  diligently to prosecute any person infringing any significant
Mark in a manner consistent with its past practice and in the ordinary course of
business.

            4.4   Preservation  of  Marks.   The  Assignor  agrees  to  use  its
significant Marks in interstate commerce during the time in which this Agreement
is in effect, sufficiently to preserve such Marks as trademarks or service marks
registered under the laws of the United States.

            4.5  Maintenance of  Registration.  The Assignor  shall,  at its own
expense, diligently process all documents required by the Trademark Act of 1946,
15 U.S.C.  ss.ss. 1051 et seq. to maintain  trademark  registration  which could
have a material effect on the financial  condition,  business or property of the
Assignor,  including but not limited to affidavits of use and  applications  for
renewals of  registration  in the United States Patent and Trademark  Office for
all of its Marks pursuant to 15 U.S.C. ss.ss.  1058(a), 1059 and 1065, and shall
pay all fees and  disbursements in connection  therewith,  and shall not abandon
any such filing of affidavit of use

                                       8
<PAGE>


or any such application of renewal prior to the exhaustion of all administrative
and judicial remedies without prior written consent of the Collateral Agent. The
Assignor agrees to notify the Collateral  Agent one (1) month prior to the dates
on which the affidavits of use or the applications for renewal  registration are
due that the affidavit of use or the renewal is being processed.

            4.6  Future  Registered  Marks.  If  any  mark  registration  issues
hereafter  to the  Assignor  as a result  of any  application  now or  hereafter
pending before the United States Patent and Trademark Office, within thirty (30)
days of receipt of such  certificate  the Assignor  shall deliver a copy of such
certificate,  and a grant of  security  in such  mark to the  Collateral  Agent,
confirming the grant thereof  hereunder,  the form of such confirmatory grant to
be substantially the same as the form hereof.

            4.7 Remedies.  If an Event of Default shall occur and be continuing,
the Collateral Agent may, by written notice to the Assignor,  take any or all of
the following  actions:  (i) declare the entire right, title and interest of the
Assignor in and to each of the Marks,  together  with all  trademark  rights and
rights of protection to the same, vested, in which event such rights,  title and
interest shall  immediately vest, in the Collateral Agent for the benefit of the
Secured Creditors, in which case the Assignor agrees to execute an assignment in
form and substance  satisfactory  to the  Collateral  Agent,  of all its rights,
title and interest in and to the Marks to the  Collateral  Agent for the benefit
of the Secured  Creditors;  (ii) take and use or sell the Marks and the goodwill
of the Assignor's business symbolized by the Marks and the right to carry on the
business and use the assets of the Assignor in  connection  with which the Marks
have been used;  and (iii)  direct the  Assignor to refrain,  in which event the
Assignor shall refrain, from using the Marks in any manner whatsoever,  directly
or indirectly,  and, if requested by the Collateral Agent, change the Assignor's
corporate name to eliminate therefrom any use of any Mark and execute such other
and further  documents that the Collateral  Agent may request to further confirm
this and to transfer  ownership of the Marks and  registrations  and any pending
trademark  application  in the United States Patent and Trademark  Office to the
Collateral Agent.


                                    ARTICLE V

                          SPECIAL PROVISIONS CONCERNING
                             PATENTS AND COPYRIGHTS

            5.1  Additional   Representations   and  Warranties.   The  Assignor
represents  and warrants that it is the true and lawful owner or licensee of all
rights in the Patents  listed in Annex F attached  hereto and in the  Copyrights
listed in Annex G attached hereto,  that said Patents  constitute all the United
States patents and  applications for United States patents that the Assignor now
owns and that  said  Copyrights  constitute  all the  registered  United  States
copyrights that the Assignor now owns. The Assignor represents and warrants that
it owns or is licensed to

                                       9
<PAGE>


practice  under all Patents and Copyrights  that it now owns,  uses or practices
under.  The Assignor  further  warrants that it is aware of no third party claim
that any aspect of the Assignor's  present or contemplated  business  operations
infringes or will  infringe any patent or any  copyright in a manner which could
have a material effect on the financial  condition,  business or property of the
Assignor.

            5.2 Licenses and  Assignments.  The  Assignor  hereby  agrees not to
divest  itself  of any  right  under a Patent  or  Copyright  other  than in the
ordinary  course of business  absent prior  written  approval of the  Collateral
Agent.

            5.3  Infringements.  The Assignor  agrees,  promptly  upon  learning
thereof,  to  furnish  the  Collateral  Agent  in  writing  with  all  pertinent
information  available to the Assignor with respect to any infringement or other
violation of the Assignor's  rights in any significant  Patent or Copyright,  or
with respect to any claim that practice of any  significant  Patent or Copyright
violates any property right of that party, to the extent that such  infringement
or violation could have a material effect on the financial  condition,  business
or property of the Assignor.  The Assignor  further agrees,  absent direction of
the  Collateral  Agent to the  contrary,  diligently  to  prosecute  any  person
infringing any significant  Patent or Copyright in a manner  consistent with its
past practice and in the ordinary course of business.

            5.4 Maintenance of Patents.  At its own expense,  the Assignor shall
make timely payment of all post-issuance fees required pursuant to 35 U.S.C. ss.
41 to maintain in force rights under each Patent.

            5.5  Prosecution  of Patent  Application.  At its own  expense,  the
Assignor shall  diligently  prosecute all applications for United States patents
listed on Annex F hereto,  and shall not abandon any such  application  prior to
exhaustion of all administrative  and judicial remedies,  absent written consent
of the Collateral Agent.

            5.6  Other  Patents  and  Copyrights.  Within  thirty  (30)  days of
acquisition  of a  United  States  Patent  or  Copyright,  or  of  filing  of an
application for a United States Patent or Copyright,  the Assignor shall deliver
to the Collateral Agent a copy of said Patent or Copyright,  as the case may be,
with a grant of  security as to such  Patent or  Copyright,  as the case may be,
confirming the grant thereof  hereunder,  the form of such confirmatory grant to
be substantially the same as the form hereof.

            5.7 Remedies.  If an Event of Default shall occur and be continuing,
the  Collateral  Agent may by written  notice to the Assignor take any or all of
the following  actions:  (i) declare the entire right, title and interest of the
Assignor  in each of the  Patents  and  Copyrights  vested,  in which event such
right, title and interest shall immediately vest in the Collateral Agent for the
benefit of the Secured  Creditors,  in which case the Assignor agrees to execute
an assignment in form and substance  satisfactory to the Collateral Agent of all
its right, title, and
                                       10
<PAGE>


interest to such Patents and Copyrights to the Collateral  Agent for the benefit
of the  Secured  Creditors;  (ii)  take and  practice  or sell the  Patents  and
Copyrights;  (iii) direct the  Assignor to refrain,  in which event the Assignor
shall  refrain,   from  practicing  the  Patents  and  Copyrights   directly  or
indirectly,  and the Assignor shall execute such other and further  documents as
the  Collateral  Agent may  request  further  to  confirm  this and to  transfer
ownership of the Patents and Copyrights to the Collateral  Agent for the benefit
of the Secured Creditors.

                                   ARTICLE VI

                      PROVISIONS CONCERNING ALL COLLATERAL

            6.1 Protection of Collateral Agent's Security.  The Assignor will do
nothing to impair  the rights of the  Collateral  Agent in the  Collateral.  The
Assignor will at all times keep its Inventory and Equipment  insured in favor of
the Collateral  Agent, at its own expense,  to the extent required by the Credit
Agreement  against fire,  theft and all other risks to which such Collateral may
be subject; all policies or certificates with respect to such insurance shall be
endorsed  to  the  Collateral  Agent's  satisfaction  for  the  benefit  of  the
Collateral Agent (including,  without limitation, by naming the Collateral Agent
as loss payee) and deposited  with the Collateral  Agent.  If the Assignor shall
fail to insure such Inventory to the extent required by the Credit Agreement, or
if  the  Assignor  shall  fail  to  so  endorse  and  deposit  all  policies  or
certificates  with respect  thereto,  the Collateral  Agent shall have the right
(but shall be under no  obligation)  to procure such  insurance and the Assignor
agrees to reimburse the Collateral Agent for all costs and expenses of procuring
such insurance. The Collateral Agent may apply any proceeds of such insurance in
accordance   with  Section  7.4.  The  Assignor   assumes  all   liability   and
responsibility  in  connection  with  the  Collateral  acquired  by it  and  the
liability of the Assignor to pay its Obligations  shall in no way be affected or
diminished by reason of the fact that such  Collateral  may be lost,  destroyed,
stolen, damaged or for any reason whatsoever unavailable to the Assignor.

            6.2 Warehouse Receipts  Non-negotiable.  The Assignor agrees that if
any warehouse  receipt or receipt in the nature of a warehouse receipt is issued
with respect to any of its Inventory,  such warehouse  receipt or receipt in the
nature thereof shall not be "negotiable"  (as such term is used in Section 7-104
of the Uniform  Commercial  Code as in effect in any  relevant  jurisdiction  or
under other relevant law).

            6.3 Further  Actions.  The Assignor will, at its own expense,  make,
execute, endorse,  acknowledge, file and/or deliver to the Collateral Agent from
time to time  such  lists,  descriptions  and  designations  of its  Collateral,
warehouse  receipts,  receipts  in the nature of  warehouse  receipts,  bills of
lading,  documents  of  title,  vouchers,  invoices,   schedules,   confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney,  certificates,  reports and other  assurances or instruments  and take
such further steps
                                       11
<PAGE>



relating to the  Collateral and other property or rights covered by the security
interest hereby granted, which the Collateral Agent deems reasonably appropriate
or  advisable  to  perfect,  preserve or protect  its  security  interest in the
Collateral.

            6.4 Financing Statements. The Assignor agrees to sign and deliver to
the  Collateral  Agent such  financing  statements,  in form  acceptable  to the
Collateral  Agent,  as the  Collateral  Agent may from  time to time  reasonably
request or as are necessary or desirable in the opinion of the Collateral  Agent
to establish and maintain a valid, enforceable, first priority security interest
in the  Collateral  as  provided  herein  and  the  other  rights  and  security
contemplated  hereby  all in  accordance  with the  Uniform  Commercial  Code as
enacted in any and all relevant  jurisdictions  or any other  relevant  law. The
Assignor will pay any applicable filing fees and related expenses.  The Assignor
authorizes the Collateral  Agent to file any such financing  statements  without
the signature of the Assignor.


                                   ARTICLE VII

                  REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT

            7.1 Remedies;  Obtaining the Collateral  Upon Default.  The Assignor
agrees that, if any Event of Default shall have occurred and be continuing, then
and in every such case, subject to any mandatory  requirements of applicable law
then in effect, the Collateral Agent, in addition to any rights now or hereafter
existing under applicable law, shall have all rights as a secured creditor under
the Uniform Commercial Code in all relevant jurisdictions and may:

            (i)  personally,  or by  agents  or  attorneys,  immediately  retake
      possession of the Collateral or any part thereof, from the Assignor or any
      other Person who then has  possession  of any part thereof with or without
      notice  or  process  of law,  and for  that  purpose  may  enter  upon the
      Assignor's  premises where any of the Collateral is located and remove the
      same  and use in  connection  with  such  removal  any  and all  services,
      supplies, aids and other facilities of the Assignor;

            (ii) instruct the obligor or obligors on any  agreement,  instrument
      or other  obligation  (including,  without  limitation,  the  Receivables)
      constituting  the Collateral to make any payment  required by the terms of
      such instrument or agreement directly to the Collateral Agent;

                                       12
<PAGE>





            (iii) withdraw all moneys,  securities and other  instruments in the
      Cash  Collateral  Account for application to the Obligations in accordance
      with Section 7.4 hereof;

            (iv) sell, assign or otherwise liquidate,  or direct the Assignor to
      sell, assign or otherwise  liquidate,  any or all of the Collateral or any
      part thereof in accordance with Section 7.2 hereof, and take possession of
      the proceeds of any such sale or liquidation; and

            (v)  take  possession  of the  Collateral  or any part  thereof,  by
      directing  the  Assignor in writing to deliver the same to the  Collateral
      Agent at any place or places  designated by the Collateral Agent, in which
      event the Assignor shall at its own expense:

                  (A)  forthwith  cause  the same to be  moved  to the  place or
            places so designated by the Collateral  Agent and there delivered to
            the Collateral Agent,

                  (B)  store  and  keep  any  Collateral  so  delivered  to  the
            Collateral  Agent at such place or places pending  further action by
            the Collateral Agent as provided in Section 7.2, and

                  (C) while the Collateral shall be so stored and kept,  provide
            such  guards  and  maintenance  services  as shall be  necessary  to
            protect  the  same  and  to  preserve  and  maintain  them  in  good
            condition;

            (vi) license or sublicense  whether on an exclusive or  nonexclusive
      basis,  any Marks,  Patents or Copyrights  included in the  Collateral for
      such term and on such  conditions  and in such  manner  as the  Collateral
      Agent shall in its sole judgment determine.

it being understood that the Assignor's  obligation so to deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Collateral Agent shall be entitled to a
decree requiring specific performance by the Assignor of said obligation.

            7.2 Remedies; Disposition of the Collateral. Upon the occurrence and
continuance of an Event of Default, any Collateral repossessed by the Collateral
Agent under or pursuant to Section 7.1 and any other  Collateral  whether or not
so  repossessed  by the  Collateral  Agent,  may be sold,  assigned,  leased  or
otherwise disposed of under one or more contracts or as an entirety, and without
the necessity of gathering at the place of sale the property to be sold,  and in
general in such  manner,  at such time or times,  at such place or places and on
such terms as the
                                       13
<PAGE>


Collateral  Agent  may,  in  compliance  with  any  mandatory   requirements  of
applicable law, determine to be commercially  reasonable.  Any of the Collateral
may be sold, leased or otherwise disposed of, in the condition in which the same
existed when taken by the Collateral Agent or after any overhaul or repair which
the Collateral  Agent shall  determine to be commercially  reasonable.  Any such
disposition which shall be a private sale or other private proceedings permitted
by such  requirements  shall be made upon not less than ten (10)  days'  written
notice to the Assignor  specifying  the time at which such  disposition is to be
made and the intended sale price or other consideration  therefor,  and shall be
subject,  for the ten (10) days after the giving of such notice, to the right of
the Assignor or any nominee of the Assignor to acquire the  Collateral  involved
at a price or for such other  consideration  at least equal to the intended sale
price or other consideration so specified. Any such disposition which shall be a
public sale permitted by such requirements  shall be made upon not less than ten
(10) days' written notice to the Assignor  specifying the time and place of such
sale and, in the absence of applicable  requirements  of law, shall be by public
auction (which may, at the Collateral  Agent's  option,  be subject to reserve),
after  publication of notice of such auction not less than 10 days prior thereto
in two newspapers in general  circulation in the City of New York. To the extent
permitted by any such  requirement of law, the Collateral Agent on behalf of the
Secured  Creditors (or certain of them) may bid for and become the purchaser (by
bidding on  Obligations  or  otherwise)  of the  Collateral or any item thereof,
offered for sale in accordance with this Section without  accountability  to the
Assignor  (except to the extent of surplus money received as provided in Section
7.4). If, under mandatory  requirements of applicable law, the Collateral  Agent
shall be required to make disposition of the Collateral  within a period of time
which  does not  permit  the  giving of notice to the  Assignor  as  hereinabove
specified,  the  Collateral  Agent need give the  Assignor  only such  notice of
disposition  as  shall  be  reasonably  practicable  in view  of such  mandatory
requirements  of applicable  law. The Assignor  agrees to do or cause to be done
all such other acts and things as may be reasonably  necessary to make such sale
or sales of all or any  portion  of the  Collateral  valid  and  binding  and in
compliance  with  any and  all  applicable  laws,  regulations,  orders,  writs,
injunctions,   decrees  or  awards  of  any  and  all  courts,  arbitrations  or
governmental  instrumentalities,  domestic or foreign,  having jurisdiction over
any such sale or sales, all at the Assignor's expense.

            7.3  Waiver  of  Claims.   Except  as  otherwise  provided  in  this
Agreement,  THE ASSIGNOR  HEREBY WAIVES,  TO THE EXTENT  PERMITTED BY APPLICABLE
LAW,  NOTICE AND JUDICIAL  HEARING IN  CONNECTION  WITH THE  COLLATERAL  AGENT'S
TAKING  POSSESSION  OR  THE  COLLATERAL  AGENT'S   DISPOSITION  OF  ANY  OF  THE
COLLATERAL,  INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING
FOR ANY  PREJUDGMENT  REMEDY OR REMEDIES  AND ANY SUCH RIGHT WHICH THE  ASSIGNOR
WOULD OTHERWISE HAVE UNDER THE  CONSTITUTION OR ANY STATUTE OF THE UNITED STATES
OR OF ANY STATE, and the Assignor hereby further waives, to the extent permitted
by law:

                                       14
<PAGE>


            (i) all damages  occasioned by such taking of possession  except any
      damages  which are the  direct  result  of the  Collateral  Agent's  gross
      negligence or willful misconduct;

            (ii) all other  requirements as to the time, place and terms of sale
      or other  requirements  with respect to the  enforcement of the Collateral
      Agent's rights hereunder; and

            (iii)  all  rights of  redemption,  appraisement,  valuation,  stay,
      extension or moratorium now or hereafter in force under any applicable law
      in order to  prevent or delay the  enforcement  of this  Agreement  or the
      absolute sale of the Collateral or any portion thereof,  and the Assignor,
      for  itself and all who may claim  under it,  insofar as it or they now or
      hereafter lawfully may, hereby waives the benefit of all such laws.

Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral  shall operate to divest all right,  title,  interest,  claim and
demand,  either at law or in equity,  of the Assignor  therein and thereto,  and
shall be a  perpetual  bar both at law and in equity  against the  Assignor  and
against any and all Persons  claiming or attempting  to claim the  Collateral so
sold,  optioned or realized upon, or any part thereof,  from,  through and under
the Assignor.

            7.4  Application  of Proceeds.  (a) The  proceeds of any  Collateral
obtained pursuant to Section 7.1 or disposed of pursuant to Section 7.2 shall be
applied as follows:

            (i) first, to the payment of all Obligations to the Collateral Agent
      of the type  described  in  clauses  (iii) and (iv) of the  definition  of
      "Obligation" contained in Article IX hereof;

            (ii) second,  to the extent  proceeds  remain after the  application
      pursuant  to  preceding  clause (i),  an amount  equal to the  outstanding
      Obligations  to the  Secured  Creditors  shall  be  paid  to  the  Secured
      Creditors  as  provided  in  Section  7.4(c)  with each  Secured  Creditor
      receiving  an  amount  equal to its  outstanding  Obligations  or,  if the
      proceeds are  insufficient  to pay in full all such  Obligations,  its Pro
      Rata Share of the amount  remaining to be distributed to be applied,  with
      respect  to the Credit  Document  Obligations,  firstly to the  payment of
      interest in respect of the unpaid principal  amount of Loans  outstanding,
      secondly to the payment of  principal  of Loans  outstanding,  then to the
      other Credit Document Obligations; and

            (iii) third, to the extent remaining after the application  pursuant
                  to the  preceding  clauses  (i) and  (ii)  and  following  the
                  termination of this Agreement pursuant to Section 10.9 hereof,
                  to the  Assignor  or to whomever  may be lawfully  entitled to
                  receive such payment.

                                       15
<PAGE>



            (b) For  purposes of this  Agreement,  "Pro Rata Share"  shall mean,
when calculating a Secured Creditor's portion of any distribution or amount, the
amount (expressed as a percentage) equal to a fraction the numerator of which is
the then  outstanding  amount of the  relevant  Obligations  owed  such  Secured
Creditor  and the  denominator  of which is the then  outstanding  amount of all
Obligations.

            (c) All  payments  required  to be made  to the (i)  Bank  Creditors
hereunder  shall be made to the Agent for the  account  of the  respective  Bank
Creditors and (ii) Interest Rate Creditors hereunder shall be made to the paying
agent under the  applicable  Secured  Interest Rate Agreement or, in the case of
Secured  Interest  Rate  Agreements  without  a paying  agent,  directly  to the
applicable Interest Rate Creditor.

            (d) For purposes of applying  payments  received in accordance  with
this Section 7.4,  the  Collateral  Agent shall be entitled to rely upon (i) the
Agent for a determination (which the Agent agrees to provide upon request to the
Collateral Agent) of the outstanding  Credit Document  Obligations and (ii) upon
any  Interest  Rate  Creditor  for a  determination  (which each  Interest  Rate
Creditor  agrees  to  provide  upon  request  to the  Collateral  Agent)  of the
outstanding  Interest Rate  Obligations  owed to such  Interest  Rate  Creditor.
Unless it has  actual  knowledge  (including  by way of  written  notice  from a
Secured  Creditor) to the  contrary,  the Agent under the Credit  Agreement,  in
furnishing  information  pursuant to the preceding sentence,  and the Collateral
Agent,  in acting  hereunder,  shall be  entitled  to assume  that (x) no Credit
Agreement Obligations other than principal, interest and regularly accruing fees
are owing to any Bank Creditor and (y) no Secured  Interest  Rate  Agreements or
Interest Rate Obligations with respect thereto are in existence.

            (e) It is  understood  that the Assignor  shall remain liable to the
extent of any  deficiency  between the amount of the proceeds of the  Collateral
and the amount of the sum referred to in clause (a) of this Section with respect
to the Assignor.

            7.5  Remedies  Cumulative.  Each and every  right,  power and remedy
hereby  specifically given to the Collateral Agent shall be in addition to every
other  right,  power and remedy  specifically  given under this  Agreement,  any
Secured  Interest  Rate  Agreement  or  the  other  Credit  Documents  or now or
hereafter  existing at law or in equity, or by statute and each and every right,
power and remedy whether  specifically herein given or otherwise existing may be
exercised from time to time or simultaneously  and as often and in such order as
may be deemed  expedient by the Collateral  Agent.  All such rights,  powers and
remedies  shall be  cumulative  and the exercise or the beginning of exercise of
one  shall  not be  deemed a waiver  of the  right to  exercise  of any other or
others. No delay or omission of the Collateral Agent in the exercise of
                                       16
<PAGE>



any such  right,  power or remedy  and no  renewal  or  extension  of any of the
Obligations  shall impair any such right,  power or remedy or shall be construed
to be a waiver of any Default or Event of Default or an acquiescence therein. In
the event that the  Collateral  Agent shall bring any suit to enforce any of its
rights  hereunder  and  shall be  entitled  to  judgment,  then in such suit the
Collateral Agent may recover reasonable expenses, including attorneys' fees, and
the amounts thereof shall be included in such judgment.

            7.6  Discontinuance  of  Proceedings.  In case the Collateral  Agent
shall have instituted any proceeding to enforce any right, power or remedy under
this Agreement by  foreclosure,  sale,  entry or otherwise,  and such proceeding
shall  have been  discontinued  or  abandoned  for any reason or shall have been
determined  adversely to the Collateral  Agent,  then and in every such case the
Assignor,  the Collateral Agent and each holder of any of the Obligations  shall
be restored to their former  positions and rights  hereunder with respect to the
Collateral  subject to the security  interest created under this Agreement,  and
all rights,  remedies and powers of the Collateral Agent shall continue as if no
such proceeding had been instituted.


                                  ARTICLE VIII

                                    INDEMNITY

            8.1 Indemnity.  (a) The Assignor agrees to indemnify,  reimburse and
hold the Collateral Agent, each Secured Creditor and its respective  successors,
assigns,  employees,  agents  and  servants  (hereinafter  in this  Section  8.1
referred to individually as  "Indemnitee,"  and  collectively as  "Indemnitees")
harmless from any and all liabilities,  obligations, losses, damages, penalties,
claims,  demands,  actions,  suits, judgments and any and all costs and expenses
(including  reasonable  attorneys'  fees and expenses) (for the purposes of this
Section 8.1 the foregoing are collectively called "expenses") of whatsoever kind
and nature imposed on, asserted against or incurred by any of the Indemnitees in
any way relating to or arising out of this Agreement,  any Secured Interest Rate
Agreement,  any other Credit  Document or the  documents  executed in connection
herewith and therewith or in any other way connected with the enforcement of any
of the terms of, or the preservation of any rights under any thereof,  or in any
way  relating  to or  arising  out  of  the  manufacture,  ownership,  ordering,
purchase,   delivery,  control,   acceptance,   lease,  financing,   possession,
operation,  condition,  sale,  return  or  other  disposition,  or  use  of  the
Collateral (including,  without limitation,  latent or other defects, whether or
not  discoverable),  the  violation of the laws of any  country,  state or other
governmental  body or unit,  any tort  (including,  without  limitation,  claims
arising or imposed under the doctrine of strict liability,  or for or on account
of injury to or the death of any Person (including any Indemnitee),
                                       17
<PAGE>


or property  damage),  or contract claim;  provided that no Indemnitee  shall be
indemnified  pursuant to this Section 8.1(a) for losses,  damages or liabilities
to the  extent  caused by the gross  negligence  or  wilful  misconduct  of such
Indemnitee.  The Assignor  agrees that upon written  notice by any Indemnitee of
the assertion of such a liability,  obligation,  loss, damage,  penalty,  claim,
demand, action,  judgment or suit, the Assignor shall assume full responsibility
for the  defense  thereof.  Each  Indemnitee  agrees to use its best  efforts to
promptly  notify the Assignor of any such assertion of which such Indemnitee has
knowledge.

            (b) Without  limiting the  application of Section  8.1(a),  Assignor
agrees to pay, or reimburse the Collateral  Agent for (if the  Collateral  Agent
shall have  incurred  fees,  costs or expenses  because the Assignor  shall have
failed to  comply  with its  obligations  under  this  Agreement  or any  Credit
Document),  any and all fees,  costs and  expenses  of  whatever  kind or nature
incurred in  connection  with the  creation,  preservation  or protection of the
Collateral   Agent's  Liens  on,  and  security  interest  in,  the  Collateral,
including,  without  limitation,  all fees  and  taxes  in  connection  with the
recording or filing of instruments and documents in public  offices,  payment or
discharge of any taxes or Liens upon or in respect of the  Collateral,  premiums
for  insurance  with  respect to the  Collateral  and all other fees,  costs and
expenses in connection with protecting, maintaining or preserving the Collateral
and  the  Collateral   Agent's  interest   therein,   whether  through  judicial
proceedings or otherwise,  or in defending or prosecuting any actions,  suits or
proceedings arising out of or relating to the Collateral.

            (c) Without  limiting the  application of Section 8.1(a) or (b), the
Assignor  agrees to pay,  indemnify and hold each  Indemnitee  harmless from and
against any loss, costs,  damages and expenses which such Indemnitee may suffer,
expend or incur in consequence of or growing out of any misrepresentation by the
Assignor in this  Agreement,  any Secured  Interest Rate  Agreement or any other
Credit  Document  or in any  statement  or  writing  contemplated  by or made or
delivered pursuant to or in connection with this Agreement, any Secured Interest
Rate Agreement or any other Credit Document.

            (d) If and to the extent that the  obligations of the Assignor under
this Section 8.1 are unenforceable for any reason, the Assignor hereby agrees to
make  the  maximum   contribution  to  the  payment  and  satisfaction  of  such
obligations which is permissible under applicable law.

            8.2  Indemnity  Obligations  Secured by  Collateral;  Survival.  Any
amounts  paid by any  Indemnitee  as to which such  Indemnitee  has the right to
reimbursement  shall  constitute  Obligations  secured  by the  Collateral.  The
indemnity  obligations  of the  Assignor  contained  in this  Article VIII shall
continue in full force and effect  notwithstanding  the full  payment of all the
Loans made  under the  Credit  Agreement  and all of the other  Obligations  and
notwithstanding the discharge thereof.

                                       18
<PAGE>

                                   ARTICLE IX

                                   DEFINITIONS

The following terms shall have the meanings herein  specified unless the context
otherwise requires. Such definitions shall be equally applicable to the singular
and plural forms of the terms defined.

            "Agent" shall have the meaning  provided in the first WHEREAS clause
of this Agreement.

            "Agreement"  shall mean this  Security  Agreement as the same may be
modified,  supplemented  or  amended  from time to time in  accordance  with its
terms.

            "Assignor" shall have the meaning  specified in the first paragraph
of this Agreement.

            "Bank Creditor" shall have the meaning provided in the first WHEREAS
clause of this Agreement.

            "Cash  Collateral  Account" shall mean a  non-interest  bearing cash
collateral account maintained with, and in the sole dominion and control of, the
Collateral Agent for the benefit of the Secured Creditors.

            "Chattel Paper" shall have the meaning  assigned that term under the
Uniform  Commercial  Code as in  effect  on the date  hereof in the State of New
York.

            "Collateral" shall have the meaning provided in Section 1.1(a).

            "Collateral  Agent"  shall have the meaning  specified  in the first
paragraph of this Agreement.

            "Contract Rights" shall mean all rights of the Assignor  (including,
without limitation, all rights to payment) under each Contract.

            "Contracts" shall mean all contracts between the Assignor and one or
more additional parties.

            "Copyrights" shall mean any U.S. copyright to which Assignor now or
hereafter has title, as well as any application for a U.S. copyright hereafter
made by the Assignor.

                                       19
<PAGE>


      "Credit  Agreement"  shall have the meaning  provided in the first WHEREAS
clause of this Agreement.

            "Credit Document Obligations" shall have the meaning provided in the
definition of "Obligations" in this Article IX.

            "Documents"  shall  have the  meaning  assigned  that term under the
Uniform  Commercial  Code as in  effect  on the date  hereof in the State of New
York.

            "Equipment"  shall mean any  "equipment," as such term is defined in
the Uniform  Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter  owned by the Assignor and, in any event,  shall include,
but shall not be limited to, all machinery, equipment, furnishings, fixtures and
vehicles  now or  hereafter  owned by the  Assignor  and any and all  additions,
substitutions  and  replacements  of  any of the  foregoing,  wherever  located,
together with all  attachments,  components,  parts,  equipment and  accessories
installed thereon or affixed thereto.

            "Event of  Default"  shall mean any Event of Default  under,  and as
defined in, the Credit Agreement,  or any payment default,  after any applicable
grace period, under any Secured Interest Rate Agreement.

            "General  Intangibles"  shall have the  meaning  assigned  that term
under the Uniform  Commercial  Code as in effect on the date hereof in the State
of New York.

            "Goods" shall have the meaning  assigned that term under the Uniform
Commercial Code as in effect on the date hereof in the State of New York.

            "Indemnitee" shall have the meaning provided in Section 8.1.

            "Instrument"  shall have the  meaning  assigned  that term under the
Uniform  Commercial  Code as in  effect  on the date  hereof in the State of New
York.

            "Interest  Rate  Creditors"  shall have the meaning  provided in the
second WHEREAS clause of this Agreement.

            "Interest Rate  Obligations"  shall have the meaning provided in the
definition of "Obligations" in this Article IX.

            "Inventory"  shall mean  merchandise,  inventory and goods,  and all
additions,  substitutions and replacements thereof,  wherever located,  together
with all goods, supplies,  incidentals,  packaging materials,  labels, materials
and any other items used or usable in  manufacturing,  processing,  packaging or
shipping same; in all stages of production -- from raw
                                       20
<PAGE>


materials  through  work-in-process  to finished  goods -- and all  products and
proceeds of whatever sort and wherever located and any portion thereof which may
be returned, rejected, reclaimed or repossessed by the Collateral Agent from the
Assignor's  customers,  and shall  specifically  include all "inventory" as such
term is defined in the Uniform  Commercial  Code as in effect on the date hereof
in the State of New York, now or hereafter owned by the Assignor.

            "Liens" shall mean any security interest,  mortgage,  pledge,  lien,
claim, charge,  encumbrance,  title retention agreement,  lessor's interest in a
financing lease or analogous instrument, in, of, or on the Assignor's property.

            "Marks"  shall mean any  trademarks  and  service  marks now held or
hereafter  acquired by the Assignor,  which are  registered in the United States
Patent  and  Trademark  Office,  as well as any  unregistered  marks used by the
Assignor in the United States and trade dress  including logos and/or designs in
connection with which any of these registered or unregistered marks are used.

            "Obligations"  shall mean (i) the full and prompt  payment  when due
(whether at stated  maturity,  by  acceleration or otherwise) of all obligations
and  liabilities  of the  Assignor,  now existing or hereafter  incurred  under,
arising out of or in connection  with any Credit Document to which it is a party
and the due  performance  and compliance by each Assignor with the terms of each
such Credit Document (all such  obligations  and  liabilities  under this clause
(i), except to the extent consisting of obligations or indebtedness with respect
to  Interest  Rate  Agreements,  being  herein  collectively  called the "Credit
Document  Obligations");  (ii) the full and prompt  payment when due (whether at
the stated  maturity,  by  acceleration  or  otherwise) of all  obligations  and
liabilities of the Assignor now existing or hereafter  incurred  under,  arising
out of or in  connection  with any Secured  Interest  Rate  Agreement  (all such
obligations and  indebtedness  under this clause (ii) being herein  collectively
called the "Interest Rate Obligations");  (iii) any and all sums advanced by the
Collateral  Agent in order to preserve the  Collateral  or preserve its security
interest  in the  Collateral;  (iv)  in the  event  of any  proceeding  for  the
collection or enforcement of any  indebtedness,  obligations,  or liabilities of
each  Assignor  referred to in clauses  (i),  (ii) and (iii),  after an Event of
Default  shall have  occurred  and be  continuing,  the  reasonable  expenses of
re-taking,  holding, preparing for sale or lease, selling or otherwise disposing
of or realizing on the  Collateral,or of any exercise by the Collateral Agent of
its rights hereunder,  together with reasonable attorneys' fees and court costs;
and (v) all amounts paid by any  Indemnitee as to which such  Indemnitee has the
right to reimbursement under Section 8.1 of this Agreement.

            "Patents" shall mean any U.S. patent to which the Assignor now or
hereafter has title, as well as any application for a U.S. patent now or
hereafter made by the Assignor.

                                       21
<PAGE>

            "Proceeds"  shall  have the  meaning  assigned  that term  under the
Uniform Commercial Code as in effect in the State of New York on the date hereof
or under other relevant law and, in any event, shall include, but not be limited
to, (i) any and all proceeds of any insurance,  indemnity,  warranty or guaranty
payable to the  Collateral  Agent or the Assignor from time to time with respect
to any of the  Collateral,  (ii) any and all payments  (in any form  whatsoever)
made or due and payable to the Assignor from time to time in connection with any
requisition,  confiscation,  condemnation,  seizure or  forfeiture of all or any
part of the Collateral by any governmental authority (or any person acting under
color of  governmental  authority) and (iii) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral.

            "Receivables"  shall mean any  "account"  as such term is defined in
the Uniform  Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter  owned by the Assignor and, in any event,  shall include,
but shall not be limited to, all of the  Assignor's  rights to payment for goods
sold or leased or services  performed by the Assignor,  whether now in existence
or arising from time to time hereafter,  including,  without limitation,  rights
evidenced by an account, note, contract,  security agreement,  chattel paper, or
other  evidence of  indebtedness  or  security,  together  with (a) all security
pledged, assigned,  hypothecated or granted to or held by the Assignor to secure
the foregoing, (b) all of the Assignor's right, title and interest in and to any
goods, the sale of which gave rise thereto, (c) all guarantees, endorsements and
indemnifications on, or of, any of the foregoing, (d) all powers of attorney for
the  execution of any evidence of  indebtedness  or security or other writing in
connection  therewith,  (e) all  books,  records,  ledger  cards,  and  invoices
relating  thereto,  (f) all notices to other creditors or secured  parties,  and
certificates  from  filing  or  other  registration  officers,  (g)  all  credit
information,  reports and memoranda relating thereto, and (h) all other writings
related in any way to the foregoing.

            "Secured  Creditors"  shall have the meaning  provided in the second
WHEREAS clause of this Agreement.

            "Secured  Interest Rate Agreements"  shall have the meaning provided
in the second WHEREAS clause of this Agreement.

            "Trade  Secrets"  means any secretly held existing  engineering  and
other data,  information,  production  procedures and other know-how relating to
the design, manufacture, assembly, installation, use, operation, marketing, sale
and  servicing  of any products or business of the  Assignor  worldwide  whether
written or not written.


                                       22
<PAGE>

                                    ARTICLE X

                                  MISCELLANEOUS

            10.1 Notices.  Except as otherwise  specified  herein,  all notices,
requests,  demands or other  communications  to or upon the  respective  parties
hereto  shall be deemed to have been duly  given or made when  delivered  to the
party to which such notice,  request,  demand or other communication is required
or permitted to be given or made under this  Agreement,  addressed to such party
at its address set forth opposite its signature  below, or at such other address
as any of the parties hereto may hereafter notify the others in writing.

            10.2 Waiver; Amendment. (a) None of the terms and conditions of this
Agreement may be changed,  waived,  modified or varied in any manner  whatsoever
unless in writing duly signed by the Assignor and the Collateral Agent (with the
consent of the Required Banks or, to the extent required by Section 12.12 of the
Credit  Agreement,  all of the Banks),  provided,  however  that no such change,
waiver,  modification  or  variance  shall be made to Section 7.4 hereof or this
Section 10 without  the  consent of each  Secured  Creditor  adversely  affected
thereby,  provided  further that any change,  waiver,  modification  or variance
affecting  the rights and benefits of a single Class of Secured  Creditors  (and
not all Secured Creditors in a like or similar manner) shall require the written
consent of the Requisite  Creditors of such Class of Secured Creditors.  For the
purpose of this  Agreement,  the term  "Class"  shall mean each class of Secured
Creditors,  i.e.,  whether  (x) the Bank  Creditors  as  holders  of the  Credit
Document  Obligations  or (y) the  Interest  Rate  Creditors  as  holders of the
Interest  Rate  Obligations.  For  the  purpose  of  this  Agreement,  the  term
"Requisite  Creditors"  of any Class shall mean each of (x) with  respect to the
Credit  Document  Obligations,  the  Required  Banks and (y) with respect to the
Interest Rate  Obligations,  the holders of 51% of all  obligations  outstanding
from time to time under the Secured Interest Rate Agreements.

      (b) No delay on the part of the Collateral  Agent in exercising any of its
rights, remedies,  powers and privileges hereunder or partial or single exercise
thereof,  shall  constitute  a waiver  thereof.  No  notice  to or demand on the
Assignor in any case shall  entitle it to any other or further  notice or demand
in similar or other circumstances or constitute a waiver of any of the rights of
the Collateral Agent to any other or further action in any circumstances without
notice or demand.

            10.3 Obligations Absolute. The obligations of the Assignor hereunder
shall  remain in full  force and  effect  without  regard  to,  and shall not be
impaired  by,  (a)  any  bankruptcy,  insolvency,  reorganization,  arrangement,
readjustment,  composition,  liquidation  or the like of the  Assignor;  (b) any
exercise  or  non-exercise,  or any  waiver  of,  any  right,  remedy,  power or
privilege  under or in respect of this Agreement or any other Credit Document or
any Secured Interest Rate Agreement except as specifically set forth in a waiver
granted  pursuant  to the  restrictions  of  Section  10.2  hereof;  or (c)  any
amendment to or modification of any Credit
                                       23
<PAGE>



Document or any Secured  Interest Rate  Agreement or any security for any of the
Obligations;  whether or not the Assignor  shall have notice or knowledge of any
of the  foregoing.  The rights  and  remedies  of the  Collateral  Agent  herein
provided are  cumulative  and not exclusive of any rights or remedies  which the
Collateral Agent would otherwise have.

            10.4  Successors and Assigns.  This Agreement  shall be binding upon
the  Assignor and its  successors  and assigns and shall inure to the benefit of
the Collateral Agent and its successors and assigns,  provided that the Assignor
may not  transfer  or assign any or all of its rights or  obligations  hereunder
without the written consent of the Collateral Agent. All agreements, statements,
representations and warranties made by the Assignor herein or in any certificate
or other  instrument  delivered  by the  Assignor  or on its  behalf  under this
Agreement shall be considered to have been relied upon by the Secured  Creditors
and shall  survive the  execution  and delivery of this  Agreement and the other
Credit Documents  regardless of any investigation  made by the Secured Creditors
on their behalf.

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

            10.6  Severability.   Any  provision  of  this  Agreement  which  is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable such provision in any other jurisdiction.

            10.7 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES  HEREUNDER  SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.

            10.8  Assignor's  Duties.  It is expressly  agreed,  anything herein
contained to the contrary notwithstanding, that the Assignor shall remain liable
to perform all of the  obligations,  if any,  assumed by it with  respect to the
Collateral  and  the  Collateral   Agent  shall  not  have  any  obligations  or
liabilities  with respect to any  Collateral by reason of or arising out of this
Agreement, nor shall the Collateral Agent be required or obligated in any manner
to perform or  fulfill  any of the  obligations  of the  Assignor  under or with
respect to any Collateral.

            10.9  Termination;  Release.  (a) After the termination of the Total
Commitment and all Secured Interest Rate  Agreements,  when no Note or Letter of
Credit is outstanding and when all Loans and other Obligations have been paid in
full, this Agreement shall terminate,  and the Collateral  Agent, at the request
and expense of the  Assignor,  will execute and deliver to the Assignor a proper
instrument  or  instruments   (including  Uniform  Commercial  Code  termination
statements on form UCC-3) acknowledging the satisfaction and termination of this
Agreement,
                                       24
<PAGE>


and will duly assign, transfer and deliver to the Assignor (without recourse and
without any  representation or warranty) such of the Collateral as may be in the
possession  of the  Collateral  Agent  and as has not  theretofore  been sold or
otherwise applied or released pursuant to this Agreement.

            (b) So long as no payment  default on any of the  Obligations  is in
existence or would exist after the  application  of proceeds as provided  below,
the Pledgee shall,  at the request of the Borrower and the Pledgor,  release any
or all of the  Collateral,  provided  that (x) such  release is permitted by the
terms of the Credit  Agreement (it being agreed for such purposes that a release
will be deemed  "permitted by the terms of the Credit Agreement" if the proposed
transaction constitutes an exception to Section 8.02 of the Credit Agreement) or
otherwise  has been  approved  in  writing  by the  Required  Banks  and (y) the
proceeds  of such  Collateral  are  applied as  required  pursuant to the Credit
Agreement or any consent or waiver with respect thereto.

            (c) At any time that the Assignor  desires that the Collateral Agent
take any action to give  effect to any  release of  Collateral  pursuant  to the
foregoing  Section  10.9(a) or (b), it shall deliver to the  Collateral  Agent a
certificate signed by a principal  executive officer stating that the release of
the respective  Collateral is permitted  pursuant to Section  10.9(a) or (b). In
the  event  that any part of the  Collateral  is  released  as  provided  in the
preceding paragraph (b), the Collateral Agent, at the request and expense of the
Assignor,  will duly  assign,  transfer  and  deliver to the  Assignor  (without
recourse and without any  representation  or warranty) such of the Collateral as
is then  being  (or has  been)  so sold and as may be in the  possession  of the
Collateral  Agent  and  has  not  theretofore  been  released  pursuant  to this
Agreement.  The  Collateral  Agent  shall have no  liability  whatsoever  to any
Secured  Creditor as the result of any release of  Collateral by it as permitted
by this Section 10.9. Upon any release of Collateral pursuant to Section 10.9(a)
or (b),  none of the  Secured  Creditors  shall  have  any  continuing  right or
interest in such Collateral, or the proceeds thereof.

            10.10 Collateral Agent. By accepting the benefits of this Agreement,
each Secured Creditor acknowledges and agrees that the rights and obligations of
the  Collateral  Agent  shall  be as set  forth  in  Section  11 of  the  Credit
Agreement. Notwithstanding anything to the contrary contained in Section 10.2 of
this Agreement or Section 12.12 of the Credit Agreement, this Section 10.10, and
the duties and  obligations  of the  Collateral  Agent set forth in this Section
10.10, may not be amended or modified without the consent of the Agent.


                    *               *               *

                                       25
<PAGE>


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




Addresses:                         HOSIERY CORPORATION OF AMERICA, INC.,
3369 Progress Drive                    as Assignor
Bensalem, PA  19020
Attention:  Arthur Hughes               /s/  Arthur Hughes
                                   By________________________________
     with a copy to:                    Title:  Vice President, CFO

HCA Holdings, Inc.
c/o Kelso & Company, Inc.
305 Park Avenue
New York, New York  10022
Attention:  James C. Connors, II



One Bankers Trust Plaza            BANKERS TRUST COMPANY,
130 Liberty Street                     as Collateral Agent
New York,New York  10006
Attention: Mary Kay Coyle               /s/  Mary Kay Coyle
                                   By_______________________________
                                        Title:  Managing Director


<PAGE>



                                     ANNEX A


                    SCHEDULE OF EXISTING FINANCING STATEMENTS




None (except for Permitted Liens)


<PAGE>




                                     ANNEX B


                          SCHEDULE OF RECORD LOCATIONS



1.     Hosiery Corporation of America, Inc.
       3369 Progress Drive
       Bensalem, PA  19020


2.     Hosiery Corporation of America, Inc.
       354-56 Dunksferry Road
       Bensalem, PA  19020


3.    Hosiery Corporation of America, Inc.
      Road SC 903, A/K/A 1792 Silkies Blvd.
      Lancaster, SC  29721


<PAGE>


                                     ANNEX C


                  SCHEDULE OF EQUIPMENT AND INVENTORY LOCATIONS



1.    3369 Progress Drive
      Bensalem, PA  19020


2.    354-56 Dunksferry Road
      Bensalem, PA  19020


3.    Chesterfield Avenue
      Road SC 903, A/K/A 1792 Silkies Blvd.
      Lancaster, SC  29721


4.    157 Westview Drive
      Meadeville, PA  16335


5.    Market Incentives Corporation
      11 Bacton Hill Road
      Frazer, PA  19355


6.    155 Rowland Avenue
      Heath Springs, SC  29058


<PAGE>


                                     ANNEX D


                     SCHEDULE OF TRADE AND FICTICIOUS NAMES




None.





<PAGE>


                                     ANNEX E
                         HOSIERY CORPORATION OF AMERICA
              SCHEDULE OF TRADEMARK REGISTRATIONS AND APPLICATIONS

                      HOSIERY CORPORAITON OF AMERICA, INC.
                              REGISTERED TADEMARKS

MARK                            REG. NO.  REG. DATE    COUNTRY     OWNER
----                            --------  ---------    -------     -----

Always There (Stylized          1406850    8/26/86       US         HCA
Letters)
BBH (Stylized Letters)          0748833    4/30/83       US         HCA
Bear (Design Only)              0747900     4/9/83       US         HCA
Bear with Top Hat (Design       0405491     2/1/84       US         HCA
Only)
D and Crown Design              0765540    2/25/84       US         HCA
Durawear                        0765539    2/25/84       US         HCA
Enchantress (Stylized Letters)  0248742    10/30/88      US         HCA
Fiberlock                       0765150    2/18/84       US         HCA
Lavco (Stylized Letters)        1471167     1/5/88       US         HCA
Lola (Stylized Letters)         0749155     5/7/83       US         HCA
Maximizer                      2,061,770   5/13/97       US         HCA
Neumode (Stylized Letters)      0550108    10/30/71      US         HCA
Paramount                       0116449     1/5/77       US         HCA
Paraqueens (Stylized Letters)   0154652    4/18/82       US         HCA
Shapely Perfection             2,074,436   6/24/97       US         HCA
Sheer Charm                     844,619    2/20/68       US         HCA
Silkies                        1,503,070    8/3/84       US         HCA
Silkies                          648505    10/18/93    TAIWAN       HCA
Sophisticated Intimates (Mail   1944588    12/26/95      US         HCA
Order)
The Video Store that Comes to   1824756     3/1/94       US         HCA
You!

                      HOSIERY CORPORATION OF AMERICA, INC.
                             TRADEMARK APPLICATIONS

MARK                            APP. NO.   DATE FILED   COUNTRY     OWNER
----                            --------   ----------   -------     -----

Beautiful Visions              74/705,950   7/25/95       US         HCA
Lauren Madison                 74/716,376   8/16/95       US         HCA
Nicole Ashton & Design         74/587,828   10/20/94      US         HCA
(Cosmetics/Parent)
Nicole Ashton                  74/802,812   10/20/94      US         HCA
(Cosmetics/Child)
Shades of Silk                 74/705,949   7/25/95       US         HCA
Silkies Ultra                  75/322,036   7/10/97       US         HCA
Sophisticated Intimates        75/146,245    8/6/96       US         HCA
(Clothing)
The Most Beautiful Legs in
the World                      75/094,866   4/26/96       US         HCA
Wear Silkies
TLC                            74/530,481   5/27/94       US         HCA



<PAGE>


                                     ANNEX F


                            PATENTS AND APPLICATIONS


A.     Patents


      1.     U.S. Patent No.:  D277,299

            Title:      Taxicab Advertising Sign
            Inventor:   Eugene Nelson
            Issued:     January 22, 1984 (14 year term)
            Assignee:   Hosiery Corporation of America, Inc.



      2.     U.S. Patent No.:  4,385,478

            Title:      Folding and Packing machine for Pantyhose
            Inventor:   Bernard H. Veerkamp
            Issued:     May 31, 1983 (17 year term)
            Assignee:   Hosiery Corporation of America, Inc.



<PAGE>

                                     ANNEX G
                             SCHEDULE OF COPYRIGHTS
                      HOSIERY CORPORATION OF AMERICA, INC.

TITLE OF WORK                                      REG. NO.         REG. DATE
-------------                                     ---------         ---------

"GRUMPY TO GORGEOUS" LETTER                        TX 2,724,062     89/12/19
"LEG LOTTO" CARD                                   TX 2,713,798     89/12/19
"LOOK LIKE A FRUMP" LETTER                         TX 2,713,802     89/12/19
"NEW" LOOK BUCKSLIP - PCT.M0994                    TX 4,016,434     95/05/19
"NO SAGS" PAMPHLET                                 TX 2,713,803     89/12/19
"SEE FOR YOURSELF" ANNOUNCEMENT                    TX 2,713,804     89/12/19
"SHOW ME"" ORDER                                   TX 2,713,806     89/12/19
"WE-WANT-YOU-BACK" CERTIFICATE-RTD.004.01-FT80-D   TX 4,124,957     95/09/21
"WHY STAY WITH HCA" PAMPLET                        TX 2,713,801     89/12/19
10 CENT CHECK MAILER ENVELOPE - HC01293-6          TX 3,926,226     94/08/l7
10 CENT CHECK RETURN ENVELOPE - HCB1293-5          TX 3,987,817     94/08/17
10 CENT SWEEPS ANNOUMCEMENT - HCF1293-1            TX 3,926,153     94/08/17
1987 SPRING/SUMMER CATALOG                         TX 2,052,633     87/04/07
1989 FALL/WINTER ADD-ON BROCHURE NO. 0753
   ("DAY" VERSION)                                 TX 2,651,728     89/09/22
1989 FALL/WINTER ADD-ON BROCHURE NO. 0755
   ("NIGHT" VERSION)                               TX 2,655,121     89/09/22
1990 SPRING/SUMMER ADD-ON BROCHURE
   CELEBRATE ROMANCE                               TX 2,789,520     90/03/27
1990 SPRING/SUMMER ADD-ON BROCHURE ELEGANT
    ESSENTIALS                                     TX  2,789,521    90/03/27
1995 REDEMPTION CATALOG - MCG.007.37               TX 4,117,929     95/09/21
2ND WINNER LETTER                                  TX 4,060,525     95/05/19
3-PART REFERRAL CARD                               TX 4,117,944     95/09/21
3RD EARLY BIRD WINNER ANNOUNCEMENT - 1324AN        TX 4,024,860     95/09/21
6 PAIR DOGGIE BAG W/SWEEPS - MOE.700.01            TX 3,895,792     94/08/17
ADD -ON INVOICE W/ QUESTIONAIRE - ADC.100.01       TX 4,016,481     95/05/19
ADD-ON INVOICE W/REFERRALS - ADC.100.02            TX 4,124,989     95/09/21
BIRTHDAY GIFT CARD                                 TX 2,713,796     89/12/19
BODY BEAUTIFUL COLLECTION BROCHURE                 TX 4,117,935     95/09/21



                                     Page 1


<PAGE>


                        SCHEDULE OF COPYRIGHTS CONTINUED
                      HOSIERY CORPORATION OF AMERICA, INC.


TITLE OF WORK                                      REG. NO.         REG. DATE
-------------                                      --------         ---------

BROCHURE                                           TX 2,052,635     87/04/07
BROCHURE - LACEY DANCER - KBD.OO1.O1               TX 3,931,412     94/08/23
BUSINESS REPLY CARD 900269                         TX 2,052,632     87/04/07
BUSINESS REPLY CARD RDF287                         TX 2,052,638     87/04/07
BUSINESS REPLY CARD RDI287                         TX 2,052,639     87/04/07
BUSINESS REPLY CARD RDJ287                         TX 2,052,637     87/04/07
BUSINESS REPLY CARD RDK287                         TX 2,052,636     87/04/07
CATALOG INSERT                                     TX 2,052,634     87/04/07
DIGITAL WRISTWATCH BUCKSLIP                        TX 2,713,781     89/12/19
DISASTER RECOVERY PLAN                             TXU 380-040      89/09/07
DOORWAY TO FORTUNE ENTRY CARD - HCD1293-7          TX 3,926,228     94/08/17
EARLY BIRD CASH COMBO ENTRY - HLC1293-2            TX 3,926,230     94/08/17
FALL/WINTER  '93 ADD-ON  BROCHURE VERSION "A"      TX 3,931,408     94/08/23
FALL/WINTER '93 ADD-ON BROCHURE VERSION "B"        TX 3,931,409     94/08/23
FALL/WINTER '93 ADD-ON BROCHURE VERSION "C"        TX 3,931,406     94/08/23
FAMILY & FRIENDS ANNOUNCEMENT
  W/INVOICE-CRF.100.01                             TX 4,060,529     95/05/19
FAMILY & FRIENDS COUPON - BPR94                    TX 4,016,432     95/05/19
FAMILY & FRIENDS GIVAWAY LETTER                    TX 4,060,527     95/05/19
FAMILY & FRIENDS OUTERWRAP - R05                   TX 4,060,528     95/05/19
FREE GIFT SLIPSHEET                                TX 4,117,938     95/09/21
FRONT END DOGGIE BAG - MDB.001.01                  TX 3,895,796     94/08/17
FRONT END NOTICE W/INVOICE & ORDER ICF.001.01      TX 4,124,992     95/09/21
GENERIC  DOGGIE  BAG -  MOF.020.01                 TX 3,895,797     94/08/17
GENERIC DOGGIE BAG - MTG.9OO.O1                    TX 3,895,791     94/08/17
GIFT REDEMPTION CATALOG                            TX 2,276,573     88/02/23
GRUMPY TO GORGEOUS ENVELOPE                        TX 2,940,550     89/12/19


                                     Page 2


<PAGE>


                        SCHEDULE OF COPYRIGHTS CONTINUED
                      HOSIERY CORPORATION OF AMERICA, INC.

TITLE OF WORK                                      REG. NO.         REG. DATE
-------------                                      --------         ---------

HANDI LIGHT SLIP SHEET - HCS1293-9                 TX 3,926,225     94/08/17
HANDI LIGHT SLIP SHEET - HLI1293-3                 TX 3,926,220     94/08/17
HAPPY FAMILY SWEEPSTAKES CARD (TIC TAC TOE)        TX 2,713,783     89/12/19
HAPPY FAMILY SWEEPSTAKES CARD CARNIVAL             TX 2,713,799     89/12/19
HAPPY FAMILY SWEEPSTAKES CARD COMBINATION CASH     TX 2,713,785     89/12/19
HAPPY FAMILY SWEEPSTAKES CARD SUPER SLOTS          TX 2,713,784     89/12/19
HAPPY FAMILY SWEEPSTAKES CARD-DIVE FOR DOLLARS     TX 2,970,403     89/12/19
HAPPY FAMILY SWEEPSTAKES CARD-STRIKE IT RICH       TX 3,124,052     89/12/19
HOSIERY SLIPSHEET HSP-2                            TX 2,713,787     89/12/19
INDEPENDENCE MAIL CARD                             TX 2,713,788     89/12/19
INVOICE LACEY DANCER - KLD.001.O1                  TX 3,927,073     94/08/23
INVOICE W/SWEEP, HOSE CHART & SPONSOR
  LABELS CCD.O4O.O1                                TX 4,049,404     94/08/23
LETTER LACEY DANCER - KLL.001.01                   TX 3,878,412     94/08/17
LOTTO GAME RETURN ENVELOPE - HLB1293-5             TX 3,987,818     94/08/17
LOTTO GAMESWEEPSANNa!NCE@lENT-HlF1293-1            TX 3,926,152     94/08/17
LUCKY KEY CASE SLIPSHEET - HCK1293-8               TX 3,926,227     94/08/17
MAXIMIZER BRA SLIPSHEET - 1289AD                   TX 4,060,531     95/05/19
MONEY SAVING CERTIFICATE-RTE.005.01-FT8I-E         TX 4,124,958     95/09/21
MYSTERY GIFT INSERT                                TX 4,117,936     95/09/21
NOTICE & REACTIVATION FORM                         TX 3,124,046     89/12/19
NOTICE OF INTENT CARD WITH GIFT                    TX 2,713,791     89/12/19
OFF-WHITE REACTIVATION SLIPSHEET - FKHOI           TX 4,016,429     94/05/l9
OFF-WHITE SLIPSHEET - ACWO1                        TX 4,016,433     95/05/19
OUTERWRAP MAILER - OWI.001.01                      TX 3,869,481     94/08/17
PERFUME ATOMIZER BUCKSLIP                          TX 2,713,786     89/12/19
PLASTIC DOGGIE BAG - MPT.042.01                    TX 4,016,479     95/05/19


                                     Page 3


<PAGE>


                        SCHEDULE OF COPYRIGHTS CONTINUED
                      HOSIERY CORPORATION OF AMERICA, INC.

TITLE OF WORK                                      REG. NO.         REG. DATE
-------------                                      --------         ---------

QUEEN AND X-8UEEN INSERT - LN8695                  TX 4,117,933     95/09/21
QUICK WIN SWEEPS CARD - HEARTS OF GOLD SW-29       TX 3,856,281     94/08/23
RE-ENROLLMENT PRIVILEGE
  CERTIFICATE-RTF.OO6.Ol-FT82-F                    TX 4,124,988     95/09/21
REACTIVATION ENVELOPE                              TX 2,713,778     89/12/19
REACTIVATION ENVELOPE                              TX 2,713,797     89/12/19
REACTIVATION FORM                                  TX 2,713,779     89/12/19
REACTIVATION MAILED                                TX 2,713,780     89/12/19
REACTIVATION MAILER                                TX 2,713,794     89/12/19
REACTIVATION PAMPHLET                              TX 2,724,055     89/12/19
REFERRAL CARD - RFCB 93                            TX 3-878-383     94/08/23
RESOLICITATION MAILER                              TX 2,713,793     89/12/19
SHEER CHARM BROCHURE - HCR1293-10                  TX 3,926,224     94/08/17
SHEER CHARM BROCHURE - HLS1293-4                   TX 3,926,221     94/08/17
SILKIES SLIPSHEET - MLP.009.05                     TX 2,783,050     89/12/19
SILKIES SLIPSHEET - MLP.010.05                     TX 2,783,051     89/12/19
SLIP SHEET - BEOI                                  TX 4,060,532     95/05/19
SLIP SHEET - FEOI                                  TX 4,016,431     95/05/19
SNAP-OUT THREE PANEL CARD W/STAMP SHEETS           TX 2,713,792     95/05/19
SOLO CARD "COME BACK" - ST-10, TEXT J              TX 4,060,539     95/05/l9
SOLO CARD - BULK AND UPGRADE CONTROL               TX 4,117,945     95/09/21
SOLO CARD - CONTROL A                              TX 4,117,946     95/09/21
SOLO CARD - SC-A, TEXT G                           TX 4,060,535     95/05/19
SOLO CARD - ST-11, TEXT L
  (RE8UEST FOR CORRECT SIZE)                       TX 4,065,484     95/05/19
SOLO CARD - ST-7, TEXT H                           TX 4,060,537     95/05/19
SOLO CARD - ST-9, TEXT A1                          TX 4,065,486     95/05/19
SOLO CARD ST-11, TEXT K
  (REQUEST FOR CORRECT SIZE)                       TX 4,065,485     95/05/19

                                     Page 4


<PAGE>

                        SCHEDULE OF COPYRIGHTS CONTINUED
                      HOSIERY CORPORATION OF AMERICA, INC.

TITLE OF WORK                                      REG. NO.         REG. DATE
-------------                                      --------         ---------

SOLO CARD w/SlO,OOO EARLY BIRD
  SWEEPSTAKES ENTRY - ST-3 TEXT D                  TX 4,065,487     95/05/19
SOLO CARD W/800 NUMBER TO CALL IN HOSE
  ORDER-ST-8, TEXT I                               TX 4,060,536     95/05/19
SOLO CARD W/TESTIHONIALS - ST-5 TEXT F             TX 4,060,538     95/05/19
SOLO CARD W/TRAPEZE TWINS - ST-1 TEXT B            TX 4,016,435     95/05/19
SOLO CARD W/VERTICAL GRAPHIC                       TX 4,117,934     95/09/21
SOLO CARD/CONTROL BULK & TIMING TEST-SCA/TEXT Al   TX 4,016,430     95/05/19
SOLO REPSONSE CARD W/LAUNDRY BAG GIFT              TX 2,713,809     89/12/19
SOLO RESPONSE CARD                                 TX 3,689,480     94/08/18
SOLO RESPONSE CARD                                 TX 3,882,447     94/08/17
SOLO RESPONSE CARD                                 TX 3,926,223     94/08/17
SOLO RESPONSE CARD                                 TX 3,926,229     94/08/17
SOLO RESPONSE CARD - FREE GIFT BOX                 TX 3,987,356     94/08/17
SOLO RESPONSE CARD - FREE SAMPLE                   TX 3,987,358     94/08/17
SOLO RESPONSE CARD - MCA                           TX 3,926,350     94/08/17
SOLO RESPONSE CARD - MT1                           TX 3,926,351     94/08/17
SOLO RESPONSE CARD - MTIO                          TX 3,888-124     94/08/17
SOLO RESPONSE CARD - MT2                           TX 3,926,348     94/08/17
SOLO RESPONSE CARD - MT3                           TX 3,926,352     94/08/17
SOLO RESPONSE CARD - MT5                           TX 3,926,349     94/08/17
SOLO RESPONSE CARD - HO COMMITMENT!
  NO OBLIGATION! NO KIDDING!                       TX 3,987,357     94/08/17
SOLO RESPONSE CARD - NON-SWEEPS                    TX 3,987,355     94/08/17
SOLO RESPONSE CARD - PNH ONLIES                    TX 3,926,222     94/08/17
SOLO RESPONSE CARD - STW ONLIES                    TX 3,869,477     94/08/17
SOLO RESPONSE CARD - SWEEPS                        TX 3,987,354     94/08/17
SOLO RESPONSE CARD W/BATH CUSHION GIFT             TX 2,789,517     90/03/27
SOLO RESPONSE CARD W/CALCULATOR/ORGANIZER GIFT     TX 2,789,516     90/03/27

                                     Page 5


<PAGE>


                        SCHEDULE OF COPYRIGHTS CONTINUED
                      HOSIERY CORPORATION OF AMERICA, INC.

TITLE OF WORK                                      REG. NO.         REG. DATE
-------------                                      --------         ---------

SOLO RESPONSE CARD W/COSMETIC KIT GIFT             TX 2,713,811     89/12/19
SOLO RESPONSE CARD W/FREE GIFT STICKER             TX 3,869,379     94/08/17
SOLO RESPONSE CARD W/FREE SAMPLES                  TX 2,713,790     89/12/19
SOLO RESPONSE CARD W/HANDI LIGHT GIFT              TX 2,789,519     90/03/27
SOLO RESPONSE CARD W/LIPSTICK HOLDER &
  PURSE HANGER GIFT                                TX 2,789,518     90/03/27
SOLO RESPONSE CARD W/LUCKY PICK GAME               TX 3,869,478     94/08/17
SOLO RESPONSE CARD W/LUCKY PICK GAME               TX 3,882,446     94/08/17
SOLO RESPONSE CARD W/MINI ORGANIZER GIFT           TX 2,713,805     89/12/19
SOLO RESPONSE CARD W/MINI TRAVEL MAKEUP KIT GIFT   TX 2,789,515     90/03/27
SOLO RESPONSE CARD W/SEWING KIT GIFT               TX 2,714,808     89/12/19
SOLO RESPONSE CARD W/TRAVEL ALARM GIFT             TX 2,173,807     89/12/19
SOLO RESPONSE CARD W/WATCH GIFT                    TX 2,173,810     89/12/19
SOPHISTICATED INTlMATES SLIPSHEET W/ORDER FORMS    TX 4,060,526     95/05/19
SPECIAL PRODUCT OFFER LETTER - MLD.002.01          TX 2,724,064     89/12/19
SPECIAL PRODUCT OFFER LETTER - MLH.007.01          TX 2,724,058     89/12/19
SPECIAL PRODUCT OFFER LETTER - MLP.006.01          TX 2,724,057     89/12/19
SPECIAL PRODUCT OFFER LETTER - HLS.010.OI          TX 2,724,063     89/12/19
SPECIAL PRODUCTS BROCHURE - SPRING/SUMMER 1992
  W/SATIN BRA COVER                                TX 4,117,943     95/09/21
SPECIAL PRODUCTS BROCHURE - SPRlNG/SUMMER '95
  W/PUSH-UP BRA COVER                              TX 4,117,942     95/09/21
SPECIAL PRODUCTS BROCHURE-FALL/WINTER '94
  W/MAXIMIZER BRA COVER                            TX 4,016,427     95/05/19
SPECIAL PRODUCTS BROCHURE-FALL/WINTER
  '94 W/RADIANCE COLLECTION                        TX 4,016,428     95/05/19
SPRING/SUMMER 93 ADD ON BROCHURE VERSION "A"       TX 3,879,216     94/08/23
SPRING/SUMMER 93 ADD ON BROCHURE VERSION "B"       TX 3,879,215     94/08/23
SPRING/SUMMER 93 ADD ON BROCHURE VERSION "C"       TX 3,879,214     94/08/23
STEAK KNIFE BUCKSLIP                               TX 2,713,800     89/12/19

                                     Page 6


<PAGE>


                        SCHEDULE OF COPYRIGHTS CONTINUED
                      HOSIERY CORPORATION OF AMERICA, INC.

TITLE OF WORK                                      REG. NO.         REG. DATE
-------------                                      --------         ---------

SWEEPS NOTICE LTR W/CHANGE OF ORDER &
  BENEFIT  CARD -  INB.002.01                      TX 4,028,817     94/08/17
SWEEPS  NOTICE LTR  W/CHANGE  ORDER & GIFT
  RESERVATION-INE.005.01                           TX 4,028,814     94/08/17
SWEEPSTAKES INVOICE - IRT.002.01                   TX 4,124,991     95/09/21
SWEEPSTAKES INVOICE W/BENEFIT CARD IRD.OO1.O1      TX 4,124,990     95/09/21
SWEEPSTAKES NOTICE LTR W/CHANGE OF
  ORDER-IFT.OOI.OI                                 TX 3,758,369     94/08/17
SWEEPSTAKES NOTICE LTR W/CHANGE OF
  ORDER-INF.OO6.Ol                                 TX 4,028,816     94/08/17
SWEEPSTAKES NOTICE LTR W/CHANGE OF
  ORDER-INH.OO8.Ol                                 TX 4,028,813     94/08/17
SWEEPSTAKES  NOTICE LTR W/ORDER &
  MYSTERY GIFT TAG -IND.OO4.Ol                     TX 4,028,815     94/08/17
SWEEPSTAKES NOTICE LTR  W/ORDER-INC.OO3.Ol         TX 3,758,371     94/08/17
T2 DOGGIE  BAG -  MDT.OO2.Ol                       TX 3,895,795     94/08/17
T3 DOGGIE BAG - MDH.OO3.O1                         TX 3,895,794     94/08/17
T4 DOGGIE BAG - MDF.OO4.O1                         TX 3,895,793     94/08/17
THANK YOU NOTE-MG.0994                             TX 4,060,530     95/05/19
TOURNAMENT OF CASH PAMPHLET - SW-28                TX 3,879,217     94/08/23
TRAVEL ALARM BUCKSLIP                              TX 2,713,789     89/12/19
TURN 2 - UPGRADE SLIPSHEET & HEAT
  SEALER GIFT - MCP.OOl.O2                         TX 4,060,534     95/05/19
TURN 2 INVOICE -  INY.005.01/SF87-7                TX 4,016,478     95/05/19
TURN 2 NOTICE W/INVOICE & ORDER ICF.002.01         TX 4,124,993     95/09/21
TURN 2 TEST NOTICE W/INVOICE & ORDER ICU.OIO.OI    TX 4,124,994     95/09/21
TURN 3 - 6 PA!R INVOICE W/SHEER WAIST
  GRID - ING.007.02                                TX 3,926,154     94/08/17
TURN 3 - UPGRADE SLIPSHEET & MINI ORGANIZER
  GIFT - MCM.002.03                                TX 4,060,533     95/05/19
TURN 3 NOTICE W/INVOICE & ORDER ICF.003.01         TX 4,117,931     95/09/21
TURN 4 NOTICE W/INVOICE & ORDER - ICR.004.01       TX 4,117,930     95/09/21
TURN 4+ INVOICE - INZ.004.01/$F86-9                TX 4,016,480     95/05/19
UPGRADE SOLO  CARD TEST                            TX 4,117,937     95/09/21
WINNER ANNOUNCEMENT W/CALCULATOR 1161AN            TX 3,933,579     94/08/23



                                     Page 7


<PAGE>


                                                          [EXHIBIT I-2 Conformed
                                                                    as Executed]





                          SUBSIDIARY GUARANTOR
                           SECURITY AGREEMENT


                                 between


                   SUBSIDIARIES OF HOSIERY CORPORATION
                            OF AMERICA, INC.


                                   and


                         BANKERS TRUST COMPANY,

                           as Collateral Agent




                      Dated as of November 20, 1997



<PAGE>


                                TABLE OF CONTENTS


                                                                    Page

ARTICLE I      SECURITY INTERESTS...................................  2
                1.1  Grant of Security Interests....................  2
                1.2  Power of Attorney..............................  3

ARTICLE II     GENERAL REPRESENTATIONS, WARRANTIES AND
               COVENANTS............................................  3
      2.1  Necessary Filings........................................  3
      2.2  No Liens.................................................  3
      2.3  Other Financing Statements...............................  4
      2.4  Chief Executive Office; Records..........................  4
      2.5  Location of Inventory and Equipment......................  4
      2.6  Trade Names; Change of Name..............................  5
      2.7  Recourse.................................................  6

ARTICLE III    SPECIAL PROVISIONS CONCERNING
               RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS............  6
      3.1  Additional Representations and Warranties................  6
      3.2  Maintenance of Records...................................  6
      3.3  Modification of Terms; etc...............................  7
      3.4  Collection...............................................  7
      3.5  Direction to Account Debtors; etc........................  7
      3.6  Instruments..............................................  8
      3.7  Further Actions..........................................  8

ARTICLE IV     SPECIAL PROVISIONS CONCERNING TRADEMARKS.............  8
      4.1  Additional Representations and Warranties................  8
      4.2  Licenses and Assignments.................................  9
      4.3  Infringements............................................  9
      4.4  Preservation of Marks....................................  9
      4.5  Maintenance of Registration..............................  9
      4.6  Future Registered Marks..................................  9
      4.7  Remedies................................................. 10

ARTICLE V      SPECIAL PROVISIONS CONCERNING
               PATENTS AND COPYRIGHTS............................... 10
      5.1  Additional Representations and Warranties................ 10
      5.2  Licenses and Assignments................................. 11

                                      (i)
<PAGE>


      5.3  Infringements............................................ 11
      5.4  Maintenance of Patents................................... 11
      5.5  Prosecution of Patent Application........................ 11
      5.6  Other Patents and Copyrights............................. 11
      5.7  Remedies................................................. 11

ARTICLE VI     PROVISIONS CONCERNING ALL COLLATERAL................. 12
      6.1  Protection of Collateral Agent's Security................ 12
      6.2  Warehouse Receipts Non-negotiable........................ 12
      6.3  Further Actions.......................................... 13
      6.4  Financing Statements..................................... 13

ARTICLE VII    REMEDIES UPON OCCURRENCE OF EVENT OF
               DEFAULT.............................................. 13
      7.1  Remedies; Obtaining the Collateral Upon Default.......... 13
      7.2  Remedies; Disposition of the Collateral.................. 15
      7.3  Waiver of Claims......................................... 16
      7.4  Application of Proceeds.................................. 16
      7.5  Remedies Cumulative...................................... 18
      7.6  Discontinuance of Proceedings............................ 18

ARTICLE VIII   INDEMNITY............................................ 19
      8.1  Indemnity................................................ 19
      8.2  Indemnity Obligations Secured by Collateral; Survival.... 20

ARTICLE IX     DEFINITIONS.......................................... 20

ARTICLE X      MISCELLANEOUS........................................ 25
      10.1  Notices................................................. 25
      10.2  Waiver; Amendment....................................... 25
      10.3  Obligations Absolute.................................... 25
      10.4  Successors and Assigns.................................. 26
      10.5  Headings Descriptive.................................... 26
      10.6  Severability............................................ 26
      10.7  GOVERNING LAW........................................... 26
      10.8  Assignors' Duties....................................... 26
      10.9  Termination; Release.................................... 27
      10.10 Collateral Agent........................................ 28


                                      (ii)
<PAGE>


ANNEX A   Schedule of Existing Financing Statements
ANNEX B   Addresses and Schedule of Record Locations
ANNEX C   Schedule of Equipment and Inventory Locations
ANNEX D   Schedule of Trade and Fictitious Names
ANNEX E   Schedule of Marks
ANNEX F   Schedule of Patents and Applications
ANNEX G   Schedule of Copyrights and Applications




                                     (iii)
<PAGE>

                      SUBSIDIARY SECURITY AGREEMENT


            AMENDMENT AND RESTATEMENT, dated as of November 20, 1997 to Security
Agreement  dated as of October 17, 1994 (as  amended,  modified or  supplemented
from time to time, the "Security  Agreement"),  among each Subsidiary of HOSIERY
CORPORATION OF AMERICA, INC. (the "Borrower) (each an "Assignor",  and together,
the "Assignors") and BANKERS TRUST COMPANY, as Collateral Agent (the "Collateral
Agent") for the Secured  Creditors (as defined  below).  Capitalized  terms used
herein shall have the meaning  specified in Article IX herein or, if not defined
therein, as specified in the Credit Agreement.


                          W I T N E S S E T H :


            WHEREAS, Hosiery Corporation of America, Inc. (the "Borrower"),  the
financial institutions from time to time party thereto (the "Banks") and Bankers
Trust  Company,  as Agent (the  "Agent"),  have entered  into an  Amendment  and
Restatement,  dated as of November 20, 1997,  amending and  restating the Credit
Agreement  dated as of October 17, 1994 (as  amended,  modified or  supplemented
from time to time, the "Credit Agreement"),  providing inter alia for the making
of Loans,  and the  issuance  of,  and  participation  in,  Letters of Credit as
contemplated  therein (the Banks from time to time party to the Credit Agreement
and the Agent being herein called the "Bank Creditors");

            WHEREAS,  the Borrower may from time to time be party to one or more
Interest Rate  Agreements  (each such Interest Rate  Agreement  with an Interest
Rate Creditor (as defined  below),  a "Secured  Interest Rate  Agreement")  with
Bankers  Trust  Company,  in its  individual  capacity  ("BTCo"),  any Bank or a
syndicate  of financial  institutions  organized by BTCo or an affiliate of BTCo
(even if BTCo or any such Bank  ceases to be a Bank under the  Credit  Agreement
for any reason),  and any institution that participates,  and in each case their
subsequent  assigns,  (collectively,  the  "Interest  Rate  Creditors",  and the
Interest Rate  Creditors  together  with the Bank  Creditors,  collectively  the
"Secured Creditors");

            WHEREAS, each Assignor is a wholly-owned direct Subsidiary of the
Borrower;

            WHEREAS,  pursuant to the  Amendment  and  Restatement,  dated as of
November 20, 1997, to the Subsidiary Guaranty,  dated as of October 17, 1994 (as
amended, modified or supplemented from time to time, the "Subsidiary Guaranty"),
each Assignor has jointly and severally  guaranteed to the Secured Creditors the
payment when due of the  Guaranteed  Obligations  (as defined in the  Subsidiary
Guaranty);


<PAGE>

            WHEREAS,  it is a condition precedent to the making of Loans and the
issuance of, and  participation in, Letters of Credit under the Credit Agreement
that each Assignor  shall have executed and  delivered to the  Collateral  Agent
this Agreement;

            WHEREAS,  each Assignor desires to execute this Agreement to satisfy
the conditions described in the preceding paragraph;


            NOW,  THEREFORE,  in  consideration  of the benefit accruing to each
Assignor,  the receipt and  sufficiency of which are hereby  acknowledged,  each
Assignor  hereby makes the following  representations  and warranties and hereby
covenants and agrees as follows:


                                    ARTICLE I

                               SECURITY INTERESTS

            1.1 Grant of Security Interests.  (a) As security for the prompt and
complete  payment  and  performance  when  due of all of the  Obligations,  each
Assignor does hereby sell,  assign and transfer unto the Collateral  Agent,  and
does  hereby  grant to the  Collateral  Agent  for the  benefit  of the  Secured
Creditors a continuing security interest of first priority in, all of the right,
title and  interest  of each  Assignor  in,  to and under all of the  following,
whether now existing or hereafter from time to time acquired: (i) each and every
Receivable,  (ii) all  Contracts,  together  with all  Contract  Rights  arising
thereunder,  (iii) all Inventory,  (iv) all Equipment,  (v) all Marks,  together
with the registrations  and right to all renewals  thereof,  and the goodwill of
the business of such Assignor  symbolized by the Marks, (vi) the Cash Collateral
Account established for such Assignor and all monies, securities and instruments
deposited or required to be deposited in such Cash Collateral Account, (vii) all
Patents and Copyrights, and all reissues, renewals or extensions thereof, (viii)
all computer  programs of such  Assignor and all  intellectual  property  rights
therein and all other proprietary information of such Assignor,  including,  but
not  limited to,  Trade  Secrets,  (ix) all other  Goods,  General  Intangibles,
Chattel Paper,  Documents and Instruments  (other than the Pledged  Securities),
and (x) all Proceeds and  products of any and all of the  foregoing  (all of the
above collectively, the "Collateral").

      (b) The security  interest of the  Collateral  Agent under this  Agreement
extends to all  Collateral  of the kind which is the  subject of this  Agreement
which each  Assignor  may  acquire at any time during the  continuation  of this
Agreement.

                                       2
<PAGE>


            1.2 Power of Attorney. Each Assignor hereby constitutes and appoints
the Collateral Agent its true and lawful attorney,  irrevocably, with full power
after the  occurrence of and during the  continuance  of an Event of Default (in
the name of such  Assignor  or  otherwise)  to act,  require,  demand,  receive,
compound and give  acquittance  for any and all monies and claims for monies due
or to become due to each  Assignor  under or arising out of the  Collateral,  to
endorse any checks or other instruments or orders in connection therewith and to
file any  claims  or take any  action or  institute  any  proceedings  which the
Collateral  Agent may deem to be necessary or advisable in the  premises,  which
appointment as attorney is coupled with an interest.


                                   ARTICLE II

                GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS

            Each   Assignor   represents,    warrants   and   covenants,   which
representations,  warranties and covenants shall survive  execution and delivery
of this Agreement, as follows:

            2.1 Necessary  Filings.  All filings,  registrations  and recordings
necessary or appropriate to create,  preserve,  protect and perfect the security
interest  granted by such Assignor to the Collateral  Agent hereby in respect of
the Collateral have been  accomplished and the security  interest granted to the
Collateral Agent pursuant to this Agreement in and to the Collateral constitutes
a perfected  security  interest  therein superior and prior to the rights of all
other Persons therein (except that the Collateral may be subject to the security
interests evidenced by the financing statements disclosed on Annex A hereto (the
"Permitted Filings")) and subject to no other Liens (except Permitted Liens) and
is entitled to all the rights,  priorities and benefits  afforded by the Uniform
Commercial Code or other relevant law as enacted in any relevant jurisdiction to
perfected security interests.

            2.2 No Liens. Such Assignor is, and as to Collateral  acquired by it
from time to time after the date hereof each  Assignor will be, the owner of all
Collateral free from any Lien,  security  interest,  encumbrance or other right,
title or interest  of any Person  (other than Liens  created  hereby,  permitted
under Sections 8.03 (a), (b) and (d) of the Credit Agreement or evidenced by the
Permitted  Filings),  and such Assignor shall defend the Collateral  against all
claims and demands of all Persons at any time  claiming the same or any interest
therein adverse to the Collateral Agent.

            2.3 Other Financing Statements.  There is no financing statement (or
similar   statement  or  instrument  of  registration   under  the  law  of  any
jurisdiction)  covering or  purporting  to cover any interest of any kind in the
Collateral  except  as  disclosed  in  Annex A hereto  and so long as the  Total
Commitment has not been  terminated or any Letter of Credit remains  outstanding
or any of the Obligations  remain unpaid or any Secured  Interest Rate Agreement
remains in effect,  such  Assignor  will not execute or authorize to be filed in
any public office any
                                       3
<PAGE>

financing  statement (or similar  statement or instrument of registration  under
the law of any  jurisdiction) or statements  relating to the Collateral,  except
financing  statements  filed or to be  filed  in  respect  of and  covering  the
security interests granted hereby by each Assignor or as permitted by the Credit
Agreement.

            2.4 Chief Executive Office;  Records.  The chief executive office of
such  Assignor  is located at the  address  set forth for each such  Assignor on
Annex B, Part I hereto.  Such Assignor will not move its chief executive  office
except to such new location as such Assignor may  establish in  accordance  with
the last sentence of this Section 2.4. The originals of all documents evidencing
all  Receivables  and Contract Rights and Trade Secrets of such Assignor and the
only  original  books of account and records of such Assignor  relating  thereto
are, and will continue to be, kept at such chief executive  office and/or one or
more of the  locations  shown on Annex B, Part II, or at such new  locations  as
such Assignor may establish in accordance with the last sentence of this Section
2.4. All Receivables and Contract Rights and Trade Secrets of such Assignor are,
and will continue to be, maintained at, and controlled and directed  (including,
without limitation,  for general accounting purposes) from, the office locations
described  above,  or such new  locations  as such  Assignor  may  establish  in
accordance  with the last sentence of this Section 2.4. Such Assignor  shall not
establish  new  locations  for such offices until (i) it shall have given to the
Collateral  Agent not less than 30 days'  prior  written  notice (or such lesser
notice  as  shall be  acceptable  to the  Collateral  Agent in the case of a new
record location to be established in connection  with newly acquired  Contracts)
of its intention to do so,  clearly  describing  such new location and providing
such other  information  in  connection  therewith as the  Collateral  Agent may
reasonably  request,  and (ii) with respect to such new location,  it shall have
taken all action, satisfactory to the Collateral Agent, to maintain the security
interest of the Collateral Agent in the Collateral intended to be granted hereby
at all times fully perfected and in full force and effect.

            2.5 Location of Inventory and Equipment. All Inventory and Equipment
held on the date  hereof by such  Assignor  is located  at one of the  locations
shown on Annex C attached  hereto.  Such Assignor  agrees that all Inventory and
Equipment now held or subsequently  acquired by it shall be kept at (or shall be
in transport to or from) any one of the  locations  shown on Annex C hereto,  or
such new location as such  Assignor may  establish in  accordance  with the last
sentence of this Section 2.5,  provided  that  Equipment may be removed from any
such location so long as (x) such Equipment is returned to such location  within
30  days  after  such  removal  and  (y) the  replacement  value  of all of such
Assignors'  Equipment  which has been removed from one of the locations shown on
Annex C, or from a new location established in accordance with the last sentence
of this Section 2.5, and has not been  returned to any such  location,  does not
exceed $100,000 in the aggregate at any one time. Each Assignor may
                                       4
<PAGE>



establish a new location for Inventory  and Equipment  only if (i) it shall have
given to the Collateral  Agent not less than 30 days prior written notice of its
intention to do so,  clearly  describing  such new location and  providing  such
other information in connection therewith as the Collateral Agent may reasonably
request,  and (ii) with  respect to such new  location,  it shall have taken all
action reasonably  satisfactory to the Collateral Agent to maintain the security
interest of the Collateral Agent in the Collateral intended to be granted hereby
at all times fully perfected and in full force and effect.

            2.6 Trade  Names;  Change of Name.  Such  Assignor  does not have or
operate in any jurisdiction  under, or in the preceding 12 months has not had or
has not operated in any jurisdiction under, any trade names, fictitious names or
other  names  (including,   without  limitation,   any  names  of  divisions  or
operations)  except  its legal name and such other  trade,  fictitious  or other
names as are listed on Annex D hereto.  Each  Assignor has only  operated  under
each name set forth in Annex D in the  jurisdiction or  jurisdictions  set forth
opposite  each such name on Annex D. Such  Assignor  shall not  change its legal
name or assume or operate in any  jurisdiction  under any trade,  fictitious  or
other name  except  those  names  listed on Annex D hereto in the  jurisdictions
listed with respect to such names and new names (including,  without limitation,
any names of  divisions  or  operations)  and/or  jurisdictions  established  in
accordance  with the last sentence of this Section 2.6. Such Assignor  shall not
assume or operate in any jurisdiction  under any new trade,  fictitious or other
name or operate under any existing name in any additional jurisdiction until (i)
it shall have given to the Collateral Agent not less than 30 days' prior written
notice  of its  intention  to do so,  clearly  describing  such new name  and/or
jurisdiction and, in the case of a new name, the jurisdictions in which such new
name shall be used and providing such other information in connection  therewith
as the Collateral  Agent may reasonably  request,  and (ii) with respect to such
new name and/or new jurisdiction, it shall have taken all action to maintain the
security  interest  of the  Collateral  Agent in the  Collateral  intended to be
granted hereby at all times fully perfected and in full force and effect.

            2.7  Recourse.  This  Agreement  is made with full  recourse to such
Assignor  and  pursuant  to  and  upon  all  the  warranties,   representations,
covenants,  and agreements on the part of such Assignor contained herein, in the
Secured Interest Rate Agreements and otherwise in writing in connection herewith
or therewith.

                                       5
<PAGE>


                                   ARTICLE III

                          SPECIAL PROVISIONS CONCERNING
                    RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS


            3.1 Additional  Representations and Warranties.  As of the time when
each of its accounts  receivable  arises,  each Assignor shall be deemed to have
represented  and warranted  that such  receivable,  and all records,  papers and
documents  relating  thereto (if any) are genuine and in all respects  what they
purport to be, and that all papers and documents  (if any) relating  thereto (i)
will represent the genuine,  legal,  valid and binding obligation of the account
debtor,  subject to adjustments customary in the business of each Assignor,  and
evidencing indebtedness unpaid and owed by the respective account debtor arising
out of the performance of labor or services or the sale or lease and delivery of
the merchandise listed therein, or both, (ii) will be the only original writings
evidencing  and embodying  such  obligation of the account  debtor named therein
(other than copies created for general accounting purposes), (iii) will evidence
true and valid  obligations,  enforceable  in accordance  with their  respective
terms,  subject to adjustments  customary in the business of each Assignor,  and
(iv) will be in compliance and will conform with all applicable  federal,  state
and local laws and applicable laws of any relevant foreign jurisdiction.

            3.2 Maintenance of Records.  Each Assignor will keep and maintain at
its own cost and expense  satisfactory  and complete  records of its Receivables
and Contracts, including, but not limited to, the originals of all documentation
(including  each  Contract)  with  respect  thereto,  records  of  all  payments
received,  all credits granted thereon,  all merchandise  returned and all other
dealings  therewith,  and each  Assignor  will  make the same  available  to the
Collateral Agent for inspection, at such Assignor's own cost and expense, at any
and all reasonable  times upon demand.  Each Assignor shall, at its own cost and
expense,  deliver all tangible  evidence of its  Receivables and Contract Rights
(including,   without  limitation,   copies  of  all  documents  evidencing  the
Receivables and all Contracts, such copies, if requested by the Collateral Agent
while an Event of Default is in existence,  to be certified as true and complete
by an  appropriate  officer of such  Assignor) and such books and records to the
Collateral Agent or to its  representatives  (copies of which evidence and books
and records may be retained by such  Assignor)  at any time upon its demand.  If
the Collateral Agent so directs,  such Assignor shall legend, in form and manner
reasonably  satisfactory to the Collateral Agent, the Receivables and Contracts,
as  well  as  books,  records  and  documents  of such  Assignor  evidencing  or
pertaining to the Receivables with an appropriate reference to the fact that the
Receivables  and Contracts have been assigned to the  Collateral  Agent and that
the Collateral Agent has a security interest therein.

            3.3  Modification  of Terms;  etc. No Assignor  shall not rescind or
cancel any  indebtedness  evidenced by any Receivable or under any Contract,  or
modify any term thereof or make any adjustment with respect  thereto,  or extend
or renew the same, or compromise or settle
                                       6
<PAGE>




any material dispute,  claim, suit or legal proceeding relating thereto, or sell
any  Receivable  or Contract,  or interest  therein,  without the prior  written
consent of the Collateral  Agent,  except (i) as permitted by Section 3.4 hereof
and (ii) so long as no Event of Default is then in existence in respect of which
the  Collateral  Agent  has  given  notice  that  this  exception  is no  longer
applicable,  each Assignor may modify,  make adjustments with respect to, extend
or renew any  Contracts in the ordinary  course of business.  Each Assignor will
duly fulfill all  obligations on its part to be fulfilled under or in connection
with the  Receivables  and Contracts and will do nothing to impair the rights of
the Collateral Agent in the Receivables or Contracts.

            3.4  Collection.  Each  Assignor  shall  endeavor  to  cause  to  be
collected  from the account  debtor named in each of its  Receivables or obligor
under any Contract,  as and when due  (including,  without  limitation,  amounts
which are delinquent,  such amounts to be collected in accordance with generally
accepted  lawful  collection  procedures)  any and all amounts owing under or on
account of such Receivable or Contract, and apply forthwith upon receipt thereof
all  such  amounts  as are so  collected  to the  outstanding  balance  of  such
Receivable or under such  Contract,  except that, so long as no Event of Default
is then in existence in respect of which the  Collateral  Agent has given notice
that this  exception  is no longer  applicable,  such  Assignor may allow in the
ordinary   course  of  business  as  adjustments  to  amounts  owing  under  its
Receivables  and  Contracts  (i) an extension or renewal of the time or times of
payment,  or  settlement  for less than the total  unpaid  balance,  which  such
Assignor finds appropriate in accordance with sound business judgment and (ii) a
refund  or  credit  due as a  result  of  returned  or  damaged  merchandise  or
improperly  performed  services.  The costs  and  expenses  (including,  without
limitation,  attorneys' fees) of collection, whether incurred by any Assignor or
the Collateral Agent, shall be borne by such Assignor.

            3.5  Direction to Account  Debtors;  etc.  Upon the  occurrence  and
during the  continuance of an Event of Default,  and if the Collateral  Agent so
directs any Assignor,  to the extent  permitted by applicable law, such Assignor
agrees (x) to cause all payments on account of the  Receivables and Contracts to
be made directly to the Cash Collateral  Account  established for such Assignor,
(y) that the Collateral  Agent may, at its option,  directly notify the obligors
with  respect to any  Receivables  and/or any  Contracts to make  payments  with
respect  thereto  as  provided  in the  preceding  clause  (x) and (z)  that the
Collateral  Agent may enforce  collection of any such  Receivables and Contracts
and may  adjust,  settle or  compromise  the  amount  of  payment  thereof.  The
Collateral  Agent may apply any or all amounts then in, or thereafter  deposited
in, the Cash  Collateral  Account in the manner  provided in Section 7.4 of this
Agreement.  The costs and expenses  (including  attorneys'  fees) of collection,
whether incurred by any Assignor or the Collateral Agent, shall be borne by such
Assignor.

                                       7
<PAGE>




            3.6  Instruments.  If any Assignor owns or acquires any  Instrument,
such Assignor will within 10 days notify the Collateral Agent thereof,  and upon
request  by  the  Collateral  Agent  promptly  deliver  such  Instrument  to the
Collateral Agent appropriately  endorsed to the order of the Collateral Agent as
further security hereunder.

            3.7 Further Actions.  Each Assignor will, at its own expense,  make,
execute, endorse,  acknowledge, file and/or deliver to the Collateral Agent from
time to time  such  vouchers,  invoices,  schedules,  confirmatory  assignments,
conveyances,  financing statements,  transfer endorsements,  powers of attorney,
certificates,  reports and other assurances or instruments and take such further
steps relating to its Receivables,  Contracts, Instruments and other property or
rights covered by the security interest hereby granted,  as the Collateral Agent
may reasonably require to give effect to the purposes of this Agreement.


                                   ARTICLE IV

                    SPECIAL PROVISIONS CONCERNING TRADEMARKS

            4.1  Additional   Representations  and  Warranties.   Each  Assignor
represents  and warrants that it is the true and lawful owner or licensee of the
Marks  listed in Annex E hereto  opposite  its name and that said  listed  Marks
constitute  all the marks  registered  in the United States Patent and Trademark
Office that such Assignor now owns or uses in connection with its business. Each
Assignor  represents  and warrants  that it owns or is licensed to use all Marks
that it uses. Each Assignor  further warrants that it is aware of no third party
claim  that any  aspect of such  Assignor's  present  or  contemplated  business
operations  infringes or will infringe any trademark or service mark in a manner
which  could have a material  effect on the  financial  condition,  business  or
property of each Assignor.

            4.2 Licenses and  Assignments.  Each  Assignor  hereby agrees not to
divest  itself of any right  under a Mark other than in the  ordinary  course of
business absent prior written approval of the Collateral Agent.

            4.3  Infringements.  Each  Assignor  agrees,  promptly upon learning
thereof,  to notify the Collateral  Agent in writing of the name and address of,
and to furnish such pertinent information that may be available with respect to,
any party who may be  infringing or otherwise  violating any of such  Assignor's
rights in and to any  significant  Mark,  or with respect to any party  claiming
that such Assignor's use of any significant  Mark violates any property right of
that  party,  to the extent that such  infringement  or  violation  could have a
material  effect  on the  financial  condition,  business  or  property  of such
Assignor.  Each  Assignor  further  agrees,  unless  otherwise  directed  by the
Collateral Agent,  diligently to prosecute any person infringing any significant
Mark in a manner consistent with its past practice and in the ordinary course of
business.

                                       8
<PAGE>




            4.4  Preservation  of  Marks.   Each  Assignor  agrees  to  use  its
significant Marks in interstate commerce during the time in which this Agreement
is in effect, sufficiently to preserve such Marks as trademarks or service marks
registered under the laws of the United States.

            4.5  Maintenance of  Registration.  Each Assignor  shall, at its own
expense, diligently process all documents required by the Trademark Act of 1946,
15 U.S.C.  ss.ss. 1051 et seq. to maintain  trademark  registration  which could
have a material effect on the financial condition,  business or property of such
Assignor,  including but not limited to affidavits of use and  applications  for
renewals of  registration  in the United States Patent and Trademark  Office for
all of its Marks pursuant to 15 U.S.C. ss.ss.  1058(a), 1059 and 1065, and shall
pay all fees and  disbursements in connection  therewith,  and shall not abandon
any such filing of affidavit of use or any such  application of renewal prior to
the exhaustion of all administrative and judicial remedies without prior written
consent of the Collateral  Agent.  Each Assignor agrees to notify the Collateral
Agent one (1) month  prior to the  dates on which the  affidavits  of use or the
applications  for renewal  registration are due that the affidavit of use or the
renewal is being processed.

            4.6  Future  Registered  Marks.  If  any  mark  registration  issues
hereafter  to any  Assignor  as a result  of any  application  now or  hereafter
pending before the United States Patent and Trademark Office, within thirty (30)
days of receipt of such  certificate  such Assignor shall deliver a copy of such
certificate,  and a grant of  security  in such  mark to the  Collateral  Agent,
confirming the grant thereof  hereunder,  the form of such confirmatory grant to
be substantially the same as the form hereof.

            4.7 Remedies.  If an Event of Default shall occur and be continuing,
the Collateral Agent may, by written notice to any Assignor,  take any or all of
the following actions:  (i) declare the entire right, title and interest of such
Assignor in and to each of the Marks,  together  with all  trademark  rights and
rights of protection to the same, vested, in which event such rights,  title and
interest shall  immediately vest, in the Collateral Agent for the benefit of the
Secured  Creditors,  in which case each Assignor agrees to execute an assignment
in form and substance  satisfactory to the Collateral  Agent, of all its rights,
title and interest in and to the Marks to the  Collateral  Agent for the benefit
of the Secured  Creditors;  (ii) take and use or sell the Marks and the goodwill
of such  Assignor's  business  symbolized by the Marks and the right to carry on
the business and use the assets of such  Assignor in  connection  with which the
Marks have been used; and (iii) direct such Assignor to refrain,  in which event
such  Assignor  shall  refrain,  from using the Marks in any manner  whatsoever,
directly or indirectly,  and, if requested by the Collateral Agent,  change such
Assignor's corporate name to eliminate therefrom any use of
                                       9
<PAGE>




any Mark and execute such other and further  documents that the Collateral Agent
may request to further  confirm this and to transfer  ownership of the Marks and
registrations and any pending trademark  application in the United States Patent
and Trademark Office to the Collateral Agent.


                                    ARTICLE V

                          SPECIAL PROVISIONS CONCERNING
                             PATENTS AND COPYRIGHTS

            5.1  Additional   Representations  and  Warranties.   Each  Assignor
represents  and warrants that it is the true and lawful owner or licensee of all
rights  in the  Patents  listed in Annex F hereto  opposite  its name and in the
Copyrights  listed  in Annex G hereto  opposite  its  name,  that  said  Patents
constitute  all the United  States  patents and  applications  for United States
patents that each Assignor now owns and that said Copyrights  constitute all the
registered  United States  copyrights that such Assignor now owns. Each Assignor
represents  and  warrants  that it owns or is  licensed  to  practice  under all
Patents and Copyrights that it now owns, uses or practices under.  Each Assignor
further  warrants  that it is aware of no third  party  claim that any aspect of
such Assignor's present or contemplated  business  operations  infringes or will
infringe  any patent or any  copyright  in a manner  which could have a material
effect on the financial condition, business or property of such Assignor.

            5.2 Licenses and  Assignments.  Each  Assignor  hereby agrees not to
divest  itself  of any  right  under a Patent  or  Copyright  other  than in the
ordinary  course of business  absent prior  written  approval of the  Collateral
Agent.

            5.3  Infringements.  Each  Assignor  agrees,  promptly upon learning
thereof,  to  furnish  the  Collateral  Agent  in  writing  with  all  pertinent
information available to such Assignor with respect to any infringement or other
violation of such Assignor's rights in any significant  Patent or Copyright,  or
with respect to any claim that practice of any  significant  Patent or Copyright
violates any property right of that party, to the extent that such  infringement
or violation could have a material effect on the financial  condition,  business
or property of such Assignor.  Each Assignor further agrees, absent direction of
the  Collateral  Agent to the  contrary,  diligently  to  prosecute  any  person
infringing any significant  Patent or Copyright in a manner  consistent with its
past practice and in the ordinary course of business.

            5.4 Maintenance of Patents. At its own expense,  each Assignor shall
make timely payment of all post-issuance fees required pursuant to 35 U.S.C. ss.
41 to maintain in force rights under each Patent.

                                       10
<PAGE>





            5.5  Prosecution  of Patent  Application.  At its own expense,  each
Assignor shall  diligently  prosecute all applications for United States patents
listed on Annex F hereto,  and shall not abandon any such  application  prior to
exhaustion of all administrative  and judicial remedies,  absent written consent
of the Collateral Agent.

            5.6  Other  Patents  and  Copyrights.  Within  thirty  (30)  days of
acquisition  of a  United  States  Patent  or  Copyright,  or  of  filing  of an
application for a United States Patent or Copyright, each Assignor shall deliver
to the Collateral Agent a copy of said Patent or Copyright,  as the case may be,
with a grant of  security as to such  Patent or  Copyright,  as the case may be,
confirming the grant thereof  hereunder,  the form of such confirmatory grant to
be substantially the same as the form hereof.

            5.7 Remedies.  If an Event of Default shall occur and be continuing,
the  Collateral  Agent may by written  notice to any Assignor take any or all of
the following actions:  (i) declare the entire right, title and interest of such
Assignor  in each of the  Patents  and  Copyrights  vested,  in which event such
right, title and interest shall immediately vest in the Collateral Agent for the
benefit of the Secured Creditors,  in which case each Assignor agrees to execute
an assignment in form and substance  satisfactory to the Collateral Agent of all
its right,  title, and interest to such Patents and Copyrights to the Collateral
Agent for the benefit of the Secured  Creditors;  (ii) take and practice or sell
the Patents and  Copyrights;  (iii)  direct such  Assignor to refrain,  in which
event such Assignor  shall refrain,  from  practicing the Patents and Copyrights
directly or  indirectly,  and such Assignor shall execute such other and further
documents  as the  Collateral  Agent may request  further to confirm this and to
transfer ownership of the Patents and Copyrights to the Collateral Agent for the
benefit of the Secured Creditors.


                                   ARTICLE VI

                      PROVISIONS CONCERNING ALL COLLATERAL

            6.1 Protection of Collateral  Agent's Security.  No Assignor will do
anything to impair the rights of the Collateral  Agent in the  Collateral.  Each
Assignor will at all times keep its Inventory and Equipment  insured in favor of
the Collateral Agent, at such Assignor's own expense,  to the extent required by
the  Credit  Agreement  against  fire,  theft and all other  risks to which such
Collateral  may be subject;  all policies or  certificates  with respect to such
insurance  shall be  endorsed to the  Collateral  Agent's  satisfaction  for the
benefit of the Collateral Agent (including,  without  limitation,  by naming the
Collateral Agent as loss payee) and deposited with the Collateral  Agent. If any
Assignor  shall fail to insure  such  Inventory  to the extent  required  by the
Credit  Agreement,  or if any Assignor  shall fail to so endorse and deposit all
policies or certificates  with respect thereto,  the Collateral Agent shall have
the right (but shall be under no
                                       11
<PAGE>





obligation) to procure such insurance and such Assignor  agrees to reimburse the
Collateral  Agent for all costs and expenses of procuring  such  insurance.  The
Collateral  Agent may apply any proceeds of such  insurance in  accordance  with
Section  7.4.  Each  Assignor  assumes  all  liability  and   responsibility  in
connection with the Collateral acquired by it and the liability of such Assignor
to pay its  Obligations  shall in no way be affected or  diminished by reason of
the fact that such Collateral may be lost, destroyed, stolen, damaged or for any
reason whatsoever unavailable to such Assignor.

            6.2 Warehouse Receipts Non-negotiable.  Each Assignor agrees that if
any warehouse  receipt or receipt in the nature of a warehouse receipt is issued
with respect to any of its Inventory,  such warehouse  receipt or receipt in the
nature thereof shall not be "negotiable"  (as such term is used in Section 7-104
of the Uniform  Commercial  Code as in effect in any  relevant  jurisdiction  or
under other relevant law).

            6.3 Further Actions.  Each Assignor will, at its own expense,  make,
execute, endorse,  acknowledge, file and/or deliver to the Collateral Agent from
time to time  such  lists,  descriptions  and  designations  of its  Collateral,
warehouse  receipts,  receipts  in the nature of  warehouse  receipts,  bills of
lading,  documents  of  title,  vouchers,  invoices,   schedules,   confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney,  certificates,  reports and other  assurances or instruments  and take
such  further  steps  relating to the  Collateral  and other  property or rights
covered by the security  interest  hereby  granted,  which the Collateral  Agent
deems  reasonably  appropriate or advisable to perfect,  preserve or protect its
security interest in the Collateral.

            6.4 Financing  Statements.  Each Assignor agrees to sign and deliver
to the Collateral  Agent such financing  statements,  in form  acceptable to the
Collateral  Agent,  as the  Collateral  Agent may from  time to time  reasonably
request or as are necessary or desirable in the opinion of the Collateral  Agent
to establish and maintain a valid, enforceable, first priority security interest
in the  Collateral  as  provided  herein  and  the  other  rights  and  security
contemplated  hereby  all in  accordance  with the  Uniform  Commercial  Code as
enacted in any and all relevant  jurisdictions  or any other  relevant law. Each
Assignor will pay any applicable filing fees and related expenses. Each Assignor
authorizes the Collateral  Agent to file any such financing  statements  without
the signature of such Assignor.


                                   ARTICLE VII

                  REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT

            7.1 Remedies;  Obtaining the Collateral Upon Default.  Each Assignor
agrees that, if any Event of Default shall have occurred and be continuing, then
and in every such case, subject to any mandatory  requirements of applicable law
then in effect, the Collateral Agent, in addition to any rights now or hereafter
existing under applicable law, shall have all rights as a secured creditor under
the Uniform Commercial Code in all relevant jurisdictions and may:

                                       12
<PAGE>





            (i)  personally,  or by  agents  or  attorneys,  immediately  retake
      possession of the  Collateral  or any part thereof,  from such Assignor or
      any other  Person  who then has  possession  of any part  thereof  with or
      without notice or process of law, and for that purpose may enter upon such
      Assignor's  premises where any of the Collateral is located and remove the
      same  and use in  connection  with  such  removal  any  and all  services,
      supplies, aids and other facilities of such Assignor;

           (ii) instruct the obligor or obligors on any agreement, instrument or
      other obligation (including,  without limitation,  the Receivables and the
      Contracts) constituting the Collateral to make any payment required by the
      terms of such instrument or agreement directly to the Collateral Agent;

          (iii)  withdraw all moneys,  securities  and other  instruments in the
      Cash  Collateral  Account for application to the Obligations in accordance
      with Section 7.4 hereof;

           (iv) sell, assign or otherwise liquidate,  or direct such Assignor to
      sell, assign or otherwise  liquidate,  any or all of the Collateral or any
      part thereof in accordance with Section 7.2 hereof, and take possession of
      the proceeds of any such sale or liquidation; and

            (v)  take  possession  of the  Collateral  or any part  thereof,  by
      directing  such Assignor in writing to deliver the same to the  Collateral
      Agent at any place or places  designated by the Collateral Agent, in which
      event such Assignor shall at its own expense:

                  (A)  forthwith  cause  the same to be  moved  to the  place or
            places so designated by the Collateral  Agent and there delivered to
            the Collateral Agent,

                  (B)  store  and  keep  any  Collateral  so  delivered  to  the
            Collateral  Agent at such place or places pending  further action by
            the Collateral Agent as provided in Section 7.2, and

                  (C) while the Collateral shall be so stored and kept,  provide
            such  guards  and  maintenance  services  as shall be  necessary  to
            protect  the  same  and  to  preserve  and  maintain  them  in  good
            condition;

                                       13
<PAGE>



           (vi) license or  sublicense  whether on an exclusive or  nonexclusive
      basis,  any Marks,  Patents or Copyrights  included in the  Collateral for
      such term and on such  conditions  and in such  manner  as the  Collateral
      Agent shall in its sole judgment determine.

it being understood that such Assignor's obligation to so deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Collateral Agent shall be entitled to a
decree requiring specific performance by such Assignor of said obligation.

            7.2 Remedies; Disposition of the Collateral. Upon the occurrence and
continuance of an Event of Default, any Collateral repossessed by the Collateral
Agent under or pursuant to Section 7.1 and any other  Collateral  whether or not
so  repossessed  by the  Collateral  Agent,  may be sold,  assigned,  leased  or
otherwise disposed of under one or more contracts or as an entirety, and without
the necessity of gathering at the place of sale the property to be sold,  and in
general in such  manner,  at such time or times,  at such place or places and on
such  terms as the  Collateral  Agent  may,  in  compliance  with any  mandatory
requirements of applicable law, determine to be commercially reasonable.  Any of
the Collateral may be sold, leased or otherwise disposed of, in the condition in
which the same existed when taken by the Collateral  Agent or after any overhaul
or  repair  which  the  Collateral  Agent  shall  determine  to be  commercially
reasonable.  Any such disposition which shall be a private sale or other private
proceedings  permitted by such requirements shall be made upon not less than ten
(10) days' written  notice to the  applicable  Assignor  specifying  the time at
which  such  disposition  is to be made  and the  intended  sale  price or other
consideration  therefor,  and shall be subject,  for the ten (10) days after the
giving of such  notice,  to the right of such  Assignor  or any  nominee of such
Assignor  to  acquire  the  Collateral  involved  at a price or for  such  other
consideration  at least equal to the intended sale price or other  consideration
so specified.  Any such  disposition  which shall be a public sale  permitted by
such requirements shall be made upon not less than ten (10) days' written notice
to such Assignor  specifying the time and place of such sale and, in the absence
of applicable requirements of law, shall be by public auction (which may, at the
Collateral  Agent's option, be subject to reserve),  after publication of notice
of such auction not less than 10 days prior thereto in two newspapers in general
circulation  in the  City of New  York.  To the  extent  permitted  by any  such
requirement of law, the Collateral Agent on behalf of the Secured  Creditors (or
certain of them) may bid for and become the purchaser (by bidding on Obligations
or  otherwise)  of the  Collateral  or any  item  thereof,  offered  for sale in
accordance with this Section without  accountability to such Assignor (except to
the extent of surplus  money  received as provided in Section  7.4).  If,  under
mandatory requirements of applicable law, the Collateral Agent shall be required
to make  disposition  of the  Collateral  within a period of time which does not
permit the  giving of notice to such  Assignor  as  hereinabove  specified,  the
Collateral  Agent need give such  Assignor  only such notice of  disposition  as
shall  be  reasonably  practicable  in view of such  mandatory  requirements  of
applicable  law. Each  Assignor  agrees to do or cause to be done all such other
acts and things as may be reasonably necessary to make such sale or sales of

                                       14
<PAGE>



all or any portion of the  Collateral  valid and binding and in compliance  with
any and all applicable laws, regulations, orders, writs, injunctions, decrees or
awards of any and all courts,  arbitrations or  governmental  instrumentalities,
domestic or foreign,  having  jurisdiction  over any such sale or sales,  all at
such Assignor's expense.

            7.3  Waiver  of  Claims.   Except  as  otherwise  provided  in  this
Agreement,  EACH ASSIGNOR HEREBY WAIVES,  TO THE EXTENT  PERMITTED BY APPLICABLE
LAW,  NOTICE AND JUDICIAL  HEARING IN  CONNECTION  WITH THE  COLLATERAL  AGENT'S
TAKING  POSSESSION  OR  THE  COLLATERAL  AGENT'S   DISPOSITION  OF  ANY  OF  THE
COLLATERAL,  INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING
FOR ANY  PREJUDGMENT  REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH  ASSIGNOR
WOULD OTHERWISE HAVE UNDER THE  CONSTITUTION OR ANY STATUTE OF THE UNITED STATES
OR OF ANY  STATE,  and  such  Assignor  hereby  further  waives,  to the  extent
permitted by law:

            (i) all damages  occasioned by such taking of possession  except any
      damages  which are the  direct  result  of the  Collateral  Agent's  gross
      negligence or willful misconduct;

            (ii) all other  requirements as to the time, place and terms of sale
      or other  requirements  with respect to the  enforcement of the Collateral
      Agent's rights hereunder; and

            (iii)  all  rights of  redemption,  appraisement,  valuation,  stay,
      extension or moratorium now or hereafter in force under any applicable law
      in order to  prevent or delay the  enforcement  of this  Agreement  or the
      absolute sale of the Collateral or any portion thereof, and such Assignor,
      for  itself and all who may claim  under it,  insofar as it or they now or
      hereafter lawfully may, hereby waives the benefit of all such laws.

Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral  shall operate to divest all right,  title,  interest,  claim and
demand,  either at law or in equity,  of such Assignor therein and thereto,  and
shall be a perpetual  bar both at law and in equity  against  such  Assignor and
against any and all Persons  claiming or attempting  to claim the  Collateral so
sold,  optioned or realized upon, or any part thereof,  from,  through and under
such Assignor.

            7.4  Application  of Proceeds.  (a) The  proceeds of any  Collateral
obtained pursuant to Section 7.1 or disposed of pursuant to Section 7.2 shall be
applied as follows:

            (i) first, to the payment of all Obligations to the Collateral Agent
      of the type  described  in  clauses  (iii) and (iv) of the  definition  of
      "Obligation" contained in Article IX hereof;

                                       15
<PAGE>




            (ii) second,  to the extent  proceeds  remain after the  application
      pursuant to the preceeding  clause (i), an amount equal to the outstanding
      Obligations  to the  Secured  Creditors  shall  be  paid  to  the  Secured
      Creditors  as  provided  in  Section  7.4(c)  with each  Secured  Creditor
      receiving  an  amount  equal to its  outstanding  Obligations  or,  if the
      proceeds are  insufficient  to pay in full all such  Obligations,  its Pro
      Rata Share of the amount  remaining to be distributed to be applied,  with
      respect to Credit Document Obligations, firstly to the payment of interest
      in respect of the unpaid principal amount of Loans  outstanding,  secondly
      to the payment of principal of Loans outstanding, then to the other Credit
      Document Obligations; and

            (iii) third, to the extent remaining after the application  pursuant
      to the preceding  clauses (i) and (ii) and following  the  termination  of
      this Agreement pursuant to Section 10.9 hereof, to respective  Assignor or
      to whomever may be lawfully entitled to receive such payment.

            (b) For  purposes of this  Agreement,  "Pro Rata Share"  shall mean,
when calculating a Secured Creditor's portion of any distribution or amount, the
amount (expressed as a percentage) equal to a fraction the numerator of which is
the then  outstanding  amount of the  relevant  Obligations  owed  such  Secured
Creditor  and the  denominator  of which is the then  outstanding  amount of all
Obligations.

            (c) All  payments  required  to be made  to the (i)  Bank  Creditors
hereunder  shall be made to the Agent for the  account  of the  respective  Bank
Creditors and (ii) Interest Rate Creditors hereunder shall be made to the paying
agent under the  applicable  Secured  Interest Rate Agreement or, in the case of
Secured  Interest  Rate  Agreements  without  a paying  agent,  directly  to the
applicable Interest Rate Creditor.

            (d) For purposes of applying  payments  received in accordance  with
this Section 7.4,  the  Collateral  Agent shall be entitled to rely upon (i) the
Agent for a determination (which the Agent agrees to provide upon request to the
Collateral Agent) of the outstanding  Credit Document  Obligations and (ii) upon
any  Interest  Rate  Creditor  for a  determination  (which each  Interest  Rate
Creditor  agrees  to  provide  upon  request  to the  Collateral  Agent)  of the
outstanding  Interest Rate  Obligations  owed to such  Interest  Rate  Creditor.
Unless it has  actual  knowledge  (including  by way of  written  notice  from a
Secured  Creditor) to the  contrary,  the Agent under the Credit  Agreement,  in
furnishing  information  pursuant to the preceding sentence,  and the Collateral
Agent,  in acting  hereunder,  shall be  entitled  to assume  that (x) no Credit
Document Obligations other than principal,  interest and regularly accruing fees
are owing to any Bank Creditor and (y) no Secured  Interest  Rate  Agreements or
Interest Rate Obligations with respect thereto are in existence.

                                       16
<PAGE>




            (e) It is understood  that each Assignor  shall remain liable to the
extent of any  deficiency  between the amount of the proceeds of the  Collateral
and the amount of the sum referred to in clause (a) of this Section with respect
to such Assignor.

            7.5  Remedies  Cumulative.  Each and every  right,  power and remedy
hereby  specifically given to the Collateral Agent shall be in addition to every
other  right,  power and remedy  specifically  given under this  Agreement,  any
Secured  Interest  Rate  Agreement  or  the  other  Credit  Documents  or now or
hereafter  existing at law or in equity, or by statute and each and every right,
power and remedy whether  specifically herein given or otherwise existing may be
exercised from time to time or simultaneously  and as often and in such order as
may be deemed  expedient by the Collateral  Agent.  All such rights,  powers and
remedies  shall be  cumulative  and the exercise or the beginning of exercise of
one  shall  not be  deemed a waiver  of the  right to  exercise  of any other or
others. No delay or omission of the Collateral Agent in the exercise of any such
right,  power or remedy and no renewal or  extension  of any of the  Obligations
shall  impair  any such  right,  power or remedy or shall be  construed  to be a
waiver of any  Default or Event of Default or an  acquiescence  therein.  In the
event that the  Collateral  Agent  shall  bring any suit to  enforce  any of its
rights  hereunder  and  shall be  entitled  to  judgment,  then in such suit the
Collateral Agent may recover reasonable expenses, including attorneys' fees, and
the amounts thereof shall be included in such judgment.

            7.6  Discontinuance  of  Proceedings.  In case the Collateral  Agent
shall have instituted any proceeding to enforce any right, power or remedy under
this Agreement by  foreclosure,  sale,  entry or otherwise,  and such proceeding
shall  have been  discontinued  or  abandoned  for any reason or shall have been
determined  adversely to the Collateral  Agent, then and in every such case each
Assignor,  the Collateral Agent and each holder of any of the Obligations  shall
be restored to their former  positions and rights  hereunder with respect to the
Collateral  subject to the security  interest created under this Agreement,  and
all rights,  remedies and powers of the Collateral Agent shall continue as if no
such proceeding had been instituted.


                                  ARTICLE VIII

                                    INDEMNITY

            8.1  Indemnity.  (a) Each Assignor  jointly and severally  agrees to
indemnify,  reimburse and hold the Collateral  Agent,  each Secured Creditor and
its respective successors,  assigns, employees, agents and servants (hereinafter
in this Section 8.1 referred to individually as  "Indemnitee,"  and collectively
as "Indemnitees")  harmless from any and all liabilities,  obligations,  losses,
damages,  penalties,  claims, demands, actions, suits, judgments and any and all
costs and expenses (including  reasonable attorneys' fees and expenses) (for the
purposes of this Section 8.1 the foregoing are collectively  called  "expenses")
of whatsoever kind and nature imposed on,

                                       17
<PAGE>



asserted against or incurred by any of the Indemnitees in any way relating to or
arising out of this Agreement,  any Secured  Interest Rate Agreement,  any other
Credit Document or the documents  executed in connection  herewith and therewith
or in any other way connected  with the  enforcement  of any of the terms of, or
the  preservation of any rights under any thereof,  or in any way relating to or
arising  out  of  the  manufacture,  ownership,  ordering,  purchase,  delivery,
control, acceptance, lease, financing,  possession,  operation, condition, sale,
return  or  other  disposition,  or use of the  Collateral  (including,  without
limitation, latent or other defects, whether or not discoverable), the violation
of the laws of any country,  state or other  governmental body or unit, any tort
(including,  without limitation, claims arising or imposed under the doctrine of
strict  liability,  or for or on account of injury to or the death of any Person
(including any Indemnitee),  or property  damage),  or contract claim;  provided
that no  Indemnitee  shall be  indemnified  pursuant to this Section  8.1(a) for
losses,  damages or liabilities to the extent caused by the gross  negligence or
wilful  misconduct of such  Indemnitee.  Each Assignor  agrees that upon written
notice by any Indemnitee of the assertion of such a liability, obligation, loss,
damage,  penalty,  claim, demand, action,  judgment or suit, such Assignor shall
assume full  responsibility  for the defense thereof.  Each Indemnitee agrees to
use its best efforts to promptly  notify such Assignor of any such  assertion of
which such Indemnitee has knowledge.

            (b)  Without  limiting  the  application  of  Section  8.1(a),  each
Assignor  jointly and severally agrees to pay, or reimburse the Collateral Agent
for (if the Collateral Agent shall have incurred fees, costs or expenses because
each  Assignor  shall  have  failed to comply  with its  obligations  under this
Agreement  or any Credit  Document),  any and all fees,  costs and  expenses  of
whatever kind or nature incurred in connection  with the creation,  preservation
or protection of the Collateral  Agent's Liens on, and security interest in, the
Collateral, including, without limitation, all fees and taxes in connection with
the recording or filing of instruments and documents in public offices,  payment
or  discharge  of any  taxes  or Liens  upon or in  respect  of the  Collateral,
premiums for insurance with respect to the Collateral and all other fees,  costs
and expenses in  connection  with  protecting,  maintaining  or  preserving  the
Collateral and the Collateral Agent's interest therein, whether through judicial
proceedings or otherwise,  or in defending or prosecuting any actions,  suits or
proceedings arising out of or relating to the Collateral.

            (c) Without  limiting the application of Section 8.1(a) or (b), each
Assignor jointly and severally agrees to pay, indemnify and hold each Indemnitee
harmless  from and against any loss,  costs,  damages  and  expenses  which such
Indemnitee  may suffer,  expend or incur in consequence of or growing out of any
misrepresentation by such Assignor in this Agreement,  any Secured Interest Rate
Agreement  or  any  other  Credit  Document  or  in  any  statement  or  writing
contemplated  by or made or  delivered  pursuant to or in  connection  with this
Agreement, any Secured Interest Rate Agreement or any other Credit Document.

                                       18
<PAGE>




            (d) If and to the extent that the  obligations of any Assignor under
this Section 8.1 are unenforceable  for any reason,  such Assignor hereby agrees
to make  the  maximum  contribution  to the  payment  and  satisfaction  of such
obligations which is permissible under applicable law.

            8.2  Indemnity  Obligations  Secured by  Collateral;  Survival.  Any
amounts  paid by any  Indemnitee  as to which such  Indemnitee  has the right to
reimbursement  shall  constitute  Obligations  secured  by the  Collateral.  The
indemnity  obligations  of each  Assignor  contained  in this Article VIII shall
continue in full force and effect  notwithstanding  the full  payment of all the
Loans made  under the  Credit  Agreement  and all of the other  Obligations  and
notwithstanding the discharge thereof.


                                   ARTICLE IX

                                   DEFINITIONS

            The following terms shall have the meanings herein  specified unless
the context otherwise requires.  Such definitions shall be equally applicable to
the singular and plural forms of the terms defined.

            "Agent" shall have the meaning  provided in the first WHEREAS clause
of this Agreement.

            "Agreement"  shall mean this  Security  Agreement as the same may be
modified,  supplemented  or  amended  from time to time in  accordance  with its
terms.

            "Assignor" shall have the meaning specified in the first paragraph
of this Agreement.

            "Bank Creditor" shall have the meaning provided in the first WHEREAS
clause of this Agreement.

            "Cash  Collateral  Account" shall mean a  non-interest  bearing cash
collateral account maintained with, and in the sole dominion and control of, the
Collateral Agent for the benefit of the Secured Creditors.

            "Chattel Paper" shall have the meaning  assigned that term under the
Uniform  Commercial  Code as in  effect  on the date  hereof in the State of New
York.

            "Collateral" shall have the meaning provided in Section 1.1(a).

                                       19
<PAGE>




            "Collateral  Agent"  shall have the meaning  specified  in the first
paragraph of this Agreement.

            "Contract Rights" shall mean all rights of any Assignor  (including,
without limitation, all rights to payment) under each Contract.

            "Contracts" shall mean all contracts between any Assignor and one or
more additional parties.

            "Copyrights" shall mean any U.S. copyright to which any Assignor now
or hereafter has title, as well as any application for a U.S. copyright
hereafter made by each Assignor.

            "Credit  Agreement"  shall have the  meaning  provided  in the first
WHEREAS clause of this Agreement.

            "Credit Document Obligations" shall have the meaning provided in the
definition of "Obligations" in this Article IX.

            "Documents"  shall  have the  meaning  assigned  that term under the
Uniform  Commercial  Code as in  effect  on the date  hereof in the State of New
York.

            "Equipment"  shall mean any  "equipment," as such term is defined in
the Uniform  Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter  owned by any Assignor and, in any event,  shall include,
but shall not be limited to, all machinery, equipment, furnishings, fixtures and
vehicles now or  hereafter  owned by such  Assignor  and any and all  additions,
substitutions  and  replacements  of  any of the  foregoing,  wherever  located,
together with all  attachments,  components,  parts,  equipment and  accessories
installed thereon or affixed thereto.

            "Event of  Default"  shall mean any Event of Default  under,  and as
defined in, the Credit Agreement,  or any payment default,  after any applicable
grace period, under any Secured Interest Rate Agreement.

            "General  Intangibles"  shall have the  meaning  assigned  that term
under the Uniform  Commercial  Code as in effect on the date hereof in the State
of New York.

            "Goods" shall have the meaning  assigned that term under the Uniform
Commercial Code as in effect on the date hereof in the State of New York.

            "Indemnitee" shall have the meaning provided in Section 8.1.

                                       20
<PAGE>



            "Instrument"  shall have the  meaning  assigned  that term under the
Uniform  Commercial  Code as in  effect  on the date  hereof in the State of New
York.

            "Interest  Rate  Creditors"  shall have the meaning  provided in the
second WHEREAS clause of this Agreement.

            "Interest Rate  Obligations"  shall have the meaning provided in the
definition of "Obligations" in this Article IX.

            "Inventory"  shall mean  merchandise,  inventory and goods,  and all
additions,  substitutions and replacements thereof,  wherever located,  together
with all goods, supplies,  incidentals,  packaging materials,  labels, materials
and any other items used or usable in  manufacturing,  processing,  packaging or
shipping  same;  in all  stages  of  production  -- from raw  materials  through
work-in-process  to finished  goods -- and all products and proceeds of whatever
sort and  wherever  located  and any  portion  thereof  which  may be  returned,
rejected,  reclaimed or repossessed by the Collateral  Agent from any Assignor's
customers,  and  shall  specifically  include  all  "inventory"  as such term is
defined in the  Uniform  Commercial  Code as in effect on the date hereof in the
State of New York, now or hereafter owned by such Assignor.

            "Liens" shall mean any security interest,  mortgage,  pledge,  lien,
claim, charge,  encumbrance,  title retention agreement,  lessor's interest in a
financing lease or analogous instrument, in, of, or on any Assignor's property.

            "Marks"  shall mean any  trademarks  and  service  marks now held or
hereafter  acquired by any Assignor,  which are  registered in the United States
Patent  and  Trademark  Office,  as well as any  unregistered  marks used by any
Assignor in the United States and trade dress  including logos and/or designs in
connection with which any of these registered or unregistered marks are used.

            "Obligations"  shall mean (i) the full and prompt  payment  when due
(whether at stated  maturity,  by  acceleration or otherwise) of all obligations
and  liabilities  of the  Assignor,  now existing or hereafter  incurred  under,
arising out of or in connection  with any Credit Document to which it is a party
and the due  performance  and compliance by each Assignor with the terms of each
such Credit Document (all such  obligations  and  liabilities  under this clause
(i), except to the extent consisting of obligations or indebtedness with respect
to  Interest  Rate  Agreements,  being  herein  collectively  called the "Credit
Document  Obligations");  (ii) the full and prompt  payment when due (whether at
the stated  maturity,  by  acceleration  or  otherwise) of all  obligations  and
liabilities of the Assignor now existing or hereafter  incurred  under,  arising
out of or in  connection  with any Secured  Interest  Rate  Agreement  (all such
obligations and  indebtedness  under this clause (ii) being herein  collectively
called the "Interest Rate
                                       21
<PAGE>


Obligations");  (iii) any and all sums advanced by the Collateral Agent in order
to preserve the Collateral or preserve its security  interest in the Collateral;
(iv) in the event of any  proceeding  for the  collection or  enforcement of any
indebtedness,  obligations,  or  liabilities  of each  Assignor  referred  to in
clauses (i),  (ii) and (iii),  after an Event of Default shall have occurred and
be continuing, the reasonable expenses of re-taking, holding, preparing for sale
or lease, selling or otherwise disposing of or realizing on the Collateral,or of
any exercise by the  Collateral  Agent of its rights  hereunder,  together  with
reasonable  attorneys'  fees and court  costs;  and (v) all amounts  paid by any
Indemnitee  as to which such  Indemnitee  has the right to  reimbursement  under
Section 8.1 of this Agreement.

            "Patents" shall mean any U.S. patent to which any Assignor now or
hereafter has title, as well as any application for a U.S. patent now or
hereafter made by such Assignor.

            "Proceeds"  shall  have the  meaning  assigned  that term  under the
Uniform Commercial Code as in effect in the State of New York on the date hereof
or under other relevant law and, in any event, shall include, but not be limited
to, (i) any and all proceeds of any insurance,  indemnity,  warranty or guaranty
payable to the  Collateral  Agent or any Assignor from time to time with respect
to any of the  Collateral,  (ii) any and all payments  (in any form  whatsoever)
made or due and payable to any Assignor from time to time in connection with any
requisition,  confiscation,  condemnation,  seizure or  forfeiture of all or any
part of the Collateral by any governmental authority (or any person acting under
color of  governmental  authority) and (iii) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral.

            "Receivables"  shall mean any  "account"  as such term is defined in
the Uniform  Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter  owned by any Assignor and, in any event,  shall include,
but shall not be limited to, all of such Assignor's  rights to payment for goods
sold or leased or services performed by such Assignor,  whether now in existence
or arising from time to time hereafter,  including,  without limitation,  rights
evidenced by an account, note, contract,  security agreement,  chattel paper, or
other  evidence of  indebtedness  or  security,  together  with (a) all security
pledged, assigned, hypothecated or granted to or held by such Assignor to secure
the foregoing,  (b) all of such Assignor's  right,  title and interest in and to
any goods, the sale of which gave rise thereto, (c) all guarantees, endorsements
and indemnifications on, or of, any of the foregoing, (d) all powers of attorney
for the execution of any evidence of  indebtedness  or security or other writing
in connection  therewith,  (e) all books,  records,  ledger cards,  and invoices
relating  thereto,  (f) all notices to other creditors or secured  parties,  and
certificates  from  filing  or  other  registration  officers,  (g)  all  credit
information,  reports and memoranda relating thereto, and (h) all other writings
related in any way to the foregoing.

                                       22
<PAGE>



            "Secured  Creditors"  shall have the meaning  provided in the second
WHEREAS clause of this Agreement.

            "Secured  Interest Rate Agreements"  shall have the meaning provided
in the second WHEREAS clause of this Agreement.

            "Trade  Secrets"  means any secretly held existing  engineering  and
other data,  information,  production  procedures and other know-how relating to
the design, manufacture, assembly, installation, use, operation, marketing, sale
and  servicing  of any  products or business  of an Assignor  worldwide  whether
written or not written.

                                    ARTICLE X

                                  MISCELLANEOUS

            10.1 Notices.  Except as otherwise  specified  herein,  all notices,
requests,  demands or other  communications  to or upon the  respective  parties
hereto  shall be deemed to have been duly  given or made when  delivered  to the
party to which such notice,  request,  demand or other communication is required
or permitted to be given or made under this  Agreement,  addressed to such party
at its address set forth opposite its signature  below, or at such other address
as any of the parties hereto may hereafter notify the others in writing.

            10.2 Waiver; Amendment. (a) None of the terms and conditions of this
Agreement may be changed,  waived,  modified or varied in any manner  whatsoever
unless in writing duly signed by each  Assignor and the  Collateral  Agent (with
the consent of the Required Banks or, to the extent required by Section 12.12 of
the Credit Agreement, all of the Banks), provided, however, that no such change,
waiver,  modification  or  variance  shall be made to Section 7.4 hereof or this
Section 10 without  the  consent of each  Secured  Creditor  adversely  affected
thereby,  provided  further that any change,  waiver,  modification  or variance
affecting  the rights and benefits of a single Class of Secured  Creditors  (and
not all Secured Creditors in a like or similar manner) shall require the written
consent of the Requisite  Creditors of such Class of Secured Creditors.  For the
purpose of this  Agreement,  the term  "Class"  shall mean each class of Secured
Creditors,  i.e.,  whether  (x) the Bank  Creditors  as  holders  of the  Credit
Document  Obligations,  or (y) the  Interest  Rate  Creditors  as holders of the
Interest  Rate  Obligations.  For  the  purpose  of  this  Agreement,  the  term
"Requisite  Creditors"  of any Class shall mean each of (x) with  respect to the
Credit  Document  Obligations,  the  Required  Banks and (y) with respect to the
Interest Rate  Obligations,  the holders of 51% of all  obligations  outstanding
from time to time under the Secured Interest Rate Agreements.

            (b) No delay on the part of the  Collateral  Agent in exercising any
of its rights,  remedies,  powers and privileges  hereunder or partial or single
exercise thereof, shall constitute a
                                       23
<PAGE>



waiver  thereof.  No  notice to or demand  on each  Assignor  in any case  shall
entitle  it to any  other or  further  notice  or  demand  in  similar  or other
circumstances  or  constitute  a waiver of any of the  rights of the  Collateral
Agent to any other or  further  action in any  circumstances  without  notice or
demand.

            10.3  Obligations   Absolute.   The  obligations  of  each  Assignor
hereunder shall remain in full force and effect without regard to, and shall not
be impaired by, (a) any  bankruptcy,  insolvency,  reorganization,  arrangement,
readjustment,  composition,  liquidation or the like of each  Assignor;  (b) any
exercise  or  non-exercise,  or any  waiver  of,  any  right,  remedy,  power or
privilege  under or in respect of this Agreement or any other Credit Document or
any Secured Interest Rate Agreement except as specifically set forth in a waiver
granted  pursuant  to the  restrictions  of  Section  10.2  hereof;  or (c)  any
amendment to or modification of any Credit Document or any Secured Interest Rate
Agreement  or any  security  for  any of the  Obligations;  whether  or not  any
Assignor shall have notice or knowledge of any of the foregoing.  The rights and
remedies  of the  Collateral  Agent  herein  provided  are  cumulative  and  not
exclusive of any rights or remedies which the Collateral  Agent would  otherwise
have.

              10.4 Successors and Assigns.  This Agreement shall be binding upon
each Assignor and its  successors  and assigns and shall inure to the benefit of
the Collateral  Agent and its successors and assigns,  provided that no Assignor
may transfer or assign any or all of its rights or obligations hereunder without
the  written  consent  of the  Collateral  Agent.  All  agreements,  statements,
representations and warranties made by any Assignor herein or in any certificate
or other  instrument  delivered  by such  Assignor  or on its behalf  under this
Agreement shall be considered to have been relied upon by the Secured  Creditors
and shall  survive the  execution  and delivery of this  Agreement and the other
Credit Documents  regardless of any investigation  made by the Secured Creditors
on their behalf.

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

            10.6  Severability.   Any  provision  of  this  Agreement  which  is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable such provision in any other jurisdiction.

            10.7 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES  HEREUNDER  SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.

                                       24
<PAGE>



            10.8  Assignors'  Duties.  It is expressly  agreed,  anything herein
contained  to the  contrary  notwithstanding,  that each  Assignor  shall remain
liable to perform all of the obligations,  if any, assumed by it with respect to
the  Collateral  and the  Collateral  Agent  shall not have any  obligations  or
liabilities  with respect to any  Collateral by reason of or arising out of this
Agreement, nor shall the Collateral Agent be required or obligated in any manner
to perform or  fulfill  any of the  obligations  of any  Assignor  under or with
respect to any Collateral.

            10.9  Termination;  Release.  After  the  termination  of the  Total
Commitment and all Secured Interest Rate  Agreements,  when no Note or Letter of
Credit is outstanding and when all Loans and other Obligations have been paid in
full, this Agreement shall terminate,  and the Collateral  Agent, at the request
and expense of the Assignors, will execute and deliver to each Assignor a proper
instrument  or  instruments   (including  Uniform  Commercial  Code  termination
statements on form UCC-3) acknowledging the satisfaction and termination of this
Agreement,  and  will  duly  assign,  transfer  and  deliver  to the  respective
Assignors  (without recourse and without any representation or warranty) such of
the  Collateral of such Assignor as may be in the  possession of the  Collateral
Agent and as has not  theretofore  been sold or  otherwise  applied or  released
pursuant to this Agreement.

            (b) So long as no payment  default on any of the  Obligations  is in
existence or would exist after the  application  of proceeds as provided  below,
the Pledgee shall,  at the request of the Borrower and the Pledgor,  release any
or all of the  Collateral,  provided  that (x) such  release is permitted by the
terms of the Credit  Agreement (it being agreed for such purposes that a release
will be deemed  "permitted by the terms of the Credit Agreement" if the proposed
transaction constitutes an exception to Section 8.02 of the Credit Agreement) or
otherwise  has been  approved  in  writing  by the  Required  Banks  and (y) the
proceeds  of such  Collateral  are  applied as  required  pursuant to the Credit
Agreement or any consent or waiver with respect thereto.

            (c) At any time that any Assignor  desires that the Collateral Agent
take any action to give  effect to any  release of  Collateral  pursuant  to the
foregoing  Section  10.9(a) or (b), it shall deliver to the  Collateral  Agent a
certificate signed by a principal  executive officer stating that the release of
the respective  Collateral is permitted  pursuant to Section  10.9(a) or (b). In
the  event  that any part of the  Collateral  is  released  as  provided  in the
preceding  paragraph  (b), the Collateral  Agent,  at the request and expense of
such Assignor,  will duly assign, transfer and deliver to such Assignor (without
recourse and without any  representation  or warranty) such of the Collateral as
is then  being  (or has  been)  so sold and as may be in the  possession  of the
Collateral  Agent  and  has  not  theretofore  been  released  pursuant  to this
Agreement.  The  Collateral  Agent  shall have no  liability  whatsoever  to any
Secured  Creditor as the result of any release of  Collateral by it as permitted
by this Section 10.9. Upon any release of Collateral pursuant to Section 10.9(a)
or (b),  none of the  Secured  Creditors  shall  have  any  continuing  right or
interest in such Collateral, or the proceeds thereof.

                                       25
<PAGE>



            10.10 Collateral Agent. By accepting the benefits of this Agreement,
each Secured Creditor acknowledges and agrees that the rights and obligations of
the  Collateral  Agent  shall  be as set  forth  in  Section  11 of  the  Credit
Agreement. Notwithstanding anything to the contrary contained in Section 10.2 of
this Agreement or Section 12.12 of the Credit Agreement, this Section 10.10, and
the duties and  obligations  of the  Collateral  Agent set forth in this Section
10.10, may not be amended or modified without the consent of the Agent.


                    *               *               *

                                       26
<PAGE>




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





Addresses:


3100 Mill Street                   THE STONEBURY GROUP INCORPORATED,
Suite 214                            as Assignor
Reno, Nevada  89502
Attention:  President                   /s/Arthur Hughes
                                   By_______________________________
                                        Name:   Arthur Hughes
      with a copy to:                   Title:  Assistant Secretary

HCA Holdings, Inc.
c/o Kelso & Company, Inc.
305 Park Avenue
New York, New York  10022
Attention:  James J. Connors, II


Chesterfield Avenue                U.S. TEXTILE CORP.,
RD SC903                             as Assignor
a/k/a 1792 Silkies Blvd.
Lancaster, SC  29721                    /s/ H. Lengers
Attention:  President              By______________________________
                                        Name:   H. Lengers
      with a copy to:                   Title:  President

HCA Holdings, Inc.
c/o Kelso & Company, Inc.
305 Park Avenue
New York, New York  10022
Attention:  James J. Connors, II


<PAGE>


3369 Progress Drive                HOSIERY CORPORATION INTERNATIONAL
Bensalem, Pennsylvania  19020
Attention:  President                   /s/ John Biagini
                                   By_______________________________
      with a copy to:                  Name:   John Biagini
                                       Title:  President
HCA Holdings, Inc.
c/o Kelso & Company, Inc.
305 Park Avenue
New York, New York  10022
Attention:  James J. Connors, II


130 Liberty Street                  BANKERS TRUST COMPANY,
New York, New York 10006               as Collateral Agent
Attention:  Mary Kay Coyle
                                        /s/ Mary Kay Coyle
                                   By_______________________________
                                        Name:   Mary Kay Coyle
                                        Title:  Managing Director



<PAGE>


                                     ANNEX A

                    SCHEDULE OF EXISTING FINANCING STATEMENTS


None (except for Permitted Liens)


<PAGE>


                                     ANNEX B


                          SCHEDULE OF RECORD LOCATIONS



1.    U.S. Textile Corp.
      Chesterfield Avenue
      Road SC 903, A/K/A 1792 Silkies Blvd.
      Lancaster, SC  29721


2.    The Stonebury Group
      3100 Mill Street, Suite 214
      Reno, NV  89502


3.    Hosiery Corporation International
      3369 Progress Drive
      Bensalem, PA  19020


4.    Hosiery Corporation International
      Suite 4, South Harrington Bldg.
      182 Sefton St.
      Liverpool, EN  L3 4BQ


5.    Hosiery Corporation International
      MVS; Pforzeheimer Strasse 176
      76275 Ettlingen, Germany


<PAGE>

                                     ANNEX C



                 SCHEDULE OF EQUIPMENT AND INVENTORY LOCATIONS



1.    U.S. Textile Corp.
      Chesterfield Avenue
      Road SC 903, A/K/A 1792 Silkies Blvd.
      Lancaster, SC  29721


2.    U.S. Textile Corp.
      Shady Street
      Newland, NC  28657


3.    The Stonebury Group
      3100 Mill Street, Suite 214
      Reno, NV  89502


4.    U.S. Textile Corp.
      155 Rowland Avenue
      Heath Springs, SC  29058


5.    Hosiery Corporation International
      McIntyre & King
      Commercial Road
      Liverpool, EN  L57 RD


6.    Hosiery Corporation International
      MVS Fulfillment Center
      Zone Industrielle Sud.
      Rue De L'Industrie
      67167 Wissembourg, France



<PAGE>


                                     ANNEX D


                       LIST OF TRADE AND FICTITIOUS NAMES



                                      None.


<PAGE>


                                     ANNEX E
               SCHEDULE OF TRADEMARK REGISTRATIONS AND APPLICATION

                    U.S. TEXTILE CORP. REGISTERED TRADEMARKS


MARK                            REG. NO.  REG. DATE    COUNTRY     OWNER
----                            --------  ---------    -------     -----
L'AMERA                         1470720    12/29/87      US         UST

             HOSIERY CORPORATION INTERNATIONAL REGISTERED TRADEMARKS

MARK                            REG. NO.     REG. DATE   COUNTRY      OWNER
----                            --------     ---------   -------      -----
HCI SHEER CHARM                  2070410      5/3/96        UK         HCI
L'AMERA                          1105285      4/23/87    GERMANY       HCI
L'AMERA                           11604       5/14/87    AUSTRIA       HCI
L'AMERA                          132762       7/14/88     NORWAY       HCI
L'AMERA                          1380487     11/19/86     FRANCE       HCI
L'AMERA                          2063565      3/22/96       UK         HCI
L'AMERA                           24991       7/28/89     CANADA       HCI
L'AMERA                          353609      11/26/86  SWITZERLAND     HCI
L'AMERA                          4241000     11/25/86    BENELUX       HCI
L'AMERA                        VR94.293-1989  7/28/89    DENMARK       HCI
SHEER CHARM                      2069031      4/17/96       UK         HCI
SILKIES                          1588554     10/10/94       UK         HCI
SILKIES                          168952       3/26/97    AUSTRIA       HCI
SILKIES                          596232       3/28/96    BENELUX       HCI
SILKIES                         94/548642    12/12/94     FRANCE       HCI
SILKIES SHAPELY PERFECTION       2070412      5/3/96        UK         HCI
SILKIES SHEER CHARM              2070411      4/1/97        UK         HCI
THE MOST BEAUTIFUL LEGS IN THE                           AUSTRIA/
  WORLD WEAR SILKIES             169535       5/14/97     GERMAN       HCI
THE MOST BEAUTIFUL LEGS IN THE                             UK/
  WORLD WEAR SILKIES             2069030      4/17/96    ENGLISH       HCI
THE MOST BEAUTIFUL LEGS IN THE                           FRANCE/
  WORLD WEAR SILKIES            97662189      2/4/97      FRENCH       HCI
TLC                              2069032      4/17/96       UK         HCI

            HOSIERY CORPORATION INTERNATIONAL TRADEMARK APPLICATIONS

MARK                            APP. NO.     DATE FILED   COUNTRY     OWNER
----                            --------     ----------   -------     -----
HCI SHAPELY PERFECTION           2070409       5/3/96        UK        HCI
SHEER CHARM                      323212        8/9/96        EC        HCI
SILKIES                         000335562      4/1/96        EC        HCI
SILKIES                        39403037.0     11/23/94    GERMANY      HCI
SILKIES                         7935/1994     11/10/94  SWITZERLAND    HCI
SILKIES                          9-9958       1/31/97      JAPAN       HCI
SILKIES                        MI96C008205    9/23/96      ITALY       HCI
SILKIES (PLAIN LETTER FORM)      213719       6/27/97        UK        HCI
SILKIES ULTRA                      N/A                    GERMANY      HCI


<PAGE>


       HOSIERY CORPORATION INTERNATIONAL TRADEMARK APPLICATIONS CONTINUED

MARK                              APP. NO.   DATE FILED   COUNTRY     OWNER
----                              --------   ----------   -------     -----

SILKIES ULTRA                      2140779    7/28/97        UK        HCI
SILKIES ULTRA                     97/689413   7/29/97      FRANCE      HCI
SOPHISTICATED INTIMATES
(CLOTHING,MAIL ORDER)              2111351    9/27/96        UK        HCI
THE MOST BEAUTIFUL LEGS IN THE
WORLD WEAR SILKIES                   N/A      7/16/97    EC/FRENCH     HCI
THE MOST BEAUTIFUL LEGS IN THE
WORLD WEAR SILKIES                000487512   1/27/97    EC/GERMAN     HCI
THE MOST BEAUTIFUL LEGS IN THE
WORLD WEAR SILKIES                 281287     6/26/96    EC/ENGLISH    HCI

THE MOST BEAUTIFUL LEGS IN THE                            GERMANY/
WORLKD WEAR SILKIES              39703334.6   1/27/97      GERMAN      HCI

TLC                                602003      7/4/97    EC/ENGLISH    HCI


<PAGE>



                                     ANNEX F


                      SCHEDULE OF PATENTS AND APPLICATIONS


A.     Patents

      1.     U.S. Patent No.:  4,797,967

            Title:      Padded General Purpose Mitten and Method of Fabricating
                        Same
            Inventor:   Hans. L. Lengers
            Issued:     January 17, 1989
            Assignee:   U.S. Textile Corp.


      2.     U.S. Patent No.:  5,573,851

            Title:      Ultraviolet-Detectable Marking Yarn and a Textile
                        Fabric Product Therewith
            Inventor:   Hans L. Lengers, Gerhard Storandt, James McCormick,
                        William M. Secrest, Michael D. Horney
            Issued:     November 12, 1996
            Assignee:   U.S. Textile Corp.


<PAGE>


                                     ANNEX G

                             SCHEDULE OF COPYRIGHTS




                                      None.


<PAGE>

                                                              EXHIBIT J



                      FORM OF SOLVENCY CERTIFICATE


To the Agent and each of the Banks  party to the Credit  Agreement  referred  to
below:


            I,  the  undersigned,   the  Chief  Financial   Officer  of  Hosiery
Corporation of America, Inc., a Delaware corporation (the "Company"),  do hereby
certify on behalf of the Company that:

            1. This  Certificate is furnished to pursuant to Section  5.01(h) of
the  Amendment  and  Restatement,  dated as of November 20,  1997,  amending and
restating the Credit  Agreement dated as of October 17, 1994, among the Company,
the Banks from time to time party thereto (each, a "Bank" and, collectively, the
"Banks") and Bankers Trust Company as Agent (the "Agent")(such Credit Agreement,
as in effect on the date of this  Certificate,  being herein  called the "Credit
Agreement").  Unless otherwise  defined herein,  capitalized  terms used in this
Certificate shall have the meanings set forth in the Credit Agreement.

            2. For purposes of this Certificate,  the terms below shall have the
following definitions:

      (a)   "Fair Value"

            The amount at which the assets,  in their  entirety,  of each of the
            Company, individually, and the Company and its Subsidiaries taken as
            whole  would  change  hands  between a  willing  buyer and a willing
            seller, within a commercially reasonable period of time, each having
            reasonable knowledge of the relevant facts, with neither being under
            any compulsion to act.

      (b)   "Present Fair Salable Value"

            The amount that could be obtained by an  independent  willing seller
            from an  independent  willing  buyer  if the  assets  of each of the
            Company, individually, and the Company and its Subsidiaries taken as
            a whole  are sold  with  reasonable  promptness  in an  arm's-length
            transaction  under  present  conditions  for the sale of  comparable
            business enterprises.


<PAGE>



      (c)   "New Financing"

            The  Indebtedness  incurred or to be incurred by the Company and its
            Subsidiaries   under  the  Credit   Documents   (assuming  the  full
            utilization  by the  Company  of the  Commitments  under the  Credit
            Agreement)  and all  other  financings  contemplated  by the  Credit
            Documents,  in each case after giving effect to the  refinancing  of
            the Loans under,  and as defined in, the Original  Credit  Agreement
            and the incurrence of all financings in connection therewith.

      (d)   "Stated Liabilities"

            The recorded  liabilities  (including  contingent  liabilities  that
            would be recorded in accordance with generally  accepted  accounting
            principles ("GAAP")) of each of the Company,  individually,  and the
            Company and its Subsidiaries  taken as a whole as of the date hereof
            after giving effect to the  refinancing  of the Loans under,  and as
            defined in, the Original Credit Agreement,  determined in accordance
            with GAAP consistently applied,  together with the amount of all New
            Financing.

      (e)   "Identified Contingent Liabilities"

            The maximum  estimated  amount of liabilities  reasonably  likely to
            result from pending  litigation,  asserted  claims and  assessments,
            guaranties, uninsured risks and other contingent liabilities of each
            of the Company,  individually,  and the Company and its Subsidiaries
            taken as a whole after giving effect to the refinancing of the Loans
            under, and as defined in, the Original Credit  Agreement  (including
            all  fees  and  expenses  related  thereto  but  exclusive  of  such
            contingent   liabilities   to  the   extent   reflected   in  Stated
            Liabilities),  as identified  and explained in terms of their nature
            and estimated  magnitude by  responsible  officers of the Company or
            that have been identified as such by an officer of the Company.

      (f)   "Will be able to pay its Stated  Liabilities,  including  Identified
            Contingent Liabilities, as they mature"

            For the period from the date hereof  through the stated  maturity of
            all  New  Financing,  each  of the  Company,  individually,  and the
            Company and its  Subsidiaries  taken as a whole will have sufficient
            assets and cash flow to pay their respective Stated  Liabilities and
            Identified  Contingent  Liabilities as those  liabilities  mature or
            otherwise become payable.

                                       2
<PAGE>



      (g)   "Does not have Unreasonably Small Capital"

            For the period from the date hereof  through the stated  maturity of
            all  New  Financing,  each  of the  Company,  individually,  and the
            Company and its Subsidiaries  taken as a whole after the refinancing
            of all Loans under, and as defined in, the Original Credit Agreement
            and all Indebtedness (including the Loans) being incurred or assumed
            and Liens created by the Company and its  Subsidiaries in connection
            therewith,  is a going concern and has sufficient  capital to ensure
            that it will  continue to be a going  concern for such period and to
            remain a going concern.

            3. For purposes of this  Certificate,  I, or officers of the Company
under my direction and supervision,  have performed the following  procedures as
of and for the periods set forth below.

      (a)   I have reviewed the financial  statements  (including  the pro forma
            financial  statements)  referred  to in  Section  6.10 of the Credit
            Agreement.

      (b)   I have made  inquiries  of certain  officials of the Company and its
            Subsidiaries  who have  responsibility  for financial and accounting
            matters  regarding  (i)  the  existence  and  amount  of  Identified
            Contingent  Liabilities  associated with the business of the Company
            and its  Subsidiaries  and (ii)  whether  the  unaudited  pro  forma
            consolidated financial statements referred to in paragraph (a) above
            are in conformity with GAAP applied on a basis  consistent with that
            of the audited financial statements as of December 31, 1996.

      (c)   I have knowledge of and have reviewed to my satisfaction  the Credit
            Documents,  and  the  respective  Annexes,  Schedules  and  Exhibits
            thereto.

      (d) With respect to Identified Contingent Liabilities, I:

            1.   inquired   of  certain   officials   of  the  Company  and  its
                 Subsidiaries who have  responsibility for legal,  financial and
                 accounting matters as to the existence and estimated  liability
                 with respect to all contingent  liabilities associated with the
                 business of the Company and its Subsidiaries; and

                                       3
<PAGE>



            2.   confirmed  with  officers of the  Company and its  Subsidiaries
                 that,  to  the  best  of  such  officers'  knowledge,  (i)  all
                 appropriate  items  were  included  in  Stated  Liabilities  or
                 Identified  Contingent  Liabilities  and that (ii) the  amounts
                 relating   thereto  were  the  maximum   estimated   amount  of
                 liabilities  reasonably  likely to result  therefrom  as of the
                 date hereof.

(e)  I  have  made  inquiries  of  certain  officers  of  the  Company  and  its
     Subsidiaries who have responsibility for financial reporting and accounting
     matters regarding whether they were aware of any events or conditions that,
     as of the date  hereof,  would  cause  the  Company,  individually,  or the
     Company and its Subsidiaries  taken as a whole,  after giving effect to the
     refinancing  of the Loans  under,  and as defined in, the  Original  Credit
     Agreement and the related financing transactions  (including the incurrence
     of the New Financing), to (i) have assets with a Fair Value or Present Fair
     Salable  Value  that  are  less  than  the sum of  Stated  Liabilities  and
     Identified Contingent Liabilities; (ii) have Unreasonably Small Capital; or
     (iii) not be able to pay their respective Stated Liabilities and Identified
     Contingent Liabilities as they mature or otherwise become payable.

            4. Based on and subject to the foregoing, I hereby certify on behalf
of the Company that,  after giving effect to the refinancing of the Loans under,
and as defined in, the  Original  Credit  Agreement  and the  related  financing
transactions  (including the incurrence of the New Financing),  it is my opinion
that (i) the Fair Value and Present Fair Salable  Value of the assets of each of
the Company, individually, and the Company and its Subsidiaries taken as a whole
exceed its respective Stated Liabilities and Identified Contingent  Liabilities;
(ii) each of the  Company,  individually,  and the Company and its  Subsidiaries
taken as a whole does not have Unreasonably Small Capital; and (iii) each of the
Company,  individually,  and the Company and its  Subsidiaries  taken as a whole
will  be  able  to  pay  their  respective  Stated  Liabilities  and  Identified
Contingent Liabilities as they mature or otherwise become payable.

                                       4
<PAGE>



            IN WITNESS WHEREOF,  I have hereto set my hand this day of November,
1997.


                              HOSIERY CORPORATION OF AMERICA, INC.



                                    ________________________________
                                    Name:
                                    Title:



                                       5
<PAGE>



                                                              EXHIBIT K



              [Letterhead of Agent for Service of Process]


                                                                 [Date]



To the Agent and the
  Banks party to the
  Credit Agreement referred to below:

Ladies and Gentlemen:

            Reference  is made to the  Amendment  and  Restatement,  dated as of
November 20, 1997,  amending and  restating  the Credit  Agreement,  dated as of
October 17, 1994, among Hosiery  Corporation of America,  Inc. (the "Borrower"),
the Banks  (the  "Banks")  party  thereto  from time to time and  Bankers  Trust
Company,  as Agent (the  "Agent")  (as such Credit  Agreement  may be  modified,
supplemented  or amended  from time to time,  the  "Credit  Agreement").  Unless
otherwise  defined herein,  all capitalized terms used herein and defined in the
Credit Agreement are used herein as so defined.

            Each  of the  Borrower  pursuant  to  Section  12.08  of the  Credit
Agreement,  and  each  Subsidiary  Guarantor  pursuant  to  Section  20  of  the
Subsidiary  Guaranty,  has irrevocably  designated,  appointed and empowered the
undersigned,  CT  Corporation  System,  with offices  currently  located at 1633
Broadway,  New York, New York 10019, as its authorized  designee,  appointee and
agent to receive,  accept and acknowledge for and on its behalf,  and in respect
of its  property,  service of any and all legal  process,  summons,  notices and
documents  which may be served in any such action or proceeding  with respect to
the Credit  Agreement  or any other  Credit  Document  (as defined in the Credit
Agreement)  brought  in the  courts  of the  State of New York or of the  United
States of America for the Southern District of New York.

            The undersigned hereby informs you that it irrevocably  accepts such
appointment  as agent as set forth in Section 12.08 of the Credit  Agreement and
Section 20 of the Subsidiary Guaranty,  as applicable,  and agrees with you that
the  undersigned (i) shall inform the Agent promptly in writing of any change of
its address in New York City, (ii) shall perform its obligations as such process
agent in accordance with the provisions of Section 12.08 of the Credit Agreement
and  Section 20 of the  Subsidiary  Guaranty,  as  applicable,  and (iii)  shall
forward  promptly  to the  Borrower,  as the case  may be,  any  legal  process,
summons,  notices and documents  received by the  undersigned in its capacity as
process agent.


<PAGE>


             As process agent, the undersigned, and its successor or successors,
agree  to  discharge  the  above-mentioned   obligations  and  will  not  refuse
fulfillment  of such  obligations  under  Section  12.08 and  Section  20 of the
Subsidiary Guaranty, as applicable, of the Credit Agreement.

                                    Very truly yours,

                                    CT CORPORATION SYSTEM


                                    By____________________________
                                        Name:
                                        Title:



                                       2
<PAGE>


                                                              EXHIBIT L


                          FORM OF ASSIGNMENT AGREEMENT


                                                            DATE: ________, ____


            Reference  is made to the Credit  Agreement  described  in Item 2 of
Annex I annexed  hereto (as such  Credit  Agreement  may  hereafter  be amended,
modified or  supplemented  from time to time,  the "Credit  Agreement").  Unless
defined in Annex I attached  hereto,  terms defined in the Credit  Agreement are
used   herein  as  therein   defined.   _____________   (the   "Assignor")   and
______________ (the "Assignee") hereby agree as follows:

            1. The Assignor  hereby  sells and assigns to the  Assignee  without
recourse  and  without  representation  or  warranty  (other  than as  expressly
provided  herein),  and the  Assignee  hereby  purchases  and  assumes  from the
Assignor,  that interest in and to all of the Assignor's  rights and obligations
under the Credit Agreement as of the date hereof which represents the percentage
interest  specified  in  Item 4 of  Annex  I (the  "Assigned  Share")  of all of
Assignor's  outstanding  rights  and  obligations  under  the  Credit  Agreement
indicated in Item 4 of Annex I, including,  without limitation,  (x) in the case
of any  assignment  of all or any portion of the  outstanding  Term  Loans,  all
rights and  obligations  with respect to the Assigned Share of such  outstanding
Term Loans,  and (y) in the case of any  assignment of all or any portion of the
Total  Revolving  Commitment,  all rights and  obligations  with  respect to the
Assigned  Share  of the  Total  Revolving  Commitment  and  of  any  outstanding
Revolving Loans and Letters of Credit.

            2. The Assignor (i) represents and warrants that it is the legal and
beneficial  owner of the interest  being  assigned by it hereunder and that such
interest  is free and clear of any liens or  security  interests;  (ii) makes no
representation  or warranty  and assumes no  responsibility  with respect to any
statements,  warranties or  representations  made in or in  connection  with the
Credit  Agreement or the other  Credit  Documents  or the  execution,  legality,
validity,  enforceability,  genuineness,  sufficiency  or  value  of the  Credit
Agreement or the other  Credit  Documents  or any other  instrument  or document
furnished  pursuant  thereto;  and (iii) makes no representation or warranty and
assumes  no  responsibility  with  respect  to the  financial  condition  of the
Borrower or the  Subsidiary  Guarantors or the  performance or observance by the
Borrower or the Subsidiary Guarantors of any of its obligations under the Credit
Agreement or the other  Credit  Documents  or any other  instrument  or document
furnished pursuant thereto.

            3.  The  Assignee  (i)  represents  and  warrants  that  it is  duly
authorized  to enter into and  perform the terms of this  Assignment  Agreement;
(ii) confirms that it has received a copy of the Credit  Agreement and the other
Credit Documents, together with copies of the

<PAGE>


                                                              EXHIBIT L
                                                                 Page 2







financial   statements   referred  to  therein  and  such  other  documents  and
information  as it has deemed  appropriate  to make its own credit  analysis and
decision to enter into this  Assignment  Agreement;  (iii)  agrees that it will,
independently  and without  reliance  upon the Agent,  the Assignor or any other
Bank and based on such documents and information as it shall deem appropriate at
the time,  continue  to make its own  credit  decisions  in taking or not taking
action under the Credit  Agreement;  (iv) appoints and  authorizes the Agent and
the Collateral  Agent to take such action as agent on its behalf and to exercise
such powers under the Credit  Agreement  and the other  Credit  Documents as are
delegated to the Agent and the Collateral  Agent by the terms thereof,  together
with such powers as are reasonably incidental thereto;  [and] (v) agrees that it
will perform in accordance with their terms all of the obligations  which by the
terms of the Credit Agreement are required to be performed by it as a Bank[; and
(v) attaches the forms  prescribed by the Internal Revenue Service of the United
States, as described in Section 4.04 of the Credit  Agreement,  certifying as to
the Assignee's  status for purposes of determining  exemption from United States
withholding  taxes with respect to all payments to be made to the Assignee under
the Credit  Agreement or such other  documents as are necessary to indicate that
all such  payments are subject to such rates at a rate reduced by an  applicable
tax treaty].11/

            4.  Following  the  execution  of this  Assignment  Agreement by the
Assignor  and the  Assignee,  an executed  original  hereof  (together  with all
attachments)  will be  delivered  to the  Agent  specified  in Item 5 of Annex I
hereto,  the effective date of this  Assignment  Agreement shall be the later of
(x) the date specified in Item 5 of Annex I hereto and (y) the date of execution
hereof by the Assignor,  the Assignee and the consent  hereof by the Agent,  the
registration of the assignment  (and the resulting  effects thereof on the Loans
and  Commitments  of the Assignor and the Assignee) on the Register,  and to the
extent relevant,  the receipt by the Agent of the administrative fee referred to
in Section 12.04(b) of the Credit Agreement (the "Settlement Date").

            5. Upon the  delivery  of a fully  executed  original  hereof to the
Agent,  as of the  Settlement  Date,  (i) the  Assignee  shall be a party to the
Credit Agreement and, to the extent provided in this Assignment Agreement,  have
the rights  and  obligations  of a Bank  thereunder  and under the other  Credit
Documents and (ii) the Assignor shall, to the extent provided in this Assignment
Agreement,  relinquish its rights and be released from its obligations under the
Credit Agreement and the other Credit Documents.


<PAGE>


                                                              EXHIBIT L
                                                                 Page 3








            6. It is agreed that upon the  effectiveness  hereof,  the  Assignee
shall be entitled to (x) all  interest on the  Assigned  Share of the Term Loans
and/or  Revolving  Loans at the  rates  specified  in Item 6 of Annex I, (y) all
Commitment  Commission  (if  applicable)  on the Assigned Share of the Revolving
Commitment  at the rate  specified  in Item 7 of Annex I, and (z) all  Letter of
Credit Fees (if  applicable) on the Assignee's  participation  in all Letters of
Credit at the rate specified in Item 8 of Annex I hereto,  which,  in each case,
accrue on and after the  Settlement  Date,  such  interest  and, if  applicable,
Commitment  Commission and Letter of Credit Fees, to be paid by the Agent,  upon
receipt  thereof  from the  Borrower,  directly to the  Assignee.  It is further
agreed that all payments of principal made by the Borrower on the Assigned Share
of the Term Loans and/or Revolving Loans which occur on and after the Settlement
Date will be paid  directly by the Agent to the  Assignee.  Upon the  Settlement
Date, the Assignee shall pay to the Assignor an amount specified by the Assignor
in writing which  represents the Assigned  Share of the principal  amount of the
respective Term Loans and/or  Revolving  Loans made by the Assignor  pursuant to
the Credit  Agreement which are  outstanding on the Settlement  Date, net of any
closing  costs,  and which are being  assigned  hereunder.  The Assignor and the
Assignee  shall make all  appropriate  adjustments  in payments under the Credit
Agreement for periods prior to the Settlement Date directly  between  themselves
on the Settlement Date.

            7. THIS  ASSIGNMENT AND ASSUMPTION  AGREEMENT  SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

                         *          *          *


<PAGE>


            IN WITNESS  WHEREOF,  the parties hereto have caused this Assignment
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.


                                    [NAME OF ASSIGNOR],
                                      as Assignor


                                    By ____________________________
                                        Name:
                                        Title:


                                    [NAME OF ASSIGNEE],
                                      as Assignee


                                    By ____________________________
                                        Name:
                                        Title:


[Acknowledged and Agreed:


BANKERS TRUST COMPANY,
  as Agent


By ____________________________
       Name:
       Title:]12/





<PAGE>


                                                                ANNEX I



              ANNEX FOR ASSIGNMENT AND ASSUMPTION AGREEMENT

                                 ANNEX I

1.  The Borrower:     Hosiery Corporation of America, Inc.

2.  Name and Date of Credit Agreement:

            Amendment and Restatement,  dated as of November 20, 1997,  amending
            and  restating the Credit  Agreement,  dated as of October 17, 1994,
            among Hosiery  Corporation of America,  Inc., the Banks from time to
            time party thereto and Bankers Trust Company, as Agent.

3.  Date of Assignment Agreement:

            --------- ---, ---

4.  Amounts (as of date of item #3 above):

                                     Outstanding
                                     Principal of         Revolving
                                     Term Loans           Commitment
                                     ------------         ----------
        a. Aggregate Amount
           for all Banks             $__________          $_________

        b. Assigned Share             __________%          _________%

        c. Amount of Assigned
           Share                     $__________          $_________


5.  Settlement Date:

            --------- ---, ----


<PAGE>



6.    Rate of Interest   As set forth in Section  1.08 of the Credit Agreement
      to the Assignee:   (unless otherwise agreed to by the Assignor and the
                         Assignee).13/

7.    Commitment         As set forth in Section 3.01(a) of the Credit Agreement
      Commission to      (unless otherwise agreed to by the Assignor and the
      the Assignee:      Assignee).14/

8.    Letter of Credit   As set forth in Section 3.01(b) of the Credit Agreement
      Fees to the        (unless otherwise agreed to by the Assignor and the
      Assignee:          Assignee).15/

9.    Notices:

            ASSIGNOR:

                  -------------------------
                  -------------------------
                  -------------------------
                  -------------------------
                  Attention:
                  Telephone No.:
                  Facsimile No.:







            ASSIGNEE:

                  -------------------------
                  -------------------------
                  -------------------------
                  -------------------------
                  Attention:
                  Telephone No.:
                  Facsimile No.:


10.   Payment Instructions:

            ASSIGNOR:

                  -------------------------
                  -------------------------
                  -------------------------
                  -------------------------
                  ABA No.:
                  Account No.:
                  Reference:
                  Attention:

            ASSIGNEE:

                  -------------------------
                  -------------------------
                  -------------------------
                  -------------------------
                   ABA No.:
                   Account No.:
                   Reference:
                   Attention:



<PAGE>

--------
 *     Continuation Statement.


1/ Shall be a Business  Day at least (x) one  Business Day after the date hereof
in the case of Base Rate Loans and (y) three Business Days after the date hereof
in the case of Eurodollar Loans.
2/ To be included for a Proposed  Borrowing of  Eurodollar  Loans.
3/ Letter of Credit Request Number.
4/ Shall be a Business  Day at least three  Business  Days prior to the proposed
Date of Issuance (or such shorter  period as may be  acceptable to the Letter of
Credit Issuer).
5/ Initial Stated Amount of Letter of Credit should not be less than $150,000
(or such lesser amount acceptable to the Letter of Credit Issuer).
6/  Insert  name and  address  of  beneficiary.
7/  Insert description  of the supported  obligations,  name of agreement and/or
the commercial  transaction to which this  Letter of Credit  Request  relates.
8/ Insert  last date upon which drafts  may be  presented,  which  date may not
be later than (i) in the case of Standby  Letters  of  Credit,  the  earlier  of
x) 12 months  after the Date of Issuance and (y) the fifth  Business Day
preceding  the Final  Maturity Date and (ii) in the case of Trade  Letters of
Credit,  the earlier of (x) 180 days after the Date of Issuance and (y) 30 days
prior to the Final Maturity Date.
9/ Insert a date  prior  to the  time  of any  corporate  action  relating  to
the  Credit Documents.
10/ Include name, office and signature of each officer who will sign
any  Credit  Document  on  behalf of the  Company  or any  other  Credit  Party,
including  the  officer  who  will  sign  the  certification  at the end of this
Certificate.

11/ Insert  bracketed  language if the Assignee is organized under the laws of a
jurisdiction  outside the United States.
12/ Insert  bracketed  language in the case of an assignment pursuant to Section
12.04(b)(y).
13/ The Borrower and the Agent shall direct the entire amount of the interest to
the Assignee at the rate set  forth in  Section  1.08 of the  Credit  Agreement,
with the  Assignor  and Assignee  effecting any agreed upon sharing of interest
through payments by the Assignee to the Assignor.
14/ The Borrower and the Agent shall direct the entire amount of the  Commitment
Commission  to the  Assignee at the rate set forth in Section  3.01(a) of the
Credit  Agreement,  with the  Assignor  and the Assignee effecting any agreed
upon sharing of Commitment  Commission  through  payment by the  Assignee to the
Assignor.
15/ The Borrower and the Agent shall direct the entire amount of the Letter of
Credit Fees to the Assignee at the rate set forth in Section 3.01(b) of the
Credit  Agreement,  with the Assignor and the Assignee
effecting  any agreed upon sharing of the Letter of Credit Fees through  payment
by the Assignee to the Assignor.