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                                CREDIT AGREEMENT

                                   dated as of
                                  May 21, 1997





                                      Among

                      SAFETY COMPONENTS INTERNATIONAL, INC.


                          PHOENIX AIRBAG GmbH & CO. KG

                                       And

               AUTOMOTIVE SAFETY COMPONENTS INTERNATIONAL LIMITED,
                                  as Borrowers

                     THE LENDING INSTITUTIONS NAMED THEREIN
                                   as Lenders


                                       And

                          KEYBANK NATIONAL ASSOCIATION
                             as Administrative Agent
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                                TABLE OF CONTENTS
                                                                           Page

SECTION 1.        DEFINITIONS AND TERMS......................................1
         1.1      Certain Defined Terms......................................1
         1.2      Computation of Time Periods...............................22
         1.3      Accounting Terms..........................................22
         1.4      Currency Equivalents......................................22

SECTION 2.        AMOUNT AND TERMS OF LOANS.................................23
         2.1      Commitments for Loans.....................................23
         2.2      Minimum Borrowing Amounts, etc.; Pro Rata Borrowings......24
         2.3      Notice of Borrowing.......................................24
         2.4      Disbursement of Funds from Borrowings.....................26
         2.5      Notes.....................................................27
         2.6      Voluntary Conversion of Dollar Denominated Loans..........28
         2.7      Interest on Loans.........................................28
         2.8      Interest Periods..........................................29
         2.9      Increased Costs, Illegality, etc..........................30
         2.10     Compensation..............................................33
         2.11     Change of Lending Office; Replacement of Lenders..........33

SECTION 3.        LETTERS OF CREDIT.........................................34
         3.1      Letters of Credit.........................................34
         3.2      Letter of Credit Requests: Notices of Issuance............35
         3.3      Agreement to Repay Letter of Credit Drawings..............36
         3.4      Letter of Credit Participations...........................37
         3.5      Increased Costs...........................................39
         3.6      Guaranty of Subsidiary Letter or Credit Obligations.......40

SECTION 4.  FEES; COMMITMENTS...............................................42
         4.1      Fees......................................................42
         4.2      Voluntary Reduction of Commitments........................43
         4.3      Mandatory Adjustments of Commitments, etc.................43
         4.4      Extension of Maturity Date................................43

SECTION 5.  PAYMENTS........................................................44
         5.1      Voluntary Prepayments.....................................44
         5.2      Mandatory Prepayments and Scheduled Repayments............44
         5.3      Method and Place of Payment...............................47
         5.4      Net Payments..............................................47

SECTION 6.  CONDITIONS PRECEDENT............................................49
         6.1      Conditions Precedent at Initial Borrowing Date............49
         6.2      Conditions Precedent to All Credit Events.................52


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SECTION 7.  REPRESENTATIONS AND WARRANTIES..................................53
         7.1      Corporate Status, etc.....................................53
         7.2      Subsidiaries..............................................53
         7.3      Corporate Power and Authority, etc........................53
         7.4      No Violation..............................................53
         7.5      Governmental Approvals....................................54
         7.6      Litigation................................................54
         7.7      Use of Proceeds; Margin Regulations.......................54
         7.8      Financial Statements, etc.................................54
         7.9      No Material Adverse Change................................56
         7.10     Tax Returns and Payments..................................56
         7.11     Title to Properties, etc..................................56
         7.12     Lawful Operations, etc....................................56
         7.13     Environmental Matters.....................................57
         7.14     Compliance with ERISA.....................................57
         7.15     Intellectual Property, etc................................58
         7.16     Investment Company Act, etc...............................58
         7.17     Burdensome Contracts; Labor Relations.....................58
         7.18     Existing Indebtedness.....................................59
         7.19     Security Interests........................................59
         7.20     True and Complete Disclosure..............................59

SECTION 8.  AFFIRMATIVE COVENANTS...........................................60
         8.1      Reporting Requirements....................................60
         8.2      Books, Records and Inspections............................63
         8.3      Insurance.................................................63
         8.4      Payment of Taxes..........................................64
         8.5      Corporate Franchises......................................64
         8.6      Good Repair...............................................65
         8.7      Compliance with Statutes, etc.............................65
         8.8      Compliance with Environmental Laws........................65
         8.9      Fiscal Years, Fiscal Quarters.............................65
         8.10     Certain Subsidiaries to Join in Subsidiary Guaranty.......66
         8.11     Additional Security; Further Assurances...................66
         8.12     Corporate Separateness....................................68
         8.13     ERISA.....................................................69
         8.14     Hedge Agreements, etc.....................................69
         8.15     Senior Debt...............................................70

SECTION 9.  NEGATIVE COVENANTS..............................................70
         9.1      Changes in Business.......................................70
         9.2      Consolidation, Merger or Sale of Assets, etc..............70
         9.3      Liens.....................................................72
         9.4      Indebtedness..............................................74


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         9.5      Advances, Investments, Loans and Guaranty Obligations.....75
         9.6      Dividends, etc............................................76
         9.7      Total Indebtedness/EBITDA Ratio...........................77
         9.8      Fixed Charge Coverage Ratio...............................77
         9.9      Capital Expenditures......................................77
         9.10     Certain Leases............................................77
         9.11     Minimum Consolidated Net Worth............................77
         9.12     Prepayments and Refinancings of Subordinated Debt, etc....78
         9.13     Transactions with Affiliates..............................78
         9.14     Limitation on Certain Restrictions on Subsidiaries........78
         9.15     Limitation on Sale and Lease-Back Transactions............79

SECTION 10.  EVENTS OF DEFAULT..............................................79
         10.1     Events of Default.........................................79
         10.2     Acceleration, etc.........................................81
         10.3     Application of Liquidation Proceeds.......................82

SECTION 11.  THE ADMINISTRATIVE AGENT.......................................82
         11.1     Appointment...............................................82
         11.2     Delegation of Duties......................................83
         11.3     Exculpatory Provisions....................................83
         11.4     Reliance by Administrative Agent..........................84
         11.5     Notice of Default.........................................84
         11.6     Non-Reliance..............................................84
         11.7     Indemnification...........................................85
         11.8     The Administrative Agent in Individual Capacity...........85
         11.9     Successor Administrative Agent............................86
         11.10             Other Agents.....................................86

SECTION 12.  GUARANTY BY THE COMPANY........................................86
         12.1     Guaranty of Subsidiary Borrowings.........................86
         12.2     Additional Undertaking....................................86
         12.3     Guaranty Unconditional, etc...............................87
         12.4     Company Obligations to Remain in Effect; Restoration......87
         12.5     Waiver or Acceptance, etc.................................88
         12.6     Subrogation...............................................88
         12.7     Effect of Stay............................................88

SECTION 13.  MISCELLANEOUS..................................................88
         13.1     Payment of Expenses, etc..................................88
         13.2     Right of Setoff...........................................89
         13.3     Notices...................................................89
         13.4     Benefit of Agreement......................................90
         13.5     No Waiver: Remedies Cumulative............................92
         13.6     Payments Pro Rata.........................................92


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         13.7     Calculations: Computations................................93
         13.8     Governing Law; Submission to Jurisdiction; Venue;
                    Waiver of Jury Trial.........................93
         13.9     Counterparts..............................................94
         13.10    Effectiveness.............................................94
         13.11    Headings Descriptive......................................94
         13.12    Amendment or Waiver.......................................94
         13.13    Survival..................................................95
         13.14    Domicile of Loans.........................................95
         13.15    Confidentiality...........................................95
         13.16    Lender Register...........................................96
         13.17    Limitations on Liability of the Letter of Credit Issuers..96
         13.18    General Limitation of Liability...........................97
         13.19    No Duty...................................................97
         13.20    Lenders and Administrative Agent Not Fiduciary to
                     Company, etc...........................................97
         13.21    Judgment Currency.........................................97
         13.22    Survival of Representations and Warranties................99



<PAGE>



                                CREDIT AGREEMENT

         THIS CREDIT AGREEMENT, dated as of May 21, 1997, among the following:

                  (i)  SAFETY   COMPONENTS   INTERNATIONAL,   INC.,  a  Delaware
         corporation  (herein,  together with its  successors  and assigns,  the
         "Company" or a "Borrower")

                  (ii) PHOENIX AIRBAG GmbH & CO. KG., a company  organized under
         the laws of the Federal Republic of Germany (herein,  together with its
         successors and assigns,  the "German Borrower" or a "Borrower"),  which
         is a Wholly-Owned Subsidiary of the Company;

                  (iii)    AUTOMOTIVE SAFETY COMPONENTS INTERNATIONAL
         LIMITED,  a  company  organized  under the laws of the  United  Kingdom
         (herein,  together  with  its  successors  and  assigns,  the  "British
         Borrower" or a "Borrower"),  which is a Wholly-Owned  Subsidiary of the
         Company;

                  (iv) the lending institutions listed in Annex I hereto (each a
         "Lender" and collectively, the "Lenders"); and

                  (v)  KEYBANK   NATIONAL   ASSOCIATION,   a  national   banking
         association, as administrative agent (the "Administrative Agent"):

         PRELIMINARY STATEMENTS:

         (1) Unless otherwise defined herein,  all capitalized terms used herein
and defined in section 1 are used herein as so defined.

         (2) The Borrowers have applied to the Lenders for credit  facilities in
order to refinance certain indebtedness of the Borrowers and in order to provide
working capital and funds for other lawful purposes.

         (3) Subject to and upon the terms and conditions set forth herein,  the
Lenders are willing to make  available to the  Borrowers  the credit  facilities
provided for herein.

         NOW, THEREFORE, it is agreed:

         SECTION 1.        DEFINITIONS AND TERMS.

         1.1 Certain  Defined Terms.  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:


                                                         1

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                  "Additional Security Document" shall have the meaning provided
         in section 8.12(a).

                  "Administrative  Agent" shall have the meaning provided in the
         first  paragraph of this  Agreement  and shall include any successor to
         the Administrative Agent appointed pursuant to section 11.9.

                  "Affiliate" shall mean, with respect to any person,  any other
         person  directly or  indirectly  controlling,  controlled  by, or under
         direct or indirect  common control with such person.  A person shall be
         deemed to  control  a second  person if such  first  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
         or  managers  of such  second  person  or (ii) to  direct  or cause the
         direction of the management and policies of such second person, whether
         through the ownership of voting  securities,  by contract or otherwise.
         Notwithstanding  the  foregoing  a  director,  officer or employee of a
         person shall not,  solely by reason of such status,  be  considered  an
         Affiliate of such person.

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

                  "Alternative  Currency"  shall  mean and  include  (i)  Pounds
         Sterling  and  Deutsche  Marks,  if at the time any  such  currency  is
         readily and freely transferable and convertible into Dollars;  and (ii)
         any other  lawful  currency  other than  Dollars  which is readily  and
         freely  transferable  and convertible into Dollars and is acceptable to
         the Required Lenders and any applicable Letter of Credit Issuer.

                  "Applicable Commitment Fee Rate" shall mean 37.50 basis points
         per  annum,  provided  that the  Applicable  Commitment  Fee Rate  will
         automatically reduce to 25 basis points per annum at the effective time
         the Applicable  Eurocurrency  Margin for Revolving  Loans is reduced to
         100 basis points.

                  "Applicable Eurocurrency Margin" shall mean (i) in the case of
         any Term Loan which is a Eurocurrency Loan, 100 basis points per annum;
         and  (ii) in the case of any  Revolving  Loan  which is a  Eurocurrency
         Loan,  125 basis  points per annum,  provided  that if (A) the  Company
         shall have  successfully  completed  (and shall have  received  the net
         proceeds of) a public offering, Rule 144A offering or private placement
         with institutional  investors, of at least $50,000,000 principal amount
         of its  subordinated  notes with a weighted  average  life to  maturity
         (computed in accordance with standard  financial  practice) of at least
         five  years,  and  shall  have  provided  to the  Administrative  Agent
         evidence  satisfactory to the  Administrative  Agent of such completion
         and receipt,  and (B) at such time no Default under section  10.1(a) or
         Event of  Default  shall  have  occurred  and be  continuing,  then the
         foregoing  125 basis  points  per annum  shall be  reduced to 100 basis
         points per annum  effective  on the first day of the month  after which
         the Company shall

                                                         2

<PAGE>



         have completed such offering or private  placement and received the net
         proceeds thereof. The Administrative Agent shall notify the Company (on
         behalf of all  Borrowers) and the Lenders of any such reduction and the
         effective date thereof.

                  "Applicable  Lending  Office" shall mean, with respect to each
         Lender,  (i)  such  Lender's  Domestic  Lending  Office  in the case of
         Borrowings  consisting  of Prime  Rate  Loans  and (ii)  such  Lender's
         Eurocurrency  Lending  Office in the case of  Borrowings  consisting of
         Eurocurrency Loans.

                  "Asset   Sale"   shall  mean  the  sale,   transfer  or  other
         disposition  (including  by  means  of  mergers,  consolidations,   and
         liquidations of a corporation, partnership or limited liability company
         of the  interests  therein  of the  Company or any  Subsidiary)  by the
         Company or any  Subsidiary  to any person other than the Company or any
         Subsidiary  of  any of  their  respective  assets  (other  than  sales,
         transfers  or other  dispositions  of  obsolete  or  excess  furniture,
         fixtures,  equipment or other property,  tangible or intangible, in the
         ordinary course of business).

                  "Assignment  Agreement"  shall  mean an  Assignment  Agreement
         substantially in the form of Exhibit J hereto.

                  "Authorized Officer" shall mean any officer or employee of any
         applicable Borrower designated as such in writing to the Administrative
         Agent by such Borrower.

                  "Bankruptcy  Code" shall have the meaning  provided in section
         10.1(g).

                  "Borrower" shall mean any of the Company,  the German Borrower
         or the British Borrower, as the case may be.

                  "Borrowing"  shall mean a Revolving  Borrowing  or a Term Loan
         Borrowing, as the case may be.

                  "Borrowing  Subsidiary"  shall mean either the German Borrower
         or the British Borrower, as the case may be.

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

                  "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 in which  the  applicable  Payment
         Office  is  located  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,
         Eurocurrency Loans, any day which is a Business Day described in clause
         (i)

                                                         3

<PAGE>



         and which is also a day on which  dealings are carried on in the London
         interbank  market and banks are open for  business in London and in the
         country of issue of any  Alternative  Currency in which any  applicable
         Eurocurrency Loans are denominated.

                  "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 Company or any of its  Subsidiaries in each
         case taken at the amount  thereof  accounted  for as  liabilities  on a
         consolidated  balance  sheet of the  Company  and its  Subsidiaries  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 one year from the
         date of  acquisition,  (ii) U.S.  dollar  denominated  or  Eurocurrency
         denominated  time  deposits,   certificates  of  deposit  and  bankers'
         acceptances  of  (x)  any  Lender  or (y)  any  bank  whose  short-term
         commercial  paper  rating  from S&P is at least  A-1 or the  equivalent
         thereof or from Moodys is at least P-1 or the  equivalent  thereof (any
         such bank, an "Approved  Lender"),  in each case with maturities of not
         more than 90 days from the date of acquisition,  (iii) commercial paper
         issued by any Lender or Approved Lender or by the parent company of any
         Lender or Approved Lender 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,  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 90 days after the date of
         acquisition,  and (iv) investments in money market funds  substantially
         all the  assets  of which  are  comprised  of  securities  of the types
         described in clauses (i) through (iii) 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 Company and/or any Subsidiary from such Asset Sale.

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


                                                         4

<PAGE>



                  "Change  of  Control"  shall mean and  include  (i) during any
         period  of  two  consecutive  calendar  years,  individuals  who at the
         beginning of such period  constituted  the Company's Board of Directors
         (together with any new directors  whose election by the Company's Board
         of  Directors  or  whose  nomination  for  election  by  the  Company's
         shareholders  was  approved  by a vote of at  least a  majority  of the
         directors  then  still in  office  who  either  were  directors  at the
         beginning of such period or whose  election or nomination  for election
         was  previously  so  approved)  cease for any  reason to  constitute  a
         majority of the  directors  then in office (ii) any person or group (as
         such term is defined in section  13(d)(3) of the 1934 Act),  other than
         the Company, any trustee or other fiduciary holding securities under an
         employee  benefit plan of the Company,  and Robert A. Zummo (and trusts
         for the  benefit of such  person,  his family and  descendants),  shall
         acquire,  directly  or  indirectly,  beneficial  ownership  (within the
         meaning of Rule 13d-3 and 13d-5 of the 1934 Act) of more than 25%, on a
         fully  diluted  basis,  of  the  economic  or  voting  interest  in the
         Company's  capital  stock,  (iii)  Robert A. Zummo (and  trusts for the
         benefit of such person, his family and descendants) shall cease for any
         reason to have beneficial  ownership  (within the meaning of Rule 13d-3
         and 13d-5 of the 1934 Act) of at least 5%, on a fully diluted basis, of
         the economic or voting  interest in the Company's  capital stock,  (iv)
         during any period of 60 consecutive days, Robert A. Zummo or Jeffrey J.
         Kaplan,  shall cease, for any reason, to be actively employed as a full
         time executive  officer of the Company,  unless a successor  reasonably
         acceptable to the Required Lenders shall have been appointed or elected
         within four months  following  said  period,  in which case the name of
         such successor  shall be  substituted  for the name of the person he or
         she replaces for purposes of this clause (iv), (v) the  shareholders of
         the Company approve (A) a merger or  consolidation  of the Company with
         any other  person,  other than a merger or  consolidation  which  would
         result in the voting securities of the Company outstanding  immediately
         prior thereto continuing to represent (either by remaining  outstanding
         or by  being  converted  or  exchanged  for  voting  securities  of the
         surviving  or resulting  entity)  more than 75% of the combined  voting
         power of the voting  securities  of the  Company or such  surviving  or
         resulting entity outstanding after such merger or consolidation, or (B)
         a merger or consolidation  effected to implement a recapitalization  of
         the Company (or similar  transaction),  other than any such transaction
         in which no person or group (as hereinabove  defined) not excepted from
         the  provisions  of clause  (ii)  above  acquires  more than 25% of the
         combined  voting power, on a fully diluted basis, of the Company's then
         outstanding  voting  securities,  (vi) the  shareholders of the Company
         approve a plan of complete  liquidation  of the Company or an agreement
         or  agreements  for the sale or  disposition  by the  Company of all or
         substantially all of the Company's assets, and/or
          (vii) any "change in control" or any similar term as defined in any of
         the indentures,  credit agreements or other  instruments  governing any
         Indebtedness  of  the  Company  or  any of  its  Subsidiaries  with  an
         outstanding  principal  amount, or providing for commitments to lend in
         an  outstanding  principal  amount,  of at  least  $5,000,000  (or  the
         equivalent amount in any other currency).


                                                         5

<PAGE>



                  "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 Effective Date and any subsequent  provisions
         of the Code,  amendatory thereof,  supplemental  thereto or substituted
         therefor.

                  "Collateral" shall mean any collateral covered by any Security
         Document.

                  "Collateral Agent" shall mean any Administrative  Agent acting
         as Collateral Agent for the Lenders pursuant to the Security Documents.

                  "Commitment" shall mean, with respect to each Lender, its Term
         Loan  Commitment  or its Revolving  Commitment,  or both if such Lender
         shall have both a Term Loan Commitment and a Revolving Commitment.

                  "Commitment  Fee" shall have the  meaning  provided in section
         4.1(a).

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

                  "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 amounts  expended or
         capitalized under Capital Leases but excluding any amount  representing
         capitalized  interest) by the Company 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 Company and its Subsidiaries.

                  "Consolidated  Net Income" shall mean for any period,  the net
         income (or loss),  without  deduction  for minority  interests,  of the
         Company and its  Subsidiaries  on a consolidated  basis for such period
         taken as a single accounting period determined in conformity with GAAP.

                  "Consolidated  Net  Worth"  shall  mean  at any  time  for the
         determination thereof all amounts which, in conformity with GAAP, would
         be included under the caption "total stockholders' equity" (or any like
         caption)  on a  consolidated  balance  sheet of the  Company as at such
         date.

                  "Credit  Documents" shall mean this Agreement,  the Notes, the
         Security Documents and any Letter of Credit Document.

                  "Credit  Event"  shall mean the making of any Loans and/or the
         issuance of any Letter of Credit.


                                                         6

<PAGE>



                  "Credit  Party" shall mean each  Borrower and each  Subsidiary
         which is a party to any Credit Document.

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

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

                  "Designated Hedge Agreement" shall mean any Hedge Agreement to
         which the Company or any of its Subsidiaries is a party which, pursuant
         to a  written  instrument  signed  by the  Required  Lenders,  has been
         designated  as a Designated  Hedge  Agreement so that the  Company's or
         Subsidiaries's   counterparty's  credit  exposure  thereunder  will  be
         entitled to share in the  benefits of the  Subsidiary  Guaranty and the
         Security Documents to the extent such Subsidiary  Guaranty and Security
         Documents  provide  guarantees or security for creditors of the Company
         or any Subsidiary under Designated Hedge Agreements.

                  "Dividends" shall have the meaning provided in section 9.6.

                  "Dollars",  "U.S.  dollars" and the sign "$" each means lawful
         money of the United States.

                  "Domestic  Lending  Office"  shall mean,  with  respect to any
         Lender,  the office of such Lender  specified as its  Domestic  Lending
         Office in Annex I or in the Assignment  Agreement  pursuant to which it
         became a Lender, or such other office of such Lender as such Lender may
         from time to time specify to the Company and the Administrative Agent.

                  "EBITDA"  shall  mean,  for  any  period,  (A)  the sum of the
         amounts for such period of, without  duplication,  (i) Consolidated Net
         Income  (exclusive  of  the  effect  thereon  of any  foreign  currency
         translation  adjustments made thereto), (ii) provisions for taxes based
         on income and  franchise  taxes,  (iii) Total  Interest  Expense,  (vi)
         depreciation and amortization,  and (v)  extraordinary  non-cash losses
         and  non-cash  charges,  less (B) gains on sales of  assets  (excluding
         sales in the ordinary course of business) and extraordinary  gains, all
         as determined  for the Company and its  Subsidiaries  on a consolidated
         basis in accordance with GAAP.

                  "Effective  Date" shall have the  meaning  provided in section
         13.10.

                  "Eligible  Transferee"  shall  mean and  include a  commercial
         bank, financial  institution or other "accredited investor" (as defined
         in SEC  Regulation  D),  in each case  which (i) so long as no  Default
         under  section  10.1(a) or Event of Default  shall have occurred and be
         continuing, and so long as the financial covenants contained in section

                                                         7

<PAGE>



         9.7, 9.8, 9.9,  9.10 or 9.11 of this  Agreement  have not been modified
         (or  compliance  therewith  waived)  following a  deterioration  in the
         financial  condition  or results of  operations  of the Company and its
         Subsidiaries,  is not disapproved in writing by the Company in a notice
         given to a requesting Lender and the Administrative  Agent,  specifying
         the reasons for such  disapproval,  within five Business Days following
         the giving of notice to the  Company of the  identity  of any  proposed
         transferee  (any such  disapproval by the Company must be  reasonable),
         and (ii) is not a direct  competitor  of the  Company or engaged in the
         same or  similar  business  as the  Company,  or any of its  respective
         Subsidiaries  or is not an  Affiliate  of any such  competitors  of the
         Company or any of its respective Subsidiaries.

                  "Environmental  Claims" shall mean any and all administrative,
         regulatory or judicial actions, suits, demands, demand letters, claims,
         liens,  notices  of  non-compliance  or  violation,  investigations  or
         proceedings  arising under any  Environmental  Law or any permit issued
         under any such 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 the storage, treatment or Release (as defined in CERCLA)
         of any Hazardous  Materials or arising from alleged injury or threat of
         injury to health, safety or the environment.

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

                  "ERISA" shall mean the Employee Retirement Income Security Act
         of 1974, as amended from time to time, and the regulations  promulgated
         and  rulings  issued  thereunder.  Section  references  to ERISA are to
         ERISA, as in effect at the Effective Date

                                                         8

<PAGE>



         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 Company or a Subsidiary
         of the Company would be deemed to be a "single employer" (i) within the
         meaning  of  section  414(b),(c),  (m) or (o) of the  Code or (ii) as a
         result of the Company or a  Subsidiary  of the Company  being or having
         been a general partner of such person.

                  "Eurocurrency  Lending Office" shall mean, with respect to any
         Lender, the office of such Lender specified as its Eurocurrency Lending
         Office in Annex I or in the Assignment  Agreement  pursuant to which it
         became a Lender,  or such  other  office or offices  (for  Eurocurrency
         Loans denominated in Dollars or particular  Alternative  Currencies) of
         such Lender as such Lender may from time to time specify to the Company
         and the Administrative Agent.

                  "Eurocurrency Loans" shall mean each Loan, denominated in U.S.
         Dollars or in an Alternative  Currency,  bearing  interest at the rates
         provided in section 2.7(b).

                  "Eurocurrency  Rate" shall mean with respect to each  Interest
         Period for a  Eurocurrency  Loan, (A) either (i) the rate per annum for
         deposits  in  Dollars or in the  relevant  Alternative  Currency  for a
         maturity most nearly  comparable to such Interest  Period which appears
         on page 3740 or 3750, as applicable,  of the Dow Jones Telerate  Screen
         as of 11:00 A.M. (local time at the Notice Office) on the date which is
         two Business Days prior to the commencement of such Interest Period, or
         (ii) if such a rate does not appear on such a page,  an  interest  rate
         per annum equal to the  average  (rounded  upward to the nearest  whole
         multiple  of  1/16  of 1% per  annum,  if such  average  is not  such a
         multiple) of the rate per annum at which  deposits in Dollars or in the
         relevant  Alternative  Currency  are  offered by each of the  Reference
         Banks to prime banks in the London  interbank  Eurocurrency  market for
         deposits  of amounts in same day funds  comparable  to the  outstanding
         principal amount of the Eurocurrency Loan for which an interest rate is
         then being determined with maturities comparable to the Interest Period
         to be applicable to such Eurocurrency Loan, determined as of 11:00 A.M.
         (London  time) on the  date  which is two  Business  Days  prior to the
         commencement of such Interest Period, in each case divided (and rounded
         upward  to  the  nearest  whole  multiple  of  1/16th  of  1%) by (B) a
         percentage  equal to 100%  minus the then  stated  maximum  rate of all
         reserve  requirements  (including,  without  limitation,  any marginal,
         emergency,  supplemental,  special or other reserves) 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).

                  "Event of Default" shall have the meaning  provided in section
         10.1.


                                                         9

<PAGE>



                  "Existing  Indebtedness"  shall have the  meaning  provided in
         section 7.18.

                  "Existing  Indebtedness  Agreements"  shall  have the  meaning
         provided in section 7.18.

                  "Existing Letter of Credit" shall have the meaning provided in
         section 3.1(d).

                  "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  Administrative  Agent from three Federal
         Funds brokers of  recognized  standing  selected by the  Administrative
         Agent.

                  "Fees" shall mean all amounts payable pursuant to, or referred
         to in, section 4.1.

                  "Fixed  Charge  Coverage  Ratio"  shall mean,  for any Testing
         Period,  the ratio of (i) EBITDA  less  unfunded  Consolidated  Capital
         Expenditures,  to  (ii)  the sum of (A)  Total  Interest  Expense,  (B)
         scheduled or mandatory  repayments,  prepayments  or redemptions of the
         principal of Indebtedness  (including  required reductions in committed
         credit  facilities),  (C) without  duplication  of any amount  included
         under the preceding  clause (B),  scheduled  payments  representing the
         principal portion of Capitalized Lease Obligations,  (D) payments under
         the Phoenix Earnout, (E) Dividends,  and (F) payments or provisions for
         payments of taxes based on income and franchise taxes, in each case for
         such Testing Period. In determining the Fixed Charge Coverage Ratio, up
         to 80% of the Consolidated  Capital  Expenditures shall be deemed to be
         "funded" for purposes of determining  the unfunded amount thereof under
         clause  (i)  above  if and  to the  extent  such  Consolidated  Capital
         Expenditures  have  actually been financed or the Company or any of its
         Subsidiaries  could have financed the same out of the Unutilized  Total
         Revolving Commitment.

                  "Foreign  Subsidiary"  shall mean any  Subsidiary (i) which is
         not  incorporated in the United States and  substantially  all of whose
         assets  and  properties  are  located,  or  substantially  all of whose
         business  is  carried  on,   outside   the  United   States,   or  (ii)
         substantially  all of whose  assets  consist of  Subsidiaries  that are
         Foreign Subsidiaries as defined in clause (i) of this definition.

                  "GAAP" shall mean generally accepted accounting  principles in
         the United  States of America as in effect from time to time;  it being
         understood and agreed that

                                                        10

<PAGE>



         determinations  in  accordance  with GAAP for  purposes  of  section 9,
         including  defined  terms as used  therein,  are subject (to the extent
         provided therein) to section 13.7(a).

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

                  "Guaranteed  Obligations"  shall have the meaning  provided in
         section 12.1.

                  "Guaranty  Obligations"  shall mean as to any person  (without
         duplication)   any   obligation   of  such  person   guaranteeing   any
         Indebtedness ("primary Indebtedness") 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  Indebtedness  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  Indebtedness  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  Indebtedness of the ability of the primary obligor
         to make  payment of such  primary  Indebtedness,  or (d)  otherwise  to
         assure or hold harmless the owner of such primary  Indebtedness against
         loss in respect  thereof,  provided,  however,  that the term  Guaranty
         Obligation shall not include endorsements of instruments for deposit or
         collection  in the  ordinary  course  of  business.  The  amount of any
         Guaranty Obligation shall be deemed to be an amount equal to the stated
         or determinable amount of the primary  Indebtedness in respect of which
         such Guaranty 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.

                  "Hedge  Agreement"  shall  mean  (i) any  interest  rate  swap
         agreement,  any interest rate cap  agreement,  any interest rate collar
         agreement or other similar agreement or arrangement designed to protect
         against  fluctuations  in interest  rates,  and (ii) any currency  swap
         agreement,  forward currency purchase agreement or similar agreement or
         arrangement  designed  to  protect  against  fluctuations  in  currency
         exchange rates.

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

                                                        11

<PAGE>



                  "Indebtedness" of any person shall mean without duplication:

                           (i) all  indebtedness  of such  person  for  borrowed
                  money,

                           (ii) all bonds,  notes,  debentures  and similar debt
                  securities of such person,

                           (iii) the deferred  purchase  price of capital assets
                  or services  which in  accordance  with GAAP would be shown on
                  the liability side of the balance sheet of such person,

                           (iv) the face amount of all letters of credit  issued
                  for the account of such person and, without  duplication,  all
                  drafts drawn thereunder,

                           (v) 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,

                           (vi)  all  Capitalized   Lease  Obligations  of  such
                  person,

                           (vii)  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,

                           (viii) all net obligations of such person under Hedge
                  Agreements,

                           (ix)   the   full   outstanding   balance   of  trade
                  receivables  sold with full or  limited  recourse,  other than
                  solely for purposes of collection of delinquent accounts, and

                           (x)      all Guaranty Obligations of such person

                  provided that neither trade payables and accrued expenses,  in
         each case arising in the ordinary  course of business,  nor obligations
         in respect of insurance  policies or  performance or surety bonds which
         themselves  are  not  guarantees  of  Indebtedness,   shall  constitute
         Indebtedness.

                  "Initial  Borrowing Date" shall mean the date, on or after the
         Effective Date, upon which the conditions  specified in section 6.1 are
         satisfied.

                  "Interest  Period" with respect to any Eurocurrency Loan shall
         mean the interest period applicable  thereto, as determined pursuant to
         section 2.8.


                                                        12

<PAGE>



                  "KeyBank" shall mean KeyBank National Association,  a national
         banking association, together with its successors and assigns.

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

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

                  "Lender  Default"  shall mean (i) the  refusal  (which has not
         been  retracted) of a Lender in violation of the  requirements  of this
         Agreement to make  available its portion of any  incurrence of Loans or
         to fund its portion of any unreimbursed payment under section 3.4(c) or
         (ii) a Lender  having  notified  the  Administrative  Agent  and/or the
         Company  that it does not intend to comply with the  obligations  under
         section 2.1 and/or section 3.4(c), in the case of either (i) or (ii) as
         a result of the  appointment of a receiver or conservator  with respect
         to such Lender at the direction or request of any regulatory  agency or
         authority.

                  "Lender  Register" shall have the meaning  provided in section
         13.16.

                  "Letter of Credit" shall have the meaning  provided in section
         3.1(a).

                  "Letter of Credit  Documents" shall have the meaning specified
         in section 3.2(a).

                  "Letter  of Credit  Fee" shall have the  meaning  provided  in
         section 4.1(b).

                  "Letter  of Credit  Issuer"  shall mean (i)  KeyBank;  (ii) in
         respect of each Existing  Letter of Credit,  the Lender that has issued
         same as of the  Effective  Date;  and/or (iii) any other Lender that is
         requested, and agrees, to so act by the Company, and is approved by the
         Administrative Agent and the Required Lenders.

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

                  "Letter of Credit Request" shall have the meaning  provided in
         section 3.2(a).

                  "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).

                  "Loan" shall mean a Revolving  Loan or Term Loan,  as the case
         may be.


                                                        13

<PAGE>



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

                  "Material Adverse Effect" shall mean a material adverse effect
         on the business, operations, property, assets, liabilities or condition
         (financial or otherwise)  of, when used with  reference to the Company,
         the Company and its  Subsidiaries,  taken as a whole, or when used with
         reference to any other person, such person and its Subsidiaries,  taken
         as a whole, as the case may be.

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

                  "Maturity  Date"  shall  mean  May 31,  2002,  unless  earlier
         terminated, or extended in accordance with section 4.4.

                  "Minimum  Borrowing Amount" shall mean (i) for Loans which are
         Prime Rate Loans,  $100,000,  with  minimum  increments  thereafter  of
         $100,000 and (ii) for Loans which are Eurocurrency Loans,  $100,000 (or
         the substantial equivalent thereof in any Alternative  Currency),  with
         minimum   increments   thereafter  of  $100,000  (or  the   substantial
         equivalent thereof in any Alternative Currency).

                  "Moody's" shall mean Moody's Investors  Service,  Inc. and its
         successors.

                  "Multiemployer  Plan"  shall  mean a  multiemployer  plan,  as
         defined  in  section  4001(a)(3)  of ERISA to which the  Company or any
         ERISA   Affiliate  is  making  or  accruing  an   obligation   to  make
         contributions  or has within any of the preceding three plan years made
         or accrued an obligation to make contributions.

                  "Multiple  Employer Plan" shall mean an employee benefit plan,
         other  than a  Multiemployer  Plan,  to which the  Company or any ERISA
         Affiliate, and one or more employers other than the Company or an ERISA
         Affiliate,  is making or accruing an obligation  to make  contributions
         or, in the event that any such plan has been  terminated,  to which the
         Company or an ERISA  Affiliate  made or accrued an  obligation  to make
         contributions  during any of the five plan years  preceding the date of
         termination of such plan.

                  "Net Cash  Proceeds"  shall  mean,  with  respect to any Asset
         Sale, the Cash Proceeds  resulting  therefrom net of (i) reasonable and
         customary expenses of sale incurred in connection with such Asset Sale,
         and other reasonable and customary fees and expenses incurred,  and all
         state,  and local taxes paid or  reasonably  estimated to be payable by
         such  person,  as a  consequence  of such Asset Sale and the payment of
         principal, premium and

                                                        14

<PAGE>



         interest of  Indebtedness  secured by the asset which is 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,   (ii)  amounts  of  any
         distributions  payable to borders of minority interests in the relevant
         person or in the  relevant  property  or assets  and (iii)  incremental
         income taxes paid or payable as a result thereof.

                  "1934 Act" shall mean the Securities  Exchange Act of 1934, as
         amended.

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

                  "Note" shall mean a Term Note or Revolving  Note,  as the case
         may be.

                  "Notice of  Borrowing"  shall  have the  meaning  provided  in
         section 2.3(a).

                  "Notice of  Conversion"  shall have the  meaning  provided  in
         section 2.6.

                  "Notice  Office"  shall mean the office of the  Administrative
         Agent at 2 Gannett  Drive,  White  Plains,  New York 10604,  Attention:
         Brendan  Sachtjen   (telephone:   (914)  696-2161;   facsimile:   (914)
         694-8463), or such other office, located in a city in the United States
         Eastern Time Zone,  as the  Administrative  Agent may  designate to the
         Company 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 Administrative  Agent or any Lender pursuant to
         the terms of this Agreement or any other Credit Document.

                  "Participant"  shall  have the  meaning  provided  in  section
         3.4(a).

                  "Payment  Office" shall mean the office of the  Administrative
         Agent at 2 Gannett  Drive,  White  Plains,  New York 10604,  Attention:
         Patricia  Williams  (telephone:   (914)  696-  2160;  facsimile:  (914)
         694-8463), or such other office, located in a city in the United States
         Eastern Time Zone,  as the  Administrative  Agent may  designate to the
         Borrowers from time to time.

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

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


                                                        15

<PAGE>



                  "Permitted Acquisitions" shall mean and include,  exclusive of
         expenditures  (including  the purchase of adjacent land) to expand then
         existing  facilities  owned by the  Company  or any  Subsidiary  on the
         Effective  Date or acquired  pursuant to a Permitted  Acquisition,  and
         exclusive of any loans,  advances or  investments  otherwise  permitted
         pursuant to section 9.5: (i) acquisitions  (whether by purchase,  lease
         or otherwise) of facilities and businesses  operated by persons who are
         not  Subsidiaries  of the Company,  and (ii)  acquisitions of equity or
         other  similar  interests  in  such  persons;  provided,  that  (A) the
         Required  Lenders consent to such  transaction,  (B) all of the Lenders
         consent to such transaction, if such transaction is actively opposed by
         the Board of  Directors  (or  similar  governing  body) of the  selling
         person or the person whose equity interests are to be acquired, and (C)
         if as a result  thereof  the  Company or any  Subsidiary  acquires  any
         equity  interest  in  any  person,   such  person  by  virtue  of  such
         transaction becomes a Subsidiary of the Company.

                  "Permitted Liens" shall mean Liens described in section 9.3.

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

                  "Phoenix  Earnout"  shall mean the amounts  payable as part of
         the  purchase  price by the  Company  pursuant  to the  Stock  Purchase
         Agreement dated August 6, 1996,  pursuant to which the Company acquired
         Phoenix,  depending on whether annual  performance  targets for Phoenix
         during the years 1996-1998 are met.

                  "Plan" shall mean any multiemployer 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 by) the Company or
         a Subsidiary of the Company or an ERISA  Affiliate,  and each such plan
         for the five year period immediately following the latest date on which
         the  Company,  or a  Subsidiary  of the  Company or an ERISA  Affiliate
         maintained,  contributed  to or had an obligation to contribute to such
         plan.

                  "Pledge  Agreement" shall have the meaning provided in section
         6.1(c).

                  "Prime  Rate"  shall  mean,  for  any  period,  a  fluctuating
         interest  rate per annum as shall be in effect  from time to time which
         rate per annum  shall at all times be equal to the  greater  of (i) the
         rate of interest  established by KeyBank in Cleveland,  Ohio, from time
         to time, as its prime rate,  whether or not publicly  announced,  which
         interest  rate  may or may not be the  lowest  rate  charged  by it for
         commercial  loans or other  extensions of credit;  and (ii) the Federal
         Funds  Effective  Rate in  effect  from time to time plus 1/2 of 1% per
         annum.

                  "Prime Rate Loan" shall mean each Loan,  denominated  in U. S.
         Dollars, bearing interest at the rates provided in section 2.7(a).

                                                        16

<PAGE>



                  "Prohibited Transaction" shall mean a transaction with respect
         to a Plan that is prohibited  under section 4975 of the Code or section
         406 of ERISA and not exempt  under  section 4975 of the Code or section
         408 of ERISA.

                  "RCRA" shall mean the Resource  Conservation and Recovery Act,
         as the same maybe amended from time to time, 42 U.S.C. ss. 6901 d 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.

                  "Reference  Banks"  shall mean (i)  KeyBank and (ii) any other
         Lender or Lenders  selected as a Reference  Bank by the  Administrative
         Agent and the Required Lenders, provided, that if any of such Reference
         Banks is no longer a Lender,  such  other  Lender or  Lenders as may be
         selected by the  Administrative  Agent acting on instructions  from the
         Required Lenders.

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

                  "Regulation  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.

                  "Reportable  Event"  shall mean an event  described in section
         4043(c) of ERISA with  respect to a Plan other than those  events as to
         which the 30-day  notice  period is waived under  subsection  .13, .14,
         .16, .18, .19 or .20 of PBGC Regulation section 2615.

                  "Required  Lenders"  shall mean  Non-Defaulting  Lenders whose
         outstanding  Revolving Loans and Unutilized  Commitments  constitute at
         least 66+2/3% of the sum of the total  outstanding  Revolving Loans and
         Unutilized  Commitments of  Non-Defaulting  Lenders (provided that, for
         purposes hereof, neither the Company, nor any of its Affiliates,  shall
         be  included in (i) the Lenders  holding  such amount of the  Revolving
         Loans or having  such  amount of the  Unutilized  Commitments,  or (ii)
         determining  the  aggregate  unpaid  principal  amount of the Revolving
         Loans or Unutilized Commitments).

                  "Revolving  Borrowing"  shall mean the incurrence of Revolving
         Loans  consisting  of one Type of Loan, by any Borrower from all of the
         Lenders having  Commitments in respect thereof on a pro rata basis on a
         given date (or resulting from  conversions on a given date),  having in
         the case of Eurocurrency Loans the same Interest Period.

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

                                                        17

<PAGE>



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

                  "Revolving  Loan" shall have the  meaning  provided in section
         2.1.

                  "Revolving  Commitment"  shall  mean,  with  respect  to  each
         Lender,  the amount,  if any, set forth  opposite such Lender's name in
         Annex I as its  "Revolving  Commitment" as the same may be reduced from
         time to time  pursuant to section 4.2,  4.3 and/or 10 or adjusted  from
         time to time as a result of assignments to or from such Lender pursuant
         to section 13.4.

                  "Revolving  Note" shall have the  meaning  provided in section
         2.5(a).

                  "Sale and Lease-Back  Transaction"  shall mean any arrangement
         with  any  person  providing  for the  leasing  by the  Company  or any
         Subsidiary of the Company of any property  (except for temporary leases
         for a term,  including any renewal  thereof,  of not more than one year
         and except for leases  between the Company and a Subsidiary  or between
         Subsidiaries),  which property has been or is to be sold or transferred
         by the Company or such Subsidiary to such person.

                  "S&P" shall mean Standard & Poor's  Ratings  Group, a division
         of McGraw Hill, Inc., and its successors.

                  "Scheduled  Repayment"  shall  have the  meaning  provided  in
         section 5.2(b).

                  "SEC" shall mean the United  States  Securities  and  Exchange
         Commission.

                  "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.

                  "Section  5.4(b)(ii)   Certificate"  shall  have  the  meaning
         provided in section 5.4(b)(ii).

                  "Security  Agreement"  shall  have  the  meaning  provided  in
         section 6.1(c).

                  "Security  Documents" shall mean the Security  Agreement,  the
         Pledge Agreement and each other document  pursuant to which any Lien or
         security  interest  is granted by any  Credit  Party to the  Collateral
         Agent as security for any of the Obligations.


                                                        18

<PAGE>



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

                  "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 Company.

                  "Subsidiary  Guaranty"  shall  have the  meaning  provided  in
         section 6.1(c).

                  "Subordinated  Indebtedness" shall mean any Indebtedness which
         has been  subordinated  to the  Obligations  in such manner and to such
         extent as the Required Lenders may require.

                  "Term Loan" shall have the meaning provided in section 2.1.

                  "Term Loan Borrowing"  shall mean the incurrence of Term Loans
         consisting  of one Type of Loan, by the Company from all of the Lenders
         having  Commitments  in respect  thereof on a pro rata basis on a given
         date (or resulting  from  conversions  on a given date),  having in the
         case of Eurocurrency Loans the same Interest Period.

                  "Term  Loan  Commitment"  shall  mean,  with  respect  to each
         Lender,  the amount,  if any, set forth  opposite such Lender's name in
         Annex I as its "Term Loan  Commitment"  as the same may be reduced from
         time to time  pursuant to sections  4.2, 4.3 and/or 10 or adjusted from
         time to time as a result of assignments to or from such Lender pursuant
         to section 13.4.

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

                  "Term Note" shall have the meaning provided in section 2.5(a).

                  "Testing Period' shall mean (i) for determinations  made prior
         to March 31, 1998,  amounts  determined on an annualized basis based on
         the fiscal year to date through the fiscal quarter most recently ended,
         and (ii) for determinations  made thereafter a single period consisting
         of the four  consecutive  fiscal  quarters of the Company most recently
         ended  (whether  or not such  quarters  are all within the same  fiscal
         year).

                                                        19

<PAGE>



                  "Total  Commitment"  shall mean the sum of the  Commitments of
         the Lenders.

                  "Total Indebtedness" shall mean the sum (without  duplication)
         of the following,  for the Company and/or any of its Subsidiaries,  all
         as determined on a consolidated basis of:

                           (i) all indebtedness for borrowed money,

                           (ii) all bonds,  notes,  debentures  and similar debt
                  securities,

                           (iii) the deferred  purchase  price of capital assets
                  or services  which in  accordance  with GAAP would be shown on
                  the  liability  side of a  consolidated  balance  sheet of the
                  Company and its Subsidiaries,

                           (iv) the face amount of all letters of credit  issued
                  for the account of the Company or any Subsidiary, and, without
                  duplication, all drafts drawn thereunder,

                           (v) 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,

                           (vi)     all Capitalized Lease Obligations,

                           (vii)  all   obligations   of  the   Company  or  any
                  Subsidiary  to pay a  specified  purchase  price  for goods or
                  services   whether  or  not   delivered  or  accepted,   i.e.,
                  take-or-pay and similar obligations,

                           (viii)   the  full   outstanding   balance  of  trade
                  receivables  sold with full or  limited  recourse,  other than
                  solely for  purposes of  collection  of  delinquent  accounts,
                  provided  that  if  the  structure  of any  receivables  sales
                  program provides for "over-collateralization", the outstanding
                  balance  of  the  trade   receivables   attributable   to  the
                  "over-collateralization" may be excluded, and

                           (ix)     all Guaranty Obligations of such person,

         provided that neither trade payables and accrued expenses, in each case
         arising in the ordinary course of business,  nor obligations in respect
         of insurance  policies or performance or surety bonds which  themselves
         are not guarantees of Indebtedness, shall be included.

                  "Total  Interest  Expense" shall mean,  for any period,  total
         interest expense (including that which is capitalized and that which is
         attributable to Capital Leases, in accordance with GAAP) of the Company
         and its Subsidiaries on a consolidated basis with

                                                        20

<PAGE>



         respect  to  all  outstanding  Indebtedness  of  the  Company  and  its
         Subsidiaries including, without limitation, all commissions,  discounts
         and other fees and charges  owed with  respect to letters of credit and
         net  costs  under  Hedge  Agreements,   but  excluding,   however,  any
         amortization  of  deferred   financing  costs,  all  as  determined  in
         accordance with GAAP.

                  "Total  Revolving  Commitment"  shall  mean  the  sum  of  the
         Revolving Commitments of the Lenders.

                  "Total  Term Loan  Commitment"  shall mean the sum of the Term
         Loan Commitments of the Lenders.

                  "Type" shall mean any type of Loan  determined with respect to
         the interest option  applicable  thereto,  i.e., a Prime Rate Loan or a
         Eurocurrency 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  exceeds the fair market  value of the assets  allocable  thereto,
         each  determined in accordance  with Statement of Financial  Accounting
         Standards  No. 87,  based upon the  actuarial  assumptions  used by the
         Plan's actuary in the most recent annual valuation of the Plan.

                  "United  States"  and  "U.S."  each  means  United  States  of
         America.

                  "Unpaid  Drawing"  shall have the meaning  provided in section
         3.3(a).

                  "Unutilized  Commitment" for any Lender at any time shall mean
         the excess of (i) such  Lender's  Commitment at such time over (ii) the
         sum  of  the  principal  amount  of  Loans  made  by  such  Lender  and
         outstanding  at such  time and (y)  such  Lender's  Revolving  Facility
         Percentage of Letter of Credit Outstandings at such time.

                  "Unutilized  Total  Commitment"  shall mean, at any time,  the
         excess  of (i) the Total  Commitment  at such time over (ii) the sum of
         (x) the aggregate  principal  amount of all Loans then outstanding plus
         (y) the aggregate Letter of Credit Outstandings at such time.

                  "Unutilized  Total  Revolving  Commitment"shall  mean,  at any
         time,  the excess of (i) the Total  Revolving  Commitment  at such time
         over  (ii)  the  sum of  (x)  the  aggregate  principal  amount  of all
         Revolving  Loans  then  outstanding  plus (y) the  aggregate  Letter of
         Credit Outstandings at such time.


                                                        21

<PAGE>



                  "Unutilized  Total Term Loan  Commitment"  shall mean,  at any
         time,  the  excess of (i) the Total Term Loan  Commitment  at such time
         over  (ii)  the  aggregate  principal  amount  of all Term  Loans  then
         outstanding at such time.

                  "Value"  shall  mean,  with  respect to a Sale and  Lease-Back
         Transaction, as of any particular time, the amount equal to the greater
         of (i) the net proceeds of the sale or transfer of the property  leased
         pursuant to such Sale and Lease-Back Transaction or (ii) the fair value
         in the opinion of the Company,  acting in good faith,  of such property
         at the time of entering into such Sale and Lease-Back Transaction.

                  "Wholly-Owned  Subsidiary"  shall mean each  Subsidiary of the
         Company  at least 95% of whose  capital  stock,  equity  interests  and
         partnership  interests,  other  than  director's  qualifying  shares or
         similar interests, are owned directly or indirectly by the Company.

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

         1.2  Computation of Time Periods.  In this Agreement in the computation
of periods of time from a specified  date to a later  specified  date,  the word
"from" means "from and  including" and the words "to" and "until" each means "to
but excluding".

         1.3 Accounting  Terms. All accounting  terms not  specifically  defined
herein shall be construed  in  accordance  with  generally  accepted  accounting
principles  consistent  with those applied in the  preparation  of the financial
statements referred to in section 7.8(a).

         1.4 Currency  Equivalents.  For purposes of this  Agreement,  except as
otherwise  specified  herein,  (i) the equivalent in Dollars of any  Alternative
Currency  shall be  determined  by  using  the  quoted  spot  rate at which  the
Administrative Agent offers to exchange Dollars for such Alternative Currency at
its Payment Office at 9:00 A.M.  (local time at the Payment Office) two Business
Days prior to the date on which such  equivalent is to be  determined,  (ii) the
equivalent in any Alternative  Currency of any other Alternative  Currency shall
be determined by using the quoted spot rate at which the Administrative  Agent's
Payment Office offers to exchange such  Alternative  Currency for the equivalent
in Dollars of such other  Alternative  Currency at such  Payment  Office at 9:00
A.M.  (local time at the Payment  Office) two Business Days prior to the date on
which such  equivalent  is to be  determined,  and (iii) the  equivalent  in any
Alternative  Currency of Dollars  shall be  determined  by using the quoted spot
rate at which the Administrative  Agent's Payment Office offers to exchange such
Alternative  Currency for Dollars at the Payment Office at 9:00 A.M. (local time
at the  Payment  Office)  two  Business  Days  prior to the  date on which  such
equivalent is to be determined;  provided, that (A) the equivalent in Dollars of
each  Eurocurrency  Loan made in an Alternative  Currency shall be  recalculated
hereunder on each date that it shall be necessary (or the  Administrative  Agent
shall elect) to determine the unused portion of each Lender's Commitment, or any
or all Loan or Loans  outstanding on such date; (B) the equivalent in Dollars of
any Unpaid Drawing in respect of any Letter of Credit denominated in an

                                                        22

<PAGE>



Alternative  Currency  shall be  determined  at the time the drawing  under such
Letter  of  Credit  was paid or  disbursed  by the  applicable  Letter of Credit
Issuer;  (C) for purposes of sections 2.1(a),  3.1(b) and 5.2(a), the equivalent
in  Dollars  of the  Stated  Amount of any  Letter of Credit  denominated  in an
Alternative  Currency shall be calculated (x) on the date of the issuance of the
respective  Letter of Credit,  (y) on the first  Business  Day of each  calendar
month  thereafter  and (z) in any  other  case  where  the same is  required  or
permitted to be calculated,  on such other day as the Administrative  Agent may,
in its sole discretion,  consider appropriate;  and (D) for purposes of sections
4.1(b) and (c), the  equivalent in Dollars of the Stated Amount of any Letter of
Credit  denominated in an Alternative  Currency shall be calculated on the first
day of each  calendar  month in the  quarterly  period in which  the  respective
payment is due pursuant to said sections.

         SECTION 2.        AMOUNT AND TERMS OF LOANS.

         2.1 Commitments for Loans. Subject to and upon the terms and conditions
herein set forth,  each Lender  severally agrees to make a loan or loans (each a
"Loan" and, collectively,  the "Loans") to the respective Borrowers, which Loans
shall be drawn,  to the extent  such Lender has a  commitment  under a Facility,
under the applicable Facility, as set forth below:

                  (a) Term Loan  Facility.  Loans  under the Term Loan  Facility
         (each a "Term Loan" and, collectively,  the "Term Loans"): (i) may only
         be incurred by the Company; (ii) are to be made pursuant to a Borrowing
         on the Initial Borrowing Date; (iii) except as otherwise provided, may,
         at the  option  of the  Company,  be  incurred  and  maintained  as, or
         converted  into, Term Loans which are Prime Rate Loans, or Eurocurrency
         Loans denominated in Dollars, provided that all Term Loans made as part
         of the same Borrowing  shall,  unless otherwise  specifically  provided
         herein,  consist  of Term  Loans of the same  Type;  and (iv) shall not
         exceed for any Lender at the time of  incurrence  thereof the aggregate
         principal amount of the Term Loan Commitment, if any, of such Lender at
         such time. Once prepaid or repaid, Term Loans may not be reborrowed.

                  (b) Revolving  Facility.  Loans under the  Revolving  Facility
         (each a "Revolving Loan" and, collectively, the "Revolving Loans"): (i)
         may be  incurred  by any  Borrower,  provided  that  (A) the  aggregate
         principal  amount of the Revolving  Loans of the Company may not exceed
         $7,500,000 at any time,  and (B) the principal  amount of the Revolving
         Loans of the German  Borrower and the British  Borrower may not exceed,
         in the aggregate for both such Borrowers,  $2,000,000 at any time; (ii)
         may be made at any time and from time to time on and after the  Initial
         Borrowing  Date  and  prior  to the  Maturity  Date;  (iii)  except  as
         otherwise provided,  may, at the option of the applicable Borrower,  be
         incurred and maintained as, or converted  into,  Revolving  Loans which
         are Prime Rate Loans, or Eurocurrency  Loans  denominated in Dollars or
         in an Alternative  Currency,  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 currency and
         Type;  (iv) may be repaid or prepaid and reborrowed in accordance  with
         the provisions  hereof;  and (v) shall not exceed for any Lender at any
         time outstanding that aggregate

                                                        23

<PAGE>



         principal  amount which,  when added to the product at such time of (A)
         such Lender's  Revolving Facility  Percentage,  times (B) the aggregate
         Letter of Credit Outstandings,  equals the Revolving Commitment of such
         Lender  at  such  time.  Revolving  Loans  to  the  Company  which  are
         Eurocurrency Loans may only be denominated in Dollars.

         2.2 Minimum  Borrowing  Amounts,  etc.;  Pro Rata  Borrowings.  (a) The
aggregate  principal  amount of each Borrowing by any Borrower shall not be less
than the Minimum  Borrowing  Amount.  More than one Borrowing may be incurred by
any Borrower on any day,  provided that (i) if there are two or more  Borrowings
on a single day by the same Borrower  under the same  Facility  which consist of
Eurocurrency  Loans denominated in the same currency,  each such Borrowing shall
have a different  initial  Interest  Period,  and at no time shall there be more
than 10 Borrowings of Eurocurrency Loans outstanding hereunder.

         (b) All Borrowings under a Facility shall be made by the Lenders having
Commitments  under  such  Facility  pro rata on the  basis  of their  respective
Commitments  under  such  Facility.  It is  understood  that no Lender  shall be
responsible  for any default by any other Lender in its obligation to make Loans
hereunder and that each Lender shall be obligated to make the Loans  provided to
be made by it  hereunder,  regardless  of the  failure  of any  other  Lender to
fulfill its Commitments hereunder.

         2.3 Notice of  Borrowing.  (a) Whenever  any Borrower  desires to incur
Loans,  the  Company  (on  behalf of any  applicable  Borrower)  shall  give the
Administrative Agent at its Notice Office,

                  (A) prior to 11:00 A.M. (local time at its Notice Office),  at
         least three Business  Days' prior written or telephonic  notice (in the
         case  of  telephonic  notice,  promptly  confirmed  in  writing  if  so
         requested   by  the   Administrative   Agent)  of  each   Borrowing  of
         Eurocurrency Loans denominated in Dollars to be made hereunder,

                  (B) prior to 11:00 A.M. (local time at its Notice Office),  at
         least five Business  Days' prior  written or telephonic  notice (in the
         case  of  telephonic  notice,  promptly  confirmed  in  writing  if  so
         requested by the  Administrative  Agent) of each Borrowing of Revolving
         Loans  consisting of Eurocurrency  Loans  denominated in an Alternative
         Currency to be made hereunder, and

                  (C) prior to 11:00 A.M.  (local time at its Notice  Office) on
         the proposed date thereof written or telephonic  notice (in the case of
         telephonic notice, promptly confirmed in writing if so requested by the
         Administrative  Agent) of each Borrowing of Prime Rate Loans to be made
         hereunder.

Each such notice (each such notice, a "Notice of Borrowing") shall (if requested
by the Administrative Agent to be confirmed in writing), be substantially in the
form of Exhibit B-1, and in any event shall be  irrevocable  and shall  specify:
(i) the Facility under which the Borrowing is to

                                                        24

<PAGE>



be  incurred,  (ii) the name of the Borrower  which is to incur such  Borrowing,
(iii) the  aggregate  principal  amount of the Loans to be made pursuant to such
Borrowing;  (iv) the date of the Borrowing  (which shall be a Business Day); (v)
whether the Borrowing shall consist of Prime Rate Loans or  Eurocurrency  Loans;
(vi) if the requested  Borrowing  consists of Eurocurrency  Loans,  the Interest
Period to be initially  applicable thereto; and (vii) in the case of a requested
Borrowing  consisting  of  Revolving  Loans which are  Eurocurrency  Loans,  the
currency,  if other than Dollars,  in which such Revolving  Loans are requested.
The Administrative  Agent shall promptly give each Lender which has a commitment
under any applicable  Facility  written notice (or  telephonic  notice  promptly
confirmed in writing) of each proposed Borrowing under the applicable  Facility,
of such Lender's proportionate share thereof and of the other matters covered by
the Notice of Borrowing  relating thereto.  Each Borrower other than the Company
hereby authorizes the Company to give any Notice of Borrowing on its behalf.

         (b) In the case of a proposed  Borrowing  comprised of Revolving  Loans
which  are  Eurocurrency  Loans  denominated  in an  Alternative  Currency,  the
obligation  of  each  affected  Lender  to  make  its  Eurocurrency  Loan in the
requested Alternative Currency as part of such Borrowing is subject to:

                  (A) if such requested  Alternative  Currency is an Alternative
         Currency  described  in  clause  (i) of  the  definition  of  the  term
         Alternative  Currency,  the confirmation by the Administrative Agent to
         the Company (on behalf of any  applicable  Borrower) not later than the
         fourth  Business Day before the requested  date of such  Borrowing that
         such  Alternative  Currency  is  readily  and freely  transferable  and
         convertible into Dollars, or

                  (B)  if  such  requested   Alternative   Currency  is  not  an
         Alternative  Currency  described in clause (i) of the definition of the
         term  Alternative  Currency,  the  confirmation  by such  Lender to the
         Administrative  Agent not later than the fourth Business Day before the
         requested  date of such  Borrowing  that such  Alternative  Currency is
         acceptable  to  such  Lender,  which  confirmation  shall  be  notified
         immediately  by the  Administrative  Agent to the Company (on behalf of
         any applicable Borrower).

If the Administrative Agent shall not have provided the confirmation referred to
in clause (A) above,  or any  affected  Lender shall not have so provided to the
Administrative  Agent the  confirmation  referred  to in clause (B)  above,  the
Administrative  Agent  shall  promptly  notify  the  Company  (on  behalf of any
applicable Borrower) and each affected Lender that a Lender has not provided any
such  confirmation  referred to in such clause  (B),  whereupon  the Company (on
behalf of any applicable  Borrower) may, by notice to the  Administrative  Agent
not  later  than the  third  Business  Day  before  the  requested  date of such
Borrowing,   withdraw  the  Notice  of  Borrowing  relating  to  such  requested
Borrowing.  If the  Company  (on  behalf  of any  applicable  Borrower)  does so
withdraw  such Notice of Borrowing,  the  Borrowing  requested in such Notice of
Borrowing shall not occur and the Administrative  Agent shall promptly so notify
each affected Lender. If the Company (on behalf of any applicable Borrower) does
not so  withdraw  such  Notice of  Borrowing,  the  Administrative  Agent  shall
promptly so notify each affected Lender and such

                                                        25

<PAGE>



Notice of Borrowing shall be deemed to be a Notice of Borrowing which requests a
Borrowing of Revolving  Loans  comprised of  Eurocurrency  Loans  denominated in
Dollars  and in an  aggregate  amount  of  Dollars  equivalent,  on the date the
Administrative  Agent so notifies  each  affected  Lender,  to the amount of the
originally requested Borrowing in an Alternative Currency; and in such notice by
the Administrative  Agent to each affected Lender the Administrative Agent shall
state such  aggregate  equivalent  amount of such  Borrowing in Dollars and such
Lender's ratable portion of such Borrowing. Each Borrower other than the Company
hereby  authorizes  the  Company  to give or  receive  on its  behalf any notice
referred to above.

         (c)  Without in any way  limiting  the  obligation  of the  Company (on
behalf of any applicable  Borrower) to confirm in writing any telephonic  notice
permitted  to be given  hereunder,  the  Administrative  Agent  may act prior to
receipt  of  written  confirmation  without  liability  upon  the  basis of such
telephonic notice believed by the Administrative  Agent in good faith to be from
an Authorized  Officer of the Company entitled to give telephonic  notices under
this  Agreement on behalf of any  applicable  Borrower.  In each such case,  the
Administrative  Agent's record of the terms of such  telephonic  notice shall be
conclusive absent manifest error.

         2.4 Disbursement of Funds from Borrowings.  (a) No later than 2:00 P.M.
(local  time at the  Payment  Office  of the  Administrative  Agent) on the date
specified in each Notice of Borrowing  relating to  Eurocurrency  Loans,  and no
later than 2:00 P.M.  (local  time at the Payment  Office of the  Administrative
Agent) on the date specified in each Notice of Borrowing  relating to Prime Rate
Loans,  each Lender with a Commitment under the applicable  Facility relating to
such Loans will make  available  its pro rata share,  if any, of each  Borrowing
under such  Facility  requested  to be made on such date in the manner  provided
below.  All  amounts  relating  to any  Borrowing  by a  Borrower  shall be made
available  to the  Administrative  Agent  in  U.S.  dollars  or  the  applicable
Alternative  Currency  and  immediately  available  funds at the  Administrative
Agent's Payment Office and the Administrative Agent promptly will make available
to the applicable  Borrower by depositing to its account at such Payment Office,
or at such other  account in another  financial  institution  designated by such
Borrower  to the  Administrative  Agent,  the  aggregate  of the amounts so made
available in the currency and type of funds received.  Unless the Administrative
Agent shall have been  notified  by any Lender  prior to the date of a Borrowing
that such Lender does not intend to make available to the  Administrative  Agent
its  portion  of the  Borrowing  or  Borrowings  to be made on  such  date,  the
Administrative  Agent may assume that such Lender has made such amount available
to the  Administrative  Agent on such date of Borrowing,  and the Administrative
Agent, in reliance upon such assumption, may (in its sole discretion and without
any  obligation  to  do  so)  make  available  to  the  applicable   Borrower  a
corresponding amount. If such corresponding amount is not in fact made available
to the Administrative Agent by such Lender and the Administrative Agent has made
available same to the applicable  Borrower,  the  Administrative  Agent shall be
entitled to recover such  corresponding  amount from such Lender. If such Lender
does not pay such corresponding amount forthwith upon the Administrative Agent's
demand therefor,  the Administrative Agent shall promptly notify the Company (on
behalf  of  any  applicable   Borrower),   and  the  applicable  Borrower  shall
immediately  pay such  corresponding  amount to the  Administrative  Agent.  The
Administrative

                                                        26

<PAGE>



Agent  shall also be  entitled  to recover  from such  Lender or the  applicable
Borrower,  as the case may be, interest on such corresponding  amount in respect
of each day from the date such  corresponding  amount was made  available by the
Administrative  Agent to the applicable  Borrower to the date such corresponding
amount is recovered by the Administrative Agent at a rate per annum equal to (x)
if paid by such Lender,  the overnight  Federal Funds  Effective  Rate or (y) if
paid  by  the  applicable  Borrower,  the  then  applicable  rate  of  interest,
calculated in accordance  with section 2.7, for the respective Loan (but without
any requirement to pay any amounts in respect thereof pursuant to section 2.10).

         (b) Nothing  herein and no subsequent  termination  of the  Commitments
pursuant  to section  4.2 or 4.3 shall be deemed to relieve  any Lender from its
obligation to fulfill its  commitments  hereunder and in existence  from time to
time or to  prejudice  any rights which any Borrower may have against any Lender
as a result of any default by such Lender hereunder.

         2.5  Notes.  (a)  Each  applicable  Borrower's  obligation  to pay  the
principal  of, and  interest  on, the Loans made to it by each  Lender  shall be
evidenced (i) if a Term Loan, by a promissory note of the Company  substantially
in the form of  Exhibit  A-1 (each a "Term  Note" and,  collectively,  the "Term
Notes") and (ii) if a Revolving  Loan,  by a promissory  note of the  applicable
Borrower  substantially  in the form of Exhibit  A-2 with  blanks  appropriately
completed in conformity herewith (each a "Revolving Note" and, collectively, the
"Revolving Notes").

         (b) The Term Note issued to a Lender with a Term Loan Commitment shall:
(i) be executed by the Company;  (ii) be payable to the order of such Lender and
be  dated  on or  prior  to the  Initial  Borrowing  Date;  (iii) be in a stated
principal amount equal to the Term Loan Commitment of such Lender and be payable
in the  principal  amount of Term Loans  evidenced  thereby;  (iv) mature on the
Maturity  Date;  (v) bear  interest as provided in section 2.7 in respect of the
Prime Rate Loans or Eurocurrency  Loans, as the case may be, evidenced  thereby;
(vi) provide for  installment  payments of principal  thereof in accordance with
section 5.2(b);  (vii) be subject to mandatory prepayment as provided in section
5.2;  and (viii) be entitled to the  benefits  of this  Agreement  and the other
Credit Documents.

         (c) The  Revolving  Note  issued  by any  Borrower  to a Lender  with a
Revolving Commitment shall: (i) be executed by such Borrower; (ii) be payable to
the order of such Lender and be dated on or prior to the Initial Borrowing Date;
(iii) be payable in the principal  amount of Revolving Loans evidenced  thereby;
(iv) mature on the Maturity  Date;  (v) bear interest as provided in section 2.7
in respect of the Prime Rate Loans or  Eurocurrency  Loans,  as the case may be,
evidenced  thereby;  (vi) be subject to  mandatory  prepayment  as  provided  in
section  5.2; and (vii) be entitled to the  benefits of this  Agreement  and the
other Credit Documents.

         (d) Each  Lender 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 the  Notes  issued  to it by any  Borrower,  endorse  on the
reverse side thereof or the grid attached thereto the outstanding

                                                        27

<PAGE>



principal amount of Loans evidenced  thereby.  Failure to make any such notation
or any error in any such notation shall not affect any Borrower's obligations in
respect of such Loans.

         2.6 Voluntary  Conversion of Dollar  Denominated  Loans.  Each 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 its Loans denominated in Dollars of one Type owing by it pursuant to a
single Facility into a Borrowing or Borrowings  pursuant to the same Facility of
another Type of Loans  denominated in Dollars which can be made pursuant to such
Facility,   provided  that:  (i)  no  partial   conversion  of  a  Borrowing  of
Eurocurrency  Loans  shall  reduce  the  outstanding  principal  amount  of  the
Eurocurrency  Loans made  pursuant  to such  Borrowing  to less than the Minimum
Borrowing Amount applicable  thereto;  (ii) any conversion of Eurocurrency Loans
into Prime Rate Loans shall be made on, and only on, the last day of an Interest
Period for such Eurocurrency Loans; (iii) Prime Rate Loans may only be converted
into Eurocurrency  Loans if no Default under section 10.1(a) or Event of Default
is in  existence  on the date of the  conversion  unless  the  Required  Lenders
otherwise agree;  and (iv) Borrowings of Eurocurrency  Loans resulting from this
section  2.6  shall  conform  to the  requirements  of  section  2.2.  Each such
conversion shall be effected by such Borrower giving the Administrative Agent at
its Notice Office,  prior to 11:00 A.M. (local time at such Notice  Office),  at
least three  Business  Days' (or prior to 11:00 A.M.  (local time at such Notice
Office) same Business  Day's, in the case of a conversion into Prime Rate Loans)
prior written notice (or telephonic  notice promptly  confirmed in writing if so
requested  by  the  Administrative  Agent)  (each  a  "Notice  of  Conversion"),
substantially  in the  form  of  Exhibit  B-2,  specifying  the  Loans  to be so
converted, the Type of Loans to be converted into and, if to be converted into a
Borrowing of Eurocurrency Loans, the Interest Period to be initially  applicable
thereto.  The  Administrative  Agent shall give each Lender prompt notice of any
such proposed conversion affecting any of its Loans. For the avoidance of doubt,
the prepayment or repayment of any Revolving  Loans out of the proceeds of other
Revolving  Loans by a Borrower is not considered a conversion of Revolving Loans
into other Revolving Loans.

         2.7  Interest on Loans.  (a) The unpaid  principal  amount of each Loan
which is a Prime Rate Loan shall bear  interest  from the date of the  Borrowing
thereof until maturity  (whether by  acceleration or otherwise) at a fluctuating
rate per annum  which  shall at all  times be equal to the Prime  Rate in effect
from time to time.

         (b) The unpaid  principal  amount of each Loan which is a  Eurocurrency
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  Eurocurrency  Margin (as defined  below) for such Loan
plus the relevant Eurocurrency Rate.

         (c)  Notwithstanding  the above provisions,  if a Default under section
10.1(a)  or Event  of  Default  is in  existence,  all  outstanding  amounts  of
principal and, to the extent permitted by law, all overdue interest,  in respect
of each Loan shall bear interest,  payable on demand,  at a rate per annum equal
to 2% per annum above the interest rate  otherwise  applicable  thereto.  If any
amount

                                                        28

<PAGE>



(other than the principal of and interest on the Loans)  payable by any Borrower
under the  Credit  Documents  is not paid  when  due,  such  amount  shall  bear
interest,  payable  on  demand,  at a rate per annum  equal to the Prime Rate in
effect from time to time plus 2% per annum.

         (d) Interest  shall accrue from and including the date of any Borrowing
to but  excluding the date of any  prepayment or repayment  thereof and shall be
payable (i) in respect of each Prime Rate Loan, quarterly in arrears on the last
Business Day of March,  June,  September and  December,  (ii) in respect of each
Eurocurrency  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 the dates
which are  successively  three months after the  commencement  of such  Interest
Period,  and (iii) in respect of each Loan, on any  prepayment or conversion (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 13.7(b).

         (f) Each  Reference  Bank  agrees to furnish the  Administrative  Agent
timely  information for the purpose of determining the Eurocurrency Rate for any
Borrowing  consisting of Eurocurrency Loans. If any one or more of the Reference
Banks shall not timely furnish such information,  the Administrative Agent shall
determine the Eurocurrency Rate on the basis of timely information  furnished by
the remaining  Reference  Banks. The  Administrative  Agent upon determining the
interest rate for any Borrowing  shall promptly notify the Company (on behalf of
any applicable Borrower) and the Lenders thereof.

         2.8  Interest  Periods.  (a) At the time the  Company (on behalf of any
applicable  Borrower)  gives a Notice of  Borrowing or Notice of  Conversion  in
respect of the making of, or conversion into, a Borrowing of Eurocurrency  Loans
(in the case of the  initial  Interest  Period  applicable  thereto) or prior to
11:00 A.M.  (local time at the  applicable  Notice Office) on the third Business
Day prior to the expiration of an Interest  Period  applicable to a Borrowing of
Eurocurrency  Loans,  it shall  have the  right  (on  behalf  of any  applicable
Borrower)  to elect by giving the  Administrative  Agent  written or  telephonic
notice (in the case of telephonic  notice,  promptly  confirmed in writing if so
requested by the Administrative Agent) of the Interest Period applicable to such
Borrowing,  which Interest Period shall, at the option of the Company (on behalf
of any  applicable  Borrower),  be a  one,  two,  three  or  six  month  period.
Notwithstanding anything to the contrary contained above:

                  (i)  the  initial   Interest   Period  for  any  Borrowing  of
         Eurocurrency  Loans  shall  commence  on the  date  of  such  Borrowing
         (including  the date of any  conversion  from a Borrowing of Prime 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;


                                                        29

<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 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 in respect of such Loans if,
         after giving  effect to the  selection  of such  Interest  Period,  the
         aggregate  principal  amount of Term Loans  maintained as  Eurocurrency
         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;

                  (v) no  Interest  Period  for any Loan may be  selected  which
         would end after the Maturity Date; and

                  (vi) no  Interest  Period  may be  elected  at any time when a
         Default  under  section  10.1(a)  or an  Event  of  Default  is then in
         existence unless the Required Lenders otherwise agree.

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

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

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


                                                        30

<PAGE>



                  (ii) at any time, that such Lender shall incur increased costs
         or  reductions in the amounts  received or  receivable  hereunder in an
         amount   which  such  Lender  deems   material   with  respect  to  any
         Eurocurrency  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 any change
         since the Effective  Date in any  applicable  law,  governmental  rule,
         regulation,  guideline,  order or  request  (whether  or not having the
         force of law), or in the  interpretation or administration  thereof and
         including  the  introduction  of  any  new  law or  governmental  rule,
         regulation,  guideline, order or request (such as, for example, but not
         limited  to, a change in  official  reserve  requirements,  but, in all
         events, excluding reserves includable in the Eurocurrency Rate pursuant
         to the definition thereof); or

                  (iii) at any  time,  that the  making  or  continuance  of any
         Eurocurrency Loan denominated in Dollars or in an Alternative  Currency
         has become unlawful by compliance by such Lender in good faith with any
         change  since  the  Effective  Date  in  any  law,  governmental  rule,
         regulation,  guideline or order, or the  interpretation  or application
         thereof, or would conflict with any thereof not having the force of law
         but with which such Lender customarily complies;

then,  and in any such event,  such Lender (or the  Administrative  Agent in the
case of clause (i) above) shall (x) on such date and (y) within 10 Business Days
of the date on which  such event no longer  exists  give  notice  (by  telephone
confirmed in writing) to the Company (on behalf of any applicable  Borrower) and
to  the   Administrative   Agent  of  such   determination   (which  notice  the
Administrative  Agent shall  promptly  transmit to each of the other  applicable
Lenders).  Thereafter  (x) in the case of clause (i) above,  Eurocurrency  Loans
shall no  longer  be  available  until  such  time as the  Administrative  Agent
notifies the Company (on behalf of the applicable  Borrowers) and the applicable
Lenders that the circumstances  giving rise to such notice by the Administrative
Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given
by or on behalf of a Borrower with respect to Eurocurrency  Loans which have not
yet been incurred or converted shall be deemed rescinded by such Borrower or, in
the case of a Notice of  Borrowing,  shall,  at the  option of the  Company  (on
behalf of such  Borrower),  be deemed  converted  into a Notice of Borrowing for
Prime Rate Loans to be made on the date of Borrowing contained in such Notice of
Borrowing,  (y) in the case of clause (ii) above, the applicable  Borrower shall
pay to such Lender,  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 Lender shall  determine) as shall be required to compensate
such  Lender,  for such  increased  costs or  reductions  in amounts  receivable
hereunder (a written  notice as to the  additional  amounts owed to such Lender,
showing the basis for the calculation  thereof,  which basis must be reasonable,
submitted  to the Company  (on behalf of such  Borrower)  by such Lender  shall,
absent  manifest  error,  be final and  conclusive  and binding upon all parties
hereto) and (z) in the case of clause (iii) above, the applicable Borrower shall
take one of the actions specified in section 2.9(b) as promptly as possible and,
in any event, within the time period required by law.


                                                        31

<PAGE>



         (b)  At  any  time  that  any  Eurocurrency  Loan  is  affected  by the
circumstances  described in section 2.9(a)(ii) or (iii), the applicable Borrower
may  (and in the  case of a  Eurocurrency  Loan  affected  pursuant  to  section
2.9(a)(iii)   the  applicable   Borrower  shall)  either  (i)  if  the  affected
Eurocurrency  Loan is then being made  pursuant  to a  Borrowing,  by giving the
Administrative  Agent  telephonic  notice  (confirmed  promptly  in  writing  if
requested)  thereof on the same date that such Borrower was notified by a Lender
pursuant to section  2.9(a)(ii)  or (iii),  cancel said  Borrowing,  convert the
related  Notice of Borrowing into one requesting a Borrowing of Prime Rate Loans
or require the affected  Lender to make its requested Loan as a Prime Rate Loan,
or (ii) if the affected Eurocurrency Loan is then outstanding, upon at least one
Business Days notice to the Administrative Agent, require the affected Lender to
convert each such  Eurocurrency  Loan into a Prime Rate Loan,  provided  that if
more than one Lender is affected at any time, then all affected  Lenders must be
treated the same pursuant to this section 2.9(b).

         (c) If any Lender shall have  determined that after the Effective Date,
the  adoption  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 by law with the  interpretation  or  administration  thereof,  or
compliance  by such  Lender  or its  parent  corporation  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,  in each case made
subsequent to the Effective Date, has or would have the effect of reducing by an
amount  reasonably  deemed by such Lender to be  material  the rate of return on
such Lender's or its parent corporation's  capital or assets as a consequence of
such Lender's  commitments or obligations  hereunder to a level below that which
such Lender or its parent corporation could have achieved but for such adoption,
effectiveness,  change or compliance (taking into consideration such Lender's or
its parent corporation's  policies with respect to capital adequacy),  then from
time to time,  within 15 days after  demand by such  Lender  (with a copy to the
Administrative  Agent),  each applicable  Borrower shall pay to such Lender such
additional  amount or  amounts  as will  compensate  such  Lender or its  parent
corporation for such reduction. Each Lender, upon determining in good faith that
any additional  amounts will be payable  pursuant to this section  2.9(c),  will
give prompt  written notice thereof to the Company (who will in turn give notice
to the other Borrowers), which notice shall set forth, in reasonable detail, the
basis  of the  calculation  of such  additional  amounts,  which  basis  must be
reasonable,  although  the failure to give any such notice  shall not release or
diminish  any  applicable  Borrower's  obligations  to  pay  additional  amounts
pursuant to this section 2.9(c) upon the subsequent receipt of such notice.

         (d) Notwithstanding  anything in this Agreement to the contrary, (i) no
Lender shall be entitled to  compensation or payment or  reimbursement  of other
amounts under section 2.9, 3.5 or 5.4 for any amounts  incurred or accruing more
than 180 days prior to the giving of notice to the Company of  additional  costs
or other amounts of the nature  described in such  sections,  and (ii) no Lender
shall demand  compensation  for any reduction  referred to in section  2.9(c) or
payment or  reimbursement  of other amounts under section 3.5 or 5.4 if it shall
not at the time be the general

                                                        32

<PAGE>



policy or  practice  of such  Lender to demand  such  compensation,  payment  or
reimbursement  in similar  circumstances  under  comparable  provisions of other
credit agreements.

         2.10  Compensation.  Each  applicable  Borrower shall  compensate  each
applicable  Lender,  upon its written request (which request shall set forth the
detailed basis for requesting and the method of calculating 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 Lender to fund its
Eurocurrency Loans) which such Lender may sustain:  (i) if for any reason (other
than a  default  by such  Lender or the  Administrative  Agent) a  Borrowing  of
Eurocurrency  Loans by such Borrower does not occur on a date specified therefor
in a Notice of Borrowing or Notice of Conversion (whether or not withdrawn by or
on behalf of such Borrower or deemed withdrawn pursuant to section 2.9(a)); (ii)
if any  repayment,  prepayment or conversion  of any of its  Eurocurrency  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 Eurocurrency Loans is not made on
any date  specified  in a notice  of  prepayment  given by or on  behalf of such
Borrower;  or (iv) as a consequence of (x) any other default by such Borrower to
repay its Eurocurrency Loans when required by the terms of this Agreement or (y)
an election made pursuant to section 2.9(b).

         2.11 Change of Lending Office;  Replacement of Lenders. (a) Each Lender
agrees that,  upon the  occurrence  of any event giving rise to the operation of
section 2.9(a)(ii) or (iii),  2.9(c), 3.5 or 5.4 with respect to such Lender, it
will, if requested by the Company (on behalf of any  applicable  Borrower),  use
reasonable efforts (subject to overall policy  considerations of such Lender) to
designate another Applicable Lending Office for any Loans or Commitment affected
by such event,  provided that such  designation  is made on such terms that such
Lender and its Applicable 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.

         (b) If any Lender  requests any  compensation,  reimbursement  or other
payment  under section  2.9(a)(ii) or (iii),  2.9(c) or 3.5 with respect to such
Lender,  or if any applicable  Borrower is required to pay any additional amount
to any Lender or  governmental  authority  pursuant  to section  5.4,  or if any
Lender is a  Defaulting  Lender,  then the Company  may, at its sole expense and
effort,  upon notice to such Lender and the Administrative  Agent,  require such
Lender  to  assign  and  delegate,  without  recourse  (in  accordance  with the
restrictions  contained  in  section  13.4(b)),  all its  interests,  rights and
obligations  under  this  Agreement  to  an  assignee  that  shall  assume  such
obligations  (which  assignee may be another  Lender,  if a Lender  accepts such
assignment); provided that (i) the Company shall have received the prior written
consent of the  Administrative  Agent,  which consent shall not be  unreasonably
withheld, (ii) such Lender shall have received payment of an amount equal to the
outstanding  principal of its Loans, accrued interest thereon,  accrued fees and
all other amounts  payable to it hereunder,  from the assignee (to the extent of
such  outstanding  principal  and accrued  interest and fees) or any  applicable
Borrower (in the case of all other  amounts),  and (iii) in the case of any such
assignment  resulting  from a claim  for  compensation,  reimbursement  or other
payments required to be made under section

                                                        33

<PAGE>



2.9(a)(ii)  or (iii),  2.9(c) or 3.5 with respect to such  Lender,  or resulting
from any required payments to any Lender or governmental  authority  pursuant to
section 5.4, such  assignment  will result in a reduction in such  compensation,
reimbursement  or  payments.  A Lender  shall not be  required  to make any such
assignment and  delegation  if, prior  thereto,  as a result of a waiver by such
Lender or  otherwise,  the  circumstances  entitling the Company to require such
assignment and delegation cease to apply.

         (c) Nothing in this  section  2.11 shall  affect or postpone any of the
obligations of any Borrower or the right of any Lender  provided in section 2.9,
3.5 or 5.4.


         SECTION 3.        LETTERS OF CREDIT.

         3.1 Letters of Credit. (a) Subject to and upon the terms and conditions
herein set forth,  the Company may request a Letter of Credit Issuer at any time
and from time to time on or after the  Initial  Borrowing  Date and prior to the
date that is 15  Business  Days  prior to the  Maturity  Date to issue,  for the
account of the  Company or any of its  Subsidiaries  and in support of (i) trade
obligations of the Company and its Subsidiaries  incurred in the ordinary course
of business and/or (ii) worker compensation,  liability  insurance,  releases of
contract retention obligations,  contract performance guarantee requirements and
other bonding  obligations of the Company or any such Subsidiary incurred in the
ordinary  course of its business,  the Phoenix  Earnout,  and such other standby
obligations  of the  Company and its  Subsidiaries  that are  acceptable  to the
Letter of Credit Issuer, 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  documentary or standby letters of credit  denominated in Dollars or
an Alternative Currency in such form as may be approved by such Letter of Credit
Issuer  and the  Administrative  Agent  (each  such  letter of credit  (and each
Existing Letter of Credit described in section 3.1(d)), a "Letter of Credit" and
collectively, the "Letters of Credit").

         (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 at such time,  would exceed either (x) $8,000,000 or (y) when added
to the aggregate  principal amount of all Revolving Loans then  outstanding,  an
amount  equal to the Total  Revolving  Commitment  at such  time,  and (ii) each
Letter of Credit  shall have an expiry  date  (including  any  renewal  periods)
occurring  not later than the  earlier of (A) one year from the date of issuance
thereof  (two  years in the case of the Letter of Credit  issued to support  the
Phoenix  Earnout),  unless a longer period is approved by the relevant Letter of
Credit Issuer and Lenders (other than any Defaulting  Lender) holding a majority
of the  Total  Revolving  Commitment,  and (B) 15  Business  Days  prior  to the
Maturity Date, in each case on terms acceptable to the Administrative  Agent and
the relevant Letter of Credit Issuer.

         (c)  Notwithstanding  the  foregoing,  in the  event a  Lender  Default
exists,  no Letter of Credit  Issuer  shall be  required  to issue any Letter of
Credit  unless  either  (i) such  Letter  of  Credit  Issuer  has  entered  into
arrangements satisfactory to it and the Company to eliminate such Letter

                                                        34

<PAGE>



of Credit Issuer's risk with respect to the  participation  in Letters of Credit
of the Defaulting Lender or Lenders,  including by cash such Defaulting Lender's
or  Lenders'  Percentage  of the  Letter  of  Credit  Outstandings;  or (ii) the
issuance of such Letter of Credit,  taking into account the potential failure of
the Defaulting Lender or Lenders to risk participate therein, will not cause the
Letter of Credit  Issuer  to incur  aggregate  credit  exposure  hereunder  with
respect to Revolving  Loans and Letter of Credit  Outstandings  in excess of its
Revolving  Commitment,  and the Company has  undertaken  for the benefit of such
Letter of Credit  Issuer,  pursuant to an  instrument  satisfactory  in form and
substance  to such Letter of Credit  Issuer,  not to  thereafter  incur Loans or
Letter of Credit  Outstandings  hereunder which would cause the Letter of Credit
Issuer to incur aggregate  credit  exposure  hereunder with respect to Revolving
Loans and Letter of Credit Outstandings in excess of its Revolving Commitment.

         (d) Annex VI hereto  contains a  description  of all  letters of credit
outstanding  on, and to continue in effect after,  the Initial  Borrowing  Date.
Each such  letter of credit  issued by a bank that is or becomes a Lender  under
this  Agreement on the  Effective  Date (each,  an "Existing  Letter of Credit")
shall  constitute  a "Letter  of Credit"  for all  purposes  of this  Agreement,
issued,  for purposes of section 3.4(a),  on the Initial Borrowing Date, and the
Company,  the Administrative Agent and the applicable Lenders hereby agree that,
from and after  such  date,  the  terms of this  Agreement  shall  apply to such
Letters of Credit,  superseding  any other agreement  theretofore  applicable to
them to the extent inconsistent with the terms hereof.

         3.2 Letter of Credit  Requests:  Notices of  Issuance.  (a) Whenever it
desires  that a  Letter  of  Credit  be  issued,  the  Company  shall  give  the
Administrative  Agent and the  Letter of Credit  Issuer  written  or  telephonic
notice (in the case of telephonic  notice,  promptly  confirmed in writing if so
requested by the  Administrative  Agent) which, if in the form of written notice
shall be  substantially  in the form of Exhibit B-3, prior to 11:00 A.M.  (local
time at its Notice  Office) at least three Business Days (or such shorter period
as may be  acceptable  to the  relevant  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 such supporting
documents that such letter of Credit Issuer  customarily  requites in connection
therewith  (including,  in the case of a Letter of Credit for an  account  party
other than the Company,  an application  for, and if applicable a  reimbursement
agreement with respect to, such Letter of Credit).  Any such documents  executed
in connection  with the issuance of a Letter of Credit,  including the Letter of
Credit itself,  are herein referred to as "Letter of Credit  Documents".  In the
event of any inconsistency  between any of the terms or provisions of any Letter
of Credit  Document and the terms and  provisions of this  Agreement  respecting
Letters of Credit, the terms and provisions of this Agreement shall control. The
Administrative  Agent shall promptly notify each Lender of each Letter of Credit
Request.

         (b) Each Letter of Credit Issuer shall, on the date of each issuance of
a Letter of Credit by it, give the Administrative  Agent, each applicable Lender
and the  Company  written  notice of the  issuance  of such  Letter  of  Credit,
accompanied  by a copy to the  Administrative  Agent of the  Letter of Credit or
Letters of Credit issued by it. Each Letter of Credit Issuer shall

                                                        35

<PAGE>



provide to the Administrative  Agent a quarterly (or monthly if requested by any
applicable  Lender)  summary  describing  each  Letter of Credit  issued by such
Letter of Credit  Issuer  and then  outstanding  and an  identification  for the
relevant period of the daily aggregate Letter of Credit Outstandings represented
by Letters of Credit issued by such Letter of Credit Issuer.

         3.3  Agreement  to Repay  Letter of Credit  Drawings.  (a) The  Company
hereby agrees to reimburse (or cause any  Subsidiary  for whose account a Letter
of Credit was  issued to  reimburse)  each  Letter of Credit  Issuer,  by making
payment directly to such Letter of Credit Issuer in immediately  available funds
at the  payment  office of such  Letter of Credit  Issuer,  for any  payment  or
disbursement  made by such  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, such Letter of Credit
Issuer  notifies  the Company (or any such  Subsidiary  for whose  account  such
Letter of Credit was issued) of such payment or  disbursement  (which  notice to
the Company (or such Subsidiary)  shall be delivered  reasonably  promptly after
any such  payment or  disbursement),  such payment to be made in Dollars (and in
the amount which is the Dollar  equivalent  of any such payment or  disbursement
made or denominated in an Alternative Currency),  with interest on the amount so
paid or disbursed by such Letter of Credit Issuer,  to the extent not reimbursed
prior to 1:00 P.M.  (local  time at the  payment  office of the Letter of Credit
Issuer) on the date of such payment or disbursement, from and including the date
paid or disbursed to but not  including the date such Letter of Credit Issuer is
reimbursed  therefor at a rate per annum which shall be the rate then applicable
to Revolving  Loans which are Prime Rate Loans (plus an  additional 3% per annum
if not  reimbursed  by the third  Business Day after the date of such payment or
disbursement), any such interest also to be payable on demand.

         (b) The Company's  obligation  under this section 3.3 to reimburse,  or
cause a Subsidiary  to  reimburse,  each 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 Company may have or have
had against such Letter of Credit Issuer,  the  Administrative  Agent, any other
Letter of Credit  Issuer  or any  Lender,  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  Company  shall  not be  obligated  to  reimburse,  or cause a
Subsidiary to reimburse, a Letter of Credit Issuer for any wrongful payment made
by such Letter of Credit  Issuer under a Letter of Credit as a result of acts or
omissions  constituting  willful  misconduct  or  negligence on the part of such
Letter of Credit Issuer.

         3.4 Letter of Credit Participations.  (a) Immediately upon the issuance
by a Letter  of  Credit  Issuer of any  Letter  of  Credit  (and on the  Initial
Borrowing  Date with respect to any Existing  Letter of Credit),  such Letter of
Credit Issuer shall be deemed to have sold and transferred to each Lender with a
Commitment  under the  Revolving  Loan  Facility,  and each such Lender  (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

                                                        36

<PAGE>



interest and  participation,  to the extent of such Lender's  Revolving Facility
Percentage,  in such Letter of Credit,  each substitute  letter of credit,  each
drawing made  thereunder,  the  obligations  of the Company under this Agreement
with respect thereto  (although  Letter of Credit Fees shall be payable directly
to the  Administrative  Agent for the  account  of the  Lenders as  provided  in
section 4.1(b) and the  Participants  shall have no right to receive any portion
of any fees of the nature  contemplated by section  4.1(c)),  the obligations of
any  Subsidiary of the Company under any Letter of Credit  Documents  pertaining
thereto,  and any security for, or guaranty pertaining to, any of the foregoing.
Upon any change in the Revolving  Commitments of the Lenders pursuant to section
13.4(b),  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  3.4 to  reflect  the  new  Revolving
Facility Percentages of the assigning and assignee Lender.

         (b) In determining  whether to pay under any Letter of Credit, a 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  appear to comply on their
face with the requirements of such Letter of Credit. Any action taken or omitted
to be taken by a 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 such  Letter of Credit  Issuer any  resulting
liability.

         (c) In the event that a Letter of Credit Issuer makes any payment under
any Letter of Credit and the Company  shall not have  reimbursed  (or caused any
applicable Subsidiary to reimburse) such amount in full to such Letter of Credit
Issuer pursuant to section  3.3(a),  such Letter of Credit Issuer shall promptly
notify the  Administrative  Agent, and the  Administrative  Agent shall promptly
notify each Participant of such failure, and each Participant shall promptly and
unconditionally  pay to the Administrative  Agent for the account of such Letter
of Credit Issuer, the amount of such Participant's Revolving Facility Percentage
of such payment in U.S. Dollars (the  Administrative  Agent having determined in
the case of any  payment  by a Letter of Credit  Issuer  made in an  Alternative
Currency the  equivalent  thereof in Dollars)  and in same day funds,  provided,
however,  that no  Participant  shall be obligated to pay to the  Administrative
Agent its  Revolving  Facility  Percentage of such  unreimbursed  amount for any
wrongful  payment made by such 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 such Letter of Credit  Issuer.  If the  Administrative
Agent so notifies any  Participant  required to fund a payment under a Letter of
Credit  prior to 11:00 A.M.  (local time at its Notice  Office) on any  Business
Day, such Participant shall make available to the  Administrative  Agent for the
account of the relevant  Letter of Credit  Issuer such  Participant's  Revolving
Facility  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
Revolving  Facility  Percentage  of the amount of such payment  available to the
Administrative  Agent for the account of the relevant  Letter of Credit  Issuer,
such Participant  agrees to pay to the  Administrative  Agent for the account of
such 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

                                                        37

<PAGE>



paid to the Administrative Agent for the account of such Letter of Credit Issuer
at the Federal Funds  Effective  Rate.  The failure of any  Participant  to make
available to the Administrative  Agent for the account of the relevant Letter of
Credit Issuer its Revolving Facility  Percentage of any payment under any Letter
of Credit shall not relieve any other Participant of its obligation hereunder to
make  available  to the  Administrative  Agent for the account of such Letter of
Credit Issuer its Revolving Facility  Percentage of any payment under any Letter
of Credit on the date required,  as specified above, but no Participant shall be
responsible  for the failure of any other  Participant  to make available to the
Administrative  Agent for the account of such Letter of Credit Issuer such other
Participant's Revolving Facility Percentage of any such payment.

         (d)  Whenever  a Letter  of  Credit  Issuer  receives  a  payment  of a
reimbursement  obligation as to which the Administrative  Agent has received for
the account of such Letter of Credit Issuer any payments  from the  Participants
pursuant to section 3.4(c) above,  such Letter of Credit Issuer shall pay to the
Administrative  Agent and the  Administrative  Agent shall  promptly pay to each
Participant which has paid its Revolving Facility  Percentage  thereof,  in U.S.
dollars and in same day funds, an amount equal to such  Participant's  Revolving
Facility  Percentage  of the  principal  amount  thereof  and  interest  thereon
accruing  after the  purchase of the  respective  participations,  as and to the
extent so received.

         (e)  The  obligations  of the  Participants  to  make  payments  to the
Administrative  Agent for the  account  of each  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 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  Company  (or any  Subsidiary)  may  have at any time
         against a beneficiary  named in a Letter of Credit,  any  transferee of
         any Letter of Credit (or any person for whom any such transferee may be
         acting),  the  Administrative  Agent, any Letter of Credit Issuer,  any
         Lender, 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 Company
         (or any  Subsidiary)  and the  beneficiary  named in any such Letter of
         Credit),  other than any claim  which the  Company  (or any  Subsidiary
         which is the account party with respect to a Letter of Credit) may have
         against any applicable  Letter of Credit Issuer for gross negligence or
         wilful  misconduct  of such Letter of Credit  Issuer in making  payment
         under any applicable Letter of Credit;


                                                        38

<PAGE>



                  (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

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

         (f) To the extent the Letter of Credit Issuer is not indemnified by the
Company,  the  Participants  will  reimburse  and indemnify the Letter of Credit
Issuer, in proportion to their respective  Revolving Loan Facility  Percentages,
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
related 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,  claims,  actions,  judgments,  costs, expenses or
disbursements  resulting from the Letter of Credit Issuer's gross  negligence or
willful misconduct.

         3.5 Increased  Costs.  If after the Effective Date, the adoption 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 any Letter of Credit  Issuer or any Lender with any
request  or  directive  (whether  or not  having  the  force of law) by any such
authority,  central bank or comparable  agency (in each case made  subsequent to
the  Effective  Date) shall  either (i) impose,  modify or make  applicable  any
reserve,  deposit,  capital adequacy or similar  requirement  against Letters of
Credit  issued by such Letter of Credit  Issuer or such  Lender's  participation
therein,  or (ii) shall impose on such Letter of Credit Issuer or any Lender any
other conditions affecting this Agreement, any Letter of Credit or such Lender's
participation therein; and the result of any of the foregoing is to increase the
cost to such Letter of Credit Issuer or such Lender of issuing,  maintaining  or
participating  in any  Letter  of  Credit,  or to reduce  the  amount of any sum
received or receivable by such Letter of Credit Issuer or such Lender  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 Company by such Letter of Credit  Issuer or
such  Lender  (a copy of which  notice  shall be sent by such  Letter  of Credit
Issuer or such Lender to the  Administrative  Agent),  the Company  shall pay to
such Letter of Credit Issuer or such Lender such additional amount or amounts as
will  compensate  any such  Letter of  Credit  Issuer  or such  Lender  for such
increased  cost or  reduction.  A  certificate  submitted  to the Company by any
Letter  of  Credit  Issuer  or any  Lender,  as the case may be (a copy of which
certificate  shall be sent by such Letter of Credit Issuer or such Lender to the
Administrative  Agent),  setting forth, in reasonable  detail, the basis for the
determination of such additional  amount or amounts  necessary to compensate any
Letter of Credit  Issuer or such Lender as  aforesaid  shall be  conclusive  and
binding on the Company

                                                        39

<PAGE>



absent  manifest  error,  although  the failure to deliver any such  certificate
shall not release or diminish any of the Company's obligations to pay additional
amounts pursuant to this section 3.5. Reference is hereby made to the provisions
of section 2.9(d) for certain  limitations upon the rights of a Letter of Credit
Issuer or Lender under this section.

         3.6  Guaranty  of  Subsidiary  Letter  or Credit  Obligations.  (a) The
Company hereby unconditionally guarantees, for the benefit of the Administrative
Agent and the Lenders,  the full and punctual payment of the Obligations of each
Subsidiary  under each Letter of Credit Document to which such Subsidiary is now
or  hereafter  becomes  a party.  Upon  failure  by any such  Subsidiary  to pay
punctually  any such  amount,  the  Company  shall  forthwith  on  demand by the
Administrative Agent pay the amount not so paid at the place and in the currency
and otherwise in the manner specified in this Agreement or any applicable Letter
of Credit Document.

         (b) As a separate,  additional and continuing  obligation,  the Company
unconditionally  and irrevocably  undertakes and agrees,  for the benefit of the
Administrative  Agent  and  the  Lenders,   that,  should  any  amounts  not  be
recoverable  from the Company  under  section  3.6(a) for any reason  whatsoever
(including,  without  limitation,  by  reason  of any  provision  of any  Credit
Document or any other agreement or instrument  executed in connection  therewith
being or becoming void, unenforceable, or otherwise invalid under any applicable
law) then,  notwithstanding  any notice or knowledge thereof by any Lender,  the
Administrative Agent, any of their respective  Affiliates,  or any other person,
at any time, the Company as sole, original and independent obligor,  upon demand
by the Administrative  Agent, will make payment to the Administrative Agent, for
the account of the Lenders and the Administrative Agent, of all such obligations
not so recoverable by way of full  indemnity,  in such currency and otherwise in
such manner as is provided in the Credit Documents.

         (c)  The  obligations  of the  Company  under  this  section  shall  be
unconditional and absolute and, without limiting the generality of the foregoing
shall not be released,  discharged or otherwise affected by the occurrence,  one
or more times, of any of the following:

                  (i) any extension, renewal, settlement,  compromise, waiver or
         release in respect to any obligation of any Subsidiary under any Letter
         of Credit Document, by operation of law or otherwise;

                  (ii) any  modification  or amendment of or  supplement to this
         Agreement, any Note or any other Credit Document;

                  (iii) any release,  non-perfection or invalidity of any direct
         or indirect  security  for any  obligation  of the  Company  under this
         Agreement,  any Note or any other Credit  Document or of any Subsidiary
         under any Letter of Credit Document;

                  (iv) any  change  in the  corporate  existence,  structure  or
         ownership   of   any   Subsidiary   or  any   insolvency,   bankruptcy,
         reorganization or other similar proceeding

                                                        40

<PAGE>



         affecting  any  Subsidiary  or  its  assets or any resulting release or
         discharge of any obligation of any Subsidiary contained in any Letter 
         of Credit Document;

                  (v) the existence of any claim,  set-off or other rights which
         the  Company  may  have  at  any  time  against  any  Subsidiary,   the
         Administrative  Agent,  any  Lender or any  other  person,  whether  in
         connection herewith or any unrelated transactions;

                  (vi) any invalidity or unenforceability relating to or against
         any Subsidiary for any reason of any Letter of Credit Document,  or any
         provision of applicable  law or  regulation  purporting to prohibit the
         payment by any  Subsidiary of any  Obligations in respect of any Letter
         of Credit; or

                  (vii) any other act or omission to act or delay of any kind by
         any  Subsidiary,  the  Administrative  Agent,  any  Lender or any other
         person or any other  circumstance  whatsoever  which might, but for the
         provisions of this section,  constitute a legal or equitable  discharge
         of the Company's obligations under this section.

         (d) The Company's  obligations  under this section shall remain in full
force and effect until the  Commitments  shall have terminated and the principal
of and interest on the Notes and all other amounts  payable by the Company under
the Credit  Documents and by any Subsidiary under the Letter of Credit Documents
shall  have  been  paid  in  full.  If at any  time  any  payment  of any of the
Obligations  of any  Subsidiary in respect of any Letter of Credit  Documents is
rescinded  or must be  otherwise  restored  or  returned  upon  the  insolvency,
bankruptcy or reorganization of such Subsidiary, the Company's obligations under
this section with respect to such payment  shall be  reinstated  at such time as
though such payment had been due but not made at such time.

         (e) The Company  irrevocably  waives  acceptance  hereof,  presentment,
demand,  protest  and  any  notice  not  provided  for  herein,  as  well as any
requirement  that at any time any  action  be taken by any  person  against  any
Subsidiary  or any other  person,  or against any  collateral or guaranty of any
other person.

         (f) Until the  indefeasible  payment in full of all of the  Obligations
and the  termination of the  Commitments of the Lenders  hereunder,  the Company
shall have no rights, by operation of law or otherwise,  upon making any payment
under this  section to be  subrogated  to the  rights of the payee  against  any
Subsidiary  with  respect  to  such  payment  or  otherwise  to  be  reimbursed,
indemnified or exonerated by any Subsidiary in respect thereof.

         (g) In the  event  that  acceleration  of the time for  payment  of any
amount payable by any Subsidiary  under any Letter of Credit  Document is stayed
upon  insolvency,  bankruptcy or  reorganization  of such  Subsidiary,  all such
amounts  otherwise  subject to  acceleration  under the terms of any  applicable
Letter of Credit Document shall nonetheless be payable by the Company under this
section forthwith on demand by the Administrative Agent.


                                                        41

<PAGE>



         SECTION 4.        FEES; COMMITMENTS.

         4.1 Fees. (a) The Company agrees to pay to the  Administrative  Agent a
Commitment Fee ("Commitment Fee") for the account of each Non-Defaulting  Lender
which has a Revolving Commitment for the period from and including the Effective
Date to, but not  including,  the  Maturity  Date or, if earlier,  the date upon
which the Total Revolving Commitment has been terminated,  computed for each day
at a rate per annum equal to the Applicable  Commitment Fee Rate for such day on
such Lender's Unutilized  Revolving Commitment for such day. Such Commitment Fee
shall be due and  payable  in  arrears  on the last  Business  Day of each June,
September,  December and March and on the Maturity Date or, if earlier, the date
upon which the Total Revolving Commitment has been terminated.

         (b) The  Company  agrees to pay to the  Administrative  Agent,  for the
account of each  Non-Defaulting  Lender,  pro rata on the basis of its Revolving
Facility  Percentage,  a fee in respect of each Letter of Credit (the "Letter of
Credit  Fee"),  computed  for  each  day at the  rate  per  annum  equal  to the
Applicable  Eurocurrency  Margin  then in  effect  on the  Stated  Amount of all
Letters of Credit  outstanding on such day.  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  and on the date on which  the  Total  Revolving
Commitment is terminated.

         (c) The Company  agrees to pay directly to each Letter of Credit Issuer
upon each drawing under, and/or amendment,  extension, renewal or transfer of, a
Letter of Credit  issued by it such amount as shall at the time of such drawing,
amendment,  extension,  renewal or transfer be the  administrative  charge which
such Letter of Credit  Issuer is  customarily  charging  for  drawings  under or
amendments,  extensions,  renewals or transfers of,  letters of credit issued by
it.

         (d) The Company shall pay lo the Administrative  Agent on the Effective
Date and thereafter for its own account and/or for  distribution  to the Lenders
such fees as heretofore agreed by the Borrower and the Administrative Agent.

         (e) All  computations  of Fees shall be made in accordance with section
13.7(b).

         4.2 Voluntary  Reduction of  Commitments.  Upon at least three Business
Days' prior written  notice (or telephonic  notice  confirmed in writing) to the
Administrative Agent at its Notice Office (which notice the Administrative Agent
shall  promptly  transmit to each of the  Lenders),  the Company  shall have the
right (on behalf of all Borrowers),  without premium or penalty, to terminate or
to  partially  and  permanently   reduce  (x)  the  Unutilized  Total  Revolving
Commitment,  and/or (y) with the  consent of each  Lender  which has a Term Loan
Commitment,  the Unutilized  Total Term Loan  Commitment,  provided that (i) any
such  termination or reduction  shall apply to  proportionately  and permanently
reduce the Revolving Commitment or Term Loan Commitment,  as the case may be, if
any, of each of the  affected  Lenders,  and (ii) any partial  reduction  of the
Unutilized Total Revolving Commitment or Unutilized Total Term Loan

                                                        42

<PAGE>



Commitment,  as the case may be,  pursuant  to this  section 4.2 shall be in the
amount of at least $100,000 (or, if greater, in integral multiples of $100,000)

         4.3 Mandatory Adjustments of Commitments, etc. (a) The Total Commitment
(and the Term Loan Commitment and the Revolving Commitment of each Lender) shall
terminate on June 15, 1997, unless the Initial Borrowing Date has occurred on or
prior to such date.

         (b) The Total Term Loan Commitment  shall (i) be reduced at the time of
each  incurrence  of Term Loans in an amount  equal to the  aggregate  principal
amount of the Term  Loans so  incurred;  and (ii)  terminate  (and the Term Loan
Commitment  of each Lender shall  terminate)  on the earlier of (x) the Maturity
Date and (y) the date on which a Change of Control occurs.

         (c) The Total  Revolving  Commitment  (and the Revolving  Commitment of
each Lender) shall terminate on the earlier of (x) the Maturity Date and (y) the
date on which a Change of Control occurs.

         (d) The  Total  Revolving  Commitment  shall  be  permanently  reduced,
without  premium  or  penalty,  at the time  that any  mandatory  prepayment  of
Revolving  Loans would be made  pursuant to section  5.2(c),  (d), (e) or (g) if
Revolving Loans were then  outstanding in the full amount of the Total Revolving
Commitment,  in an amount at least equal to the required prepayment of principal
of Revolving Loans which would be required to be made in such circumstance.  Any
such  reduction  shall  apply to  proportionately  and  permanently  reduce  the
Revolving  Commitment of each of the affected Lenders, and any partial reduction
of the Total  Revolving  Commitment  pursuant to this section 4.3(d) shall be in
the amount of at least  $100,000  (or, if  greater,  in  integral  multiples  of
$100,000).  The Company will provide at least three Business Days' prior written
notice (or telephonic notice confirmed in writing) to the  Administrative  Agent
at its Notice  Office  (which  notice the  Administrative  Agent shall  promptly
transmit  to each of the  Lenders),  of any  reduction  of the  Total  Revolving
Commitment  pursuant to this section  4.3(d),  specifying the date and amount of
the reduction.

         4.4 Extension of Maturity  Date. At any time after February 1, 2000 and
during the 30 day period  following  delivery by the Company pursuant to section
8.1(a) of its  consolidated  financial  statements for its fiscal year then most
recently  ended,  and  annually  thereafter  during the 30 day period  following
delivery by the Company of its  consolidated  financial  statements  pursuant to
section 8.1(a), the Company may request the Administrative Agent to determine if
all of the Lenders  are then  willing to extend the  Maturity  Date for a single
additional year. If the Company so requests,  the  Administrative  Agent will so
advise the Lenders.  If the Lenders in their sole  discretion are all willing to
so extend the Maturity Date,  after taking into account such  considerations  as
any  Lender  may  deem  relevant,   the  Company,   the  other  Borrowers,   the
Administrative  Agent and all of the  Lenders  (including  each Letter of Credit
Issuer) shall execute and deliver a definitive  written  instrument so extending
the Maturity  Date.  No such  extension  of the Maturity  Date shall be valid or
effective for any purpose unless such definitive written

                                                        43

<PAGE>



instrument is so signed and delivered within 60 days following the giving by the
Administrative  Agent of notice to the Lenders  that the  Company has  requested
such an extension.

         SECTION 5.        PAYMENTS.

         5.1 Voluntary Prepayments.  Any Borrower shall have the right to prepay
any of its Loans, in whole or in part, without premium or penalty,  from time to
time on the following terms and conditions: (i) such Borrower (or the Company on
its behalf) shall give the Administrative  Agent at the Notice Office written or
telephonic  notice (in the case of  telephonic  notice,  promptly  confirmed  in
writing if so requested by the Administrative Agent) of its intent to prepay the
Term  Loans or the  Revolving  Loans,  as the case may be,  the  amount  of such
prepayment  and (in the case of  Eurocurrency  Loans) the specific  Borrowing(s)
pursuant to which made,  which  notice  shall be received by the  Administrative
Agent by (x) 11:00 A.M.  (local time at the Notice  Office) three  Business Days
prior  to the  date  of  such  prepayment,  in the  case  of any  prepayment  of
Eurocurrency  Loans,  or (y) 12:00 noon (local time at the Notice Office) on the
date of such prepayment,  in the case of any prepayment of Prime Rate Loans, and
which notice shall promptly be transmitted by the  Administrative  Agent to each
of the affected Lenders;  (ii) each partial prepayment of any Borrowing shall be
in an  aggregate  principal  of at least  $100,000  or an  integral  multiple of
$100,000 in excess thereof, in the case of Loans which are Prime Rate Loans, and
at least $100,000 or an integral multiple of $100,000 in excess thereof,  in the
case of Loans which are Eurocurrency Loans,  provided that no partial prepayment
of  Eurocurrency  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) each
prepayment in respect of any Loans made pursuant to a Borrowing shall be applied
pro rata among such Loans;  (iv) each prepayment of Eurocurrency  Loans pursuant
to this section 5.1 on any date other than the last day of the  Interest  Period
applicable  thereto  shall be  accompanied  by any  amounts  payable  in respect
thereof under section 2.10;  and (v) each  prepayment of any Term Loans pursuant
to this  section  5.1 shall be applied to reduce  the then  remaining  Scheduled
Repayments applicable to such Term Loans in inverse order of maturity.

         5.2 Mandatory Prepayments and Scheduled Repayments.  (a) If on any date
(after  giving  effect to any other  payments  on such  date) the sum of (i) the
aggregate  outstanding  principal  amount  of  Revolving  Loans  plus  (ii)  the
aggregate amount of Letter of Credit  Outstandings,  exceeds the Total Revolving
Commitment  as then in  effect,  the  Borrowers  shall  prepay on such date that
principal amount of Revolving Loans and, after Revolving Loans have been paid in
full,  Unpaid Drawings,  in an aggregate amount equal to such excess.  If, after
giving effect to the  prepayment  of Revolving  Loans and Unpaid  Drawings,  the
aggregate  amount of Letter of Credit  Outstandings  exceeds the Total Revolving
Commitment as then in effect, the Company shall pay to the Administrative  Agent
an  amount  in  cash  and/or  Cash  Equivalents  equal  to such  excess  and the
Administrative  Agent shall hold such payment as security for the obligations of
the Company hereunder pursuant to a cash collateral agreement to be entered into
in form and substance  reasonably  satisfactory to the Administrative  Agent and
the Company

                                                        44

<PAGE>



(which shall permit certain investments in Cash Equivalents  satisfactory to the
Administrative  Agent and the  Company  until the  proceeds  are  applied to the
secured obligations).

         (b) On the  last  Business  Day of  each  March,  June,  September  and
December,  commencing on the last Business Day of September  1997 and continuing
through the last  Business Day of March 2002,  the Company shall be required to,
and  shall,  repay  the  principal  amount  of the Term  Loans in the  amount of
$750,000,  with a final  installment  of principal  being due and payable by the
Company  on the  Maturity  Date in the  amount of the then  remaining  principal
balance  of the Term  Loans  (each  such  repayment,  as the same may be reduced
pursuant to section 5.1 or 5.2(g), a "Scheduled Repayment").

         (c) If during any  fiscal  year of the  Company,  the  Company  and its
Subsidiaries have received  cumulative  aggregate Cash Proceeds from one or more
Asset  Sales of at least  $1,000,000,  not  later  than the third  Business  Day
following the date of receipt of any Cash Proceeds in excess of such amount,  an
amount at least equal to 100% of the Net Cash  Proceeds  then received in excess
of such amount  shall be applied as a mandatory  prepayment  of principal of (x)
first, the then outstanding Term Loans and (y) second, once no Term Loans remain
outstanding, the then outstanding Revolving Loans.

         (d) Not later than the Business Day  following  the date of the receipt
thereof by the  Company,  an amount equal to 100% of the cash  proceeds  (net of
underwriting  discounts and commissions,  placement agent  commissions and other
customary fees and costs  associated  therewith) from the public sale or private
placement  of  subordinated  debt  securities,  or  any  similar  incurrence  of
subordinated  Indebtedness for borrowed money, by the Company as contemplated by
section 9.4(c),  shall be applied as a mandatory  prepayment of principal of (x)
first,  the then  outstanding  Term Loans,  and (y)  second,  once no Term Loans
remain outstanding, the then outstanding Revolving Loans.

         (e) Not later than the Business Day  following  the date of the receipt
thereof by the Company  and/or any  Subsidiary,  an amount  equal to 100% of the
cash proceeds (net of underwriting  discounts and  commissions,  placement agent
fees and other customary fees and costs  associated  therewith) from any sale or
issuance of equity securities by the Company or any Subsidiary after the Initial
Borrowing  Date  (other  than (i) any  inter-company  sale to the Company or any
Subsidiary  and (ii) any  sale or  issuance  to  management,  employees  (or key
employees)  or  directors  pursuant  to stock  option or  similar  plans for the
benefit of management,  employees (key employees) or directors  generally) shall
be  applied  as a  mandatory  repayment  of  principal  of (x)  first,  the then
outstanding Term Loans, and (y) second,  once no Term Loans remain  outstanding,
the then outstanding Revolving Loans.

         (f) On the date of which a Change of  Control  occurs,  notwithstanding
anything to the  contrary  contained  in this  Agreement,  no further  Revolving
Borrowings shall be made and the then outstanding principal amount of all Loans,
if any,  shall  become due and  payable  and shall be  prepaid in full,  and the
Company shall contemporaneously either (i) cause all outstanding Letters

                                                        45

<PAGE>



of Credit to be surrendered for  cancellation  (any such Letters of Credit to be
replaced by letters of credit issued by other financial  institutions),  or (ii)
the Company shall pay to the Administrative  Agent an amount in cash and/or Cash
Equivalents  equal  to  100%  of the  Letter  of  Credit  Outstandings  and  the
Administrative  Agent shall hold such payment as security for the obligations of
the Company hereunder pursuant to a cash collateral agreement to be entered into
in form and substance  reasonably  satisfactory to the Administrative  Agent and
the  Company  (which  shall  permit  certain  investments  in  Cash  Equivalents
satisfactory to the Administrative  Agent and the Company until the proceeds are
applied to the secured obligations).

         (g) If Safety Components International, s.r.o., a Foreign Subsidiary of
the Company, shall not have received by July 31, 1997, proceeds of approximately
$7,500,000  from the  incurrence  of the  Indebtedness  referred  to in  section
9.4(b),  the  Company  and the  other  Borrowers  will  immediately  prepay  any
outstanding  Revolving Loans in an aggregate  principal amount not less than the
lesser of $7,500,000 and the aggregate  principal amount of Revolving Loans then
outstanding.

         (h) Each mandatory prepayment of Term Loans pursuant to section 5.2(c),
(d) or (e) shall be applied to reduce the Scheduled  Repayments in inverse order
of maturity.

         (i) With respect to each  prepayment of Loans  required by this section
5.2, the Company  shall (on behalf of any  applicable  Borrower)  designate  the
Types of Loans which are to be prepaid and the specific Borrowing(s) pursuant to
which such  prepayment is to be made,  provided that (i) the Company shall first
so  designate  all Loans that are Prime Rate Loans and  Eurocurrency  Loans with
Interest Periods ending on the date of prepayment prior to designating any other
Eurocurrency Loans for prepayment,  (ii) if the outstanding  principal amount of
Eurocurrency  Loans made pursuant to a Borrowing is reduced below the applicable
Minimum Borrowing Amount as a result of any such prepayment,  then all the Loans
outstanding pursuant to such Borrowing shall be converted into Prime Rate Loans,
and (iii) each  prepayment  of any Loans made  pursuant to a Borrowing  shall be
applied  pro rata among such  Loans.  In the  absence  of a  designation  by the
Company as described in the preceding sentence,  the Administrative 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 2.10.  Any
prepayment  of  Eurocurrency  Loans  pursuant  to this  section 5.2 shall in all
events be accompanied by such compensation as is required by section 2.10.

         5.3  Method  and Place of  Payment.  Except as  otherwise  specifically
provided  herein,  all  payments  under  this  Agreement  shall  be  made to the
Administrative  Agent for the ratable  (based on its pro rata share)  account of
the  Lenders  entitled  thereto,  not later than 11:00 A.M.  (local  time at the
Payment Office) on the date when due and shall be made in immediately  available
funds and in lawful money of the United States of America (or in the  applicable
Alternative  Currency,  in  the  case  of  Revolving  Loans  denominated  in  an
Alternative  Currency) at the Payment Office,  it being  understood that written
notice by any  Borrower to the  Administrative  Agent to make a payment from the
funds in such Borrower's account at the Payment Office shall

                                                        46

<PAGE>



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 11:00 A.M.
(local time at the Payment Office) 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.

         5.4 Net  Payments.  (a) All payments  made by any  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  5.4(b),  all
such  payments  will be made  free  and  clear  of,  and  without  deduction  or
withholding for, any present or future taxes,  levies,  imposts,  duties,  fees,
assessments or other charges of whatever nature now or hereafter  imposed by any
jurisdiction  or by any political  subdivision  or taxing  authority  thereof or
therein with respect to such payments (but excluding,  except as provided in the
second succeeding sentence, any tax, imposed on or measured by the net income or
net  profits of a Lender  pursuant to the laws of the  jurisdiction  under which
such Lender is organized or the  jurisdiction  in which the principal  office or
Applicable  Lending Office of such Lender is located or any subdivision  thereof
or therein) and all interest,  penalties or similar  liabilities with respect to
such non excluded taxes,  levies  imposts,  duties,  fees,  assessments or other
charges (all such nonexcluded taxes levies, imposts, duties, fees assessments or
other charges being referred to  collectively  as "Taxes").  If any Taxes are so
levied or imposed, the applicable Borrower agrees to pay the full amount of such
Taxes and such  additional  amounts as may be necessary so that every payment by
it 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,  the applicable  Borrower  agrees to reimburse each Lender,
upon the written  request of such Lender for taxes imposed on or measured by the
net income or profits of such Lender pursuant to the laws of the jurisdiction in
which such Lender is organized or in which the  principal  office or  Applicable
Lending  Office of such  Lender 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  Lender  is  located  and for any
withholding  of income or similar  taxes imposed by the United States of America
as such Lender shall  determine are payable by, or withheld from, such Lender in
respect of such  amounts so paid to or on behalf of such Lender  pursuant to the
preceding sentence,  which request shall be accompanied by a statement from such
Lender setting forth, in reasonable detail, the computations used in determining
such amounts.  The applicable Borrower will furnish to the Administrative  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, or other evidence  satisfactory to the Lender,  evidencing such
payment by the applicable  Borrower.  The applicable Borrower will indemnify and
hold  harmless the  Administrative  Agent and each  Lender,  and  reimburse  the
Administrative  Agent or such Lender upon its written request, for the amount of
any Taxes so levied or imposed and paid or withheld by such Lender.

                                                        47

<PAGE>



         (b) Each  Lender  that 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 to provide to each applicable Borrower and the Administrative Agent on or
prior to the Effective  Date, or in the cases of a Lender that is an assignee or
transferee of an interest under this Agreement  pursuant to section 13.4 (unless
the respective  Lender was already a Lender hereunder  immediately prior to such
assignment or transfer and such Lender is in compliance  with the  provisions of
this section 5.4(b)), on the date of such assignment or transfer to such Lender,
(i) two accurate and complete original signed copies of Internal Revenue Service
Form 4224 or 1001 (or successor forms)  certifying to such Lender's  entitlement
to a complete  exemption  from United  States  withholding  tax with  respect to
payments to be made under this Agreement, any Note or any other Credit Document,
or (ii) if the Lender is not a "bank" within the meaning of section 881(c)(3)(A)
of the Code and cannot deliver either Internal Revenue Service Form 1001 or 4224
pursuant to clause (i) above,  (x) a  certificate  substantially  in the form of
Exhibit K (any such certificate, a "Section 5.4(b)(ii) Certificate") and (y) two
accurate and complete  original  signed copies of Internal  Revenue Service Form
W-8 (or successor  form)  certifying to such Lender's  entitlement to a complete
exemption  from  United  States  withholding  tax with  respect to  payments  of
interest to be made under this Agreement, any Note or any other Credit Document.
In addition, each Lender agrees that from time to time after the Effective Date,
when  a  lapse  in  time  or  change  in  circumstances   renders  the  previous
certification obsolete or inaccurate in any material respect, it will deliver to
the  applicable  Borrower  and the  Administrative  Agent two new  accurate  and
complete  original signed copies of Internal  Revenue Service Form 4224 or 1001,
or Form W-8 and a Section 5.4(b)(ii)  Certificate,  as the case may be, and such
other forms as may be required in order to confirm or establish the  entitlement
of such Lender to a  continued  exemption  from or  reduction  in United  States
withholding tax with respect to payments under this  Agreement,  any Note or any
other Credit Document,  or it shall immediately  notify the applicable  Borrower
and the  Administrative  Agent of its  inability  to  deliver  any such  Form or
Certificate, in which case such Lender shall not be required to deliver any such
Form or Certificate pursuant to this section 5.4(b). Notwithstanding anything to
the contrary contained in section 5.4(a), but subject to section 13.4(b) and the
immediately  succeeding sentence, (x) the applicable 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  for the account of any Lender  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 applicable
Borrower such forms that  establish a complete  exemption from such deduction or
withholding and (y) the applicable  Borrower shall not be obligated  pursuant to
section 5.4(a) hereof to gross- up payments to be made to a Lender in respect of
income or similar taxes imposed by the United States or any  additional  amounts
with  respect  thereto  (I) if such Lender has not  provided  to the  applicable
Borrower  the  Internal  Revenue  Service  forms  required to be provided to the
applicable  Borrower  pursuant to this  section  5.4(b) or (II) in the case of a
payment other than interest,  to a Lender described in clause (ii) above, to the
extent that such forms do not establish a complete exemption from withholding of
such taxes.  Notwithstanding anything to the contrary contained in the preceding
sentence or elsewhere in this  section 5.4 and except as  specifically  provided
for in

                                                        48

<PAGE>



section 13.4(b),  the applicable  Borrower agrees to pay additional  amounts and
indemnify each Lender in the manner set forth in section 5.4(a)  (without regard
to the identity of the  jurisdiction  requiring the deduction or withholding) in
respect of any Taxes  deducted or withheld by it as  described  in the  previous
sentence as a result of any changes after the 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.

         (c) If any Lender, in its sole opinion,  determines that it has finally
and  irrevocably  received or been granted a refund in respect of any Taxes paid
as to which indemnification has been paid by the applicable Borrower pursuant to
this  section,  it shall  promptly  remit such refund  (including  any  interest
received  in respect  thereof),  net of all  out-of-pocket  costs and  expenses;
provided, that the applicable Borrower agrees to promptly return any such refund
(plus  interest)  to such  Lender in the event such  Lender is required to repay
such refund to the relevant taxing authority.  Any such Lender shall provide the
applicable  Borrower with a copy of any notice of  assessment  from the relevant
taxing authority  (redacting any unrelated  confidential  information  contained
therein)  requiring  repayment of such refund.  Nothing  contained  herein shall
impose an obligation on any Lender to apply for any such refund.

         (d) Reference is hereby made to the  provisions  of section  2.9(d) for
certain limitations upon the rights of a Lender under this section.

         SECTION 6.        CONDITIONS PRECEDENT.

         6.1 Conditions  Precedent at Initial  Borrowing Date. The obligation of
the  Lenders to make Term Loans  and/or  Revolving  Loans,  and of any Letter of
Credit Issuer to issue Letters of Credit, is subject to the satisfaction of each
of the following conditions on the Initial Borrowing Date:

                  (a) Effectiveness; Notes. On or prior to the Initial Borrowing
         Date,  (i) the Effective  Date shall have occurred and (ii) there shall
         have been delivered to the Administrative Agent for the account of each
         Lender each appropriate  Note executed by each Borrower,  in each case,
         in the amount, maturity and as otherwise provided herein.

                  (b) Fees,  etc.  The  Company  shall have paid or caused to be
         paid  all  fees  required  to be paid by it on or  prior  to such  date
         pursuant to section 4 hereof and all  reasonable  fees and  expenses of
         the  Administrative  Agent and of special counsel to the Administrative
         Agent which have been  invoiced on or prior to such date in  connection
         with the preparation,  execution and delivery of this Agreement and the
         other  Credit  Documents  and  the  consummation  of  the  transactions
         contemplated hereby and thereby.

                  (c) Other Credit  Documents.  The Credit Parties named therein
         shall have duly executed and delivered and there shall be in full force
         and effect, and original  counterparts shall have been delivered to the
         Administrative Agent, in sufficient quantities for the

                                                        49

<PAGE>



         Administrative  Agent and the Lenders,  of, (i) the Subsidiary Guaranty
         (as modified,  amended or supplemented  from time to time in accordance
         with  the  terms  thereof  and  hereof,  the  "Subsidiary   Guaranty"),
         substantially  in the form  attached  hereto  as  Exhibit  C;  (ii) the
         Security  Agreement (as modified,  amended or supplemented from time to
         time in  accordance  with the terms  thereof and hereof,  the "Security
         Agreement"),  substantially  in the form attached  hereto as Exhibit D;
         (iii) the Pledge Agreement (as modified,  amended or supplemented  from
         time to time in  accordance  with the terms  thereof  and  hereof,  the
         "Pledge  Agreement'),  substantially  in the form  attached  hereto  as
         Exhibit E; (iv) the Assignment of Life  Insurance  Policy as Collateral
         (as modified,  amended or supplemented  from time to time in accordance
         with the terms thereof and hereof,  the  "Assignment  of Life Insurance
         Policy"),  substantially  in the form attached hereto as Exhibit F; and
         (v)  the   Agreement  on  the  Creation  of  a  Security   Interest  in
         Receivables,  Inventory and Equipment,  the Mortgage,  and the Open End
         Mortgage, Assignment of Leases and Security Agreement, substantially in
         the forms attached hereto as Exhibit G-1, G-2 and G- 3.

                  (d) Recordation of Security Documents, Delivery of Collateral,
         Taxes,  etc. The  Security  Documents  (or proper  notices or financing
         statements in respect thereof) shall have been duly recorded, published
         and filed in such  manner and in such  places as is  required by law to
         establish,  perfect,  preserve  and  protect  the rights  and  security
         interests of the parties  thereto and their  respective  successors and
         assigns,  all collateral  items required to be physically  delivered to
         the  Collateral   Agent   thereunder  shall  have  been  so  delivered,
         accompanied by any appropriate  instruments of transfer, and all taxes,
         fees and other  charges  then due and  payable in  connection  with the
         execution,   delivery,   recording,   publishing  and  filing  of  such
         instruments  and the issue and  delivery  of the Notes  shall have been
         paid in full.

                  (e) Corporate  Resolutions and Approvals.  The  Administrative
         Agent   shall  have   received,   in   sufficient   quantity   for  the
         Administrative   Agent  and  the  Lenders,   certified  copies  of  the
         resolutions  of the Board of Directors of each  Borrower and each other
         Credit Party,  approving the Credit Documents to which such Borrower or
         any such  other  Credit  Party,  as the case may be, is or may become a
         party, and of all documents evidencing other necessary corporate action
         and  governmental  approvals,  if any,  with respect to the  execution,
         delivery  and  performance  by such  Borrower or any such other  Credit
         Party of the Credit Documents to which it is or may become a party.

                  (f) Incumbency  Certificate.  The  Administrative  Agent shall
         have received,  in sufficient quantity for the Administrative Agent and
         the Lenders,  a certificate of the Secretary or an Assistant  Secretary
         of each Borrower and of each other Credit Party,  certifying  the names
         and true  signatures  of the  officers  of such  Borrower or such other
         Credit  Party,  as the  case  may be,  authorized  to sign  the  Credit
         Documents to which such  Borrower or such other Credit Party is a party
         and any other documents to which such

                                                        50

<PAGE>



         Borrower  or any  such  other  Credit  Party  is a party  which  may be
         executed and delivered in connection herewith.

                  (g) Solvency Certificate.  The Administrative Agent shall have
         received,  in sufficient quantity for the Administrative  Agent and the
         Lenders,  a solvency  certificate of the chief financial officer of the
         Company, substantially in the form attached hereto as Exhibit H.

                  (h) Opinion of Counsel.  On the Initial  Borrowing  Date,  the
         Administrative  Agent shall have received an opinion,  addressed to the
         Administrative  Agent and each of the  Lenders  and  dated the  Initial
         Borrowing Date, from Shereff,  Friedman,  Hoffman & Goodman, counsel to
         the Company, substantially in the form of Exhibit I hereto and covering
         such other matters incident to the transactions  contemplated hereby as
         the Administrative Agent may reasonably request,  such opinion to be in
         form and substance satisfactory to the Administrative Agent.

                  (i) Existing  Credit  Agreements.  Contemporaneously  with the
         initial Borrowing hereunder,  the Company and the other borrowers named
         therein shall have  terminated the commitments of the lenders under the
         Loan  Agreement,  dated as of August 1, 1996,  as  amended,  shall have
         prepaid all borrowings thereunder,  shall have made effective provision
         satisfactory  to the  Administrative  Agent  for  the  termination,  or
         assignment  to  the  Collateral   Agent,  of  the  liens  and  security
         thereunder,  and if required in connection with such termination,  made
         effective  provision for any letters of credit issued  thereunder to be
         supported by Letters of Credit issued hereunder.

                  (j)  Approvals,  etc. On the Initial  Borrowing  Date, (i) all
         material  governmental and third party approvals in connection with the
         transactions   contemplated  by  the  Credit  Documents  and  otherwise
         referred to herein shall have been  obtained and remain in effect,  and
         all applicable  waiting  periods shall have expired  without any action
         being taken by any  competent  authority  (including  any court  having
         jurisdiction) which restrains or prevents such transactions or imposes,
         in the judgment of the Required  Lenders or the  Administrative  Agent,
         materially   adverse   conditions   upon  the   consummation   of  such
         transactions;  and (ii) there  shall be no legal  restriction  upon any
         Lender which prohibits, or imposes any material burdens upon any Lender
         in connection with, the extensions of credit contemplated by the Credit
         Documents.

                  (k) Environmental Report re Galion, Ohio Facility. The Lenders
         shall have received a report  prepared by an  environmental  consulting
         firm acceptable to the Required  Lenders  concerning the  environmental
         aspects  of the  Galion,  Ohio  Facility,  and  the  Lenders  shall  be
         satisfied in all respects, in their sole discretion, with the scope and
         conclusions contained in such report.


                                                        51

<PAGE>



                  (l) Evidence of  Insurance.  The  Collateral  Agent shall have
         received certificates of insurance and other evidence,  satisfactory to
         it, of compliance with the insurance requirements of this Agreement and
         the Security Documents.

                  (m)  Proceedings  and  Documents.   All  corporate  and  other
         proceedings   and  all  documents   incidental   to  the   transactions
         contemplated  hereby shall be satisfactory in substance and form to the
         Administrative  Agent and the Lenders and the Administrative  Agent and
         its  special  counsel  and the  Lenders  shall have  received  all such
         counterpart originals or certified or other copies of such documents as
         the  Administrative  Agent or its  special  counsel  or any  Lender may
         reasonably request.

         6.2 Conditions  Precedent to All Credit Events.  The obligations of the
Lenders  to make each Term  Loan,  Revolving  Loan  and/or of a Letter of Credit
Issuer to issue each Letter of Credit is subject,  at the time  thereof,  to the
satisfaction of the following conditions:

                  (a) Notice of Borrowing,  etc. The Administrative  Agent shall
         have received a Notice of Borrowing meeting the requirements of section
         2.3 with  respect  to the  incurrence  of Loans or a Letter  of  Credit
         Request  meeting the  requirement  of section  3.2 with  respect to the
         issuance of a Letter of Credit.

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

The  acceptance  of the  benefits of each Loan or issuance of a Letter of Credit
shall  constitute a  representation  and warranty by the applicable  Borrower to
each of the Lenders that all of the applicable  conditions  specified in section
6.1  and/or  6.2,  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 6.1 or this section 6.2, unless otherwise specified,  shall be delivered
to the  Administrative  Agent for the account of each of the Lenders and, except
for the Notes,  in  sufficient  counterparts  for each of the  Lenders,  and the
Administrative  Agent will promptly  distribute to the Lenders their  respective
Notes and the copies of such other certificates, legal opinions and documents.

         SECTION 7.  REPRESENTATIONS AND WARRANTIES.

         In order to induce the Lenders to enter into this Agreement and to make
the  Loans,  and/or to issue  and/or to  participate  in the  Letters  of Credit
provided  for  herein,  the  Company  makes the  following  representations  and
warranties to, and agreements with, the Lenders,  all of which shall survive the
execution and delivery of this Agreement and each Credit Event:

                                                        52

<PAGE>



         7.1 Corporate Status, etc. Each of the Company and its Subsidiaries (i)
is a duly organized or formed and validly existing  corporation,  partnership or
limited liability  company,  as the case may be, in good standing under the laws
of the  jurisdiction  of its formation  and has the  corporate,  partnership  or
limited  liability  company  power  and  authority,  as  applicable,  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 in all jurisdictions  where it is required to be so qualified except
where the failure to be so qualified would not have a Material Adverse Effect.

         7.2  Subsidiaries.  Annex II hereto lists, as of the date hereof,  each
Subsidiary of the Company (and the direct and indirect ownership interest of the
Company therein).

         7.3  Corporate  Power and  Authority,  etc.  Each Credit  Party has the
corporate  power and  authority to execute,  deliver and carry out the terms and
provisions  of the  Credit  Documents  to which it is party  and has  taken  all
necessary corporate action to authorize the execution,  delivery and performance
of the  Credit  Documents  to which it is  party.  Each  Credit  Party  has duly
executed and delivered each Credit Document to which it is party and each Credit
Document to which it is party constitutes the legal, valid and binding agreement
or obligation  of such Credit Party  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).

         7.4 No Violation. Neither the execution,  delivery,  performance by any
Credit Party of the Credit  Documents to which it is party nor  compliance  with
the terms and provisions thereof,  nor the consummation of the loan transactions
contemplated  therein (i) will  contravene  any  provision of any law,  statute,
rule, regulation, order, writ, injunction or decree of any court or governmental
instrumentality  applicable to such Credit Party or its  properties  and assets,
(ii) will conflict with or result in any breach of, any of the terms, covenants,
conditions or provisions  of, or  constitute a default  under,  or result in the
creation  or  imposition  of (or the  obligation  to create or impose)  any Lien
(other than the Liens of any Credit Document) upon any of the property or assets
of the  Company  or  any  of its  Subsidiaries  pursuant  to  the  terms  of any
promissory note, bond, debenture,  indenture, mortgage, deed of trust, credit or
loan agreement,  or any other material  agreement or other instrument,  to which
the Company 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 or articles of  incorporation,  code of
regulations or by-laws, or other charter documents of any Credit Party.

         7.5  Governmental  Approvals.  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 as a
condition to (i) the execution,  delivery and performance by any Credit Party of
any

                                                        53

<PAGE>



Credit Document or (ii) the legality, validity, binding effect or enforceability
of any Credit  Document,  other than the filings and recordings  contemplated by
section 7.19.

         7.6 Litigation.  There are no actions, suits or proceedings pending or,
to, the knowledge of the Company,  threatened with respect to the Company or any
of its  Subsidiaries  (i) that have, or could  reasonably be expected to have, a
Material Adverse Effect,  or (ii) which question the validity or  enforceability
of any of the Credit Documents, or of any action to be taken by any Credit Party
pursuant to any of the Credit Documents.

         7.7 Use of Proceeds; Margin Regulations.  (a) The proceeds of all Loans
shall be utilized (i) to retire the Indebtedness  referred to in sections 6.1(i)
and  (j),  and  (ii)  for  other  lawful  purposes  not  inconsistent  with  the
requirements of this Agreement.

         (b) No part of the proceeds of any Credit  Event will be used  directly
or indirectly  to purchase or carry Margin Stock,  or to extend credit to others
for the purpose of purchasing  or carrying any Margin Stock.  Neither any Credit
Event, 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.  No Borrower is engaged in the  business of  extending
credit for the purpose of purchasing  or carrying any Margin  Stock.  At no time
would more than 25% of the value of the assets of the  Company or of the Company
and its consolidated Subsidiaries that are subject to any "arrangement" (as such
term is used in section  221.2(g) of such Regulation U) hereunder be represented
by Margin Stock.

         7.8  Financial  Statements,  etc. (a) The Company has  furnished to the
Lenders and the  Administrative  Agent  complete  and correct  copies of (i) the
audited  consolidated  balance  sheets  of  the  Company  and  its  consolidated
subsidiaries  as of March 31, 1996 and March 31,  1995 and the  related  audited
consolidated  statements of income,  shareholders' equity, and cash flows of the
Company  and its  consolidated  subsidiaries  for the fiscal  years then  ended,
accompanied  by the  unqualified  report  thereon of the  Company's  independent
accountants,  as contained in the Annual Reports on Form 10-K of the Company for
each of the fiscal years then ended filed with the SEC;  and (ii) the  unaudited
condensed  consolidated  balance  sheets  of the  Company  and its  consolidated
subsidiaries as of December 31, 1997, and the related consolidated statements of
income and of cash flows of the Company and its  consolidated  subsidiaries  for
the fiscal quarter then ended, as contained in the Form 10-Q Quarterly Report of
the Company filed with the SEC. All such financial statements have been prepared
in accordance with GAAP,  consistently  applied (except as stated therein),  and
fairly  present the  financial  position  of the  Company  and its  consolidated
subsidiaries as of the respective dates indicated and the  consolidated  results
of their operations and cash flows for the respective periods indicated, subject
to  adjustments  related to deferred  product  launch costs and the write off of
Citibank  finance  expenses  and  subject  in the  case  of any  such  financial
statements which are unaudited, to normal audit adjustments,  none of which will
involve a Material Adverse Effect.


                                                        54

<PAGE>



         (b) Each Borrower has received  consideration  which is the  reasonable
equivalent  value of the  obligations  and  liabilities  that such  Borrower has
incurred to the  Administrative  Agent and the  Lenders.  Each  Borrower now has
capital  sufficient to carry on its business and  transactions  and all business
and  transactions  in which it is about to engage and is now solvent and able to
pay its debts as they  mature and each  Borrower,  as of the  Initial  Borrowing
Date, owns property  having a value,  both at fair valuation and at present fair
salable value,  greater than the amount required to pay such  Borrower's  debts;
and no Borrower is entering into the Credit Documents with the intent to hinder,
delay or defraud its creditors.  Without limitation of the foregoing,  on and as
of the Initial  Borrowing Date, (i) the sum of the assets,  at a fair valuation,
of the Company will exceed its debts, (ii) the Company will not have incurred or
intended to, or believe that it will, incur debts beyond its ability to pay such
debts as such debts  mature and (iii) the Company will have  sufficient  capital
with which to conduct its business.  For purposes of this section 7.8(b), "debt"
means any liability on a claim,  and "claim" means (x) 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 (y) right to an equitable  remedy for breach of performance if
such breach  gives rise to a payment,  whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent,  matured, unmatured, disputed,
undisputed, secured or unsecured.

         (c) The Company has delivered to the Lenders prior to the execution and
delivery of this  Agreement (i) a copy of the  Company's  Report on Form 10-K as
filed (without  Exhibits) with the SEC for its fiscal year ended March 31, 1996,
which contains a general description of the business and affairs of the Borrower
and its Subsidiaries,  and (ii) financial  projections prepared by management of
the Company for the Company and its  Subsidiaries  for the fiscal years 1998 and
1999 which take into account,  on a pro forma basis, the acquisition of Valentec
International   Corporation   (the  "Financial   Projections").   The  Financial
Projections  were  prepared on behalf of the Company in good faith after  taking
into  account the  existing and  historical  levels of business  activity of the
Company and its Subsidiaries,  historical financial  information with respect to
the   properties   and  business   acquired  in  the   acquisition  of  Valentec
International  Corporation,  as supplied by the sellers, known trends, including
general economic trends,  and all other  information,  assumptions and estimates
considered  by management  of the Company and its  Subsidiaries  to be pertinent
thereto,  taking into account the fact that such  management  is not  intimately
familiar  with the  properties  and  business  acquired  in the  acquisition  of
Valentec International Corporation. The Financial Projections were considered by
management of the Company,  as of such date of preparation,  to be realistically
achievable;  provided,  that no  representation  or  warranty  is made as to the
impact of future  general  economic  conditions  or as to whether the  Company's
projected  consolidated  results as set forth in the Financial  Projections will
actually be realized;  and  provided,  further,  that the Company  undertakes no
responsibility  for the accuracy of any  historical  information  concerning the
business or operations  acquired in the  acquisition  of Valentec  International
Corporation which is included in the Financial  Projections.  No facts are known
to the  Company  at  the  date  hereof  which,  if  reflected  in the  Financial
Projections,   would  result  in  a  material  adverse  change  in  the  assets,
liabilities, results of operations or cash flows reflected therein.

                                                        55

<PAGE>



         7.9 No Material Adverse Change. Since December 31, 1996, there has been
no  change  in the  condition,  business  or  affairs  of the  Company  and  its
Subsidiaries  taken as a whole, or their properties and assets  considered as an
entirety,  except for changes none of which,  individually  or in the aggregate,
has had or could reasonably be expected to have a Material Adverse Effect.

         7.10 Tax  Returns  and  Payments.  Each of the  Company 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
Company and each of its  Subsidiaries has established on its books such charges,
accruals  and  reserves  in  respect  of  taxes,  assessments,  fees  and  other
governmental charges for all fiscal periods as are required by GAAP. The Company
knows of no proposed assessment for additional  federal,  foreign or state taxes
for  any  period,  or of  any  basis  therefor,  which,  individually  or in the
aggregate,  taking into account such  charges,  accruals and reserves in respect
thereof as the Company  and its  Subsidiaries  have made,  could  reasonably  be
expected to have a Material Adverse Effect.

         7.11 Title to Properties, etc. The Company and each of its Subsidiaries
has good and marketable title, in the case of real property,  and good title (or
valid leasehold interests,  in the case of any leased property),  in the case of
all other property,  to all of its properties and assets free and clear of Liens
other than Liens permitted by section 9.3. The interests of the Company and each
of its Subsidiaries in the properties reflected in the most recent balance sheet
referred to in section 7.8, taken as a whole,  were sufficient,  in the judgment
of the  Company,  as of the  date of such  balance  sheet  for  purposes  of the
ownership  and  operation  of the  businesses  conducted by the Company and such
Subsidiaries.

         7.12 Lawful  Operations,  etc. Except for known situations or incidents
which are reserved for on the most recent consolidated balance sheet referred to
in section 7.8 or which, if not so reserved, could not reasonably be expected to
have a Material  Adverse Effect,  the Company and each of its Subsidiaries is in
full compliance with all material  requirements  imposed by law, whether federal
or  state,   including  (without  limitation)   Environmental  Laws  and  zoning
ordinances.

         7.13   Environmental   Matters.   (a)  The  Company  and  each  of  its
Subsidiaries is in compliance with all Environmental Laws governing its business
except  to the  extent  that any  such  failure  to  comply  (together  with any
resulting  penalties,  fines or forfeitures) would not reasonably be expected to
have  a  Material  Adverse  Effect.  All  licenses,  permits,  registrations  or
approvals required for the business of the Company and each of its Subsidiaries,
as conducted as of the Initial  Borrowing Date, under any Environmental Law have
been  secured  and the Company and each of its  Subsidiaries  is in  substantial
compliance  therewith,  except  for such  licenses,  permits,  registrations  or
approvals the failure to secure or to comply therewith is not reasonably  likely
to  have  a  Material  Adverse  Effect.  Neither  the  Company  nor  any  of its
Subsidiaries has received

                                                        56

<PAGE>



written notice,  or otherwise knows,  that it is in any respect in noncompliance
with  breach  of  or  default  under  any  applicable  writ,  order,   judgment,
injunction,  or decree to which the  Company  or such  Subsidiary  is a party or
which would affect the ability of the Company 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 would not  reasonably be expected to, in the  aggregate,
have a Material  Adverse Effect.  There are as of the Initial  Borrowing Date no
Environmental  Claims  pending  or,  to  the  best  knowledge  of  the  Company,
threatened wherein an unfavorable  decision,  ruling or finding would reasonably
be  expected  to  have  a  Material   Adverse   Effect.   There  are  no  facts,
circumstances, conditions or occurrences on any Real Property now or at any time
owned,  leased or operated by the Company or any of its  Subsidiaries  or on any
property  adjacent to any such Real Property,  which are known by the Company or
as to which the Company or any such Subsidiary has received written notice, that
could  reasonably  be expected (i) to form the basis of an  Environmental  Claim
against  the  Company or any of its  Subsidiaries  or any Real  Property  of the
Company 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
would not reasonably be expected 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
Company or any of its  Subsidiaries  or (ii) released on any such Real Property,
in  each  case  where  such  occurrence  or  event  is  not in  compliance  with
Environmental Laws and is reasonably likely to have a Material Adverse Effect.

         7.14  Compliance  with  ERISA.  Compliance  by  the  Company  with  the
provisions  hereof and Credit  Events  contemplated  hereby will not involve any
prohibited  transaction within the meaning of ERISA or section 4975 of the Code.
The Company and each of its  Subsidiaries,  (i) has  fulfilled  all  obligations
under minimum funding  standards of ERISA and the Code with respect to each Plan
that is not a Multiemployer Plan or a Multiple Employer Plan, (ii) has satisfied
all respective  contribution  obligations in respect of each  Multiemployer Plan
and each Multiple Employer Plan, (iii) is in compliance in all material respects
with all other applicable  provisions of ERISA and the Code with respect to each
Plan, each  Multiemployer Plan and each Multiple Employer Plan, and (iv) has not
incurred any  liability  under the Title IV of ERISA to the PBGC with respect to
any Plan,  any  Multiemployer  Plan,  any Multiple  Employer  Plan, or any trust
established thereunder. No Plan or trust created thereunder has been terminated,
and there  have been no  Reportable  Events,  with  respect to any Plan or trust
created  thereunder  or with  respect  to any  Multiemployer  Plan  or  Multiple
Employer Plan, which termination or Reportable Event will or could result in the
termination of such Plan,  Multiemployer Plan or Multiple Employer Plan and give
rise to a Material  Adverse Effect in respect  thereof.  Neither the Company nor
any ERISA  Affiliate is at the date  hereof,  or has been at any time within the
two years preceding the date hereof,  an employer  required to contribute to any
Multiemployer  Plan or Multiple  Employer Plan, or a "contributing  sponsor" (as
such term is defined in section 4001 of ERISA) in any

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<PAGE>



Multiemployer  Plan or Multiple Employer Plan. Neither the Company nor any ERISA
Affiliate  has any  contingent  liability  with  respect to any  post-retirement
"welfare  benefit  plan" (as such term is defined  in ERISA)  except as has been
disclosed to the Lenders in writing.

         7.15  Intellectual   Property,   etc.  The  Company  and  each  of  its
Subsidiaries  has  obtained  or has  the  right  to use  all  material  patents,
trademarks,  servicemarks,  trade names,  copyrights,  licenses and other rights
with  respect to the  foregoing  necessary  for the present  and planned  future
conduct of its business,  without any known  conflict with the rights of others,
except for such  patents,  trademarks,  servicemarks,  trade names,  copyrights,
licenses and rights,  the loss of which,  and such conflicts,  which in any such
case individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect.

         7.16  Investment  Company Act, etc.  Neither the Company nor any of its
Subsidiaries is subject to regulation with respect to the creation or incurrence
of  Indebtedness  under the  Investment  Company Act of 1940,  as  amended,  the
Interstate  Commerce  Act, as amended,  the Federal  Power Act, as amended,  the
Public Utility Holding Company Act of 1935, as amended,  or any applicable state
public utility law.

         7.17  Burdensome  Contracts;  Labor  Relations.  The  Company  and  the
Subsidiaries  (i)  are  not  subject  to  any  materially  burdensome  contract,
agreement,  corporate  restriction,  judgment,  decree  or  order,  (ii) are not
parties to any labor  dispute,  (iii) are not subject to any  material  strikes,
slow downs, workouts or other concerted interruptions of operations by employees
of  the  Company  or  any  Subsidiary,  whether  or not  relating  to any  labor
contracts,  (iv) are not subject to any significant pending or, to the knowledge
of the Company, threatened, unfair labor practice complaint, before the National
Labor  Relations  Board,  and (v) are not  subject  to any  pending  or,  to the
knowledge  of the Company,  threatened,  grievance  or  significant  arbitration
proceeding arising out of or under any collective bargaining agreement, (vi) are
not subject to any  significant  pending or, to the  knowledge  of the  Company,
threatened,  significant strike, labor dispute,  slowdown or stoppage, and (vii)
to the knowledge of the Company,  no union  representation  question exists with
respect to the employees of the Company or any of its Subsidiaries, except (with
respect to any matter  specified in any of the above clauses),  for such matters
as, individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.

         7.18  Existing  Indebtedness.  Annex III sets forth a true and complete
list,  as of the date or dates set forth  therein,  of all  Indebtedness  of the
Company  and each of its  Subsidiaries  which (i) has an  outstanding  principal
amount of at least $1,000,000 (all such Indebtedness,  whether or not so listed,
the "Existing  Indebtedness")  or (ii) is secured by any Lien on any property of
the  Company or any  Subsidiary,  and which will be  outstanding  on the Initial
Borrowing  Date after giving effect to the initial  Borrowing  hereunder,  other
than the  Indebtedness  created  under the Credit  Documents.  The  Company  has
provided to the Administrative  Agent prior to the date of execution hereof true
and complete copies of all agreements and instruments governing the Indebtedness
listed on Annex III (the "Existing Indebtedness Agreements").

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<PAGE>



         7.19  Security  Interests.  Once  executed  and  delivered,  and  until
terminated in accordance with the terms thereof,  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 from time to time, in favor of the Collateral  Agent
for the benefit of the Secured Creditors referred to in the Security  Documents,
superior to and prior to the rights of all third persons and subject to no other
Liens (except that the Collateral under the Security Agreement may be subject to
Permitted  Liens). 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 which shall
have been made, or for which  satisfactory  arrangements have been made, upon or
prior to the execution and delivery thereof. All recording, stamp, intangible or
other similar  taxes  required to be paid by any person under  applicable  legal
requirements or other laws applicable to the property encumbered by the Security
Documents in  connection  with the  execution,  delivery,  recordation,  filing,
registration, perfection or enforcement thereof have been paid.

         7.20 True and Complete Disclosure.  All factual information (taken as a
whole) heretofore or contemporaneously  furnished by or on behalf of the Company
or any of its Subsidiaries in writing to the Administrative  Agent or any Lender
for  purposes  of or in  connection  with  this  Agreement  or  any  transaction
contemplated  herein,  other  than  the  Financial   Projections  (as  to  which
representations  are made only as  provided in section  7.8),  is, and all other
such factual  information (taken as a whole) hereafter furnished by or on behalf
of such  person in writing  to any  Lender  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,  except that any such
future information consisting of financial projections prepared by management of
the Company is only  represented  herein as being based on good faith  estimates
and  assumptions  believed by such persons to be reasonable at the time made, it
being  recognized by the Lenders 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  materially  from  the  projected
results.  As of the Effective Date, there is no fact known to the Company or any
of its  Subsidiaries  which has, or could  reasonably  be  expected  to have,  a
Material Adverse Effect which has not theretofore been disclosed to the Lenders.

         SECTION 8.  AFFIRMATIVE COVENANTS.

         The Company hereby  covenants and agrees that so long as this Agreement
is in effect and until such time as the Total Commitment has been terminated, no
Notes are outstanding and the Loans, together with interest,  Fees and all other
Obligations hereunder, have been paid in full:




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<PAGE>



         8.1 Reporting Requirements. The Company will furnish to each Lender and
the Administrative Agent:

                  (a) Annual Financial  Statements.  As soon as available and in
         any event  within 105 days after the close of each  fiscal  year of the
         Company,  the  consolidated  and  consolidating  balance  sheets of the
         Company and its consolidated  Subsidiaries as at the end of such fiscal
         year and the  related  consolidated  and  consolidating  statements  of
         income and consolidated  statements of stockholder's equity and of cash
         flows for such fiscal  year,  in each case  setting  forth  comparative
         figures for the preceding  fiscal year,  all in  reasonable  detail and
         accompanied by the opinion with respect to such consolidated  financial
         statements of independent  public  accountants  of recognized  national
         standing  selected by the Company,  which opinion shall be  unqualified
         and shall (i) state that such  accountants  audited  such  consolidated
         financial  statements in accordance  with generally  accepted  auditing
         standards,  that such  accountants  believe that such audit  provides a
         reasonable  basis for their  opinion,  and that in their  opinion  such
         consolidated  financial  statements  present  fairly,  in all  material
         respects,  the consolidated  financial  position of the Company and its
         consolidated  subsidiaries  as at the end of such  fiscal  year and the
         consolidated results of their operations and cash flows for such fiscal
         year in conformity with generally accepted  accounting  principles,  or
         (ii) contain such statements as are customarily included in unqualified
         reports   of   independent   accountants   in   conformity   with   the
         recommendations and requirements of the American Institute of Certified
         Public Accountants (or any successor organization).

                  (b) Quarterly Financial  Statements.  As soon as available and
         in any event  within 60 days after the close of each of the first three
         quarterly  accounting  periods in each fiscal year of the Company,  the
         unaudited,  condensed  consolidated and consolidating balance sheets of
         the Company  and its  consolidated  Subsidiaries  as at the end of such
         quarterly period and the related unaudited,  condensed consolidated and
         consolidating  statements of income and consolidated statements of cash
         flows for such quarterly period, and setting forth, in the case of such
         unaudited  consolidated   statements  of  income  and  of  cash  flows,
         comparative  figures for the related  periods in the prior  fiscal year
         (except to the extent  that a business or  Subsidiary  was not owned in
         such prior year), and which shall be certified on behalf of the Company
         by the Chief  Financial  Officer  or other  Authorized  Officer  of the
         Company,  subject to  changes  resulting  from  normal  year-end  audit
         adjustments.

                  (c)  Officer's  Compliance  Certificates.  At the  time of the
         delivery of the financial  statements  provided for in sections  8.1(a)
         and (b), a certificate on behalf of the Company of the Chief  Financial
         Officer or other Authorized  Officer of the Company to the effect that,
         to the best  knowledge of the  Company,  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  shall set forth the
         calculations  required to establish  compliance  with the provisions of
         sections 9.4, 9.5, 9.6, 9.7, 9.8, 9.9, 9.10 and 9.11 of this Agreement.

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                  (d) Notice of Default, Litigation or Certain Matters Involving
         Major Customers. Promptly, and in any event within three Business Days,
         in the case of clause (i) below,  or 10 Business  Days,  in the case of
         clause (ii) or (ii) below, after the Company or any of its Subsidiaries
         obtains knowledge thereof, notice of

                           (i) 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 Company proposes to take with respect thereto,

                           (ii) any  litigation  or  governmental  or regulatory
                  proceeding   pending   against  the  Company  or  any  of  its
                  Subsidiaries which is likely to have a Material Adverse Effect
                  or a material  adverse effect on the ability of the Company to
                  perform its  obligations  hereunder  or under any other Credit
                  Document, and

                           (iii) any significant adverse change in the Company's
                  or any  Subsidiary's  relationship  with,  or any  significant
                  event or circumstance  which is likely to adversely affect the
                  Company's or any Subsidiary's  relationship with, any customer
                  representing  more  than  10%  of the  Company's  consolidated
                  revenues during its most recent fiscal year, and which adverse
                  change is reasonably likely to have a Material Adverse Effect.

                  (e) Auditors' Internal Control Comment Letters,  etc. Promptly
         upon receipt thereof, a copy of each letter or memorandum commenting on
         internal  accounting  or  auditing  controls  or  procedures  which  is
         submitted to the Company by its  independent  accountants in connection
         with any annual audit made by them of the books of the Company.

                  (f) ERISA.  Promptly, and in any event within 10 Business Days
         after the Company, any Subsidiary of the Company or any ERISA Affiliate
         becomes aware of the  occurrence of any of the  following,  the Company
         will  deliver  to each of the  Lenders a  certificate  on behalf of the
         Company of an Authorized  Officer of the Company setting forth the full
         details as to such occurrence and the action, if any, that the Company,
         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 Company, the Subsidiary,  the ERISA Affiliate, the
         PBGC,  a  Plan  participant  or the  Plan  administrator  with  respect
         thereto:

                           (i) that a Reportable Event has occurred with respect
                  to any Plan;

                           (ii) the institution of any steps by the Company, any
                  ERISA Affiliate, the PBGC or any other person to terminate any
                  Plan which has funding requirements;


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<PAGE>



                           (iii) the  institution of any steps by the Company or
                  any ERISA Affiliate to withdraw from any Plan;

                           (iv) the  institution  of any steps by the Company or
                  any  Subsidiary  to withdraw  from any  Multiemployer  Plan or
                  Multiple  Employer  Plan, if such  withdrawal  could result in
                  withdrawal  liability (as described in Part 1 of Subtitle E of
                  Title IV of ERISA) in excess of $1,000,000;

                           (v) a non-exempt "prohibited  transaction" within the
                  meaning of section 406 of ERISA in connection with any Plan;

                           (vi) that a Plan has an  Unfunded  Current  Liability
                  exceeding $1,000,000;

                           (vii)  any  material   increase  in  the   contingent
                  liability of the Company or any Subsidiary with respect to any
                  post-retirement welfare liability; or

                           (viii)   the   taking  of  any   action  by,  or  the
                  threatening  of the  taking of any  action  by,  the  Internal
                  Revenue  Service,  the  Department  of Labor or the PBGC  with
                  respect to any of the foregoing.

                  (g)  Environmental  Matters.  Promptly  upon, and in any event
         within 10 Business Days after,  an officer of the Company or any of its
         Subsidiaries obtains knowledge thereof,  notice of any of the following
         environmental  matters which involves any reasonable likelihood (in the
         Company's  reasonable  judgment)  of  resulting  in a Material  Adverse
         Effect: (i) any pending or threatened (in writing)  Environmental Claim
         against the  Company or any of its  Subsidiaries  or any Real  Property
         owned or operated by the Company or any of its  Subsidiaries;  (ii) any
         condition or occurrence  on or arising from any Real Property  owned or
         operated by the Company or any of its Subsidiaries  that (A) results in
         noncompliance  by the  Company  or any of  its  Subsidiaries  with  any
         applicable  Environmental  Law or (B) would  reasonably  be expected to
         form the basis of an Environmental  Claim against the Company or any of
         its  Subsidiaries  or any such Real  Property;  (iii) any  condition or
         occurrence  on any Real  Property  owned,  leased  or  operated  by the
         Company or any of its Subsidiaries that could reasonably be expected to
         cause  such Real  Property  to be subject  to any  restrictions  on the
         ownership,  occupancy,  use or transferability by the Company or any of
         its Subsidiaries of such Real Property under any Environmental Law; and
         (iv) the taking of any  removal or  remedial  action in response to the
         actual  or  alleged  presence  of any  Hazardous  Material  on any Real
         Property  owned,  leased  or  operated  by  the  Company  or any of its
         Subsidiaries as required by any  Environmental  Law or any governmental
         or other  administrative  agency.  All such notices  shall  describe in
         reasonable  detail  the  nature  of the  Environmental  Claim  and  the
         Company's or such Subsidiary's response thereto.


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<PAGE>



                  (h) SEC Reports and  Registration  Statements.  Promptly  upon
         transmission  thereof  or other  filing  with the  SEC,  copies  of all
         registration  statements  (other  than  the  exhibits  thereto  and any
         registration  statement  on Form  S-8 or its  equivalent)  and  annual,
         quarterly   or  current   reports  that  the  Company  or  any  of  its
         Subsidiaries files with the SEC.

                  (i) Other Information.  With reasonable promptness, such other
         information  or  documents  (financial  or  otherwise)  relating to the
         Company or any of its Subsidiaries as any Lender may reasonably request
         from time to time.

         8.2 Books,  Records and  Inspections.  The Company will, and will cause
each of its  Subsidiaries  to, (i) keep proper books of record and  account,  in
which full and correct entries shall be made of all financial  transactions  and
the assets and business of the Company or such Subsidiaries, as the case may be,
in accordance with GAAP; and (ii) permit during regular business hours,  upon at
least five  Business  Days' notice to the Chief  Financial  Officer or any other
Authorized  Officer of the Company,  officers and designated  representatives of
the  Administrative  Agent or any of the Lenders to visit and inspect any of the
properties or assets of the Company and any of its  Subsidiaries in whomsoever's
possession  (but only to the extent the Company or such Subsidiary has the right
to do so to the extent in the possession of another person),  and to examine the
books of account of the  Company  and any of its  Subsidiaries  and  discuss the
affairs,  finances  and  accounts of the Company and of any of its  Subsidiaries
with, and be advised as to the same by, its and their  officers and  independent
accountants and independent actuaries,  if any, all at such reasonable times and
intervals and to such reasonable  extent as the  Administrative  Agent or any of
the Lenders may request.

         8.3  Insurance.  (a) The  Company  will,  and  will  cause  each of its
Subsidiaries  to, (b) maintain  insurance  coverage by such insurers and in such
forms and amounts and against such risks as are  generally  consistent  with the
insurance  coverage  maintained by the Company and its  Subsidiaries at the date
hereof,  and (c) forthwith upon any Lender's  written  request,  furnish to such
Lender such  information  about such  insurance  as such Lender may from time to
time reasonably request,  which information shall be prepared in form and detail
satisfactory  to such  Lender  and  certified  by an  Authorized  Officer of the
Company.

         (d) The Company will,  and will cause each of its  Subsidiaries  to, at
all times keep  their  respective  property  which is subject to the Lien of any
Security  Document insured in favor of the Collateral Agent, and all policies or
certificates  (or certified  copies thereof) with respect to such insurance (and
any other insurance  maintained by the Company or any such Subsidiary) (i) 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  (with  respect to  Collateral)  or, to the  extent  permitted  by
applicable law, as an additional insured),  (ii) shall state that such insurance
policies shall not be canceled without 30 days' prior written notice thereof (or
10 days' prior written notice in the case of cancellation for the non-payment of
premiums) by the respective insurer to the Collateral Agent, (iii) shall provide
that the respective insurers irrevocably waive any and all rights of subrogation
with respect to the Collateral Agent and the Lenders, and (iv)

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<PAGE>



shall in the  case of any  such  certificates  or  endorsements  in favor of the
Collateral  Agent, be deposited with the Collateral Agent. In no event shall the
Company be required to deposit the actual insurance policies with the Collateral
Agent.  The  Administrative  Agent shall deliver copies of any  certificates  of
insurance to a Lender upon such Lender's request.

         (e) Without  limitation of the foregoing,  the Company will maintain in
full force and effect  with an  insurance  company  acceptable  to the  Required
Lenders a key man life  insurance  policy on the life of Robert A.  Zummo in the
amount of at least  $2,500,000,  which  insurance  policy  shall at all times be
subject to the Assignment of Life Insurance Policy.

         (f) If the  Company or any of its  Subsidiaries  shall fail to maintain
all insurance in  accordance  with this section 8.3, or if the Company or any of
its  Subsidiaries  shall  fail  to  so  endorse  and  deposit  all  policies  or
certificates  with  respect  thereto,   the  Administrative   Agent  and/or  the
Collateral  Agent shall have the right (but shall be under no obligation),  upon
prior notice to the Company, to procure such insurance and the Company agrees to
reimburse the Administrative  Agent or the Collateral Agent, as the case may be,
for all costs and expenses of procuring such insurance.

         8.4 Payment of Taxes.  The  Company  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 Company or any of its  Subsidiaries;  provided that
neither  the Company  nor any of its  Subsidiaries  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 with
respect thereto in accordance with GAAP; and provided, further, that the Company
will  not be  considered  to be in  default  of any of the  provisions  of  this
sentence if the Company or any  Subsidiary  fails to pay any such amount  which,
individually or in the aggregate, is immaterial.

         8.5 Corporate  Franchises.  The Company will do, and will cause each of
its  Subsidiaries  to do, or cause to be done, all things  necessary to preserve
and keep in full force and effect its corporate existence, rights and authority,
provided  that any  transaction  permitted by section 9.2 will not  constitute a
breach of this section 8.5.

         8.6  Good  Repair.  The  Company  will,  and  will  cause  each  of its
Subsidiaries  to,  ensure that its material  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 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  customary  for
companies in similar businesses.


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<PAGE>



         8.7  Compliance  with  Statutes,  etc. The Company will, and will cause
each  of its  Subsidiaries  to,  comply,  in all  material  respects,  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
noncompliance  with  which  would not have,  and which  would not be  reasonably
expected to have, a Material  Adverse Effect or a material adverse effect on the
ability of the Company to perform its obligations under any Credit Document.

         8.8  Compliance  with  Environmental  Laws.  Without  limitation of the
covenants contained in section 8.7, the Company will comply, and will cause each
of its Subsidiaries to comply, in all material respects,  with all Environmental
Laws  applicable  to the  ownership,  lease or use of all Real  Property  now or
hereafter owned,  leased or operated by the Company or any of its  Subsidiaries,
will  promptly  pay or cause to be paid  all  costs  and  expenses  incurred  in
connection with such compliance, and will keep or cause to be kept all such Real
Property free and clear of any Liens imposed pursuant to such Environmental Laws
which are not permitted  under  section 9.3.  Neither the Company 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  other than in compliance
with  applicable  Environmental  Laws and in the  ordinary  course of  business,
except  for such  noncompliance  as would  not  have,  and  which  would  not be
reasonably  expected to have, a Material  Adverse  Effect or a material  adverse
effect on the ability of the Company to perform its obligations under any Credit
Document.  If required to do so under any applicable  order of any  governmental
agency,  the  Company  will  undertake,  and cause each of its  Subsidiaries  to
undertake,  any clean up, removal,  remedial or other action necessary to remove
and clean-up any Hazardous  Materials  from any Real Property  owned,  leased or
operated by the Company or any of its  Subsidiaries  in accordance  with, in all
material respects, the requirements of all applicable  Environmental Laws and in
accordance  with,  in all  material  respects,  such orders of all  governmental
authorities,  except  to the  extent  that the  Company  or such  Subsidiary  is
contesting such order in good faith and by appropriate proceedings and for which
adequate reserves have been established to the extent required by GAAP.

         8.9 Fiscal Years,  Fiscal Quarters.  The Company will, for consolidated
financial reporting purposes,  continue to use March 31 as the end of its fiscal
year  and  June 30,  September  30,  and  December  31 as the end of its  fiscal
quarters.  If the Company shall change any of its Subsidiaries'  fiscal years or
fiscal quarters (other than the fiscal year or fiscal quarters of a person which
becomes a  Subsidiary,  made at the time such  person  becomes a  Subsidiary  to
conform to the  Company's  fiscal year and fiscal  quarters),  the Company  will
promptly,  and in any event within 30 days following any such change,  deliver a
notice to the  Administrative  Agent and the Lenders  describing such change and
any material accounting entries made in connection therewith and stating whether
such  change  will have any impact upon any  financial  computations  to be made
hereunder,  and if any such impact is foreseen,  describing in reasonable detail
the nature and extent of such impact. If the Required Lenders determine that any
such change will have any impact

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<PAGE>



upon any financial  computations  to be made  hereunder  which is adverse to the
Lenders,  the Company will, if so requested by the  Administrative  Agent, enter
into an amendment to this Agreement,  in form and substance  satisfactory to the
Administrative  Agent and the Required  Lenders,  modifying any of the financial
covenants or related  provisions  hereof in such manner as the Required  Lenders
determine is necessary to eliminate such adverse effect.

         8.10 Certain  Subsidiaries to Join in Subsidiary  Guaranty.  (a) In the
event that at any time after the  Initial  Borrowing  Date the  Company  has any
Material Subsidiary which is not a party to the Subsidiary Guaranty, the Company
will notify the Administrative  Agent in writing of such event,  identifying the
Material Subsidiary in question and referring  specifically to the rights of the
Administrative  Agent and the Lenders  under this  section.  The  Company  will,
within 30 days following request therefor from the Administrative Agent (who may
give  such  request  on its own  initiative  or  upon  request  by the  Required
Lenders), cause such Material Subsidiary to deliver to the Administrative Agent,
in sufficient quantities for the Lenders, (i) a joinder supplement, satisfactory
in form and substance to the Administrative Agent and the Required Lenders, duly
executed by such Material Subsidiary, pursuant to which such Material Subsidiary
joins in the  Subsidiary  Guaranty as a guarantor  thereunder,  and (ii) if such
Material  Subsidiary is a corporation,  resolutions of the Board of Directors of
such Material  Subsidiary,  certified by the Secretary or an Assistant Secretary
of such  Material  Subsidiary  as duly  adopted  and in full  force and  effect,
authorizing  the execution and delivery of such joinder  supplement,  or if such
Material  Subsidiary is not a corporation,  such other evidence of the authority
of  such  Material   Subsidiary  to  execute  such  joinder  supplement  as  the
Administrative Agent may reasonably request.

         (b)  Notwithstanding  the  foregoing or the  provisions of section 8.11
hereof,  the Company shall not be required to cause a Foreign Subsidiary to join
in the  Subsidiary  Guaranty  or to  become  a party to an  Additional  Security
Document if (i) to do so would subject the Company to liability  for  additional
United States income taxes by virtue of section 956 of the Code in an amount the
Company  considers  material,  and (ii) the Company provides the  Administrative
Agent with  documentation,  including  computations  prepared  by the  Company's
internal tax officer, its independent accountants or tax counsel,  acceptable to
the Required Lenders, in support thereof.

         8.11 Additional Security; Further Assurances. (a) In the event that the
Company  or any  Subsidiary  at any time owns or holds an  interest  in any Real
Property or any other  property or interest which is not at the time included in
the Collateral and is not subject to a Permitted Lien securing Indebtedness, the
Company will, or will cause such Subsidiary to, within 20 days following request
by the Collateral Agent (who may make such request on its own initiative or upon
instructions  from the Required  Lenders),  grant the  Collateral  Agent for the
benefit of the Secured Creditors (as defined in the Security Documents) security
interests  and  mortgages  (each  an  "Additional  Security  Document")  in such
interests or properties of the Company or any  Subsidiary,  subject to obtaining
any required  consents  from third  parties  (including  third party lessors and
co-venturers)  necessary  to be  obtained  for  the  granting  of a Lien  on the
interests  or assets  involved  (with the  Company  hereby  agreeing  to use its
reasonable best efforts to obtain such consents),  and subject to the provisions
of section 8.10(b). Each Additional Security

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Document (i) shall be granted pursuant to documentation satisfactory in form and
substance  to  the   Administrative   Agent  and  the  Collateral  Agent,  which
documentation  shall  in the  case of Real  Property  or  interests  therein  be
accompanied by such Phase I  environmental  assessments,  surveys and surveyor's
certifications,  a mortgage policy of title insurance, consents of landlords and
other  supporting  documentation  requested  by and  satisfactory  in  form  and
substance to the  Administrative  Agent and the Collateral Agent; and (ii) shall
constitute  a valid  and  enforceable  perfected  Lien  upon  the  interests  or
properties so included in the Collateral, superior to and prior to the rights of
all third  persons and  subject to no other  Liens  except  those  permitted  by
section  9.3 or  otherwise  agreed  by the  Administrative  Agent at the time of
perfection  thereof and (in the case of Real Property or interests therein) such
other  encumbrances as may be set forth in the mortgage policy, if any, relating
to such Additional  Security Document which shall be delivered to the Collateral
Agent  together  with such  Additional  Security  Document  and  which  shall be
satisfactory in form and substance to the Collateral Agent. The Company,  at its
sole  cost  and  expense,  will  cause  each  Additional  Security  Document  or
instruments  related  thereto to be duly recorded or filed in such manner and in
such places as are required by law to establish,  perfect,  preserve and protect
the Liens  created  thereby  required to be granted  pursuant to the  Additional
Security Document,  and will pay or cause to be paid in full all taxes, fees and
other charges payable in connection therewith.

         (b) Within 60 days  following the Initial  Borrowing  Date, the Company
will,  and will cause any of its applicable  Subsidiaries  to, (i) contribute to
the capital of a newly formed Delaware corporation ("Intermediate Holding Co."),
which shall be a direct Wholly-Owned Subsidiary of the Company, all of the stock
and Indebtedness of each Subsidiary  which is a corporation  organized under the
laws of a country  other  than the United  States  (the  "Contributed  Stock and
Debt") which is owned by the Company or any  Subsidiary,  pursuant to a tax free
reorganization  (or other tax free  transaction)  under the Code, and (ii) enter
into an amendment to the Pledge Agreement, satisfactory in form and substance to
the Administrative Agent, pursuant to which, among other things, (A) the Company
pledges all of the outstanding  capital stock of  Intermediate  Holding Co., and
(B) the 65% of the outstanding  capital stock of each such foreign  corporation,
which was previously  pledged under the Pledge  Agreement by other Pledgors,  is
pledged thereunder by Intermediate Holding Co.

         (c) The Company will,  and will cause each of its  Subsidiaries  to, at
the expense of the Company,  make, execute,  endorse,  acknowledge,  file and/or
deliver to the Collateral  Agent from time to time such  conveyances,  financing
statements, transfer endorsements,  powers of attorney,  certificates, and other
assurances or instruments and take such further steps relating to the Collateral
covered by any of the Security  Documents as the Collateral Agent may reasonably
require.  If at any time the Collateral  Agent  determines,  based on applicable
law,  that  all  applicable  taxes  (including,  without  limitation,   mortgage
recording  taxes  or  similar  charges)  were not  paid in  connection  with the
recordation of any mortgage or deed of trust, the Company shall promptly pay the
same upon demand.  Furthermore,  the Company  shall cause to be delivered to the
Collateral  Agent such opinions of local counsel,  appraisals,  title insurance,
surveys,  environmental  assessments,  consents of landlords,  lien waivers from
landlords or mortgagees and other related

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documents  as may be  reasonably  requested by the  Administrative  Agent or the
Collateral  Agent in connection  therewith,  all of which  documents shall be in
form and substance  satisfactory to the Administrative  Agent and the Collateral
Agent,  except that no title  insurance  or surveys  shall be  required  for any
leasehold  properties  (unless  the lessee  has a nominal  or  bargain  purchase
option).

         (d) The Company will if  requested by any Lender at any time,  in order
to  meet  any  legal   requirement   applicable  to  such  Lender,   provide  to
Administrative Agent, the Collateral Agent and the Lenders, at the sole cost and
expense of the Company,  appraisals and other supporting  documentation relating
to any mortgage or deed of trust  delivered as an Additional  Security  Document
hereunder,  as  specified  by  any  Lender,  meeting  the  appraisal  and  other
documentation requirements of the Real Estate Reform Amendments of the Financial
Institution  Reform,  Recovery and Enforcement  Act of 1989, as amended,  or any
other legal requirements applicable to any Lender, which in the case of any such
appraisal shall be prepared by one or more valuation firms of national standing,
acceptable to the Required Lenders,  utilizing  appraisal  standards  satisfying
such Amendments, Act or other legal requirements.

         (e) The Company will provide the  Administrative  Agent with sufficient
copies  of each  Additional  Security  Document  and any  additional  supporting
documents  delivered in connection  therewith for distribution of copies thereof
to the Lenders,  and the  Administrative  Agent will promptly so distribute such
copies.

         8.12 Corporate Separateness. The Company will take, and will cause each
of its  Subsidiaries  to  take,  all such  action  as is  necessary  to keep the
operations of the Company and its Subsidiaries  separate and apart from those of
each  Subsidiary  which  has  outstanding   Indebtedness,   including,   without
limitation,   ensuring  that  all  customary   formalities  regarding  corporate
existence,   including   holding  regular  board  of  directors'   meetings  and
maintenance of corporate records, are followed.  All financial statements of the
Company and its  Subsidiaries  provided to creditors  will clearly  evidence the
corporate  separateness  of the  Company  and its other  Subsidiaries  from each
Subsidiary which has Indebtedness outstanding.  Finally, neither the Company nor
any of its other  Subsidiaries will take any action, or conduct its affairs in a
manner  which is likely to result in the  corporate  existence  of a  Subsidiary
which has  Indebtedness  outstanding,  on the one hand,  and the Company and its
other  Subsidiaries,  on the other  hand,  being  ignored,  or in the assets and
liabilities of the Company or any of its other Subsidiaries being  substantively
consolidated with those of a Subsidiary which has Indebtedness  outstanding in a
bankruptcy,   reorganization  or  other  insolvency  proceeding.  No  action  or
indemnity, or provision of support in the form of a letter of credit,  expressly
permitted by this Agreement will breach this covenant.

         8.13 ERISA. As soon as possible and, in any event, within 10 days after
the Company,  any Subsidiary of the Company or any ERISA  Affiliate knows or has
reason to know of the  occurrence  of any of the  following,  the  Company  will
deliver to each of the Lenders a certificate of the chief  financial  officer of
the Company setting forth the full details as to such occurrence and the action,
if any, that the Company, such Subsidiary or such ERISA Affiliate is required or

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proposes to take,  together with any notices required or proposed to be given to
or filed with or by the Company, the Subsidiary,  the ERISA Affiliate, the PBGC,
a Plan  participant  or the Plan  administrator  with  respect  thereto:  that a
Reportable Event has occurred;  that an accumulated funding  deficiency,  within
the  meaning  of  section  412 of the Code or  section  302 of  ERISA,  has been
incurred or an application  may be or has been made 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 or section
303 or 304 of ERISA with respect to a Plan; that any contribution required to be
made with  respect to a Plan has not been timely  made;  that a Plan has been or
may be terminated, reorganized, partitioned or declared insolvent under Title IV
of ERISA; that a Plan has an Unfunded Current Liability; that proceedings may be
or have been  instituted  to terminate or appoint a trustee to administer a Plan
which is subject to Title IV of ERISA;  that a  proceeding  has been  instituted
pursuant to section 515 of ERISA to collect a delinquent contribution to a Plan;
that the Company,  any Subsidiary of the Company or any ERISA  Affiliate will or
may incur any  liability  (including  any  indirect,  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 or 502(i) or 502(1) of ERISA or with  respect to a group health plan
(as defined in section 607(1) of ERISA or section 4980B(g)(2) of the Code) under
section 4980B of the Code; or that the Company or any  Subsidiary of the Company
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 Plan.

         8.14 Hedge Agreements,  etc. The Company may, and may permit any of its
Subsidiaries to, enter into Hedge Agreements (i) in order to provide  protection
to the Company or any such  Subsidiary  from  fluctuations  and other changes in
interest  rates and currency  exchange  rates,  as and to the extent  considered
reasonably  necessary by the Company,  but no such Hedge  Agreement shall expose
the Company or its Subsidiaries to predominantly  speculative risks unrelated to
the amount of  Indebtedness  or assets  intended  to be subject to coverage on a
notional basis under any such Hedge Agreement; and (ii) in the case of any Hedge
Agreement  entered into after the  Effective  Date,  only if the  proposed  form
thereof  (including  any  proposed  pricing  or other  material  terms) has been
provided to the Administrative Agent  contemporaneously with the entry into such
Hedge Agreement.

         8.15 Senior  Debt.  The Company  will at all times  ensure that (a) the
claims of the Lenders in respect of the  Obligations  of the Company will not be
subordinate  to, and will in all  respects  at least rank pari passu  with,  the
claims of every other senior secured or unsecured  creditor of the Company,  and
(b) any  Indebtedness  subordinated  in any  manner to the  claims of any senior
secured or unsecured creditor of the Company will be subordinated in like manner
to such claims of the Lenders.


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         SECTION 9.  NEGATIVE COVENANTS.

         The Company hereby  covenants and agrees that on the Effective Date and
thereafter for so long as this Agreement is in effect and until such time as the
Total Commitment has been terminated, no Notes remain outstanding and the Loans,
together with interest,  Fees and all other Obligations  incurred  hereunder are
paid in full:

         9.1  Changes  in   Business.   Neither  the  Company  nor  any  of  its
Subsidiaries will engage in any business if, as a result,  the general nature of
the business,  taken on a consolidated  basis, which would then be engaged in by
the  Company  and its  Subsidiaries,  would be  substantially  changed  from the
general nature of the business engaged in by the Company and its Subsidiaries on
the date hereof,  which includes the production of automotive airbag systems and
components  thereof,  it being  understood  that  the  vertical  integration  of
businesses  into the  Company in order to avoid  reliance  on outside  suppliers
shall not be considered a substantial change in the Company's business.

         9.2 Consolidation, Merger or Sale of Assets, etc. The Company 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  or sell or
otherwise  dispose of any of its property or assets (but  excluding  any sale or
disposition  of obsolete or excess  furniture,  fixtures or  equipment or excess
vacant land in the ordinary course of business), or purchase, lease or otherwise
acquire (in one transaction or a series of related transactions) all or any part
of the  property or assets of any person  (excluding  any  purchases,  leases or
other acquisitions of property or assets in, and for use 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) Capital  Expenditures:  Consolidated  Capital Expenditures
         permitted by section 9.9;

                  (b) Permitted Investments:  the investments permitted pursuant
         to section 9.5;

                  (c) Certain Intercompany Mergers, etc.: if no Default or Event
         of Default  shall  have  occurred  and be  continuing  or would  result
         therefrom,   (i)  the  merger  or  consolidation  of  any  Wholly-Owned
         Subsidiary with or into the Company or another Wholly-Owned Subsidiary,
         so long as in any merger or  consolidation  involving  any Borrower the
         Borrower is the surviving or continuing corporation, or the liquidation
         or  dissolution  of any  Subsidiary,  or (ii)  the  transfer  or  other
         disposition  of  any  property  by  the  Company  to  any  Wholly-Owned
         Subsidiary  or by any  Wholly-Owned  Subsidiary  to the  Company or any
         other Wholly-Owned Subsidiary of the Company;

                  (d) Valentec  International  Transaction:  the  acquisition of
         Valentec  International  Corporation  pursuant  to the  Stock  Purchase
         Agreement (the "Valentec  Stock Purchase  Agreement"),  among Robert A.
         Zummo, Francis X. Suozzi, the Valentec International

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<PAGE>



         Corporation   Employee  Stock  Ownership  Plan,  and  the  Company,  in
         compliance  with all  applicable  laws,  provided that, (i) there shall
         have  been no  amendment  to or  other  modification  of the  terms  or
         conditions  since  the  date  hereof  of the  Valentec  Stock  Purchase
         Agreement,  or any waiver of  performance  of any of the terms thereof,
         which in the opinion of the  Required  Lenders is  materially  adverse;
         (ii) the  Indebtedness  for  borrowed  money of Valentec  International
         Corporation   under  the  credit   facility  with  Congress   Financial
         Corporation  (Western)  shall have been repaid or prepaid in full,  any
         commitments  for  further  borrowings  thereunder  terminated,  and any
         related Liens  discharged;  (iii) all material  governmental  and third
         party approvals shall have been obtained; and (iv) none of the proceeds
         of any Loan is used to pay any  indebtedness of Valentec  International
         Corporation under the credit facility with Coutts & Co. AG;

                  (e) Permitted Acquisitions:  if no Default or Event of Default
         shall have occurred and be continuing  or would result  therefrom,  the
         Company or any Subsidiary may make any Permitted Acquisition,  provided
         that any consents of the Required Lenders (or all Lenders)  required by
         the terms of the  definition of the term  Permitted  Acquisition  shall
         first  have been  obtained  and the  Administrative  Agent  shall  have
         confirmed in writing that such consents have been obtained;

                  (f) Permitted Dispositions:  if no Default or Event of Default
         shall have occurred and be continuing  or would result  therefrom,  the
         Company or any of its Subsidiaries  may (i) sell any property,  land or
         building (including any related receivables or other intangible assets)
         to any person  which is not a Subsidiary  of the Company,  or (ii) sell
         the entire capital stock (or other equity  interests) and  Indebtedness
         of any Subsidiary  owned by the Company or any other  Subsidiary to any
         person  which is not a Subsidiary  of the Company,  or (iii) permit any
         Subsidiary to be merged or  consolidated  with a person which is not an
         Affiliate of the Company,  or (iv) consummate any other Asset Sale with
         a person who is not a Subsidiary of the Company;  provided that (A) the
         consideration for such transaction represents fair value (as determined
         by management of the Company),  and at least 90% of such  consideration
         consists  of cash,  (B) in the case of any such  transaction  involving
         consideration  in excess of  $1,000,000,  at least five  Business  Days
         prior to the date of completion of such  transaction  the Company shall
         have  delivered to the  Administrative  Agent an officer's  certificate
         executed  on behalf of the  Company  by an  Authorized  Officer  of the
         Company,  which certificate shall contain a description of the proposed
         transaction,  the date such transaction is scheduled to be consummated,
         the  estimated   purchase  price  or  other   consideration   for  such
         transaction,  financial  information  pertaining to compliance with the
         preceding   clause  (A),   and  which  shall  (if   requested   by  the
         Administrative  Agent)  include  a  certified  copy  of  the  draft  or
         definitive  documentation pertaining thereto, and (C) contemporaneously
         therewith,  the Company prepays Loans as and to the extent contemplated
         by section 5.2(c); and


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                  (g) Leases:  the Company or any of its  Subsidiaries may enter
         into  leases  of  property   or  assets  not   constituting   Permitted
         Acquisitions  in the  ordinary  course of  business  not  otherwise  in
         violation of this Agreement.

To the extent the  Required  Lenders (or all of the Lenders as shall be required
by section  13.12) waive the  provisions of this section 9.2 with respect to the
sale,  transfer or other  disposition  of any  Collateral,  or any Collateral is
sold,  transferred  or disposed of as  permitted  by this  section 9.2, (i) such
Collateral shall be sold, transferred or disposed of free and clear of the Liens
created by the respective Security  Documents;  (ii) if such Collateral includes
all of the  capital  stock of a  Subsidiary  which is a Party to the  Subsidiary
Guaranty or other Security  Document,  such capital stock shall be released from
the Pledge  Agreement and such Subsidiary  shall be released from the Subsidiary
Guaranty;  and (iii) the Administrative  Agent and the Collateral Agent shall be
authorized to take actions deemed appropriate by them in order to effectuate the
foregoing.

         9.3  Liens.  The  Company  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 Company 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 or without recourse to the
Company or any of its Subsidiaries, other than for purposes of collection in the
ordinary course of business) 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 that the
foregoing restrictions shall not apply to:

                  (a)  Liens for  taxes  not yet  delinquent  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
         Company) have been established;

                  (b) Liens in  respect  of  property  or assets  imposed by law
         which  were  incurred  in the  ordinary  course  of  business,  such as
         carriers', warehousemen's, materialmen's and mechanics' Liens and other
         similar Liens arising in the ordinary course of business,  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 Company or any Subsidiary;

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

                  (d) Liens (i) in existence on the Initial Borrowing Date which
         are listed,  and the  Indebtedness  secured  thereby  and the  property
         subject thereto on the Initial  Borrowing Date described,  in Annex IV,
         or (ii) arising out of the refinancing, extension, renewal or refunding
         of any  Indebtedness  secured  by any  such  Liens,  provided  that the
         principal  amount  of  such  Indebtedness  is not  increased  and  such
         Indebtedness is not secured by any additional assets;

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<PAGE>



                  (e) Liens arising from  judgments,  decrees or  attachments in
         circumstances  not  constituting  an Event  of  Default  under  section
         10.1(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;  and mechanic's  Liens,  carrier's  Liens, and other Liens to
         secure the  performance  of tenders,  statutory  obligations,  contract
         bids, 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),  whether  pursuant  to  statutory  requirements,  common law or
         consensual arrangements;

                  (g) Leases or subleases  granted to others not  interfering in
         any  material  respect  with the  business of the Company or any of its
         Subsidiaries  and any interest or title of a lessor under any lease not
         in violation of this Agreement;

                  (h)  easements,  rights-of-way,  zoning or deed  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 Company or any of its Subsidiaries;

                  (i) Liens created by virtue of Capitalized  Lease  Obligations
         or other leases not in violation of the requirements of this Agreement,
         provided  that such Liens are only in respect of the property or assets
         subject to, and secure  only,  the  respective  Capital  Lease or other
         lease (and any other  Capital  Lease or other  lease with the same or a
         related group of lessors);

                  (j) Liens placed upon Real Property,  improvements thereto and
         related  fixtures and equipment or  machinery,  in each case located in
         the Czech  Republic,  provided  the  Indebtedness  secured  thereby  is
         permitted by section 9.4(b); and

                  (k) Liens (i) placed upon Real Property, improvements thereto,
         equipment or machinery  used in the ordinary  course of business of the
         Company or any Subsidiary at the time of (or within 270 days after) the
         acquisition or completion of construction thereof by the Company or any
         such Subsidiary to secure Indebtedness incurred to pay all or a portion
         of the purchase price or construction cost thereof, or (ii) existing on
         property  or other  assets at the time  acquired  by the Company or any
         Subsidiary  or on  assets of a person  at the time  such  person  first
         becomes a  Subsidiary  of the Company  (other than any such Liens which
         were created at the time of or in  contemplation  of the acquisition of
         such  assets  or  person by the  Company  or any of its  Subsidiaries);
         provided (A) in the case of any such acquisition of a person,  any such
         Lien  attaches  only to the property and assets of such person,  (B) in
         the case of any such  acquisition  of property or assets by the Company
         or any  Subsidiary,  any such Lien  attaches  only to the  property and
         assets so acquired or

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<PAGE>



         constructed  and not to any other  property or assets of the Company or
         any Subsidiary,  and (C) the  Indebtedness  secured by any such Lien is
         permitted by section 9.4(c).

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

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

                  (b)    Indebtedness    of   Automotive    Safety    Components
         International,  s.r.o., a Foreign Subsidiary, in the original aggregate
         principal amount of approximately  $7,500,000 (or the equivalent in any
         applicable  currency or  currencies),  used to finance  Real  Property,
         improvements  and  related  properties  subject to Liens  permitted  by
         section  9.3(j),  and an  unsecured  guaranty  by the  Company  of such
         Indebtedness;  and any refinancing,  extension, renewal or refunding of
         any such Indebtedness not involving an increase in the principal amount
         thereof  or a  reduction  of more  than 10% in the  remaining  weighted
         average life to maturity thereof  (computed in accordance with standard
         financial practice);

                  (c)  Indebtedness of the Company or any Subsidiary (i) subject
         to Liens  permitted  by section  9.3(k),  or (ii) in respect of Capital
         Leases;   provided  that  the  aggregate   principal   amount  of  such
         Indebtedness (and the principal portion of any Capital Leases) incurred
         in  any  fiscal  year  shall  not  exceed  an  amount  equal  to 80% of
         Consolidated  Capital  Expenditures for such year; and any refinancing,
         extension,  renewal or refunding of any such Indebtedness not involving
         an increase in the principal amount thereof or a reduction of more than
         10%  in  the  remaining  weighted  average  life  to  maturity  thereof
         (computed in accordance with standard financial practice);

                  (d) unsecured Subordinated  Indebtedness of the Company in the
         aggregate  principal  amount of up to $5,000,000 (or such larger amount
         as may be approved by the Required Lenders),  having a weighted average
         life to  maturity  (computed  in  accordance  with  standard  financial
         practice)  at the time of  incurrence  thereof  in  excess  of 5 years,
         incurred pursuant to a public offering,  Rule 144A offering, or private
         placement with institutional  investors,  of the Company's subordinated
         unsecured debt securities;

                  (e) to the  extent not  otherwise  permitted  pursuant  to the
         foregoing clauses, Indebtedness of Foreign Subsidiaries of the Company,
         and Indebtedness of branches of the Company that are incorporated under
         the laws of a country  other than the United  States,  not in excess of
         $500,000 (or the equivalent in any  applicable  currency or currencies)
         outstanding at any time;


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<PAGE>



                  (f)  Existing  Indebtedness,   to  the  extent  not  otherwise
         permitted  pursuant  to the  foregoing  clauses;  and any  refinancing,
         extension,  renewal or refunding of any such Existing  Indebtedness not
         involving an increase in the principal amount thereof or a reduction of
         more  than  10% in the  remaining  weighted  average  life to  maturity
         thereof (computed in accordance with standard financial practice);

                  (g)  Indebtedness of the Company or any Subsidiary under Hedge
         Agreements;

                  (h)  Indebtedness  of the Company to any of its  Subsidiaries,
         and Indebtedness of any of the Company's Subsidiaries to the Company or
         to  another  Subsidiary  of the  Company,  in each  case to the  extent
         permitted under section 9.5; and

                  (i)  Guaranty Obligations permitted under section 9.5.

         9.5 Advances,  Investments, Loans and Guaranty Obligations. The Company
will not,  and will not  permit  any of its  Subsidiaries  to, (a) lend money or
credit or make  advances  to any  person,  (b)  purchase  or acquire  any stock,
obligations  or  securities  of, or any other  interest  in, or make any capital
contribution to, any person, (c) create, acquire or hold any Subsidiary,  (d) be
or  become a party to any  joint  venture  or  partnership,  or (e) be or become
obligated under any Guaranty  Obligations  (other than those created in favor of
the Lenders pursuant to the Credit Documents), except:

                  (i) the Company or any of its  Subsidiaries may invest in cash
         and Cash Equivalents;

                  (ii) any endorsement of a check or other medium of payment for
         deposit or collection,  or any similar transaction in the normal course
         of business;

                  (iii) the  Company and its  Subsidiaries  may acquire and hold
         receivables  owing  to them in the  ordinary  course  of  business  and
         payable or dischargeable in accordance with customary trade terms;

                  (iv)  investments  acquired  by  the  Company  or  any  of its
         Subsidiaries  (A) in  exchange  for any  other  investment  held by the
         Company or any such  Subsidiary in connection  with or as a result of a
         bankruptcy,  workout,  reorganization or recapitalization of the issuer
         of such other  investment,  or (B) as a result of a foreclosure  by the
         Company  or  any of  its  Subsidiaries  with  respect  to  any  secured
         investment  or other  transfer  of title with  respect  to any  secured
         investment in default;

                  (v) any unsecured  guaranty by the Company of the Indebtedness
         described in section 9.4(b), (c) or (e);

                  (vi)  investments of the Company and its Subsidiaries in Hedge
         Agreements;

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                  (vii) the existing  investments  and  guarantees  described on
         Annex V hereto;

                  (viii)  existing   investments  in  Foreign  Subsidiaries  and
         Subsidiaries which are not Wholly-Owned Subsidiaries (and any increases
         thereof attributable to increases in retained earnings)

                  (ix)  investments in the capital of Wholly-Owned  Subsidiaries
         which are not Foreign Subsidiaries;

                  (x) loans and advances by any Subsidiary of the Company to the
         Company, provided that the Indebtedness represented thereby constitutes
         Subordinated Indebtedness;

                  (xi) to the extent not  permitted  by the  foregoing  clauses,
         loans and advances by the Company or by any  Subsidiary  of the Company
         to, or other investments in, any person (including, without limitation,
         Subsidiaries  of the Company and  employees,  officers and directors of
         the  Company  and  its  Subsidiaries);  provided  that  the  cumulative
         aggregate  amount of all such loans,  advances  and  investments  after
         March 31, 1997,  after giving effect to any repayment of any such loans
         or advances, shall not exceed $500,000 at any time outstanding; and

                  (xii)   Guaranty   Obligations  of  (A)  the  Company  or  any
         Subsidiary in respect of leases which are not  prohibited by under this
         Agreement and (B) the Company or any Subsidiary in respect of any other
         person  (other  than in respect of  Indebtedness  for  borrowed  money)
         arising  as a matter of  applicable  law  because  the  Company or such
         Subsidiary  is or is  deemed  to be a  general  partner  of such  other
         person,  or  arising  in the  ordinary  course  of  business,  shall be
         permitted.

         9.6  Dividends,  etc. The Company will not declare or pay any dividends
(other than dividends payable solely in common stock of the Company) on, or make
any other  distribution  or payment  on account of (other  than in shares of the
common stock of the Company),  and the Company will not, and will not permit any
of its Subsidiaries  to,  purchase,  redeem,  retire or otherwise  acquire,  any
shares  of any  class  of the  capital  stock  of the  Company,  whether  now or
hereafter  outstanding  (all of the  foregoing  "Dividends"),  except that if no
Event of Default shall have occurred or be continuing or would result therefrom,
the Company may  repurchase  shares of its common stock for cash  consideration,
provided that the  cumulative  aggregate  cash  consideration  so expended after
March 31, 1997 does not exceed $500,000.

         9.7 Total  Indebtedness/EBITDA  Ratio. The Company will not at any time
permit  the ratio of (i) the amount of Total  Indebtedness  at such time to (ii)
EBITDA for any Testing Period, to exceed 2.50 to 1.00.


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         9.8 Fixed Charge Coverage Ratio.  The Company will not permit its Fixed
Charge  Coverage  Ratio for any  Testing  Period to be less than the ratio shown
below for any applicable period:




             Period                            Ratio
Initial Borrowing Date
through March 31, 2000                      1.00 to 1.00
Thereafter                                  1.20 to 1.00
================================  ================================


         9.9 Capital Expenditures. The Company will not, and will not permit any
of its Subsidiaries to, make or incur Consolidated  Capital  Expenditures during
any fiscal year of the Company,  commencing with its fiscal year ended March 31,
1998, in an aggregate amount in excess of $8,000,000.

         9.10  Certain  Leases.  The Company  will not (a) permit the  aggregate
payments  (excluding any property  taxes,  insurance or maintenance  obligations
paid by the Company and its  Subsidiaries  as additional rent or lease payments)
by the Company and its Subsidiaries on a consolidated  basis under agreements to
rent or lease any personal  property for a period exceeding 12 months (including
any renewal or similar option  periods),  other than pursuant to Capital Leases,
to exceed  $1,000,000  in any  fiscal  year of the  Company;  or (b)  permit the
aggregate fair value of property  leased by the Company and/or its  Subsidiaries
pursuant to one or more Capital  Leases from any single lessor (or related group
of lessors),  determined at the time of any applicable  Capital Lease, to exceed
$5,000,000.

         9.11 Minimum  Consolidated  Net Worth.  The Company will not permit its
Consolidated  Net  Worth,   without  regard  to  foreign  currency   translation
adjustments  subsequent  to  March  31,  1997,  at  any  time  to be  less  than
$37,000,000,  except that (i) effective as of the end of the  Borrower's  fiscal
quarter  ended  June  30,  1997,  and  as of  the  end of  each  fiscal  quarter
thereafter,  the  foregoing  amount (as it may from time to time be increased as
herein provided),  shall be increased by 100% of Consolidated Net Income for the
fiscal  quarter ended on such date, if any (there being no reduction in the case
of any such  Consolidated  Net Income  which  reflects a deficit);  and (ii) the
foregoing amount (as it may from time to time be increased as herein  provided),
shall be decreased by the amount of Dividends  paid in  accordance  with section
9.6.

         9.12  Prepayments  and  Refinancings  of  Subordinated  Debt,  etc. The
Company will not, and will not permit any of its  Subsidiaries to, 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, or refinance or refund,
any

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Subordinated Indebtedness of the Company referred to in section 9.4(c); provided
that the Company may refinance or refund any such  Subordinated  Indebtedness if
the aggregate  principal  amount thereof is not increased,  the weighted average
life to  maturity  thereof  (computed  in  accordance  with  standard  financial
practice)  is not  reduced  by more  than  10%,  and  there is no  change in the
subordination  provisions  applicable thereto which is materially adverse to the
Lenders.

         9.13 Transactions  with Affiliates.  The Company will not, and will not
permit any Subsidiary to, enter into any  transaction or series of  transactions
with any Affiliate (other than, in the case of the Company, any Subsidiary,  and
in the case of a Subsidiary,  the Company or another  Subsidiary)  other than in
the ordinary  course of business of and pursuant to the reasonable  requirements
of the  Company's or such  Subsidiary's  business  and upon fair and  reasonable
terms no less favorable to the Company or such Subsidiary than would obtain in a
comparable  arm's-  length  transaction  with a person other than an  Affiliate,
except (i) loans,  advances and investments permitted by section 9.5, (ii) sales
of goods to an Affiliate for use or distribution outside the United States which
in the good faith  judgment of the Company  complies with any  applicable  legal
requirements of the Code, or (iii) agreements and transactions with and payments
to officers, directors and shareholders which are either (A) entered into in the
ordinary  course of business and not prohibited by any of the provisions of this
Agreement, or (B) entered into outside the ordinary course of business, approved
by the directors or  shareholders  of the Company,  and not prohibited by any of
the provisions of this Agreement.

         9.14 Limitation on Certain  Restrictions on  Subsidiaries.  The Company
will  not,  and  will  not  permit  any  of its  Subsidiaries  to,  directly  or
indirectly, create or otherwise cause or suffer to exist or become effective any
contractual  encumbrance  or  restriction  in or on  the  ability  of  any  such
Subsidiary to (a) pay dividends or make any other  distributions  on its capital
stock or any other interest or participation in its profits owned by the Company
or any Subsidiary of the Company, or pay any Indebtedness owed to the Company or
a Subsidiary of the Company, (b) make loans or advances to the Company or any of
the Company's other  Subsidiaries,  or transfer any of its property or assets to
the  Company  or  any of the  Company's  other  Subsidiaries,  except  for  such
encumbrances or restrictions  existing under or by reason of (i) applicable law,
(ii) this Agreement and the other Credit Documents,  (iii) customary  provisions
restricting subletting or assignment of any lease governing a leasehold interest
of a Subsidiary of the Company, (iv) customary provisions restricting assignment
of any licensing  agreement entered into by any Subsidiary of the Company in the
ordinary course of business,  (v) customary provisions  restricting the transfer
of assets subject to Liens permitted under section 9.3(k), (vi) encumbrances and
restrictions  contained in the Existing Indebtedness  Agreements as in effect on
the Effective Date and customary  restrictions governing any of the Indebtedness
of a Subsidiary  permitted  pursuant to section 9.4, (vii) any document relating
to  Indebtedness  secured by a Lien  permitted  by section  9.3,  insofar as the
provisions  thereof  limit  grants of junior liens on the assets  securing  such
Indebtedness,  and (viii) any operating  lease or Capital Lease,  insofar as the
provisions  thereof limit grants of a security interest in, or other assignments
of, the related leasehold interest to any other person.

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<PAGE>



         9.15 Limitation on Sale and Lease-Back  Transactions.  The Company will
not, nor will it permit any  Subsidiary  to, enter into any Sale and  Lease-Back
Transaction involving any individual property (or related group of properties as
part of the same Sale and Lease-Back Transaction) having a Value over $1,000,000
unless  either (a) the  Company or such  Subsidiary  would be  entitled to incur
Indebtedness  secured by a Lien on such property  pursuant to section 9.4(c), or
(b) the Company shall prepay Term Loans, or voluntarily  and permanently  reduce
the Unutilized  Total Revolving  Commitment,  by an amount at least equal to the
Value of such Sale and Lease-Back Transaction.

         SECTION 10.  EVENTS OF DEFAULT.

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

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

         (b)  Representations,  etc.: any representation,  warranty or statement
made by the  Company or any other  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

         (c) Covenants:  the Company shall (i) default in the due performance or
observance  by it of any term,  covenant or agreement  contained in section 9.2,
9.3, 9.4, 9.5,  9.6,  9.7,  9.8,  9.9, 9.10 or 9.11 of this  Agreement,  or (ii)
default in the due  performance  or  observance  by it of any term,  covenant or
agreement  (other  than  those  referred  to in  clause  (a) or (b) above or the
preceding  clause (i) of this clause (c))  contained  in this  Agreement  or any
other Credit Document and such default shall continue unremedied for a period of
at  least 30 days  after  notice  by the  Administrative  Agent or the  Required
Lenders; or

         (d) Cross  Default  Under Other  Agreements:  the Company or any of its
Subsidiaries  shall (i) default in any payment with respect to any  Indebtedness
(other than the Obligations)  having an unpaid principal amount of $1,000,000 or
greater,  and such default shall continue after the applicable grace period,  if
any, specified in the agreement or instrument relating to such Indebtedness,  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 (and all grace periods  applicable to
such  observance,  performance or condition  shall have  expired),  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 any
such Indebtedness of the

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<PAGE>



Company or any of its Subsidiaries  shall be declared to be due and payable,  or
shall be required to be prepaid  (other than by a regularly  scheduled  required
prepayment or redemption, prior to the stated maturity thereof); or

         (e) Other Credit  Documents:  the  Subsidiary  Guaranty or any Security
Document (once  executed and  delivered)  shall cease for any reason (other than
termination in accordance with its terms) to be in full force and effect; or any
Credit Party shall default in any payment obligation  thereunder;  or any Credit
Party  shall  default  in any  material  respect  in  the  due  performance  and
observance of any other  obligation  thereunder  and such default shall continue
unremedied  for a period of at least 30 days after notice by the  Administrative
Agent or the Required Lenders;  or any Credit Party shall (or seek to) disaffirm
or  otherwise  limit  its  obligations   thereunder  otherwise  than  in  strict
compliance with the terms thereof; or

         (f)  Judgments:  one or more  judgments  or  decrees  shall be  entered
against  the  Company  and/or  any of its  Subsidiaries  involving  a  liability
(whether or not covered by  insurance)  of $500,000 or more in the aggregate for
all such judgments and decrees for the Company and its Subsidiaries and any such
judgments or decrees shall not have been vacated, discharged or stayed or bonded
pending appeal within 30 days from the entry thereof; or

         (g) Bankruptcy,  etc.: any 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 any 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
any Borrower or any of its Material Subsidiaries;  or any Borrower or any of its
Material Subsidiaries  commences (including by way of applying for or consenting
to the  appointment  of,  or the  taking  of  possession  by,  a  rehabilitator,
receiver,  custodian,  trustee,  conservator  or  liquidator  (collectively,   a
"conservator") of itself or all or any substantial  portion of its property) any
other  proceeding  under any  reorganization,  arrangement,  adjustment of debt,
relief  of  debtors,  dissolution,   insolvency,  liquidation,   rehabilitation,
conservatorship  or similar law of any jurisdiction  whether now or hereafter in
effect relating to any Borrower or any of its Material Subsidiaries; or any such
proceeding is commenced against any Borrower or any of its Material Subsidiaries
to the extent such proceeding is consented by such person or remains undismissed
for a period of 60 days; or any 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;  or any Borrower or any of its
Material Subsidiaries suffers any appointment of any conservator or the like for
it or any  substantial  part of its property  which  continues  undischarged  or
unstayed  for a  period  of 60  days;  or any  Borrower  or any of its  Material
Subsidiaries  makes a general  assignment  for the benefit of creditors;  or any
corporate (or similar  organizational) action is taken by any Borrower or any of
its Material Subsidiaries for the purpose of effecting any of the foregoing; or


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         (h) ERISA:  (i) any of the events  described  in  clauses  (i)  through
(viii) of section  8.1(f) shall have  occurred;  or (ii) there shall result from
any such event or events the  imposition  of a lien,  the granting of a security
interest, or a liability or a material risk of incurring a liability;  and (iii)
any such  event or events or any such  lien,  security  interest  or  liability,
individually,  and/or in the aggregate,  in the opinion of the Required Lenders,
has had, or could reasonably be expected to have, a Material Adverse Effect; or

         (i) Material Adverse Effect:  any event or circumstance  shall occur or
exist which has a Material  Adverse Effect upon the Company,  as compared to the
business,  operations,  property, assets, liabilities or condition (financial or
otherwise)  of the Company and its  Subsidiaries  as reflected in the  financial
statements referred to in section 7.8.

         10.2  Acceleration,  etc. Upon the  occurrence of any Event of Default,
and at any time  thereafter,  if any Event of Default shall then be  continuing,
the  Administrative  Agent  shall,  upon the  written  request  of the  Required
Lenders,  by written  notice to the  Company  (which  shall in turn  immediately
furnish  a copy of the  same to the  other  Borrowers),  take  any or all of the
following actions,  without prejudice to the rights of the Administrative  Agent
or any Lender to enforce its claims  against any  Borrower,  except as otherwise
specifically  provided  for in this  Agreement  (provided  that,  if an Event of
Default  specified in section  10.1(g) shall occur with respect to any Borrower,
the  result  which  would  occur  upon  the  giving  of  written  notice  by the
Administrative  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 Lender shall forthwith
terminate  immediately  without any other  notice of any kind;  (ii) declare the
principal  of and any  accrued  interest  in respect  of all  Loans,  all Unpaid
Drawings and all obligations owing hereunder and thereunder to be, whereupon the
same shall  become,  forthwith  due and  payable  without  presentment,  demand,
protest  or other  notice of any kind,  all of which are  hereby  waived by each
Borrower;  (iii)  terminate  any  Letter of Credit  which may be  terminated  in
accordance  with its terms;  and (iv) direct the Company to pay (and the Company
hereby agrees that on receipt of such notice or upon the  occurrence of an Event
of Default with respect to any Borrower under section  10.1(g),  it will pay) to
the Administrative  Agent an amount of cash equal to the aggregate Stated Amount
of all Letters of Credit then  outstanding  (such  amount to be held as security
after the Borrower's reimbursement obligations in respect thereof).

         10.3  Application of Liquidation  Proceeds.  All monies received by the
Administrative  Agent or any Lender from the  exercise of remedies  hereunder or
under the other Credit  Documents or under any other documents  relating to this
Agreement  shall,  unless  otherwise  required by the terms of the other  Credit
Documents or by applicable law, be applied as follows:

                  (i) first,  to the payment of all  expenses (to the extent not
         paid by the  Borrowers)  incurred by the  Administrative  Agent and the
         Lenders in connection  with the exercise of such  remedies,  including,
         without  limitation,  all reasonable  costs and expenses of collection,
         attorneys' fees, court costs and any foreclosure expenses;

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<PAGE>



                  (ii) second,  to the payment pro rata of interest then accrued
         on the outstanding Loans;

                  (iii) third,  to the payment pro rata of any fees then accrued
         and payable to the Administrative Agent, any Letter of Credit Issuer or
         any Lender  under this  Agreement in respect of the Loans or the Letter
         of Credit Outstandings;

                  (iv)  fourth,  to the  payment  pro rata of (A) the  principal
         balance then owing on the outstanding  Loans,  (B) the amounts then due
         under  Designated  Hedge  Agreements to creditors of the Company or any
         Subsidiary,  subject to confirmation by the Administrative Agent of any
         calculations  of  termination  or other  payment  amounts being made in
         accordance with normal industry practice,  and (C) the Stated Amount of
         the  Letter  of  Credit  Outstandings  (to be held and  applied  by the
         Administrative  Agent as security for the reimbursement  obligations in
         respect thereof);

                  (v) fifth,  to the payment to the Lenders of any amounts  then
         accrued and unpaid under sections 2.9, 2.10 and 3.5 hereof, and if such
         proceeds are  insufficient  to pay such amounts in full, to the payment
         of such amounts pro rata;

                  (vi) sixth,  to the payment pro rata of all other amounts owed
         by the Borrowers to the  Administrative  Agent, to any Letter of Credit
         Issuer or any Lender under this Agreement or any other Credit Document,
         and to any  counterparties  under  Designated  Hedge  Agreements of the
         Company and its Subsidiaries,  and if such proceeds are insufficient to
         pay such amounts in full, to the payment of such amounts pro rata; and

                  (vii)  finally,   any  remaining  surplus  after  all  of  the
         Obligations  have been paid in full,  to the Borrowers or to whomsoever
         shall be lawfully entitled thereto.

         SECTION 11.  THE ADMINISTRATIVE AGENT.

         11.1  Appointment.   Each  Lender  hereby  irrevocably  designates  and
appoints KeyBank as Administrative Agent (such term to include, for the purposes
of this  section 11,  KeyBank  acting as  Collateral  Agent) to act as specified
herein  and  in  the  other  Credit  Documents,  and  each  such  Lender  hereby
irrevocably  authorizes KeyBank as the Administrative  Agent for such Lender, to
take such action on its behalf under the  provisions  of this  Agreement and the
other Credit  Documents  and to exercise  such powers and perform such duties as
are  expressly  delegated  to the  Administrative  Agent  by the  terms  of this
Agreement and the other Credit Documents, together with such other powers as are
reasonably  incidental thereto.  The Administrative  Agent agrees to act as such
upon the express conditions  contained in this section 11.  Notwithstanding  any
provision to the contrary elsewhere in this Agreement,  the Administrative Agent
shall not have any duties or responsibilities,  except those expressly set forth
herein or in the other Credit Documents, nor any fiduciary relationship with any
Lender,  and  no  implied  covenants,   functions,   responsibilities,   duties,
obligations or liabilities shall be read into this Agreement or otherwise

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exist against the  Administrative  Agent.  The provisions of this section 11 are
solely for the benefit of the  Administrative  Agent,  and the Lenders,  and the
Company  and its  Subsidiaries  shall  not  have  any  rights  as a third  party
beneficiary  of any of the  provisions  hereof.  In performing its functions and
duties under this Agreement,  the Administrative Agent shall act solely as agent
of the Lenders  and does not assume and shall not be deemed to have  assumed any
obligation or  relationship of agency or trust with or for the Company or any of
its Subsidiaries.

         11.2 Delegation of Duties. The Administrative  Agent may execute any of
its duties  under this  Agreement  or any other  Credit  Document  by or through
agents  or  attorneys-in-fact  and  shall  be  entitled  to  advice  of  counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not  be  responsible   for  the  negligence  or  misconduct  of  any  agents  or
attorneys-in-fact  selected  by it with  reasonable  care  except to the  extent
otherwise required by section 11.3.

         11.3 Exculpatory  Provisions.  Neither the Administrative Agent nor any
of its respective officers, directors,  employees, agents,  attorneys-in-fact or
affiliates  shall be (i) liable for any action  lawfully  taken or omitted to be
taken by it or such person under or in connection  with this  Agreement  (except
for its or such  person's own gross  negligence or willful  misconduct)  or (ii)
responsible  in any manner to any of the Lenders for any  recitals,  statements,
representations  or warranties made by the Company or of its Subsidiaries or any
of their  respective  officers  contained  in this  Agreement,  any other Credit
Document or in any certificate,  report, statement or other document referred to
or  provided  for in,  or  received  by the  Administrative  Agent  under  or in
connection  with, this Agreement or any other Credit Document or for any failure
of the  Company or any  Subsidiary  of the  Company  or any of their  respective
officers to perform its obligations hereunder or thereunder.  The Administrative
Agent shall not be under any obligation to any Lender to ascertain or to inquire
as to the observance or  performance  of any of the agreements  contained in, or
conditions of, this Agreement, or to inspect the properties, books or records of
the Company or any of its Subsidiaries.  The  Administrative  Agent shall not be
responsible  to  any  Lender  for  the  effectiveness,   genuineness,  validity,
enforceability,  collectibility  or  sufficiency of this Agreement or any Credit
Document or for any  representations,  warranties,  recitals or statements  made
herein or therein or made in any written or oral  statement or in any  financial
or other statements,  instruments,  reports, certificates or any other documents
in  connection  herewith or therewith  furnished  or made by the  Administrative
Agent  to  the  Lenders  or by or on  behalf  of  the  Company  or  any  of  its
Subsidiaries  to the  Administrative  Agent  or any  Lender  or be  required  to
ascertain or inquire as to the  performance  or  observance of any of the terms,
conditions,  provisions,  covenants or agreements contained herein or therein or
as to the use of the  proceeds  of the  Loans or of the  existence  or  possible
existence of any Default or Event of Default.

         11.4 Reliance by Administrative  Agent. The Administrative  Agent shall
be entitled to rely,  and shall be fully  protected  in relying,  upon any note,
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, facsimile transmission, telex or teletype message, statement, order or
other document or conversation believed by it, in good faith, to be genuine

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and  correct  and to have  been  signed,  sent or made by the  proper  person or
persons and upon advice and  statements  of legal  counsel  (including,  without
limitation,  counsel  to the  Company or any of its  Subsidiaries),  independent
accountants  and  other  experts  selected  by  the  Administrative  Agent.  The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Credit  Document  unless it shall first
receive  such  advice  or  concurrence  of  the  Required  Lenders  as it  deems
appropriate or it shall first be indemnified to its  satisfaction by the Lenders
against any and all  liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative  Agent shall
in all cases be fully protected in acting,  or in refraining from acting,  under
this  Agreement and the other Credit  Documents in accordance  with a request of
the  Required  Lenders,  and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders.

         11.5 Notice of Default. The Administrative Agent shall not be deemed to
have  knowledge or notice of the  occurrence  of any Default or Event of Default
hereunder unless the  Administrative  Agent has received notice from a Lender or
any Borrower  referring to this  Agreement,  describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event that
the Administrative  Agent receives such a notice, the Administrative Agent shall
give prompt notice thereof to the Lenders.  The Administrative  Agent shall take
such  action  with  respect  to such  Default  or Event of  Default  as shall be
reasonably directed by the Required Lenders,  provided that unless and until the
Administrative  Agent shall have received such  directions,  the  Administrative
Agent may (but shall not be  obligated  to) take such  action,  or refrain  from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.

         11.6 Non-Reliance.  Each Lender expressly acknowledges that neither the
Administrative  Agent nor any of its  officers,  directors,  employees,  agents,
attorneys-in-fact  or Affiliates have made any  representations or warranties to
it and that no act by the Administrative Agent hereinafter taken,  including any
review of the affairs of the Company or any of its Subsidiaries, shall be deemed
to constitute any representation or warranty by the Administrative  Agent to any
Lender.  Each  Lender  represents  to the  Administrative  Agent  that  it  has,
independently and without reliance upon the  Administrative  Agent, or any other
Lender,   and  based  on  such  documents  and  information  as  it  has  deemed
appropriate,  made its own  appraisal of and  investigation  into the  business,
assets,  operations,  property,  financial and other  conditions,  prospects and
creditworthiness  of the Company and its  Subsidiaries and made its own decision
to make its Loans  hereunder  and enter into this  Agreement.  Each  Lender also
represents  that  it  will,   independently   and  without   reliance  upon  the
Administrative  Agent,  or any other  Lender,  and based on such  documents  and
information as it shall deem  appropriate at the time,  continue to make its own
credit  analysis,  appraisals and decisions in taking or not taking action under
this Agreement,  and to make such  investigation as it deems necessary to inform
itself as to the business,  assets,  operations,  property,  financial and other
conditions,  prospects and creditworthiness of the Company and its Subsidiaries.
The  Administrative  Agent shall not have any duty or  responsibility to provide
any  Lender  with any  credit  or other  information  concerning  the  business,
operations, assets, property, financial and other conditions, prospects or

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creditworthiness  of the Company or any of its Subsidiaries  which may come into
the possession of the  Administrative  Agent or any of its officers,  directors,
employees, agents, attorneys-in-fact or Affiliates.

         11.7 Indemnification. The Lenders agree to indemnify the Administrative
Agent in its capacity as such ratably  according to their  respective  Loans and
Unutilized Commitments,  from and against any and all liabilities,  obligations,
losses,  damages,  penalties,   actions,  judgments,  suits,  costs,  reasonable
expenses  or  disbursements  of any  kind  whatsoever  which  may  at  any  time
(including,  without  limitation,  at any  time  following  the  payment  of the
Obligations) be imposed on, incurred by or asserted  against the  Administrative
Agent in its  capacity  as such in any way  relating  to or arising  out of this
Agreement or any other Credit  Document,  or any  documents  contemplated  by or
referred to herein or the transactions  contemplated  hereby or any action taken
or omitted to be taken by the  Administrative  Agent under or in connection with
any of the  foregoing,  but only to the extent that any of the  foregoing is not
paid  by  the  Borrowers,  provided  that  no  Lender  shall  be  liable  to the
Administrative  Agent  for the  payment  of any  portion  of  such  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses or disbursements to the extent resulting solely from the Administrative
Agent's gross negligence or willful  misconduct.  If any indemnity  furnished to
the  Administrative  Agent  for  any  purpose  shall,  in  the  opinion  of  the
Administrative  Agent, be insufficient or become  impaired,  the  Administrative
Agent may call for additional  indemnity and cease,  or not commence,  to do the
acts  indemnified  against until such  additional  indemnity is  furnished.  The
agreements in this section 11.7 shall survive the payment of all Obligations.

         11.8   The   Administrative   Agent   in   Individual   Capacity.   The
Administrative  Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Company,  its Subsidiaries
and their  Affiliates as though not acting as  Administrative  Agent  hereunder.
With  respect  to the  Loans  made by it and all  Obligations  owing to it,  the
Administrative  Agent shall have the same rights and powers under this Agreement
as any Lender and may exercise the same as though it were not the Administrative
Agent,  and the terms  "Lender" and "Lenders"  shall include the  Administrative
Agent in its individual capacity.

         11.9  Successor  Administrative  Agent.  The  Administrative  Agent may
resign as the  Administrative  Agent upon 20 days' notice to the Lenders and the
Company (which shall in turn immediately furnish a copy of the same to the other
Borrowers).  The  Required  Lenders  shall  appoint  from  among  the  Lenders a
successor  Administrative Agent for the Lenders subject to prior approval by the
Company (such approval not to be  unreasonably  withheld or delayed),  whereupon
such  successor  agent  shall  succeed to the  rights,  powers and duties of the
Administrative  Agent,  and the term  "Administrative  Agent" shall include such
successor agent effective upon its appointment, and the resigning Administrative
Agent's  rights,  powers  and  duties  as  the  Administrative  Agent  shall  be
terminated,  without any other or further act or deed on the part of such former
Administrative Agent or any of the parties to this Agreement. After the retiring
Administrative  Agent's resignation  hereunder as the Administrative  Agent, the
provisions

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of this section 11 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Administrative Agent under this Agreement.

         11.10  Other  Agents.  Any  Lender  identified  herein  as a  Co-Agent,
Syndication Agent or any other corresponding  title, other than  "Administrative
Agent or "Collateral Agent", shall have no right, power, obligation,  liability,
responsibility  or duty under this Agreement or any other Credit Document except
those  applicable to all Lenders as such. Each Lender  acknowledges  that it has
not relied,  and will not rely, on any Lender so identified in deciding to enter
into this Agreement or in taking or not taking any action hereunder.

         SECTION 12.  GUARANTY BY THE COMPANY.

         12.1   Guaranty  of   Subsidiary   Borrowings.   The   Company   hereby
unconditionally  guarantees, for the benefit of the Administrative Agent and the
Lenders,  the full and  punctual  payment by each  Borrowing  Subsidiary  of all
Indebtedness of each Borrowing  Subsidiary  incurred  pursuant to this Agreement
(herein, the "Guaranteed Obligations"). Upon failure by any Borrowing Subsidiary
to pay punctually any such amount,  the Company shall forthwith on demand by the
Administrative Agent pay the amount not so paid at the place and in the currency
and otherwise in the manner specified in this Agreement.

         12.2 Additional Undertaking.  As a separate,  additional and continuing
obligation,  the Company  unconditionally and irrevocably undertakes and agrees,
for the benefit of the  Administrative  Agent and the Lenders,  that, should any
amounts not be  recoverable  from the Company  under section 12.1 for any reason
whatsoever  (including,  without  limitation,  by reason of any provision of any
Credit  Document or any other  agreement or  instrument  executed in  connection
therewith being or becoming void, unenforceable,  or otherwise invalid under any
applicable  law) then,  notwithstanding  any notice or knowledge  thereof by any
Lender, the  Administrative  Agent, any of their respective  Affiliates,  or any
other  person,  at any time,  the  Company  as sole,  original  and  independent
obligor,  upon  demand by the  Administrative  Agent,  will make  payment to the
Administrative  Agent,  for the account of the  Lenders  and the  Administrative
Agent, of all such  obligations not so recoverable by way of full indemnity,  in
such  currency  and  otherwise  in such  manner  as is  provided  in the  Credit
Documents.

         12.3 Guaranty Unconditional,  etc. The obligations of the Company under
this section  shall be  unconditional  and absolute  and,  without  limiting the
generality  of the  foregoing,  shall not be released,  discharged  or otherwise
affected by the occurrence, one or more times, of any of the following:

                  (i) any extension, renewal, settlement,  compromise, waiver or
         release  in  respect  to any  Guaranteed  Obligation  of any  Borrowing
         Subsidiary  under any agreement or  instrument,  by operation of law or
         otherwise;


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                  (ii) any  modification  or amendment of or  supplement to this
         Agreement,  any Note,  any other Credit  Document,  or any agreement or
         instrument evidencing or relating to any Guaranteed Obligation;

                  (iii) any release,  non-perfection or invalidity of any direct
         or indirect  security for any  Guaranteed  Obligation  of any Borrowing
         Subsidiary under any agreement or instrument  evidencing or relating to
         any Guaranteed Obligation;

                  (iv) any  change  in the  corporate  existence,  structure  or
         ownership of any Borrowing  Subsidiary or any  insolvency,  bankruptcy,
         reorganization  or other  similar  proceeding  affecting  any Borrowing
         Subsidiary or its assets or any  resulting  release or discharge of any
         obligation  of any Borrowing  Subsidiary  contained in any agreement or
         instrument evidencing or relating to any Guaranteed Obligation;

                  (v) the existence of any claim,  set-off or other rights which
         the Company may have at any time against any Borrower  Subsidiary,  the
         Administrative  Agent,  any  Lender or any  other  person,  whether  in
         connection herewith or any unrelated transactions;

                  (vi) any invalidity or unenforceability relating to or against
         any Borrowing  Subsidiary for any reason of any agreement or instrument
         evidencing or relating to any Guaranteed  Obligation,  or any provision
         of applicable  law or regulation  purporting to prohibit the payment by
         any Borrowing Subsidiary of any Guaranteed Obligations; or

                  (vii) any other act or omission to act or delay of any kind by
         any Borrowing  Subsidiary,  the Administrative Agent, any Lender or any
         other person or any other circumstance  whatsoever which might, but for
         the  provisions  of  this  section,  constitute  a legal  or  equitable
         discharge of the Borrower's obligations under this section.

         12.4  Company  Obligations  to  Remain  in  Effect;  Restoration.   The
Company's  obligations  under this section shall remain in full force and effect
until the Commitments shall have terminated and the principal of and interest on
the  Notes  and all other  amounts  payable  by the  Company  under  the  Credit
Documents shall have been paid in full. If at any time any payment of any of the
Guaranteed  Obligations of any Borrowing Subsidiary in respect of any Guaranteed
Obligations  is  rescinded or must be  otherwise  restored or returned  upon the
insolvency,  bankruptcy or  reorganization  of such  Borrowing  Subsidiary,  the
Company's  obligations  under this section with respect to such payment shall be
reinstated at such time as though such payment had been due but not made at such
time.

         12.5  Waiver  or  Acceptance,   etc.  The  Company  irrevocably  waives
acceptance hereof, presentment,  demand, protest and any notice not provided for
herein,  as well as any requirement  that at any time any action be taken by any
person  against any Borrowing  Subsidiary  or any other  person,  or against any
collateral or guaranty of any other person.


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<PAGE>



         12.6 Subrogation.  Until the indefeasible payment in full of all of the
Obligations and the termination of the Commitments of the Lenders hereunder, the
Company shall have no rights, by operation of law or otherwise,  upon making any
payment  under this section to be  subrogated to the rights of the payee against
any  Borrowing  Subsidiary  with  respect  to such  payment or  otherwise  to be
reimbursed,  indemnified  or exonerated  by any Borrowing  Subsidiary in respect
thereof.

         12.7  Effect of Stay.  In the event that  acceleration  of the time for
payment of any amount payable by any Borrowing  Subsidiary  under any Guaranteed
Obligation  is stayed upon  insolvency,  bankruptcy  or  reorganization  of such
Borrowing  Subsidiary,  all such amounts otherwise subject to acceleration under
the terms of any  applicable  agreement or instrument  evidencing or relating to
any Guaranteed Obligation shall nonetheless be payable by the Company under this
section forthwith on demand by the Administrative Agent.

         SECTION 13.  MISCELLANEOUS.

         13.1  Payment of Expenses,  etc. The Company  agrees to: (i) whether or
not the transactions  herein  contemplated  are consummated,  pay all reasonable
out-of-pocket costs and expenses of the Administrative  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  Jones,   Day,  Reavis  &  Pogue,   special  counsel  to  the
Administrative  Agent), and of the Administrative  Agent and each of the Lenders
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  Administrative  Agent and for each of
the Lenders); (ii) in the event of the bankruptcy, insolvency, rehabilitation or
other similar  proceeding in respect of the Company or any of its  Subsidiaries,
pay all costs of collection and defense, including reasonable attorneys' fees in
connection  therewith  and  in  connection  with  any  appellate  proceeding  or
post-judgment  action involved therein,  which shall be due and payable together
with all required  service or use taxes;  (iii) pay and hold each of the Lenders
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  Lenders
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
Lender)  to pay such  taxes;  and (iv)  indemnify  each  Lender,  its  officers,
directors,   employees,    representatives   and   agents   (collectively,   the
"Indemnitees")  from and hold each of them harmless  against any and all losses,
liabilities, claims, damages or expenses reasonably 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 any Lender is a
party  thereto)  related to the entering into and/or  performance  of any Credit
Document or the use of the proceeds of any Loans  hereunder or the  consummation
of any  transactions  contemplated in any Credit  Document,  other than any such
investigation,  litigation  or  proceeding  arising out of  transactions  solely
between  any of the Lenders or the  Administrative  Agent,  transactions  solely
involving  the  assignment  by a Lender  of all or a  portion  of its  Loans and
Commitment, or the

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<PAGE>



granting of participations  therein,  as provided in this Agreement,  or arising
solely out of any  examination  of a Lender by any regulatory  authority  having
jurisdiction  over it, or (b) any  Environmental  Claim in  respect  of any Real
Property  owned,  leased or at any time  operated  by the  Company or any of its
Subsidiaries,  including, in each case, 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 negligence
or willful misconduct of the person to be indemnified or of any other Indemnitee
who is such  person or an  Affiliate  of such  person).  To the extent  that the
undertaking  to  indemnify,  pay or hold  harmless  any  person set forth in the
preceding  sentence may be  unenforceable  because it is violative of any law or
public policy,  the Company shall make the maximum  contribution  to the payment
and  satisfaction  of each of the indemnified  liabilities  which is permissible
under applicable law.

         13.2  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,  upon the occurrence of an Event of Default,  each Lender is hereby
authorized  at any  time or from  time to  time,  without  presentment,  demand,
protest or other notice of any kind to any Borrower 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  Lender  (including,  without  limitation,  by
branches and agencies of such Lender  wherever  located) to or for the credit or
the  account of any  Borrower  against  and on account  of the  Obligations  and
liabilities  of the  Borrowers  (or any of  them)  to  such  Lender  under  this
Agreement  or  under  any of the  other  Credit  Documents,  including,  without
limitation,  all interests in Obligations  purchased by such Lender  pursuant to
section 13.4(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 Lender shall have made any demand  hereunder and although
said Obligations,  liabilities or claims, or any of them, shall be contingent or
unmatured.

         13.3  Notices.  Except as  otherwise  expressly  provided  herein,  all
notices and other  communications  provided  for  hereunder  shall be in writing
(including  telegraphic,  telex,  facsimile transmission or cable communication)
and mailed, telegraphed,  telexed,  transmitted,  cabled or delivered, (a) if to
any  Borrower,  to such  Borrower  at 99 Main  Street,  Nyack,  New York  10960,
attention: Jeffrey J. Kaplan, Executive Vice President & Chief Financial Officer
(facsimile:  (914) 348-7677);  (b) if to any Lender at its address specified for
such Lender on Annex I hereto; (c) if to the Administrative Agent, at its Notice
Address;  or (d) 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.

         13.4 Benefit of Agreement. (a) This Agreement shall be binding upon and
inure to the  benefit  of and be  enforceable  by the  parties  hereto and their
respective  successors  and  assigns,  provided  that no Borrower  may assign or
transfer any of its rights or  obligations  hereunder  without the prior written
consent of all the Lenders. Each Lender may at any time grant

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<PAGE>



participations  in any of its  rights  hereunder  or under  any of the  Notes to
another financial  institution or any other "accredited investor" (as defined in
SEC Regulation D), provided that in the case of any such participation,  (i) the
participant  shall not have any rights under this  Agreement or any of the other
Credit  Documents,   including  rights  of  consent,  approval  or  waiver  (the
participant's  rights against such Lender in respect of such participation to be
those  set  forth  in the  agreement  executed  by such  Lender  in favor of the
participant  relating  thereto),  (ii)  such  Lender's  obligations  under  this
Agreement (including, without limitation, its Commitment hereunder) shall remain
unchanged,  (iii) such  Lender  shall  remain  solely  responsible  to the other
parties hereto for the performance of such  obligations,  (iv) such Lender shall
remain the holder of any Note for all  purposes  of this  Agreement  and (v) the
Borrowers,  the  Administrative  Agent,  and the other Lenders shall continue to
deal  solely  and  directly  with the  selling  Lender in  connection  with such
Lender's rights and obligations under this Agreement, and all amounts payable by
the Borrowers  hereunder shall be determined as if such Lender had not sold such
participation,  except that the participant shall be entitled to the benefits of
sections  2.9,  2.10 and 5.4 of this  Agreement  to the extent  that such Lender
would be entitled to such  benefits if the  participation  had not been  entered
into or sold, and,  provided  further,  that no Lender shall transfer,  grant or
sell 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 (x) extend the final  scheduled
maturity  of the Loans in which  such  participant  is  participating  (it being
understood  that  any  waiver  of  the  making  of,  or the  application  of any
amortization payment or other prepayment or the method of any application of any
prepayment to the amortization of the Loans shall not constitute an extension of
the final  maturity  date  thereof),  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 effect (it being  understood
that a waiver of any Default or Event of Default or of any mandatory  prepayment
or a mandatory  reduction in the Total  Commitment,  or a mandatory  prepayment,
shall not  constitute  a change in the terms of any  Commitment)  or (y) release
substantially  all of the  Collateral,  or  release  any  Credit  party from any
obligations  under any Security Document or the Subsidiary  Guaranty,  except in
accordance  with the  explicit  terms  hereof or thereof,  or (z) consent to the
assignment  or  transfer by any  Borrower  of any of its rights and  obligations
under this Agreement.

         (b) Notwithstanding  the foregoing,  (x) any Lender may assign all or a
portion  of its Loans  and/or  Commitments,  which  does not have to be pro rata
among the Facilities, and its rights and obligations hereunder to another Lender
that is not a Defaulting  Lender,  or to an  Affiliate of any Lender  (including
itself) which is not a Defaulting  Lender which is a commercial bank,  financial
institution or other "accredited investor" (as defined in SEC Regulation D), and
(y) any Lender may assign all, or if less than all, a portion  equal to at least
$5,000,000 in the aggregate for the assigning  Lender or assigning  Lenders,  of
its Loans and/or  Commitments  and its rights and obligations  hereunder,  which
assignment does not have to be pro rata between the  Facilities,  to one or more
Eligible  Transferees,  each of  which  assignees  shall  become a party to this
Agreement as a Lender by execution of an Assignment  Agreement,  provided  that,
(i) at the

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time of any such  assignment  Annex I shall be deemed  modified  to reflect  the
Commitments of such new Lender and of the existing Lenders,  (ii) upon surrender
of the old Notes, new Notes will be issued,  at the Company's  expense,  to such
new Lender and to the assigning Lender,  such new Notes to be in conformity with
the requirements of section 2.5 (with  appropriate  modifications) to the extent
needed to reflect the revised Commitments, (iii) in the case of clause (y) only,
the consent of the  Administrative  Agent and each Letter of Credit Issuer shall
be required in connection with any such  assignment  (which consent shall not be
unreasonably  withheld  or  delayed),  and (iv) the  Administrative  Agent shall
receive at the time of each such  assignment,  from the  assigning  or  assignee
Lender,  the payment of a non-refundable  assignment fee of $3,000 and, provided
further,  that such transfer or assignment  will not be effective until recorded
by the Administrative  Agent on the Lender Register maintained by it as provided
herein.  To the extent of any assignment  pursuant to this section 13.4(b),  the
assigning Lender shall be relieved of its obligations  hereunder with respect to
its  assigned  Commitments.  At the  time of each  assignment  pursuant  to this
section 13.4(b) to a person which is not already a Lender hereunder and 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,  the respective assignee Lender shall
provide to the Company and the  Administrative  Agent the  appropriate  Internal
Revenue  Service Forms (and, if applicable,  a Section  5.4(b)(ii)  Certificate)
described  in section  5.4(b).  To the extent that an  assignment  of all or any
portion of a Lender's Commitment and related outstanding Obligations pursuant to
this section 13.4(b) would, at the time of such assignment,  result in increased
costs under  section 2.9 from those being  charged by the  respective  assigning
Lender  prior to such  assignment,  then the  applicable  Borrower  shall not be
obligated to pay such increased costs (although the applicable Borrower shall be
obligated to any other  increased  costs of the type described  above  resulting
from  changes  after the date of the  respective  assignment).  Nothing  in this
section  13.4(b) shall prevent or prohibit any Lender from pledging its Notes or
Loans to a Federal  Reserve  Bank in support of  borrowings  made by such Lender
from such Federal Reserve Bank.

         (c)  Notwithstanding  any other  provisions  of this section  13.4,  no
transfer or assignment of the interests or obligations  of any Lender  hereunder
or any grant of  participation  therein  shall be  permitted  if such  transfer,
assignment or grant would require any Borrower to file a registration  statement
with the SEC or to qualify the Loans under the "Blue Sky" laws of any State.

         (d) Each Lender  initially party to this Agreement  hereby  represents,
and each person that became a Lender pursuant to an assignment permitted by this
section 13.4 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 or acquires  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  sections 13.4(a) and (b), the disposition of any promissory notes
or other evidences of or interests in Indebtedness  held by such Lender shall at
all times be within its exclusive control.


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<PAGE>



         13.5 No Waiver: Remedies Cumulative. No failure or delay on the part of
the  Administrative  Agent or any  Lender  in  exercising  any  right,  power or
privilege  hereunder or under any other Credit Document and no course of dealing
between any Borrower and the Administrative Agent or any Lender 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  Administrative
Agent or any Lender would otherwise have. No notice to or demand on any Borrower
in any case shall entitle such Borrower to any other or further notice or demand
in similar or other  circumstances  or  constitute a waiver of the rights of the
Administrative  Agent or the  Lenders  to any  other or  further  action  in any
circumstances without notice or demand.

         13.6  Payments  Pro Rata.  (a) The  Administrative  Agent  agrees  that
promptly  after its receipt of each payment from or on behalf of any Borrower in
respect of any  Obligations,  it shall  distribute  such  payment to the Lenders
(other than any Lender that has expressly waived in writing 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.  As to any
such payment received by the Administrative Agent prior to 1:00 P.M. (local time
at its Payment Office) in funds which are immediately available on such day, the
Administrative  Agent will use all reasonable efforts to distribute such payment
in immediately available funds on the same day to the Lenders as aforesaid.

         (b) Each of the Lenders  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  Lenders  is in a greater  proportion  than the total of such
Obligation  then  owed  and  due to  such  Lender  bears  to the  total  of such
Obligation  then owed and due to all of the  Lenders  immediately  prior to such
receipt,  then such Lender receiving such excess payment shall purchase for cash
without  recourse  or  warranty  from  the  other  Lenders  an  interest  in the
Obligations  to such  Lenders in such amount as shall  result in a  proportional
participation by all of the Lenders in such amount,  provided that if all or any
portion of such excess amount is  thereafter  recovered  from such Lender,  such
purchase  shall be rescinded  and the purchase  price  restored to the extent of
such recovery, but without interest.

         (c)  Notwithstanding  anything to the contrary  contained  herein,  the
provisions  of the  preceding  sections  13.6(a) and (b) shall be subject to the
express  provisions  of this  Agreement  which  require,  or  permit,  differing
payments to be made to Lenders which are not Defaulting  Lenders,  as opposed to
Defaulting Lenders.


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         13.7  Calculations:  Computations.  (a) The financial  statements to be
furnished  to the  Lenders  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 Company to the Lenders);  provided,  that if at any time the computations
determining  compliance with section 9 utilize accounting  principles  different
from those utilized in the financial statements  furnished to the Lenders,  such
computations  shall  set  forth  in  reasonable  detail  a  description  of  the
differences and the effect upon such computations.

         (b) All  computations of interest on Eurocurrency  Loans and Prime Rate
Loans hereunder and all computations of Commitment  Fees,  Letter of Credit Fees
and other Fees hereunder shall be made on the actual number of days elapsed over
a year of 360 days.

         13.8 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.  TO THE
FULLEST  EXTENT  PERMITTED BY LAW,  EACH  BORROWER  HEREBY  UNCONDITIONALLY  AND
IRREVOCABLY  WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY  JURISDICTION  OTHER
THAN THE STATE OF NEW YORK  GOVERNS  THIS  AGREEMENT  OR ANY OF THE OTHER CREDIT
DOCUMENTS.  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 Borrower hereby  irrevocably  accepts for
itself  and in respect  of its  property,  generally  and  unconditionally,  the
jurisdiction of the aforesaid courts.  Each Borrower hereby 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 such Borrower at its address for notices
pursuant to section  13.3,  such service to become  effective 30 days after such
mailing or at such earlier time as may be provided under applicable law. Nothing
herein shall affect the right of the Administrative Agent or any Lender to serve
process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against the Borrower in any other jurisdiction.

         (b) Each Borrower hereby  irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid  actions or
proceedings  arising out of or in  connection  with this  Agreement or any other
Credit  Document  brought in the courts referred to in section 13.8(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.

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         13.9  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  agreement.  A set of  counterparts
executed by all the parties  hereto  shall be lodged with the  Borrower  and the
Administrative Agent.

         13.10 Effectiveness.  This Agreement shall become effective on the date
(the "Effective  Date")on which each Borrower and each of the Lenders shall have
signed a copy  hereof  (whether  the same or  different  copies)  and shall have
delivered  the same to the  Administrative  Agent at the  Notice  Office  of the
Administrative  Agent or, in the case of the  Lenders,  shall  have given to the
Administrative  Agent  telephonic  (confirmed  in  writing),  written  telex  or
facsimile  transmission  notice (actually received) at such office that the same
has been signed and mailed to it.

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

         13.12 Amendment or Waiver.  Neither this Agreement 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 Borrowers and the
Required Lenders, provided that no such change, waiver, discharge or termination
shall,  without  the consent of each Lender  (other  than a  Defaulting  Lender)
affected  thereby,  (i) extend any interim or final  maturity  date provided for
herein  (including any extension of any interim  maturity date to be effected in
accordance with section 4.4 hereof) applicable to a Loan or a Commitment under a
Facility (it being  understood  that any waiver of the making of, or application
of any prepayment of or the method of application of any amortization payment or
other  prepayment  to, the  amortization  of, the Loans shall not  constitute an
extension of such final maturity thereof), 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 Lender over the
amount thereof then in effect (it being  understood that a waiver of any Default
or Event of Default or of any mandatory  prepayment or a mandatory  reduction in
the  Total  Commitment  shall  not  constitute  a  change  in the  terms  of any
Commitment of any Lender),  (ii) release the Company from any  obligations  as a
guarantor of its  Subsidiaries'  obligations  under any Credit  Document,  (iii)
release any Credit Party from the Subsidiary Guaranty, except in connection with
a transaction permitted by section 9.2(f), (iv) release all or substantially all
of the  Collateral  (in each case  except as  expressly  provided  in the Credit
Documents),  (v) change the definition of the term "Change of Control" or any of
the provisions of section 5.2(f) which are applicable  upon a Change of Control,
(vi) change the  definition of the term  "Permitted  Acquisition"  or any of the
provisions of section  9.2(e) which are  applicable to a Permitted  Acquisition,
(vii) amend,  modify or waive any  provision of this section  13.12,  or section
11.7, 13.1, 13.4, 13.6 or 13.7(b), (viii) reduce the percentage specified in, or
otherwise  modify,  the definition of Required  Lenders,  or (ix) consent to the
assignment or transfer by any

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Borrower of any of its rights and obligations under this Agreement. No provision
of  section 3 or 11 may be  amended  without  the  consent  of (x) any Letter of
Credit  Issuer  adversely  affected  thereby  or (y) the  Administrative  Agent,
respectively.

         13.13 Survival.  All indemnities  set forth herein  including,  without
limitation,  in  sections  2.9,  2.10,  3.5,  11.7 and 13.1,  shall  survive the
execution  and  delivery  of this  Agreement  and  the  making,  prepayment  and
repayment of Loans.

         13.14  Domicile of Loans.  Each Lender may transfer and carry its Loans
at, to or for the account of any branch office,  subsidiary or affiliate of such
Lender,  provided that no Borrower shall be responsible  for costs arising under
section 2.9 resulting from any such transfer (other than a transfer  pursuant to
section  2.11) to the extent not  otherwise  applicable  to such Lender prior to
such transfer.

         13.15 Confidentiality.  Subject to section 13.4, the Lenders shall hold
all  non-public  information  obtained  pursuant  to the  requirements  of  this
Agreement  which has been  identified as such by any 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  Commitment  or
participation  therein  (provided that each such prospective  transferee  and/or
participant  shall execute an agreement  for the benefit of the  Borrowers  with
such prospective transferor Lender containing provisions substantially identical
to those  contained in this section  13.15),  to its  auditors,  attorneys 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  Lender  shall  notify the Company 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 Lender 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 Lender be  obligated  or required to return any  materials
furnished  by or on  behalf  of the  Company  or any of its  Subsidiaries.  Each
Borrower  hereby  agrees  that  the  failure  of a  Lender  to  comply  with the
provisions  of this  section  13.15 shall not relieve any Borrower of any of the
obligations to such Lender under this Agreement and the other Credit Documents.

         13.16  Lender   Register.   Each   Borrower   hereby   designates   the
Administrative  Agent to serve as its agent, solely for purposes of this section
13.16, to retain a copy of each Assignment  Agreement  delivered to and accepted
by it and to maintain a register (the "Lender  Register") on or in which it will
record the names and addresses of the Lenders,  and the Commitments from time to
time of each of such Lenders to such  Borrower,  the Loans made to such Borrower
by each of such  Lenders  and each  repayment  or  prepayment  in respect of the
principal  amount of such  Loans of each such  Lender.  Failure to make any such
recordation, or (absent manifest error) any error in such recordation, shall not
affect such Borrower's obligations in respect of such Loans. With respect to any
Lender, the transfer of the Commitments of such

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Lender  and the  rights to the  principal  of,  and  interest  on, any Loan made
pursuant  to such  Commitments  shall not be  effective  until such  transfer is
recorded on the Lender  Register  maintained  by the  Administrative  Agent with
respect to ownership of such Commitments and Loans and prior to such recordation
all amounts owing to the transferor  with respect to such  Commitments and Loans
shall remain owing to the transferor. The registration of assignment or transfer
of  all  or  part  of  any  Commitments  and  Loans  shall  be  recorded  by the
Administrative  Agent on the Lender  Register  only upon the  acceptance  by the
Administrative  Agent of a properly executed and delivered  Assignment Agreement
pursuant  to  section   13.4(b).   Each   Borrower   agrees  to  indemnify   the
Administrative  Agent from and against any and all losses,  claims,  damages and
liabilities of whatsoever  nature which may be imposed on,  asserted  against or
incurred  by such  Administrative  Agent in  performing  its  duties  under this
section  13.16.  The Lender  Register  shall be available for  inspection by any
Borrower  or any  Lender  at any  reasonable  time  and from  time to time  upon
reasonable prior notice.

         13.17  Limitations  on Liability of the Letter of Credit  Issuers.  The
Company  assumes  all  risks  of the acts or  omissions  of any  beneficiary  or
transferee  of any Letter of Credit with  respect to its use of such  Letters of
Credit. Neither any Letter of Credit Issuer nor any of its officers or directors
shall be liable or responsible  for: (a) the use which may be made of any Letter
of  Credit  or any  acts  or  omissions  of any  beneficiary  or  transferee  in
connection therewith; (b) the validity, sufficiency or genuineness of documents,
or of any endorsement thereon,  even if such documents should prove to be in any
or all respects invalid,  insufficient,  fraudulent or forged;  (c) payment by a
Letter of Credit Issuer  against  presentation  of documents  that do not comply
with the terms of a Letter of Credit, including failure of any documents to bear
any reference or adequate  reference to such Letter of Credit;  or (d) any other
circumstances  whatsoever  in making or failing to make payment under any Letter
of Credit,  except that the Company (or a Subsidiary  which is the account party
in  respect of the Letter of Credit in  question)  shall have a claim  against a
Letter of Credit  Issuer,  and a Letter of Credit  Issuer shall be liable to the
Company  (or  such   Subsidiary),   to  the  extent  of  any  direct,   but  not
consequential,  damages suffered by the Company (or such  Subsidiary)  which the
Company  (or such  Subsidiary)  proves  were caused by (i) such Letter of Credit
Issuer's willful misconduct or gross negligence in determining whether documents
presented  under a Letter of  Credit  comply  with the  terms of such  Letter of
Credit or (ii) such  Letter of Credit  Issuer's  willful  failure to make lawful
payment under any Letter of Credit after the presentation to it of documentation
strictly  complying with the terms and  conditions of such Letter of Credit.  In
furtherance  and not in limitation of the  foregoing,  a Letter of Credit Issuer
may  accept  documents  that  appear  on  their  face  to be in  order,  without
responsibility for further investigation.

         13.18  General  Limitation  of  Liability.  No claim may be made by any
Borrower,  any Lender, the Administrative  Agent, any Letter of Credit Issuer or
any other person against the Administrative  Agent, any Letter of Credit Issuer,
or any other Lender or the Affiliates, directors, officers, employees, attorneys
or agents of any of them for any damages other than actual compensatory  damages
in respect of any claim for breach of contract or any other  theory of liability
arising out of or related to the transactions  contemplated by this Agreement or
any of the

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other Credit  Documents,  or any act,  omission or event occurring in connection
therewith;  and each Borrower,  each Lender, each Administrative  Agent and each
Letter of Credit Issuer hereby, to the fullest extent permitted under applicable
law, waives,  releases and agrees not to sue or counterclaim upon any such claim
for any special,  consequential or punitive damages,  whether or not accrued and
whether or not known or suspected to exist in its favor.

         13.19 No Duty. All attorneys, accountants,  appraisers, consultants and
other  professional  persons (including the firms or other entities on behalf of
which any such  person  may act)  retained  by the  Administrative  Agent or any
Lender with respect to the  transactions  contemplated  by the Credit  Documents
shall  have the  right to act  exclusively  in the  interest  of the  applicable
Administrative  Agent or such Lender, as the case may be, and shall have no duty
of disclosure, duty of loyalty, duty of care, or other duty or obligation of any
type or nature whatsoever to the Company, to any of its Subsidiaries,  or to any
other   person,   with  respect  to  any  matters   within  the  scope  of  such
representation   or  related  to  their   activities  in  connection  with  such
representation.

         13.20 Lenders and Administrative  Agent Not Fiduciary to Company,  etc.
The relationship  among the Company and its  Subsidiaries,  on the one hand, and
the Administrative  Agent, each Letter of Credit Issuer and the Lenders,  on the
other hand, is solely that of debtor and creditor, and the Administrative Agent,
each Letter of Credit  Issuer and the Lenders have no fiduciary or other special
relationship with the Company and its Subsidiaries,  and no term or provision of
any Credit Document, no course of dealing, no written or oral communication,  or
other  action,  shall be construed so as to deem such  relationship  to be other
than that of debtor and creditor.

         13.21 Judgment Currency.  (a) The Credit Parties' obligations hereunder
and under the other Credit  Documents to make payments in U.S. dollars shall not
be  discharged  or satisfied by any tender or recovery  pursuant to any judgment
expressed in or converted into any currency other than U.S.  dollars,  except to
the extent that such tender or recovery results in the effective  receipt by the
Administrative Agent or the applicable Lender of the full amount of U.S. dollars
expressed  to be payable to the  Administrative  Agent or such Lender under this
Agreement  or the other  Credit  Documents.  If, for the purpose of obtaining or
enforcing judgment against any Credit Party in any court or in any jurisdiction,
it  becomes  necessary  to  convert  into or from any  currency  other than U.S.
dollars  (such other  currency  being  hereinafter  referred to as the "Judgment
Currency") an amount due in U.S.  dollars,  the conversion  shall be made at the
equivalent  thereof in Dollars  determined  as of the Business  Day  immediately
preceding  the day on which  the  judgment  is given  (such  Business  Day being
hereinafter referred to as the "Judgment Currency Conversion Date").

         (b) If there is a change in the rate of exchange prevailing between the
Judgment  Currency  Conversion Date and the date of actual payment of the amount
due, each applicable  Borrower covenants and agrees to pay, or cause to be paid,
such additional amounts, if any (but in any event not a lesser amount) as may be
necessary to ensure that the amount paid in the Judgment

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<PAGE>



Currency,  when  converted  at the rate of  exchange  prevailing  on the date of
payment, will produce the amount of U.S. dollars which could have been purchased
with the amount of  Judgment  Currency  stipulated  in the  judgment or judicial
award at the rate of exchange  prevailing  on the Judgment  Currency  Conversion
Date.

         (c) For  purposes of  determining  the  equivalent  in Dollars for this
section,  such amount shall  include any premium and costs payable in connection
with the conversion into or from the Judgment Currency.

               [The balance of this page is intentionally blank.]


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<PAGE>



         13.22 Survival of Representations  and Warranties.  All representations
and  warranties  herein  shall  survive the making of Loans and the  issuance of
Letters of Credit hereunder,  the execution and delivery of this Agreement,  the
Notes  and the other  documents  the forms of which  are  attached  as  Exhibits
hereto,  the issue and  delivery of the Notes,  any  disposition  thereof by any
holder thereof,  and any investigation made by the  Administrative  Agent or any
Lender or any other holder of any of the Notes or on its behalf.  All statements
contained in any certificate or other document  delivered to the  Administrative
Agent or any Lender or any holder of any Notes by or on behalf of the Company or
of its  Subsidiaries  pursuant  hereto  or  otherwise  specifically  for  use in
connection  with  the   transactions   contemplated   hereby  shall   constitute
representations  and  warranties  by  the  Company  hereunder,  made  as of  the
respective  dates  specified  therein  or,  if no date is  specified,  as of the
respective dates furnished to the Administrative Agent or any Lender.

         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.

                            SAFETY COMPONENTS INTERNATIONAL, INC.

                            By:
                                ------------------------------
                                Executive Vice President


                            PHOENIX AIRBAG GmbH & CO. K.G.

                            By:
                                ------------------------------
                                Executive Vice President


                            AUTOMOTIVE SAFETY COMPONENTS
                                     INTERNATIONAL LIMITED


                            By:
                                ------------------------------
                                Executive Vice President


                            KEYBANK NATIONAL ASSOCIATION,
                                     individually and as Administrative
                                     Agent

                            By:
                                ------------------------------
                                Executive Vice President

                                                        99