<PAGE>   1
                 (i)      During the term of this Agreement, the Borrower must
                          maintain a minimum current ratio of 1.20 to 1.00
                          during fiscal year 1997; 1.30 to 1.00 during fiscal
                          year 1998; and 2.00 to 1.00 during fiscal year 1999
                          and thereafter.  For the purposes of this
                          subparagraph, current ratio shall be defined as the
                          ratio of Borrower's current assets (including the
                          unused formula loan availability under the Grid Note,
                          as hereinafter defined) to Borrower's current
                          liabilities (excluding Borrower's liability to the
                          Lender under the Grid Note) as would be shown on each
                          fiscal quarter end and fiscal year end balance sheet
                          of the Borrower prepared in accordance with GAAP;

                 (ii)     During the term of this Agreement, the Borrower must
                          maintain minimum working capital of Three Million
                          Five Hundred Thousand and no/100 Dollars
                          ($3,500,000.00) as at June 30, 1996 through December
                          31, 1996 and Four Million and no/100 Dollars
                          ($4,000,000.00) as at March 31, 1997 through December
                          31, 1997 and Five Million Five Hundred Thousand and
                          no/100 Dollars ($5,500,000.00) as at March 31, 1998.
                          During fiscal year 1999 and thereafter, the Borrower
                          must maintain a minimum working capital of Seven
                          Million and no/100 Dollars ($7,000,000.00), all as
                          would be shown on the fiscal quarter end and fiscal
                          year end balance sheets of the Borrower prepared in
                          accordance with GAAP.  For the purposes of
                          determining working capital, the Borrower's liability
                          to the Bank pursuant to the Grid Note will be
                          excluded, and the Borrower's current assets shall be
                          increased by the Borrower's unused formula loan
                          availability under the Grid Note.

                 (iii)    During the term of this Agreement, the Borrower must
                          maintain a total debt to tangible net worth ratio
                          during the first quarter of fiscal year 1997 through
                          the third quarter of fiscal year 1998 of 4.0 to 1.0;
                          at fiscal year end 1998 of 2.75 to  1.0; during the
                          first quarter of fiscal year 1999 through the third
                          quarter of fiscal year 1999 of 4.0 to 1.0; at fiscal
                          year end 1999 and thereafter of 2.75 to 1.00.   For
                          the purposes of this Agreement, debt to tangible net
                          worth ratio shall be defined as the ratio of
                          Borrower's total liabilities (less subordinated debt)
                          divided by the sum of Borrower's tangible net worth
                          plus subordinated debt less the amount of the
                          outstanding principal balance of the notes receivable
                          from the Corporate Guarantor, as would


                                        -2-
                                        


<PAGE>   2
                          be shown on the fiscal quarter end and fiscal year
                          end balance sheets of the Borrower prepared in
                          accordance with GAAP.

                 (iv)     During the term of this Agreement, the Borrower must
                          maintain a minimum debt service coverage ratio during
                          fiscal year 1997 and thereafter of 1.20 to 1.00.  For
                          the purposes of this Agreement, debt service coverage
                          ratio will be calculated using the trailing four
                          quarters of Borrower's earnings before interest,
                          taxes, depreciation and amortization minus the
                          Borrower's cash capital expenditures (net of financed
                          capital expenditures) divided by the sum of
                          Borrower's trailing four quarters debt service
                          payments (principal and interest) less funds raised
                          by the Borrower to finance the repayment of
                          indebtedness of the Borrower to CIGNA (in the form of
                          either debt or equity), as would be shown on the
                          fiscal quarter end and fiscal year end balance sheets
                          of the Borrower prepared in accordance with GAAP; and

                 (v)      During the term of this Agreement, the Borrower shall
                          be limited to making capital expenditures in the
                          maximum amount of One Million Five Hundred Thousand
                          and no/100 Dollars ($1,500,000.00) during any fiscal
                          year.  If required by the terms of the manufacturing
                          agreement between the Borrower and Rubbermaid, for
                          each year during the term of this Agreement, the
                          Borrower must provide evidence, satisfactory to the
                          Bank, that the Borrower has received the consent of
                          Rubbermaid to make capital expenditures exceeding One
                          Million and no/100 Dollars ($1,000,000.00) in said
                          year."


         2.      Paragraph 3(g) of the Loan Agreement, as previously amended by
Amendment No. 1, is hereby amended to read in its entirety as follows:

         "(g)    The Borrower and its Corporate Guarantor will at all times
                 keep proper books of record and account in accordance with
                 GAAP, and the Borrower shall furnish to the Lender:

                 (1)      Within one hundred twenty (120) days after the close
                          of each fiscal year, a consolidated and consolidating
                          balance sheet (which must contain a consolidating
                          statement schedule) truly presenting the financial
                          condition of the Corporate Guarantor, the Borrower,
                          and any other subsidiary of the Corporate Guarantor,
                          as of the close of each fiscal



                                          -3-
                                          

<PAGE>   3
                          year and consolidated and consolidating statements of
                          profit and loss and surplus truly presenting the
                          results of operations of the Corporate Guarantor, the
                          Borrower, and any other subsidiary of the Corporate
                          Guarantor, for such fiscal year, and a statement of
                          changes in financial position, all prepared in
                          accordance with generally accepted accounting
                          principles consistently applied and audited as
                          certified statements by nationally recognized
                          independent certified public accountants acceptable
                          to the Lender;

                 (2)      Within one hundred twenty (120) days after the close
                          of each fiscal year, copies of the Borrower's 10K
                          reports as required by SEC;

                 (3)      Within sixty (60) days after the close of each fiscal
                          quarter, copies of the 10Q reports of the Corporate
                          Guarantor, as required by SEC;

                 (4)      Within thirty (30) days after the close of each
                          calendar month, a compiled statement of financial
                          position truly presenting the financial condition of
                          the Borrower as of the close of said calendar month
                          and compiled statements of operations and retained
                          earnings truly presenting activities of the Borrower
                          for said calendar month, prepared by the Borrower
                          and/or the Corporate Guarantor (but certified by the
                          chief financial officer of the Corporate Guarantor)
                          in accordance with generally accepted accounting
                          principles consistently applied;

                 (5)      Simultaneously with each delivery to the Lender of
                          the annual audited reports referenced to subparagraph
                          (1) above, a certificate of the independent certified
                          public accountants who certified said annual reports
                          stating that in making the examination necessary to
                          said certification of the annual reports, that they
                          have obtained no knowledge of any default by the
                          Borrower or the Corporate Guarantor in the
                          performance of any of the covenants, conditions,
                          agreements or warranties under this Agreement, the
                          Note, any Instrument of Collateral Security delivered
                          in connection herewith, the $6,000,000.00 Restated
                          Promissory Note (Revolving Line of Credit) of the
                          Borrower to the Lender dated August 13, 1996 (the
                          "Grid Note"), the Secured Revolving Line of Credit
                          Agreement dated April 18, 1990 between the Borrower
                          and the Lender, as amended (the "Line of Credit
                          Agreement"), a $1,000,000.00 Promissory Note



                                             -4-
                                             

<PAGE>   4
                          of the Borrower to the Lender dated July 19, 1994
                          (the "$1,000,000.00 Note"), the Loan and Security
                          Agreement dated July 19, 1994 between the Borrower
                          and the Lender concerning the $1,000,000.00 Note (the
                          "Loan and Security Agreement") and/or any other note
                          or loan document from the Borrower to the Lender, or
                          any amendments, modifications, extensions or renewals
                          of any of the foregoing; or if they shall have
                          obtained knowledge of any such default, the nature
                          thereof;

                 (6)      With reasonable promptness upon the written request
                          of the Lender, such further information regarding the
                          business affairs and financial condition of the
                          Borrower and its Corporate Guarantor as the Lender
                          may reasonably request;

                 (7)      Simultaneously at the time they are so furnished, a
                          copy of all statements and reports furnished to
                          stockholders of the Borrower and its Corporate
                          Guarantor;

                 (8)      Within sixty (60) days of the after the close of each
                          fiscal quarter, a certificate signed by the Chief
                          Financial Officer of the Borrower and the Corporate
                          Guarantor stating that to the best of their knowledge
                          and belief, the Borrower and the Corporate Guarantor
                          have fulfilled all of their obligations under this
                          Agreement and the Instruments of Collateral Security
                          identified herein, the Line of Credit Agreement, the
                          Loan and Security Agreement, the Note, the
                          $1,000,000.00 Note and the Grid Note, and that
                          neither the Borrower nor the Corporate Guarantor,
                          upon the date of such certificate or at any time
                          since the date of the last certificate, is in default
                          under any provision of this Agreement or the
                          Instruments of Collateral Security identified herein,
                          the Line of Credit Agreement, the Loan and Security
                          Agreement, the Note, the $1,000,000.00 Note or the
                          Grid Note; and that said Chief Financial Officer has
                          no knowledge of any condition or event that, except
                          for notice or the passage of time or both, would
                          constitute an event of default under any provision of
                          this Agreement or the Instruments of Collateral
                          Security identified herein, the Line of Credit
                          Agreement, the Loan Agreement, the Note, the
                          $1,000,000.00 Note or the Grid Note (a "Default
                          Condition") - or if they shall have knowledge of such
                          default or default condition, the nature and
                          specifics thereof;


                                             -5-
                                             


<PAGE>   5
                 (9)      Within thirty (30) days after the close of each
                          calendar month, account receivable aging reports
                          concerning the Borrower, in form acceptable to the
                          Lender;

                 (10)     Within sixty (60) days after the close of each fiscal
                          quarter, a compliance letter acknowledged by the
                          Chief Financial Officers of both the Borrower and its
                          Corporate Guarantor concerning those financial
                          covenants referenced in paragraph 3(d) hereof, in
                          form acceptable to the Lender; and

                 (11)     The Borrower certifies that as of the date of this
                          Agreement, the Borrower currently owns 423 print
                          cylinders currently in use in connection with the
                          production of product for Rubbermaid Incorporated and
                          214 print cylinders which are not currently used in
                          production.  In addition, the Borrower is currently
                          using in production 190 additional print cylinders
                          owned by Rubbermaid Incorporated.  A detailed list of
                          the aforementioned cylinders is attached hereto as
                          Exhibit "A" and made a part hereof.  Within
                          forty-five (45) days after the close of each fiscal
                          year, the Borrower shall submit to the Bank a
                          detailed summary of all print cylinders owned by the
                          Borrower and used in production, owned by the
                          Borrower and not used in production and owned by
                          Rubbermaid Incorporated and used in production."

         3.      The Borrower and the Corporate Guarantor hereby warrant and
covenant to the Lender that as of the date of this Agreement there are no
disputes, offsets, claims or counterclaims of any kind or nature whatsoever
under the Note, the Grid Note, the $1,000,000.00 Note, the Loan Agreement, as
previously amended by Amendment No. 1, any Instrument of Collateral Security,
the Environmental Agreement, the Line of Credit Agreement or the Loan and
Security Agreement or any of the documents executed in connection herewith or
therewith or the obligations represented or evidenced hereby or thereby.

         4.      Except as expressly modified hereunder, all the remaining
terms and conditions of the Loan Agreement, as previously modified by Amendment
No. 1, shall remain in full force and effect.


                                     -6-
                                     


<PAGE>   6
         IN WITNESS WHEREOF, the parties hereby have caused this instrument to
be duly executed as of the day and year first above written.

                                              DECORA, INCORPORATED d/b/a
                                              DECORA MANUFACTURING


                                              By:  ________________________
                                              Name:  ______________________
                                              Title: ______________________


                                              DECORA INDUSTRIES, INC.


                                              By:  ________________________
                                              Name:  ______________________
                                              Title: ______________________


                                              FLEET BANK


                                              By:  _________________________
                                                   James M. Marini
                                                   Vice President




                                     -7-