LOAN AND SECURITY AGREEMENT


                                 by and between


                             ONEITA INDUSTRIES, INC.

                              ONEITA-KINSTON CORP.


                                       and


                          FOOTHILL CAPITAL CORPORATION


                        Dated as of ______________, 1998









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                                TABLE OF CONTENTS


                                                                           

                                                                         Page(s)
1.    DEFINITIONS AND CONSTRUCTION.......................................  1
      1.1      Definitions...............................................  1
      1.2      Accounting Terms.......................................... 24
      1.3      Code...................................................... 24
      1.4      Construction.............................................. 24
      1.5      Schedules and Exhibits.................................... 25

2.    LOAN AND TERMS OF PAYMENT.......................................... 25
      2.1      Revolving Advances........................................ 25
      2.2      Letters of Credit......................................... 26
      2.3      Supplemental Advances..................................... 30
      2.4      [Intentionally omitted]................................... 30
      2.5      Overadvances.............................................. 31
      2.6      Interest and Letter of Credit Fees:  Rates, Payments, and 
               Calculations.............................................. 31
      2.7      Collection of Accounts.................................... 32
      2.8      Crediting Payments; Application of Collections............ 33
      2.9      Designated Account........................................ 33
      2.10     Maintenance of Loan Account; Statements of Obligations.... 34
      2.11     Fees...................................................... 34
      2.12     Eurodollar Rate Loans..................................... 35
      2.13     Illegality................................................ 36
      2.14     Requirements of Law....................................... 37
      2.15     Taxes..................................................... 39
      2.16     Indemnity................................................. 41
3.    CONDITIONS; TERM OF AGREEMENT...................................... 42
      3.1      Conditions Precedent to the Initial Advance or
               Letter of Credit.......................................... 42
      3.2      Conditions Precedent to all Advances, all Supplemental
               Advances and all Letters of Credit........................ 44
      3.3      Conditions Subsequent..................................... 45
      3.4      Term; Automatic Renewal................................... 45
      3.5      Effect of Termination..................................... 45
      3.6      Early Termination by Borrower............................. 46
      3.7      Termination Upon Event of Default......................... 46

4.    CREATION OF SECURITY INTEREST...................................... 46
      4.1      Grant of Security Interest................................ 46
      4.2      Negotiable Collateral..................................... 47
      4.3      Collection of Proceeds of Inventory, Accounts, and Certain
               Negotiable Collateral..................................... 47

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      4.4      Delivery of Additional Documentation Required............. 47
      4.5      Power of Attorney......................................... 47
      4.6      Right to Inspect.......................................... 48

5.    REPRESENTATIONS AND WARRANTIES..................................... 48
      5.1      No Encumbrances........................................... 48
      5.2      Eligible Accounts......................................... 49
      5.3      Eligible Inventory........................................ 49
      5.4      Equipment................................................. 49
      5.5      Location of Inventory and Equipment....................... 49
      5.6      Inventory Records......................................... 49
      5.7      Location of Chief Executive Office; FEIN.................. 49
      5.8      Due Organization and Qualification; Subsidiaries.......... 49
      5.9      Due Authorization; No Conflict............................ 50
      5.10     Litigation................................................ 51
      5.11     No Material Adverse Change. .............................. 51
      5.12     Solvency.................................................. 51
      5.13     Employee Benefits......................................... 51
      5.14     Environmental Condition................................... 52
      5.15     Brokerage Fees............................................ 52

6.    AFFIRMATIVE COVENANTS.............................................. 52
      6.1      Accounting System......................................... 52
      6.2      Collateral Reporting...................................... 53
      6.3      Financial Statements, Reports, Certificates............... 53
      6.4      Tax Returns............................................... 55
      6.5      [Intentionally omitted]................................... 55
      6.6      Returns................................................... 55
      6.7      Title to Equipment........................................ 55
      6.8      Maintenance of Equipment.................................. 55
      6.9      Taxes..................................................... 55
      6.10     Insurance................................................. 56
      6.11     No Setoffs or Counterclaims............................... 57
      6.12     Location of Inventory and Equipment....................... 58
      6.13     Compliance with Laws...................................... 58
      6.14     Employee Benefits......................................... 58
      6.15     Leases.................................................... 59
      6.16     Brokerage Commissions. ................................... 59
      6.17     Chief Executive Officer................................... 59

7.    NEGATIVE COVENANTS................................................. 59
      7.1      Indebtedness.............................................. 60
      7.2      Liens..................................................... 60
      7.3      Restrictions on Fundamental Changes....................... 60
      7.4      Disposal of Assets........................................ 61

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      7.5      Change Name............................................... 61
      7.6      Guarantee................................................. 61
      7.7      Nature of Business........................................ 61
      7.8      Prepayments and Amendments................................ 61
      7.9      Change of Control......................................... 61
      7.10     Consignments.............................................. 62
      7.11     Distributions............................................. 62
      7.12     Accounting Methods........................................ 62
      7.13     Investments............................................... 62
      7.14     Transactions with Affiliates.............................. 62
      7.15     Suspension................................................ 63
      7.16     [Intentionally omitted]................................... 63
      7.17     Use of Proceeds........................................... 63
      7.18     Change in Location of Chief Executive Office; Inventory
               and Equipment with Bailees................................ 63
      7.19     No Prohibited Transactions Under ERISA.................... 63
      7.20     Financial Covenant........................................ 64
      7.21     Capital Expenditures...................................... 64

8.    EVENTS OF DEFAULT.................................................. 64

9.    FOOTHILL'S RIGHTS AND REMEDIES..................................... 67
      9.1      Rights and Remedies....................................... 67
      9.2      Remedies Cumulative....................................... 69

10.   TAXES AND EXPENSES................................................. 69

11.   WAIVERS; INDEMNIFICATION........................................... 70
      11.1     Demand; Protest; etc...................................... 70
      11.2     Foothill's Liability for Collateral....................... 70
      11.3     Indemnification........................................... 70

12.   NOTICES............................................................ 71

13.   CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER......................... 72

14.   DESTRUCTION OF BORROWER'S DOCUMENTS................................ 72

15.   GENERAL PROVISIONS................................................. 73
      15.1     Effectiveness............................................. 73
      15.2     Successors and Assigns.................................... 73
      15.3     Section Headings.......................................... 73
      15.4     Interpretation............................................ 73
      15.5     Severability of Provisions................................ 73
      15.6     Amendments in Writing..................................... 73

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      15.7     Counterparts; Telefacsimile Execution..................... 74
      15.8     Revival and Reinstatement of Obligations.................. 74
      15.9     Integration............................................... 74
                             SCHEDULES AND EXHIBITS


Schedule E-1                        Eligible Inventory Locations
Schedule I-1                        IDB Equipment
Schedule P-1                        Permitted Dispositions
Schedule P-2                        Permitted Liens
Schedule P-3                        Permitted Priority Liens
Schedule R-1                        Real Property Collateral
Schedule 5.8                        Subsidiaries
Schedule 5.10                       Litigation
Schedule 5.13                       ERISA Benefit Plans
Schedule 5.14                       Environmental Disclosures
Schedule 6.12                       Location of Inventory and Equipment
Schedule 7.1                        Permitted Indebtedness

Exhibit C-1                         Form of Compliance Certificate
Exhibit D-1                         Form of Deposit Account Security Agreement
Exhibit I-1                         Form of Intercreditor Agreement
Exhibit P-1                         Form of Plan of Reorganization
Exhibit S-1                         Form of Stock Pledge Agreement
Exhibit S-2                         Form of Suretyship Agreement
Exhibit T-1                         Form of Trademark Security Agreement
Exhibit V-1                         Form of VCOC Letter




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<PAGE>



                           LOAN AND SECURITY AGREEMENT


         THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into as
of  ___________,  1998,  between  FOOTHILL  CAPITAL  CORPORATION,  a  California
corporation ("Foothill"), with a place of business located at 11111 Santa Monica
Boulevard,  Suite 1500, Los Angeles,  California 90025-3333,  ONEITA INDUSTRIES,
INC., a Delaware corporation ("Oneita"), with its chief executive office located
at 4130 Faber Place Drive,  Suite 200,  Charleston,  South Carolina  29405,  and
ONEITA- KINSTON CORP., a North Carolina corporation ("Kinston"),  with its chief
executive office located at 4130 Faber Place Drive, Suite 200, Charleston, South
Carolina 29405.

         The parties agree as follows:

     1. DEFINITIONS AND CONSTRUCTION.

     1.1 Definitions.  As used in this Agreement, the following terms shall have
the following definitions:

     "Account Debtor" means any Person who is or who may become obligated under,
with respect to, or on account of, an Account.

     "Accounts"  means all currently  existing and hereafter  arising  accounts,
contract  rights,  and all other forms of obligations  owing to Borrower arising
out of the sale or lease of goods or the  rendition  of  services  by  Borrower,
irrespective of whether earned by performance, and any and all credit insurance,
guaranties, or security therefor.

     "Accounts Component" means, as of any date of determination,  the amount of
the component of the Borrowing Base determined pursuant to Section 2.1(a)(x).

     "Adjusted  Eurodollar Rate" means, with respect to each Interest Period for
any Eurodollar Rate Loan, the rate per annum (rounded upwards, if necessary,  to
the next 1/16%) determined by dividing (a) the Eurodollar Rate for such Interest
Period by (b) a percentage equal to (i) 100% minus (ii) the Reserve  Percentage.
The Adjusted Eurodollar Rate shall be adjusted on and as of the effective day of
any change in the Reserve Percentage.

     "Advances" has the meaning set forth in Section 2.1(a). An Advance is not a
Supplemental Advance, but is an Obligation.

     "Affiliate" means, as applied to any Person, any other Person who, directly
or indirectly, controls, is controlled by, is under common control with, or is a

                                                     



<PAGE>


director or officer of such Person.  For purposes of this definition,  "control"
means the possession, directly or indirectly, of the power to vote 5% or more of
the Stock  having  ordinary  voting  power for the  election  of  directors  (or
comparable  managers) or the direct or indirect  power to direct the  management
and policies of a Person.

     "Agreement" has the meaning set forth in the preamble hereto.

     "Andrews  Real  Property"  means the Real  Property  owned by  Borrower  in
Andrews, South Carolina.

     "Applicable Percentage" means: (a) with respect to Eligible Not- In-Transit
Finished  Goods,  60%; (b) with respect to Eligible  In-Transit  Finished Goods,
55%;  (c) with  respect to Eligible  Raw  Materials,  40%;  (d) with  respect to
Eligible  Piece Goods,  30%;  and (e) with respect to Eligible  Work-In-Process,
25%.

     "Atlanta  Distribution  Center" means the distribution center maintained by
Borrower in the vicinity of Atlanta, Georgia, as more particularly identified on
Schedule E-1.

     "Authorized Person" means any officer or other employee of Borrower.

     "Availability" means, as of any date of determination, the aggregate amount
of Advances Borrower would be entitled to borrow on such date under the terms of
this Agreement (including Section 2.1) after taking into account all outstanding
Obligations.

     "Average  Unused  Portion  of  Maximum  Amount"  means,  as of any  date of
determination,  (a) the  Maximum  Amount,  less  (b) the sum of (i) the  average
aggregate  Daily  Balance  of  Advances  and  Supplemental  Advances  that  were
outstanding during the immediately  preceding month, plus (ii) the average Daily
Balance of the Letter of Credit Usage during the immediately preceding month.

     "Bank  Group" means those  Persons  holding "Old  Revolving  Credit  Lender
Claims"  immediately prior to the "Effective Date" as those terms are defined in
the Plan of Reorganization.

     "Bankruptcy  Code" means the United States  Bankruptcy Code (11 U.S.C.  ss.
101 et seq.), as amended, and any successor statute.


     "Base Net Worth"  means the greater of (a)  $1,000,000,  and (b) the actual
net worth of Oneita and its consolidated Subsidiaries,  on a consolidated basis,
in accordance with GAAP, on the Net Worth Covenant Commencement Date.

     "Benefit Plan" means a "defined  benefit plan" (as defined in Section 3(35)
of ERISA) for which Borrower, any Subsidiary of Borrower, or any ERISA Affiliate
has been an "employer" (as defined in Section 3(5) of ERISA) within the past six
years.
<PAGE>

     "Borrower" means Oneita and Kinston,  and each of them, and either of them,
jointly and severally.  Following any merger of Kinston into Oneita, with Oneita
to be the surviving corporation,  or any dissolution of Kinston and distribution
of its assets to Oneita, Borrower shall mean Oneita.

     "Borrower's  Books" means all of  Borrower's  books and records  including:
ledgers; records indicating, summarizing, or evidencing Borrower's properties or
assets  (including the Collateral) or liabilities;  all information  relating to
Borrower's  business  operations  or  financial  condition;   and  all  computer
programs,  disk or tape  files,  printouts,  runs,  or other  computer  prepared
information.

     "Borrowing Base" has the meaning set forth in Section 2.1(a).

     "Business Day" means any day that is not a Saturday,  Sunday,  or other day
on which national banks are authorized or required to close.

     "Change  of  Control"  shall be deemed to have  occurred  at such time as a
"person" or "group"  (within the meaning of Sections  13(d) and  14(d)(2) of the
Securities  Exchange  Act of  1934)  other  than  Foothill  or an  Affiliate  or
transferee of Foothill becomes the "beneficial  owner" (as defined in Rule 13d-3
under the Securities Exchange Act of 1934), directly or indirectly, of more than
50% of the total  voting  power of all  classes  of stock  then  outstanding  of
Borrower  entitled  to  vote  in  the  election  of  directors.   The  Permitted
Combination shall not constitute a Change of Control.

     "Closing  Date"  means the date of the first to occur of the  making of the
initial Advance or the issuance of the initial Letter of Credit.

     "Code" means the New York Uniform Commercial Code.

     "Collateral" means each of the following:

          (a) the Accounts,

          (b) Borrower's  Books,  

          (c) the Equipment  except for and excluding the IDB Equipment,

          (d) the General Intangibles,

          (e) the Inventory,
<PAGE>

          (f) the Negotiable Collateral,

          (g) the Real Property Collateral,

          (h) any money,  or other assets of Borrower that now or hereafter come
into the possession, custody, or control of Foothill, and

          (i) the proceeds and products, whether tangible or intangible, of any
of the foregoing, including proceeds of  insurance  covering  any or all of the
Collateral,  and any and all  Accounts,  Borrower's  Books,  Equipment,  General
Intangibles,  Inventory,  Negotiable Collateral,  Real Property,  money, deposit
accounts,  or other  tangible or intangible  property  resulting  from the sale,
exchange,  collection,  or other  disposition of any of the foregoing  items (a)
through  (h),  or any  portion  thereof or interest  therein,  and the  proceeds
thereof.

The foregoing  notwithstanding,  "Collateral" shall not include any Stock of any
foreign Subsidiary of Borrower.

     "Collateral  Access  Agreement" means a landlord waiver,  mortgagee waiver,
bailee letter,  or  acknowledgement  agreement of any  warehouseman,  processor,
lessor,  consignee,  or other Person in  possession  of,  having a Lien upon, or
having rights or interests in the Equipment or Inventory,  in each case, in form
and substance satisfactory to Foothill.

     "Collateral  Agent"  has the  meaning  ascribed  to such  term in the  Note
Purchase Agreement.

     "Collections" means all cash, checks, notes,  instruments,  and other items
of payment  (including,  insurance  proceeds,  proceeds  of cash  sales,  rental
proceeds, and tax refunds).

     "Combined   Availability"   means,   as  of  any  date  of   determination,
Availability plus Supplemental Availability.

     "Compliance  Certificate" means a certificate  substantially in the form of
Exhibit C-1 and  delivered  by the  principal  financial  officer of Borrower to
Foothill. "Cullman Distribution Center" means the distribution center maintained
by Borrower in the vicinity of Cullman, Alabama, as more particularly identified
on Schedule E-1.

     "Daily Balance" means,  with respect to any Obligation,  the amount of such
Obligation owed at the end of a given day.
<PAGE>

     "deems  itself  insecure"  means that the Person deems  itself  insecure in
accordance with the provisions of Section 1-208 of the Code.  Without limitation
of the  foregoing,  any  determination  by Foothill that  Foothill  deems itself
insecure  must be based on a good faith  belief by Foothill  that one or more of
the following circumstances exists: (a) that the priority of Foothill's Liens on
the Collateral is materially impaired from Foothill's priority as of the Closing
Date;  (b) that the prospects of repayment by Borrower of the  Obligations  have
been  materially  impaired  since the Closing  Date;  or (c) that  Borrower  has
engaged in fraud,  material  misrepresentation,  or  defalcation.  The foregoing
notwithstanding,  if Borrower's consolidated financial results of operations and
financial  condition  are in  substantial  compliance  with the  projections  of
Borrower  most  recently  furnished  to Foothill  prior to the date of filing of
Oneita's Chapter 11 bankruptcy  case, then such financial  results of operations
and  financial  condition  shall not be  considered  as factors by  Foothill  in
determining whether Foothill deems itself insecure, and shall not be relevant to
such determination.

     "Default"  means an event,  condition,  or default that, with the giving of
notice, the passage of time, or both, would be an Event of Default.

     "Deposit  Account  Security  Agreement"  means a Deposit  Account  Security
Agreement  in the form of Exhibit  D-1,  executed  and  delivered by Borrower to
Foothill.

     "Designated  Account"  means account number  60872058 of Oneita  maintained
with the  Designated  Account Bank,  or such other  deposit  account of Borrower
(located  within the United  States) which has been  designated,  in writing and
from time to time, by Borrower to Foothill.

     "Designated  Account Bank" means  SouthTrust Bank of Alabama,  N.A.,  whose
office is located at 420 North 20th Street, Birmingham, Alabama 35203, and whose
ABA number is 062000080.

     "Designated  Existing  Lenders" means the Existing  Lenders  referred to in
clause (b) of the definition of "Existing Lenders" herein.

     "Dilution" means, in each case based upon the experience of the immediately
prior twelve  months,  the result of dividing the Dollar  amount of (a) bad debt
writeoffs   (including  partial  writeoffs,   net  of  recoveries),   discounts,
advertising, returns, promotions, credits, or other dilution with respect to the
Accounts, by (b) Borrower's Collections (excluding extraordinary items) plus the
Dollar amount of clause (a).

     "Dilution  Reserve"  means,  as of any  date of  determination,  an  amount
sufficient to reduce  Foothill's  advance rate against Eligible  Accounts by one
percentage  point for each  percentage  point by which  Dilution is in excess of
5.00%.
<PAGE>

     "DIP Agreement" means that certain Loan and Security Agreement entered into
in or about December,  1997,  between  Foothill and Oneita,  with respect to the
provision by Foothill of credit  facilities to Oneita as a  debtor-in-possession
during  Oneita's  Chapter 11 bankruptcy  case, as it may from time to time be or
have been amended, modified, supplemented, or restated.

     "DIP Event of  Default"  means an "Event of  Default" as defined in the DIP
Agreement.

     "Disbursement  Letter" means an instructional letter executed and delivered
by Borrower to Foothill  regarding  the  extensions  of credit to be made on the
Closing Date, the form and substance of which shall be satisfactory to Foothill.

     "Dollars or $" means United States dollars.

     "Early Termination Premium" has the meaning set forth in Section 3.6.

     "Effective Date" means the "effective date" of the Plan of  Reorganization,
as defined therein.

     "Eligible  Accounts" means those Accounts (net of unapplied cash and net of
interest  charges) created by Borrower in the ordinary course of business,  that
arise out of  Borrower's  sale of goods or rendition of services,  that strictly
comply  with  each  and all of the  representations  and  warranties  respecting
Accounts made by Borrower to Foothill in the Loan Documents, and that are and at
all times  continue to be  acceptable  to Foothill  in all  respects;  provided,
however,  that  standards of  eligibility  may be fixed and revised from time to
time by Foothill in Foothill's  reasonable  credit judgment.  Eligible  Accounts
shall not include the following:

     (a)  Accounts  that the Account  Debtor has failed to pay within 90 days of
invoice date or Accounts with selling terms of more than 60 days;

     (b) Accounts owed by an Account Debtor or its Affiliates  where 50% or more
of all  Accounts  owed by that  Account  Debtor (or its  Affiliates)  are deemed
ineligible under clause (a) above;

     (c)  Accounts  with  respect to which the  Account  Debtor is an  employee,
Affiliate, or agent of Borrower;

     (d)  Accounts  with  respect  to which  goods are  placed  on  consignment,
guaranteed sale, sale or return, sale on approval,  bill and hold (except to the
extent that  Borrower  has  obtained  from the Account  Debtor a "bill and hold"
letter in form reasonably  acceptable to Foothill),  or other terms by reason of
which the payment by the Account Debtor may be conditional;
<PAGE>

     (e)  Accounts  that are not payable in Dollars or with respect to which the
Account Debtor:  (i) does not maintain its chief executive  office in the United
States,  or (ii) is not  organized  under the laws of the  United  States or any
State thereof,  or (iii) is the  government of any foreign  country or sovereign
state, or of any state, province,  municipality,  or other political subdivision
thereof,  or  of  any  department,   agency,   public   corporation,   or  other
instrumentality  thereof,  unless (y) the Account is supported by an irrevocable
letter of credit satisfactory to Foothill (as to form, substance,  and issuer or
domestic  confirming  bank) that has been  delivered to Foothill and is directly
drawable by Foothill,  or (z) the Account is covered by credit insurance in form
and amount, and by an insurer, satisfactory to Foothill;

     (f) Accounts in excess of $200,000 in the  aggregate  with respect to which
the Account Debtor is either (i) the United States or any department, agency, or
instrumentality  of the United  States  (exclusive,  however,  of Accounts  with
respect to which Borrower has complied,  to the  satisfaction of Foothill,  with
the  Assignment  of Claims Act, 31 U.S.C.  ss.  3727),  or (ii) any State of the
United States (exclusive,  however,  of Accounts owed by any State that does not
have a statutory counterpart to the Assignment of Claims Act);

     (g)  Accounts  with  respect to which the  Account  Debtor is a creditor of
Borrower, has or has asserted a right of setoff (including,  without limitation,
debit memos and chargebacks),  has disputed its liability, or has made any claim
with  respect to the Account,  in each case to the extent of such contra  claim,
setoff, or dispute;

     (h)  Accounts  with respect to an Account  Debtor  whose total  obligations
owing to Borrower exceed 10% of all Eligible  Accounts (except that with respect
to not more than two Account Debtors of Borrower at any one time, as they may be
designated  by  Borrower  with  Foothill's  approval  from  time to time,  which
approval of Foothill shall not unreasonably be withheld,  provided that Foothill
shall be entitled to consider,  in granting or withholding  such  approval,  the
payment  histories and  creditworthiness  of such proposed Account Debtors,  and
which such two Account Debtors,  as of the Closing Date, are San Mar Corporation
and Kayman Inc., the  concentration  percentage limit shall be 20% each,  rather
than 10% each,  provided that the combined  concentration  percentage  limit for
both such  Account  Debtors,  at any given  time,  shall not  exceed  35% in the
aggregate),  to the extent of the  obligations  owing by such Account  Debtor in
excess of such percentages;

     (i)  Accounts  with  respect to which the Account  Debtor is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business;

     (j) Accounts the collection of which  Foothill,  in its  reasonable  credit
judgment,  believes to be doubtful by reason of the Account  Debtor's  financial
condition;
<PAGE>

     (k)  Accounts  with  respect to which the goods giving rise to such Account
have not been  shipped  and billed to the Account  Debtor  (except to the extent
that the transaction giving rise to the Account is a "bill and hold" transaction
and Borrower has  obtained  from the Account  Debtor a "bill and hold" letter in
form  reasonably  acceptable  to  Foothill),  the  services  giving rise to such
Account  have not been  performed  and  accepted by the Account  Debtor,  or the
Account otherwise does not represent a final sale;

     (l)  Accounts  with  respect to which the Account  Debtor is located in the
states of New Jersey,  Minnesota,  Indiana, or West Virginia (or any other state
that requires a creditor to file a Business  Activity Report or similar document
in order to bring suit or otherwise  enforce its  remedies  against such Account
Debtor in the courts or through  any  judicial  process of such  state),  unless
Borrower has qualified to do business in New Jersey,  Minnesota,  Indiana,  West
Virginia,  or such other  states,  or has filed a Notice of Business  Activities
Report with the applicable  division of taxation,  the department of revenue, or
with such other state offices, as appropriate,  for the then-current year, or is
exempt from such filing requirement;

     (m) Accounts that  represent  progress  payments or other advance  billings
that are due prior to the  completion of  performance by Borrower of the subject
contract for goods or services;

     (n)  "Manual"  Accounts  (such  as  non-trade  Accounts  or rent  due  from
subtenants); and

     (o) Accounts that are not subject to a valid and perfected  first  priority
security  interest in favor of  Foothill  (except to the  extent,  if any,  that
Foothill  in its  discretion  has elected to include  such  Accounts as Eligible
Accounts and reserve for any senior Liens thereon pursuant to Section 2.1(b));

     "Eligible  In-Transit  Finished Goods" means Eligible Inventory of the type
referred to in clause (b) of the definition of Eligible Inventory.

     "Eligible  Inventory"  means  Inventory  consisting  of: (a) first  quality
Not-In-Transit Finished Goods held for sale in the ordinary course of Borrower's
business;  (b) first quality In-Transit Finished Goods which upon receipt at the
Atlanta  Distribution Center or the Cullman Distribution Center will be held for
sale in the ordinary course of Borrower's business, provided that, to the extent
any such In- Transit Finished Goods are located outside the United States,  they
shall constitute Eligible Inventory while located outside the United States only
to the extent that Foothill's  security  interest therein is perfected by notice
to the bailees,  customs brokers,  or carriers in possession  thereof while they
are in transit,  receipt of which notice has been  acknowledged by such bailees,
customs  brokers,  or carriers;  (c) Raw  Materials  held for the  production of
Finished Goods;  (d) Piece Goods held for the production of Finished Goods;  and
(e)  Work-In-Process  which, when completed,  will constitute Finished Goods; in
each case  (except  for  clause  (b)  above)  that is  located at one or more of

<PAGE>

Borrower's owned or leased premises  located in the United States  identified on
Schedule  E-1  (or,  in the  case of  clause  (b),  in  transit  to the  Atlanta
Distribution Center or the Cullman  Distribution  Center),  that strictly comply
with each and all of the  representations  and warranties  respecting  Inventory
made by  Borrower to  Foothill  in the Loan  Documents,  and that are and at all
times continue to be acceptable to Foothill in all respects;  provided, however,
that  standards  of  eligibility  may be fixed and revised  from time to time by
Foothill in Foothill's  reasonable credit judgment. In determining the amount to
be so  included,  Inventory  shall be valued at the lower of cost or market on a
basis consistent with Borrower's current and historical accounting practices. At
any point in time,  an item of  Inventory  shall only be  included  under one of
clauses  (a) through (e) above.  An item of  Inventory  shall not be included in
Eligible Inventory if:

     (i) it is not owned  solely by  Borrower  or  Borrower  does not have good,
valid, and marketable title thereto;

     (ii) it is not subject to a valid and  perfected  first  priority  security
interest in favor of Foothill  (except to the extent,  if any,  that Foothill in
its discretion  has elected to include such Inventory as Eligible  Inventory and
reserve for any senior Liens thereon pursuant to Section 2.1(b));

     (iii) it consists of goods  returned or rejected by  Borrower's  customers,
unless  such  returned  or  rejected  goods are  Finished  Goods  that have been
inspected by Borrower  and  determined  to be of first  quality and suitable for
sale in the ordinary course of business as such, and have been reintegrated with
the other Not-In- Transit Finished Goods of Borrower;

     (iv) it is obsolete or slow moving (collectively  defined as the greater of
(A)  Borrower's  book  reserves  for  obsolete  or slow  moving  inventory,  (B)
Inventory held in excess of 12 months,  and (C) 20% of  Not-In-Transit  Finished
Goods  (which  percentage  may be  removed  or  diminished  from time to time by
Foothill based on appraisals and/or evidence provided by the Borrower, with such
percentage  being  determined  by Foothill to be adequate  and  appropriate),  a
restrictive or custom item, or constitutes  spare parts,  packaging and shipping
materials,  labels  and/or  boxes,  supplies  used  or  consumed  in  Borrower's
business, Inventory subject to a Lien in favor of any third Person (other than a
Permitted Lien with priority  junior to that of the Lien of Foothill),  bill and
hold goods,  defective  goods or "seconds"  not readily  salable in the ordinary
course  of  business  as  "irregulars,"   or  Inventory   acquired  or  held  on
consignment; or

     (v) it is commingled with, or not segregated from, consigned goods or goods
belonging to Persons  other than  Borrower,  or it is  otherwise  not subject to
proper inventory controls in the reasonable judgment of Foothill.

     "Eligible  Not-In-Transit  Finished Goods" means Eligible  Inventory of the
type referred to in Clause (a) of the definition of Eligible Inventory.
<PAGE>

     "Eligible Piece Goods" means Eligible  Inventory of the type referred to in
Clause (d) of the definition of Eligible Inventory.

     "Eligible Raw Materials"  means Eligible  Inventory of the type referred to
in Clause (c) of the definition of Eligible Inventory.

     "Eligible  Transferee" means (a) a commercial bank organized under the laws
of the United States,  or any state  thereof,  and having net worth in excess of
$50,000,000; (b) a commercial bank organized under the laws of any other country
which is a member of the Organization  for Economic  Cooperation and Development
or a political  subdivision of any such country,  and having net worth in excess
of  $50,000,000;  provided  that such bank is acting  through a branch or agency
located  in the  United  States;  (c) a  finance  company,  insurance  or  other
financial institution or fund that is engaged in making, purchasing or otherwise
investing in commercial  loans in the ordinary course of its business and having
net  worth  in  excess  of  $25,000,000;  and  (d)  any  Affiliate  (other  than
individuals) of Foothill.

     "Eligible Work-in-Process" means Eligible Inventory of the type referred to
in Clause (e) of the definition of Eligible Inventory.

     "Enhanced Inventory Component" means, as of any date of determination,  the
amount  that the  Inventory  Component  of the  Borrowing  Base  would be if the
Borrowing  Base were  recalculated  on such date in accordance  with Section 2.1
(including application of any relevant caps, reserves,  and sublimits),  but (1)
using 63.5% as the Applicable Percentage for each category of Inventory included
within  the  definition  of  Eligible  Inventory  rather  than  using  the lower
percentages  stated in the definition of "Applicable  Percentage," and (2) using
2.00 rather than 1.50 as the factor by which to multiply the Accounts  Component
in subsection 2.1(a)(y)(iii).

     "Equipment"  means  all  of  Borrower's   present  and  hereafter  acquired
machinery, machine tools, motors, equipment, furniture,  furnishings,  fixtures,
vehicles  (including motor vehicles and trailers),  tools,  parts,  goods (other
than consumer goods, farm products, or Inventory),  wherever located,  including
all   attachments,   accessories,   accessions,   replacements,   substitutions,
additions, and improvements to any of the foregoing.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  29
U.S.C.  ss.ss.  1000  et  seq.,  amendments  thereto,  successor  statutes,  and
regulations or guidance promulgated thereunder.

     "ERISA  Affiliate"  means  (a)  any  corporation  subject  to  ERISA  whose
employees  are  treated as employed by the same  employer  as the  employees  of
Borrower under IRC Section  414(b),  (b) any trade or business  subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower  under IRC Section  414(c),  (c) solely for  purposes of Section 302 of
ERISA and Section 412 of the IRC,  any  organization  subject to ERISA that is a
member of an affiliated  service  group of which  Borrower is a member under IRC
Section  414(m),  or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC,  any party  subject to ERISA  that is a party to an  arrangement
with Borrower and whose  employees are aggregated with the employees of Borrower
under IRC Section 414(o).
<PAGE>

     "ERISA Event" means (a) a Reportable Event with respect to any Benefit Plan
or Multiemployer  Plan, (b) the withdrawal of Borrower,  any of its Subsidiaries
or ERISA  Affiliates  from a Benefit  Plan  during a plan year in which it was a
"substantial  employer"  (as defined in Section  4001(a)(2)  of ERISA),  (c) the
providing  of  notice  of  intent to  terminate  a  Benefit  Plan in a  distress
termination (as described in Section  4041(c) of ERISA),  (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or  Multiemployer  Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1),  (2),
or (3) of ERISA for the  termination  of,  or the  appointment  of a trustee  to
administer,  any Benefit Plan or Multiemployer  Plan, or (ii) that may result in
termination of a Multiemployer  Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete  withdrawal  within the meaning of Sections 4203 and 4205 of
ERISA,  of  Borrower,  any  of  its  Subsidiaries  or  ERISA  Affiliates  from a
Multiemployer  Plan,  or (g)  providing  any security to any Plan under  Section
401(a)(29)  of the IRC by  Borrower  or its  Subsidiaries  or any of their ERISA
Affiliates.

     "Eurodollar  Rate"  means,  with  respect  to  the  Interest  Period  for a
Eurodollar  Rate Loan, the interest rate per annum at which United States dollar
deposits  are  offered to  Foothill  (or its  Affiliates)  by major banks in the
London  interbank  market (or other  Eurodollar Rate market selected by Foothill
(or its Affiliates) if Foothill (or its Affiliates)  reasonably  determines that
the London interbank market has ceased to be a suitable interbank market for the
designation of offshore United States dollar deposit interest rates) on or about
2:00 p.m.  (New York time) 2 Business  Days  prior to the  commencement  of such
Interest Period in amounts comparable to the amount of the Eurodollar Rate Loans
requested by and available to Borrower in accordance with this Agreement, with a
maturity of comparable duration to the Interest Period selected by Borrower.

     "Eurodollar  Rate Loans" means any Advance (or any portion thereof) made or
outstanding  hereunder  during any period  when  interest  on such  Advance  (or
portion thereof) is payable based on the Adjusted Eurodollar Rate.

     "Event of Default" has the meaning set forth in Section 8.

     "Existing  Lenders"  means (a)  Foothill,  with respect to the  $10,000,000
debtor-in-possession  facility  extended by Foothill to Oneita  during  Oneita's
Chapter 11 bankruptcy case, and (b) the Bank Group and Prudential, to the extent
of $15,000,000 in the aggregate of claims held by the Bank Group and Prudential.

     "FEIN" means Federal Employer Identification Number.
<PAGE>

     "Finished  Goods" means Inventory that has been assembled and packaged into
cartons for transportation to the Atlanta  Distribution  Center (for activewear)
or the Cullman  Distribution  Center (for  infantwear) for bagging and packaging
into dozens and half dozens, or that is at such distribution centers.

     "Foothill" has the meaning set forth in the preamble to this Agreement.

     "Foothill Account" has the meaning set forth in Section 2.7.

     "Foothill  Expenses"  means all: costs or expenses  (including  taxes,  and
insurance  premiums)  required  to be paid by  Borrower  under  any of the  Loan
Documents that are paid or incurred by Foothill;  reasonable  out-of-pocket fees
or  charges  paid  or  incurred  by  Foothill  in  connection   with  Foothill's
transactions with Borrower under the Loan Documents,  including, fees or charges
for  photocopying,  notarization,  couriers and  messengers,  telecommunication,
public record  searches  (including tax lien,  litigation,  and UCC searches and
including  searches with the patent and trademark office,  the copyright office,
or the department of motor vehicles), filing, recording, publication,  appraisal
(including  periodic  Personal Property  Collateral or Real Property  Collateral
appraisals),  real estate surveys,  real estate title policies and endorsements,
and environmental  audits;  actual  out-of-pocket costs and expenses incurred by
Foothill  in the  disbursement  of  funds  to  Borrower  (by  wire  transfer  or
otherwise);  actual out-of-pocket charges paid or incurred by Foothill resulting
from the dishonor of checks; reasonable out-of-pocket costs and expenses paid or
incurred by Foothill to correct any default or enforce any provision of the Loan
Documents,  or in gaining  possession  of,  maintaining,  handling,  preserving,
storing,  shipping,  selling,  preparing  for sale, or  advertising  to sell the
Personal  Property  Collateral or the Real Property  Collateral,  or any portion
thereof,  irrespective  of whether a sale is consummated;  reasonable  costs and
expenses paid or incurred by Foothill in examining Borrower's Books;  reasonable
out-of-pocket costs and expenses of third party claims or any other suit paid or
incurred  by  Foothill  in  enforcing  or  defending  the Loan  Documents  or in
connection  with  the  transactions   contemplated  by  the  Loan  Documents  or
Foothill's  relationship  with  Borrower,  except  for  any  costs  or  expenses
resulting  from the gross  negligence  or willful  misconduct  of Foothill;  and
Foothill's   reasonable  attorneys  fees  and  expenses  incurred  in  advising,
structuring,   drafting,  reviewing,   administering,   amending,   terminating,
enforcing  (including  reasonable  local counsel fees, and reasonable  attorneys
fees and expenses incurred in connection with a "workout," a "restructuring," or
an Insolvency Proceeding concerning Borrower), defending, or concerning the Loan
Documents, irrespective of whether suit is brought.

     "Foothill Funds" means Foothill  Partners II, L.P. and/or Foothill Partners
III, L.P.

     "Foothill Primary Collateral" means that portion of the Collateral in which
the Lien of Foothill has priority over the Lien of the Collateral Agent, for the
benefit of  Designated  Existing  Lenders,  pursuant  to the  provisions  of the
Intercreditor Agreement.
<PAGE>

     "GAAP" means  generally  accepted  accounting  principles as in effect from
time to time in the United States, consistently applied.

     "General  Intangibles"  means all of Borrower's  present and future general
intangibles  (including  contract  rights,  rights  arising  under  common  law,
statutes, or regulations,  choses or things in action, goodwill,  patents, trade
names, trademarks,  servicemarks,  copyrights,  blueprints,  drawings,  purchase
orders,  customer  lists,  monies due or recoverable  from pension funds,  route
lists,  rights to  payment  and other  rights  under any  royalty  or  licensing
agreements,  infringement claims,  computer programs,  information  contained on
computer  disks or  tapes,  literature,  reports,  catalogs,  deposit  accounts,
insurance premium rebates, tax refunds, and tax refund claims).

     "Governing  Documents" means the certificate or articles of  incorporation,
by-laws, or other organizational or governing documents of any Person.

     "Hazardous  Materials"  means (a) substances that are defined or listed in,
or otherwise  classified  pursuant to, any  applicable  laws or  regulations  as
"hazardous   substances,"  "hazardous  materials,"  "hazardous  wastes,"  "toxic
substances,"  or any other  formulation  intended to define,  list,  or classify
substances  by  reason  of   deleterious   properties   such  as   ignitability,
corrosivity,   reactivity,   carcinogenicity,   reproductive  toxicity,  or  "EP
toxicity",  (b) oil, petroleum,  or petroleum derived  substances,  natural gas,
natural gas liquids,  synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any  radioactive  materials,  and (d)  asbestos  in any  form  or  electrical
equipment  that  contains  any oil or  dielectric  fluid  containing  levels  of
polychlorinated biphenyls in excess of 50 parts per million.

     "IDB Equipment"  means the Equipment of Borrower  subject to existing Liens
in connection with industrial development bonds, as more particularly identified
on Schedule I-1.

     "Indebtedness"  means:  (a) all obligations of Borrower for borrowed money,
(b) all obligations of Borrower evidenced by bonds, debentures,  notes, or other
similar  instruments and all  reimbursement or other  obligations of Borrower in
respect of letters of credit, bankers acceptances, interest rate swaps, or other
financial  products,  (c) all obligations of Borrower under capital leases,  (d)
all  obligations  or  liabilities of others secured by a Lien on any property or
asset of  Borrower,  irrespective  of whether  such  obligation  or liability is
assumed,  and (e)  any  obligation  of  Borrower  guaranteeing  or  intended  to
guarantee  (whether  guaranteed,  endorsed,  co-made,  discounted,  or sold with
recourse to Borrower) any indebtedness,  lease,  dividend,  letter of credit, or
other obligation of any other Person.

     "Insolvency  Proceeding"  means any proceeding  commenced by or against any
Person under any provision of the Bankruptcy Code or under any other  bankruptcy
or insolvency law, assignments for the benefit of creditors,  formal or informal
moratoria,  compositions,  extensions  generally with creditors,  or proceedings
seeking reorganization, arrangement, or other similar relief.
<PAGE>

     "Intercreditor   Agreement"  means  an  Intercreditor   Agreement   between
Foothill,  the Collateral Agent, and Designated Existing Lenders,  and consented
to by Borrower, in the form attached hereto as Exhibit I-1.

     "Interest   Period"  means,  for  any  Eurodollar  Rate  Loan,  the  period
commencing  on the  Business  Day such  Eurodollar  Rate  Loan is  disbursed  or
continued, or on the Business Day on which a Reference Rate Loan is converted to
such Eurodollar Rate Loan, and ending on the date 1, 2, or 3 months  thereafter,
as selected by Borrower and notified to Foothill pursuant to Section 2.1(c), and
as further provided in Section 2.12(a)&(b).

     "In-Transit  Finished  Goods" means Finished Goods that are in transit from
the domestic United States,  Jamaican,  or Mexican facilities of Borrower or its
Subsidiaries  to the Atlanta  Distribution  Center or the  Cullman  Distribution
Center,  and, in the case of any such goods that are located  outside the United
States, that are in the possession of a bailee, customs broker, or carrier.

     "Inventory"  means all present and future  inventory in which  Borrower has
any interest,  including goods held for sale or lease or to be furnished under a
contract of service and all of Borrower's present and future raw materials, work
in  process,  finished  goods,  and  packing and  shipping  materials,  wherever
located.

     "Inventory Component" means, as of any date of determination, the amount of
the component of the Borrowing Base determined pursuant to Section 2.1(a)(y).

     "Inventory  Reserves"  means  reserves  (determined  from  time  to time by
Foothill in its discretion but without  duplication) for (a) the estimated costs
relating to unpaid  freight  charges,  warehousing  or storage  charges,  taxes,
duties,  and other  similar  unpaid costs  associated  with the  acquisition  or
transportation  of  Eligible  Inventory  by  Borrower,  plus  (b) the  estimated
reclamation claims of unpaid sellers of Eligible Inventory sold to Borrower.

     "Investment  Property" means "investment  property" as that term is defined
in Section 9115 of the Code.

     "IRC"  means  the  Internal  Revenue  Code of  1986,  as  amended,  and the
regulations thereunder.

     "Kinston" has the meaning set forth in the  introductory  paragraph of this
Agreement.
<PAGE>

     "L/C" has the meaning set forth in Section 2.2(a).

     "L/C Guaranty" has the meaning set forth in Section 2.2(a).

     "Letter  of  Credit"  means  an  L/C  or an L/C  Guaranty,  as the  context
requires.

     "Letter  of  Credit  Usage"  means  the sum of (a) the  undrawn  amount  of
outstanding Letters of Credit plus (b) the amount of unreimbursed drawings under
Letters of Credit.

     "Lien" means any interest in property  securing an obligation owed to, or a
claim by, any Person other than the owner of the property, whether such interest
shall be based on the common law,  statute,  or contract,  whether such interest
shall be recorded or perfected,  and whether such  interest  shall be contingent
upon the  occurrence  of some future  event or events or the  existence  of some
future  circumstance or  circumstances,  including the lien or security interest
arising  from a mortgage,  deed of trust,  encumbrance,  pledge,  hypothecation,
assignment,  deposit arrangement,  security agreement,  adverse claim or charge,
conditional sale or trust receipt, or from a lease, consignment, or bailment for
security purposes and also including  reservations,  exceptions,  encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases, and other
title exceptions and encumbrances affecting Real Property.

     "Loan Account" has the meaning set forth in Section 2.10.

     "Loan Documents" means this Agreement, the Disbursement Letter, the Letters
of Credit, the Lockbox Agreements,  the Mortgage, the Suretyship Agreement,  the
VCOC Letter, the Stock Pledge Agreement, the Deposit Account Security Agreement,
the Trademark  Security  Agreement,  any note or notes  executed by Borrower and
payable to Foothill in connection with this  Agreement,  and any other agreement
entered into, now or in the future, in connection with this Agreement.

     "Lockbox Account" shall mean a depositary account  established  pursuant to
one of the Lockbox Agreements.

     "Lockbox  Agreements"  means those  certain  Lockbox  Operating  Procedural
Agreements  and  those  certain  Depository  Account  Agreements,  in  form  and
substance satisfactory to Foothill,  each of which is among Borrower,  Foothill,
and one of the Lockbox Banks.

     "Lockbox Banks" means _____________________.

     "Lockboxes" has the meaning set forth in Section 2.7.
<PAGE>

     "Material  Adverse  Change"  means  (a) a  material  adverse  change in the
business, prospects,  operations,  results of operations, assets, liabilities or
condition (financial or otherwise) of Oneita and its consolidated  Subsidiaries,
on a  consolidated  basis,  occurring  after the Closing Date,  (b) the material
impairment  of the  ability of Oneita and its  consolidated  Subsidiaries,  on a
consolidated  basis,  to perform their  obligations  under the Loan Documents to
which they are a party or of Foothill to enforce the Obligations or realize upon
the Collateral,  occurring after the Closing Date, or (c) a material  impairment
of the  priority  of  Foothill's  Liens  with  respect  to the  Collateral.  The
foregoing  notwithstanding,  if  Borrower's  consolidated  financial  results of
operations  and  financial  condition  are in  substantial  compliance  with the
projections of Borrower most recently furnished to Foothill prior to the date of
filing of Oneita's  Chapter 11 bankruptcy  case, then such financial  results of
operations  and  financial  condition  shall not be  considered  as  factors  by
Foothill in  determining  whether a Material  Adverse  Change has occurred,  and
shall not be relevant to such determination.

     "Maturity Date" means, as of any date of  determination  thereof,  the date
that this Agreement is then scheduled to terminate pursuant to Section 3.4.

     "Maximum Amount" means $35,000,000.

     "Maximum Revolving Amount" means $31,000,000.

     "Maximum Supplemental Amount" means $4,000,000.

     "Mortgage" means a mortgages executed by Borrower in favor of Foothill, the
form and substance of which shall be  satisfactory  to Foothill,  that encumbers
the Real Property Collateral and the related improvements thereto.

     "Multiemployer  Plan" means a  "multiemployer  plan" (as defined in Section
4001(a)(3) of ERISA) to which Borrower,  any of its  Subsidiaries,  or any ERISA
Affiliate has contributed,  or was obligated to contribute,  within the past six
years.

     "Negotiable  Collateral" means all of a Person's present and future letters
of credit, notes, drafts, instruments,  Investment Property, documents, personal
property  leases (wherein such Person is the lessor),  chattel paper,  and Books
relating to any of the foregoing.

     "Net Worth Covenant  Commencement Date" means, if the Effective Date is the
last day of a fiscal month of Borrower,  the Effective Date, or, otherwise,  the
first  day to occur  after the  Effective  Date that is the last day of a fiscal
month of Borrower.

     "Net Worth  Testing  Dates"  means the last day of each  fiscal  quarter of
Borrower,  commencing  with the first such date to occur on or after the Closing
Date  (which  dates,  as of the Closing  Date,  are the last days of each March,
June, September, and December ending on or after the Closing Date).
<PAGE>

     "Non-Reconciliation  Reserve" means a reserve (determined from time to time
by Foothill in its  discretion  but without  duplication)  for the amount of any
unreconciled variance between, on the one hand, Borrower's Eligible Inventory as
reflected  by  Borrower's  perpetual  inventory  system  and, on the other hand,
Borrower's  Eligible Inventory as reflected on Borrower's general ledger,  which
reserve shall be determined by category of Eligible  Inventory and deducted,  by
category,  prior to  multiplication  by the Applicable  Percentages and prior to
application of any relevant sublimits.

     "Not-In-Transit  Finished  Goods"  means  Finished  Goods  that  have  been
received at the Atlanta  Distribution Center or the Cullman  Distribution Center
and that are not in transit.

     "Note Purchase  Agreement"  shall have the meaning ascribed to such term in
the Intercreditor Agreement.

     "Obligations"  means all loans,  Advances,  Supplemental  Advances,  debts,
principal,  interest (including any interest that, but for the provisions of the
Bankruptcy Code, would have accrued),  premiums (including the Early Termination
Premium, if applicable),  reimbursement or indemnity obligations  (including any
such obligations with respect to Letters of Credit),  liabilities (including all
amounts charged to Borrower's Loan Account pursuant hereto),  obligations,  fees
(including  any fees or expenses  that, but for the provisions of the Bankruptcy
Code,  would have  accrued),  charges,  costs,  Foothill  Expenses,  guaranties,
covenants,  and duties owing by Borrower to  Foothill,  in each case of any kind
and description in any way arising under or related to the Loan  Documents,  and
irrespective  of whether for the payment of money,  whether  direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
and further  including all interest not paid when due and all Foothill  Expenses
that Borrower is required to pay or reimburse by the Loan Documents,  by law, or
otherwise.

     "Obligor" means either of Oneita or Kinston.

     "Oneita"  has the meaning set forth in the  introductory  paragraph of this
Agreement.

     "Overadvance" has the meaning set forth in Section 2.5.

     "Participant"  means any Person to which Foothill has sold a  participation
interest in its rights under the Loan Documents. "Participant" includes, without
limitation,  the  Foothill  Funds  with  respect to the  Supplemental  Liquidity
Facility.
<PAGE>

     "Pay-Off/Paydown  Letters" means letters, in form and substance  reasonably
satisfactory to Foothill,  from Existing Lenders respecting the amount necessary
to  repay in full,  in the  case of  Foothill  with  respect  to the  debtor  in
possession  financing  provided  by  Foothill  to Oneita  during its  Chapter 11
bankruptcy case, and in part, in the case of Designated  Existing  Lenders,  the
obligations of Borrower  owing to Existing  Lenders;  provided that,  subject to
Availability  hereunder,  outstanding  "Letters  of  Credit"  under the Loan and
Security  Agreement with Foothill as an Existing Lender may be assumed hereunder
and be deemed Letters of Credit issued hereunder as opposed to being terminated,
released, or paid in full.

     "PBGC" means the Pension Benefit  Guaranty  Corporation as defined in Title
IV of ERISA, or any successor thereto.

     "Permitted  Combination"  means  either (a) the merger of Kinston  with and
into Oneita,  with Oneita the surviving  corporation,  or (b) the dissolution of
Kinston  and  transfer  of all its  assets  to Oneita  (subject  to the Liens of
Foothill in such assets). "Permitted Disposition" means a disposition of Andrews
Real Property, or Collateral described on Schedule P-1.

     "Permitted  Investments"  means (a) direct obligations of the United States
of America,  or any agency thereof if backed by the full faith and credit of the
United States of America,  or obligations  fully guaranteed by the United States
of America,  or any agency thereof if backed by the full faith and credit of the
United  States of America,  in each case  denominated  in Dollars  and  maturing
within one (1) year from the date of creation  thereof,  (b)  commercial  paper,
denominated  in Dollars,  issued by a  corporation  (other than  Borrower or any
Affiliate  of  Borrower)  organized  under the laws of any  State of the  United
States of America or the District of Columbia  maturing within one (1) year from
the  date of  creation  thereof  rated  in the  highest  grade  by a  nationally
recognized  credit rating agency,  (c) time deposits  denominated in Dollars and
maturing within one (1) year from the date of creation  thereof with,  including
certificates  of deposit  issued by, any office  located in the United States of
America of any bank or trust  company  which is organized  under the laws of the
united  States of America or any state  thereof and has  capital,  surplus,  and
undivided profits  aggregating at least  $500,000,000,  and/or (d) shares of any
money market mutual fund holding only  obligations  denominated in Dollars rated
at least AAAm or the equivalent  thereof by Standard & Poor's  Corporation or at
least Aaa or the equivalent thereof by Moody's Investors Service, Inc.; provided
that, to the extent any such investment is made with Collateral, such investment
shall not be a Permitted  Investment  unless the  security  interest of Foothill
therein is perfected.

     "Permitted  Liens" means (a) Liens held by  Foothill,  (b) Liens for unpaid
taxes  that  either (i) are not yet due and  payable or (ii) are the  subject of
Permitted  Protests,  (c) Liens set forth on Schedule  P-2, (d) the interests of
lessors under operating leases and purchase money Liens of lessors under capital

<PAGE>

leases to the extent that the  acquisition or lease of the  underlying  asset is
permitted  under this  Agreement  and so long as the Lien only  attaches  to the
asset  purchased or acquired  and only secures the purchase  price of the asset,
(e) Liens  arising  by  operation  of law in favor of  warehousemen,  landlords,
carriers,  mechanics,  materialmen,  laborers,  or  suppliers,  incurred  in the
ordinary course of business of Borrower and not in connection with the borrowing
of money,  and which Liens either (i) are for sums not yet due and  payable,  or
(ii) are the subject of Permitted Protests, (f) Liens arising from deposits made
in  connection  with  obtaining  worker's  compensation  or  other  unemployment
insurance,  (g) Liens or deposits to secure  performance  of bids,  tenders,  or
leases (to the extent permitted under this Agreement),  incurred in the ordinary
course of business of  Borrower  and not in  connection  with the  borrowing  of
money, (h) Liens arising by reason of security for surety or appeal bonds in the
ordinary  course of business of  Borrower,  (i) Liens of or  resulting  from any
judgment  or award that would not cause or result in a Material  Adverse  Change
and as to which the time for the appeal or petition  for  rehearing of which has
not yet expired, or in respect of which Borrower is in good faith prosecuting an
appeal or proceeding  for a review,  and in respect of which a stay of execution
pending such appeal or proceeding  for review has been  secured,  (j) Liens with
respect to the Real Property  Collateral  that are  exceptions to the commitment
for title insurance or title reports issued in connection with the Mortgage,  as
accepted by Foothill,  (k) with respect to any Real Property that is not part of
the Real  Property  Collateral,  easements,  rights of way,  zoning and  similar
covenants and restrictions,  and similar  encumbrances that customarily exist on
properties of Persons engaged in similar  activities and similarly  situated and
that  in any  event  do not  materially  interfere  with  or  impair  the use or
operation of the Collateral by Borrower or the value of Foothill's  Lien thereon
or therein, or materially interfere with the ordinary conduct of the business of
Borrower,  and (l) property taxes due and owing on the Real Property  Collateral
that do not  materially  impair the value of Foothill's  Lien thereon or therein
and so long as the relevant  governmental  taxing authority is not taking action
to enforce the tax lien.

     "Permitted  Priority Liens" means the subset of Permitted Liens  consisting
of those described in clauses (b), (d), (e), (j), (k), and (l) of the definition
of Permitted  Liens, and those  identified on Schedule P-3,  collectively  being
those  Permitted  Liens that are  entitled  to have  priority  over the Liens of
Foothill with respect to the affected Collateral.

     "Permitted  Protest"  means the right of Borrower to protest any Lien other
than any such Lien that secures the  Obligations,  tax (other than payroll taxes
or taxes that are the subject of a United  States  federal tax lien),  or rental
payment,  pro vided  that (a) a  reserve  with  respect  to such  obligation  is
established   on  the  books  of  Borrower  in  an  amount  that  is  reasonably
satisfactory  to Foothill,  (b) any such protest is  instituted  and  diligently
prosecuted by Borrower in good faith,  and (c) Foothill is satisfied that, while
any such protest is pending,  there will be no impairment of the enforceability,
validity, or priority of any of the Liens of Foothill in and to the Collateral.

     "Person"  means  and  includes  natural  persons,   corporations,   limited
liability  companies,  limited  partnerships,   general  partnerships,   limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other  organizations,  irrespective  of  whether  they are legal  entities,  and
governments and agencies and political subdivisions thereof.
<PAGE>

     "Personal  Property  Collateral"  means all Collateral  other than the Real
Property Collateral.

     "Piece Goods" means rolls of fabric  produced from Raw Materials,  prior to
being cut, and which may be in the form of  untouched  gray,  bleached,  or dyed
fabric.

     "Plan" means any employee benefit plan, program, or arrangement  maintained
or contributed to by Borrower or with respect to which it may incur liability.

     "Plan  of  Reorganization"  means  the  Plan of  Reorganization  of  Oneita
Industries,  Inc. under Chapter 11 of the Bankruptcy Code, dated  _____________,
199_, in substantially the form attached hereto as Exhibit P-1.

     "Prudential" means The Prudential Insurance Company of America.

     "Raw Materials" means yarns, dyes, thread, chemicals, labels, and supplies.

     "Real  Property"  means any estates or interests in real property now owned
or hereafter acquired by Borrower.

     "Real Property Collateral" means the parcel or parcels of real property and
the  related  improvements  thereto  identified  on Schedule  R-1,  and any Real
Property hereafter acquired by Borrower.

     "Reference  Rate" means the  variable  rate of  interest,  per annum,  most
recently  announced  by Norwest Bank  Minnesota,  National  Association,  or any
successor  thereto,  as its "base rate,"  irrespective of whether such announced
rate is the best rate available from such financial institution.

     "Reference  Rate Loan" means any Advance (or any portion  thereof)  made or
outstanding  hereunder  during any period  when  interest  on such  Advance  (or
portion thereof) is payable based on the Reference Rate.

     "Renewal Date" has the meaning set forth in Section 3.4.

     "Reportable  Event" means any of the events described in Section 4043(c) of
ERISA or the regulations  thereunder  other than a Reportable  Event as to which
the  provision  of 30  days  notice  to the  PBGC  is  waived  under  applicable
regulations.
<PAGE>

     "Required Net Worth Amount" means, as of any date of determination thereof:
(a) The Base Net Worth minus $4,500,000; plus (b) The amount that is the product
of (y)  $150,000  times (z) the number of months  that have  elapsed,  as of and
including such date of determination,  since the Effective Date (which number of
elapsed  months,  if not a whole  number,  shall be  truncated  downward  to the
nearest whole number,  e.g., if more than four, and less than five,  months have
elapsed  since the  Effective  Date,  the number "4" would be  multiplied  times
$150,000 in making the foregoing determination).

     "Requirement  of  Law"  means,  as to any  Person,  all  (i)  statutes  and
regulations  and (ii) court  orders and  injunctions,  arbitrators's  decisions,
and/or similar rulings, in each instance by any Governmental Authority, or other
body which has jurisdiction over such Person, or any property of such Person, or
of any other Person whose conduct such Person would be responsible.

     "Reserve  Percentage"  means and refers to, as of the date of determination
thereof,  the maximum  percentage  (rounded upward,  if necessary to the nearest
1/100th of 1%), as determined by Foothill (or its Affiliates) in accordance with
its (or their) usual procedures (which  determination shall be conclusive in the
absence of manifest error),  that is in effect on such date as prescribed by the
Federal  Reserve  Board for  determining  the  reserve  requirements  (including
supplemental,  marginal,  and emergency  reserve  requirements)  with respect to
eurocurrency  funding (currently  referred to as "eurocurrency  liabilities") by
Foothill or its Affiliates.

     "Retiree  Health Plan" means an "employee  welfare benefit plan" within the
meaning of Section 3(1) of ERISA that  provides  benefits to  individuals  after
termination of their employment, other than as required by Section 601 of ERISA.

     "Solvent"  means,  with respect to any Person on a particular date, that on
such date (a) such Person is able to realize upon its  properties and assets and
pay  its  debts  and  other  liabilities,   contingent   obligations  and  other
commitments  as they mature in the normal  course of  business,  (b) such Person
does not intend to, and does not believe  that it will,  incur debts beyond such
Person's ability to pay as such debts mature, and (c) such Person is not engaged
in  business  or a  transaction,  and is not about to engage  in  business  or a
transaction,  for which such  Person's  properties  and assets would  constitute
unreasonably  small capital  after giving due  consideration  to the  prevailing
practices  in the  industry in which such Person is engaged.  In  computing  the
amount  of  contingent  liabilities  at  any  time,  it is  intended  that  such
liabilities  will be computed at the amount that,  in light of all the facts and
circumstances  existing at such time,  represents the amount that reasonably can
be expected to become an actual or matured liability.

     "Stock" means all shares, options, warrants, interests,  participations, or
other  equivalents  (regardless  of how  designated)  of or in a corporation  or
equivalent  entity,  whether  voting  or  nonvoting,   including  common  stock,
preferred stock, or any other "equity security" (as such term is defined in Rule
3a11-1 of the General  Rules and  Regulations  promulgated  by the SEC under the
Exchange Act).
<PAGE>

     "Stock  Pledge  Agreement"  means a Stock  Pledge  Agreement in the form of
Exhibit S-1, executed and delivered by Borrower to Foothill, with respect to the
Stock  of the  Subsidiaries  of  Borrower  (but  not the  Stock  of the  foreign
Subsidiaries of Borrower except to the extent, if any, that the Collateral Agent
has a Lien thereon).

     "Strathleven"  means  Oneita  Strathleven,  a Jamaican  corporation,  and a
Subsidiary of Borrower.

     "Subsidiary"  of  a  Person  means  a  corporation,   partnership,  limited
liability  company,  or other entity in which that Person directly or indirectly
owns or controls  the shares of Stock  having  ordinary  voting power to elect a
majority of the board of directors  (or appoint  other  comparable  managers) of
such corporation, partnership, limited liability company, or other entity.

     "Supplemental  Advance"  has the  meaning  set forth in Section  2.3(a).  A
Supplemental Advance is not an Advance, but is an Obligation.

     "Supplemental  Availability"  means, as of any date of  determination,  the
aggregate amount of Supplemental  Advances  Borrower would be entitled to borrow
on such date under the terms of this  Agreement  (including  Section  2.3) after
taking into account all outstanding Obligations, determined as if Borrower first
had borrowed all Advances Borrower was entitled to borrow as of such date to the
extent of the Availability on such date.

     "Supplemental  Borrowing Base" means, as of any date of determination,  the
amount equal to the difference  obtained by subtracting the Inventory  Component
from the Enhanced Inventory Component.  "Supplemental  Liquidity Facility" means
the $4,000,000 facility provided for in Section 2.3.

     "Suretyship Agreement" means a Suretyship Agreement executed by Borrower in
favor of Foothill,  containing  customary  suretyship  provisions and waivers in
light of the  co-obligor  status of Oneita  and  Kinston,  in the form  attached
hereto as Exhibit S-2.

     "Trademark  Security Agreement" means a Trademark Security Agreement in the
form of Exhibit T-1, executed and delivered by Borrower to Foothill.
<PAGE>

     "VCOC  Letter"  means a letter  in the form of  Exhibit  V-1  executed  and
delivered by Borrower for the benefit of the Foothill Funds as  participants  of
Foothill in the Supplemental Liquidity Facility.

     "Voidable Transfer" has the meaning set forth in Section 15.8.

     "Work-In-Process" means fabric that has been cut from Piece Goods, prior to
assembly into Finished Goods.

     1.2 Accounting Terms. All accounting terms not specifically  defined herein
shall  be  construed  in  accordance  with  GAAP.  When  used  herein,  the term
"financial  statements" shall include the notes and schedules thereto.  Whenever
the term  "Borrower"  is used in respect of a  financial  covenant  or a related
definition,  it  shall  be  understood  to mean  Borrower  and its  consolidated
Subsidiaries  on a  consolidated  basis  unless  the  context  clearly  requires
otherwise.

     1.3 Code.  Any terms used in this  Agreement  that are  defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein.

     1.4  Construction.  Unless the context of this Agreement  clearly  requires
otherwise,  references  to the plural  include the  singular,  references to the
singular include the plural, the term "including" is not limiting,  and the term
"or" has, except where otherwise indicated, the inclusive meaning represented by
the phrase "and/or." The words "hereof,"  "herein,"  "hereby,"  "hereunder," and
similar terms in this  Agreement  refer to this  Agreement as a whole and not to
any  particular  provision  of  this  Agreement.  Section,  subsection,  clause,
schedule,  and  exhibit  references  are  to  this  Agreement  unless  otherwise
specified.  Any  reference in this  Agreement  or in the Loan  Documents to this
Agreement  or  any  of  the  Loan  Documents  shall  include  all   alterations,
amendments,   changes,  extensions,   modifications,   renewals,   replacements,
substitutions, and supplements, thereto and thereof, as applicable.

     1.5 Schedules and Exhibits.  All of the schedules and exhibits  attached to
this Agreement shall be deemed incorporated herein by reference.

     2. LOAN AND TERMS OF PAYMENT.

     2.1 Revolving Advances.

     (a) Subject to the terms and conditions of this Agreement,  Foothill agrees
to make advances ("Advances") to Borrower in an amount outstanding not to exceed
at any one time the lesser of (i) the Maximum  Revolving  Amount less the Letter
of Credit Usage, or (ii) the Borrowing Base less the Letter of Credit Usage. For
purposes of this Agreement,  "Borrowing  Base", as of any date of determination,
shall mean the result of:
<PAGE>

                                    (x)  the  lesser  of  (i)  85%  of  Eligible
                  Accounts,  less the amount,  if any, of the Dilution  Reserve,
                  and  (ii) an  amount  equal  to  Borrower's  Collections  with
                  respect  to  Accounts  for the  immediately  preceding  75 day
                  period; plus

                                    (y) the lowest of: (i) $23,000,000; (ii) the
                  Applicable Percentage times the difference between, on the one
                  hand, the value of Eligible Inventory (determined by category,
                  and  subject to the  following  sublimits:  $2,500,000  (after
                  multiplication  by the Applicable  Percentage) with respect to
                  Advances  based on Eligible Raw Materials;  $2,500,000  (after
                  multiplication  by the Applicable  Percentage) with respect to
                  Advances  based on Eligible  Piece  Goods;  $2,500,000  (after
                  multiplication  by the Applicable  Percentage) with respect to
                  Advances  based on Eligible  Work-In-Process;  and  $3,000,000
                  (after  multiplication  by  the  Applicable  Percentage)  with
                  respect to  Advances  based on  Eligible  In-Transit  Finished
                  Goods) and, on the other hand, the sum of the aggregate amount
                  of the Non-Reconciliation  Reserve (deducted by category prior
                  to multiplication  by the Applicable  Percentages and prior to
                  application  of any  relevant  sublimits)  and  the  aggregate
                  amount of the Inventory Reserves, with such Inventory Reserves
                  amount  being   subtracted   only  from  either  the  Eligible
                  In-Transit  Finished Goods component or Eligible Raw Materials
                  component  of  Eligible  Inventory,  by  category,   prior  to
                  multiplication  by the  Applicable  Percentages  and  prior to
                  application of any relevant sublimits;  and (iii) the Accounts
                  Component times 1.50; minus

                                    (z)  the   aggregate   amount  of   reserves
                  (without  duplication of other reserves),  if any, established
                  by Foothill under Section 2.1(b).

     (b) Anything to the  contrary in Section  2.1(a)  above  notwith  standing,
Foothill may create  reserves  against the Borrowing  Base or reduce its advance
rates based upon Eligible  Accounts or Eligible  Inventory  without declaring an
Event of Default (i) if it  determines  that there has  occurred a material  and
adverse  change in the value of the  Eligible  Accounts  or  Eligible  Inventory
included  within the Borrowing  Base or the amount that Foothill would be likely
to  receive  (after  giving  consideration  to  delays in  payment  and costs of
enforcement) in the liquidation of such Collateral,  occurring after the Closing
Date,  and/or (ii) to the extent of any Liens on any Collateral  included in the
Borrowing Base that have priority over the Liens of Foothill (provided that this
clause shall not require  Foothill to permit  inclusion in the Borrowing Base of
Collateral  subject to senior Liens unless Foothill in its discretion  elects to
permit such inclusion).

     (c) Foothill  shall have no obligation  to make  Advances  hereunder to the
extent they would cause the outstanding  Obligations (except for undrawn Letters
of Credit,  unaccrued  contingent  Obligations,  and  Supplemental  Advances) to
exceed the Maximum  Revolving Amount minus Letter of Credit Usage.  Each Advance
shall be made upon  Borrower's  request  (pursuant to the terms of Section 2.9),

<PAGE>

which  request  shall  be  irrevocable  except  as set  forth in  Section  2.12,
specifying (i) the amount of the requested  Advance;  (ii) the requested funding
date of such  Advance;  (iii)  whether the Advance is to constitute a Eurodollar
Rate Loan or a Reference  Rate Loan; and (iv) if such Advance is to constitute a
Eurodollar  Rate Loan,  the requested  Interest  Period  therefor.  If requested
Advance  constitutes a Eurodollar  Rate Loan,  such request must be delivered to
Foothill no later than 2:00 p.m.  (New York time) two Business Days prior to the
requested funding date therefor.

     (d)  Amounts  borrowed  pursuant  to this  Section  2.1 may be repaid  and,
subject to the terms and  conditions of this  Agreement,  reborrowed at any time
during the term of this Agreement.

     2.2 Letters of Credit.

     (a) Subject to the terms and conditions of this Agreement,  Foothill agrees
to provide a  $5,000,000  subline  under the  Maximum  Revolving  Amount for the
issuance of letters of credit for the account of  Borrower  (each,  an "L/C") or
for  the  issuance  of  guarantees  of  payment  (each  such  guaranty,  an "L/C
Guaranty")  with respect to letters of credit  issued by an issuing bank for the
account of  Borrower.  Foothill  shall have no  obligation  to issue a Letter of
Credit if any of the following would result:

               (i) Letter of Credit Usage would exceed the  Borrowing  Base less
          the amount of outstanding Advances;

               (ii) Letter of Credit  Usage would  exceed the Maximum  Revolving
          Amount less the amount of outstanding Advances; or

               (iii) Letter of Credit Usage would exceed $5,000,000.

Borrower expressly understands and agrees that Foothill shall have no obligation
to arrange for the  issuance by issuing  banks of the letters of credit that are
to be the  subject of L/C  Guarantees;  however,  Foothill  will use  reasonable
efforts to cause its Affiliate, Norwest Bank Minnesota, National Association, to
issue such letters of credit.  Borrower and  Foothill  acknowledge  that certain
"Letters  of  Credit"  may  be   outstanding  on  the  Closing  Date  under  the
debtor-in-possession  facility  provided by Foothill,  as an Existing Lender, to
Oneita.  Any obligations of Oneita with respect to such outstanding  "Letters of
Credit" hereby expressly are assumed by Borrower and shall become Obligations of
Borrower  on  the  Closing  Date,   and  such  "Letters  of  Credit"  under  the
debtor-in-possession facility shall be deemed and shall become Letters of Credit
hereunder on the Closing  Date.  Each Letter of Credit shall have an expiry date
no later than 30 days prior to the date on which this  Agreement is scheduled to
terminate under Section 3.4 (without  regard to any potential  renewal term) and
all such Letters of Credit shall be in form and substance acceptable to Foothill

<PAGE>

in its sole  discretion,  it being  understood  that a provision  in a Letter of
Credit for automatic extensions of the expiration date for additional periods of
up to one year each shall not be  prohibited  under the  foregoing  provision so
long as such Letter of Credit  provides  that  Foothill  can cease such  further
automatic  extensions by notice or by paying the Letter of Credit. If any Letter
of Credit shall contain a provision  authorizing  Foothill (or the issuing bank,
if it is not Foothill) to (i) send notice of its election not to have the Letter
of Credit renew for further periods,  (ii) send notice terminating the Letter of
Credit prior to its scheduled expiration date, (iii) pay all or a portion of the
Letter of Credit prior to drawing, or (iv) take other discretionary action, then
Foothill agrees to take such action upon  Borrower's  written request so long as
no Event of Default  exists or would be  continuing  after giving effect to such
request by Borrower and such action by Foothill (or the issuing  bank,  if it is
not  Foothill).  If Foothill  is  obligated  to advance  funds under a Letter of
Credit,  then, and if there is Availability for Advances,  Foothill and Borrower
agree that such  advances  with respect to the Letter of Credit shall be charged
as  Advances  to  Borrower's  Loan  Account;  to the  extent  that  there is not
Availability   for  Advances  but  there  is   Supplemental   Availability   for
Supplemental  Advances,  Foothill and  Borrower  agree that such  advances  with
respect to the Letter of Credit  shall be charged as  Supplemental  Advances  to
Borrower's Loan Account;  otherwise,  Borrower  immediately shall reimburse such
amounts to Foothill  and,  if  Borrower  fails to do so, the amounts so advanced
immediately  and  automatically  shall  be  treated  as if  they  were  Advances
hereunder  (even  if  such  treatment  would  result  in  the  existence  of  an
Overadvance) and, thereafter, shall bear interest at the rate then applicable to
Advances under Section 2.6.

     (b) Borrower hereby agrees to indemnify,  save,  defend,  and hold Foothill
harmless from any loss, cost, expense, or liability,  including payments made by
Foothill,  expenses,  and reasonable attorneys fees incurred by Foothill arising
out of or in connection  with any Letter of Credit,  except to the extent caused
by the gross negligence or wilful misconduct of Foothill.  Borrower agrees to be
bound by the issuing bank's  regulations and good faith  interpretations  of any
Letters of Credit guarantied by Foothill and opened to or for Borrower's account
or by Foothill's good faith  interpretations of any L/C issued by Foothill to or
for Borrower's  account,  even though this  interpretation may be different from
Borrower's  own, and Borrower  understands and agrees that Foothill shall not be
liable for any error, negligence, or mistake, whether of omission or commission,
in following Borrower's  instructions or those contained in the Letter of Credit
or any modifications, amendments, or supplements thereto agreed to in writing by
Borrower,  in each case except to the extent  caused by the gross  negligence or
wilful misconduct of Foothill.  Borrower understands that the L/C Guarantees may
require  Foothill to indemnify the issuing bank for certain costs or liabilities
arising out of claims by Borrower  against such issuing  bank.  Borrower  hereby
agrees to indemnify,  save,  defend,  and hold Foothill harmless with respect to
any loss,  cost,  expense  (including  reasonable  attorneys fees), or liability
incurred  by  Foothill  under  any  L/C  Guaranty  as  a  result  of  Foothill's
indemnification  of any such issuing bank (provided,  however,  that in no event
shall Borrower indemnify, save, defend, or hold harmless Foothill or any issuing
bank for any loss,  cost,  expense,  or  liability  arising out of (i) the gross
negligence  or willful  misconduct of Foothill or such issuing bank, or (ii) any
claim brought by Borrower  against Foothill or such issuing bank with respect to
any Letter of Credit, any letter of credit issued by an issuing bank that is the
subject of an L/C Guaranty,  or any action,  inaction, or transaction related to

<PAGE>

any thereof,  where  Borrower is the  prevailing  party;  also, in no event will
Foothill  be required  to issue any L/C  Guaranty  in favor of any issuing  bank
(other than Norwest Bank Minnesota, National Association) that requires Foothill
to indemnify such issuing bank for any loss, cost, expense, or liability arising
out of the gross negligence or willful misconduct of such issuing bank).

     (c) Borrower hereby authorizes and directs any bank that issues a letter of
credit guaranteed by Foothill to deliver to Foothill all instruments, documents,
and other  writings and property  received by the issuing bank  pursuant to such
letter of  credit,  and to  accept  and rely upon  Foothill's  instructions  and
agreements with respect to all matters arising in connection with such letter of
credit and the related  application,  provided that Foothill shall not authorize
the waiver of  documentary  conditions  to drawing a Letter of Credit  expressly
stated in such Letter of Credit without Borrower's approval. Borrower may or may
not be the  "applicant" or "account party" with respect to such letter of credit
(i.e.,  the  issuing  bank may  designate  Borrower  or  Foothill or both as the
"applicant" or "account party").

     (d) Any and all charges, commissions,  fees, and costs incurred by Foothill
relating to the letters of credit  guaranteed  by Foothill  shall be  considered
Foothill  Expenses  for  purposes of this  Agreement  and  immediately  shall be
reimbursable by Borrower to Foothill.

     (e) Immediately upon the termination of this Agreement,  Borrower agrees to
either (i) provide cash  collateral to be held by Foothill in an amount equal to
105% of the maximum  amount of  Foothill's  obligations  under Letters of Credit
(which maximum  amount,  for purposes of this  paragraph,  in the case of an L/C
Guaranty issued by Foothill,  shall not be deemed to exceed the amount available
to be drawn under the underlying letter of credit that is the subject of the L/C
Guaranty),  or  (ii)  cause  to be  delivered  to  Foothill  releases  of all of
Foothill's  obligations  under  outstanding  Letters  of Credit.  At  Foothill's
discretion, any proceeds of Collateral received by Foothill after the occurrence
and  during  the  continuation  of an Event of  Default  may be held as the cash
collateral required by this Section 2.2(e).

     (f) If by reason of (i) any change after the date hereof in any  applicable
law,  treaty,  rule,  or  regulation  or any change after the date hereof in the
interpretation  or  application  by  any  governmental  authority  of  any  such
applicable law, treaty,  rule, or regulation,  or (ii) compliance by the issuing
bank or Foothill with any post-Closing Date direction,  request,  or requirement
(irrespective of whether having the force of law) of any governmental  authority
or monetary authority including,  without limitation,  Regulation D of the Board
of Governors of the Federal  Reserve  System as from time to time in effect (and
any successor thereto):

     (A) any reserve,  deposit, or similar requirement is or shall be imposed or
modified in respect of any Letters of Credit issued hereunder, or
<PAGE>

     (B) there  shall be  imposed  on the  issuing  bank or  Foothill  any other
condition  regarding any letter of credit,  or Letter of Credit,  as applicable,
issued pursuant hereto;

and the result of the foregoing is to increase, directly or indirectly, the cost
to the issuing bank or Foothill of issuing, making, guaranteeing, or maintaining
any  letter of  credit,  or Letter of Credit,  as  applicable,  or to reduce the
amount receivable in respect thereof by such issuing bank or Foothill, then, and
in any such case, Foothill may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced,  notify Borrower,
and  Borrower  shall pay on demand such  amounts as the issuing bank or Foothill
may specify to be necessary to compensate  the issuing bank or Foothill for such
additional cost or reduced  receipt,  together with interest on such amount from
the date of such demand  until  payment in full thereof at the rate set forth in
Section  2.6(a)(i) or (c)(i), as applicable.  The good faith  non-discriminatory
determination by the issuing bank or Foothill, as the case may be, of any amount
due pursuant to this Section 2.2(f), as set forth in a certificate setting forth
the calculation thereof in reasonable detail,  shall, in the absence of manifest
or demonstrable error, be final and conclusive and binding on all of the parties
hereto.

     2.3 Supplemental Advances.

     (a) Subject to the terms and conditions of this Agreement,  Foothill agrees
to make advances ("Supplemental  Advances") to Borrower in an amount outstanding
not to exceed at any one time the lesser of (i) the Maximum Supplemental Amount,
or (ii) the  Supplemental  Borrowing  Base.  Borrower  shall not be  entitled to
request or receive Supplemental Advances unless the combined outstanding balance
of Advances  and Letter of Credit  Usage  equals the Maximum  Revolving  Amount.
Absent an Event of  Default,  Supplemental  Advances  shall be  repaid  prior to
Advances. Upon the occurrence and during the continuance of an Event of Default,
as between Foothill and Borrower, all Collections,  repayments,  and proceeds of
Collateral received by Foothill may be allocated by Foothill to the repayment or
cash-collateralization  of the Obligations by Foothill in such order as Foothill
elects in its sole and absolute  discretion,  even if such  allocation  does not
minimize  Borrower's  interest  expense,  or fees or other  charges  payable  by
Borrower.  Borrower  understands  that the  Foothill  Funds may  purchase a 100%
participation  interest in the  Supplemental  Advances,  and that, under certain
circumstances  during the  continuance  of an Event of Default,  Foothill may be
entitled,  as between itself and the Foothill Funds, to receive repayment of all
Obligations other than the Supplemental Advances (and interest and fees or other
charges with respect  thereto) prior to the Foothill Funds becoming  entitled to
repayment of their  investment  with respect to the  Supplemental  Advances (and
interest and fees or other charges with respect thereto),  which entitlement may
influence  the order in which  Foothill  elects to cause the  Obligations  to be
reduced,  and which  election may affect the amount of interest,  fees, or other
charges required to be paid by Borrower.
<PAGE>

     (b)  Foothill  shall  have  no  obligation  to make  Supplemental  Advances
hereunder to the extent they would cause the  outstanding  Obligations to exceed
the  Maximum  Amount,  or the  outstanding  Supplemental  Advances to exceed the
Maximum Supplemental Amount or the Supplemental  Borrowing Base. If Availability
exists to borrow Advances while Supplemental Advances are outstanding,  Borrower
agrees that Foothill may,  without prior request by Borrower,  cause Advances to
be made to the extent of  Availability  for the purpose of repaying  outstanding
Supplemental  Advances.  Except as  specifically  aforesaid,  each  Supplemental
Advance shall be made upon Borrower's  request (pursuant to the terms of Section
2.9),  which  request  shall be  irrevocable,  specifying  (i) the amount of the
requested  Supplemental  Advance;  and (ii) the  requested  funding date of such
Supplemental Advance.

     (c)  Amounts  borrowed  pursuant  to this  Section  2.3 may be repaid  and,
subject to the terms and  conditions of this  Agreement,  reborrowed at any time
during the term of this Agreement.

     2.4 [Intentionally omitted].

     2.5 Overadvances.  If, at any time or for any reason,  the aggregate amount
of  Obligations  owed by  Borrower to Foothill  pursuant to Sections  2.1,  2.2,
and/or 2.3 (except for  unaccrued  contingent  Obligations  other than Letter of
Credit  Usage) is greater than either the Dollar or percentage  limitations  set
forth in Sections 2.1, 2.2, and/or 2.3 (an "Overadvance"),  Borrower immediately
shall pay to Foothill, in cash, the amount of such excess to be used by Foothill
first,  (except as otherwise  provided in Section 2.3(a)) to repay  Supplemental
Advances  outstanding under Section 2.3, second,  to repay Advances  outstanding
under Section 2.1, and, thereafter, to be held by Foothill as cash collateral to
secure Borrower's  obligation to repay Foothill for all amounts paid pursuant to
Letters of Credit.

     2.6 Interest and Letter of Credit Fees: Rates, Payments, and Calculations.

     (a) Interest Rate.  Except as provided in clause (c) below, all Obligations
(except  for undrawn  Letters of Credit and  unaccrued  contingent  Obligations)
shall  bear  interest  as  follows:  (i) Each  Eurodollar  Rate Loan  shall bear
interest  at a per annum  rate of 3.00  percentage  points  above  the  Adjusted
Eurodollar Rate; (ii) each Supplemental Advance shall bear interest at the fixed
per annum rate of fifteen  percent (15%);  and (iii) all other such  Obligations
shall bear  interest  at a per annum rate of 1.00  percentage  points  above the
Reference Rate.

     (b) Letter of Credit Fee. Borrower shall pay Foothill a fee (in addition to
the charges, commissions,  fees, and costs set forth in Section 2.2(d)) equal to
1.25% per annum times the aggregate undrawn amount of all outstanding Letters of
Credit.  
<PAGE>

     (c) Default Rate.  Upon the  occurrence and during the  continuation  of an
Event of Default, (i) all Obligations (except for Supplemental Advances, undrawn
Letters of Credit, and unaccrued contingent  Obligations) shall bear interest at
a per annum rate equal to 3.00 percentage  points above the Reference Rate, (ii)
Supplemental  Advances  shall bear interest at a per annum rate equal to sixteen
and one-half  percent  (16.5%),  and (iii) the Letter of Credit Fee set forth in
Section 2.6(b) shall be increased to 3.25% per annum.

     (d) Minimum  Interest.  In no event  shall the rate of interest  chargeable
hereunder for any day be less than 7.00% per annum.  To the extent that interest
accrued  hereunder at the rate set forth herein would be less than the foregoing
minimum  daily  rate,  the  interest  rate  chargeable  hereunder  for  such day
automatically shall be deemed increased to the minimum rate.

     (e) Payments.  Interest in respect of Reference Rate Loans and Supplemental
Advances and Letter of Credit fees payable  hereunder  shall be due and payable,
in arrears,  on the first day of each month during the term hereof.  Interest in
respect of each  Eurodollar Rate Loan shall be due and payable,  in arrears,  on
the  last  day  of the  Interest  Period  applicable  thereto.  Borrower  hereby
authorizes Foothill, at its option,  without prior notice to Borrower, to charge
such  interest  and Letter of Credit fees,  all  Foothill  Expenses (as and when
incurred),  the charges,  commissions,  fees,  and costs provided for in Section
2.2(d) (as and when accrued or incurred),  the  --------------  fees and charges
provided for in Section 2.11 (as and when accrued or incurred), and ------------
all  installments  or other  payments due under any Loan  Document to Borrower's
Loan Account,  which amounts  thereafter  shall accrue interest at the rate then
applicable  to Reference  Rate Loans  hereunder.  Any interest not paid when due
shall be  compounded  and  shall  thereafter  accrue  interest  at the rate then
applicable to Reference Rate Loans hereunder.

     (f)  Computation.  The Reference  Rate as of the date of this  Agreement is
____% per annum.  In the event the  Reference  Rate is changed from time to time
hereafter,   the  applicable  rate  of  interest  hereunder   automatically  and
immediately shall be increased or decreased by an amount equal to such change in
the Reference  Rate. All interest and fees  chargeable  under the Loan Documents
shall be computed  on the basis of a 360 day year for the actual  number of days
elapsed.

     (g) Intent to Limit  Charges to Maximum  Lawful Rate. In no event shall the
interest rate or rates payable under this Agreement, plus any other amounts paid
in connection herewith, exceed the highest rate permissible under any law that a
court  of  competent   jurisdiction  shall,  in  a  final  determination,   deem
applicable.  Borrower and Foothill,  in executing and delivering this Agreement,
intend legally to agree upon the rate or rates of interest and manner of payment
stated within it;  provided,  however,  that,  anything  contained herein to the
contrary notwithstanding, if said rate or rates of interest or manner of payment
exceeds the maximum  allowable under  applicable law, then, ipso facto as of the
date of this Agreement,  Borrower is and shall be liable only for the payment of
such maximum as allowed by law, and payment  received from Borrower in excess of
such legal maximum,  whenever received, shall be applied to reduce the principal
balance of the Obligations to the extent of such excess.
<PAGE>

     2.7 Collection of Accounts.  Borrower shall at all times maintain lockboxes
(the  "Lockboxes")  and,  immediately after the Closing Date, shall instruct all
Account Debtors with respect to the Accounts, proceeds of Accounts or Inventory,
and  Negotiable  Collateral  (to the extent,  and only to the extent,  that such
Negotiable  Collateral  is  proceeds  of  Accounts)  of  Borrower  to remit  all
Collections in respect thereof to such Lockboxes.  Borrower,  Foothill,  and the
Lockbox Banks shall enter into the Lockbox Agreements,  which among other things
shall  provide  for  the  opening  of a  Lockbox  Account  for  the  deposit  of
Collections at a Lockbox Bank.  Borrower  agrees that all  Collections and other
amounts  received by Borrower  from any Account  Debtor or any other source with
respect to Accounts, proceeds of Accounts or Inventory, or Negotiable Collateral
that is proceeds of Accounts, immediately upon receipt shall be deposited into a
Lockbox Account. No Lockbox Agreement or arrangement  contemplated thereby shall
be modified by Borrower without the prior written consent of Foothill.  Upon the
terms and subject to the  conditions  set forth in the Lockbox  Agreements,  all
amounts  received in each Lockbox  Account shall be wired each Business Day into
an account  (the  "Foothill  Account")  maintained  by Foothill at a  depositary
selected by Foothill.

     2.8 Crediting  Payments;  Application  of  Collections.  Subject to Section
2.3(a),  the receipt of any  Collections by Foothill  (whether from transfers to
Foothill by the Lockbox Banks  pursuant to the Lockbox  Agreements or otherwise)
immediately shall be applied provisionally to reduce the Obligations outstanding
under Section 2.1, but shall not be considered a payment on account  unless such
Collection item is a wire transfer of immediately available federal funds and is
made to the Foothill Account or unless and until such Collection item is honored
when presented for payment.  From and after the Closing Date,  Foothill shall be
entitled to charge  Borrower for two (2) Business Days of `clearance' or `float'
at  the  rate  set  forth  in  Section  2.6(a)(iii)  or  Section  2.6(c)(i),  as
applicable,  on all  Collections  that are received by Foothill  (regardless  of
whether  forwarded  by the  Lockbox  Banks to  Foothill,  whether  provisionally
applied to reduce  the  Obligations  under  Section  2.1,  or  otherwise).  This
across-the-board  two  (2)  Business  Day  clearance  or  float  charge  on  all
Collections is  acknowledged  by the parties to constitute an integral aspect of
the pricing of Foothill's financing of Borrower, and shall apply irrespective of
the characterization of whether receipts are owned by Borrower or Foothill,  and
whether or not there are any outstanding Advances or Supplemental  Advances, the
effect of such  clearance or float charge being the  equivalent  of charging two
(2) Business Days of interest on such  Collections.  Should any Collection  item
not be honored when presented for payment,  then Borrower shall be deemed not to
have made such payment, and interest shall be recalculated accordingly. Anything
to the contrary contained herein notwithstanding:  (a) any Collection item shall
be deemed received by Foothill only if it is received into the Foothill  Account
on a Business Day on or before 2:00 p.m. New York time. If any  Collection  item
is received into the Foothill  Account on a non-Business  Day or after 2:00 p.m.
New York time on a Business  Day,  it shall be deemed to have been  received  by
Foothill as of the opening of business  on the  immediately  following  Business

<PAGE>

Day;  and (b) so long as no Event of Default  has  occurred  and is  continuing,
Collections  will only be applied to Obligations  that are not  Eurodollar  Rate
Loans,  and to the extent that all such  Obligations  other than Eurodollar Rate
Loans have been repaid, additional Collections will be, at Borrower's direction,
returned  to Borrower or applied to such  Eurodollar  Rate Loans  subject to any
required payments under Section 2.16(d).

     2.9  Designated  Account.  Foothill is  authorized to make the Advances and
Supplemental Advances and issue the Letters of Credit under this Agreement based
upon telephonic or other  instructions  received from anyone purporting to be an
Authorized  Person,  or without  instructions  if  pursuant  to Section  2.6(e).
Borrower  agrees to  establish  and  maintain  the  Designated  Account with the
Designated  Account  Bank for the  purpose  of  receiving  the  proceeds  of the
Advances requested by Borrower and made by Foothill hereunder.  Unless otherwise
agreed by Foothill and Borrower,  any Advance or Supplemental  Advance requested
by  Borrower  and made by  Foothill  hereunder  shall be made to the  Designated
Account.

     2.10 Maintenance of Loan Account; Statements of Obligations. Foothill shall
maintain an account on its books in the name of Borrower (the "Loan Account") on
which Borrower will be charged with all Advances or  Supplemental  Advances made
by Foothill to Borrower or for Borrower's account, including,  accrued interest,
Foothill Expenses,  and any other payment Obligations of Borrower. In accordance
with Section 2.8, the Loan Account will be credited  with all payments  received
by Foothill  from  Borrower or for  Borrower's  account,  including  all amounts
received in the Foothill  Account from any Lockbox Bank.  Foothill  shall render
statements  regarding  the  Loan  Account  to  Borrower,   including  principal,
interest,  fees,  and  including  an  itemization  of all charges  and  expenses
constituting  Foothill Expenses owing, and such statements shall be conclusively
presumed to be correct and accurate and  constitute  an account  stated  between
Borrower and Foothill unless,  within 30 days after receipt thereof by Borrower,
Borrower  shall  deliver to Foothill  written  objection  thereto  describing in
reasonable  detail the  objections  of Borrower to any such  statements or items
therein.

     2.11 Fees. Borrower shall pay to Foothill the following fees:

     (a)  Agency  Fee.  On the  earlier  of the  Closing  Date and the date that
Foothill issues a written commitment letter committing to provide the facilities
provided  for in this  Agreement  on the terms set forth in this  Agreement,  an
agency fee of $215,000;

     (b) Unused Line Fee. On the first day of each month during the term of this
Agreement,  an unused line fee in an amount  equal to 0.375% per annum times the
Average Unused Portion of the Maximum Amount.
<PAGE>

     (c) Annual  Facility Fee. On the Closing Date,  and on each  anniversary of
the Closing  Date,  an annual  facility  fee in an amount  equal to 0.25% of the
Maximum Amount;

     (d) Financial  Examination,  Documentation,  and Appraisal Fees. Foothill's
customary fee of $650 per day per examiner, plus out-of-pocket expenses for each
financial  analysis  and  examination  (i.e.,  audits) of Borrower  performed by
personnel employed by Foothill; Foothill's customary appraisal fee of $1,500 per
day per  appraiser,  plus  out-of-pocket  expenses  for  each  appraisal  of the
Collateral performed by personnel employed by Foothill;  and, the actual charges
paid or incurred by Foothill if it elects to employ the  services of one or more
third Persons to perform such financial analyses and examinations (i.e., audits)
of Borrower or to  appraise  the  Collateral;  and, on each  anniversary  of the
Closing  Date,  Foothill's  customary  fee of  $1,000  per  year  for  its  loan
documentation review; and

     (e)  Collateral  Management  Fee. On the first day of each  calendar  month
during the term of this Agreement, and thereafter so long as any Obligations are
outstanding,  a Collateral management fee payable in arrears with respect to the
preceding calendar month in an amount equal to $3,000 per month.

     2.12 Eurodollar  Rate Loans.  Any other  provisions  herein to the contrary
notwithstanding,   the  following   provisions  shall  govern  with  respect  to
Eurodollar Rate Loans as to the matters covered:

     (a) Borrowing; Conversion; Continuation. Borrower may from time to time, on
or after the Closing Date, request in a written or telephonic communication with
Foothill:  (i) Advances to constitute Eurodollar Rate Loans (pursuant to Section
2.1(c)); (ii) that Reference Rate Loans be converted into Eurodollar Rate Loans;
or (iii) that existing Eurodollar Rate Loans continue for an additional Interest
Period.  Any such request shall  specify the  aggregate  amount of the requested
Eurodollar  Rate Loans,  the proposed  funding date  therefor  (which shall be a
Business Day, and with respect to continued  Eurodollar  Rate Loans shall be the
last day of the  Interest  Period of the  existing  Eurodollar  Rate Loans being
continued),  and the  proposed  Interest  Period,  in each case  subject  to the
limitations set forth below). Eurodollar Rate Loans may only be made, continued,
or extended if, as of the proposed  funding date  therefor each of the following
conditions is satisfied:

               (v) no Event of Default exists;

               (w) no more than five  Interest  Periods  may be in effect at any
          one time;
<PAGE>
               (x) the amount of each Eurodollar Rate Loan borrowed,  converted,
          or  continued  must be in an  amount  not  less  than  $1,000,000  and
          integral multiples of $500,000 in excess thereof;

               (y) Foothill shall have  determined  that the Interest  Period or
          Adjusted  Eurodollar  Rate is available to Foothill and can be readily
          determined as of the date of the request for such Eurodollar Rate Loan
          by Borrower; and

               (z)  Foothill  shall  have  received  such  request  at least two
          Business Days prior to the proposed funding date therefor.

     Any  request  by  Borrower  to borrow  Eurodollar  Rate  Loans,  to convert
Reference  Rate Loans to  Eurodollar  Rate Loans,  or to continue  any  existing
Eurodollar Rate Loans shall be  irrevocable,  except to the extent that Foothill
shall determine under Sections  2.12(a),  2.13 or 2.14 that such Eurodollar Rate
Loans cannot be made or continued.

     (b)  Determination  of Interest  Period.  By giving  notice as set forth in
Section  2.12(a),  the Borrower  shall have the option of selecting a 1 month, 2
month,   or  3  month  Interest  Period  for  such  Eurodollar  Rate  Loan.  The
determination of Interest Periods shall be subject to the following provisions:

               (i) in the case of immediately  successive Interest Periods, each
          successive Interest Period shall commence on the day on which the next
          preceding Interest Period expires;

               (ii) if any Interest Period would otherwise expire on a day which
          is not a Business Day, the Interest Period shall be extended to expire
          on the next succeeding  Business Day; provided,  however,  that if the
          next succeeding  Business Day occurs in the following  calendar month,
          then such Interest  Period shall expire on the  immediately  preceding
          Business Day;

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

               (iv) the Borrower may not select an Interest Period which expires
          later than the Maturity Date.

     (c) Automatic Conversion:  Optional Conversion by Foothill.  Any Eurodollar
Rate Loan shall automatically convert to a Reference Rate Loan upon the last day
of the applicable  Interest  Period,  unless  Foothill has received a request to

<PAGE>

continue such  Eurodollar  Rate Loan at least two Business Days prior to the end
of such Interest  Period in accordance  with the terms of Section  2.12(a).  Any
Eurodollar  Rate Loan shall,  at  Foothill's  option,  upon notice to  Borrower,
convert to a Reference Rate Loan in the event that (i) an Event of Default shall
have occurred and be  continuing  as of the last day of the Interest  Period for
such Eurodollar Rate Loan, or (ii) this Agreement shall terminate,  and Borrower
shall pay to Foothill any amounts required by Section 2.16 as a result thereof.

     2.13   Illegality.   Any   other   provision   herein   to   the   contrary
notwithstanding,  if the adoption of or any change in any  Requirement of Law or
in the interpretation or application thereof shall make it unlawful for Foothill
to make or maintain Eurodollar Rate Loans as contemplated by this Agreement, (a)
the obligation of Foothill  hereunder to make  Eurodollar  Rate Loans,  continue
Eurodollar  Rate Loans as such,  and convert  Reference Rate Loans to Eurodollar
Rate Loans shall  forthwith be suspended  and (b)  Foothill's  then  outstanding
Eurodollar  Rate Loans,  if any, shall be converted  automatically  to Reference
Rate Loans on the respective last days of the then current Interest Periods with
respect  thereto or within such  earlier  period as  required by law;  provided,
however,  that before making any such demand,  Foothill agrees to use reasonable
efforts   (consistent   with  its  internal  policy  and  legal  and  regulatory
restrictions and so long as such efforts would not be  disadvantageous to it, in
its reasonable  discretion,  in any legal,  economic,  or regulatory  manner) to
designate a different  lending office if the making of such a designation  would
allow Foothill or its lending  office to continue to perform its  obligations to
make  Eurodollar  Rate Loans.  If any such  conversion of a Eurodollar Rate Loan
occurs on a day which is not the last day of the then  current  Interest  Period
with respect  thereto,  the Borrower  shall pay to such Lender such amounts,  if
any, as may be required pursuant to Section 2.16. If circumstances  subsequently
change so that  Foothill  shall  determine  that it is no  longer  so  affected,
Foothill will promptly  notify  Borrower,  and upon receipt of such notice,  the
obligations of Foothill to make or continue  Eurodollar Rate Loans or to convert
Reference Rate Loans into Eurodollar Rate Loans shall be reinstated.

     2.14  Requirements  of Law.  (a) If the  adoption  of or any  change in any
Requirement of Law or in the interpretation or application thereof or compliance
by Foothill  with any request or  directive  (whether or not having the force of
law) from any central bank or other  Governmental  Authority made  subsequent to
the date hereof

               (i)  shall  subject  Foothill  to any  tax,  levy,  charge,  fee,
          reduction,  or withholding of any kind whatsoever with respect to this
          Agreement or any Advance,  or change the basis of taxation of payments
          to Foothill in respect  thereof  (except for taxes  covered by Section
          2.15  and  the  establishment  of a tax  based  on the net  income  of
          Foothill or changes in the rate of tax on the net income of Foothill);

               (ii) shall impose, modify or hold applicable any reserve, special
          deposit,  compulsory loan, or similar  requirement against assets held
          by,  deposits or other  liabilities in or for the account of, Advances
          or other  extensions of credit by, or any other  acquisition  of funds
          by, any office of Foothill; or
<PAGE>

               (iii) shall impose on Foothill any other  condition  with respect
          to this Agreement or any Advance;


and the result of any of the  foregoing is to increase the cost to Foothill,  by
an  amount  which  Foothill  in good  faith  deems to be  material,  of  making,
converting into, continuing,  or maintaining Advances or to increase the cost to
Foothill,  by an amount which  Foothill  deems to be material,  or to reduce any
amount receivable  hereunder in respect of Advances,  or to forego any other sum
payable  thereunder  or make any payment on account  thereof,  then, in any such
case,  Borrower  shall  promptly pay Foothill,  upon its demand,  any additional
amounts  necessary to  compensate  Foothill for such  increased  cost or reduced
amount  receivable;  provided,  however,  that  before  making any such  demand,
Foothill agrees to use reasonable  efforts  (consistent with its internal policy
and legal and regulatory  restrictions  and so long as such efforts would not be
disadvantageous to it, in its reasonable discretion,  in any legal, economic, or
regulatory  manner) to designate a different  Eurodollar  lending  office if the
making of such designation would allow Foothill or its Eurodollar lending office
to continue  to perform  its  obligations  to make  Eurodollar  Rate Loans or to
continue  to fund or maintain  Eurodollar  Rate Loans and avoid the need for, or
materially  reduce the amount of,  such  increased  cost.  If  Foothill  becomes
entitled to claim any additional amounts pursuant to this Section 2.14, Foothill
shall promptly  notify Borrower of the event by reason of which it has become so
entitled.  A certificate as to any additional  amounts payable  pursuant to this
Section  2.14  submitted  by  Foothill to Borrower  shall be  conclusive  in the
absence of manifest  error.  If Borrower so notifies  Foothill within 5 Business
Days after  Foothill  notifies  Borrower of any  increased  cost pursuant to the
foregoing  provisions of this Section 2.14,  Borrower may convert all Eurodollar
Rate Loans then outstanding into Reference Rate Loans in accordance with Section
2.12 and,  additionally,  reimburse  Foothill  for any cost in  accordance  with
Section 2.16.  This covenant shall survive the termination of this Agreement and
the payment of the Advances and all other  amounts  payable  hereunder  for nine
months following such termination and repayment.

     (b) If Foothill shall have determined that the adoption of or any change in
any Requirement of Law regarding  capital adequacy or in the  interpretation  or
application thereof or compliance by Foothill or any Person controlling Foothill
with any request or directive  regarding capital adequacy (whether or not having
the force of law) from any  Governmental  Authority made  subsequent to the date
hereof  does or shall  have the  effect of  increasing  the  amount  of  capital
required to be  maintained  or reducing the rate of return on Foothill's or such
Person's capital as a consequence of its obligations  hereunder to a level below
that which such  Foothill or such Person could have achieved but for such change
or compliance  (taking into  consideration  Foothill's or such Person's policies
with  respect  to  capital  adequacy)  by an  amount  deemed by  Foothill  to be
material,  then from time to time, after submission by Foothill to Borrower of a
prompt written request therefor,  Borrower shall pay to Foothill such additional

<PAGE>

amount or amounts as will compensate Foothill or such Person for such reduction.
This covenant shall survive the termination of this Agreement and the payment of
the Advances and all other amount  payable  hereunder for nine months  following
such termination and repayment. 

     2.15 Taxes. (a) Except as provided below in this Section 2.15, all payments
made by Borrower under this Agreement and any other Loan Documents shall be made
free and clear of, and without  deduction or  withholding  for or on account of,
any present or future income,  stamp or other taxes,  levies,  imposts,  duties,
charges, fees, deductions,  or withholdings,  now or hereafter imposed,  levied,
collected,  withheld, or assessed by any Governmental  Authority,  excluding net
income taxes and franchise  taxes  imposed in lieu of net income  taxes.  If any
such non-excluded taxes, levies,  imposts,  duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts
payable to Foothill hereunder or under any other Loan Documents,  the amounts so
payable to  Foothill  shall be  increased  to the extent  necessary  to yield to
Foothill  (after payment of all Non- Excluded  Taxes) interest or any such other
amounts  payable  hereunder  at the rates or in the  amounts  specified  in this
Agreement and any other Loan Documents,  provided,  however, that Borrower shall
be  entitled  to deduct and  withhold  any  Non-Excluded  Taxes and shall not be
required to increase any such amounts  payable to Foothill if Foothill  fails or
is unable to comply with the requirements of paragraph (b) of this Section 2.15.
Whenever any Non-Excluded Taxes are payable by Borrower, as promptly as possible
thereafter  Borrower  shall send to  Foothill a  certified  copy of an  original
official receipt received by Borrower showing payment thereof. If Borrower fails
to pay any  Non-Excluded  Taxes when due to the appropriate  taxing authority or
fails to remit to Foothill the required  receipts or other required  documentary
evidence,  Borrower shall indemnify Foothill for any incremental taxes, interest
or  penalties  that may  become  payable  by  Foothill  as a result  of any such
failure.  The  agreements in this Section 2.15 shall survive the  termination of
this  Agreement  and the payment of the Advances and all other  amounts  payable
hereunder.

     (b) Any Participant or assignee of Foothill that is not incorporated  under
the laws of the United States of America or a state thereof (any such Person,  a
"Foreign Lender") shall:

               (i) (x) on or before the date of any  payment by  Borrower  under
          this  Agreement  to such  Foreign  Lender,  deliver  to  Borrower  and
          Foothill  (A) two duly  completed  copies  of United  States  Internal
          Revenue  Service Form 1001 or 4224, or successor  applicable  form, as
          the case may be,  certifying  that it is entitled to receive  payments
          under this  Agreement  without any  deduction  or  withholding  of any
          United States federal  income taxes and (B) a duly completed  Internal
          Revenue Service Form W-8 or W-9, or successor  applicable form, as the
          case may be,  certifying  that it is  entitled  to an  exemption  from
          United States backup withholding tax;
<PAGE>

               (y) deliver to Borrower and  Foothill  two further  copies of any
          such form or certification on or before the date that any such form or
          certification  expires or becomes obsolete and after the occurrence of
          any  event  requiring  a change  in the most  recent  form  previously
          delivered by it to Borrower, and

               (z) obtain such  extensions  of time for filing and complete such
          forms or  certifications as may reasonably be requested by Borrower or
          Foothill;

          or

               (ii) in the case of any such Foreign  Lender that is not a "bank"
          within the  meaning of Section  881(c)(3)(A)  of the IRC and that does
          not comply with subparagraph (i) of this paragraph (b),

                    (x)  represent to Borrower  (for the benefit of Borrower and
               Foothill)  that it is not a bank  within  the  meaning of Section
               881(c)(3)(A) of the IRC,

                    (y) deliver to Borrower on or before the date of any payment
               by Borrower,  with a copy to Foothill:  (1) a certificate stating
               that  such  Foreign  Lender  (A) is not a  "bank"  under  Section
               881(c)(3)(A)  of the IRC, is not subject to  regulatory  or other
               legal  requirements  as a bank in any  jurisdiction,  and has not
               been treated as a bank for purposes of any tax,  securities  law,
               or other filing or submission made to any Governmental Authority,
               any application made to a rating agency or qualification  for any
               exemption from tax,  securities law or other legal  requirements,
               (B) is not a 10-percent shareholder within the meaning of Section
               881(c)(3)(B)  of the  IRC,  and (C) is not a  controlled  foreign
               corporation  receiving  interest from a related person within the
               meaning of Section  881(c)(3)(C) of the IRC (any such certificate
               a "U.S. Tax Compliance Certificate");  and (2) two duly completed
               copies  of  Internal  Revenue  Service  Form  W-8,  or  successor
               applicable  form,  certifying  to  such  Foreign  Lender's  legal
               entitlement at the date of such  certificate to an exemption from
               U.S.  withholding  tax under the  provisions of Section 881(c) of
               the IRC with respect to payments to be made under this  Agreement
               (and to deliver to Borrower and  Foothill  two further  copies of
               Form W-8 on or before the date it expires or becomes obsolete and
               after the occurrence of any event  requiring a change in the most
               recently  provided form and, if necessary,  obtain any extensions
               of time  reasonably  requested by Borrower or Foothill for filing
               and completing such forms), and

                    (z) agree,  to the extent  legally  entitled  to do so, upon
               reasonable  request by Borrower,  to provide to Borrower (for the
               benefit of  Borrower  and  Foothill)  such other  forms as may be
               reasonably  required in order to establish the legal  entitlement
               of such Foreign  Lender to an  exemption  from  withholding  with
               respect to payments under this Agreement;
<PAGE>

     (c) Foothill and each Foreign Lender shall, upon the reasonable  request by
Borrower,  deliver to Borrower or the applicable  Governmental Authority, as the
case may be,  any form or  certificate  required  in order  that any  payment by
Borrower  under  this  Agreement  may be made  free and clear  of,  and  without
deduction  or  withholding  for or on  Non-Excluded  Taxes (or to allow any such
deduction or  withholding to be at a reduced rate) imposed on such payment under
the laws of any jurisdiction,  provided that Foothill or such Foreign Lender, as
the case may be, is legally entitled to complete,  execute and deliver such form
or certificate and such completion, execution or submission would not materially
prejudice the legal position of Foothill or such Foreign Lender, as the case may
be,

unless in any such case any change in treaty,  law, or  regulation  has occurred
after the date such Person becomes a Foreign Lender  hereunder which renders all
such forms and  certificates  inapplicable  or which would  prevent such Foreign
Lender from duly  completing and  delivering  any such form or certificate  with
respect to it and such Foreign  Lender so advises  Borrower and  Foothill.  Each
Person  that  shall  become  an  assignee  or  a  Participant  shall,  upon  the
effectiveness of the related transfer,  be required to provide all of the forms,
certifications, and statements required pursuant to this Section 2.15; provided,
however,  that in the case of a Participant the obligations of such  Participant
pursuant to this paragraph (b) shall be determined as if such  Participant  were
an assignee except that such Participant  shall furnish all such required forms,
certifications, and statements to Foothill.

     2.16 Indemnity.  Borrower agrees to indemnify Foothill and to hold Foothill
harmless  from any loss or  expense  which  Foothill  may  sustain or incur as a
consequence  of (a)  default by Borrower  in payment  when due of the  principal
amount of or interest on any  Eurodollar  Rate Loan,  (b)default  by Borrower in
making a borrowing of, conversion into, or continuation of Eurodollar Rate Loans
after  Borrower has given a notice  requesting  the same in accordance  with the
provisions of this  Agreement,  (c) default by Borrower in making any prepayment
after Borrower has given a notice  thereof in accordance  with the provisions of
this Agreement,  or (d) the making of a prepayment of Eurodollar Rate Loans on a
day  which  is not the last  day of an  Interest  Period  with  respect  thereto
(whether due to the  termination  of this  Agreement upon an Event of Default or
otherwise),  including,  in each case,  any such loss or expense (but  excluding
loss of margin)  arising from the  reemployment  of funds obtained by it or from
fees payable to  terminate  the  deposits  from which such funds were  obtained.
Calculation of all amounts  payable to Foothill under this Section 2.16 shall be
made as though  Foothill had actually  funded the relevant  Eurodollar Rate Loan
through the purchase of a deposit bearing  interest at the Eurodollar Rate in an
amount  equal to the amount of such  Eurodollar  Rate Loan and having a maturity
comparable to the relevant Interest Period; provided, however, that Foothill may
fund each of the  Eurodollar  Rate  Loans in any  manner  it sees  fit,  and the
foregoing  assumption  shall be  utilized  only for the  calculation  of amounts
payable under this Section 2.16.  This covenant shall survive the termination of
this  Agreement  and the  payment  of the Loans and all  other  amounts  payable
hereunder for a period of nine months thereafter.
<PAGE>

     3. CONDITIONS; TERM OF AGREEMENT.

     3.1 Conditions  Precedent to the Initial  Advance or Letter of Credit.  The
obligation  of  Foothill  to make the  initial  Advance or to issue the  initial
Letter of Credit is subject to the fulfillment,  to the satisfaction of Foothill
and its counsel (or the waiver or postponement,  by Foothill, in Foothill's sole
discretion), of each of the following conditions on or before the Closing Date:

     (a) the Closing Date shall occur on or before July 31, 1998;

     (b) Foothill  shall have  received  searches  reflecting  the filing of its
financing statements;

     (c) Foothill  shall have  received each of the  following  documents,  duly
executed, and each such document shall be in full force and effect:

          i. the Lockbox Agreements;

          ii. the Disbursement Letter;

          iii.  the  Pay-Off/Paydown  Letters,  together  with  UCC  termination
     statements and other  documentation  evidencing the termination by Existing
     Lenders of their Liens in and to the  properties  and assets of Borrower to
     the extent of the obligations so repaid;

          iv. the Mortgage;

          v. the Suretyship Agreement;

          vi. the VCOC Letter;

          vii. the Stock Pledge Agreement;

          viii. the Deposit Account Security Agreement;

          ix. the Intercreditor Agreement; and

          x. the Trademark Security Agreement;
<PAGE>

     (d) Foothill  shall have received a certificate  from the Secretary of each
Obligor  attesting  to the  resolutions  of such  Obligor's  Board of  Directors
authorizing its execution,  delivery,  and performance of this Agreement and the
other Loan Documents to which such Obligor is a party and  authorizing  specific
officers of such Obligor to execute the same;

     (e)  Foothill  shall  have  received  copies  of each  Obligor's  Governing
Documents, as amended,  modified, or supplemented to the Closing Date, certified
by the Secretary of such Obligor;

     (f) Foothill  shall have received a  certificate  of status with respect to
each Obligor,  dated within 15 days of the Closing Date, such  certificate to be
issued by the  appropriate  officer of the  jurisdiction of organization of such
Obligor,  which certificate shall indicate that such Obligor is in good standing
in such jurisdiction;

     (g) Foothill  shall have  received  certificates  of status with respect to
each Obligor,  each dated within 15 days of the Closing Date, such  certificates
to be  issued  by the  appropriate  officer  of the  jurisdictions  in which its
failure to be duly  qualified or licensed  would  constitute a Material  Adverse
Change,  which certificates shall indicate that such Obligor is in good standing
in such jurisdictions;

     (h) Foothill shall have received a certificate of insurance,  together with
the  endorsements  thereto,  as are  required  by  Section  6.10,  the  form and
substance of which shall be reasonably satisfactory to Foothill and its counsel;

     (i) Except to the extent that same are in the  possession of the Collateral
Agent,  Foothill  shall have received duly executed  certificates  of title with
respect to that portion of the  Collateral  that is subject to  certificates  of
title;

     (j) Foothill shall have received such  Collateral  Access  Agreements  from
lessors,  warehousemen,  bailees, and other third persons as Foothill reasonably
may require;

     (k) Foothill  shall have received an opinion of Borrower's  counsel in form
and substance satisfactory to Foothill and Foothill's counsel;

     (l)  Foothill  shall have  received  updated  appraisals  of the  Inventory
(including  any  required  in-person  inspections)  and title  reports  or title
commitments with respect to the Real Property Collateral;

     (m) the Plan of  Reorganization  shall have been confirmed by a final order
of the Bankruptcy  Court, and shall be substantially  consummated on the Closing
Date;
<PAGE>

     (n) Foothill shall have received  satisfactory  evidence,  in the form of a
certificate of the principal financial officer of Borrower, that all tax returns
required  to be filed by  Borrower  have been  timely  filed and all taxes  upon
Borrower or its  properties,  assets,  income,  and franchises  (including  real
property  taxes and payroll taxes) have been paid prior to  delinquency,  except
such taxes that are the subject of a Permitted Protest;

     (o) on the  Closing  Date,  after  giving  effect  to any  Advances  and/or
Supplemental  Advances  made on such date and any  Letters  of Credit  issued or
assumed on such date, Borrower shall have remaining Combined Availability of not
less than $5,000,000;

     (p) no DIP Event of Default shall have occurred and be continuing;

     (q) Foothill  shall have full  cooperation  from the Borrower and access to
the Borrower's facilities and records in the event Foothill elects to conduct an
updated  audit of Borrower to  ascertain  the levels of  Eligible  Accounts  and
Eligible  Inventory of Borrower and to establish the opening  Borrowing Base and
Supplemental Borrowing Base (as per this Agreement) hereunder, and Borrower will
provide  Foothill  with  written  notice  of the  Closing  Date not less than 20
Business Days before such Closing Date; and

     (r)  all  other   documents  and  legal  matters  in  connection  with  the
transactions contemplated by this Agreement shall have been delivered, executed,
or  recorded  and  shall be in form and  substance  reasonably  satisfactory  to
Foothill and its counsel.

     3.2 Conditions Precedent to all Advances, all Supplemental Advances and all
Letters of Credit. The following shall be conditions  precedent to all Advances,
all Supplemental Advances, and all Letters of Credit hereunder:

     (a) the representations and warranties  contained in this Agreement and the
other Loan Documents  shall be true and correct in all respects on and as of the
date of such extension of credit,  as though made on and as of such date (except
to the extent  that such  representations  and  warranties  relate  solely to an
earlier date);

     (b) no Default or Event of Default shall have occurred and be continuing on
the date of such  extension of credit,  nor shall either  result from the making
thereof; and

     (c) no injunction,  writ,  restraining  order, or other order of any nature
prohibiting,  directly or  indirectly,  the  extending of such credit shall have
been issued and remain in force by any governmental  authority against Borrower,
Foothill, or any of their Affiliates.
<PAGE>

     3.3 Conditions  Subsequent.  As condition subsequent to the initial closing
hereunder,  Borrower  shall perform or cause to be performed the following  (the
failure by Borrower to so perform or cause to be performed constituting an Event
of Default):

     (a) within 30 days of the Closing  Date,  deliver to Foothill the certified
copies of the policies of insurance,  together with the endorsements thereto, as
are  required  by  Section  6.10,  the form  and  substance  of  which  shall be
satisfactory to Foothill and its counsel.

     (b) in the event that Foothill,  in its sole discretion,  elects to make an
initial  Advance or issue an initial Letter of Credit pursuant to this Agreement
without the  satisfaction  of each of the  conditions  set forth in Section 3.1,
Borrower agrees that such unsatisfied  conditions are conditions  subsequent and
shall give rise to an Event of Default if not satisfied within 30 days after the
Closing Date.

     3.4 Term; Automatic Renewal. This Agreement shall become effective upon the
execution  and delivery  hereof by Borrower  and Foothill and shall  continue in
full force and effect for a term ending on the date (the "Renewal Date") that is
three (3) years from the  Closing  Date and  automatically  shall be renewed for
successive one (1) year periods thereafter, unless sooner terminated pursuant to
the terms hereof.  Either party may terminate  this  Agreement  effective on the
Renewal  Date or on any one (1) year  anniversary  of the Renewal Date by giving
the  other  party  at  least  90  days  prior  written  notice.   The  foregoing
notwithstanding,  Foothill  shall have the right to  terminate  its  obligations
under this  Agreement  immediately  and without  notice upon the  occurrence and
during the continuation of an Event of Default.

     3.5 Effect of  Termination.  On the date of termination of this  Agreement,
all Obligations (including contingent reimbursement obligations of Borrower with
respect to any outstanding  Letters of Credit)  immediately shall become due and
payable  without notice or demand.  No termination of this  Agreement,  however,
shall  relieve or  discharge  Borrower of  Borrower's  duties,  Obligations,  or
covenants  hereunder,  and  Foothill's  continuing  security  interests  in  the
Collateral  shall  remain in effect  until all  Obligations  have been fully and
finally  discharged  and  Foothill's  obligation  to provide  additional  credit
hereunder is terminated.  If Borrower has sent a notice of termination  pursuant
to the  provisions of Section 3.4, but fails to pay the  Obligations  in full on
the date set forth in said notice,  then Foothill may, but shall not be required
to, renew this Agreement for an additional term of one (1) year.

     3.6 Early Termination by Borrower. The provisions of Section 3.4 that allow
termination  of this  Agreement by Borrower only on the Renewal Date and certain
anniversaries thereof notwithstanding, Borrower has the option, at any time upon
90 days prior written notice to Foothill,  to terminate this Agreement by paying
to Foothill, in cash, the Obligations  (including an amount equal to 105% of the
undrawn amount of the Letters of Credit),  in full, together with a premium (the
"Early  Termination  Premium")  equal to (a) 4.00% of the Maximum Amount if such

<PAGE>

termination  occurs on or before the first  anniversary of the Closing Date, (b)
3.00%  of the  Maximum  Amount  if  such  termination  occurs  after  the  first
anniversary  of the Closing Date and on or before the second  anniversary of the
Closing Date,  and (c) 2.00% of the Maximum  Amount if such  termination  occurs
after the second  anniversary  of the Closing Date and other than on the Renewal
Date or any  subsequent  anniversary  of the  Renewal  Date in  accordance  with
Section 3.4.

     3.7  Termination  Upon  Event  of  Default.  If  Foothill  terminates  this
Agreement  upon  the  occurrence  of  an  Event  of  Default,  in  view  of  the
impracticability  and extreme  difficulty of ascertaining  actual damages and by
mutual  agreement of the parties as to a reasonable  calculation  of  Foothill's
lost  profits  as a result  thereof,  Borrower  shall pay to  Foothill  upon the
effective  date of such  termination,  a premium in an amount equal to the Early
Termination  Premium.  The Early Termination Premium shall be presumed to be the
amount of damages  sustained by Foothill as the result of the early  termination
and Borrower  agrees that it is  reasonable  under the  circumstances  currently
existing.  The Early Termination  Premium provided for in this Section 3.7 shall
be deemed included in the Obligations.

     4. CREATION OF SECURITY INTEREST.

     4.1 Grant of  Security  Interest.  Borrower  hereby  grants to  Foothill  a
continuing security interest in all currently existing and hereafter acquired or
arising Personal Property  Collateral in order to secure prompt repayment of any
and all  Obligations  and in order to secure prompt  performance  by Borrower of
each of its covenants and duties under the Loan Documents.  Foothill's  security
interests  in the  Personal  Property  Collateral  shall  attach to all Personal
Property  Collateral  without  further act on the part of Foothill or  Borrower.
Anything  contained in this Agreement or any other Loan Document to the contrary
notwithstanding,  except  for the sale of  Inventory  to buyers in the  ordinary
course of  business,  except  for  Permitted  Dispositions,  and  except for the
Permitted Combination, Borrower has no authority, express or implied, to dispose
of any item or portion of the Personal Property  Collateral or the Real Property
Collateral.

     4.2  Negotiable  Collateral.  In the event that any Accounts are  converted
into or become evidenced by Negotiable  Collateral,  Borrower,  immediately upon
the request of Foothill,  shall endorse and deliver physical  possession of such
Negotiable Collateral to Foothill.

     4.3 Collection of Proceeds of Inventory,  Accounts,  and Certain Negotiable
Collateral.  At any time following the occurrence and during the  continuance of
an Event of Default or if Foothill deems itself insecure, Foothill or Foothill's
designee  may (a) notify  customers  or Account  Debtors  of  Borrower  that the
Inventory,  Accounts,  and/or  Negotiable  Collateral  consisting of proceeds of
Inventory  or Accounts  have been  assigned to Foothill or that  Foothill  has a
security interest therein, and (b) collect the proceeds of Inventory,  Accounts,
and  Negotiable  Collateral  consisting  of  proceeds of  Inventory  or Accounts
directly  and charge the  collection  costs and  expenses  to the Loan  Account.

<PAGE>

Borrower agrees that it will hold in trust for Foothill,  as Foothill's trustee,
any  Collections  that it  receives  with  respect to any  Inventory,  Accounts,
proceeds of  Inventory or  Accounts,  or  Negotiable  Collateral  consisting  of
proceeds of Inventory or Accounts and immediately  will deliver said Collections
to Foothill in their original form as received by Borrower.

     4.4 Delivery of  Additional  Documentation  Required.  At any time upon the
request  of  Foothill,  Borrower  shall  execute  and  deliver to  Foothill  all
financing  statements,   continuation  financing  statements,  fixture  filings,
security  agreements,  pledges,  assignments,  endorsements  of  certificates of
title,  applications  for title,  affidavits,  reports,  notices,  schedules  of
accounts, letters of authority, and all other documents that Foothill reasonably
may request, in form satisfactory to Foothill, to perfect and continue perfected
Foothill's  security  interests  in  the  Collateral,  and  in  order  to  fully
consummate all of the transactions  contemplated  hereby and under the other the
Loan Documents.

     4.5 Power of Attorney. Borrower hereby irrevocably makes, constitutes,  and
appoints  Foothill  (and  any  of  Foothill's  officers,  employees,  or  agents
designated  by Foothill) as  Borrower's  true and lawful  attorney,  at any time
while this  Agreement  remains  in effect or at any time  while any  Obligations
remain outstanding, with power to (a) if Borrower refuses to, or fails timely to
execute and deliver any of the documents described in Section 4.4, sign the name
of Borrower on any of the  documents  described  in Section 4.4, (b) at any time
that an Event of Default has occurred and is continuing or Foothill deems itself
insecure,  sign Borrower's name on any invoice or bill of lading relating to any
Account, drafts against Account Debtors,  schedules and assignments of Accounts,
verifications of Accounts, and notices to Account Debtors, (c) send requests for
verification  of Accounts,  (d) endorse  Borrower's  name on any Collection item
that may  come  into  Foothill's  possession,  (e) at any time  that an Event of
Default has occurred and is continuing or Foothill deems itself insecure, notify
the post office  authorities  to change the address for  delivery of  Borrower's
mail to an  address  designated  by  Foothill,  to  receive  and  open  all mail
addressed to Borrower,  and to retain all mail  relating to the  Collateral  and
forward all other mail to Borrower, (f) at any time that an Event of Default has
occurred and is continuing or Foothill deems itself insecure,  make, settle, and
adjust all claims  under  Borrower's  policies of  insurance  to the extent they
pertain to Foothill Primary Collateral and make all determinations and decisions
with respect to such policies of insurance to the extent they relate to Foothill
Primary  Collateral,  and (g) at any time that an Event of Default has  occurred
and is continuing or Foothill deems itself insecure,  settle and adjust disputes
and claims  respecting the Accounts  directly with Account Debtors,  for amounts
and upon terms that Foothill determines to be reasonable, and Foothill may cause
to be executed and delivered any documents and releases that Foothill determines
to be necessary.  The appointment of Foothill as Borrower's  attorney,  and each
and every one of Foothill's  rights and powers,  being coupled with an interest,
is irrevocable  until all of the Obligations  have been fully and finally repaid
and  performed  and  Foothill's   obligation  to  extend  credit   hereunder  is
terminated.
<PAGE>

     4.6 Right to Inspect. At any time that an Event of Default has occurred and
is continuing or Foothill deems itself  insecure,  Foothill  (through any of its
officers,  employees,  or  agents)  shall  have  the  right,  from  time to time
hereafter  to inspect  Borrower's  Books and to check,  test,  and  appraise the
Collateral  in order to verify  Borrower's  financial  condition  or the amount,
quality,  value,  condition of, or any other matter relating to, the Collateral.
At any other time, Foothill (through any of its officers,  employees, or agents)
shall have the right,  from time to time hereafter at reasonable  times and in a
reasonable  manner  (including  periodic  audits,  as  customarily  conducted by
Foothill of its customers,  which are stipulated to be  reasonable),  to inspect
Borrower's  Books and to check,  test,  and appraise the  Collateral in order to
verify Borrower's financial condition or the amount,  quality,  value, condition
of, or any other matter relating to, the Collateral.

     5. REPRESENTATIONS AND WARRANTIES.

     In order to induce  Foothill to enter into this  Agreement,  Borrower makes
the following  representations and warranties which shall be true, correct,  and
complete in all respects as of the date hereof, and shall be true, correct,  and
complete in all  respects as of the Closing  Date,  and at and as of the date of
the making of each Advance or Supplemental Advance or issuance of each Letter of
Credit made or issued  thereafter,  as though made on and as of the date of such
Advance or  Supplemental  Advance or Letter of Credit (except to the extent that
such  representations  and warranties relate solely to an earlier date) and such
representations  and warranties shall survive the execution and delivery of this
Agreement:

     5.1 No  Encumbrances.  Borrower  has  good  and  indefeasible  title to the
Collateral, free and clear of Liens except for Permitted Liens. Foothill's Liens
in the Collateral  have priority over all other Liens in the  Collateral  except
for Permitted Priority Liens.

     5.2  Eligible  Accounts.  The  Eligible  Accounts  are bona  fide  existing
obligations  created by the sale and delivery of  Inventory or the  rendition of
services  to Account  Debtors in the  ordinary  course of  Borrower's  business,
unconditionally   owed  to  Borrower  without   defenses,   disputes,   offsets,
counterclaims,  or rights of return or cancellation. The property giving rise to
such  Eligible  Accounts  has been  delivered to the Account  Debtor,  or to the
Account Debtor's agent for immediate shipment to and unconditional acceptance by
the  Account  Debtor.  Borrower  has not  received  notice of actual or imminent
bankruptcy, insolvency, or material impairment of the financial condition of any
Account Debtor regarding any Eligible Account.

     5.3 Eligible Inventory.  All Eligible Inventory is of good and merchantable
quality, free from defects (except for Inventory readily salable in the ordinary
course of business as "irregulars").

     5.4  Equipment.  All of the Equipment is used or held for use in Borrower's
business or the businesses of its Subsidiaries and is fit for such purposes.
<PAGE>

     5.5 Location of Inventory  and  Equipment.  The Inventory and Equipment are
not stored with a bailee,  warehouseman,  or similar party  (without  Foothill's
prior  written  consent) and are located  only at the  locations  identified  on
Schedule 6.12 or otherwise permitted by Section 6.12.

     5.6  Inventory  Records.   Borrower  keeps  correct  and  accurate  records
itemizing and describing the kind, type, quality, and quantity of the Inventory,
and Borrower's cost therefor.

     5.7 Location of Chief Executive Office; FEIN. The chief executive office of
Borrower is located at the address  indicated in the preamble to this Agreement.
Oneita's FEIN is 57-0351045. Kinston's FEIN is 58-1514502.

     5.8 Due Organization and Qualification; Subsidiaries.

     (a) Borrower is duly  organized and existing and in good standing under the
laws of the jurisdiction of its  incorporation  and qualified and licensed to do
business  in,  and in good  standing  in, any state  where the  failure to be so
licensed or qualified  reasonably  could be expected to have a Material  Adverse
Change.

     (b)  Set  forth  on  Schedule  5.8,  is a  complete  and  accurate  list of
Borrower's direct and indirect  Subsidiaries,  showing:  (i) the jurisdiction of
their  incorporation;  (ii) the  number of shares  of each  class of common  and
preferred Stock authorized for each of such  Subsidiaries;  and (iii) the number
and the percentage of the  outstanding  shares of each such class owned directly
or indirectly by Borrower.  All of the outstanding Stock of each such Subsidiary
has been validly issued and is fully paid and non-assessable.

     (c)  Except  as set forth on  Schedule  5.8,  no Stock (or any  securities,
instruments,  warrants, options, purchase rights, conversion or exchange rights,
calls,  commitments or claims of any character  convertible  into or exercisable
for Stock) of any direct or  indirect  Subsidiary  of Borrower is subject to the
issuance  of  any  security,   instrument,   warrant,  option,  purchase  right,
conversion or exchange right, call,  commitment or claim of any right, title, or
interest therein or thereto.

     (d) Oneita Freeport Holdings Corp., organized under the laws of the British
Virgin Islands, is a holding company for a foreign Subsidiary of Oneita, and has
no material operating assets of its own. Oneita International  Corp.,  organized
under the laws of the British Virgin Islands, is a holding company for a foreign
Subsidiary of Oneita,  and has no material  operating  assets of its own. Oneita
Export Corp., a South Carolina corporation, has no material assets.

     5.9 Due Authorization; No Conflict.
<PAGE>

     (a) The execution,  delivery, and performance by Borrower of this Agreement
and the Loan  Documents to which it is a party have been duly  authorized by all
necessary corporate action.

     (b) The execution,  delivery, and performance by Borrower of this Agreement
and the Loan  Documents  to which it is a party do not and will not (i)  violate
any  provision  of  federal,  state,  or  local  law  or  regulation  (including
Regulations G, T, U, and X of the Federal Reserve Board) applicable to Borrower,
the Governing Documents of Borrower,  or any order,  judgment,  or decree of any
court or other Governmental  Authority binding on Borrower,  (ii) conflict with,
result in a breach of, or constitute  (with due notice or lapse of time or both)
a  default  under any  material  contractual  obligation  or  material  lease of
Borrower,  (iii) result in or require the creation or  imposition of any Lien of
any nature  whatsoever  upon any  properties  or assets of Borrower,  other than
Permitted Liens, or (iv) require any approval of stockholders or any approval or
consent of any Person under any  material  contractual  obligation  of Borrower,
except to the extent such approval or consent has been obtained.

     (c) Other  than the filing of  appropriate  financing  statements,  fixture
filings, and the Mortgage, the execution,  delivery, and performance by Borrower
of this Agreement and the Loan Documents to which Borrower is a party do not and
will not require any registration with,  consent,  or approval of, or notice to,
or other action with or by, any federal,  state,  foreign, or other Governmental
Authority or other Person,  except for any necessary filings or reports required
to be made to or with the Securities Exchange Commission.

     (d) This Agreement and the Loan Documents to which Borrower is a party, and
all other documents contemplated hereby and thereby, when executed and delivered
by Borrower  will be the  legally  valid and binding  obligations  of  Borrower,
enforceable  against Borrower in accordance with their respective terms,  except
as  enforcement  may  be  limited  by  equitable  principles  or by  bankruptcy,
insolvency, reorganization,  moratorium, or similar laws relating to or limiting
creditors' rights generally.

     (e)  Except  with  respect  to the  perfection  and  priority  of  Liens on
Inventory  or  Equipment  located  outside the United  States,  as to which this
paragraph is not applicable, the Liens granted by Borrower to Foothill in and to
its  properties  and  assets  pursuant  to this  Agreement  and the  other  Loan
Documents are validly created, perfected, and first priority Liens, subject only
to Permitted Liens.

     5.10 Litigation.  There are no actions or proceedings pending by or against
Borrower  before any court or  administrative  agency and Borrower does not have
knowledge  or  belief  of  any  pending,  threatened,  or  imminent  litigation,
governmental  investigations,  or claims,  complaints,  actions, or prosecutions
involving Borrower or any guarantor of the Obligations,  except for: (a) ongoing
collection matters in which Borrower is the plaintiff;  (b) matters disclosed on
Schedule  5.10;  and (c) matters  arising after the date hereof that, if decided
adversely to Borrower,  reasonably could not be expected to result in a Material
Adverse Change.
<PAGE>

     5.11 No Material  Adverse  Change.  All  financial  statements  relating to
Borrower  or any  guarantor  of the  Obligations  that  have been  delivered  by
Borrower to Foothill have been prepared in accordance with GAAP (except,  in the
case of unaudited  financial  statements,  for the lack of  footnotes  and being
subject to year-end audit  adjustments)  and fairly present  Borrower's (or such
guarantor's,  as  applicable)  financial  condition  as of the date  thereof and
Borrower's results of operations for the period then ended. There has not been a
Material  Adverse  Change  with  respect  to  Borrower  (or such  guarantor,  as
applicable)  since the date of the  latest  financial  statements  submitted  to
Foothill on or before the Closing Date.

     5.12 Solvency.  Borrower is Solvent.  No transfer of property is being made
by Borrower and no obligation is being  incurred by Borrower in connection  with
the transactions contemplated by this Agreement or the other Loan Documents with
the intent to hinder,  delay,  or defraud either present or future  creditors of
Borrower.

     5.13 Employee Benefits.  None of Borrower, any of its Subsidiaries,  or any
of their ERISA  Affiliates  maintains or contributes to any Benefit Plan,  other
than those listed on Schedule 5.13. Borrower,  each of its Subsidiaries and each
ERISA  Affiliate have satisfied the minimum  funding  standards of ERISA and the
IRC with respect to each Benefit Plan to which it is obligated to contribute. No
ERISA Event has occurred nor has any other event  occurred that may result in an
ERISA Event that  reasonably  could be expected to result in a Material  Adverse
Change.  None of  Borrower  or its  Subsidiaries,  any ERISA  Affiliate,  or any
fiduciary  of any Plan is  subject  to any  direct or  indirect  liability  with
respect to any Plan under any  applicable  law,  treaty,  rule,  regulation,  or
agreement.  None of  Borrower  or its  Subsidiaries  or any ERISA  Affiliate  is
required to provide security to any Plan under Section 401(a)(29) of the IRC.

     5.14 Environmental Condition.  Except as specifically disclosed on Schedule
5.14, none of Borrower's properties or assets has ever been used by Borrower or,
to the best of  Borrower's  knowledge,  by previous  owners or  operators in the
disposal of, or to produce,  store, handle,  treat,  release, or transport,  any
Hazardous Materials.  Except as specifically disclosed on Schedule 5.14, none of
Borrower's  properties  or assets has ever been  designated or identified in any
manner pursuant to any environmental protection statute as a Hazardous Materials
disposal  site,  or a  candidate  for  closure  pursuant  to  any  environmental
protection statute.  No Lien arising under any environmental  protection statute
has  attached  to any  revenues  or to any real or  personal  property  owned or
operated  by  Borrower.  Except as  specifically  disclosed  on  Schedule  5.14,
Borrower has not received a summons,  citation,  notice,  or directive  from the
Environmental  Protection  Agency or any  other  federal  or state  governmental
agency concerning any action or omission by Borrower  resulting in the releasing
or disposing of Hazardous  Materials into the  environment.  None of the matters
disclosed on Schedule 5.14 reasonably  could be expected to result in a Material
Adverse Change.
<PAGE>

     5.15  Brokerage  Fees.  Except  for  fees  paid or  payable  to  Borrower's
financial advisors,  the payment of which is Borrower's sole responsibility,  no
brokerage  commission  or finders  fees has or shall be  incurred  or payable in
connection with or as a result of Borrower's  obtaining  financing from Foothill
under this  Agreement,  and Borrower has not utilized the services of any broker
or finder in connection with Borrower's  obtaining financing from Foothill under
this Agreement.

     6. AFFIRMATIVE COVENANTS.

     Borrower  covenants and agrees that, so long as any credit  hereunder shall
be available  and until full and final  payment of the  Obligations,  and unless
Foothill  shall  otherwise  consent  in  writing,  Borrower  shall do all of the
following:

     6.1 Accounting System.  Maintain a standard and modern system of accounting
that enables Borrower to produce  financial  statements in accordance with GAAP,
and maintain  records  pertaining to the Collateral that contain  information as
from time to time may be  requested  by  Foothill.  Borrower  also  shall keep a
modern  inventory  reporting  system that shows all  additions,  sales,  claims,
returns, and allowances with respect to the Inventory.

     6.2 Collateral Reporting.  Provide Foothill with the following documents or
information at the following times in form satisfactory to Foothill: (a) on each
Business Day, a sales journal, collection journal, and credit register since the
last such schedule and a calculation  of the Borrowing Base as of such date, (b)
on a monthly  basis  and,  in any  event,  by no later than the 10th day of each
month  during  the term of this  Agreement,  (i) a detailed  calculation  of the
Borrowing Base, (ii) a detailed aging, by total, of the Accounts,  together with
a  reconciliation  to the detailed  calculation of the Borrowing Base previously
provided to Foothill,  and (iii) a report showing the  post-Petition  Date loans
and advances outstanding from Borrower to its Jamaican and Mexican Subsidiaries,
and any changes in the  balances  thereof  from the last such  report,  (c) on a
monthly  basis and,  in any  event,  by no later than the 10th day of each month
during the term of this  Agreement,  a summary aging,  by vendor,  of Borrower's
accounts  payable and any book overdraft,  (d) on a weekly basis,  (i) Inventory
reports  specifying  Borrower's  cost  and the  wholesale  market  value  of its
Inventory by category, with additional detail showing additions to and deletions
from the Inventory, and (ii) an in-transit Inventory report specifying types and
amounts of Inventory in transit  between  locations  of Borrower  (domestic  and
foreign), (e) on each Business Day, notice of all returns,  disputes, or claims,
(f) upon request,  copies of invoices in connection with the Accounts,  customer
statements,  credit  memos,  remittance  advices  and  reports,  deposit  slips,
shipping  and  delivery  documents  in  connection  with  the  Accounts  and for
Inventory and Equipment acquired by Borrower,  purchase orders and invoices, (g)
on a quarterly basis, a detailed list of Borrower's customers,  (h) on a monthly
basis,  a calculation  of the Dilution for the prior month,  (i) as requested by

<PAGE>

Foothill from time to time,  access to Borrower's  electronic data, and (j) such
other reports as to the  Collateral  or the  financial  condition of Borrower as
Foothill  reasonably  may request  from time to time.  Original  sales  invoices
evidencing  daily sales shall be mailed by Borrower to each  Account  Debtor and
payments thereon shall be directed to be made to the Lockboxes.

     6.3 Financial Statements,  Reports, Certificates.  Deliver to Foothill: (a)
as soon as  available,  but in any event  within  60 days  after the end of each
fiscal  quarter  during each of  Borrower's  fiscal  years,  a company  prepared
balance sheet, income statement,  and statement of cash flow covering Borrower's
operations  during such period;  and (b) as soon as available,  but in any event
within  105 days after the end of each of  Borrower's  fiscal  years,  financial
statements  of  Borrower  for each  such  fiscal  year,  certified  to have been
prepared in accordance  with GAAP.  Such  financial  statements  shall include a
balance  sheet,  profit and loss  statement,  and  statement  of cash  flow.  If
Borrower is a parent company of one or more Subsidiaries, or Affiliates, or is a
Subsidiary or Affiliate of another  company,  then, in addition to the financial
statements  referred to above,  Borrower agrees to deliver financial  statements
prepared  on a  consolidating  basis so as to  present  Borrower  and each  such
related entity separately, and on a consolidated basis.

     Together with the above, Borrower also shall deliver to Foothill Borrower's
Form 10-Q  Quarterly  Reports,  Form 10-K Annual  Reports,  and Form 8-K Current
Reports, and any other filings made by Borrower with the Securities and Exchange
Commission, if any, as soon as the same are filed, or any other information that
is provided by Borrower to its  shareholders,  and any other  report  reasonably
requested by Foothill relating to the financial condition of Borrower.

     Within 45 days after the end of each calendar month, Borrower shall deliver
to Foothill  consolidated  monthly  financial  statements  of  Borrower  and its
consolidated  Subsidiaries  in the same form as a distributed  internally to the
members of senior management of Borrower,  which statements shall be prepared in
accordance  with GAAP as  applicable to interim  statements,  provided that such
statements need not contain footnotes and may be subject to quarterly and annual
adjustments.

     Each  month,  within 45 days after the end of the  calendar  month to which
such certificate relates (except that to the extent any such certificate relates
to quarterly financial statements, such certificate shall be delivered within 60
days after the end of such  month that is the last month of the fiscal  quarter,
rather than 45 days), Borrower shall deliver to Foothill a certificate signed by
its principal financial officer,  acting in his or her capacity as an officer of
Borrower,  to the effect that: (i) any and all financial statements delivered or
caused to be delivered to Foothill hereunder, as applicable,  have been prepared
in accordance with GAAP (except, in the case of unaudited financial  statements,
for the lack of footnotes and being subject to year-end audit  adjustments (and,
in the case of monthly statements,  quarter-end adjustments)) and fairly present
the financial condition of Borrower,  (ii) the representations and warranties of
Borrower  contained in this  Agreement and the other Loan Documents are true and
correct in all material respects on and as of the date of such  certificate,  as

<PAGE>

though  made  on  and  as  of  such  date   (except  to  the  extent  that  such
representations and warranties relate solely to an earlier date), (iii) for each
month  ending date that also is the date on which a covenant in Section  7.20 or
Section  7.21  is  to be  tested,  a  Compliance  Certificate  demonstrating  in
reasonable  detail  compliance  at the end of such  period  with the  applicable
covenants  contained  in Section 7.20 or Section  7.21,  and (iv) on the date of
delivery of such  certificate  to Foothill there does not exist any condition or
event that constitutes a Default or Event of Default (or, in the case of clauses
(i),  (ii),  or (iii),  to the  extent of any  non-compliance,  describing  such
non-compliance as to which he or she may have knowledge and what action Borrower
has taken, is taking, or proposes to take with respect thereto).

     Borrower  shall  have  issued  written   instructions  to  its  independent
certified public  accountants  authorizing them to communicate with Foothill and
to release to Foothill whatever financial  information  concerning Borrower that
Foothill may request.  Borrower  hereby  irrevocably  authorizes and directs all
auditors,  accountants,  or other  third  parties  to deliver  to  Foothill,  at
Borrower's expense,  copies of Borrower's financial  statements,  papers related
thereto, and other accounting records of any nature in their possession,  and to
disclose to Foothill any information they may have regarding Borrower's business
affairs and financial  conditions,  except those matters that are subject to the
attorney-client privilege or the attorney work product privilege.

     6.4 Tax Returns.  Deliver to Foothill  copies of each of Borrower's  future
federal income tax returns,  and any amendments  thereto,  within 30 days of the
filing thereof with the Internal Revenue Service.

     6.5 [Intentionally omitted].

     6.6 Returns. Cause returns and allowances,  if any, as between Borrower and
its  Account  Debtors to be on the same basis and in  accordance  with the usual
customary practices of Borrower,  as they exist at the time of the execution and
delivery of this Agreement.  If, at a time when no Event of Default has occurred
and is  continuing,  any Account  Debtor  returns  any  Inventory  to  Borrower,
Borrower  promptly  shall  determine the reason for such return and, if Borrower
accepts  such  return,  issue  a  credit  memorandum  (with a copy to be sent to
Foothill) in the appropriate  amount to such Account Debtor.  If, at a time when
an Event of Default has occurred and is  continuing,  any Account Debtor returns
any Inventory to Borrower, Borrower promptly shall determine the reason for such
return  and, if  Foothill  consents  (which  consent  shall not be  unreasonably
withheld), issue a credit memorandum (with a copy to be sent to Foothill) in the
appropriate amount to such Account Debtor.

     6.7  Title to  Equipment.  Subject  to any prior  rights of the  Collateral
Agent, upon Foothill's request,  Borrower immediately shall deliver to Foothill,
to the extent  such items are in the  possession  or  control  of  Borrower,  or
otherwise  reasonably  available to  Borrower,  properly  endorsed,  any and all
evidences of ownership of,  certificates of title, or applications  for title to
any items of Equipment.
<PAGE>

     6.8  Maintenance  of Equipment.  Maintain the  Equipment in good  operating
condition and repair  (ordinary wear and tear excepted),  and make all necessary
replacements thereto so that the value and operating efficiency thereof shall at
all times be maintained and preserved.  Other than those items of Equipment that
constitute  fixtures on the Closing Date,  Borrower shall not permit any item of
Equipment to become a fixture to real estate or an accession to other  property,
and such Equipment shall at all times remain personal property.

     6.9 Taxes.  Cause all assessments  and taxes,  whether real,  personal,  or
otherwise,  due or payable by, or imposed,  levied, or assessed against Borrower
or any of its  property  to be paid in full,  before  delinquency  or before the
expiration  of any extension  period,  except to the extent that the validity of
such  assessment  or tax shall be the subject of a Permitted  Protest.  Borrower
shall make due and timely  payment or deposit of all such  federal,  state,  and
local  taxes,  assessments,  or  contributions  required of it by law,  and will
execute and deliver to Foothill, on demand,  appropriate  certificates attesting
to the payment  thereof or deposit  with  respect  thereto.  Borrower  will make
timely payment or deposit of all tax payments and withholding  taxes required of
it by applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state
disability,  and local, state, and federal income taxes, and will, upon request,
furnish  Foothill with proof  satisfactory to Foothill  indicating that Borrower
has made such payments or deposits.

     6.10 Insurance.

     (a) At its expense,  keep the Personal Property  Collateral insured against
loss or damage by fire, theft, explosion,  sprinklers, and all other hazards and
risks, and in such amounts, as are ordinarily insured against by other owners in
similar businesses.  Borrower also shall maintain business interruption,  public
liability,   product  liability,  and  property  damage  insurance  relating  to
Borrower's  ownership and use of the Personal  Property  Collateral,  as well as
insurance against larceny, embezzlement, and criminal misappropriation.

     (b) At its expense, obtain and maintain (i) insurance of the type necessary
to insure  the  Improvements  and  Chattels  (as such  terms are  defined in the
Mortgage),  for the full  replacement  cost  thereof,  against any loss by fire,
lightning,  windstorm, hail, explosion,  aircraft, smoke damage, vehicle damage,
elevator  collision,  and other risks from time to time included under "extended
coverage" policies,  in such amounts as Foothill reasonably may require,  but in
any event in amounts  sufficient to prevent  Borrower from becoming a co-insurer
under such  policies,  (ii)  combined  single limit  bodily  injury and property
damages insurance against any loss, liability, or damages on, about, or relating
to each  parcel  of Real  Property  Collateral,  in an  amount  of not less than
$5,000,000;  and (iii)  insurance  for such other risks as Foothill may require.
Replacement  costs,  at Foothill's  option,  may be redetermined by an insurance
appraiser,  satisfactory  to Foothill,  not more  frequently  than once every 12
months at Borrower's cost.
<PAGE>

     (c) All such  policies  of  insurance  shall  be in such  form,  with  such
companies,  and in such amounts as may be reasonably  satisfactory  to Foothill.
All insurance required herein shall be written by companies which are authorized
to do insurance business in the States of Alabama and South Carolina. All hazard
insurance and such other  insurance as Foothill shall  specify,  shall contain a
Form  438BFU  (NS)   mortgagee   endorsement,   or  an  equivalent   endorsement
satisfactory  to  Foothill,  showing  Foothill as a loss payee  thereof,  as its
interests may appear, and shall contain a waiver of warranties.  Every policy of
insurance  referred to in this  Section  6.10 shall  contain an agreement by the
insurer that it will not cancel such policy  except after 30 days prior  written
notice  to  Foothill  and that  any loss  payable  thereunder  shall be  payable
notwithstanding  any act or  negligence  of Borrower or  Foothill  which  might,
absent such agreement, result in a forfeiture of all or a part of such insurance
payment and notwithstanding (i) occupancy or use of the Real Property Collateral
for purposes more hazardous than permitted by the terms of such policy, (ii) any
foreclosure  or other  action or  proceeding  taken by Foothill  pursuant to the
Mortgage upon the happening of an Event of Default, or (iii) any change in title
or ownership of the Real Property Collateral. Borrower shall deliver to Foothill
certified  copies of such  policies of insurance  and evidence of the payment of
all premiums therefor.

     (d) Original  policies or  certificates  thereof  satisfactory  to Foothill
evidencing  such insurance shall be delivered to Foothill at least 30 days prior
to the  expiration of the existing or preceding  policies.  Borrower  shall give
Foothill prompt notice of any loss covered by such insurance, and Foothill shall
have the right to adjust any loss.  Foothill,  at Foothill's option,  shall have
the  exclusive  right to adjust  all  losses  payable  under any such  insurance
policies with respect to the Foothill Primary  Collateral  without any liability
to Borrower  whatsoever in respect of such adjustments,  absent gross negligence
or wilful misconduct on the part of Foothill. Any monies received as payment for
any loss under any insurance policy including the insurance  policies  mentioned
above, to the extent it pertains to the Foothill  Primary  Collateral,  shall be
paid over to  Foothill  to be applied at the  option of  Foothill  either to the
prepayment  of the  Obligations  without  premium,  in such  order or  manner as
Foothill  may  elect,  but  consistent  with the terms of the  Mortgage  and the
Intercreditor  Agreement,  to the extent  applicable,  or shall be  disbursed to
Borrower  under staged  payment terms  reasonably  satisfactory  to Foothill for
application to the cost of repairs,  replacements, or restorations. All repairs,
replacements,  or restorations shall be effected with reasonable  promptness and
shall be of a value  at  least  equal  to the  value  of the  items or  property
destroyed prior to such damage or  destruction.  Upon the occurrence of an Event
of  Default,  Foothill  shall  have  the  right to apply  all  prepaid  premiums
pertaining to insurance that relates to the Foothill  Primary  Collateral to the
payment of the Obligations in such order or form as Foothill shall determine.

     (e) Borrower  shall not take out separate  insurance  concurrent in form or
contributing in the event of loss with that required to be maintained under this
Section 6.10,  unless  Foothill is included  thereon as a named insured with the

<PAGE>

loss payable to Foothill,  as its interests may appear,  under a standard 438BFU
(NS) Mortgagee endorsement, or its local equivalent.  Borrower immediately shall
notify Foothill  whenever such separate  insurance is taken out,  specifying the
insurer thereunder and full particulars as to the policies  evidencing the same,
and originals of such policies immediately shall be provided to Foothill.

     6.11 No Setoffs or  Counterclaims.  Make  payments  hereunder and under the
other Loan Documents by or on behalf of Borrower  without setoff or counterclaim
and free and clear of, and without  deduction or  withholding  for or on account
of, any federal, state, or local taxes.

     6.12 Location of Inventory and Equipment.  Keep the Inventory and Equipment
only at the locations  identified  on Schedule 6.12 and not further  remove same
from the United  States except for (a) ordinary  course  relocation of Equipment
between locations in the United States,  Mexico, and Jamaica, to meet production
requirements, and (b) ordinary course movement of Work-In-Process from locations
in the United States to locations in Mexico and/or Jamaica for assembly, so long
as the  resulting  Finished  Goods  promptly are returned to the United  States;
provided,  however,  that  Borrower  may  amend  Schedule  6.12  so long as such
amendment  occurs by written  notice to Foothill  not less than 10 days prior to
the date on which  Inventory or Equipment is moved to such new location,  and so
long as such new location is within the United States (unless Foothill  consents
to removal to additional  locations outside the United States),  and so long as,
at the time of such  written  notification  (except  with  respect to  Equipment
and/or  Inventory that is to be moved outside the United States with  Foothill's
consent or pursuant to the provisions  above that apply to certain  movements of
Equipment  and/or  Inventory  to  Mexico  or  Jamaica),  Borrower  provides  any
financing  statements  or fixture  filings  necessary  to perfect  and  continue
perfected  Foothill's security interests in such assets and also, within such 10
day period,  provides to Foothill a Collateral  Access Agreement if requested by
Foothill.

     6.13 Compliance with Laws.  Comply with the  requirements of all applicable
laws, rules,  regulations,  and orders of any governmental authority,  including
the Fair Labor Standards Act and the Americans With Disabilities Act, other than
laws, rules, regulations, and orders the non-compliance with which, individually
or in the aggregate, would not result in and reasonably could not be expected to
result in a Material Adverse Change.

     6.14 Employee Benefits.

     (a) Cause to be delivered to Foothill, each of the following: (i) promptly,
and  in  any  event  within  10  Business  Days  after  Borrower  or  any of its
Subsidiaries  knows or has reason to know that an ERISA Event has occurred  that
reasonably  could be expected to result in a Material  Adverse Change, a written
statement of the principal  financial officer of Borrower  describing such ERISA

<PAGE>

Event and any action that is being taking with respect thereto by Borrower,  any
such  Subsidiary or ERISA  Affiliate,  and any action taken or threatened by the
IRS, Department of Labor, or PBGC.  Borrower or such Subsidiary,  as applicable,
shall be deemed to know all facts known by the administrator of any Benefit Plan
of  which it is the plan  sponsor,  (ii)  promptly,  and in any  event  within 3
Business  Days after the  filing  thereof  with the IRS, a copy of each  funding
waiver  request  filed with respect to any Benefit  Plan and all  communications
received by Borrower,  any of its Subsidiaries or, to the knowledge of Borrower,
any ERISA Affiliate with respect to such request, and (iii) promptly, and in any
event within 3 Business Days after receipt by Borrower,  any of its Subsidiaries
or, to the knowledge of Borrower,  any ERISA Affiliate,  of the PBGC's intention
to  terminate a Benefit  Plan or to have a trustee  appointed  to  administer  a
Benefit Plan, copies of each such notice.

     (b) Cause to be delivered to Foothill, upon Foothill's request, each of the
following:  (i) a copy of each Plan (or,  where any such plan is not in writing,
complete  description  thereof) (and if applicable,  related trust agreements or
other   funding   instruments)   and  all   amendments   thereto,   all  written
interpretations   thereof  and  written  descriptions  thereof  that  have  been
distributed  to employees or former  employees of Borrower or its  Subsidiaries;
(ii) the most recent determination letter issued by the IRS with respect to each
Benefit Plan; (iii) for the three most recent plan years, annual reports on Form
5500 Series required to be filed with any  governmental  agency for each Benefit
Plan; (iv) all actuarial reports prepared for the last three plan years for each
Benefit  Plan;  (v) a listing of all  Multiemployer  Plans,  with the  aggregate
amount of the most recent annual  contributions  required to be made by Borrower
or any ERISA Affiliate to each such plan and copies of the collective bargaining
agreements  requiring such  contributions;  (vi) any  information  that has been
provided to Borrower or any ERISA Affiliate regarding withdrawal liability under
any Multiemployer Plan; and (vii) the aggregate amount of the most recent annual
payments  made to former  employees  of Borrower or its  Subsidiaries  under any
Retiree Health Plan.

     6.15 Leases.  Pay when due all rents and other  amounts  payable  under any
leases to which Borrower is a party or by which Borrower's properties and assets
are bound,  unless such payments are the subject of a Permitted Protest.  To the
extent  that  Borrower  fails  timely to make  payment  of such  rents and other
amounts  payable when due under its leases,  Foothill shall be entitled,  in its
discretion,  to reserve  an amount  equal to such  unpaid  amounts  against  the
Borrowing Base.
<PAGE>

     6.16 Brokerage Commissions. Pay any and all brokerage commission or finders
fees  incurred  by  Borrower  in  connection  with or as a result of  Borrower's
obtaining financing from Foothill under this Agreement.

     6.17 Chief  Executive  Officer.  At all times cause Michael  Billingsley or
another Person acceptable to Foothill in Foothill's  reasonable discretion to be
the Chief Executive Officer of Borrower.

     7. NEGATIVE COVENANTS.

     Borrower  covenants and agrees that, so long as any credit  hereunder shall
be available and until full and final payment of the Obligations,  Borrower will
not do any of the following without Foothill's prior written consent:

     7.1 Indebtedness.  Create, incur, assume, permit,  guarantee,  or otherwise
become  or  remain,   directly  or  indirectly,   liable  with  respect  to  any
Indebtedness, except:

     (a) Indebtedness evidenced by this Agreement, together with Indebtedness to
issuers of letters of credit that are the subject of L/C Guarantees;

     (b) Indebtedness set forth in Schedule 7.1;

     (c) Indebtedness secured by Permitted Liens; and

     (d) refinancings,  renewals, or extensions of Indebtedness  permitted under
clauses  (b) and (c) of this  Section  7.1 (and  continuance  or  renewal of any
Permitted Liens  associated  therewith) so long as: (i) the terms and conditions
of such  refinancings,  renewals,  or  extensions do not  materially  impair the
prospects  of  repayment  of the  Obligations  by  Borrower,  (ii)  the net cash
proceeds  of such  refinancings,  renewals,  or  extensions  do not result in an
increase in the aggregate  principal  amount of the  Indebtedness so refinanced,
renewed,  or  extended,  (iii)  such  refinancings,   renewals,  refundings,  or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced,  renewed,  or extended,  and (iv) to the extent that
Indebtedness  that is  refinanced  was  subordinated  in right of payment to the
Obligations,  then the  subordination  terms and  conditions of the  refinancing
Indebtedness  must be at least as favorable to Foothill as those  applicable  to
the refinanced Indebtedness.

     7.2  Liens.  Create,  incur,  assume,  or  permit  to  exist,  directly  or
indirectly, any Lien on or with respect to any of its property or assets, of any
kind,  whether  now  owned or  hereafter  acquired,  or any  income  or  profits
therefrom,  except for Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced under
Section 7.1(d) and so long as the  replacement  Liens only encumber those assets
or property  that  secured the original  Indebtedness).  Nothing in this section
shall impair the right of Borrower to lease or sublease, as lessor or sublessor,

<PAGE>

any Real Property of Borrower in the ordinary course of Borrower's  business and
consistent with past practice, so long as any lease or sublease of Real Property
Collateral is junior to the Lien of Foothill.

     7.3 Restrictions on Fundamental Changes. Except for Permitted Dispositions,
and except for the Permitted Combination,  enter into any merger, consolidation,
reorganization, or recapitalization, or reclassify its Stock, or liquidate, wind
up, or dissolve  itself (or suffer any liquidation or  dissolution),  or convey,
sell, assign, lease,  transfer, or otherwise dispose of, in one transaction or a
series of  transactions,  all or any substantial part of its property or assets.
Nothing in this section shall impair the right of Borrower to lease or sublease,
as lessor or sublessor,  any Real Property of Borrower in the ordinary course of
Borrower's  business and consistent with past practice,  so long as any lease or
sublease of Real Property Collateral is junior to the Lien of Foothill.

     7.4 Disposal of Assets. Except for Permitted  Dispositions,  and except for
the Permitted Combination,  sell, lease, assign,  transfer, or otherwise dispose
of any of  Borrower's  properties  or assets  other than sales of  Inventory  to
buyers in the ordinary course of Borrower's  business as currently conducted and
the sale of obsolete  equipment in the ordinary course of business not to exceed
$1,000,000 per annum. Nothing in this section shall impair the right of Borrower
to lease or sublease,  as lessor or sublessor,  any Real Property of Borrower in
the ordinary course of Borrower's business and consistent with past practice, so
long as any lease or sublease of Real Property  Collateral is junior to the Lien
of Foothill.

     7.5 Change Name. Change Borrower's name, FEIN,  corporate structure (within
the  meaning  of  Section  9402(7) of the  Code),  or  identity,  or add any new
fictitious name.

     7.6 Guarantee. Guarantee or otherwise become in any way liable with respect
to the  obligations  of any third Person except by endorsement of instruments or
items of payment for deposit to the account of Borrower or which are transmitted
or turned over to Foothill.

     7.7  Nature  of  Business.  Make any  change  in the  principal  nature  of
Borrower's business.

     7.8 Prepayments and Amendments.

     (a) Except in connection  with a refinancing  permitted by Section  7.1(d),
prepay  (except  that,  if no Event of Default has occurred  and is  continuing,
Borrower may make mandatory prepayments of principal to the holders of the notes
issued pursuant to the Note Purchase  Agreement,  or to their agent, as required
by the terms of the Note Purchase  Agreement as in effect on the Closing  Date),
redeem, retire,  defease,  purchase, or otherwise acquire any Indebtedness owing
to any  third  Person,  other  than the  Obligations  in  accordance  with  this
Agreement, and
<PAGE>

     (b) Directly or indirectly,  amend, modify, alter,  increase, or change any
of the terms or conditions of any agreement, instrument, document, indenture, or
other writing  evidencing or concerning  Indebtedness  permitted  under Sections
7.1(b), (c), or (d).

     7.9 Change of Control.  Cause,  permit, or suffer,  directly or indirectly,
any Change of Control.

     7.10 Consignments.  Consign any Inventory or sell any Inventory on bill and
hold, sale or return, sale on approval, or other conditional terms of sale.

     7.11  Distributions.  Make any distribution or declare or pay any dividends
(in cash or other property, other than Stock) on, or purchase,  acquire, redeem,
or retire any of  Borrower's  Stock,  of any  class,  whether  now or  hereafter
outstanding.

     7.12 Accounting Methods. Modify or change its method of accounting or enter
into,  modify,  or terminate any agreement  currently  existing,  or at any time
hereafter  entered into with any third party  accounting  firm or service bureau
for the  preparation or storage of Borrower's  accounting  records  without said
accounting  firm or service  bureau  agreeing  to provide  Foothill  information
regarding the Collateral or Borrower's financial condition.  Borrower waives the
right to  assert  a  confidential  relationship,  if any,  it may have  with any
accounting firm or service bureau in connection  with any information  requested
by Foothill  pursuant to or in accordance with this  Agreement,  and agrees that
Foothill may contact  directly  any such  accounting  firm or service  bureau in
order to obtain such information.

     7.13  Investments.  Directly  or  indirectly  make,  acquire,  or incur any
liabilities (including contingent obligations) for or in connection with (a) the
acquisition  of the securities  (whether debt or equity) of, or other  interests
in, a Person,  (b) loans,  advances,  capital  contributions,  or  transfers  of
property to a Person,  or (c) the acquisition of all or substantially all of the
properties or assets of a Person.  The foregoing  notwithstanding,  Borrower may
make intercompany loans to its Jamaican and Mexican  Subsidiaries to the extent,
and  only to the  extent,  that  such  loans  (y) are  provided  for in  written
projections  provided  to and  approved  by  Foothill  in  advance of the making
thereof,  and (z) are necessary to cover reasonable  operating  expenses of such
Subsidiaries.  The  foregoing  notwithstanding,  Borrower may make  intercompany
loans to its Jamaican and Mexican  Subsidiaries  to the extent,  and only to the
extent, that such loans (y) do not exceed $3,000,000 in the aggregate during any
fiscal quarter of Borrower,  and (z) are necessary to cover reasonable operating
expenses of such  Subsidiaries.  In addition,  this  section  shall not prohibit
Borrower  from  investing  up to  $200,000  to  acquire  minority  interests  in
Strathleven. In addition, this section shall not prohibit Permitted Investments.
In addition,  this section shall not prohibit loans to employees of Borrower not
exceeding $250,000 principal in the aggregate at any one time outstanding.
<PAGE>

     7.14  Transactions  with  Affiliates.  Directly or indirectly enter into or
permit to exist any material  transaction  with any Affiliate of Borrower except
for transactions  that are in the ordinary course of Borrower's  business,  upon
fair and reasonable terms, that are fully disclosed to Foothill, and that are no
less favorable to Borrower than would be obtained in an arm's length transaction
with a non-Affiliate.

     7.15  Suspension.  Except in  connection  with the  Permitted  Combination,
suspend or go out of a substantial portion of its business.

     7.16 [Intentionally omitted].

     7.17 Use of Proceeds.  Use the  proceeds of the  Advances and  Supplemental
Advances made  hereunder for any purpose other than (i) on the Closing Date, (y)
to repay in full the outstanding  principal,  accrued interest, and accrued fees
and expenses owing to Existing Lenders,  and (z) to pay transactional  costs and
expenses  incurred  in  connection  with this  Agreement,  and (ii)  thereafter,
consistent  with the terms and conditions  hereof,  for its lawful and permitted
corporate purposes.

     7.18 Change in Location of Chief Executive Office;  Inventory and Equipment
with  Bailees.  Relocate its chief  executive  office to a new location  without
providing 30 days prior written notification thereof to Foothill and so long as,
at the  time of such  written  notification,  Borrower  provides  any  financing
statements  or fixture  filings  necessary  to perfect  and  continue  perfected
Foothill's  security interests and also provides to Foothill a Collateral Access
Agreement with respect to such new location.  The Inventory and Equipment  shall
not at any time now or  hereafter  be  stored  with a bailee,  warehouseman,  or
similar party without Foothill's prior written consent. Foothill consents to any
bailment, warehousing or similar arrangements specifically disclosed on Schedule
6.12.

     7.19 No Prohibited Transactions Under ERISA. Directly or indirectly:

     (a)  engage,  or permit  any  Subsidiary  of  Borrower  to  engage,  in any
prohibited  transaction  which is reasonably likely to result in a civil penalty
or excise tax  described in Sections 406 of ERISA or 4975 of the IRC for which a
statutory or class  exemption is not  available or a private  exemption  has not
been previously obtained from the Department of Labor;

     (b)  permit to exist  with  respect  to any  Benefit  Plan any  accumulated
funding  deficiency  (as defined in  Sections  302 of ERISA and 412 of the IRC),
whether or not waived;
<PAGE>

     (c) fail,  or permit any  Subsidiary  of  Borrower  to fail,  to pay timely
required  contributions  or annual  installments  due with respect to any waived
funding deficiency to any Benefit Plan;

     (d)  terminate,  or permit any  Subsidiary  of Borrower to  terminate,  any
Benefit Plan where such event would result in any liability of Borrower,  any of
its Subsidiaries or any ERISA Affiliate under Title IV of ERISA;

     (e)  fail,  or permit  any  Subsidiary  of  Borrower  to fail,  to make any
required contribution or payment to any Multiemployer Plan;

     (f) fail, or permit any Subsidiary of Borrower to fail, to pay any required
installment  or any other  payment  required  under Section 412 of the IRC on or
before the due date for such installment or other payment;

     (g) amend,  or permit any Subsidiary of Borrower to amend, a Plan resulting
in an  increase  in  current  liability  for the plan year  such that  either of
Borrower,  any  Subsidiary  of  Borrower or any ERISA  Affiliate  is required to
provide security to such Plan under Section 401(a)(29) of the IRC; or

     (h) withdraw,  or permit any  Subsidiary of Borrower to withdraw,  from any
Multiemployer  Plan where such withdrawal is reasonably  likely to result in any
liability of any such entity under Title IV of ERISA;

which,  individually  or in the  aggregate,  results in or  reasonably  would be
expected  to result in a claim  against or  liability  of  Borrower,  any of its
Subsidiaries or any ERISA Affiliate in excess of $100,000.

     7.20 Financial Covenant. Fail to maintain net worth (in each case of Oneita
and its consolidated  Subsidiaries,  on a consolidated basis, in accordance with
GAAP) in compliance  with the following  requirements:  (a) as of each Net Worth
Testing  Date,  net worth of at least the Required Net Worth Amount with respect
to such date;  and (b) if the Net Worth  Testing Date occurs more than 12 months
after  the  Effective  Date,  net worth of not less than the net worth 12 months
prior to the Net Worth Testing Date minus $4,500,000.

     7.21 Capital  Expenditures.  Make capital expenditures in any of Borrower's
fiscal years 1998, 1999, 2000, or 2001 in excess of: (a) $3,200,000 with respect
to 1998;  (b) $3,200,000  with respect to 1999;  (c) $4,800,000  with respect to
2000; and (d) $4,800,000 with respect to 2001.

     8. EVENTS OF DEFAULT.

     Any one or more of the  following  events  shall  constitute  an  event  of
default (each, an "Event of Default") under this Agreement:
<PAGE>

     8.1 If Borrower  fails to pay when due and payable or when declared due and
payable,  any  portion  of  the  Obligations  (whether  of  principal,  interest
(including any interest  which,  but for the provisions of the Bankruptcy  Code,
would  have  accrued  on  such   amounts),   fees  and  charges  due   Foothill,
reimbursement of Foothill Expenses, or other amounts constituting  Obligations);
provided,  however,  that in the case of  Overadvances  that are  caused  by the
charging of interest,  fees, or Foothill  Expenses to  Borrower's  Loan Account,
such event shall not  constitute  an Event of Default if, within 3 Business Days
of incurring such Overadvance,  Borrower repays, or otherwise  eliminates,  such
Overadvance;

     8.2 (a) If Borrower  fails or neglects  to  perform,  keep,  or observe any
term,  provision,  condition,  covenant,  or agreement contained in Sections 6.2
(Collateral Reporting), 6.3 (Financial Statements, Reports,  Certificates),  6.4
(Tax  Returns),  6.7 (Title to Equipment),  6.12  (Location of Equipment),  6.13
(Compliance  with Laws),  6.14  (Employee  Benefits),  or 6.15  (Leases) of this
Agreement  and such failure  continues for a period of 5 Business  Days;  (b) If
Borrower  fails or neglects to perform,  keep,  or observe any term,  provision,
condition,  covenant, or agreement contained in Sections 6.1 (Accounting System)
or 6.8  (Maintenance of Equipment) of this Agreement and such failure  continues
for a period of 15 Business  Days; (c) If Borrower fails or neglects to perform,
keep,  or  observe  any  term,  provision,  condition,  covenant,  or  agreement
contained in Section 6.17 (Chief Executive  Officer) and such failure or neglect
continues  for a period of 30 days;  or (d) If  Borrower  fails or  neglects  to
perform,  keep, or observe any other term,  provision,  condition,  covenant, or
agreement  contained in this  Agreement,  or in any of the other Loan  Documents
(giving effect to any grace periods,  cure periods, or required notices, if any,
expressly  provided for in such Loan  Documents);  in each case,  other than any
such term, provision,  condition,  covenant, or agreement that is the subject of
another provision of this Section 8, in which event such other provision of this
Section 8 shall govern);  provided that, during any period of time that any such
failure or neglect of Borrower  referred to in this  paragraph  exists,  even if
such  failure  or  neglect  is not yet an  Event of  Default  by  virtue  of the
existence  of a grace or cure  period or the  pre-condition  of the  giving of a
notice,  Foothill  shall not  required  during such  period to make  Advances or
Supplemental  Advances to Borrower or issue Letters of Credit for the account of
Borrower;

     8.3 If there is a Material Adverse Change;

     8.4 If any material portion of Borrower's properties or assets is attached,
seized,  subjected to a writ or distress  warrant,  or is levied upon,  or comes
into the  possession  of any  third  Person in  connection  with a claim of such
person of $100,000 or more;

     8.5 If an Insolvency Proceeding is commenced by Borrower;

     8.6 If an Insolvency  Proceeding is commenced  against  Borrower and any of
the following  events occur:  (a) Borrower  consents to the  institution  of the
Insolvency  Proceeding  against it; (b) the petition  commencing  the Insolvency
Proceeding  is  not  timely  controverted;   (c)  the  petition  commencing  the
Insolvency  Proceeding is not  dismissed  within 60 calendar days of the date of
the filing thereof; provided, however, that, during the pendency of such period,
Foothill shall be relieved of its obligation to extend credit hereunder;  (d) an
interim trustee is appointed to take possession of all or a substantial  portion
of the properties or assets of, or to operate all or any substantial  portion of
the business of, Borrower;  or (e) an order for relief shall have been issued or
entered therein;
<PAGE>

     8.7 If Borrower is enjoined,  restrained,  or in any way prevented by court
order  from  continuing  to conduct  all or any  material  part of its  business
affairs;

     8.8 If notices of Lien (other than notices  with  respect to any  Permitted
Lien of the  Collateral  Agent),  levy, or  assessment  are filed of record with
respect  to any of  Borrower's  properties  or assets  which have not been cured
within ten days after the Lien has been filed which (a)  represent  claims in an
aggregate  amount of in excess of  $100,000  and which  have  priority  over the
security interests of Foothill in the Collateral,  or (b) represent claims in an
aggregate  amount of in excess of $250,000  and which are junior to the security
interests of Foothill in the  Collateral  (provided  that  Foothill may maintain
reserves with respect to any such Liens that affect  Collateral  included in the
Borrowing  Base without  regard to whether an Event of Default exists under this
Section 8.8);

     8.9 If a judgment or other  claim in excess of  $100,000  becomes a Lien or
encumbrance  upon any material  portion of  Borrower's  properties or assets and
such  judgment is not  removed or  released  within 30 days of the entry of such
judgment  (provided that Foothill may maintain reserves with respect to any such
Liens that affect  Collateral  included in the Borrowing  Base without regard to
whether an Event of Default exists under this Section 8.9);

     8.10 If there is a default in any material agreement to which Borrower is a
party with one or more third Persons  involving claims,  Indebtedness,  or other
obligations  in excess of  $1,000,000,  and such default (a) occurs at the final
maturity of the obligations thereunder,  or (b) results in a right by such third
Person(s),  irrespective  of whether  exercised,  to accelerate  the maturity of
Borrower's obligations thereunder;

     8.11 If Borrower makes any payment on account of Indebtedness that has been
contractually   subordinated   in  right  of  payment  to  the  payment  of  the
Obligations,  except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness; or

     8.12  If any  material  misstatement  or  misrepresentation  exists  now or
hereafter in any warranty, representation, statement, or report made to Foothill
by Borrower or any officer, employee, agent, or director of Borrower.
<PAGE>

     9. FOOTHILL'S RIGHTS AND REMEDIES.

     9.1 Rights and Remedies. Upon the occurrence,  and during the continuation,
of an Event of Default  Foothill  may, at its  election,  without  notice of its
election and without demand,  do any one or more of the following,  all of which
are authorized by Borrower:

     (a) Declare all Obligations, whether evidenced by this Agreement, by any of
the other Loan Documents, or otherwise, immediately due and payable;

     (b) Cease  advancing  money or  extending  credit to or for the  benefit of
Borrower under this  Agreement,  under any of the Loan  Documents,  or under any
other agreement between Borrower and Foothill;

     (c) Terminate  this Agreement and any of the other Loan Documents as to any
future  liability or obligation of Foothill,  but without  affecting  Foothill's
rights and security  interests in the Personal  Property  Collateral or the Real
Property Collateral and without affecting the Obligations;

     (d) Settle or adjust  disputes and claims directly with Account Debtors for
amounts and upon terms which Foothill  considers  advisable,  and in such cases,
Foothill will credit  Borrower's Loan Account with only the net amounts received
by Foothill in payment of such disputed  Accounts  after  deducting all Foothill
Expenses incurred or expended in connection therewith;

     (e) Cause  Borrower to hold all returned  Inventory in trust for  Foothill,
segregate  all  returned  Inventory  from all other  property  of Borrower or in
Borrower's  possession and  conspicuously  label said returned  Inventory as the
property of Foothill;

     (f) Without notice to or demand upon Borrower or any  guarantor,  make such
payments  and do such acts as Foothill  considers  necessary  or  reasonable  to
protect its security  interests in the  Collateral.  Borrower agrees to assemble
the  Personal  Property  Collateral  if  Foothill so  requires,  and to make the
Personal  Property  Collateral  available to Foothill as Foothill may designate.
Borrower  authorizes  Foothill to enter the premises where the Personal Property
Collateral is located,  to take and maintain possession of the Personal Property
Collateral, or any part of it, and to pay, purchase,  contest, or compromise any
encumbrance,  charge,  or  Lien  that in  Foothill's  determination  appears  to
conflict  with  its  security  interests  and to pay all  expenses  incurred  in
connection  therewith.  With  respect  to  any of  Borrower's  owned  or  leased
premises,  Borrower hereby grants Foothill a license to enter into possession of
such  premises  and to occupy the same,  without  charge,  for up to 120 days in
order to exercise any of Foothill's  rights or remedies provided herein, at law,
in equity, or otherwise;
<PAGE>

     (g) Without notice to Borrower (such notice being  expressly  waived),  and
without  constituting  a  retention  of any  collateral  in  satisfaction  of an
obligation  (within the meaning of Section 9505 of the Code),  set off and apply
to the  Obligations  any and all (i) balances  and deposits of Borrower  held by
Foothill  (including  any amounts  received in the  Lockbox  Accounts),  or (ii)
indebtedness  at any time owing to or for the credit or the  account of Borrower
held by Foothill;

     (h) Hold, as cash collateral, any and all balances and deposits of Borrower
held by Foothill  (including any cash collateral  provided to secure Obligations
with respect to Letters of Credit or  indemnities),  and any amounts received in
the  Lockbox  Accounts,  to secure  the full and final  repayment  of all of the
Obligations;

     (i) Ship, reclaim,  recover, store, finish,  maintain,  repair, prepare for
sale,  advertise  for sale,  and sell (in the manner  provided  for  herein) the
Personal  Property  Collateral.  Foothill  is hereby  granted a license or other
right to use, without charge, Borrower's labels, patents, copyrights,  rights of
use of any name,  trade secrets,  trade names,  trademarks,  service marks,  and
advertising  matter,  or any property of a similar nature, as it pertains to the
Personal  Property  Collateral,  if and to  the  extent  such  usage  is  deemed
necessary  or  advisable  by  Foothill  to  effect  a  commercially   reasonable
disposition of the Personal Property  Collateral,  in completing  production of,
advertising  for  sale,  and  selling  any  Personal  Property   Collateral  and
Borrower's rights under all licenses and all franchise agreements shall inure to
Foothill's benefit;

     (j) Sell the  Personal  Property  Collateral  at either a public or private
sale, or both, by way of one or more contracts or  transactions,  for cash or on
terms,  in such manner and at such places  (including  Borrower's  premises)  as
Foothill  determines is  commercially  reasonable.  It is not necessary that the
Personal Property Collateral be present at any such sale;

     (k) Foothill shall give notice of the disposition of the Personal  Property
Collateral as follows:

     (1) Foothill shall give Borrower and each holder of a security  interest in
the Personal  Property  Collateral who has filed with Foothill a written request
for notice, a notice in writing of the time and place of public sale, or, if the
sale is a private sale or some other  disposition other than a public sale is to
be made of the Personal Property Collateral, then the time on or after which the
private sale or other disposition is to be made;

     (2) The notice shall be personally delivered or mailed, postage prepaid, to
Borrower  as  provided  in Section 12, at least 5 days before the date fixed for
the sale,  or at least 5 days before the date on or after which the private sale
or other  disposition  is to be made;  no notice  needs to be given prior to the
disposition  of  any  portion  of  the  Personal  Property  Collateral  that  is
perishable  or  threatens  to  decline  speedily  in  value or that is of a type

<PAGE>

customarily sold on a recognized  market.  Notice to Persons other than Borrower
claiming an interest in the Personal  Property  Collateral shall be sent to such
addresses as they have furnished to Foothill;

     (3) If the sale is to be a public sale,  Foothill also shall give notice of
the time and place by  publishing  a notice one time at least 5 days  before the
date of the sale in a newspaper  of general  circulation  in the county in which
the sale is to be held;

     (l) Foothill may credit bid and purchase at any public sale; and

     (m) Any deficiency that exists after  disposition of the Personal  Property
Collateral as provided above will be paid  immediately  by Borrower.  Any excess
promptly will be returned,  without  interest and subject to the rights of third
Persons, by Foothill to Borrower.

     9.2  Remedies  Cumulative.   Foothill's  rights  and  remedies  under  this
Agreement,  the Loan Documents,  and all other  agreements  shall be cumulative.
Foothill shall have all other rights and remedies not  inconsistent  herewith as
provided  under the Code,  by law, or in equity.  No exercise by Foothill of one
right or remedy  shall be deemed an  election,  and no waiver by Foothill of any
Event of Default shall be deemed a continuing waiver. No delay by Foothill shall
constitute a waiver, election, or acquiescence by it.

     10. TAXES AND EXPENSES.

     If Borrower fails to pay any monies (whether taxes, assessments,  insurance
premiums, or, in the case of leased properties or assets, rents or other amounts
payable under such leases) due to third  Persons,  or fails to make any deposits
or furnish any required  proof of payment or deposit,  all as required under the
terms of this Agreement,  then, to the extent that Foothill determines that such
failure by Borrower could result in a Material Adverse Change, in the good faith
exercise of its discretion and without prior notice to Borrower, Foothill may do
any or all of the  following:  (a) make payment of the same or any part thereof;
(b) set up such reserves in Borrower's  Loan Account as Foothill deems necessary
to protect Foothill from the exposure created by such failure; or (c) obtain and
maintain  insurance policies of the type described in Section 6.10, and take any
action with respect to such policies as Foothill deems prudent. Any such amounts
paid by Foothill shall constitute  Foothill Expenses.  Any such payments made by
Foothill shall not constitute an agreement by Foothill to make similar  payments
in the  future  or a waiver  by  Foothill  of any Event of  Default  under  this
Agreement. Foothill need not inquire as to, or contest the validity of, any such
expense,  tax,  or Lien and the  receipt  of the usual  official  notice for the
payment  thereof shall be conclusive  evidence that the same was validly due and
owing.
<PAGE>

     11. WAIVERS; INDEMNIFICATION.

     11.1 Demand;  Protest;  etc.  Borrower  waives demand,  protest,  notice of
protest,  notice of  default or  dishonor,  notice of  payment  and  nonpayment,
nonpayment at maturity, release, compromise,  settlement,  extension, or renewal
of accounts, documents,  instruments,  chattel paper, and guarantees at any time
held by Foothill on which Borrower may in any way be liable.

     11.2 Foothill's Liability for Collateral. So long as Foothill complies with
its obligations,  if any, under Section 9207 of the Code,  Foothill shall not in
any way or manner  be liable or  responsible  for:  (a) the  safekeeping  of the
Collateral; (b) any loss or damage thereto occurring or arising in any manner or
fashion from any cause; (c) any diminution in the value thereof;  or (d) any act
or default of any carrier,  warehouseman,  bailee,  forwarding  agency, or other
Person.  All risk of loss,  damage,  or destruction  of the Collateral  shall be
borne by Borrower.

     11.3  Indemnification.  Borrower  shall pay,  indemnify,  defend,  and hold
Foothill,  each Participant,  and each of their respective officers,  directors,
employees,   counsel,  agents,  and  attorneys-in-fact  (each,  an  "Indemnified
Person")  harmless (to the fullest extent permitted by law) from and against any
and all  claims,  demands,  suits,  actions,  investigations,  proceedings,  and
damages, and all reasonable attorneys fees and disbursements and other costs and
expenses  actually  incurred  in  connection  therewith  (as and  when  they are
incurred and  irrespective  of whether suit is  brought),  at any time  asserted
against,  imposed upon,  or incurred by any of them in  connection  with or as a
result of or related to the execution, delivery,  enforcement,  performance, and
administration   of  this   Agreement  and  any  other  Loan  Documents  or  the
transactions  contemplated  herein,  and  with  respect  to  any  investigation,
litigation, or proceeding related to this Agreement, any other Loan Document, or
the use of the  proceeds  of the  credit  provided  hereunder  (irrespective  of
whether any Indemnified Person is a party thereto), or any act, omission,  event
or circumstance in any manner related thereto (all the foregoing,  collectively,
the  "Indemnified  Liabilities").  Borrower  shall  have  no  obligation  to any
Indemnified  Person  under this  Section  11.3 with  respect to any  Indemnified
Liability  that a court of competent  jurisdiction  finally  determines  to have
resulted  from the gross  negligence or willful  misconduct of such  Indemnified
Person.  This provision  shall survive the termination of this Agreement and the
repayment of the Obligations.

     12. NOTICES.

     Unless otherwise provided in this Agreement,  all notices or demands by any
party  relating to this Agreement or any other Loan Document shall be in writing
and (except for financial statements and other informational documents which may
be sent by first-class mail,  postage prepaid) shall be personally  delivered or
sent  by  registered  or  certified  mail  (postage   prepaid,   return  receipt
requested),  overnight courier, or telefacsimile to Borrower or to Foothill,  as
the case may be, at its address set forth below:
<PAGE>

               If to Borrower:     ONEITA INDUSTRIES,  INC. 
                                   4130 Faber Place Drive, Suite  200   
                                   Charleston,   South  Carolina  29405  
                                   Attn:  Mr.  Michael Billingsley 
                                   Fax No. 803.264.4262

               with copies to:     MOSES & SINGER LLP
                                   1301 Avenue of the Americas
                                   New York, New York  10019-6076
                                   Attn:  Alan E. Gamza
                                   Fax No. 212.554.7700

               If to Foothill:     FOOTHILL CAPITAL CORPORATION
                                   11111 Santa Monica Boulevard
                                   Suite 1500
                                   Los Angeles, California  90025-3333
                                   Attn:  Mngr. Bus. Fin. Div.
                                   Fax No. 310.478.9788

               with copies to:     BROBECK, PHLEGER & HARRISON LLP
                                   550 South Hope Street, Suite 2100
                                   Los Angeles, California 90071
                                   Attn:  Jeffrey S. Turner, Esq.
                                   Fax No. 213.239.1324

                  The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other. All notices or demands sent in accordance with this Section 12, other
than notices by Foothill in  connection  with Sections 9504 or 9505 of the Code,
shall be deemed  received on the earlier of the date of actual receipt or 3 days
after the deposit  thereof in the mail.  Borrower  acknowledges  and agrees that
notices sent by Foothill in
connection  with  Sections  9504 or 9505 of the Code  shall be deemed  sent when
deposited  in the mail or  personally  delivered,  or,  where  permitted by law,
transmitted telefacsimile or other similar method set forth above.

         13.      CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

                  THE VALIDITY OF THIS  AGREEMENT  AND THE OTHER LOAN  DOCUMENTS
(UNLESS  EXPRESSLY  PROVIDED TO THE CONTRARY IN AN ANOTHER LOAN  DOCUMENT),  THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS
OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING  HEREUNDER

<PAGE>

OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED  UNDER,  GOVERNED
BY, AND  CONSTRUED  IN  ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK.  THE
PARTIES AGREE THAT ALL ACTIONS OR  PROCEEDINGS  ARISING IN CONNECTION  WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS  SHALL BE TRIED AND LITIGATED ONLY IN THE
STATE AND FEDERAL  COURTS  LOCATED IN THE COUNTY OF NEW YORK,  STATE OF NEW YORK
OR, AT THE SOLE OPTION OF FOOTHILL,  IN ANY OTHER COURT IN WHICH  FOOTHILL SHALL
INITIATE   LEGAL  OR  EQUITABLE   PROCEEDINGS   AND  WHICH  HAS  SUBJECT  MATTER
JURISDICTION  OVER THE MATTER IN  CONTROVERSY.  EACH OF  BORROWER  AND  FOOTHILL
WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO
ASSERT THE DOCTRINE OF FORUM NON  CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT
ANY  PROCEEDING  IS BROUGHT IN  ACCORDANCE  WITH THIS  SECTION 13.  BORROWER AND
FOOTHILL  HEREBY WAIVE THEIR  RESPECTIVE  RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF
THE TRANSACTIONS  CONTEMPLATED THEREIN,  INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS,  AND ALL OTHER COMMON LAW OR  STATUTORY  CLAIMS.  EACH OF
BORROWER  AND  FOOTHILL  REPRESENTS  THAT IT HAS  REVIEWED  THIS WAIVER AND EACH
KNOWINGLY AND VOLUNTARILY  WAIVES ITS JURY TRIAL RIGHTS  FOLLOWING  CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION,  A COPY OF THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

         14.      DESTRUCTION OF BORROWER'S DOCUMENTS.

                  All documents,  schedules,  invoices,  agings, or other papers
delivered to Foothill  may be  destroyed or otherwise  disposed of by Foothill 4
months after they are
delivered to or received by Foothill,  unless Borrower requests, in writing, the
return of said documents,  schedules, or other papers and makes arrangements, at
Borrower's expense, for their return.

         15.      GENERAL PROVISIONS.

                  15.1 Effectiveness. This Agreement shall be binding and deemed
effective when executed by Borrower and Foothill.

                  15.2  Successors and Assigns.  This  Agreement  shall bind and
inure to the  benefit of the  respective  successors  and assigns of each of the
parties;  provided,  however, that Borrower may not assign this Agreement or any

<PAGE>

rights or duties  hereunder  without  Foothill's  prior written  consent and any
prohibited  assignment  shall be absolutely void. No consent to an assignment by
Foothill shall release Borrower from its  Obligations.  Foothill may assign this
Agreement and its rights hereunder,  and may delegate its duties hereunder,  and
no consent or approval by  Borrower  is  required  in  connection  with any such
assignment and delegation to an Eligible Transferee. Foothill reserves the right
to sell, assign, transfer, negotiate, or grant participations in all or any part
of, or any  interest in  Foothill's  rights and benefits  hereunder  without the
requirement of consent of Borrower.  In connection  with any such  assignment or
participation,  Foothill  may  disclose  all  documents  and  information  which
Foothill now or hereafter may have relating to Borrower or Borrower's  business.
To the extent that  Foothill  assigns or  delegates  its rights and  obligations
hereunder to a third Person that is an Eligible Transferee,  Foothill thereafter
shall be released from such assigned or delegated  obligations  to Borrower and,
to such  extent,  such  assignment  shall  effect a novation  between  Borrower,
Foothill, and such third Person.

                  15.3  Section  Headings.  Headings  and numbers  have been set
forth  herein for  convenience  only.  Unless the  contrary is  compelled by the
context,  everything  contained in each section  applies  equally to this entire
Agreement.

                  15.4   Interpretation.   Neither   this   Agreement   nor  any
uncertainty or ambiguity  herein shall be construed or resolved against Foothill
or  Borrower,  whether  under  any rule of  construction  or  otherwise.  On the
contrary, this Agreement has been reviewed by all parties and shall be construed
and  interpreted  according to the  ordinary  meaning of the words used so as to
fairly accomplish the purposes and intentions of all parties hereto.

                  15.5  Severability  of  Provisions.  Each  provision  of  this
Agreement  shall be severable  from every other  provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.

                  15.6 Amendments in Writing. This Agreement can only be amended
by a writing signed by both Foothill and Borrower.

                  15.7 Counterparts; Telefacsimile Execution. This Agreement may
be executed in any number of counterparts  and by different  parties on separate
counterparts,  each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same  Agreement.  Delivery of an executed  counterpart  of this Agreement by
telefacsimile  shall be equally as effective as delivery of an original executed
counterpart of this Agreement.  Any party delivering an executed  counterpart of
this  Agreement  by  telefacsimile  also  shall  deliver  an  original  executed
counterpart  of this  Agreement but the failure to deliver an original  executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.

                  15.8  Revival  and   Reinstatement  of  Obligations.   If  the
incurrence  or payment of the  Obligations  by Borrower or any  guarantor of the

<PAGE>

Obligations or the transfer by either or both of such parties to Foothill of any
property of either or both of such parties should for any reason subsequently be
declared  to be void or  voidable  under any state or federal  law  relating  to
creditors'  rights,  including  provisions  of the  Bankruptcy  Code relating to
fraudulent conveyances,  preferences, and other voidable or recoverable payments
of money or transfers of property (collectively,  a "Voidable Transfer"), and if
Foothill is required to repay or restore, in whole or in part, any such Voidable
Transfer, or elects to do so upon the reasonable advice of its counsel, then, as
to any such Voidable  Transfer,  or the amount thereof that Foothill is required
or elects to repay or restore,  and as to all reasonable  costs,  expenses,  and
attorneys fees of Foothill  related  thereto,  the liability of Borrower or such
guarantor  automatically  shall be revived,  reinstated,  and restored and shall
exist as though such Voidable Transfer had never been made.

                  15.9 Integration. This Agreement, together with the other Loan
Documents,  reflects the entire understanding of the parties with respect to the
transactions  contemplated  hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.

                                                   



<PAGE>


                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Agreement to be executed as of the date first written above.


                                            ONEITA INDUSTRIES, INC.,
                                            a Delaware corporation


                                            By__________________________________

                                            Title:______________________________


                                            ONEITA-KINSTON CORP.,
                                            a North Carolina corporation


                                            By__________________________________

                                            Title:______________________________


                                            FOOTHILL CAPITAL CORPORATION,
                                            a California corporation


                                            By__________________________________

                                            Title:______________________________