Document:

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                                                                   EXHIBIT 10.27

                                    AGREEMENT

This Agreement made the 6th day of December, 2004 between STERLITE INDUSTRIES
(INDIA) LIMITED, a Company incorporated and registered under the Companies Act,
1956 and having its Registered Office at B 10/4 Waluj, MIDC Industrial Area,
Waluj, District Aurangabad 431 133, and Corporate Office at 'Vedanta', 75 Nehru
Road, Vile Parle (East), Mumbai - 400 099 (hereinafter referred to as "THE
COMPANY") of the ONE PART and MR. TARUN JAIN Indian inhabitant residing at 411,
Akshay Giri Kunj, Pali Ram Road, Opp. Andheri (West) Railway Station, Andheri
(West), Mumbai - 400 058 (hereinafter referred to as "WHOLE TIME DIRECTOR") of
the OTHER PART.

WHEREAS:

The Board of Directors at their meeting held on 24th November, 2004 have
appointed Mr. Tarun Jain as a "WHOLE TIME DIRECTOR" of the Company with effect
from November 24, 2004 till November 23, 2009 for a period of five (5) years and
Mr. Tarun Jain has agreed to the said appointment upon the terms and conditions
hereinafter contained.

The appointment and remuneration of the Whole Time Director is subject to the
approval of the Members at the General Meeting of the Company.

NOW THIS AGREEMENT WITNESSETH AND IT IS HEREBY AGREED BY AND BETWEEN THE PARTIES
HERETO AS FOLLOWS:

1.   The Company hereby approves the appointment of Mr. Tarun Jain as a 'WHOLE
     TIME DIRECTOR' from the 24th day of November, 2004 till 23rd day of
     November, 2009 subject to such appointment being determined earlier in
     accordance with the provisions of this Agreement.

2.   Mr. Tarun Jain, Whole Time Director of the Company is entitled to exercise
     all such powers and to do all such acts and things which the company is
     authorised, subject to the provisions of the Companies Act, 1956 as well as
     the provisions of the Memorandum of Association and Articles of Association
     of the Company. Provided that the Whole Time Director shall exercise his
     powers and do such acts, subject to the superintendence, direction and
     control of the Board of Directors.

3.   The Whole Time Director shall in consideration of his services to the
     Company be entitled to receive remuneration by way of salary, allowances,
     Bonus and perquisites as set out below:

I(a) Basic Salary              : In the range of Rs.4,00,000 - Rs. 10,00,000 per
                                 month.
                                 (With such annual/special increments within the
                                 aforesaid range as may be decided by the Board

                                        2

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                                 or any Committee thereof, in its absolute
                                 discretion and from time to time).

(b) Performance Incentive      : As may be determined by the Board or its
                                 Committee thereof in each year.

(c) Bonus               :        20% of the Basic salary in accordance with the
                                 rules of the Company.

(d) Perquisites         :        In addition to Basic salary, Bonus and
                                 performance incentives payable, Mr. Tarun Jain
                                 shall also be entitled to perquisites including
                                 furnished accommodation or house rent allowance
                                 in lieu thereof, personal allowance, medical
                                 and insurance reimbursement, leave travel
                                 concession for self and family, club fees and
                                 personal accident insurance in accordance with
                                 the rules of the Company or as may be agreed to
                                 by the Board of Directors or its Committee
                                 thereof.

     Explanation:

i)   Perquisities shall be evaluated as per Income Tax Rules, wherever
     applicable and in the absence of any such rule, perquisites shall be
     evaluated at actual cost to the Company.

ii)  For the purpose of perquisites stated hereinabove, 'family' means the
     spouse, dependent children and dependent parents of the appointee.

     II)  Provident Fund and Superannuation Fund or Annuity Fund.

     Mr. Tarun Jain will also be entitled to following perquisites as per rules
     of the Company or as agreed by the Directors which will not be included in
     the computation of the ceiling of remuneration as above

     i)   Contribution to Provident Fund and Superannuation Fund or Annuity Fund
          to the extent these, either singly or put together are not taxable
          under the Income Tax Act, 1961.
     ii)  Gratuity payable as per rules of the Company.
     iii) Encashment of leave as per rules of the Company.

III) Other Benefits:

i)   The Company shall provide a car, expenses relating to fuel maintenance and
     driver will be reimbursed on actuals. Further the Company shall also
     provide telephones and other communication facility (for official
     business).
ii)  Such other benefits as may be decided by the Board or its Committee from
     time to time.

                                        3

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In accordance with the resolution, within the aforesaid limits, the amount of
salary and perquisites payable to Mr. Tarun Jain will be decided/varied by the
Board of directors or its Committee thereof, from time to time as it may deem
fit in its absolute discretion.

Minimum Remuneration

In the event of any loss or inadequacy of profits in any financial year during
his tenure the Company shall remunerate by way of salary, perquisites or any
other allowance as specified above.

Apart from the remuneration aforesaid he shall be entitled to reimbursement of
expenses incurred in connection with the business of the Company.

Mr. Tarun Jain shall not be retiring by rotation as a Director.

No sitting fees shall be paid to him for attending the meeting of the Board of
Directors or Committee thereof of the Company.

4.   The Whole Time Director shall throughout the term of this Agreement devote
     his full time and attention to the business of the Company, and shall in
     all respects conform to and comply with the directions and regulations made
     by the Board of Directors and rules of the Company and shall well and
     faithfully serve the Company and use his utmost endeavour to promote the
     interests thereof.

5.   The Whole Time Director shall during the term of this Agreement and at all
     times thereafter keep strictly confidential and shall not divulge,
     disclose, make known or communicate to any person or persons, firm, Company
     or concerns (unless required by the Board or except in the ordinary course
     of business and/or to those of the officials of the Company whose province
     it is to know the same) or himself make use of any and all information
     relating to the Company or any of its holding company, subsidiary or
     affiliate including its business activities, technologies, designs,
     processes and related matters which he may acquire, receive or obtain or
     which may come to his knowledge in the course of or by reason of his
     appointment hereunder.

6.   Notwithstanding anything contrary herein contained or implied, the Company
     shall be entitled to terminate the employment of the Whole Time Director
     under this Agreement forthwith by notice in writing:-

     i)   If he becomes insolvent or make any composition or arrangement with
          his creditors;

     ii)  If he commits a material breach of any of the terms, provisions or
          conditions herein; or

     iii) If he becomes disqualified to act as a director for any reason, other
          than an inadvertent breach of Section 283 of the Companies Act, 1956.

                                        4

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7.   The Whole Time Director shall not, so long as he functions as such become
     interested or otherwise concerned directly or through his wife and children
     in any selling agency of the Company in future without the prior approval
     of the Central Government.

8.   Notwithstanding anything to the contrary contained in this Agreement,
     either party shall be entitled to determine this Agreement by giving not
     less than 90 days prior notice in writing in that behalf to the other
     party, or 90 days salary in lieu thereof and on the expiry of the period of
     such notice this Agreement shall stand terminated.

IN WITNESS WHEREOF the Company has caused its Common Seal to be hereunto affixed
and the Mr. Tarun Jain, Whole Time Director has hereunto set his hand and seal
the day and year first herein above written.

The Common Seal of the above named
STERLITE INDUSTRIES (INDIA)
LIMITED has been affixed hereunto
pursuant to a Resolution passed by its Board      /s/ Navin Agarwal
of Directors in that behalf at their meeting
held on 24th November, 2004 in the presence
of MR. Navin Agarwal
of the Company who in token thereof has set
and subscribed his signatures hereto.

Signed and delivered by the above named
Whole Time Director, MR. TARUN JAIN               /s/ Tarun Jain
in the presence of:

Ms. Kavitha Pillar
   -----------------------------

                                        5EXHIBIT 10.37

                      AMENDED AND RESTATED REVOLVING CREDIT
                                    AGREEMENT

                          DATED AS OF NOVEMBER 9, 2006

                                      AMONG

                     QUAKER FABRIC CORPORATION OF FALL RIVER

                                  AS BORROWER,

                  BANK OF AMERICA, N.A., AND THE OTHER LENDING
                    INSTITUTIONS LISTED ON SCHEDULE 1 HERETO,

                                       AND

                              BANK OF AMERICA, N.A.

         AS ADMINISTRATIVE AGENT, ISSUING BANK AND CASH MANAGEMENT BANK

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                                TABLE OF CONTENTS

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<TABLE>
<CAPTION>

<S>                                                                                                             <C>
1.       DEFINITIONS AND RULES OF INTERPRETATION.................................................................1

         1.1.     Definitions....................................................................................1
         1.2.     Rules of Interpretation.......................................................................22

2.       REVOLVING LOANS........................................................................................23

         2.1.     Revolving Loans...............................................................................23
         2.2.     Commitment Fee................................................................................23
         2.3.     Reduction of Commitments......................................................................23
         2.4.     The Revolving Notes...........................................................................24
         2.5.     Interest on Revolving Loans...................................................................24
         2.6.     Requests for Revolving Loans..................................................................25
                  2.6.1.   General..............................................................................25
                  2.6.2.   Swing Line...........................................................................25
         2.7.     Conversion Options............................................................................25
                  2.7.1.   Conversion to Different Type of Revolving Loan.......................................25
                  2.7.2.   Continuation of Type of Revolving Loan...............................................26
                  2.7.3.   LIBOR Rate Loans.....................................................................26
         2.8.     Funds for Revolving Loans.....................................................................26
                  2.8.1.   Funding Procedures for Revolving Loans...............................................26
                  2.8.2.   Advances by Administrative Agent for Revolving Loans.................................26
         2.9.     Change in Borrowing Base......................................................................27
         2.10.    Settlements...................................................................................27
                  2.10.1.  General..............................................................................27
                  2.10.2.  Failure to Make Funds Available......................................................27
                  2.10.3.  No Effect on Other Lenders...........................................................28
         2.11.    Repayments of Revolving Loans Prior to Event of Default.......................................28
                  2.11.1.  Credit for Funds Received in Concentration Account...................................28
                  2.11.2.  Application of Payments Prior to Event of Default....................................29
         2.12.    Repayments of Loans After Event of Default....................................................29
         2.13.    [Intentionally Omitted].......................................................................30
         2.14.    [Intentionally Omitted].......................................................................30
         2.15.    [Intentionally Omitted].......................................................................30
         2.16.    Administrative Agent Advances.................................................................30

3.       REPAYMENT OF LOANS.....................................................................................30

         3.1.     Revolving Loans...............................................................................30
                  3.1.1.   Maturity.............................................................................30
                  3.1.2.   Mandatory Repayments of Revolving Loans..............................................30
                  3.1.3.   Optional Repayments of Revolving Loans...............................................31
         3.2.     Mandatory Prepayments.........................................................................31
                  3.2.1.   Additional Mandatory Prepayments of Revolving Loans..................................31

4.       LETTERS OF CREDIT......................................................................................32

         4.1.     Letter of Credit Commitments..................................................................32
                  4.1.1.   Commitment to Issue Letters of Credit................................................32
                  4.1.2.   Letter of Credit Applications........................................................32
                  4.1.3.   Terms of Letters of Credit...........................................................32
                  4.1.4.   Reimbursement Obligations of Lenders.................................................33
                  4.1.5.   Participations of Lenders............................................................33
         4.2.     Reimbursement Obligation of the Borrower......................................................33
         4.3.     Letter of Credit Payments.....................................................................34
         4.4.     Obligations Absolute..........................................................................35
         4.5.     Reliance by Issuer............................................................................35
         4.6.     Letter of Credit Fee..........................................................................35
         4.7.     Existing Letters of Credit....................................................................36
</TABLE>

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<TABLE>
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<S>                                                                                                            <C>
5.       CERTAIN GENERAL PROVISIONS.............................................................................36

         5.1.     Fees..........................................................................................36
                  5.1.1.   Administrative Agent's Fee...........................................................36
                  5.1.2.   Closing Fee..........................................................................36
                  5.1.3.   Other Fees...........................................................................36
         5.2.     Funds for Payments............................................................................36
                  5.2.1.   Payments to Administrative Agent.....................................................36
                  5.2.2.   No Offset, etc.......................................................................36
                  5.2.3.   Non-U.S. Lenders.....................................................................37
         5.3.     Computations..................................................................................37
         5.4.     Interest Limitation...........................................................................38
         5.5.     Inability to Determine LIBOR Rate.............................................................38
         5.6.     Illegality....................................................................................38
         5.7.     Additional Costs, etc.........................................................................38
         5.8.     Capital Adequacy..............................................................................40
         5.9.     Certificate...................................................................................40
         5.10.    Indemnity.....................................................................................40
         5.11.    Interest After Default........................................................................40
         5.12.    Collateral Security and Guaranties............................................................41

6.       REPRESENTATIONS AND WARRANTIES.........................................................................41

         6.1.     Corporate Authority, Etc......................................................................41
                  6.1.1.   Existence, Good Standing.............................................................41
                  6.1.2.   Authorization........................................................................41
                  6.1.3.   Delivery.............................................................................42
                  6.1.4.   Enforceability.......................................................................42
         6.2.     Financial Statements; Projections.............................................................42
         6.3.     Solvency......................................................................................43
         6.4.     No Material  Adverse Changes, etc.............................................................43
         6.5.     Absence of Mortgages and Liens................................................................43
         6.6.     Franchises, Patents, Copyrights, etc..........................................................44
         6.7.     Litigation....................................................................................44
         6.8.     No Materially Adverse Contracts, etc..........................................................44
         6.9.     Compliance with Other Instruments, Laws, etc..................................................44
         6.10.    Tax Status....................................................................................44
         6.11.    No Default or Event of Default................................................................44
         6.12.    Holding Company and Investment Company Acts...................................................45
         6.13.    Employee Benefit Plans........................................................................45
                  6.13.1.  In General...........................................................................45
                  6.13.2.  Terminability of Welfare Plans.......................................................45
                  6.13.3.  Guaranteed Pension Plans.............................................................45
                  6.13.4.  Multiemployer Plans..................................................................45
         6.14.    Regulations U and X...........................................................................46
         6.15.    True Copies of Governing Documents............................................................46
         6.16.    Fiscal Year...................................................................................46
         6.17.    Perfection of Security Interest...............................................................46
         6.18.    Subsidiaries, etc.............................................................................46
         6.19.    Environmental Compliance......................................................................46
         6.20.    Bank Accounts.................................................................................48
         6.21.    Labor Contracts...............................................................................48
         6.22.    Disclosure....................................................................................48
         6.23.    Title to Properties; Leases...................................................................48
         6.24.    Certain Transactions..........................................................................49
         6.25.    Foreign Assets Control Regulations, Etc.......................................................49
         6.26.    Compliance....................................................................................49
         6.27.    Contracts.....................................................................................50
         6.28.    Utilities and Public Access...................................................................50
         6.29.    Physical Condition............................................................................50
</TABLE>
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<TABLE>
<CAPTION>
<S>                                                                                                            <C>
7.       AFFIRMATIVE COVENANTS OF THE PARENT AND THE BORROWER...................................................50

         7.1.     Punctual Payment..............................................................................50
         7.2.     Maintenance of Office.........................................................................50
         7.3.     Records and Accounts..........................................................................51
         7.4.     Financial Statements, Certificates and Information............................................51
         7.5.     Notices.......................................................................................53
                  7.5.1.   Defaults.............................................................................53
                  7.5.2.   Notice of Litigation and Judgments...................................................53
                  7.5.3.   Notification of Claim Against Collateral.............................................54
                  7.5.4.   Notices Concerning Inventory Collateral..............................................54
                  7.5.5.   Notification of Additional Intellectual Property Rights..............................54
                  7.5.6.   Environmental Events.................................................................54
                  7.5.7.   Notification Regarding the Real Property.............................................54
         7.6.     Legal Existence; Maintenance of Properties....................................................55
         7.7.     Insurance.....................................................................................55
         7.8.     Taxes.........................................................................................55
         7.9.     Compliance with Laws, Contracts, Licenses, and Permits........................................56
         7.10.    Employee Benefit Plans........................................................................56
         7.11.    Use of Proceeds...............................................................................56
         7.12.    Certain Changes...............................................................................56
         7.13.    Conduct of Business...........................................................................56
         7.14.    Further Assurances............................................................................56
         7.15.    Inspection of Properties and Books, etc.......................................................57
                  7.15.1.  General..............................................................................57
                  7.15.2.  Appraisals...........................................................................57
                  7.15.3.  Communications with Accountants......................................................57
                  7.15.4.  Environmental Assessments............................................................57
         7.16.    Additional Mortgaged Property.................................................................58
         7.17.    Bank Accounts.................................................................................58
                  7.17.1.  General..............................................................................58
         7.18.    Domestic Subsidiaries.........................................................................59
         7.19.    [Intentionally Omitted].......................................................................59
         7.20.    Financial Consultant..........................................................................59
</TABLE>

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<TABLE>
<CAPTION>
<S>                                                                                                            <C>
8.       NEGATIVE COVENANTS OF THE PARENT AND THE BORROWER......................................................59

         8.1.     Investments...................................................................................59
         8.2.     Restrictions on Indebtedness..................................................................60
         8.3.     Restrictions on Liens.........................................................................61
                  8.3.1.   Permitted Liens......................................................................61
                  8.3.2.   Restrictions on Negative Pledges and Upstream Limitations............................62
         8.4.     Restricted Payments...........................................................................62
         8.5.     Merger, Consolidation and Disposition of Assets...............................................62
                  8.5.1.   Mergers and Acquisitions.............................................................62
                  8.5.2.   Disposition of Assets................................................................62
         8.6.     Sale and Leaseback............................................................................63
         8.7.     Change of Fiscal Year.........................................................................63
         8.8.     Employee Benefit Plans........................................................................63
         8.9.     Compliance with Environmental Laws............................................................63
         8.10.    Change in Terms of Governing Documents........................................................63
         8.11.    Creation of Subsidiaries......................................................................63
         8.12.    Transactions with Affiliates..................................................................64
         8.13.    Agency Account................................................................................64
         8.14.    Business Activities...........................................................................65
         8.15.    Changes Relating to Term Loan Documents.......................................................65

9.       FINANCIAL COVENANTS OF THE PARENT AND THE BORROWER.....................................................65

         9.1.     Fixed Charge Coverage Ratio...................................................................65
         9.2.     [Intentionally Omitted].......................................................................65
         9.3.     Capital Expenditures..........................................................................65

10.      CLOSING CONDITIONS.....................................................................................65

         10.1.    Loan Documents................................................................................66
         10.2.    Certified Copies of Governing Documents.......................................................66
         10.3.    Corporate or Other Action.....................................................................66
         10.4.    Incumbency Certificate........................................................................66
         10.5.    Validity of Liens.............................................................................66
         10.6.    Perfection Certificates and UCC Search Results................................................66
         10.7.    Certificates of Insurance.....................................................................66
         10.8.    Agency Account Agreements.....................................................................66
         10.9.    Borrowing Base and Collateral Update Certificates.............................................67
         10.10.   Accounts Receivable Aging Report..............................................................67
         10.11.   Payment of Closing Fees.......................................................................67
         10.12.   Existing Credit Agreement.....................................................................67
         10.13.   Intercreditor Agreement; Term Loan Documents..................................................67
         10.14.   Opinions of Counsel...........................................................................67
         10.15.   [Intentionally Omitted].......................................................................67
         10.16.   [Intentionally Omitted].......................................................................67
         10.17.   [Intentionally Omitted].......................................................................67
         10.18.   [Intentionally Omitted].......................................................................67
         10.19.   No Material Adverse Change....................................................................68
         10.20.   Landlord Waivers..............................................................................68
         10.21.   Landlord Consents.............................................................................68
         10.22.   Collateral Examinations/Appraisals............................................................68
         10.23.   Financial Statement and Projections...........................................................68
</TABLE>
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<TABLE>
<CAPTION>

<S>                                                                                                             <C>
11.      CONDITIONS TO ALL BORROWINGS...........................................................................68

         11.1.    Representations True; No Default or Event of Default..........................................68
         11.2.    No Legal Impediment...........................................................................68
         11.3.    Governmental Regulation.......................................................................68
         11.4.    Proceedings and Documents.....................................................................69
         11.5.    Payment of Fees...............................................................................69
         11.6.    Exchange Limitations..........................................................................69
         11.7.    Validity of Liens.............................................................................69
         11.8.    Financial Covenants...........................................................................69

12.      EVENTS OF DEFAULT; ACCELERATION; ETC...................................................................69

         12.1.    Events of Default and Acceleration............................................................69
         12.2.    Termination of Commitments....................................................................72
         12.3.    Remedies......................................................................................72
         12.4.    Distribution of Collateral Proceeds...........................................................73

13.      SETOFF.................................................................................................74

14.      THE ADMINISTRATIVE AGENT...............................................................................74

         14.1.    Authorization.................................................................................74
         14.2.    Employees and Administrative Agents...........................................................75
         14.3.    No Liability..................................................................................75
         14.4.    No Representations............................................................................75
                  14.4.1.  General..............................................................................75
                  14.4.2.  Closing Documentation, etc...........................................................76
         14.5.    Payments......................................................................................76
                  14.5.1.  Payments to Administrative Agent.....................................................76
                  14.5.2.  Distribution by Administrative Agent.................................................76
                  14.5.3.  Delinquent Lenders...................................................................76
         14.6.    Holders of Letters of Credit Participation....................................................77
         14.7.    Indemnity.....................................................................................77
         14.8.    Administrative Agent as Lender................................................................77
         14.9.    Resignation...................................................................................77
         14.10.   Notification of Defaults and Events of Default................................................78
         14.11.   Duties in the Case of Enforcement.............................................................78
         14.12.   Administrative Agent May File Proofs of Claim.................................................78

</TABLE>
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<TABLE>
<CAPTION>
<S>                                                                                                            <C>
15.      EXPENSES...............................................................................................79

16.      INDEMNIFICATION........................................................................................80

17.      SURVIVAL OF COVENANTS, ETC.............................................................................80

18.      ASSIGNMENT AND PARTICIPATION...........................................................................81

         18.1.    General Conditions............................................................................81
         18.2.    Assignments...................................................................................81
         18.3.    Register......................................................................................82
         18.4.    Participations................................................................................82
         18.5.    Payments to Participants......................................................................82
         18.6.    Miscellaneous Assignment Provisions...........................................................82
         18.7.    Assignee or Participant Affiliated with the Parent............................................83
         18.8.    New Notes.....................................................................................83
         18.9.    Special Purpose Funding Vehicle...............................................................83

19.      NOTICES, ETC...........................................................................................84

20.      GOVERNING LAW..........................................................................................85

21.      HEADINGS...............................................................................................85

22.      COUNTERPARTS...........................................................................................85

23.      ENTIRE AGREEMENT, ETC..................................................................................85

24.      WAIVER OF JURY TRIAL...................................................................................85

25.      CONSENTS, AMENDMENTS, WAIVERS, ETC.....................................................................86

26.      SEVERABILITY...........................................................................................87

27.      CONFIDENTIALITY........................................................................................87

28.      USA PATRIOT ACT........................................................................................89

29.      DESIGNATION OF PERMITTED LIENS.........................................................................89

30.      TRANSITIONAL ARRANGEMENTS..............................................................................89

</TABLE>

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                        SCHEDULES AND EXHIBITS

Schedule 1            Lenders, Commitment Percentages, Lending Offices
Schedule 1.1(a)       Mortgaged Properties
Schedule 1.2          Certain Account Debtors
Schedule 4.7          Existing Letters of Credit
Schedule 6.6          Intellectual Property
Schedule 6.7          Litigation
Schedule 6.8          Material Adverse Contracts
Schedule 6.10         Municipal Taxes
Schedule 6.13.1       Employment Matters
Schedule 6.18         Subsidiaries
Schedule 6.19(a)      Environmental Notices
Schedule 6.19(b)      Material Environmental Notices
Schedule 6.19(e)      Material Environmental Reports
Schedule 6.20         Bank Accounts
Schedule 6.21         Labor Contracts
Schedule 6.23         Title to Properties
Schedule 8.1          Existing Investments
Schedule 8.2          Existing Indebtedness
Schedule 8.3.1        Existing Liens
Schedule 10.20(a)     Landlord Waivers

Exhibit A             Form of Loan Request
Exhibit B             Form of Compliance Certificate
Exhibit C             Form of Assignment and Acceptance
Exhibit D-1           Form of Borrowing Base Certificate
Exhibit D-2           Form of Collateral Update Certificate
Exhibit D-3           Form of Accounts Receivable/Loan Reconciliation Report
Exhibit E             Form of Revolving Note

<PAGE>

                 AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT

         THIS  AMENDED  AND  RESTATED  REVOLVING  CREDIT  AGREEMENT  dated as of
November 9, 2006 is by and among  Quaker  Fabric  Corporation  of Fall River,  a
Massachusetts  corporation  (the  "Borrower"),   Quaker  Fabric  Corporation,  a
Delaware corporation (the "Parent"), Bank of America, N.A. and the other Lenders
from time to time party  hereto and Bank of  America,  N.A.,  as  Administrative
Agent, Issuing Bank and Cash Management Bank.

         WHEREAS,  the Borrower,  the Parent,  the Lenders,  the  Administrative
Agent,  the  Issuing  Bank and the Cash  Management  Bank  are  parties  to that
Existing  Credit  Agreement  (as  hereinafter  defined),  pursuant  to which the
Lenders have made loans and other extensions of credit to the Borrower.

         WHEREAS,  the Lenders  are  willing to amend and  restate the  Existing
Credit Agreement, and the Lenders are willing to make loans and other extensions
of credit to the Borrower, all on the terms and conditions set forth herein.

         NOW THEREFORE,  in consideration  of the foregoing,  and for other good
and  valuable  consideration,  the  receipt and  sufficiency  of which is hereby
acknowledged  (these  recitals being an integral part of this Credit  Agreement)
the Borrower,  the Parent,  the Administrative  Agent, the Lenders,  the Issuing
Bank and the Cash  Management Bank hereby agree that, as of the Closing Date (as
defined below),  the Existing Credit  Agreement shall be amended and restated in
its  entirety and shall remain in full force and effect only as set forth herein
and the parties hereto hereby agree as follows:

         The parties hereto agree as follows:

                  1. DEFINITIONS AND RULES OF INTERPRETATION.

         1.1. DEFINITIONS. The following terms shall have the meanings set forth
in this ss.1 or elsewhere in the provisions of this Credit Agreement referred to
below:

         ACCOUNTS RECEIVABLE.  All rights of a Person to payment for goods sold,
leased or otherwise  marketed in the ordinary  course of business and all rights
of a Person to payment for services  rendered in the ordinary course of business
and all sums of money or other  proceeds  due thereon  pursuant to  transactions
with account debtors recorded on books of account in accordance with GAAP.

         ACCOUNTS RECEIVABLE/LOAN RECONCILIATION REPORT. A certificate signed by
the senior  financial  officer (or  another  officer  designated  by such senior
financial  officer)  of the  Borrower in  substantially  the form of EXHIBIT D-3
hereto.

         ADMINISTRATIVE  AGENT. Bank of America,  acting as administrative agent
for the Lenders, and each other person appointed as the successor Administrative
Agent in accordance with ss.14.9.
<PAGE>

         ADMINISTRATIVE QUESTIONNAIRE. An Administrative Questionnaire in a form
supplied by the Administrative Agent.

         ADMINISTRATIVE AGENTS ADVANCES.  See ss.2.16.

         ADMINISTRATIVE AGENT'S FEE.  See ss.5.1.1.

         ADMINISTRATIVE   AGENT'S  OFFICE.  The  Administrative  Agent's  office
located at One Federal  Street,  Boston,  Massachusetts  02110, or at such other
location as the Administrative Agent may designate from time to time.

         ADMINISTRATIVE  AGENT'S  SPECIAL  COUNSEL.  Bingham  McCutchen  LLP  of
Boston,  Massachusetts  or  such  other  counsel  as  may  be  approved  by  the
Administrative Agent.

         AFFILIATE.  With respect to any Person, any other Person which directly
or indirectly,  controls,  is controlled by or is under common control with such
Person.  "Control"  means the power,  directly  or  indirectly,  (a) to vote ten
percent  (10%) or more of the  Capital  Stock  (on a fully  diluted  basis) of a
Person  having  ordinary  voting power for the election of  directors,  managing
members  or  general  partners  (as  applicable);  or (b) to direct or cause the
direction of the  management  and  policies of a Person  (whether by contract or
otherwise).

         AGENCY ACCOUNT AGREEMENT.  See ss.7.17.1.

         AMENDMENT  AND  REAFFIRMATION  OF LOAN  DOCUMENTS.  The  Amendment  and
Reaffirmation  of Loan  Documents,  dated  as of the  Closing  Date,  among  the
Borrower,  the Guarantors and the  Administrative  Agent,  in form and substance
satisfactory to the Administrative Agent.

         APPLICABLE MARGIN. With respect to (a) Base Rate Loans, 1.25%, and (b),
with respect to LIBOR Rate Loans, 2.75%.

         APPLICABLE PENSION LEGISLATION.  At any time, any pension or retirement
benefits  legislation  (be it  national,  federal,  provincial,  territorial  or
otherwise) then applicable to the Parent or any of its Subsidiaries.

         APPROVED  FUND.  Any Fund  that is  administered  or  managed  by (a) a
Lender,  (b) an  Affiliate  of a Lender or (c) an entity or an  Affiliate  of an
entity that administers or manages a Lender.

         ARRANGER. Banc of America Securities LLC.

         ASSET  SALE.  Any one or series of  related  transactions  in which the
Parent or any of its Subsidiaries conveys,  sells, leases, licenses or otherwise
disposes of, directly or indirectly, any of its properties, businesses or assets
(including the sale or issuance of Capital Stock of any Subsidiary other than to
the Parent) whether owned on the Closing Date or thereafter acquired.

         ASSIGNMENT AND ACCEPTANCE. An assignment and acceptance entered into by
a Lender and an Eligible  Assignee  (with the consent of any party whose consent
is  required  by  ss.18.2),   and  accepted  by  the  Administrative  Agent,  in
substantially  the  form  of  EXHIBIT  C or  any  other  form  approved  by  the
Administrative Agent.

         AVAILABILITY  RESERVE.  The sum of (a)  $4,250,000  PLUS (b)  $0.75 for
every $1.00 released from the Environmental Escrow Funds (as defined in the Term
Loan Agreement as in effect on the date hereof),  other than amounts released to
fund  Remediation  Costs (as defined in the Term Loan  Agreement as in effect on
the date hereof).

         BALANCE SHEET DATE.  September 30, 2006.

         BANK OF AMERICA.  Bank of America, N.A and its successors and assigns.

<PAGE>

         BASE RATE.  The higher of (i) the  variable  annual rate of interest so
designated  from time to time by Bank of America as its "prime rate",  such rate
being a reference rate and not necessarily  representing the lowest or best rate
being charged to any customer, and (ii) one-half of one percent (0.5%) above the
Federal Funds  Effective  Rate.  For the purposes of this  definition,  "FEDERAL
FUNDS  EFFECTIVE  RATE" shall mean for any day,  the rate per annum equal to the
weighted  average of the rates on  overnight  federal  funds  transactions  with
members of the Federal  Reserve  System  arranged by federal funds  brokers,  as
published  for such day (or,  if such day is not a  Business  Day,  for the next
preceding  Business  Day) by the Federal  Reserve Bank of New York,  or, if such
rate is not so published  for any day that is a Business Day, the average of the
quotations  for such day on such  transactions  received  by the  Administrative
Agent  from  three  funds  brokers  of  recognized   standing  selected  by  the
Administrative  Agent.  Changes in the Base Rate  resulting  from any changes in
Bank of America's  "PRIME RATE" shall take place  immediately  without notice or
demand of any kind.

         BASE RATE LOANS.  All or any  portion of the  Revolving  Loans  bearing
interest calculated by reference to the Base Rate.

         BORROWER. As defined in the preamble hereto.

         BORROWING BASE. As of any date of determination, an amount equal to the
result of the following:

                  (a)  eighty-five  percent  (85%) of the net amount of Eligible
Accounts Receivable of the Borrower outstanding at such date; PLUS

                  (b) the lesser of

                           (i) $12,500,000 and

                           (ii) the sum of

                                    (A) the  lesser  of (x) 65% of the Net  Book
                                    Value of Eligible  Finished Goods  Inventory
                                    of the  Borrower,  determined  in accordance
                                    with  GAAP  and (y)  85% of the Net  Orderly
                                    Liquidation Value of Eligible Finished Goods
                                    Inventory of the Borrower; PLUS

                                    (B) the  lesser  of (x) 35% of the Net  Book
                                    Value of Eligible Raw Materials Inventory of
                                    the  Borrower,  in each case,  determined in
                                    accordance  with GAAP and (y) 85% of the Net
                                    Orderly  Liquidation  Value of Eligible  Raw
                                    Materials Inventory of the Borrower; MINUS

                  (c) the Availability Reserve; MINUS

                  (d) Reserves.

The  Administrative  Agent may, from time to time in its sole discretion (not to
be  exercised  unreasonably),  (x) reduce the lending  formula  with  respect to
Eligible   Accounts   Receivable   of  the  Borrower  to  the  extent  that  the
Administrative  Agent  determines  that:  (i) the  dilution  with respect of the
Accounts Receivable of the Borrower for any period has increased in any material
respect or may be  reasonably  anticipated  to increase in any material  respect
above historical levels, or (ii) the general creditworthiness of account debtors
or other  obligors  of the  Borrower  has  declined  or (y) reduce  the  lending
formula(s) with respect to Eligible Inventory of the Borrower to the extent that
the Administrative Agent determines that: (i) the number of days of the turnover
of the  inventory  of the  Borrower  for any period has changed in any  material
adverse  respect,  (ii) the liquidation  value of the Eligible  Inventory of the
Borrower,  or any  category  thereof,  has  decreased,  or (iii) the  nature and
quality of the  inventory  of the  Borrower  has  deteriorated  in any  material
respect or the mix of such  inventory  has changed  materially.  In  determining
whether to reduce the lending formula(s),  the Administrative Agent may consider
events,  conditions,  contingencies  or  risks  which  are  also  considered  in
determining Eligible Accounts Receivable of the Borrower,  Eligible Inventory of
the Borrower or in establishing the Reserves.
<PAGE>

         BORROWING  BASE  CERTIFICATE.   A  certificate  signed  by  the  senior
financial  officer  (or another  officer  designated  by such  senior  financial
officer) of the Borrower demonstrating  calculation of the Borrowing Base in the
form of EXHIBIT D-1 hereto.

         BUSINESS  DAY.  Any day on which  commercial  banking  institutions  in
Boston, Massachusetts,  are open for the transaction of banking business and, in
the case of LIBOR Rate Loans, also a day which is a LIBOR Business Day.

         BUSINESS  PLAN. The "Quaker  Fabric Bank  Presentation"  by Alvarez and
Marsal,  dated May 19, 2006, as supplemented on September 29, 2006,  October 30,
2006 and November 9, 2006, as the same may be updated from time to time.

         CAPITAL ASSETS.  Fixed assets, both tangible (such as land,  buildings,
fixtures,  machinery and equipment) and intangible (such as patents, copyrights,
trademarks,  franchises  and  goodwill);  PROVIDED that Capital Assets shall not
include any item  customarily  charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with GAAP.

         CAPITAL  EXPENDITURES.  Amounts  paid or  Indebtedness  incurred by the
Parent or any  Subsidiary of the Parent in  connection  with (i) the purchase or
lease by the Parent or such  Subsidiary of Capital Assets that would be required
to be  capitalized  and shown on the balance  sheet of such Person in accordance
with GAAP or (ii) the lease of any  assets by the Parent or such  Subsidiary  as
lessee under any Synthetic  Lease to the extent that such assets would have been
Capital Assets had the Synthetic Lease been treated for accounting purposes as a
Capitalized Lease.

         CAPITALIZED  LEASES.  Leases  under  which  the  Parent  or  any of its
Subsidiaries  is the lessee or obligor,  the  discounted  future rental  payment
obligations  under which are required to be  capitalized on the balance sheet of
the lessee or obligor in accordance with GAAP.

         CAPITAL STOCK. Any and all shares,  interests,  participations or other
equivalents (however designated) of capital stock of a corporation,  any and all
equivalent  ownership  interests in a Person (other than a corporation)  and any
and all warrants,  rights or options to purchase any of the foregoing (including
convertible debt instruments).

         CASH MANAGEMENT BANK. Bank of America,  in its capacity as the provider
of cash management services to the Parent and its Subsidiaries.

         CASH  MANAGEMENT  OBLIGATIONS.  All  present  and  future  liabilities,
obligations  and  Indebtedness of the Parent and its  Subsidiaries  owing to any
Lender,  the  Administrative  Agent,  the Cash  Management Bank or any Affiliate
thereof under or in connection with any cash  management or related  services or
products provided by any Lender, the  Administrative  Agent, the Cash Management
Bank  or any  Affiliate  thereof  to or for the  account  of the  Parent  or any
Subsidiary  of  the  Parent,   including,   without   limitation,   liabilities,
obligations  or  Indebtedness  in respect of automated  clearing house and other
fund transfers,  checks, money orders, drafts, instruments,  funds, payments and
other items and forms of remittances  paid,  deposited or otherwise  credited to
any deposit,  disbursement  or other account of the Parent or any  Subsidiary of
the Parent,  any overdraft or other  extension of credit made to cover any funds
transfer,  check, draft, instrument or amount paid for the account or benefit of
the Parent or any Subsidiary of the Parent, and all fees, charges,  indemnities,
expenses  and  other  amounts  from  time  to  time  owing  to any  Lender,  the
Administrative  Agent,  the Cash  Management  Bank or any  Affiliate  thereof in
connection  therewith (all whether  accruing before or after the commencement of
any  bankruptcy  proceeding  by or against the Parent or any  Subsidiary  of the
Parent and regardless of whether allowed as a claim in any such proceeding).

<PAGE>

         CASUALTY EVENT. With respect to any property (including any interest in
property) of the Parent or any Subsidiary of the Parent, any loss of, damage to,
or  condemnation  or other taking of, such property for which the Parent or such
Subsidiary  receives  insurance  proceeds,  proceeds of a condemnation  award or
other compensation.

         CHANGE OF CONTROL.  An event or series of events by which:

                  (a) any  "person"  or  "group"  (as  such  terms  are  used in
         Sections  13(d) and 14(d) of the  Securities  Exchange Act of 1934, but
         excluding any employee benefit plan of such person or its subsidiaries,
         and any person or entity  acting in its  capacity as trustee,  agent or
         other fiduciary or administrator  of any such plan),  other than Nortex
         Holdings, Inc. or any Affiliate thereof, becomes the "beneficial owner"
         (as defined in Rules 13d-3 and 13d-5 under the Securities  Exchange Act
         of  1934,  except  that a  person  or group  shall  be  deemed  to have
         "beneficial  ownership" of all securities that such person or group has
         the right to acquire  (such  right,  an "OPTION  RIGHT"),  whether such
         right is  exercisable  immediately  or only after the passage of time),
         directly or indirectly,  of 30% or more of the equity securities of the
         Parent  entitled  to vote for  members  of the  board of  directors  or
         equivalent  governing body of the Parent on a fully-diluted  basis (and
         taking into account all such  securities  that such person or group has
         the right to acquire pursuant to any option right);

                  (b) during any period of 12 consecutive  months, a majority of
         the members of the board of  directors  or other  equivalent  governing
         body of the Parent  ceases to be composed of  individuals  (i) who were
         members of that board or equivalent  governing body on the first day of
         such  period,  (ii)  whose  election  or  nomination  to that  board or
         equivalent  governing body was approved by  individuals  referred to in
         clause  (i)  above  constituting  at  the  time  of  such  election  or
         nomination  at least a majority of that board or  equivalent  governing
         body or (iii)  whose  election  or  nomination  to that  board or other
         equivalent  governing body was approved by  individuals  referred to in
         clauses (i) and (ii) above constituting at the time of such election or
         nomination  at least a majority of that board or  equivalent  governing
         body (excluding,  in the case of both clause (ii) and clause (iii), any
         individual whose initial  nomination for, or assumption of office as, a
         member of that board or equivalent governing body occurs as a result of
         an actual or  threatened  solicitation  of proxies or consents  for the
         election  or  removal of one or more  directors  by any person or group
         other than a solicitation  for the election of one or more directors by
         or on behalf of the board of directors); or

                  (c) any  Person,  other  than  Nortex  Holdings,  Inc.  or any
         Affiliate thereof,  or two or more Persons acting in concert shall have
         acquired  by  contract  or  otherwise,  or shall  have  entered  into a
         contract or arrangement that, upon consummation thereof, will result in
         its or  their  acquisition  of  the  power  to  exercise,  directly  or
         indirectly,  a controlling influence over the management or policies of
         the  Parent,  or  control  over the  equity  securities  of the  Parent
         entitled to vote for members of the board of  directors  or  equivalent
         governing body of the Parent on a fully-diluted  basis (and taking into
         account all such  securities that such Person or group has the right to
         acquire  pursuant to any option right)  representing 30% or more of the
         combined voting power of such securities.
<PAGE>

         CLOSING  DATE.  The  first  date on which the  conditions  set forth in
ss.ss.10 and 11 have been  satisfied and any Loans are to be made or any Letters
of Credit are to be issued hereunder.

         CLOSING FEE.  See ss.5.1.2.

         CODE. The Internal Revenue Code of 1986.

         COLLATERAL.  All of the  property,  rights  and  interests  of (a)  the
Borrower,  (b) the Parent,  (c) each Subsidiary of the Parent, and (d) all other
Guarantors from time to time party to the  Guaranties,  that are or are intended
to be subject to the Liens created by the Security Documents.

         COLLATERAL  UPDATE  CERTIFICATE.  A  certificate  signed by the  senior
financial  officer  (or another  officer  designated  by such  senior  financial
officer) of the Borrower in substantially the form of EXHIBIT D-2 hereto.

         COMMITMENT.  With  respect to each  Lender,  (a) the Dollar  amount set
forth on SCHEDULE 1 hereto as the amount of such Lender's commitment (i) to make
Revolving  Loans  to the  Borrower  and  (ii) to  participate  in the  issuance,
extension  and  renewal  of  Letters  of Credit  issued  for the  account of the
Borrower or Quaker Textile, as the same may be reduced from time to time; or (b)
if such commitment is terminated pursuant to the provisions hereof, zero.

         COMMITMENT FEE.  See ss.2.2.

         COMMITMENT PERCENTAGE.  With respect to each Lender, the percentage set
forth on SCHEDULE 1 hereto reflecting such Lender's commitment to make Revolving
Loans and to  participate  in the issuance,  extension and renewal of Letters of
Credit issued for the account of the Borrower or Quaker Textile.

         COMPLIANCE CERTIFICATE.  See ss.7.4(d).

         CONCENTRATION ACCOUNT.  See ss.7.17.1.

         CONSOLIDATED  OR  CONSOLIDATED.  With  reference  to any  term  defined
herein,  shall mean that term as applied to the  accounts  of the Parent and its
Subsidiaries, consolidated in accordance with GAAP.

         CONSOLIDATED EBITDA. For any period, (a) the net income (or deficit) of
the Parent and its  Subsidiaries  (determined  on a  consolidated  basis without
duplication  in  accordance  with GAAP) for such period,  PLUS (b) to the extent
deducted in calculating  net income (i) income taxes accrued during such period,
(ii) interest and fees in respect of Indebtedness  (including amounts accrued or
paid in respect of  Derivative  Agreements)  during such period  (whether or not
actually paid in cash during such period), (iii) depreciation,  amortization and
other non-cash charges  (including  asset  impairment  charges) accrued for such
period,  (iv)  extraordinary  losses during such period,  (v) costs and expenses
incurred by the Parent and its  Subsidiaries  in  connection  with the  Parent's
retention of the Financial  Consultant  (as defined in ss.7.20),  (vi) severance
charges  incurred by the Parent and its  Subsidiaries,  (vii) up to $300,000 per
month  of  plant   consolidation   expenses   specifically   identified  to  the
satisfaction of the Administrative  Agent, and (viii) transaction costs incurred
during such period in connection with the transactions  contemplated  hereby and
in the Term Loan Agreement not to exceed $2,600,000 in the aggregate,  MINUS (c)
to the extent such items were added in calculating net income (i)  extraordinary
gains  during  such  period and (ii)  proceeds  received  during  such period in
respect  of  Casualty  Events  and  dispositions  of any  property  (other  than
dispositions in the ordinary course of business on ordinary business terms).
<PAGE>

         CONSOLIDATED  INTEREST  EXPENSE.  For  any  period,  the  sum,  without
duplication,  for the Parent and its Subsidiaries  (determined on a consolidated
basis without  duplication in accordance with GAAP),  of the following:  (a) all
interest in respect of  Indebtedness  required to be paid or accrued during such
period  (whether  or not  actually  paid  during  such  period),  but  excluding
capitalized debt acquisition  costs (including fees and expenses related to this
Credit  Agreement and the Term Loan  Agreement) PLUS (b) the net amounts payable
(or MINUS the net  amounts  receivable)  in  respect  of  Derivative  Agreements
accrued during such period (whether or not actually paid or received during such
period)  excluding  reimbursement  of legal fees and other  similar  transaction
costs and further excluding payments required by reason of the early termination
of  Derivative  Agreements  in  effect  on the date  hereof  PLUS (c) all  fees,
including  letter of credit fees and expenses (but  excluding  reimbursement  of
legal fees and any early termination fee paid by the Borrower pursuant to ss.2.3
of the Existing Credit Agreement in connection with the Borrower's  reduction of
the Total Commitment (as defined in the Existing Credit Agreement)  effective as
of February 3, 2006) incurred hereunder during such period.

         CONVERSION   REQUEST.   A  notice   given  by  the   Borrower   to  the
Administrative Agent of the Borrower's election to convert or continue a Loan in
accordance with ss.2.7.

         COPYRIGHT  MORTGAGE.  The  Memorandum of Grant of Security  Interest in
Copyrights,  dated as of the Original Closing Date, made by the Borrower and the
Guarantors  in  favor  of  the  Administrative  Agent,  in  form  and  substance
satisfactory to the Administrative Agent.

         CREDIT AGREEMENT. This Amended and Restated Revolving Credit Agreement,
including the Schedules and Exhibits hereto.

         DEFAULT. See ss.12.1.

         DEFAULT  RATE.  (a) When used with  respect to  Obligations  other than
Letter of Credit Fees, an interest rate equal to (i) the Base Rate PLUS (ii) the
Applicable  Margin  applicable  to the Base Rate  Loans PLUS (iii) 2% per annum;
PROVIDED,  HOWEVER,  that with  respect to a LIBOR Rate Loan,  the Default  Rate
shall be an  interest  rate equal to the LIBOR Rate PLUS the  Applicable  Margin
applicable  to such Loan PLUS 2% per  annum,  and (b) when used with  respect to
Letter of Credit  Fees,  a rate equal to the  Applicable  Margin  applicable  to
Revolving  Loans  bearing  interest at the LIBOR Rate PLUS 2% per annum,  in all
cases to the fullest extent permitted by applicable laws.

         DELINQUENT LENDER.  See ss.14.5.3.

         DERIVATIVE  AGREEMENT.  Any forward contract,  futures contract,  swap,
option or other similar agreement or arrangement (including, without limitation,
caps, floors,  collars and similar agreements),  the value of which is dependent
upon interest  rates,  currency  exchange  rates,  commodities  or other indices
(including foreign exchange lines).

         DISTRIBUTION.  The  declaration  or  payment of any  dividend  on or in
respect  of any  shares  of any  class of  Capital  Stock of the  Parent  or any
Subsidiary  of the  Parent,  other than  dividends  payable  solely in shares of
common  stock of the Parent or such  Subsidiary;  the payment or  prepayment  of
principal  of,  premium,  if any,  or  interest  on,  or  purchase,  redemption,
defeasance, retirement or other acquisition of with respect to any shares of any
class of Capital Stock of the Parent or any  Subsidiary of the Parent,  directly
or indirectly  through a Subsidiary of such Person or otherwise  (including  the
setting  apart of assets  for a sinking or other  analogous  fund to be used for
such  purpose);  the return of capital  by the Parent or any  Subsidiary  of the
Parent to its  shareholders as such; or any other  distribution on or in respect
of any shares of any class of Capital  Stock of the Parent or any  Subsidiary of
the Parent.
<PAGE>

         DOLLARS  OR $.  Dollars  in lawful  currency  of the  United  States of
America.

         DOMESTIC  LENDING  OFFICE.   Initially,   the  office  of  each  Lender
designated as such in SCHEDULE 1 hereto;  thereafter,  such other office of such
Lender,  if any,  located  within  the  United  States  that  will be  making or
maintaining Base Rate Loans.

         DOMESTIC SUBSIDIARY. Any Subsidiary that is organized under the laws of
the United States of America,  any state or territory thereof or the District of
Columbia.

         DRAWDOWN DATE. The date on which any Revolving Loan is made or is to be
made,  and the date on which any  Revolving  Loan is  converted  or continued in
accordance with ss.2.7.

         ELIGIBLE  ACCOUNTS  RECEIVABLE.  With  respect  to  the  Borrower,  the
aggregate  of the unpaid  portions  of  Accounts  Receivable  (net of any contra
accounts,   credits,  rebates,  offsets,   holdbacks  or  other  adjustments  or
commissions  payable to third  parties  that are  adjustments  to such  Accounts
Receivable) of the Borrower,  except any Account  Receivable to which any of the
exclusionary  criteria set forth below applies.  The Administrative  Agent shall
have the right to  establish,  modify or  eliminate  Reserves  against  Eligible
Accounts  Receivable  from time to time in its reasonable  credit  judgment.  In
addition, the Administrative Agent reserves the right, at any time and from time
to time after the Closing  Date,  to adjust any of the  criteria set forth below
and to establish new criteria,  in its reasonable  credit  judgment,  reflecting
changes in the collectibility or realization values of such Accounts  Receivable
arising or  discovered  by the  Administrative  Agent  after the  Closing  Date,
subject to the approval of the Required  Lenders in the case of  adjustments  or
new  criteria  which  have the  effect of  making  additional  credit  available
hereunder. Eligible Accounts Receivable shall not include any Account Receivable
if:

                  (i) it is unpaid  for more  than  sixty  (60)  days  after the
         original due date shown on the invoice; or

                  (ii) (x) with  respect to  Accounts  Receivable  from  account
         debtors  listed on SCHEDULE  1.2 (as such  schedule may be updated from
         time to time by the  Borrower  with the prior  written  consent  of the
         Administrative Agent) arising from sample book orders from such account
         debtors,  such  Account  Receivable  is due and  unpaid  more  than one
         hundred and twenty (120) days after the  original  invoice date and (y)
         with respect to all other Accounts Receivable,  such Account Receivable
         is due and unpaid more than ninety (90) days after the original invoice
         date; or

                  (iii) 50% or more of the Accounts  Receivable from the account
         debtor are not deemed Eligible Accounts Receivable; or

                  (iv) the  total  unpaid  Accounts  Receivable  of the  account
         debtor  exceed  25%  of  the  net  amount  of  all  Eligible   Accounts
         Receivable, to the extent of such excess; or

                  (v)  any  material   covenant,   representation   or  warranty
         contained in the agreement with respect to such Account  Receivable has
         been breached by the Borrower; or

                  (vi) the  account  debtor is also the  Borrower's  creditor or
         supplier,  or the account debtor has disputed liability with respect to
         such Account Receivable,  or the account debtor has made any claim with
         respect to any other Account Receivable due from such account debtor to
         the  Borrower,  or the Account  Receivable  otherwise  is or may become
         subject to any right of setoff by the account  debtor;  PROVIDED  that,
         only the portion of the Account  Receivable equal to the amount of such
         dispute,  claim or setoff shall not be an Eligible  Account  Receivable
         pursuant to this clause (vi); or
<PAGE>

                  (vii) the account  debtor has commenced a voluntary case under
         the federal  bankruptcy laws, as now constituted or hereafter  amended,
         or other  insolvency,  reorganization  or adjustment  laws of any other
         jurisdiction,  or made an assignment for the benefit of creditors, or a
         decree  or  order  for  relief  has  been  entered  by a  court  having
         jurisdiction  in the  premises in respect of the  account  debtor in an
         involuntary case under the federal  bankruptcy laws, as now constituted
         or hereafter amended, or other insolvency, reorganization or adjustment
         laws  of  any  other  jurisdiction,  or any  other  petition  or  other
         application  for  relief  under the  federal  bankruptcy  laws or other
         insolvency, reorganization or adjustment laws of any other jurisdiction
         has been filed against the account debtor, or if the account debtor has
         failed,  suspended  business,  ceased to be solvent, or consented to or
         suffered a receiver,  trustee,  liquidator or custodian to be appointed
         for it or for all or a significant portion of its assets or affairs; or

                  (viii) it arises from a sale to an account  debtor outside the
         United  States and Canada or is  denominated  in a currency  other than
         Dollars,  unless, in each case, the sale is covered by credit insurance
         or on letter of credit,  guaranty  or  acceptance  terms,  in each case
         acceptable to Administrative Agent in its sole discretion; or

                  (ix) it arises from a sale to the account debtor on a bill and
         hold, guaranteed sale, sale or return, sale on approval, consignment or
         any other repurchase or return basis; or

                  (x) the account  debtor is the United States of America or any
         state  located  therein or any  department,  agency or  instrumentality
         thereof,  unless  the  Borrower  assigns  its right to  payment of such
         Account   Receivable  to  the   Administrative   Agent,   in  a  manner
         satisfactory  to the  Administrative  Agent,  so as to comply  with the
         Assignment of Claims Act of 1940 (31 U.S.C. ss.203 ET SEQ.), as amended
         or any equivalent state law; or

                  (xi)  it is not at all  times  subject  to the  Administrative
         Agent's duly perfected,  first priority  security interest and no other
         Lien except a Permitted Lien; or

                  (xii) the goods  giving rise to such Account  Receivable  have
         not  been  delivered  to and  accepted  by the  account  debtor  or the
         services giving rise to such Account Receivable have not been performed
         by the  Borrower  and  accepted  by the  account  debtor or the Account
         Receivable otherwise does not represent a final sale; or

                  (xiii) the Account Receivable is evidenced by chattel paper or
         an instrument of any kind, or has been reduced to judgment; or

                  (xiv) the  Borrower  has made any  agreement  with the account
         debtor for any deduction therefrom,  except for discounts or allowances
         which are made in the ordinary course of business for prompt payment or
         quality credits related to such Account Receivable; or
<PAGE>

                  (xv) the  Borrower  has  made an  agreement  with the  account
         debtor to extend the time of payment thereof; or (xvi) it arises out of
         a sale made by the  Borrower  to a  Subsidiary  of the  Borrower  or an
         Affiliate of the Borrower or to a Person  controlled by an Affiliate of
         the Borrower.

         ELIGIBLE  ASSIGNEE.  Any of (a) a Lender, (b) an Affiliate of a Lender,
(c) an Approved  Fund and (d) any other  Person  (other  than a natural  person)
approved by (i) the  Administrative  Agent and (ii) unless a Default or an Event
of Default has occurred and is continuing,  the Borrower (each such approval not
to be unreasonably withheld or delayed).

         ELIGIBLE FINISHED GOODS INVENTORY.  That portion of Eligible  Inventory
consisting of finished goods.

         ELIGIBLE INVENTORY.  With respect to the Borrower, all of the inventory
owned by the Borrower shall be "Eligible  Inventory" for purposes of this Credit
Agreement, excluding any inventory to which any of the exclusionary criteria set
forth below applies. The Administrative Agent shall have the right to establish,
modify or eliminate Reserves against Eligible Inventory from time to time in its
reasonable credit judgment.  In addition,  the Administrative Agent reserves the
right,  at any time and from time to time after the Closing  Date, to adjust the
criteria set forth below and to establish new criteria, in its reasonable credit
judgment,  reflecting  changes  in the  saleability  or  realization  values  of
inventory  arising or discovered by the  Administrative  Agent after the Closing
Date, subject to the approval of the Required Lenders in the case of adjustments
or new  criteria  which have the effect of making  additional  credit  available
hereunder. Eligible Inventory shall not include any inventory if:

                  (i) it is not readily marketable in its current form; or

                  (ii) it is not in good, new and saleable condition; or

                  (iii)   it   is   slow   moving,   obsolete,    defective   or
         unmerchantable; or

                  (iv) it  consists of  supplies,  packing  materials,  shipping
         materials or work-in-process; or

                  (v) it does not meet all standards imposed by any governmental
         agency or  authority,  including,  without  limitation,  the Fair Labor
         Standards Act; or

                  (vi) it does not conform in all respects to the warranties and
         representations set forth in this Credit Agreement; or

                  (vii) it is not at all  times  subject  to the  Administrative
         Agent's duly perfected,  first priority  security interest and no other
         Lien except a Permitted Lien; or

                  (viii) it is not  situated  at a location in  compliance  with
         this Credit Agreement or is in transit; or

                  (ix) it is not located in the United States of America; or

                  (x) it is held on  consignment,  or not otherwise owned by the
         Borrower; or
<PAGE>

                  (xi) it has been shipped to a customer,  regardless of whether
         such shipment is on a consignment basis; or

                  (xii) it is held at a location leased by the Borrower,  unless
         the Administrative Agent has received a waiver from the lessor (and any
         sublessor) of such property, in form and substance  satisfactory to the
         Administrative Agent; or

                  (xiii) it has been  returned  by a  customer  and has not been
         qualified by the  Borrower  within  thirty (30) days as being  Eligible
         Inventory; or

                  (xiv) it is not in the possession of the Borrower,  unless the
         Administrative Agent has received a waiver from the party in possession
         of  such   inventory  in  form  and  substance   satisfactory   to  the
         Administrative Agent; or

                  (xv) it is  subject  to a third  party's  trademark  or  other
         proprietary right unless the Administrative  Agent determines that such
         inventory  could be sold  pursuant  to the  exercise of remedies by the
         Administrative  Agent  hereunder  or  under  applicable  law  on  terms
         satisfactory to the Administrative Agent in its sole discretion; or

                  (xvi) it is subject to capitalized variances.

         ELIGIBLE RAW MATERIALS  INVENTORY.  That portion of Eligible  Inventory
consisting of raw materials.

         EMPLOYEE  BENEFIT PLAN. Any employee benefit plan within the meaning of
ss.3(3) of ERISA maintained or contributed to by the Parent, the Borrower or any
ERISA Affiliate, other than a Guaranteed Pension Plan or a Multiemployer Plan.

         ERISA. The Employee Retirement Income Security Act of 1974.

         ERISA AFFILIATE.  Any Person which is treated as a single employer with
the Parent or any Subsidiary of the Parent under ss.414 of the Code.

         ERISA REPORTABLE EVENT. A reportable event with respect to a Guaranteed
Pension  Plan  within  the  meaning  of  ss.4043  of ERISA  and the  regulations
promulgated  thereunder  as to which  the  requirement  of  notice  has not been
waived.

         EUROCURRENCY  RESERVE RATE. For any day, the maximum rate (expressed as
a decimal)  at which any bank  subject  thereto  would be  required  to maintain
reserves  under  Regulation D of the Board of  Governors of the Federal  Reserve
System  (or any  successor  or  similar  regulations  relating  to such  reserve
requirements)  against  "EUROCURRENCY  LIABILITIES"  (as  that  term  is used in
Regulation D), if such liabilities were  outstanding.  The Eurocurrency  Reserve
Rate shall be  adjusted  automatically  on and as of the  effective  date of any
change in the Eurocurrency Reserve Rate.

         EVENT OF DEFAULT.  See ss.12.1.

         EXCESS  AVAILABILITY.  As of any  date of  determination  thereof,  the
difference  between (a) the lesser of (i) the Total  Commitment at such time and
(ii) the Borrowing  Base at such time,  and (b) the  Revolving  Exposure at such
time.

         EXCLUDED TAXES. With respect to the  Administrative  Agent, any Lender,
the Issuing Bank, the Cash Management Bank or any other recipient of any payment
to be made by or on account of any  obligation  of the Borrower  hereunder,  (a)
taxes  imposed on or measured by its overall net income  (however  denominated),
and  franchise  taxes  imposed  on it (in  lieu  of net  income  taxes),  by the
jurisdiction (or any political subdivision thereof) under the laws of which such
recipient  is  organized or in which its  principal  office is located,  (b) any
branch  profits taxes imposed by the United States or any similar tax imposed by
any other  jurisdiction  in which the Borrower is located,  (c) in the case of a
Non-U.S.  Lender, any withholding tax that is imposed on amounts payable to such
Non-U.S.  Lender at the time such Non-U.S. Lender becomes a party hereto and (d)
any taxes  imposed  on a Lender as a result of such  Lender's  failure to comply
with ss.5.2.3.
<PAGE>

         EXISTING  CREDIT   AGREEMENT.   The  Revolving  Credit  and  Term  Loan
Agreement, dated as of May 18, 2005 (as amended as of July 27, 2005, October 25,
2005,  December 30, 2005, March 22, 2006 and May 6, 2006), among the Parent, the
Borrower,  the Lenders, the Administrative  Agent, the Issuing Bank and the Cash
Management Bank.

         EXISTING LETTERS OF CREDIT.  See ss.4.7 hereof.

         FEE  LETTER.  The fee  letter,  dated as  November  9, 2006,  among the
Borrower and Bank of America.

         FEES. Collectively,  the Commitment Fee, the Letter of Credit Fees, the
Administrative Agent's Fee and the Closing Fee.

         FISCAL QUARTER(S). The thirteen (13) or fourteen (14) week periods, the
first of which shall  commence on the first day of each Fiscal Year, and each of
which shall be referred to as "FQ1", "FQ2", "FQ3" and "FQ4", respectively.

         FISCAL YEAR. The fifty-two (52) or fifty-three  (53) week period ending
on the Saturday closest to January 1 of each calendar year.

         FIXED ASSET COLLATERAL.  All of the Real Estate,  Equipment (as defined
in the UCC) and  Fixtures (as defined in the UCC) of the  Borrower,  the Parent,
each Subsidiary of the Parent,  and all other Guarantors from time to time party
to the  Guaranties,  which is subject to a mortgage,  lien or security  interest
pursuant to the Term Loan Documents,  together with all identifiable proceeds of
the foregoing.

         FIXED CHARGE COVERAGE RATIO. As at any date of determination, the ratio
of (a) (i) Consolidated EBITDA for the four Fiscal Quarter period ending on such
date of  determination  MINUS  (ii) the  aggregate  amount  of all  Non-Financed
Capital  Expenditures  made during such period MINUS (iii) the aggregate  amount
paid,  or required to be paid (without  duplication),  in cash in respect of the
current  portion of all income  taxes for such period  MINUS (iv) the  aggregate
amount of dividends and  distributions  permitted to be paid by the Parent under
ss.8.4  (if any) and  actually  paid in cash  during  such  period  PLUS (v) tax
refunds  received  in cash  during such period to (b) the sum for the Parent and
its  Subsidiaries  (determined  on a consolidated  basis without  duplication in
accordance  with GAAP),  of (i) the aggregate  amount of  Consolidated  Interest
Expense for such period and (ii) the  aggregate  amount of  regularly  scheduled
payments of principal in respect of Indebtedness  for borrowed money  (including
the principal  component of any payments in respect of Capitalized  Leases) paid
or required to be paid during such period  (excluding  payments made pursuant to
3.1.3,  3.1.4,  3.1.5 and 3.1.6 of the Term Loan  Agreement  as in effect on the
date hereof).

         FOREIGN SUBSIDIARY.  Any Subsidiary that is not a Domestic Subsidiary.
<PAGE>

         FUND.  Any Person  (other than a natural  person)  that is (or will be)
engaged in making,  purchasing,  holding or otherwise  investing  in  commercial
loans and similar extensions of credit in the ordinary course of its business.

         GAAP.  (i) When used in ss.9,  whether  directly or indirectly  through
reference to a capitalized  term used  therein,  means (A)  principles  that are
consistent  with  the  principles   promulgated  or  adopted  by  the  Financial
Accounting  Standards Board and its predecessors,  in effect for the Fiscal Year
ended  on  December  31,  2005,  and  (B) to the  extent  consistent  with  such
principles, the accounting practice of the Parent and its Subsidiaries reflected
in the Parent's  financial  statements for the period ended on the Balance Sheet
Date,  and (ii)  when used in  general,  other  than as  provided  above,  means
principles that are (A) consistent with the principles promulgated or adopted by
the Financial Accounting Standards Board and its predecessors, as in effect from
time to time, and (B) consistently applied with past financial statements of the
Parent and its Subsidiaries adopting the same principles,  provided that in each
case  referred to in this  definition  of "GAAP" a certified  public  accountant
would,  insofar as the use of such accounting  principles is pertinent,  be in a
position to deliver an unqualified opinion (other than qualifications  regarding
changes  in  GAAP  and  as to  normal  year-end  adjustments)  as  to  financial
statements in which such principles have been properly applied.

         GOVERNING  DOCUMENTS.  With respect to any Person,  its  certificate or
articles of  incorporation,  certificate  of formation,  or, as the case may be,
certificate of limited partnership,  its by-laws, operating agreement or, as the
case may be,  partnership  agreement  or other  constitutive  documents  and all
shareholder agreements, voting trusts and similar arrangements applicable to any
of its Capital Stock.

         GOVERNMENTAL  AUTHORITY.  Any  foreign,   federal,  state,  provincial,
regional,  local municipal or other government,  or any department,  commission,
board, bureau, agency, public authority or instrumentality thereof, or any court
or arbitrator.

         GUARANTEED  PENSION PLAN. Any employee  pension benefit plan within the
meaning of ss.3(2) of ERISA  maintained  or  contributed  to by the Parent,  the
Borrower  or any  ERISA  Affiliate,  the  benefits  of which are  guaranteed  on
termination in full or in part by the PBGC pursuant to Title IV of ERISA,  other
than a Multiemployer Plan.

         GROSS  AVAILABILITY.  At any time, the lesser of (a) the Borrowing Base
at such time and (b) the Total Commitment at such time.

         GUARANTIES.  The  Guaranties  made by each  Guarantor  in  favor of the
Lenders and the Administrative Agent pursuant to which such Guarantor guaranties
to the Lenders and the Administrative  Agent the payment and performance in full
of the Obligations.

         GUARANTORS.  Collectively,  (i) the  Parent,  Quaker  Mexico and Quaker
Textile and (ii) any direct or indirect Domestic Subsidiary of the Parent.

         INDEBTEDNESS. As to any Person and whether recourse is secured by or is
otherwise  available  against all or only a portion of the assets of such Person
and whether or not contingent, but without duplication:

                  (a) every obligation of such Person for money borrowed,

                  (b)  every  obligation  of such  Person  evidenced  by  bonds,
         debentures,  notes or other similar instruments,  including obligations
         incurred in  connection  with the  acquisition  of property,  assets or
         businesses,
<PAGE>

                  (c) every reimbursement obligation of such Person with respect
         to letters  of  credit,  bankers'  acceptances,  or similar  facilities
         issued for the account of such Person,

                  (d) every  obligation  of such Person issued or assumed as the
         deferred purchase price of property or services  (including  securities
         repurchase  agreements but excluding trade accounts  payable or accrued
         liabilities arising in the ordinary course of business),

                  (e) every  obligation  of such  Person  under any  Capitalized
         Lease,

                  (f) every obligation of such Person under any Synthetic Lease,

                  (g) all  sales  by such  Person  of (i)  accounts  or  general
         intangibles  for  money  due or to  become  due,  (ii)  chattel  paper,
         instruments  or documents  creating or evidencing a right to payment of
         money or (iii) other receivables (collectively "RECEIVABLES"),  whether
         pursuant to a purchase facility or otherwise,  other than in connection
         with the disposition of the business operations of such Person relating
         thereto or a disposition of defaulted receivables for collection (or as
         a sale of claims in bankruptcy) and not as a financing arrangement, and
         together  with  any  obligation  of such  Person  to pay any  discount,
         interest,  fees, indemnities,  penalties,  recourse,  expenses or other
         amounts in connection therewith,

                  (h)  every  obligation  of such  Person  (an  "EQUITY  RELATED
         PURCHASE OBLIGATION") to purchase,  redeem, retire or otherwise acquire
         for value any  shares of  Capital  Stock  issued by such  Person or any
         rights measured by the value of such Capital Stock,

                  (i) every  obligation  of such  Person  under  any  Derivative
         Agreement,

                  (j) every  obligation in respect of  Indebtedness of any other
         entity  (including  any  partnership  in which such Person is a general
         partner) to the extent that such Person is liable  therefor as a result
         of such Person's  ownership interest in or other relationship with such
         entity,  except  to the  extent  that the  terms  of such  Indebtedness
         provide  that such  Person is not  liable  therefor  and such terms are
         enforceable under applicable law, and

                  (k) every obligation,  contingent or otherwise, of such Person
         guaranteeing, or having the economic effect of guarantying or otherwise
         acting as surety for,  any  obligation  of a type  described  in any of
         clauses (a) through (j) (the "PRIMARY  obligation")  of another  Person
         (the "PRIMARY OBLIGOR"), in any manner, whether directly or indirectly,
         and including, without limitation, any obligation of such Person (i) to
         purchase or pay (or advance or supply  funds for the  purchase  of) any
         security for the payment of such primary  obligation,  (ii) to purchase
         property,  securities  or  services  for the  purpose of  assuring  the
         payment  of such  primary  obligation,  or  (iii) to  maintain  working
         capital,  equity  capital or other  financial  statement  condition  or
         liquidity of the primary obligor so as to enable the primary obligor to
         pay such primary obligation.

                  The "AMOUNT" or "PRINCIPAL  AMOUNT" of any Indebtedness at any
         time of determination represented by (1) any Indebtedness,  issued at a
         price that is less than the principal amount at maturity thereof, shall
         be the  amount  of the  liability  in  respect  thereof  determined  in
         accordance  with GAAP, (2) any  Capitalized  Lease shall be the present
         value of the aggregate of the rentals obligation under such Capitalized
         Lease payable over the term thereof that is not subject to  termination
         by the  lessee,  (3) any sale of  receivables  shall be the  amount  of
         unrecovered  capital or principal  investment of the  purchaser  (other
         than  the  Parent  or any of its  wholly-owned  Subsidiaries)  thereof,
         excluding  amounts  representative  of yield or interest earned on such
         investment, (4) any Synthetic Lease shall be the stipulated loss value,
         termination  value  or other  equivalent  amounts,  (5) any  derivative
         contract shall be the maximum amount of any termination or loss payment
         required to be paid by such Person if such derivative contract were, at
         the time of  determination,  to be terminated by reason of any event of
         default  or early  termination  event  thereunder,  whether or not such
         event of default or early termination  event has in fact occurred,  (6)
         any equity  related  purchase  obligation  shall be the  maximum  fixed
         redemption  or  purchase  price  thereof  inclusive  of any accrued and
         unpaid  dividends to be comprised in such  redemption or purchase price
         and (7) any  guaranty  or other  contingent  liability  referred  to in
         clause  (k) shall be an  amount  equal to the  stated  or  determinable
         amount of the primary  obligation  in respect of which such guaranty or
         other contingent  obligation is made or, if not stated or determinable,
         the  maximum  reasonably   anticipated  liability  in  respect  thereof
         (assuming such Person is required to perform  thereunder) as determined
         by such Person in good faith.
<PAGE>

         INTERCREDITOR AGREEMENT. That certain Intercreditor Agreement, dated as
of the date hereof,  among the Borrower,  the Guarantors the Term Loan Agent and
the   Administrative   Agent,   in  form  and  substance   satisfactory  to  the
Administrative Agent.

         INTEREST  PAYMENT DATE.  (i) As to any Base Rate Loan, the first day of
each  calendar  month  (including  the month which  includes the  Drawdown  Date
thereof) and the Maturity Date and (ii) as to any LIBOR Rate Loan,  the last day
of each Interest Period applicable to such Loan and the Maturity Date; PROVIDED,
HOWEVER,  that if any Interest  Period for a LIBOR Rate Loan  exceeds  three (3)
months, the respective dates that fall every three months after the beginning of
such Interest Period shall also be Interest Payment Dates.

         INTEREST  PERIOD.  With respect to each Revolving  Loan, (i) initially,
the period  commencing  on the Drawdown Date of such Loan and ending on the last
day of one of the periods set forth below, as selected by the Borrower in a Loan
Request or as otherwise  required by the terms of this Credit  Agreement (A) for
any Base Rate  Loan,  the last day of the  calendar  month and (B) for any LIBOR
Rate Loan 1, 2, 3, or 6 months,  and (ii) thereafter,  each period commencing on
the last day of the next preceding  Interest Period applicable to such Revolving
Loan and  ending  on the last day of one of the  periods  set  forth  above,  as
selected  by the  Borrower in a  Conversion  Request;  PROVIDED  that all of the
foregoing provisions relating to Interest Periods are subject to the following:

                  (a) if any  Interest  Period with respect to a LIBOR Rate Loan
         would  otherwise end on a day that is not a Business Day, that Interest
         Period shall be extended to the next succeeding Business Day unless the
         result of such  extension  would be to carry such Interest  Period into
         another  calendar  month, in which event such Interest Period shall end
         on the immediately preceding Business Day;

                  (b) if any  Interest  Period with  respect to a Base Rate Loan
         would end on a day that is not a Business  Day,  that  Interest  Period
         shall end on the next succeeding Business Day;

                  (c) if the  Borrower  fails  to give  notice  as  provided  in
         ss.2.7,  the Borrower shall be deemed to have requested a conversion of
         the affected LIBOR Rate Loan to a Base Rate Loan and the continuance of
         all  Base  Rate  Loans as Base  Rate  Loans on the last day of the then
         current Interest Period with respect thereto;

                  (d) any Interest  Period  relating to any LIBOR Rate Loan that
         begins on the last  Business  Day of a calendar  month (or on a day for
         which there is no numerically  corresponding  day in the calendar month
         at the end of such Interest  Period) shall end on the last Business Day
         of a calendar month; and

                                       0
<PAGE>

(e)      any  Interest  Period  relating  to any  LIBOR  Rate  Loan  that  would
         otherwise  extend  beyond the  Maturity  Date shall end on the Maturity
         Date.

         INVESTMENTS.  All loans,  advances (other than  commission,  travel and
similar  advances to  officers,  directors  and  employees  made in the ordinary
course of  business),  extensions  of credit  (other  than  accounts  receivable
arising in the ordinary course of business  provided that in no event shall such
extension  of credit  exceed 180 days in  accordance  with its  terms),  deposit
account  or  contribution  of capital  to any  Person or any  investment  in, or
purchase or other  acquisition  of, the  Capital  Stock of, or in respect of any
guaranty of the obligations of, any Person.  In determining the aggregate amount
of  Investments  outstanding  at any  particular  time:  (i) the  amount  of any
Investment  represented  by a  guaranty  shall be  taken  at not  less  than the
principal amount of the obligations guaranteed and still outstanding; (ii) there
shall be  included  as an  Investment  all  interest  accrued  with  respect  to
Indebtedness  constituting an Investment unless and until such interest is paid;
(iii)  there shall be  deducted  in respect of each such  Investment  any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment,  liquidating dividend or liquidating distribution);  (iv) there shall
not be deducted in respect of any Investment any amounts received as earnings on
such  Investment,  whether as  dividends,  interest  or  otherwise,  except that
accrued  interest  included  as  provided  in the  foregoing  clause (ii) may be
deducted  when paid;  and (v) there  shall not be  deducted  from the  aggregate
amount of Investments any decrease in the value thereof.

         ISSUING BANK.  Bank of America.

         LC GUARANTY. A guaranty or indemnity in form and substance satisfactory
to the  Administrative  Agent  and  the  Issuing  Bank  pursuant  to  which  the
Administrative  Agent shall  guaranty the payment or performance by the Borrower
of its reimbursement obligations in respect of Letters of Credit.

         LENDER OR LENDERS.  Bank of America and the other lending  institutions
listed on SCHEDULE 1 hereto and any other  person who becomes an assignee of any
rights and  obligations  of a Lender  pursuant to ss.18 and,  unless the context
otherwise requires, the Issuing Bank and the Cash Management Bank.

         LETTER OF CREDIT.  See ss.4.1.

         LETTER OF CREDIT  APPLICATION.  With  respect  to any  Letter of Credit
issued  for  the  account  of the  Borrower  or  Quaker  Textile  hereunder,  an
application  for such Letter of Credit made to the Issuing Bank on its customary
form.

         LETTER OF CREDIT FEE.  See ss.4.6.

         LIBOR  BUSINESS  DAY.  Any day on which  commercial  banks are open for
international business (including dealings in U.S. dollar deposits) in London.

         LIBOR LENDING OFFICE.  Initially,  the office of each Lender designated
as such by notice to the Borrower; thereafter, such other office of such Lender,
if any, that shall be making or maintaining LIBOR Rate Loans.

         LIBOR RATE. For any Interest  Period with respect to a LIBOR Rate Loan,
the rate of  interest  equal to (i) the rate  determined  by the  Administrative
Agent at which Dollar  deposits for such  Interest  Period are offered  based on
information  presented  on Page 3750 of the Dow Jones Market  Service  (formerly
known as the  Telerate  Service)  or such other  commercially  available  source
providing such  information  and designated by the  Administrative  Agent, as of
11:00 a.m.  London time on the second LIBOR  Business Day prior to the first day
of such  Interest  Period,  divided  by (ii) a number  equal to 1.00  minus  the
Eurocurrency  Reserve Rate. If the rate  described  above does not appear on the
Dow Jones Market Service or such other  commercially  available source providing
such  information and designated by the  Administrative  Agent on any applicable
interest  determination  date, the LIBOR Rate shall be the rate (rounded upward,
if  necessary,  to the nearest one  hundred-thousandth  of a percentage  point),
determined  on the basis of the  offered  rates for  deposits  in Dollars  for a
period of time  comparable  to such LIBOR  Rate Loan  which are  offered by four
major banks in the London interbank  market at  approximately  11:00 a.m. London
time,  on the second LIBOR  Business Day prior to the first day of such Interest
Period as selected by the  Administrative  Agent. The principal London office of
each of the four major  London banks will be requested to provide a quotation of
its Dollar deposit  offered rate. If at least two such  quotations are provided,
the rate for that date will be the arithmetic mean of the  quotations.  If fewer
than two  quotations  are provided as requested,  the rate for that date will be
determined  on the basis of the rates  quoted  for loans in  Dollars  to leading
European banks for a period of time  comparable to such Interest  Period offered
by major banks in New York City at approximately  11:00 a.m. New York City time,
on the second LIBOR Business Day prior to the first day of such Interest Period.
In the  event  that  the  Administrative  Agent is  unable  to  obtain  any such
quotation as provided above, it will be considered that LIBOR Rate pursuant to a
LIBOR Rate Loan cannot be determined.

<PAGE>

         LIBOR RATE LOANS.  All or any portion of the  Revolving  Loans  bearing
interest calculated by reference to the LIBOR Rate.

         LICENSES. See ss.6.26.

         LIENS.  Any   encumbrance,   mortgage,   deed  of  trust,   assignment,
attachment,  deposit  arrangement,  lien  (statutory,  judgment  or  otherwise),
pledge, hypothecation,  charge, restriction or other security interest, security
agreement,  or any interest of any kind securing any obligation of any entity or
person,  whether  such  interest is based on common law,  civil law,  statute or
contract.

         LOAN DOCUMENTS.  This Credit Agreement, the Notes, the Letter of Credit
Applications, the Letters of Credit, the Guaranties, the Security Documents, the
LC Guaranty,  the Fee Letter,  the  Intercreditor  Agreement,  the Amendment and
Reaffirmation  of Loan  Documents and any other  agreement  between the Borrower
and/or any Guarantor and the Administrative  Agent and/or any Lender relating to
fee arrangements.

         LOAN REQUEST.  See ss.2.6.1.

         LOANS. The Revolving Loans.

         MATURITY DATE.  May 18, 2010.

         MAXIMUM  DRAWING  AMOUNT.   The  maximum   aggregate  amount  that  the
beneficiaries  may at any time draw under  outstanding  Letters of Credit issued
for the account of the Borrower or Quaker Textile,  as such aggregate amount may
be  reduced  from time to time  pursuant  to the terms of the  Letters of Credit
issued for the account of the Borrower or Quaker Textile.

         MORTGAGED PROPERTY.  Any Real Estate which is subject to any Mortgage.

         MORTGAGES.  (a) The mortgage(s)  and, if applicable,  deed(s) of trust,
dated on or prior to the Closing Date,  from the Borrower to the  Administrative
Agent with  respect to the fee and, if  applicable,  leasehold  interests of the
Borrower in the  properties  listed on SCHEDULE  1.1(A) hereto and (b) any other
deeds of mortgage,  deeds of trust, or deeds of leasehold  mortgage executed and
delivered to the Administrative Agent after the Closing Date pursuant to ss.7.16
hereof, in each case, in form and substance  satisfactory to the  Administrative
Agent.
<PAGE>

         MULTIEMPLOYER  PLAN.  Any  multiemployer  plan  within  the  meaning of
ss.3(37) of ERISA  maintained or contributed  to by the Parent,  the Borrower or
any ERISA Affiliate.

         NET BOOK VALUE. At the relevant time of reference thereto, the net book
value of Eligible Inventory determined on a first-in first-out basis at lower of
cost or market as expressed on the Borrower's perpetual inventory report.

         NET ORDERLY  LIQUIDATION VALUE. With respect to any inventory,  the net
appraised orderly  liquidation value of such inventory,  as determined from time
to time by the Administrative Agent by reference to the most recent appraisal of
the inventory of the Borrower  performed by an appraisal firm  acceptable to the
Administrative Agent.

         NON-FINANCED CAPITAL EXPENDITURES Capital Expenditures paid in cash and
not  financed  with  Indebtedness  for  borrowed  money;  PROVIDED  that Capital
Expenditures  financed  with the proceeds of Revolving  Loans shall be deemed to
constitute "Non-Financed Capital Expenditures" for purposes of this Agreement.

         NON-U.S. LENDER. See ss.5.2.3.

         NOTES. The Revolving Notes.

         OBLIGATIONS.  All  indebtedness,  obligations  and  liabilities  of the
Parent  and its  Subsidiaries  to any of the  Lenders,  the  Issuing  Bank,  the
Administrative  Agent,  the Cash  Management  Bank or any of  their  Affiliates,
individually or  collectively,  existing on the date of this Credit Agreement or
arising  thereafter,   direct  or  indirect,  joint  or  several,   absolute  or
contingent,  matured  or  unmatured,  liquidated  or  unliquidated,  secured  or
unsecured,  arising  by  contract,  operation  of law or  otherwise,  arising or
incurred  under this Credit  Agreement or any of the other Loan Documents or any
Derivative  Agreement or in respect of any of the Loans made, or any obligations
under  Derivative  Agreements or Cash  Management  Obligations or  Reimbursement
Obligations  incurred  or any of the Letter of Credit  Applications,  Letters of
Credit or other instruments at any time evidencing any thereof.

         ORIGINAL CLOSING DATE.  May 18, 2005.

         OUTSTANDING or  OUTSTANDING.  With respect to the Loans,  the aggregate
unpaid principal thereof as of any date of determination.

         PARENT. As defined in the preamble hereto.

         PATENT  AGREEMENT.   The  Patent  Collateral  Assignment  and  Security
Agreement,  dated as of the Original  Closing Date, made by the Borrower and the
Guarantors  in  favor  of  the  Administrative  Agent,  in  form  and  substance
satisfactory to the Administrative Agent.

         PBGC. The Pension Benefit  Guaranty  Corporation  created by ss.4002 of
ERISA and any successor entity or entities having similar responsibilities.

         PERFECTION CERTIFICATES.  The Perfection Certificates,  dated as of the
Closing  Date,  in  each  case,  in  form  and  substance  satisfactory  to  the
Administrative Agent.
<PAGE>

         PERMITTED LIENS.  Liens permitted by ss.8.3 hereof.

         PERSON.  Any  individual,   corporation,   limited  liability  company,
partnership,  limited partnership, trust, unincorporated association,  business,
or other legal entity, or any Governmental Authority.

         PLEDGE AGREEMENT. The Pledge Agreement,  executed by the Parent and the
Borrower  in  favor  of  the   Administrative   Agent,  in  form  and  substance
satisfactory to the Administrative Agent.

         PROJECTIONS. Those certain treasury cash flow forecasts of receipts and
disbursements  delivered to the Administrative Agent pursuant to Section 3(e) of
the Fifth  Amendment  (as defined in the  Existing  Credit  Agreement),  as such
forecasts may be updated from time to time pursuant to Section 7.4(n).

         QUAKER  MEXICO.  Quaker  Fabric  Mexico,  S.A. de C.V.,  a  corporation
organized under the laws of Mexico.

         QUAKER TEXTILE Quaker Textile Corporation, a Massachusetts corporation.

         REAL ESTATE.  All real  property at any time owned or leased (as lessee
or sublessee) by the Parent or any Subsidiary of the Parent.

         RECORD.  The grid attached to a Note, or the continuation of such grid,
or any other  similar  record,  including  computer  records,  maintained by any
Lender with respect to any Loan referred to in such Note.

         REGISTER. See ss.18.3.

         REIMBURSEMENT  OBLIGATION.  The Borrower's  obligation to reimburse the
Administrative  Agent and the Lenders on account of any drawing under any Letter
of Credit  issued for the account of the Borrower or Quaker  Textile as provided
in ss.4.2.

         RELATED PARTIES.  With respect to any specified  Person,  such Person's
Affiliates  and  the  respective  directors,  officers,  employees,  agents  and
advisors of such Person and such Person's Affiliates.

         REQUIRED  LENDERS.  As of any  date,  any  combination  of two or  more
Lenders, excluding Delinquent Lenders, holding Loans and participating interests
in the risks  relating  to Letters  of Credit  constituting  at least  fifty-one
percent (51%) of the outstanding Loans and Letters of Credit; or, if no Loans or
Letters of Credit are then outstanding,  any combination of two or more Lenders,
excluding  Delinquent  Lenders,  having at least fifty-one  percent (51%) of the
Total Commitment.

         RESERVES.  As determined by the Administrative Agent in the exercise of
its reasonable discretion and upon written notice to the Borrower,  such amounts
as the  Administrative  Agent may from time to time  establish and revise (a) to
reflect  (i) any  Default  or  Event  of  Default  or (ii)  events,  conditions,
contingencies  or risks  which do or may have a material  adverse  effect on the
business,  assets,  operations  or  financial  condition of the Borrower and the
Guarantors (taken as a whole), or the ability of the Parent and its Subsidiaries
to fulfill  their  obligations  under this  Credit  Agreement  or the other Loan
Documents  or (b) to  reflect  the belief of the  Administrative  Agent that any
Borrowing Base Certificate or other collateral  report or financial  information
furnished by or on behalf of the Parent and the  Borrower to the  Administrative
Agent  or any of the  Lenders  is or may have  been  incomplete,  inaccurate  or
misleading  in  any  material  respect  or (c) to  reflect  events,  conditions,
contingencies  or risks  which would  reasonably  be expected to have a material
adverse effect on the value of the Collateral, taken as a whole, or the value of
the  security  interests  and other rights of the  Administrative  Agent and the
Lenders in the Collateral (including the enforceability,  perfection or priority
thereof)  or (d) to reflect any costs and  expenses  (or  anticipated  costs and
expenses)  determined  by the  Administrative  Agent in order to  realize on the
Collateral or (e) in respect of any Derivative  Agreements or cash management or
similar arrangements.
<PAGE>

         RESTRICTED PAYMENT. In relation to the Parent and any Subsidiary of the
Parent,  any (a)  Distribution  or (b) any payment made to any Affiliates of the
Parent or a Subsidiary  of the Parent in respect of  management,  consulting  or
other similar services provided to the Parent or a Subsidiary of the Parent.

         REVOLVING  EXPOSURE.  At any time, the sum of the outstanding amount of
all Revolving Loans PLUS the Maximum Drawing Amount and all Unpaid Reimbursement
Obligations.

         REVOLVING  LOANS.  The revolving credit loans to be made by the Lenders
to the Borrower (including Swing Line Loans) pursuant to ss.2.

         REVOLVING NOTES.  See ss.2.4.

         SARBANES-OXLEY ACT.  The Sarbanes-Oxley Act of 2002.

         SECURITY AGREEMENT.  The Security  Agreement,  dated as of the Original
Closing Date, among the Parent, the Borrower,  Quaker Textile, Quaker Mexico and
the Administrative Agent.

         SECURITY  DOCUMENTS.  The  Guaranties,   the  Security  Agreement,  the
Copyright Mortgage, the Patent Agreement,  the Pledge Agreement,  the Mortgages,
the Trademark  Agreement,  and all other  instruments  and documents,  including
without  limitation  Uniform  Commercial  Code  financing  statements  and other
equivalent registration documents,  control agreements and the like, required to
be  executed  or  delivered  pursuant  to, or in  connection  with,  this Credit
Agreement or any other Loan Document.

         SENIOR MANAGEMENT.  The chairman,  president,  chief executive officer,
chief  financial  officer,  any  executive  vice  president,   any  senior  vice
president,  the  vice-president - legal and  environmental,  the treasurer,  the
controller, or the general counsel of the Parent or a Subsidiary of the Parent.

         SETTLEMENT.  With  respect  to any  Swing  Line  Loans,  the  making or
receiving of payments,  in immediately  available funds, by the Lenders,  to the
extent  necessary to cause each Lender's actual share of the outstanding  amount
of Revolving Loans (after giving effect to any Loan Request) to be equal to such
Lender's Commitment Percentage of the outstanding amount of such Revolving Loans
(after  giving  effect to any Loan  Request),  in any case where,  prior to such
event or action, the actual share is not so equal.

         SETTLEMENT AMOUNT.  See ss.2.10.1.

         SETTLEMENT  DATE.  (a)  Friday  of each  week,  or if a Friday is not a
Business Day, the Business Day  immediately  following  such Friday,  (b) at the
option of the Administrative Agent, on any Business Day following a day on which
the account  officers of the  Administrative  Agent  active upon the  Borrower's
account  become aware of the existence of an Event of Default,  (c) the Business
Day  immediately  following  any day on which  the  Administrative  Agent  gives
written notice to the Lenders to effect a Settlement,  (d) the Maturity Date and
(e) on the third (3rd)  Business  Day  following  any date on which the Borrower
requests a conversion of a Swing Line Loan to a LIBOR Rate Loan.

         SETTLING LENDER.  See ss.2.10.1.
<PAGE>

         SUBSIDIARY.  Any  corporation,  association,  trust,  or other business
entity  of which  the  designated  parent  shall at any  time  own  directly  or
indirectly  through a Subsidiary or  Subsidiaries at least a majority (by number
of votes) of the outstanding Voting Stock.

         SWING LINE LOANS.  See ss.2.6.2.

         SYNTHETIC LEASE. Any lease of goods or other property,  whether real or
personal,  which is treated as an  operating  lease  under GAAP and as a loan or
financing for U.S. income tax purposes.

         TAXES.  All  present  or  future  taxes,   levies,   imposts,   duties,
deductions,  withholdings,  assessments,  fees or other  charges  imposed by any
Governmental  Authority,  including any interest,  additions to tax or penalties
applicable thereto.

         TERM LOANS.  The "Term Loans" as defined in the Term Loan  Agreement as
in effect on the date hereof.

         TERM  LOAN  AGENT.  GB  Merchant  Partners,  LLC,  a  Delaware  limited
liability company.

         TERM  LOAN  AGREEMENT.  The Term Loan  Agreement,  dated as of the date
hereof, by and among the Credit Parties,  certain financial  institutions  party
thereto and the Term Loan Agent, as agent for such financial institutions.

         TERM LOAN DOCUMENTS.  The "Loan  Documents" as defined in the Term Loan
Agreement.

         TERM LOAN  OBLIGATIONS.  The  "Obligations" as defined in the Term Loan
Agreement as in effect on the date hereof.

         TOTAL  COMMITMENT.  The sum of the  Commitments  of the Lenders,  as in
effect from time to time.

         TRADEMARK  AGREEMENT.  The  Trademark  Collateral  Security  and Pledge
Agreement,  dated as of the Original  Closing Date, made by the Borrower and the
Guarantors  in  favor  of  the  Administrative  Agent  and  the  Assignments  of
Trademarks executed in connection therewith,  in form and substance satisfactory
to the Administrative Agent.

         TYPE. As to any Revolving Loan, its nature as a Base Rate Loan or LIBOR
Rate Loan.

         UCC. The Uniform  Commercial  Code, as the same may, from time to time,
be enacted and in effect in the Commonwealth of Massachusetts; PROVIDED, that to
the extent  that the UCC is used to define any term  herein or in any other Loan
Document and such term is defined differently in different Articles or Divisions
of the UCC, the definition of such term contained in Article or Division 9 shall
govern; PROVIDED FURTHER, that if, by reason of mandatory provisions of law, any
or all of the attachment, perfection or priority of, or remedies with respect to
the  Administrative  Agent's Lien on any  Collateral  is governed by the Uniform
Commercial  Code as  enacted  and in effect  in a  jurisdiction  other  than the
Commonwealth of Massachusetts,  the term "UCC" shall mean the Uniform Commercial
Code as enacted and in effect in such other jurisdiction  solely for purposes of
the provisions  thereof  relating to such  attachment,  perfection,  priority or
remedies and for purposes of definitions related to such provisions.

         UNPAID  REIMBURSEMENT  OBLIGATION.  The  Reimbursement  Obligations for
which the Borrower does not reimburse the  Administrative  Agent and the Lenders
on the date specified in, and in accordance with, ss.4.3.
<PAGE>

         VOTING  STOCK.  Stock or  similar  interests,  of any class or  classes
(however  designated),  the holders of which are at the time  entitled,  as such
holders,  to vote for the  election of a majority of the  directors  (or persons
performing  similar functions) of the corporation,  association,  trust or other
business entity  involved,  whether or not the right so to vote exists by reason
of the happening of a contingency.

1.2.     RULES OF INTERPRETATION.

         (a) A  reference  to any  document  or  agreement  shall  include  such
document or agreement as amended,  modified or supplemented from time to time in
accordance with its terms and the terms of this Credit Agreement.

         (b) The  singular  includes  the  plural and the  plural  includes  the
singular.

         (c) Unless  otherwise  expressly  indicated,  a reference to any law or
regulation includes any amendment or modification to such law or regulation.

         (d) A reference to any Person  includes its  permitted  successors  and
permitted assigns.

         (e)  Accounting  terms not otherwise  defined  herein have the meanings
assigned to them by GAAP applied on a consistent basis by the accounting  entity
to which they refer.

         (f) The words "include", "includes" and "including" are not limiting.

         (g) All terms not  specifically  defined herein or by GAAP, which terms
are defined in the Uniform  Commercial Code as in effect in the  Commonwealth of
Massachusetts,  have  the  meanings  assigned  to them  therein,  with  the term
"instrument" being that defined under Article 9 of the Uniform Commercial Code.

         (h)  Reference  to a  particular  "ss."  refers to that section of this
Credit Agreement unless otherwise indicated.

         (i) The words "herein", "hereof",  "hereunder" and words of like import
shall  refer  to this  Credit  Agreement  as a whole  and not to any  particular
section or subdivision of this Credit Agreement.

         (j) Unless otherwise expressly indicated, in the computation of periods
of time from a specified date to a later  specified  date, the word "from" means
"from and  including,"  the words "to" and "until" each mean "to but excluding,"
and the word "through" means "to and including."

         (k) This Credit  Agreement and the other Loan Documents may use several
different  limitations,  tests or  measurements  to regulate the same or similar
matters. All such limitations,  tests and measurements are, however,  cumulative
and are to be performed in accordance with the terms thereof.

         (l) This Credit  Agreement and the other Loan  Documents are the result
of negotiation  among,  and have been reviewed by counsel to, among others,  the
Administrative  Agent,  the  Parent  and the  Borrower  and are the  product  of
discussions  and  negotiations  among  all  parties.  Accordingly,  this  Credit
Agreement and the other Loan Documents are not intended to be construed  against
the  Administrative  Agent  or any of  the  Lenders  merely  on  account  of the
Administrative  Agent's or any Lender's  involvement in the  preparation of such
documents.
<PAGE>

         (m) If at any time any change in GAAP would affect the  computation  of
any financial  ratio or requirement  set forth in any Loan Document,  and either
the Borrower or the Required Lenders shall so request, the Administrative Agent,
the Lenders and the Borrower  shall  negotiate in good faith to amend such ratio
or requirement  to preserve the original  intent thereof in light of such change
in GAAP (subject to the approval of the Required Lenders);  provided that, until
so  amended,  (i) such ratio or  requirement  shall  continue  to be computed in
accordance  with GAAP prior to such change  therein and (ii) the Borrower  shall
provide to the  Administrative  Agent and the Lenders  financial  statements and
other documents required under this Credit Agreement or as reasonably  requested
hereunder setting forth a reconciliation  between  calculations of such ratio or
requirement made before and after giving effect to such change in GAAP.

                              2. REVOLVING LOANS.

         2.1. REVOLVING LOANS.  Subject to the terms and conditions set forth in
this  Credit  Agreement,  each of the  Lenders  severally  agrees to lend to the
Borrower and the Borrower may borrow, repay, and reborrow from time to time from
the Closing Date up to but not  including  the Maturity  Date upon notice by the
Borrower to the Administrative  Agent given in accordance with ss.2.6, such sums
as are requested by the Borrower up to a maximum  aggregate  amount  outstanding
(after  giving  effect to all amounts  requested)  at any one time equal to such
Lender's Commitment MINUS such Lender's Commitment  Percentage of the sum of (a)
the Maximum Drawing Amount and all Unpaid Reimbursement  Obligations and (b) the
outstanding Swing Line Loans; PROVIDED that the Revolving Exposure (after giving
effect  to all  amounts  requested)  shall  not at any  time  exceed  the  Gross
Availability. The Revolving Loans shall be made PRO RATA in accordance with each
such Lender's Commitment Percentage. Each request for a Revolving Loan hereunder
shall  constitute  a  representation  and  warranty  by the  Borrower  that  the
conditions  set forth in ss.10 and ss.11,  in the case of the initial  Revolving
Loans to be made on the  Closing  Date,  and  ss.11,  in the  case of all  other
Revolving Loans, have been satisfied on the date of such request.

         2.2.  COMMITMENT FEE. The Borrower agrees to pay to the  Administrative
Agent for the  accounts  of the  Lenders in  accordance  with  their  respective
Commitment Percentages a commitment fee (the "Commitment Fee") calculated at the
rate of 0.50% per annum on the average daily amount  during each calendar  month
or portion  thereof from the date hereof to the Maturity Date by which the Total
Commitment  MINUS  the  sum  of  the  Maximum  Drawing  Amount  and  all  Unpaid
Reimbursement  Obligations  exceeds the  outstanding  amount of Revolving  Loans
(excluding  Swing Line Loans) during such calendar  month.  The  Commitment  Fee
shall be payable  monthly in arrears on the first day of each calendar month for
the  immediately  preceding  calendar  month  commencing  on the first such date
following  the date hereof,  with a final  payment on the  Maturity  Date or any
earlier date on which the Commitments shall terminate.

         2.3. REDUCTION OF COMMITMENTS. The Borrower shall have the right at any
time and from time to time upon five (5) Business Days prior  written  notice to
the  Administrative  Agent to reduce by  $5,000,000  or an integral  multiple of
$1,000,000 in excess  thereof or to terminate  entirely the Total  Commitment in
excess of the Revolving Exposure at such time,  whereupon the Commitments of the
Lenders shall be reduced pro rata in accordance with their respective Commitment
Percentages  of the  amount  specified  in such  notice  or, as the case may be,
terminated.  Promptly  after  receiving  any  notice of the  Borrower  delivered
pursuant to this ss.2.3, the Administrative Agent will notify the Lenders of the
substance thereof. Upon the effective date of any such reduction or termination,
the Borrower shall pay to the Administrative  Agent for the respective  accounts
of such Lenders the full amount of any Commitment Fee then accrued on the amount
of  the  reduction.  No  reduction  or  termination  of the  Commitments  may be
reinstated.  If the Total Commitment is terminated or reduced by the Borrower in
whole or in part on or prior to the second  anniversary of the Closing Date, the
Borrower shall pay to the Administrative Agent for the benefit of the Lenders an
early termination fee in an amount calculated as follows:
<PAGE>

                  (a) if such  termination or reduction is concluded on or prior
         to the second anniversary of the Original Closing Date, an amount equal
         to one-half of one percent (0.5%) of the Total  Commitment  immediately
         prior  to  such  termination  or in the  case of a  partial  reduction,
         one-half of one percent (0.5%) of the amount of such reduction; or

                  (b) if such  termination  or reduction is concluded  after the
         second  anniversary of the Original Closing Date, the Borrower will not
         be required to pay an early termination fee.

For greater clarity,  the Borrower  acknowledges and agrees that as a direct and
proximate  result of such  termination  under the aforesaid  circumstances,  the
Lenders will suffer a loss in an amount  which is  difficult  to  calculate  and
determine with certainty and, therefore,  as a result of the Borrower's and each
Lender's  reasonable  endeavour to ascertain  and agree in advance to the amount
necessary to  compensate  the Lenders for said loss,  the Borrower has agreed to
pay the  aforesaid  early  termination  fees  described  in this  ss.2.3  in the
circumstances described.

         2.4. THE REVOLVING  NOTES.  The  Revolving  Loans shall be evidenced by
separate promissory notes of the Borrower in substantially the form of EXHIBIT E
hereto  (each a "Revolving  Note"),  dated as of the Closing Date (or such other
date on which a Lender  may  become a party  hereto  in  accordance  with  ss.18
hereof) and completed with appropriate  insertions.  One Revolving Note shall be
payable to the order of each Lender in a principal amount equal to such Lender's
Commitment  Percentage  of the Total  Commitment  or, if less,  the  outstanding
amount  of all  Revolving  Loans  made by such  Lender,  plus  interest  accrued
thereon,  as set forth below.  The  Borrower  irrevocably  authorizes  each such
Lender to make or cause to be made, at or about the time of the Drawdown Date of
any Revolving Loan or at the time of receipt of any payment of principal on such
Lender's Revolving Note, an appropriate notation on such Lender's Revolving Note
Record  reflecting the making of such Revolving Loan or (as the case may be) the
receipt of such payment. The outstanding amount of the Revolving Loans set forth
on such  Lender's  Revolving  Note Record  shall be PRIMA FACIE  evidence of the
principal  amount  thereof  owing and unpaid to such Lender,  but the failure to
record, or any error in so recording, any such amount on such Lender's Revolving
Note Record shall not limit or otherwise  affect the obligations of the Borrower
hereunder  or under any  Revolving  Note to make  payments  of  principal  of or
interest on any Revolving Note when due.

         2.5.  INTEREST ON  REVOLVING  LOANS.  Except as  otherwise  provided in
ss.5.11,

                  (a) Each  Revolving  Loan which is a Base Rate Loan shall bear
         interest for the period  commencing  with the Drawdown Date thereof and
         ending on the last day of the Interest  Period with respect  thereto at
         the rate per annum equal to the Base Rate PLUS the Applicable Margin as
         in effect  from time to time  applicable  to  Revolving  Loans  bearing
         interest at the Base Rate.

                  (b) Each  Revolving Loan which is a LIBOR Rate Loan shall bear
         interest for the period  commencing  with the Drawdown Date thereof and
         ending on the last day of the Interest  Period with respect  thereto at
         the rate per annum equal to the LIBOR Rate determined for such Interest
         Period  PLUS the  Applicable  Margin  as in  effect  from  time to time
         applicable to Revolving Loans bearing interest at the LIBOR Rate.

The Borrower  promises to pay interest on each Revolving Loan in arrears on each
Interest Payment Date with respect thereto.

                                       0
<PAGE>

         2.6. REQUESTS FOR REVOLVING LOANS.

                  2.6.1.  GENERAL. The Borrower shall give to the Administrative
         Agent written  notice in the form of EXHIBIT A hereto of each Revolving
         Loan  requested  hereunder (a "Loan  Request") no less than (a) one (1)
         Business Day prior to the proposed  Drawdown Date of any Base Rate Loan
         and (b) three (3) Business Days prior to the proposed  Drawdown Date of
         any LIBOR Rate Loan.  Each such notice shall  specify (i) the principal
         amount of the Revolving Loan requested, (ii) the proposed Drawdown Date
         of such Revolving  Loan,  (iii) the Interest  Period for such Revolving
         Loan and (iv) the Type of such Revolving Loan. Promptly upon receipt of
         any such  notice,  the  Administrative  Agent shall  notify each of the
         Lenders thereof.  Each Loan Request shall be irrevocable and binding on
         the  Borrower and shall  obligate the Borrower to accept the  Revolving
         Loan  requested from such Lenders on the proposed  Drawdown Date.  Each
         Loan  Request  with  respect  to a Base Rate Loan shall be in a minimum
         aggregate  amount of $500,000  or an  integral  multiple of $100,000 in
         excess  thereof and each Loan Request with respect to a LIBOR Rate Loan
         shall be in a minimum  aggregate  amount of  $1,000,000  or an integral
         multiple of $100,000 in excess thereof.

                  2.6.2.  SWING  LINE.  Notwithstanding  the notice and  minimum
         amount  requirements  set forth in ss.2.6.1 but otherwise in accordance
         with  the  terms  and   conditions  of  this  Credit   Agreement,   the
         Administrative Agent may, in its sole discretion and without conferring
         with the Lenders,  make Revolving Loans to the Borrower (a) by entry of
         credits  to  the  Borrower's  operating  account  (No.  51191331)  (the
         "Operating  Account") with the Cash  Management Bank to cover checks or
         other charges which the Borrower has drawn or made against such account
         or (b) in an amount as otherwise  requested by the  Borrower;  provided
         that  the  maximum   outstanding   amount  of  advances   made  by  the
         Administrative  Agent  pursuant  to this  ss.2.6.2  (each a "Swing Line
         Loan") shall not, at any time, exceed  $5,000,000.  The Borrower hereby
         requests and authorizes the  Administrative  Agent to make from time to
         time the  Swing  Line  Loans by means of  appropriate  entries  of such
         credits sufficient to cover checks and other charges then presented for
         payment from the Operating  Account or as otherwise so  requested.  The
         Borrower  acknowledges  and  agrees  that the  making of the Swing Line
         Loans shall, in each case, be subject in all respects to the provisions
         of this Credit  Agreement as if they were Revolving  Loans covered by a
         Loan Request including,  without limitation,  the limitations set forth
         in ss.2.1 and the requirements that the applicable  provisions of ss.10
         (in the case of Swing Line Loans made on the Closing Date) and ss.11 be
         satisfied.  Swing Line Loans made  pursuant to this  ss.2.6.2  shall be
         Base Rate Loans until  converted in accordance  with the  provisions of
         this Credit  Agreement and, prior to a Settlement,  such interest shall
         be for the account of the Administrative Agent.

         2.7. CONVERSION OPTIONS.

                  2.7.1.  CONVERSION TO DIFFERENT  TYPE OF REVOLVING  LOAN.  The
         Borrower  may  elect  from  time  to time to  convert  any  outstanding
         Revolving Loan to a Revolving  Loan of another Type,  provided that (a)
         with respect to any such conversion of a LIBOR Rate Loan to a Base Rate
         Loan, the Borrower shall give the  Administrative  Agent at least three
         (3)  Business  Days prior  written  notice of such  election;  (b) with
         respect  to any such  conversion  of a Base Rate  Loan to a LIBOR  Rate
         Loan, the Borrower shall give the  Administrative  Agent at least three
         (3)  Business  Days prior  written  notice of such  election;  (c) with
         respect  to any such  conversion  of a LIBOR Rate Loan into a Base Rate
         Loan,  such  conversion  shall  only  be made  on the  last  day of the
         Interest  Period with respect  thereto and (d) no Revolving Loan may be
         converted  into, or continued as, a LIBOR Rate Loan when any Default or
         Event of Default has  occurred  and is  continuing.  Promptly  upon the
         receipt of any such election, the Administrative Agent shall notify the
         Lenders  thereof.  On the date on which such  conversion is being made,
         each Lender  shall take such  action as is  necessary  to transfer  its
         Commitment  Percentage of such Revolving Loans to its Domestic  Lending
         Office or its LIBOR Lending Office, as the case may be. All or any part
         of  outstanding  Revolving  Loans of any Type may be  converted  into a
         Revolving  Loan of another Type as PROVIDED  herein,  provided that any
         partial conversion with respect to -------- Revolving Loans shall be in
         an aggregate  principal  amount of  $1,000,000  or a whole  multiple of
         $100,000 in excess  thereof.  Each Conversion  Request  relating to the
         conversion  of  a  Revolving  Loan  to  a  LIBOR  Rate  Loan  shall  be
         irrevocable by the Borrower.

                                       1
<PAGE>

                  2.7.2.  CONTINUATION  OF TYPE OF REVOLVING LOAN. Any Revolving
         Loan of any Type may be continued as a Revolving  Loan of the same Type
         upon the  expiration  of an  Interest  Period with  respect  thereto by
         compliance  by the  Borrower  with the notice  provisions  contained in
         ss.2.7.1;  PROVIDED  that no LIBOR Rate Loan may be  continued  as such
         when any Default or Event of Default has  occurred  and is  continuing,
         but shall be  automatically  converted  to a Base Rate Loan on the last
         day of the first  Interest  Period  relating  thereto ending during the
         continuance of any Default or Event of Default of which officers of the
         Administrative  Agent  active upon the  Borrower's  account have actual
         knowledge.  In the event that the  Borrower  fails to provide  any such
         notice with respect to the  continuation  of any LIBOR Rate Loan,  then
         such LIBOR Rate Loan shall be  automatically  converted  to a Base Rate
         Loan on the last day of the first Interest Period relating thereto. The
         Administrative Agent shall notify the Lenders thereof promptly when any
         such automatic  conversion  contemplated by this ss.2.7 is scheduled to
         occur.

                  2.7.3.  LIBOR RATE LOANS. Any conversion to or from LIBOR Rate
         Loans shall be in such amounts and be made  pursuant to such  elections
         so that, after giving effect thereto, the aggregate principal amount of
         all LIBOR Rate Loans having the same Interest  Period shall not be less
         than $1,000,000 or a whole multiple of $100,000 in excess  thereof.  No
         more than ten (10) LIBOR Rate Loans having  different  Interest Periods
         may be outstanding at any time.

         2.8. FUNDS FOR REVOLVING LOANS.

                  2.8.1.  FUNDING PROCEDURES FOR REVOLVING LOANS. Not later than
         2 p.m.  (Boston  time) on the proposed  Drawdown  Date of any Revolving
         Loans,  each of the Lenders will make  available to the  Administrative
         Agent, at the Administrative  Agent's Office, in immediately  available
         funds, the amount of such Lender's Commitment  Percentage of the amount
         of the requested Revolving Loans. Upon receipt from such Lender of such
         amount,  and upon receipt of the documents  required by ss.ss.10 and 11
         and the satisfaction of the other conditions set forth therein,  to the
         extent applicable,  the Administrative Agent will make available to the
         Borrower the aggregate amount of such Revolving Loans made available to
         the Administrative Agent by such Lenders. The failure or refusal of any
         such  Lender  to make  available  to the  Administrative  Agent  at the
         aforesaid  time  and  place on any  Drawdown  Date  the  amount  of its
         Commitment  Percentage  of the  requested  Revolving  Loans  shall  not
         relieve any other  Lender of its several  obligation  hereunder to make
         available to the Administrative Agent the amount of such other Lender's
         Commitment Percentage of any requested Revolving Loans.

                  2.8.2.  ADVANCES BY ADMINISTRATIVE  AGENT FOR REVOLVING LOANS.
         The  Administrative  Agent may,  unless notified to the contrary by any
         Lender  prior to a  Drawdown  Date,  assume  that such  Lender has made
         available to the Administrative  Agent on such Drawdown Date the amount
         of such Lender's  Commitment  Percentage  of the Revolving  Loans to be
         made on such Drawdown  Date, and the  Administrative  Agent may (but it
         shall not be  required  to),  in reliance  upon such  assumption,  make
         available to the Borrower a  corresponding  amount.  If any such Lender
         makes available to the Administrative Agent such amount on a date after
         such Drawdown Date, such Lender shall pay to the  Administrative  Agent
         on demand an amount  equal to the product of (a) the  average  computed
         for the period referred to in clause (c) below, of the weighted average
         interest  rate  paid by the  Administrative  Agent  for  federal  funds
         acquired by the  Administrative  Agent during each day included in such
         period, times (b) the amount of such Lender's Commitment  Percentage of
         such Revolving Loans,  times (c) a fraction,  the numerator of which is
         the number of days that elapse from and including such Drawdown Date to
         the date on which the amount of such Lender's Commitment  Percentage of
         such  Revolving  Loans  shall  become  immediately   available  to  the
         Administrative  Agent, and the denominator of which is 360. A statement
         of the  Administrative  Agent  submitted to such Lender with respect to
         any amounts owing under this paragraph shall be prima facie evidence of
         the amount due and owing to the Administrative Agent by such Lender. If
         the amount of such Lender's  Commitment  Percentage  of such  Revolving
         Loans is not made available to the Administrative  Agent by such Lender
         within  three (3) Business  Days  following  such  Drawdown  Date,  the
         Administrative  Agent shall be entitled to recover such amount from the
         Borrower  on  demand,  with  interest  thereon  at the rate  per  annum
         applicable to the Revolving Loans made on such Drawdown Date.

                                       2
<PAGE>

         2.9.  CHANGE IN BORROWING  BASE. The Borrowing Base shall be determined
weekly (or at such other interval as may be specified  pursuant to ss.7.4(f)) by
the  Administrative  Agent  by  reference  to  the  Borrowing  Base  Certificate
delivered to the Lenders and the Administrative  Agent pursuant to ss.7.4(f) and
other  information  obtained  by or provided to the  Administrative  Agent.  The
Administrative  Agent shall give to the Borrower written notice of any change in
the Borrowing Base determined by the Administrative Agent, which notice shall be
effective upon its receipt by the Borrower.

         2.10. SETTLEMENTS.

                  2.10.1.  GENERAL.  On each Settlement Date, the Administrative
         Agent shall, not later than 11:00 a.m.  (Boston time),  give telephonic
         or  facsimile  notice  (a) to  the  Lenders  and  the  Borrower  of the
         respective   outstanding  amount  of  Swing  Line  Loans  made  by  the
         Administrative  Agent on behalf  of the  Lenders  from the  immediately
         preceding  Settlement  Date  through the close of business on the prior
         day and (b) to such Lenders of the amount (a "Settlement  Amount") that
         each such Lender (a "Settling Lender") shall pay to effect a Settlement
         of any  Swing  Line  Loan.  A  statement  of the  Administrative  Agent
         submitted  to such  Lenders and the  Borrower  or to the  Lenders  with
         respect to any amounts  owing under this  ss.2.10  shall be PRIMA FACIE
         evidence of the amount due and owing.  Each Settling Lender shall,  not
         later than 2:00 p.m.  (Boston time) on such Settlement  Date,  effect a
         wire  transfer of  immediately  available  funds to the  Administrative
         Agent in the amount of the Settlement  Amount for such Settling Lender.
         All funds advanced by such Lender as a Settling Lender pursuant to this
         ss.2.10  shall for all purposes be treated as a Revolving  Loan made by
         such  Settling  Lender to the Borrower  and all funds  received by such
         Lender  pursuant to this  ss.2.10  shall for all purposes be treated as
         repayment of amounts owed with respect to Revolving  Loans made by such
         Lender. In the event that any bankruptcy, reorganization,  liquidation,
         receivership or similar cases or proceedings in which the Borrower is a
         debtor  prevent a Settling  Lender  from making any  Revolving  Loan to
         effect a Settlement as contemplated  hereby,  such Settling Lender will
         make such  dispositions  and  arrangements  with the other Lenders with
         respect  to  such  Revolving  Loans,  either  by  way  of  purchase  of
         participations,   distribution,   pro  tanto   assignment   of  claims,
         subrogation  or otherwise as shall result in each Lender's share of the
         outstanding  Revolving  Loans being equal, as nearly as may be, to such
         Lender's  Commitment  Percentage  of  the  outstanding  amount  of  the
         Revolving Loans.

                  2.10.2.  FAILURE TO MAKE FUNDS AVAILABLE.  The  Administrative
         Agent may, unless notified to the contrary by any Settling Lender prior
         to a Settlement Date, assume that such Settling Lender has made or will
         make available to the Administrative  Agent on such Settlement Date the
         amount of such Settling Lender's Settlement Amount, and, if applicable,
         the  Administrative  Agent may (but it shall not be  required  to),  in
         reliance  upon  such  assumption,  make  available  to the  Borrower  a
         corresponding  amount.  If any Settling  Lender makes  available to the
         Administrative  Agent such amount on a date after such Settlement Date,
         such Settling Lender shall pay to the Administrative Agent on demand an
         amount equal to the product of (a) the average  computed for the period
         referred to in clause (c) below, of the weighted  average interest rate
         paid by the  Administrative  Agent for  federal  funds  acquired by the
         Administrative Agent during each day included in such period, times (b)
         the  amount  of such  Settlement  Amount,  times  (c) a  fraction,  the
         numerator of which is the number of days that elapse from and including
         such Settlement Date to the date on which the amount of such Settlement
         Amount shall become immediately  available to the Administrative Agent,
         and the denominator of which is 360. A statement of the  Administrative
         Agent  submitted  to such  Settling  Lender with respect to any amounts
         owing under this ss.2.10.2  shall be prima facie evidence of the amount
         due and owing to the  Administrative  Agent by such Settling Lender. If
         such Settling  Lender's  Settlement Amount is not made available to the
         Administrative  Agent by such Settling Lender within three (3) Business
         Days following such Settlement Date, the Administrative  Agent shall be
         entitled  to recover  such amount  from the  Borrower  on demand,  with
         interest  thereon  at the rate per annum  applicable  to the  Revolving
         Loans as of such Settlement Date.

                                       3
<PAGE>

                  2.10.3. NO EFFECT ON OTHER LENDERS.  The failure or refusal of
         any Settling  Lender to make available to the  Administrative  Agent at
         the aforesaid time and place on any Settlement  Date the amount of such
         Settling  Lender's  Settlement  Amount  shall not (a) relieve any other
         Settling  Lender  from  its  several  obligations   hereunder  to  make
         available to the Administrative Agent the amount of such other Settling
         Lender's  Settlement  Amount or (b) impose upon any Lender,  other than
         the Settling Lender so failing or refusing,  any liability with respect
         to such failure or refusal or otherwise increase the Commitment of such
         other Lender.

         2.11. REPAYMENTS OF REVOLVING LOANS PRIOR TO EVENT OF DEFAULT.

                  2.11.1.  CREDIT FOR FUNDS RECEIVED IN  CONCENTRATION  ACCOUNT.
         Prior to the  occurrence of an Event of Default as to which the account
         officers of the Administrative Agent active upon the Borrower's account
         have actual  knowledge,  (a) all funds and cash proceeds in the form of
         money, checks and like items received in the Concentration  Account (as
         defined in and as contemplated  by ss.7.17.1)  shall be credited to the
         Borrower,  on the same Business Day on which the  Administrative  Agent
         determines that good collected funds have been received,  and, prior to
         the receipt of good collected funds, on a provisional basis until final
         receipt of good collected funds, (b) all funds and cash proceeds in the
         form  of a wire  transfer  received  in the  Concentration  Account  as
         contemplated  by ss.7.17  shall be credited to the Borrower on the same
         Business Day as the Cash  Management  Bank's receipt of such amounts in
         good collected funds, (c) all funds and cash proceeds in the form of an
         automated clearing house transfer received in the Concentration Account
         as  contemplated  by ss.7.17 shall be credited to the Borrower,  on the
         next Business Day following the Cash Management  Bank's receipt of such
         amounts  in  good  collected  funds.  For  purposes  of  the  foregoing
         provisions of this  ss.2.11.1,  the Cash  Management  Bank shall not be
         deemed to have  received  any such  funds or cash  proceeds  on any day
         unless received by the Cash  Management  Bank before 2:30 p.m.  (Boston
         time) on such day. The Borrower  further  acknowledges  and agrees that
         any such provisional credits or credits in respect of wire or automatic
         clearing  house funds  transfers  shall be subject to reversal if final
         collection  in good funds of the related  item is not  received  by, or
         final  settlement  of the funds  transfer  is not made in favor of, the
         Cash  Management  Bank  in  accordance  with  Cash  Management   Bank's
         customary procedures and practices for collecting  provisional items or
         receiving settlement of funds transfers.

                                       4
<PAGE>

                  2.11.2. APPLICATION OF PAYMENTS PRIOR TO EVENT OF DEFAULT.

                  (a) [Intentionally Omitted].

                  (b) Prior to the  occurrence  of an Event of  Default of which
         the  account  officers  of  the  Administrative  Agent  active  on  the
         Borrower's  account  have  knowledge,  all  funds  transferred  to  the
         Concentration  Account and for which the Borrower has received  credits
         shall,  subject  to the  Intercreditor  Agreement,  be  applied  to the
         Obligations of the Borrowers as follows:

                           (i) first, to pay amounts then due and payable by the
                  Borrower under this Credit Agreement,  the Notes and the other
                  Loan Documents and in respect of any other  Obligations of the
                  Borrower;

                           (ii)  second,  to repay  Swing Line Loans made by the
                  Administrative  Agent  pursuant  to  ss.2.6.2  and  for  which
                  Settlement has not then been made;

                           (iii) third,  to repay Revolving Loans which are Base
                  Rate Loans;

                           (iv) fourth, to repay Revolving Loans which are LIBOR
                  Rate Loans; and

                           (v)   fifth,   except  as   otherwise   required   by
                  ss.ss.4.2(b) and (c), to the Operating Account.

                  (c) All prepayments of LIBOR Rate Loans prior to the end of an
         Interest  Period shall  obligate the Borrower to pay any breakage costs
         associated with such LIBOR Rate Loans in accordance with ss.5.10. Prior
         to the  occurrence  of an Event of Default,  the  Borrower may elect to
         avoid such breakage costs by providing to the Administrative Agent cash
         in an amount  sufficient to cash  collateralize  such LIBOR Rate Loans,
         but in no event  shall the  Borrower  be deemed to have paid such LIBOR
         Rate Loans  until such cash has been paid to the  Administrative  Agent
         and has been applied to such LIBOR Rate Loans.  Until such application,
         the Administrative  Agent may elect to cause such cash collateral to be
         deposited  into either (i) a cash  collateral  account  pursuant to the
         terms of a cash collateral  agreement  executed by the Borrower and the
         Administrative  Agent  and in form and  substance  satisfactory  to the
         Administrative  Agent or (ii) the  Operating  Account with  appropriate
         instructions  prohibiting  the  Borrower's  withdrawal of such funds so
         long as they remain cash  collateral.  In each such case,  the Borrower
         agrees  to  execute  and  deliver  to  the  Administrative  Agent  such
         instruments and documents,  including Uniform  Commercial Code or other
         financing  statements  and agreements  with any third party  depository
         banks, as the Administrative Agent may request.

                  (d) All  prepayments  of the Revolving  Loans pursuant to this
         ss.2.11.2  shall be allocated  among the Lenders  making such Revolving
         Loans,  in  proportion,  as nearly as  practicable,  to the  respective
         unpaid  principal  amount of such  Revolving  Loans  outstanding,  with
         adjustments to the extent practicable to equalize any prior payments or
         repayments  not exactly in proportion.  Prior to any  Settlement  Date,
         however,  all  prepayments  of the Revolving  Loans shall be applied in
         accordance with this ss.2.11.2, first to outstanding Revolving Loans of
         the Administrative Agent.

         2.12.  REPAYMENTS  OF LOANS  AFTER  EVENT  OF  DEFAULT.  Following  the
occurrence  and  during  the  continuance  of an Event of  Default  of which the
account officers of the  Administrative  Agent active on the Borrower's  account
have knowledge, all funds transferred to the Concentration Account and for which
the  Borrower  has  received  credits  shall be,  subject  to the  Intercreditor
Agreement, applied to the Obligations in accordance with ss.12.4.

<PAGE>

         2.13. [INTENTIONALLY OMITTED].

         2.14. [INTENTIONALLY OMITTED].

         2.15. [INTENTIONALLY OMITTED].

         2.16.  ADMINISTRATIVE AGENT ADVANCES.  Notwithstanding  anything to the
contrary  contained  herein  (including,   without  limitation,   the  borrowing
limitations  set forth in ss.2.1  hereof),  but subject to the  limitations  set
forth in the proviso  contained in this  ss.2.16,  the  Administrative  Agent is
hereby  authorized  by the Borrower  and the  Lenders,  from time to time at the
request of the Borrower but in the Administrative  Agent's sole discretion,  (a)
after the  occurrence  and  during the  continuance  of a Default or an Event of
Default,  or (b) at any  time  that  any  of  the  other  applicable  conditions
precedent set forth in ss.11 have not been satisfied, to make Revolving Loans to
the Borrower on behalf of the Lenders  which the  Administrative  Agent,  in its
reasonable  business  judgment,  deems necessary or desirable (i) to preserve or
protect the Collateral,  or any portion thereof,  (ii) to enhance the likelihood
of, or  maximize  the amount of,  repayment  of the Loans and other  Obligations
(other than amounts in respect of Cash Management Obligations),  or (iii) to pay
any  other  amount  chargeable  to the  Borrower  pursuant  to the terms of this
Agreement  (other  than  amounts  in respect  of Cash  Management  Obligations),
including,  without  limitation,  costs, fees and expenses as described in ss.15
(any of the advances described in this ss.2.16 being hereinafter  referred to as
"Administrative  Agent Advances");  PROVIDED,  that (w) the Administrative Agent
Advances  shall  be  due  and  payable  on the  earlier  of  (1)  demand  by the
Administrative  Agent and (2) sixty (60) days after the making thereof,  (x) the
aggregate  outstanding  principal  amount of all  Administrative  Agent Advances
shall not exceed $2,500,000 and (y) the Administrative  Agent shall not make any
Administrative  Agent Advance to the Borrower if the amount  thereof would cause
the Revolving Exposure to exceed the Total Commitment.  The Administrative Agent
Advances  shall be  repayable  on demand and  secured by the  Collateral,  shall
constitute Revolving Loans and Obligations hereunder, and shall bear interest at
the rate  applicable to Base Rate Loans which are  Revolving  Loans from time to
time.  The  Administrative  Agent shall  notify each Lender and the  Borrower in
writing of each such Administrative  Agent Advance promptly following the making
thereof,  which  notice  shall  include a  description  of the  purpose  of such
Administrative  Agent Advance.  Each Lender  irrevocably agrees to purchase from
the  Administrative  Agent, upon demand,  its pro rata share (in accordance with
its Commitment Percentage) of the amount of the outstanding Administrative Agent
Advances.  Until such  purchase,  all payments in respect of the  Administrative
Agent Advances shall be for the account of the Administrative Agent.

                             3. REPAYMENT OF LOANS.

         3.1. REVOLVING LOANS.

                  3.1.1.  MATURITY. The Borrower promises to pay on the Maturity
         Date, and there shall become absolutely due and payable on the Maturity
         Date, all of the Revolving  Loans  outstanding  on such date,  together
         with any and all accrued and unpaid interest thereon and all other fees
         and other amounts then accrued and outstanding with respect thereto.

                  3.1.2. MANDATORY REPAYMENTS OF REVOLVING LOANS. If at any time
         the sum of the Revolving Exposure exceeds the Gross Availability,  then
         the  Borrower  shall  immediately  pay the amount of such excess to the
         Administrative  Agent for the  respective  accounts  of the Lenders for
         application: first, to any Swing Line Loans outstanding, second, to any
         Unpaid  Reimbursement  Obligations;   third,  to  all  Revolving  Loans
         advanced to the Borrower;  and fourth, to provide to the Administrative
         Agent cash collateral for Reimbursement  Obligations as contemplated by
         ss.4.2(b) and (c). Each payment of any Unpaid Reimbursement  Obligation
         or prepayment of Revolving  Loans shall be allocated among the Lenders,
         in  proportion,  as  nearly  as  practicable,   to  each  Reimbursement
         Obligation  or (as the case  may be) the  respective  unpaid  principal
         amount of each Lender's Revolving Note or loan account (as the case may
         be) with  adjustments  to the extent  practicable to equalize any prior
         payments or  repayments  not exactly in  proportion.  In addition,  the
         Borrower   shall  repay  the  Revolving   Loans  in   accordance   with
         ss.3.2.1(d).
<PAGE>

                  3.1.3.  OPTIONAL  REPAYMENTS OF REVOLVING  LOANS. The Borrower
         shall  have the  right,  at their  election,  to repay the  outstanding
         amount  of the  Revolving  Loans,  as a whole or in  part,  at any time
         without  penalty  or  premium,   provided  that  any  full  or  partial
         prepayment of the  outstanding  amount of any LIBOR Rate Loans pursuant
         to this  ss.3.1.3  may be made  only on the  last  day of the  Interest
         Period relating thereto (unless breakage costs are paid by the Borrower
         pursuant to ss.5.10 or cash  collateral is provided in accordance  with
         ss.2.11.2(c)) . The Borrower shall provide to the Administrative Agent,
         no later than 10:00 a.m., Boston time, at least three (3) Business Days
         prior  written  notice  of any  proposed  prepayment  pursuant  to this
         ss.3.1.3,  specifying the proposed date of prepayment of any LIBOR Rate
         Loans  and the  principal  amount  to be  prepaid.  Each  such  partial
         prepayment of the Revolving  Loans shall be  accompanied by the payment
         of accrued interest on the principal  prepaid to the date of prepayment
         and shall be applied,  in the absence of  instruction  by the Borrower,
         first to the principal of Base Rate Loans which are Revolving Loans and
         second to the principal of LIBOR Rate Loans which are Revolving  Loans.
         Each  partial  prepayment  shall be  allocated  among the  Lenders,  in
         proportion,  as  nearly  as  practicable,   to  the  respective  unpaid
         principal amount of each such Lender's  Revolving Note or loan account,
         as the case may be,  with  adjustments  to the  extent  practicable  to
         equalize any prior repayments not exactly in proportion.

         3.2. MANDATORY PREPAYMENTS.

                  3.2.1. ADDITIONAL MANDATORY PREPAYMENTS OF REVOLVING LOANS.

                  (a) [Intentionally Omitted].

                  (b) [Intentionally Omitted].

                  (c)  Concurrently  with  the  receipt  by  the  Parent  or any
         Subsidiary of the Parent of:

                           (i) net cash  proceeds  from any  Asset  Sales by the
                  Parent or such Subsidiary (other than the sale, lease, license
                  or other  disposition  of  assets  in the  ordinary  course of
                  business consistent with past practices);

                           (ii)  net cash  proceeds  from  the  issuance  by the
                  Parent  or  such  Subsidiary  of any  debt  (other  than  debt
                  permitted  under  ss.8.2)  or equity  securities  (other  than
                  equity  securities  issued in connection with any compensatory
                  employee benefit or option plan); or

                           (iii) net cash  proceeds  received  by the  Parent or
                  such  Subsidiary  from  Casualty  Events  which  have not been
                  utilized by the Parent or such Subsidiary to repair or replace
                  the property so damaged, destroyed or taken within one hundred
                  and eighty (180) days of receipt of such proceeds;

                                       0
<PAGE>

                  the  Borrower  shall pay to the  Administrative  Agent for the
                  respective  accounts  of the  Lenders  an amount  equal to one
                  hundred percent (100%) of such proceeds,  to be applied in the
                  manner  set  forth in  ss.3.2.1(d);  PROVIDED  that (A) to the
                  extent that any such amounts received as a result of any Asset
                  Sale  of,  or any  Casualty  Event  related  to,  Fixed  Asset
                  Collateral, are applied to prepay the Term Loans, such amounts
                  shall  not be  required  to be  applied  to  prepay  the Loans
                  pursuant to this  ss.3.2.1(c)  and (B) the Borrower shall only
                  be required to apply 50% pursuant to this  ss.3.2.1(c)  of the
                  net cash  proceeds  from the  issuance  by the  Parent  or any
                  Subsidiary of any debt or equity  securities so long as 50% of
                  such   proceeds   are   applied  to  prepay  the  Term  Loans.
                  Notwithstanding   the   foregoing,   the  provisions  of  this
                  ss.3.2.1(c) shall not impair any restrictions set forth in the
                  Loan Documents with respect to the incurrence of  Indebtedness
                  or Asset Sales by the Parent or any of its Subsidiaries.

                  (d) All payments made pursuant to ss.3.2.1(c) shall be applied
         to repay the outstanding  principal amount of the Revolving Loans, with
         a permanent  reduction  of the Total  Commitment  in the amount of such
         Revolving   Loan   prepayment   required   under  this   ss.3.2.1   and
         corresponding  permanent reductions of each Lender's  Commitment.  Such
         mandatory   prepayments   shall  be  allocated  among  the  Lenders  in
         proportion,  as nearly as  practicable,  to the respective  outstanding
         amounts of each such Lender's Notes or loan  accounts,  as the case may
         be, with  adjustments  to the extent  practicable to equalize any prior
         prepayments not exactly in proportion.

                             4. LETTERS OF CREDIT.

         4.1. LETTER OF CREDIT COMMITMENTS.

                  4.1.1.  COMMITMENT TO ISSUE LETTERS OF CREDIT.  Subject to the
         terms and  conditions  hereof and the  execution  and  delivery  by the
         Borrower  of a letter  of  credit  application  on the  Issuing  Bank's
         customary form (a "Letter of Credit  Application"),  the Administrative
         Agent on behalf of the Lenders and in reliance  upon the  agreement  of
         such  Lenders set forth in ss.4.1.4  and upon the  representations  and
         warranties of the Borrower  contained  herein,  agrees to (a) cause the
         Issuing Bank to issue, extend and renew for the account of the Borrower
         or Quaker Textile one or more standby or documentary  letters of credit
         (each  individually,  a  "Letter  of  Credit"),  in such form as may be
         requested  from  time to  time by the  Borrower  and  agreed  to by the
         Administrative  Agent and the  Issuing  Bank and (b)  enter  into an LC
         Guaranty to support the reimbursement  obligations of the Borrower with
         respect to  Letters  of Credit  requested  by the  Borrower;  PROVIDED,
         HOWEVER,  that after giving effect to such request,  (i) the sum of the
         aggregate  Maximum  Drawing  Amount on all  Letters  of Credit  and all
         Unpaid Reimbursement Obligations shall not exceed $7,500,000 at any one
         time and  (ii) the  Revolving  Exposure  shall  not  exceed  the  Gross
         Availability at such time.

                  4.1.2.  LETTER OF CREDIT  APPLICATIONS.  Each Letter of Credit
         Application   shall   be   completed   to  the   satisfaction   of  the
         Administrative  Agent  and the  Issuing  Bank.  In the  event  that any
         provision  of any Letter of Credit  Application  shall be  inconsistent
         with any  provision of this Credit  Agreement,  then the  provisions of
         this Credit Agreement  shall, to the extent of any such  inconsistency,
         govern.

                  4.1.3.  TERMS OF  LETTERS  OF  CREDIT.  Each  Letter of Credit
         issued,  extended or renewed hereunder shall,  among other things,  (a)
         provide  for the  payment  of sight  drafts for honor  thereunder  when
         presented in accordance with the terms thereof and when  accompanied by
         the documents  described therein,  and (b) have an expiry date no later
         than the date which is fourteen  (14) days (or, if the Letter of Credit
         is  confirmed  by a confirmer  or  otherwise  provides  for one or more
         nominated  persons,  forty-five  (45) days) prior to the Maturity Date.
         Subject  to clause  (b)  above,  each  Letter of  Credit  shall  expire
         (without  giving  effect  to any  extension  thereof  by  reason  of an
         interruption  of  business)  at or prior to the close of  business  365
         days,  in the case of standby  Letters of Credit,  or 180 days,  in the
         case of documentary  Letters of Credit,  after the date of the issuance
         of such Letter of Credit  (or, in the case of any renewal or  extension
         thereof,  365 days or 180 days,  as  applicable,  after such renewal or
         extension) provided that the Issuing Bank may, in its sole and absolute
         discretion,  agree to issue any such standby Letter of Credit providing
         for  automatic  extensions  thereof  to a date not later  than 365 days
         beyond its current  expiration  date;  PROVIDED that any such automatic
         extension  Letter of Credit must permit the Issuing Bank to prevent any
         such extension at least once in each  twelve-month  period  (commencing
         with the date of  issuance  of such  Letter of Credit) by giving  prior
         notice to the  beneficiary  thereof  not later  than a day in each such
         twelve-month period to be agreed upon at the time such Letter of Credit
         is issued.  Each Letter of Credit so issued,  extended or renewed shall
         be subject to the Uniform Customs and Practice for Documentary  Credits
         (1993 Revision),  International Chamber of Commerce Publication No. 500
         or any  successor  version  thereto  adopted by the Issuing Bank in the
         ordinary  course of its  business  as a letter of credit  issuer and in
         effect at the time of issuance  of such Letter of Credit (the  "Uniform
         Customs")  or, in the case of a standby  Letter of  Credit,  either the
         Uniform  Customs  or  the  International   Standby  Practices  (ISP98),
         International Chamber of Commerce Publication No. 590, or any successor
         code of standby letter of credit  practices  among banks adopted by the
         Issuing Bank in the ordinary course of its business as a standby letter
         of credit  issuer and in effect at the time of  issuance of such Letter
         of Credit.

                                       1
<PAGE>

                  4.1.4.  REIMBURSEMENT  OBLIGATIONS  OF  LENDERS.  Each  Lender
         severally agrees that it shall be absolutely liable,  without regard to
         the  occurrence  of any  Default  or  Event  of  Default  or any  other
         condition  precedent  whatsoever,   to  the  extent  of  such  Lender's
         Commitment Percentage,  to reimburse the Administrative Agent on demand
         for the amount of each draft paid by the Issuing Bank under each Letter
         of Credit issued for the account of the Borrower or Quaker  Textile and
         each payment made by the Administrative Agent to the Issuing Bank under
         the LC Guaranty relating to any Letter of Credit issued for the account
         of the Borrower or Quaker Textile to the extent that such amount is not
         reimbursed  by the  Borrower  pursuant to ss.4.2  (such  agreement by a
         Lender being called herein the "Letter of Credit Participation" of such
         Lender).

                  4.1.5.  PARTICIPATIONS OF LENDERS. Each such payment made by a
         Lender shall, unless the applicable  Reimbursement  Obligation has been
         otherwise  funded as a Revolving Loan bearing interest at the Base Rate
         pursuant  to ss.4.2,  be treated as the  purchase  by such  Lender of a
         participating interest in the Borrower's Reimbursement Obligation under
         ss.4.2 in an amount equal to such payment.  To that extent, each Lender
         shall  share in  accordance  with  its  participating  interest  in any
         interest which accrues pursuant to ss.4.2.

         4.2.  REIMBURSEMENT  OBLIGATION OF THE BORROWER. In order to induce the
Administrative  Agent to cause the Issuing Bank to issue,  extend and renew each
Letter of Credit for the account of the Borrower or Quaker Textile, the Borrower
agrees to reimburse or pay to the  Administrative  Agent, for the account of the
Administrative  Agent  and/or  the  Issuing  Bank  or (as the  case  may be) the
Lenders,  with respect to each Letter of Credit issued,  extended or renewed for
the Borrower's or Quaker Textile's account,

                  (a) except as otherwise expressly provided in ss.ss.4.2(b) and
         (c), on each date that any draft  presented under such Letter of Credit
         is  honored  by  the  Issuing   Bank,   or  the  Issuing  Bank  or  the
         Administrative  Agent otherwise makes a payment with respect thereto or
         the Administrative  Agent makes any payment under the LC Guaranty,  (i)
         the amount paid by the Issuing Bank or the  Administrative  Agent under
         or with  respect to such  Letter of Credit,  and (ii) the amount of any
         taxes, fees, charges or other costs and expenses whatsoever incurred by
         the Issuing Bank or  Administrative  Agent or any Lender in  connection
         with any payment made by the Issuing Bank,  Administrative Agent or any
         Lender under, or with respect to, such Letter of Credit; PROVIDED that,
         subject to the  conditions to borrowing  set forth  herein,  payment of
         each  Reimbursement  Obligation  by the Borrower  under this  ss.4.2(a)
         shall be made through the automatic funding of a Revolving Loan bearing
         interest at the Base Rate  applicable  to Revolving  Loans in an amount
         equal to the amount of such Reimbursement Obligation,  and the Borrower
         hereby irrevocably  authorizes and directs the Administrative Agent and
         Issuing Bank to take such  actions as may be  necessary  to  effectuate
         such automatic funding of any such Base Rate Loans;

                                       2
<PAGE>

                  (b) upon the  reduction  (but not  termination)  of the  Total
         Commitment to an amount less than the Maximum Drawing Amount, an amount
         equal  to  such   difference,   which  amount  shall  be  held  by  the
         Administrative   Agent  for  the   benefit  of  the   Lenders  and  the
         Administrative   Agent  as  cash   collateral  for  all   Reimbursement
         Obligations, and

                  (c) upon  the  termination  of the  Total  Commitment,  or the
         acceleration  of the  Reimbursement  Obligations  with  respect  to all
         Letters of Credit  issued for the  account  of the  Borrower  or Quaker
         Textile in accordance  with ss.12,  an amount equal to the then Maximum
         Drawing  Amount on all Letters of Credit  issued for the account of the
         Borrower  or  Quaker  Textile,  which  amount  shall  be  held  by  the
         Administrative   Agent  for  the   benefit  of  the   Lenders  and  the
         Administrative   Agent  as  cash   collateral  for  all   Reimbursement
         Obligations.

Each  such  payment   shall  be  made  to  the   Administrative   Agent  at  the
Administrative  Agent's Office in immediately  available funds.  Interest on any
and all amounts  remaining  unpaid by the Borrower under this ss.4.2 at any time
from the date such  amounts  become due and  payable  (whether as stated in this
ss.4.2,  by acceleration or otherwise)  until payment in full (whether before or
after  judgment) shall be payable to the  Administrative  Agent on demand at the
Default Rate.

         4.3.  LETTER OF CREDIT  PAYMENTS.  If any draft shall be  presented  or
other  demand  for  payment  shall be made  under  any  Letter  of  Credit,  the
Administrative  Agent  shall  notify the  Borrower of the date and amount of the
draft  presented  or demand for payment and of the date and time when it expects
to pay such draft or honor such demand for  payment.  If the  Borrower  fails to
reimburse the  Administrative  Agent as provided in ss.4.2 on or before the date
that such  draft is paid or other  payment  is made by the  Issuing  Bank or the
Administrative  Agent  or,  as a  result  of  the  applicable  borrowing  limits
described  therein  being  exceeded  such  Reimbursement   Obligations  are  not
satisfied by the making of a Revolving  Loan  bearing  interest at the Base Rate
applicable  to  Revolving  Loans,  the  Administrative  Agent  may at  any  time
thereafter  notify the  Lenders of the amount of any such  Unpaid  Reimbursement
Obligation.  No later  than 2:00 p.m.  (Boston  time) on the  Business  Day next
following the receipt of such notice,  each such Lender shall make  available to
the Administrative  Agent, at the Administrative  Agent's Office, in immediately
available   funds,   such   Lender's   Commitment   Percentage  of  such  Unpaid
Reimbursement  Obligation,  together  with an amount equal to the product of (a)
the  average,  computed for the period  referred to in clause (c) below,  of the
weighted  average  interest  rate paid by the  Administrative  Agent for federal
funds  acquired by the  Administrative  Agent  during each day  included in such
period,  times (b) the amount equal to such  Lender's  Commitment  Percentage of
such Unpaid  Reimbursement  Obligation,  times (c) a fraction,  the numerator of
which is the number of days that elapse from and  including the date the Issuing
Bank or the Administrative Agent paid the draft presented for honor or otherwise
made payment to the date on which such  Lender's  Commitment  Percentage of such
Unpaid  Reimbursement  Obligation,  shall  become  immediately  available to the
Administrative Agent, and the denominator of which is 360. The responsibility of
the Issuing  Bank and the  Administrative  Agent to the Borrower and the Lenders
shall be only to determine that the documents  (including each draft)  delivered
under each  Letter of Credit in  connection  with such  presentment  shall be in
conformity in all material respects with such Letter of Credit.

                                       3
<PAGE>

         4.4. OBLIGATIONS ABSOLUTE.  The Borrower's  obligations under this ss.4
shall  be  absolute  and  unconditional  under  any  and all  circumstances  and
irrespective  of the  occurrence  of any  Default  or  Event of  Default  or any
condition precedent whatsoever or any setoff, counterclaim or defense to payment
which the  Borrower  or Quaker  Textile may have or have had against the Issuing
Bank or the  Administrative  Agent, any Lender or any beneficiary of a Letter of
Credit.  The  Borrower  further  agrees  with the  Administrative  Agent and the
Lenders that none of the Issuing Bank, the Administrative  Agent and the Lenders
shall be responsible  for, and the Borrower's  Reimbursement  Obligations  under
ss.4.2 shall not be affected by, among other things, the validity or genuineness
of documents or of any  endorsements  thereon,  even if such documents should in
fact prove to be in any or all respects  invalid,  fraudulent or forged,  or any
dispute between or among the Borrower or Quaker Textile,  the beneficiary of any
Letter of Credit or any financing institution or other party to which any Letter
of Credit  may be  transferred  or any  claims  or  defenses  whatsoever  of the
Borrower or Quaker  Textile  against the  beneficiary of any Letter of Credit or
any such transferee.  None of the Issuing Bank, the Administrative Agent and the
Lenders  shall be  liable  for any  error,  omission,  interruption  or delay in
transmission,   dispatch  or   delivery  of  any  message  or  advice,   however
transmitted,  in connection with any Letter of Credit.  The Borrower agrees that
any action taken or omitted by the Issuing Bank, the Administrative Agent or any
Lender under or in connection  with each Letter of Credit and the related drafts
and  documents,  if done in good faith and in the  absence of gross  negligence,
shall be binding upon the  Borrower  and Quaker  Textile and shall not result in
any liability on the part of the Issuing Bank, the  Administrative  Agent or any
Lender to the Borrower or Quaker Textile.

         4.5.  RELIANCE BY ISSUER.  To the extent not inconsistent  with ss.4.4,
the Issuing  Bank and the  Administrative  Agent shall be entitled to rely,  and
shall be fully protected in relying upon, any Letter of Credit,  draft, writing,
resolution,   notice,  consent,   certificate,   affidavit,  letter,  cablegram,
telegram,  telecopy,  telex  or  teletype  message,  statement,  order  or other
document  believed  by such  Person to be genuine  and  correct and to have been
signed,  sent or made by the  proper  Person  or  Persons  and upon  advice  and
statements of legal counsel,  independent accountants and other experts selected
by the Issuing Bank or the  Administrative  Agent.  Each of the Issuing Bank and
the Administrative Agent shall be fully justified in failing or refusing to take
any action under this Credit  Agreement unless it shall first have received such
advice  or  concurrence  of  the  Required   Lenders  as  they  reasonably  deem
appropriate or it shall first be indemnified to its reasonable  satisfaction  by
the  other  Lenders  against  any and all  liability  and  expense  which may be
incurred by it by reason of taking or  continuing  to take any such action.  The
Issuing Bank and the Administrative  Agent shall in all cases be fully protected
in acting,  or in  refraining  from  acting,  under  this  Credit  Agreement  in
accordance  with a request of the  Required  Lenders,  and such  request and any
action  taken or  failure to act  pursuant  thereto  shall be  binding  upon the
Lenders and all future  holders of the Revolving  Notes or of a Letter of Credit
Participation.

         4.6.  LETTER OF CREDIT FEE. The Borrower shall pay a fee (in each case,
a "Letter of Credit Fee") to the Administrative Agent, in respect of each Letter
of Credit  issued for the account of the Borrower or Quaker  Textile,  (a) in an
amount equal to the Applicable Margin per annum with respect to LIBOR Rate Loans
that are Revolving Loans on the available  amount of each such Letter of Credit,
which  Letter  of  Credit  Fee  shall  be for the  accounts  of the  Lenders  in
accordance  with their  respective  Commitment  Percentages and (b) in an amount
equal to one-eighth of one percent (0.125%) per annum on the available amount of
each  such  Letter of  Credit,  which  amount  shall be for the  account  of the
Administrative Agent or the Issuing Bank as a fronting fee. The Letter of Credit
Fee shall be paid monthly in arrears on the first Business Day of each month for
the  immediately  preceding  calendar month. In respect of each Letter of Credit
issued for the account of the Borrower or Quaker  Textile,  the  Borrower  shall
also  pay  to  the   Administrative   Agent  for  the  Issuing   Bank's  or  the
Administrative  Agent's own account, at such other time or times as such charges
are  customarily  made by the  Issuing  Bank or the  Administrative  Agent,  the
Issuing Bank's and/or the Administrative Agent's customary issuance,  amendment,
negotiation, payment or document examination and other administrative fees as in
effect from time to time.

                                       4
<PAGE>

         4.7.  EXISTING  LETTERS  OF  CREDIT.  SCHEDULE  4.7  contains a list of
certain  letters of credit  issued  prior to the Closing Date for the account of
the  Borrower  or  Quaker  Textile  under the  Existing  Credit  Agreement  (the
"Existing Letters of Credit").  On the Closing Date, (a) the Existing Letters of
Credit shall be deemed to be Letters of Credit issued  pursuant to this ss.4 and
shall be subject to all of the provisions  applicable to Letters of Credit under
this Credit  Agreement and (b) all  liabilities  of the Borrower with respect to
the Existing Letters of Credit shall constitute Obligations of the Borrower with
respect to Letters of Credit in  accordance  with this Credit  Agreement and the
other Loan  Documents as though the  Borrower  had  delivered a Letter of Credit
Application  under this Credit  Agreement.  The letter of credit fees owing with
respect to the Existing  Letters of Credit  under ss.4.6 of the Existing  Credit
Agreement  shall be  calculated as of the Closing Date and shall be paid in full
at the time Letter of Credit Fees under ss.4.6 are required to be paid. From and
after the Closing  Date,  the Borrower  shall pay Letter of Credit Fees and such
other fees as provided in ss.4.6, in each case when due pursuant to ss.4.6, with
respect to each of the Existing Letters of Credit.

                         5. CERTAIN GENERAL PROVISIONS.

         5.1. FEES.

                  5.1.1.  ADMINISTRATIVE  AGENT'S FEE. The Borrower shall pay to
         the  Administrative  Agent,  for its  own  account,  an  administrative
         agent's fee as set forth in the Fee Letter (the "Administrative Agent's
         Fee"), in the amounts and at the times referred to therein.

                  5.1.2.   CLOSING   FEE.   The   Borrower   shall  pay  to  the
         Administrative  Agent on the Closing Date,  for the pro rata account of
         the  Lenders,  a closing  fee in the amount of $437,500  (the  "Closing
         Fee").

                  5.1.3.   OTHER   FEES.   The   Borrower   shall   pay  to  the
         Administrative  Agent on the Closing Date any additional fees set forth
         in the Fee Letter, in the amounts and at the times referred to therein.

         5.2. FUNDS FOR PAYMENTS.

                  5.2.1.  PAYMENTS  TO  ADMINISTRATIVE  AGENT.  All  payments of
         principal and interest on Loans and all Reimbursement Obligations, Fees
         and any other  amounts  due  hereunder  or under any of the other  Loan
         Documents  (unless  the  provisions  of this Credit  Agreement  require
         otherwise) shall be made on the due date thereof to the  Administrative
         Agent in Dollars  for the  respective  accounts  of the Lenders and the
         Administrative  Agent, at the Administrative  Agent's Office or at such
         other  place  that  the  Administrative  Agent  may  from  time to time
         designate,   in  each  case  no  later   than   12:00   noon   (Boston,
         Massachusetts, time or other local time at the place of payment) and in
         immediately available funds.

                  5.2.2. NO OFFSET,  ETC. All payments by the Borrower hereunder
         and  under  any of the  other  Loan  Documents  shall  be made  without
         recoupment,  setoff or  counterclaim  and free and clear of and without
         deduction  for any  taxes,  levies,  imposts,  duties,  charges,  fees,
         deductions, withholdings,  compulsory loans, restrictions or conditions
         of any nature now or hereafter imposed or levied by any jurisdiction or
         any political  subdivision thereof or taxing or other authority therein
         (other than Excluded  Taxes) unless the Borrower is compelled by law to
         make such deduction or  withholding.  If any such obligation is imposed
         upon the Borrower with respect to any amount payable by it hereunder or
         under any of the other Loan  Documents,  the  Borrower  will pay to the
         Administrative  Agent,  for the  account of the Lenders or (as the case
         may be) the  Administrative  Agent, on the date on which such amount is
         due and  payable  hereunder  or under such other  Loan  Document,  such
         additional  amount in  Dollars  as shall be  necessary  to  enable  the
         Lenders  or the  Administrative  Agent to  receive  the same net amount
         which the Lenders or the  Administrative  Agent would have  received on
         such due date had no such  obligation  been imposed upon the  Borrower.
         The  Borrower  will  deliver  promptly  to  the  Administrative   Agent
         certificates  or other valid  vouchers  for all taxes or other  charges
         deducted  from or paid with  respect to payments  made by the  Borrower
         hereunder or under such other Loan Document.

<PAGE>

                  5.2.3.  NON-U.S.  LENDERS.  Each Lender and the Administrative
         Agent that is not a U.S.  Person as defined in Section  7701(a)(30)  of
         the Code for federal income tax purposes (a "Non-U.S.  Lender")  hereby
         agrees  that,  if and to the  extent  it is  legally  able to do so, it
         shall,  prior  to the  date on which  it  becomes  a Lender  hereunder,
         deliver to the Borrower and the  Administrative  Agent,  as applicable,
         such certificates, documents or other evidence, as and when required by
         the Code or Treasury Regulations issued pursuant thereto, including (a)
         in the case of a  Non-U.S.  Lender  that is a "bank"  for  purposes  of
         Section  881(c)(3)(A)  of the Code,  two (2) duly  completed  copies of
         Internal  Revenue  Service  Form  W-8BEN or Form  W-8ECI  and any other
         certificate or statement of exemption required by Treasury Regulations,
         or any  subsequent  versions  thereof or successors  thereto,  properly
         completed and duly executed by such Lender or the Administrative  Agent
         establishing  that with respect to payments of  principal,  interest or
         fees  hereunder  it  is  (i)  not  subject  to  United  States  federal
         withholding  tax under the Code  because  such  payment is  effectively
         connected with the conduct by such Lender or Administrative  Agent of a
         trade or  business  in the United  States or (ii)  totally  exempt from
         United  States  federal   withholding  tax  under  a  provision  of  an
         applicable tax treaty and (b) in the case of a Non-U.S.  Lender that is
         not a "bank"  for  purposes  of  Section  881(c)(3)(A)  of the Code,  a
         certificate  in  form  and  substance  reasonably  satisfactory  to the
         Administrative  Agent and the  Borrower and to the effect that (i) such
         Non-U.S. Lender is not a "bank" for purposes of Section 881(c)(3)(A) of
         the Code, 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 any tax,  securities  law or
         other legal  requirements,  (ii) is not a ten percent (10%) shareholder
         for  purposes  of Section  881(c)(3)(B)  of the Code and (iii) is not a
         controlled foreign corporation receiving interest from a related person
         for  purposes  of Section  881(c)(3)(C)  of the Code,  together  with a
         properly  completed  Internal  Revenue  Service  Form  W-8 or  W-9,  as
         applicable  (or  successor  forms).  Each Lender or the  Administrative
         Agent  agrees  that it shall,  promptly  upon a change  of its  lending
         office or the selection of any additional lending office, to the extent
         the forms  previously  delivered  by it pursuant to this section are no
         longer   effective,   and   promptly   upon  the   Borrower's   or  the
         Administrative  Agent's  reasonable request after the occurrence of any
         other event (including the passage of time) requiring the delivery of a
         Form  W-8BEN,  Form  W-8ECI,  Form  W-8  or W-9  in  addition  to or in
         replacement of the forms previously delivered,  deliver to the Borrower
         and the Administrative Agent, as applicable, if and to the extent it is
         properly  entitled to do so, a properly  completed  and  executed  Form
         W-8BEN,  Form W-8ECI,  Form W-8 or W-9, as applicable (or any successor
         forms thereto).

         5.3.  COMPUTATIONS.  All computations of interest on Loans, any Fees or
any other  amount due  hereunder  shall,  unless  otherwise  expressly  provided
herein,  be based on a  360-day  year and  paid for the  actual  number  of days
elapsed.  Except as otherwise  provided in the  definition of the term "Interest
Period" with respect to LIBOR Rate Loans,  whenever a payment hereunder or under
any of the other Loan Documents becomes due on a day that is not a Business Day,
the due date for such payment shall be extended to the next succeeding  Business
Day, and interest and fees shall accrue during such extension.
<PAGE>

         5.4. INTEREST LIMITATION. Notwithstanding any other term of this Credit
Agreement  or any other  document  referred  to herein or  therein,  the maximum
amount of interest  which may be charged to or collected  from any person liable
hereunder by the Lenders shall be  absolutely  limited to, and shall in no event
exceed,  the  maximum  amount of  interest  which  could  lawfully be charged or
collected  under  applicable  law  (including,  to the  extent  applicable,  the
provisions  of Section  5197 of the  Revised  Statutes  of the United  States of
America, as amended or 12 U.S.C. Section 85, as amended), so that the maximum of
all amounts  constituting  interest under  applicable law,  howsoever  computed,
shall never exceed as to any Person liable therefor such lawful maximum, and any
term of this  Credit  Agreement  or any  other  document  referred  to herein or
therein  which could be construed  as  providing  for interest in excess of such
lawful maximum, shall be and hereby is made expressly subject to and modified by
the provisions of this paragraph.

         5.5.  INABILITY TO  DETERMINE  LIBOR RATE.  In the event,  prior to the
commencement  of any  Interest  Period  relating  to any LIBOR  Rate  Loan,  the
Administrative Agent shall determine or be notified by the Required Lenders that
(a) adequate and reasonable methods do not exist for ascertaining the LIBOR Rate
that would  otherwise  determine  the rate of interest to be  applicable  to any
LIBOR Rate Loan during any Interest  Period or (b) the LIBOR Rate  determined or
to be determined for such Interest Period will not adequately and fairly reflect
the cost to the Lenders of making or  maintaining  their LIBOR Rate Loans during
such  period,  the  Administrative  Agent  shall  forthwith  give notice of such
determination  (which  shall be  conclusive  and binding on the Borrower and the
Lenders) to the Borrower and the Lenders.  In such event (i) any Loan Request or
Conversion  Request  with  respect to LIBOR Rate  Loans  shall be  automatically
withdrawn  and shall be deemed a request  for Base Rate  Loans,  (ii) each LIBOR
Rate  Loan  will  automatically,  on the last day of the then  current  Interest
Period  relating  thereto,  become a Base Rate Loan and (iii) the obligations of
the Lenders to make LIBOR Rate Loans shall be suspended until the Administrative
Agent or the Required Lenders  determine that the  circumstances  giving rise to
such suspension no longer exist,  whereupon the Administrative  Agent or, as the
case may be, the  Administrative  Agent  upon the  instruction  of the  Required
Lenders,  shall  so  notify  the  Borrower  and the  Lenders.

         5.6.  ILLEGALITY.  Notwithstanding  any other provisions herein, if any
present or future law, regulation,  treaty or directive or in the interpretation
or  application  thereof  shall make it  unlawful  for any Lender to (i) make or
maintain  LIBOR Rate Loans,  or (ii) perform its  obligations  in respect of any
LIBOR Rate Loan, such Lender shall  forthwith give notice of such  circumstances
to the Borrower and the other Lenders and  thereupon (a) the  commitment of such
Lender to make LIBOR Rate Loans or convert  Loans of another  Type to LIBOR Rate
Loans shall forthwith be suspended, and (b) such Lender's Loans then outstanding
as LIBOR Rate Loans if any such Loans exist, shall be converted automatically to
Base Rate Loans on the last day of each Interest Period applicable to such LIBOR
Rate Loans or within such earlier period as may be required by law. The Borrower
hereby  agrees  promptly to pay to the  Administrative  Agent for the account of
such Lender,  upon demand by such Lender,  any additional  amounts  necessary to
compensate  such  Lender  for any costs  incurred  by such  Lender in making any
conversion  in  accordance  with this  ss.5.6,  including  any  interest or fees
payable by such  Lender to lenders of funds  obtained  by it in order to make or
maintain its LIBOR Rate Loans hereunder.

         5.7.  ADDITIONAL  COSTS,  ETC. If any present or future applicable law,
which  expression,  as used herein,  includes  statutes,  rules and  regulations
thereunder  and  interpretations  thereof  by  any  competent  court  or by  any
governmental   or  other   regulatory   body  or  official   charged   with  the
administration  or  the   interpretation   thereof  and  requests,   directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to any Lender,  the  Administrative  Agent, the Issuing Bank or
the Cash Management Bank by any central bank or other fiscal,  monetary or other
authority (whether or not having the force of law), shall:

                  (a) subject any Lender, the Administrative  Agent, the Issuing
         Bank or the  Cash  Management  Bank to any  Tax,  levy,  impost,  duty,
         charge,  fee,  deduction or  withholding  of any nature with respect to
         this Credit Agreement, the other Loan Documents, any Letters of Credit,
         such  Lender's  Commitment  or the LIBOR Rate  Loans,  or change in the
         basis of taxation of payments to such Lender, the Administrative Agent,
         the Issuing Bank or the Cash Management Bank (other than Taxes, levies,
         imposts.  charges, fees, deductions or withholdings covered by ss.5.2.2
         and the  imposition  of, or any change in the rate of, any Excluded Tax
         payable by such Lender, the  Administrative  Agent, the Issuing Bank or
         the Cash Management Bank), or

                  (b) impose or increase or render applicable (other than to the
         extent  specifically  provided for elsewhere in this Credit  Agreement)
         any special deposit, reserve,  assessment,  liquidity, capital adequacy
         or other similar requirements  (whether or not having the force of law)
         against  assets held by, or deposits in or for the account of, or loans
         by, or letters of credit issued by, or  commitments of an office of any
         Lender,  the  Administrative  Agent,  the  Issuing  Bank  or  the  Cash
         Management Bank, or

                  (c)  impose  on any  Lender,  the  Administrative  Agent,  the
         Issuing  Bank or the Cash  Management  Bank  any  other  conditions  or
         requirements  with  respect to this  Credit  Agreement,  the other Loan
         Documents,  such  Lender's  Commitment,  any  Letters of Credit or, the
         LIBOR Rate Loans, and the result of any of the foregoing is:

                           (i) to increase the cost to any Lender or the Issuing
                  Bank of  making,  funding,  issuing,  renewing,  extending  or
                  maintaining  any  of  the  LIBOR  Rate  Loans,  such  Lender's
                  Commitment or any Letter of Credit, or

                           (ii) to reduce  the  amount of  principal,  interest,
                  Reimbursement  Obligation  or  other  amount  payable  to such
                  Lender, the Administrative Agent or the Issuing Bank hereunder
                  on account of such Lender's  Commitment,  any Letter of Credit
                  or any of the Loans, or

                           (iii) to  require  such  Lender,  the  Administrative
                  Agent,  the Issuing Bank or the Cash  Management  Bank to make
                  any  payment  or  to  forego  any  interest  or  Reimbursement
                  Obligation or other sum payable hereunder, the amount of which
                  payment or foregone  interest or  Reimbursement  Obligation or
                  other sum is  calculated  by  reference to the gross amount of
                  any sum  receivable  or deemed  received by such  Lender,  the
                  Administrative  Agent, the Issuing Bank or the Cash Management
                  Bank from the Borrower hereunder,

then, and in each such case, the Borrower will, upon demand made by such Lender,
the  Administrative  Agent,  the Issuing Bank or the Cash Management Bank at any
time and from time to time and as often as the occasion  therefor may arise, pay
to  such  Lender,  the  Administrative  Agent,  the  Issuing  Bank  or the  Cash
Management Bank such additional amounts as will be sufficient to compensate such
Lender, the  Administrative  Agent, the Issuing Bank or the Cash Management Bank
for  such  additional  cost,   reduction,   payment  or  foregone   interest  or
Reimbursement  Obligation  or other sum upon  presentation  by such Lender,  the
Administrative  Agent,  the  Issuing  Bank  or the  Cash  Management  Bank  of a
certificate in accordance  with ss.5.9 hereof;  PROVIDED that the Borrower shall
not be liable to any Lender, the  Administrative  Agent, the Issuing Bank or the
Cash  Management  Bank for costs incurred more than one hundred and twenty (120)
days prior to receipt by the Borrower of such certificate from such Lender,  the
Administrative  Agent,  the  Issuing  Bank,  or the  Cash  Management  Bank,  as
applicable,  unless such costs were incurred prior to such 120-day period solely
as a result of such present or future applicable law being retroactive to a date
which occurred prior to such 120-day period.
<PAGE>

         5.8.  CAPITAL  ADEQUACY.  If after  the date  hereof  any  Lender,  the
Administrative  Agent or the Issuing Bank determines that (i) the adoption of or
change in any law, governmental rule, regulation, policy, guideline or directive
(whether  or not having the force of law)  regarding  capital  requirements  for
banks  or  bank  holding  companies  or  any  change  in the  interpretation  or
application  thereof  by a court  or  governmental  authority  with  appropriate
jurisdiction, or (ii) compliance by such Lender, the Administrative Agent or the
Issuing Bank or any  corporation  controlling  such Lender,  the  Administrative
Agent or the Issuing Bank with any law, governmental rule,  regulation,  policy,
guideline  or  directive  (whether  or not  having the force of law) of any such
entity regarding capital adequacy, has the effect of reducing the return on such
Lender's,  the  Administrative  Agent's or the Issuing  Bank's  commitment  with
respect to any Loans to a level below that which such Lender, the Administrative
Agent or the Issuing Bank could have achieved but for such  adoption,  change or
compliance (taking into consideration such Lender's,  the Administrative Agent's
or Issuing  Bank's then existing  policies with respect to capital  adequacy and
assuming full utilization of such entity's capital) by any amount deemed by such
Lender, the Administrative  Agent or the Issuing Bank to be material,  then such
Lender, the Administrative  Agent or the Issuing Bank may notify the Borrower of
such fact upon  presentation  of a certificate in accordance with ss.5.9 hereof.
To the extent that the amount of such  reduction in the return on capital is not
reflected  in the Base Rate,  the  Borrower  and such  Lender  shall  thereafter
attempt to negotiate in good faith,  within thirty (30) days of the day on which
the Borrower  receives such notice,  an adjustment to the  compensation  payable
hereunder  which  will  adequately  compensate  such  Lender  in  light of these
circumstances.  If the  Borrower  and such  Lender  are  unable to agree to such
adjustment  within  thirty (30) days of the date on which the Borrower  receives
such notice,  then  commencing  on the date of such notice (but not earlier than
the effective date of any such increased capital requirement),  the fees payable
hereunder shall increase by an amount that will, in the Administrative  Agent's,
Issuing  Bank's or such  Lender's  reasonable  determination,  provide  adequate
compensation;  PROVIDED that the Borrower shall not be liable to any Lender, the
Administrative  Agent or the  Issuing  Bank for  costs  incurred  more  than one
hundred and twenty  (120) days prior to receipt by the  Borrower of such notice.
Each Lender shall allocate such cost increases among its customers in good faith
and on an equitable basis.

         5.9.  CERTIFICATE.  A certificate  setting forth any additional amounts
payable  pursuant to ss.5.7 or ss.5.8 and a brief  explanation  of such  amounts
which are due, submitted by any Lender,  the  Administrative  Agent, the Issuing
Bank or the Cash Management Bank to the Borrower,  shall be PRIMA FACIE evidence
that such amounts are due and owing.

         5.10.  INDEMNITY.  The Borrower  agrees to indemnify each Lender and to
hold each Lender  harmless from and against any loss,  cost or expense that such
Lender may sustain or incur as a  consequence  of (a) default by the Borrower in
payment of the  principal  amount of or any  interest on any LIBOR Rate Loans as
and when due and  payable,  including  any such  loss or  expense  arising  from
interest  or fees  payable by such  Lender to banks of funds  obtained  by it in
order to maintain its LIBOR Rate Loans,  (b) default by the Borrower in making a
borrowing  or  conversion  after the  Borrower  has given (or are deemed to have
given) a Loan Request or a Conversion  Request  relating  thereto in  accordance
with  ss.2.7 or (c) the making of any payment of a LIBOR Rate Loan or the making
of any  conversion of any such Loan to a Base Rate Loan on a day that is not the
last day of the  applicable  Interest  Period with  respect  thereto,  including
interest or fees  payable by such  Lender to lenders of funds  obtained by it in
order to maintain any such Loans.

         5.11.  INTEREST  AFTER  DEFAULT.  Immediately  upon the  occurrence and
during the  continuance of an Event of Default,  the Borrower shall pay interest
on the principal amount of all outstanding Obligations and Letter of Credit Fees
at a fluctuating  interest rate per annum at all times equal to the Default Rate
to the fullest extent permitted by applicable laws.
<PAGE>

         5.12.  COLLATERAL  SECURITY AND GUARANTIES.  Each of the Parent and the
Borrower covenants and agrees that:

                  (a)  Pursuant  to the  terms of the  Security  Documents,  the
         Obligations  shall be secured by a perfected  first  priority  security
         interest   (subject  only  to  Permitted  Liens,   including,   without
         limitation,  the Lien of the Term Loan Agent on Fixed Asset Collateral)
         in the Collateral;

                  (b) If at  any  time  the  Parent  or any of its  Subsidiaries
         grants any security interest to the Term Loan Agent or any lender party
         to Term Loan Agreement, or any of their respective successors,  assigns
         or transferees, on any property of the Parent or such Subsidiary or any
         other party,  then the Parent,  such Subsidiary or such other party, as
         the case may be, shall simultaneously grant to the Administrative Agent
         a security interest in such property,  and such security interest shall
         be subject to the Intercreditor Agreement.

                  (c) The Obligations  shall also be guaranteed  pursuant to the
         terms of the Guaranties.

                       6. REPRESENTATIONS AND WARRANTIES.

         Each of the Parent and the  Borrower  represents  and  warrants  to the
Lenders and the Administrative Agent as follows:

         6.1. CORPORATE AUTHORITY, ETC.

                  6.1.1. EXISTENCE, GOOD STANDING.

                           (a) Each of the Parent and its  Subsidiaries (i) is a
                  corporation  (or  similar  business  entity)  duly  organized,
                  validly  existing and in good  standing  under the laws of its
                  jurisdiction of incorporation or formation, (ii) has taken all
                  actions  which,  by reason of its  ownership  of  property  or
                  carrying on of business,  are required to be taken by it under
                  the laws of any  jurisdiction,  wherein  it owns  property  or
                  carries on  business,  except where the failure to do so would
                  not  materially  and  adversely  affect the  Borrower  and the
                  Guarantors  (taken as a whole)  and  (iii)  has all  corporate
                  authority  (or  the  equivalent  company)  power  to  own  its
                  property  and conduct its  business  as now  conducted  and as
                  presently contemplated.

                           (b)  Each  of the  Parent  and its  Subsidiaries  has
                  adequate power and authority and has full legal right to enter
                  into each of the Loan Documents to which it is or is to become
                  a  party,  to  perform,  observe  and  comply  with all of its
                  agreements and obligations  under each of such documents,  and
                  to make all of the  borrowings  and obtain the  extensions  of
                  credit contemplated by this Credit Agreement.

                  6.1.2.  AUTHORIZATION.  The  execution and delivery by each of
         the Parent and its Subsidiaries of each of the Loan Documents  executed
         and  delivered  on the  Closing  Date to  which,  by the  terms of such
         document,  it is a party, the performance by each of the Parent and its
         Subsidiaries  of all of its  agreements and  obligations  under each of
         such documents, and the making by the Borrower of all of the borrowings
         contemplated by this Credit Agreement, are within the corporate (or the
         equivalent   company)   authority   of  the  Parent  and  each  of  its
         Subsidiaries, as applicable, have been duly authorized by all necessary
         corporate   or  other  action  on  the  part  of  the  Parent  and  its
         Subsidiaries,  as  applicable,  and do not and will not (i)  except  as

<PAGE>

         otherwise expressly contemplated by the Loan Documents,  conflict with,
         or result in a breach of any material term,  condition or provision of,
         or  constitute  a  default  under  or  result  in the  creation  of any
         mortgage,  lien, pledge, charge, security interest or other encumbrance
         upon any of the property of the Parent or its  Subsidiaries,  under any
         agreement, trust deed, indenture, mortgage or other instrument to which
         the Parent or any of its Subsidiaries is a party or by which the Parent
         or any of its  Subsidiaries or any of the property of the Parent or any
         of its  Subsidiaries is bound,  the  consequences of which would have a
         material  and  adverse  effect on the  financial  condition,  assets or
         operations of the Borrower and the Guarantors (taken as a whole),  (ii)
         violate or  contravene  any  provision of any law,  regulation,  order,
         ruling or interpretation thereunder or any decree, order or judgment of
         any court or governmental or regulatory  authority,  bureau,  agency or
         official  (all as from time to time in  effect  and  applicable  to the
         Parent or any of its  Subsidiaries)  except  where  such  violation  or
         contravention  would not materially and adversely  affect the financial
         condition,  assets or  operations  of the Borrower  and the  Guarantors
         (taken as a whole), (iii) require any waivers, consents or approvals by
         any of the  creditors  of the Parent or any of its  Subsidiaries  which
         have  not  been  obtained  (except  when  failure  to do so  would  not
         materially  and  adversely  affect the financial  condition,  assets or
         operations of the Borrower and the Guarantors,  taken as a whole,  (iv)
         in the case of the Parent and its Subsidiaries, require any consents or
         approvals by any  shareholders or members of such Person,  (except such
         as will be obtained on or prior to the Closing Date and will be in full
         force and  effect  on and as of the  Closing  Date),  (v)  require  any
         approval, consent, order, authorization or license by, or giving notice
         to, or taking any other  action with  respect to, any  governmental  or
         regulatory   authority  or  agency  under  any  provision  of  any  law
         applicable  to the  Parent  or any of its  Subsidiaries,  except  those
         actions  which  have been taken or will be taken  prior to the  Closing
         Date and except where failure to take such actions would not materially
         and adversely affect the financial  condition,  assets or operations of
         the Borrower and the  Guarantors  (taken as a whole),  or (vi) conflict
         with any  provision  of the  Governing  Documents  of the Parent or any
         Subsidiary of the Parent.

                  6.1.3.  DELIVERY.  Each of the Parent and its Subsidiaries has
         duly executed and delivered each of the Loan Documents to which it is a
         party and each of such documents is in full force and effect.

                  6.1.4.  ENFORCEABILITY.  The  execution  and  delivery of this
         Credit  Agreement  and the other Loan  Documents to which the Parent or
         any of its Subsidiaries is or is to become a party will result in valid
         and legally binding  obligations of such Person enforceable  against it
         in  accordance  with the  respective  terms and  provisions  hereof and
         thereof, except as enforceability is limited by bankruptcy, insolvency,
         reorganization,  moratorium  or other  laws  relating  to or  affecting
         generally the enforcement of creditors' rights and except to the extent
         that  availability of the remedy of specific  performance or injunctive
         relief is  subject  to the  discretion  of the court  before  which any
         proceeding therefor may be brought.

         6.2. FINANCIAL STATEMENTS; PROJECTIONS.

                  (a) There has been furnished to the  Administrative  Agent and
         each of the  Lenders  the  audited  consolidated  balance  sheet of the
         Parent and its  Subsidiaries as at December 31, 2005, and  consolidated
         statements  of income and cash flow of the Parent and its  Subsidiaries
         for the Fiscal Year then ended,  certified  by  PricewaterhouseCoopers.
         Such  balance  sheet and  statements  of income and cash flow have been
         prepared  in  accordance  with GAAP and fairly  present  the  financial
         condition  of the  Parent  and  its  Subsidiaries  as at the  close  of
         business  on the date  thereof and the  results of  operations  for the
         Fiscal  Year then ended.  There are no  contingent  liabilities  of the
         Parent or any of its  Subsidiaries  as of such date involving  material
         amounts,  known to the  officers of the Parent or the  Borrower,  which
         were not disclosed in such balance sheet and the notes related thereto.

                  (b) There has been furnished to the  Administrative  Agent and
         each of the  Lenders an  unaudited  consolidated  balance  sheet of the
         Parent and its  Subsidiaries  as at September  30, 2006,  and unaudited
         consolidated  statements  of income and cash flow of the Parent and its
         Subsidiaries  for the  period(s)  then ended.  Such  balance  sheet and
         statements  of income and cash flow have been  prepared  in  accordance
         with GAAP and fairly present the financial  condition of the Parent and
         its  Subsidiaries  as at the close of business on the date  thereof and
         the results of operations  for the period(s)  then ended.  There are no
         contingent  liabilities of the Parent or any of its  Subsidiaries as of
         such date  involving  material  amounts,  known to the  officers of the
         Parent or the Borrower,  which were not disclosed in such balance sheet
         and the notes related thereto.

                                       0
<PAGE>

                  (c) There has also been furnished to the Administrative  Agent
         and each of the Lenders the  Projections and the Business Plan, in each
         case, on a consolidated  basis.  To the knowledge of the Parent and its
         Subsidiaries,  no facts exist that  (individually  or in the aggregate)
         would result in any material change in any of such  projections  (taken
         as a whole).  The  Projections  and the  Business  Plan are based  upon
         reasonable   estimates  and  assumptions  and  reflect  the  reasonable
         estimates  of  the  Parent  and  its  Subsidiaries  of the  results  of
         operations and other information projected therein (it being understood
         that such projections are not a guarantee of future performance).

         6.3.  SOLVENCY.  As of the Closing Date and after giving  effect to the
Loans hereunder and the other transactions contemplated hereby:

                  (a) the  aggregate  value of all  properties of the Parent and
         its  Subsidiaries,  on a  consolidated  basis,  at their  present  fair
         saleable  value  exceed  the  amount  of all  the  probable  debts  and
         liabilities   (including   contingent,   subordinated,   unmatured  and
         unliquidated  liabilities)  of the Parent and its  Subsidiaries as they
         become absolute and mature;

                  (b) the  present  fair  saleable  value of the  assets  of the
         Parent and its Subsidiaries,  on a consolidated basis, is not less than
         the amount that will be required to pay the probable liability on their
         debts as they become absolute and mature;

                  (c)  the  Parent  and  its   Subsidiaries   will  not,   on  a
         consolidated  basis,  have an unreasonably  small capital with which to
         conduct their business operations as heretofore conducted; and

                  (d) the Parent and its  Subsidiaries do not, on a consolidated
         basis, intend to incur debts or liabilities beyond their ability to pay
         such debts and liabilities as they mature.

         6.4. NO MATERIAL  ADVERSE  CHANGES,  ETC. Since the Balance Sheet Date,
there has  occurred no material  adverse  change in the  financial  condition or
business of the Parent or any of its Subsidiaries,  taken as a whole.  Since the
Balance Sheet Date, neither the Parent nor any Subsidiary of the Parent has made
any Restricted Payment (other than Restricted Payments permitted under ss.8.4).

         6.5.  ABSENCE OF MORTGAGES AND LIENS.  Except with respect to Permitted
Liens, there is no financing  statement,  security agreement,  chattel mortgage,
real  estate  mortgage  or other  document  filed or  recorded  with any  filing
records, registry or other public office, that purports to cover, affect or give
notice of any present or possible  future Lien on, or security  interest in, any
of the material assets or property of the Parent or any Subsidiary of the Parent
or of any of the rights relating thereto.

                                       1
<PAGE>

         6.6. FRANCHISES,  PATENTS,  COPYRIGHTS, ETC. Each of the Parent and its
Subsidiaries possesses all franchises,  patents,  copyrights,  trademarks, trade
names,  licenses and permits,  and rights in respect of the foregoing,  adequate
for the conduct of its business  substantially  as now  conducted  without known
conflict with any rights of others unless the failure of such  possession  would
not have a  material  adverse  effect on the  business,  assets,  operations  or
financial  condition  of the  Borrower  and the  Guarantors  (taken as a whole).
Attached  hereto as SCHEDULE  6.6 is a true,  correct and  complete  list of all
patents,  patent  applications,  federally  registered  copyrights,  trademarks,
trademark applications, trade names and other intellectual property owned by the
Parent or any Subsidiary of the Parent as of the Closing Date.

         6.7. LITIGATION.  Except as set forth in SCHEDULE 6.7 hereto, there are
no actions, suits, proceedings or investigations of any kind pending, or, to the
best knowledge of the Senior Management after all due investigation  appropriate
under  the   circumstances,   threatened  against  the  Parent  or  any  of  its
Subsidiaries,  before any court, tribunal or administrative agency or board that
would be likely to, either in any case or in the aggregate, materially adversely
affect the properties,  assets,  financial condition or business of the Borrower
and the  Guarantors,  taken as a whole,  or  materially  impair the right of the
Borrower  and  the   Guarantors,   taken  as  a  whole,  to  carry  on  business
substantially  as now conducted by them, or that  questions the validity of this
Credit Agreement or any of the other Loan Documents.

         6.8.  NO  MATERIALLY  ADVERSE  CONTRACTS,  ETC.  Except as set forth on
SCHEDULE 6.8,  neither the Parent nor any of its  Subsidiaries is subject to any
charter, partnership or other legal restriction, or any judgment, decree, order,
law, statute, rule or regulation that has or is expected in the future to have a
material  adverse effect on the business,  assets or financial  condition of the
Borrower or the Guarantors,  taken as a whole.  Except as listed on SCHEDULE 6.8
hereto,  neither  the  Parent  nor any of its  Subsidiaries  is a  party  to any
contract or agreement  that has or is expected,  in the judgment of the Parent's
or the Borrower's officers,  to have any material adverse effect on the business
of the Borrower and the Guarantors, taken as a whole.

         6.9.  COMPLIANCE WITH OTHER INSTRUMENTS,  LAWS, ETC. Neither the Parent
nor any of its  Subsidiaries  is in violation of any  provision of its Governing
Documents,  or, except for environmental  issues more specifically dealt with in
SECTION 6.19, any agreement or instrument to which it may be subject or by which
it or  any of its  properties  may be  bound  or any  decree,  order,  judgment,
statute,  license, rule or regulation, in any of the foregoing cases in a manner
that could materially and adversely affect the financial  condition,  properties
or business of the Parent and its Subsidiaries.

         6.10. TAX STATUS.  Except as set forth on SCHEDULE 6.10, the Parent and
its Subsidiaries (i) have made or filed all federal, provincial and all material
state, provincial and foreign income and all other material tax returns, reports
and  declarations  required by any jurisdiction to which any of them is subject,
(ii) have paid all material Taxes and other governmental assessments and charges
imposed on them,  except those being  contested in good faith and by appropriate
proceedings  and for which the  Parent  and its  Subsidiaries  have set aside on
their books reasonably adequate provisions therefor (unless foreclosure or other
enforcement  action  has  been  commenced  in  respect  thereof  or any Lien has
attached as security therefor, in which case such exception does not apply), and
(iii)  have set aside on their  books  provisions  reasonably  adequate  for the
payment  of all  taxes for  periods  subsequent  to the  periods  to which  such
returns,  reports  or  declarations  apply.  There  are no  unpaid  Taxes in any
material amount claimed to be due by the taxing  authority of any  jurisdiction,
except those being contested in good faith and as to which adequate reserves are
maintained, and the officers of the Parent and the Borrower know of no basis for
any such claim.

         6.11.  NO DEFAULT OR EVENT OF  DEFAULT.  No Default or Event of Default
has occurred and is continuing.

                                       2
<PAGE>

         6.12.  HOLDING COMPANY AND INVESTMENT  COMPANY ACTS. Neither the Parent
nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of
a "holding company",  or an affiliate" of a "holding company", as such terms are
defined  in  the  Public  Utility  Holding  Company  Act of  1935;  nor is it an
"investment company", or an "affiliated company" or a "principal underwriter" of
an "investment company", as such terms are defined in the Investment Company Act
of 1940.

         6.13. EMPLOYEE BENEFIT PLANS.

                  6.13.1.  IN  GENERAL.  Each  Employee  Benefit  Plan  and each
         Guaranteed  Pension Plan has been maintained and operated in compliance
         in  all  material   respects  with  applicable  law  including  without
         limitation  the   provisions  of  ERISA  and  all  Applicable   Pension
         Legislation and, to the extent applicable,  the Code, including but not
         limited   to   the   provisions    thereunder   respecting   prohibited
         transactions,  other  than as set  forth on  SCHEDULE  6.13.1  attached
         hereto.  The Parent and the Borrower have  heretofore  delivered to the
         Administrative  Agent the most recently  completed annual report,  Form
         5500, with all required  attachments,  and actuarial statement required
         to be  submitted  under  ss.103(d)  of  ERISA,  with  respect  to  each
         Guaranteed Pension Plan.

                  6.13.2.  TERMINABILITY  OF WELFARE PLANS.  Under each Employee
         Benefit  Plan which is an  employee  welfare  benefit  plan  within the
         meaning of ss.3(1) or ss.3(2)(B)  of ERISA,  no benefits are due unless
         the event giving rise to the benefit  entitlement  occurs prior to plan
         termination  (except  as  required  by Title I, Part 6 of  ERISA).  The
         Parent,  the  Borrower  or an  ERISA  Affiliate,  as  appropriate,  may
         terminate each such Plan at any time (or at any time  subsequent to the
         expiration of any applicable bargaining agreement) in the discretion of
         the Parent,  the Borrower or such ERISA Affiliate  without liability to
         any  Person,  other  than for  benefits  which  have  accrued  prior to
         termination.

                  6.13.3.  GUARANTEED PENSION PLANS. Each contribution  required
         to be made to a Guaranteed Pension Plan, whether required to be made to
         avoid the incurrence of an accumulated funding  deficiency,  the notice
         or lien provisions of ss.302(f) of ERISA, or otherwise, has been timely
         made. No waiver of an  accumulated  funding  deficiency or extension of
         amortization  periods has been received with respect to any  Guaranteed
         Pension  Plan  and  none of the  Parent,  the  Borrower  nor any  ERISA
         Affiliate is obligated to or has posted  security in connection with an
         amendment to a Guaranteed  Pension Plan  pursuant to ss.307 of ERISA or
         ss.401(a)(29)  of the  Code.  No  liability  to the  PBGC  (other  than
         required  insurance  premiums,  all of which  have been  paid) has been
         incurred  by the  Parent,  the  Borrower  or any ERISA  Affiliate  with
         respect to any Guaranteed Pension Plan and there has not been any ERISA
         Reportable  Event,  or any other event or  condition  which  presents a
         material  risk of  termination  of any  Guaranteed  Pension Plan by the
         PBGC.  Based on the latest  valuation of each  Guaranteed  Pension Plan
         (which in each case  occurred  within twelve months of the date of this
         representation),  and on the actuarial methods and assumptions employed
         for that  valuation,  the  aggregate  benefit  liabilities  of all such
         Guaranteed Pension Plans within the meaning of ss.4001 of ERISA did not
         exceed the aggregate value of the assets of all such Guaranteed Pension
         Plans.

                  6.13.4.  MULTIEMPLOYER PLANS. None of the Parent, the Borrower
         nor any ERISA Affiliate has incurred any material liability  (including
         secondary  liability)  to  any  Multiemployer  Plan  as a  result  of a
         complete  or  partial  withdrawal  from such  Multiemployer  Plan under
         ss.4201  of ERISA  or as a  result  of a sale of  assets  described  in
         ss.4204  of  ERISA.  None of the  Parent,  the  Borrower  nor any ERISA
         Affiliate  has  been  notified  that  any  Multiemployer   Plan  is  in
         reorganization  or insolvent under and within the meaning of ss.4241 or
         ss.4245 of ERISA or is at risk of entering  reorganization  or becoming
         insolvent,  or that any Multiemployer  Plan intends to terminate or has
         been terminated under ss.4041A of ERISA.
<PAGE>

         6.14.  REGULATIONS  U AND X. The  proceeds  of the Loans and Letters of
Credit shall be used solely for the purposes specified in ss.7.11. No portion of
any  Loan is to be  used,  and no  portion  of any  Letter  of  Credit  is to be
obtained,  for the purpose of  purchasing  or carrying any "margin  security" or
"margin  stock" as such  terms are used in  Regulations  U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.

         6.15. TRUE COPIES OF GOVERNING  DOCUMENTS.  The Parent and the Borrower
have  furnished  or  caused  to be  furnished  to each of the  Lenders  true and
complete  copies  of the  Governing  Documents  (together  with  any  amendments
thereto) of the Parent and each Subsidiary of the Parent.

         6.16.  FISCAL YEAR. The Parent has a Fiscal Year which is the fifty-two
(52) or fifty-three (53) week period ending on the Saturday closest to January 1
of each calendar year.

         6.17.  PERFECTION  OF  SECURITY  INTEREST.  All  filings,  assignments,
pledges and deposits of documents  or  instruments  have been made and all other
actions have been taken that are necessary or advisable, under applicable United
States  federal and state law,  to  establish  and  perfect  the  Administrative
Agent's (a)  first-priority  Lien and security interest in the Collateral (other
than the Fixed  Asset  Collateral)  and (b)  second-priority  Lien and  security
interest in the Fixed Asset  Collateral.  The Collateral and the  Administrative
Agent's  rights with  respect to the  Collateral  are not subject to any setoff,
claims, withholdings or other defenses. The Borrower and the Guarantors party to
the Security  Agreements  are the owners of the  Collateral  free from any Lien,
except for Permitted Liens.

         6.18.  SUBSIDIARIES,  ETC.  The Parent  does not have any  Subsidiaries
except as set forth on SCHEDULE  6.18  hereto,  as such  schedule may be updated
from time to time by the Borrower in accordance with ss.8.11.

         6.19.  ENVIRONMENTAL  COMPLIANCE.  With respect to the past and present
condition and usage of the Real Estate and the operations conducted thereon:

                  (a)  except as  disclosed  on  SCHEDULE  6.19(A),  none of the
         Parent,  its  Subsidiaries  or any  operator  of the Real Estate or any
         operations  thereon  is in  violation,  or  alleged  violation,  of any
         judgment,  decree,  order,  law,  license,  rule,  permit or regulation
         pertaining to  environmental  matters,  including  without  limitation,
         those  arising  under  the  Resource   Conservation  and  Recovery  Act
         ("RCRA"), the Comprehensive  Environmental  Response,  Compensation and
         Liability Act of 1980 as amended ("CERCLA"),  the Superfund  Amendments
         and Reauthorization Act of 1986 ("SARA"),  the Federal Clean Water Act,
         the Federal  Clean Air Act,  the Toxic  Substances  Control Act, or any
         other  state,  local,  foreign  or  common  law,  statute,  regulation,
         ordinance,  order,  decree  or any  other  binding  requirement  of any
         Governmental  Authority  relating to health,  safety or the environment
         (all of the foregoing,  collectively,  the "Environmental Laws"), which
         violation  could  reasonably  be  expected  to have a material  adverse
         effect on the business,  assets,  operations or financial  condition of
         the Borrower and the Guarantors  (taken as a whole),  or the ability of
         the Parent or any  Subsidiary of the Parent to fulfill its  obligations
         under this Credit Agreement or the other Loan Documents;
<PAGE>

                  (b) (i) except as set forth on SCHEDULE 6.19(A) hereto,  as of
         the Closing Date,  neither the Parent nor any of its  Subsidiaries  has
         received notice from any third party including, without limitation, any
         Governmental Authority, (A) that any one of them has been identified by
         the  United  States  Environmental   Protection  Agency  ("EPA")  as  a
         potentially  responsible  party  under  CERCLA  with  respect to a site
         listed on the National  Priorities List, 40 C.F.R. Part 300 Appendix B;
         (B) that any hazardous waste, as defined by 42 U.S.C.  ss.6903(5),  any
         hazardous substances as defined by 42 U.S.C. ss.9601(14), any pollutant
         or  contaminant  as  defined  by 42  U.S.C.  ss.9601(33)  and any toxic
         substances, oil or hazardous materials or other chemicals or substances
         regulated by any Environmental Laws ("Hazardous  Substances") which any
         one of them has generated, transported or disposed of has been found at
         any site at which a Governmental Authority has conducted or has ordered
         that the  Parent or any  Subsidiary  of the  Parent  conduct a remedial
         investigation,  removal  or  other  response  action  pursuant  to  any
         Environmental  Law;  or (C) that it is or shall be a named party to any
         claim, action, cause of action,  complaint,  or legal or administrative
         proceeding (in each case,  contingent or otherwise)  arising out of any
         third party's incurrence of costs,  expenses,  losses or damages of any
         kind whatsoever in connection with the release of Hazardous  Substances
         and (ii) except as set forth on SCHEDULE 6.19(B),  as such schedule may
         be  updated  from time to time by the  Borrower  (subject  to the prior
         approval of the  Administrative  Agent),  neither the Parent nor any of
         its  Subsidiaries  has received  any notices  referred to in clause (i)
         above  identifying  any event or condition  that could  materially  and
         adversely affect the financial condition, properties or business of the
         Borrower and the Guarantors, taken as a whole;

                  (c) except as set forth on SCHEDULE  6.19(A)  attached hereto:
         (i) no portion of the Real Estate is used for the handling, processing,
         storage  or  disposal  of  Hazardous   Substances  except  in  material
         accordance with applicable  Environmental Laws; and, to the best of the
         Parent's  and  Borrower's  knowledge,  no  underground  tank  or  other
         underground  storage receptacle for Hazardous  Substances is located on
         any portion of the Real  Estate;  (ii) in the course of any  activities
         conducted  by  the  Parent,   its  Subsidiaries  or  operators  of  its
         properties,  no Hazardous  Substances  have been generated or are being
         used on the Real Estate except in material  accordance  with applicable
         Environmental Laws; (iii) there have been no releases (i.e. any past or
         present  releasing,  spilling,  leaking,  pumping,  pouring,  emitting,
         emptying,  discharging,  injecting,  escaping, disposing or dumping) or
         threatened releases of Hazardous  Substances on, upon, into or from the
         properties  of the Parent or its  Subsidiaries,  which  releases  could
         reasonably be expected to have a material  adverse  effect on the value
         of any of the Real Estate or on the  business,  assets,  operations  or
         financial  condition  of the Borrower  and the  Guarantors  (taken as a
         whole),  or the  ability of the Parent or the  Borrower  to fulfill its
         obligations  under this Credit  Agreement or the other Loan  Documents;
         (iv) to the best of the Parent's and the  Borrower's  knowledge,  there
         have been no releases on, upon,  from or into any real  property in the
         vicinity of any of the Real Estate which,  through soil or  groundwater
         contamination,  may  have  come  to be  located  on,  and  which  could
         reasonably be expected to have a material  adverse  effect on the value
         of any of the Real Estate or adjacent  properties or the environment or
         on the  business,  assets,  operations  or  financial  condition of the
         Borrower and the Guarantors  (taken as a whole),  or the ability of the
         Parent or any Subsidiary of the Parent to fulfill its obligations under
         this Credit Agreement or the other Loan Documents; and (v) in addition,
         to the best of the Parent's and the Borrower's knowledge, any Hazardous
         Substances that have been generated on any of the Real Estate have been
         transported  offsite only by carriers having an  identification  number
         issued  by  the  EPA  (or  the   equivalent   thereof  in  any  foreign
         jurisdiction),  treated or  disposed of only by  treatment  or disposal
         facilities  maintaining  valid  permits as  required  under  applicable
         Environmental  Laws,  which  transporters  and facilities have been and
         are,  to the  best  of  the  Parent's  and  the  Borrower's  knowledge,
         operating in compliance with such permits and applicable  Environmental
         Laws;

                  (d) none of the Parent  nor its  Subsidiaries,  any  Mortgaged
         Property or any of the other Real  Estate is subject to any  applicable
         Environmental  Law requiring the  performance  of Hazardous  Substances
         site   assessments,   or  the  removal  or   remediation  of  Hazardous
         Substances,  or the giving of notice to any  Governmental  Authority or
         the  recording  or  delivery  to  other  Persons  of  an  environmental
         disclosure  document or  statement  by virtue of the  transactions  set
         forth  herein  and  contemplated  hereby,  or  as a  condition  to  the
         recording  of  any  Mortgage  or to  the  effectiveness  of  any  other
         transactions contemplated hereby; and
<PAGE>

                  (e) to the best of their  knowledge  after due inquiry,  there
         are listed on SCHEDULE  6.19(E),  all  material  environmental  reports
         relating to the Parent and its  Subsidiaries  and their  properties and
         operations,  copies of which have been furnished to the  Administrative
         Agent's Special Counsel.

         6.20.  BANK  ACCOUNTS.  SCHEDULE  6.20, as such schedule may be updated
from  time  to  time by the  Borrower  (subject  to the  prior  approval  of the
Administrative  Agent),  sets forth the account numbers and location of all bank
accounts of the Parent and its Subsidiaries.

         6.21. LABOR CONTRACTS.  Except as set forth on SCHEDULE 6.21, as of the
Closing  Date,  neither the Parent nor any of its  Subsidiaries  is party to any
collective bargaining agreement. Except as disclosed to the Administrative Agent
and the Lenders in writing,  (a) neither the Parent nor any of its  Subsidiaries
is a party to any collective  bargaining agreement and (b) there are no material
grievances,  disputes or controversies  with any union or other  organization of
the Parent's or any of its Subsidiary's employees, or threats of strikes or work
stoppages.

         6.22.  DISCLOSURE.  Neither this Credit  Agreement nor any of the other
Loan  Documents  contains any untrue  statement  of a material  fact or omits to
state a material  fact  (known to the Parent or any of its  Subsidiaries  in the
case of any document or  information  not  furnished by the Parent or any of its
Subsidiaries)  necessary in order to make the  statements  herein or therein not
misleading.  Except as disclosed to the Administrative  Agent and the Lenders in
writing,  there is no fact known to the Parent or any of its Subsidiaries  which
could  reasonably be expected to have a material adverse effect on the business,
assets,  operations  or financial  condition of the Borrower and the  Guarantors
(taken as a whole), or the ability of the Parent or any Subsidiary of the Parent
to  fulfill  its  obligations  under  this  Credit  Agreement  or the other Loan
Documents,  exclusive  of effects  resulting  from  changes in general  economic
conditions, legal standards or regulatory conditions.
<PAGE>

         6.23. TITLE TO PROPERTIES; LEASES.

                  (a) Except as set forth on SCHEDULE  6.23,  the Parent and its
         Subsidiaries  own  all  of the  assets  reflected  in the  consolidated
         balance  sheet of the  Parent  and its  Subsidiaries  delivered  to the
         Administrative Agent pursuant to ss.10.23, subject to no Liens or other
         rights of others, except Permitted Liens.

                  (b) The Borrower has good,  marketable and indefeasible  title
         in fee to the  Mortgaged  Property  free and clear of all Liens  except
         Permitted Liens. All transfer taxes,  deed stamps,  intangible taxes or
         other  amounts in the nature of transfer  taxes  required to be paid by
         any Person under applicable  legal  requirements in connection with the
         transfer of the Mortgaged Property to the Borrower have been paid. Each
         Mortgage when properly  recorded in the appropriate  records,  together
         with any Uniform  Commercial Code Financing  Statements  required to be
         filed in connection therewith, will create (a) a valid, perfected first
         priority Lien on the Borrower's  interest in the  respective  Mortgaged
         Property, (b) valid and perfected collateral assignments of, all leases
         relating  to such  Mortgaged  Property,  and (c)  valid  and  perfected
         security interests in all other related assets constituting Fixed Asset
         Collateral,  all in  accordance  with the terms  thereof,  in each case
         subject  only  to  any  applicable   Permitted   Liens.  All  mortgage,
         recording, stamp, intangible or other similar taxes required to be paid
         by any Person under  applicable  legal  requirements in connection with
         the execution, delivery, recordation, filing, registration,  perfection
         or  enforcement  of  any of the  Loan  Documents  have  been  paid.  No
         condemnation  or other  material  proceeding  has been commenced or, to
         Borrower's best knowledge,  is contemplated with respect to all or part
         of the Mortgaged  Property or for the relocation of roadways  providing
         access to the Mortgaged  Property.  There are no claims for payment for
         work, labor or materials  affecting the Mortgaged Property which are or
         may  become a Lien  prior  to,  or of equal  priority  with,  the Liens
         created  by  the  Loan  Documents.  Other  than  as  disclosed  to  the
         Administrative  Agent, there are no outstanding  options to purchase or
         rights of first  refusal  affecting all or any portion of the Mortgaged
         Property.  To the best of the  Borrower's  knowledge,  the ALTA  survey
         delivered by Borrower with respect to each parcel of Mortgaged Property
         does not fail to reflect any material  matter  affecting the applicable
         Mortgaged  Property  or the title  thereto.  To the best of  Borrower's
         knowledge,   all  of  the  improvements  included  in  determining  the
         appraised value of each parcel of Mortgaged  Property lie wholly within
         the  boundaries  and  building  restriction  lines  of  such  Mortgaged
         Property,  and no improvement on an adjoining property  encroaches upon
         such Mortgaged Property,  and no easement or other encumbrance upon the
         Real Estate  encroaches  upon any of the  improvements,  except in each
         case those insured against by the title  insurance  policy insuring the
         Lien of the applicable Mortgage.  Each parcel comprising each Mortgaged
         Property  is a  separate  tax lot and is not a portion of any other tax
         lot  that  is  not a part  of the  applicable  Mortgaged  Property.  To
         Borrower's knowledge, there are no pending or proposed special or other
         assessments for public  improvements or otherwise  affecting any of the
         Mortgaged Property,  or any contemplated  improvements to the Mortgaged
         Property that may result in such special or other assessments.

         6.24.  CERTAIN  TRANSACTIONS.  Except  for  arm's  length  transactions
pursuant to which the Parent,  the  Borrower,  any of the  Guarantors  or any of
their  Subsidiaries  make payments in the ordinary course of business upon terms
no less  favorable  than  the  Parent,  the  Borrower,  the  Guarantors  or such
Subsidiary could obtain from third parties, none of the officers,  directors, or
employees  of  the  Parent,  the  Borrower,  the  Guarantors  or  any  of  their
Subsidiaries  is  presently  a party to any  transaction  with the  Parent,  the
Borrower,  the Guarantors or any of their Subsidiaries  (other than for services
as employees,  officers and  directors),  including  any contract,  agreement or
other  arrangement  providing for the furnishing of services to or by, providing
for rental of real or  personal  property  to or from,  or  otherwise  requiring
payments to or from any officer,  director or such employee or, to the knowledge
of the Parent and the Borrower,  any  corporation,  partnership,  trust or other
entity in which any officer,  director,  or any such  employee has a substantial
interest or is an officer, director, trustee or partner.

                                       3
<PAGE>

         6.25. FOREIGN ASSETS CONTROL  REGULATIONS,  ETC. None of the requesting
or borrowing of the Loans,  the requesting or issuance,  extension or renewal of
any Letters of Credit or the use of the proceeds of any thereof will violate the
Trading With the Enemy Act (50 U.S.C.  ss. 1 et seq.,  as amended) (the "Trading
With the Enemy Act") or any of the foreign  assets  control  regulations  of the
United States  Treasury  Department (31 CFR,  Subtitle B, Chapter V, as amended)
(the  "Foreign  Assets  Control  Regulations")  or any enabling  legislation  or
executive  order  relating  thereto  (which  for the  avoidance  of doubt  shall
include,  but shall not be limited to (a) Executive Order 13224 of September 21,
2001 Blocking  Property and  Prohibiting  Transactions  With Persons Who Commit,
Threaten to Commit,  or Support  Terrorism  (66 Fed.  Reg.  49079  (2001))  (the
"Executive  Order") and (b) the Uniting and  Strengthening  America by Providing
Appropriate  Tools  Required to  Intercept  and Obstruct  Terrorism  Act of 2001
(Public  Law  107-56)).   Furthermore,   neither  the  Parent  nor  any  of  its
Subsidiaries  or other  Affiliates  (a) is or will become a "blocked  person" as
described in the Executive  Order, the Trading With the Enemy Act or the Foreign
Assets  Control  Regulations  or (b) engages or will  engage in any  dealings or
transactions, or be otherwise associated, with any such "blocked person".

         6.26.  COMPLIANCE.  The Borrower and each parcel of Mortgaged  Property
and the use thereof comply in all material  respects with all  applicable  legal
requirements  (including with respect to parking and applicable  zoning and land
use laws,  regulations  and  ordinances)  or constitute  permitted,  preexisting
conditions with respect thereto.  Borrower is not in default or violation of any
order, writ,  injunction,  decree or demand of any Governmental  Authority,  the
violation  of which could  reasonably  be  expected  to have a material  adverse
effect on the  business,  assets or  financial  condition of the Borrower or the
Guarantors,  taken  as a  whole.  In the  event  that  all or  any  part  of the
improvements  on any of the Mortgaged  Property are  destroyed or damaged,  said
improvements  can be  legally  reconstructed  to their  condition  prior to such
damage or destruction,  and thereafter exist for the same use without  violating
any  material  zoning or other  ordinances  applicable  thereto  and without the
necessity  of  obtaining  any  variances  or special  permits  (provided  that a
casualty  affecting  more than 50% of the assessed  value of the  structure  may
require such relief if not then in conformity  with the zoning bylaw).  No legal
proceedings are pending or, to the best of Borrower's knowledge, threatened with
respect  to the  zoning  of the Real  Estate  the  consequences  of which  could
reasonably be expected to have a material adverse effect on the business, assets
or  financial  condition of the  Borrower or the  Guarantors,  taken as a whole.
Neither  the zoning nor any other  right to  construct,  use or operate the Real
Estate is in any way  dependent  upon or related to any property  other than the
Real  Estate.  All material  certifications,  permits,  licenses and  approvals,
including  certificates  of completion  and occupancy  permits  required for the
legal  use,  occupancy  and  operation  of the Real  Estate  (collectively,  the
"LICENSES"),  have been obtained and are in full force and effect. The use being
made of the Real Estate is in  conformity  with the  certificates  of  occupancy
issued for the Real Estate and all other restrictions,  covenants and conditions
affecting the Real Estate.

         6.27. CONTRACTS. There are no service,  maintenance or repair contracts
affecting the Mortgaged  Property that are not  terminable on one month's notice
or less  without  cause  and  without  penalty  or  premium.  All such  service,
maintenance or repair contracts affecting the Real Estate have been entered into
at arms-length in the ordinary course of Borrower's business and provide for the
payment of fees in amounts and upon terms comparable to existing market rates.

         6.28.  UTILITIES  AND  PUBLIC  ACCESS.  Excluding  the  Bleachery  Pond
property, there is reasonable utility and public access to the Real Estate.

         6.29. PHYSICAL CONDITION.  The Real Estate is in good condition,  order
and  repair  in all  material  respects;  there  exists no  structural  or other
material defect or damages to the Real Estate, whether latent or otherwise.  The
Borrower has not received  notice from any insurance  company or bonding company
of any defect or inadequacy in the Real Estate, or any part thereof, which would
materially  adversely  affect  its  insurability  or  cause  the  imposition  of
extraordinary  premiums or charges  thereon or any  termination of any policy of
insurance  or bond.  Except as may be  expressly  disclosed  on the  compilation
drawing of the Mortgage  Property  certified  to the  Administrative  Agent,  no
portion  of the  Mortgaged  Property  is located  in an area  identified  by the
Federal Emergency Management Agency as an area having special flood hazards.

<PAGE>

            7. AFFIRMATIVE COVENANTS OF THE PARENT AND THE BORROWER.

         Each of the Parent and the Borrower  covenants and agrees that, so long
as any Loan, Unpaid Reimbursement  Obligation or Letter of Credit is outstanding
or any Lender has any obligation to make any Loans or the  Administrative  Agent
has any  obligation  to cause the  Issuing  Bank to  issue,  extend or renew any
Letter of Credit:

         7.1.  PUNCTUAL  PAYMENT.  Each of the Parent and the Borrower will duly
and  punctually  pay or cause to be paid when due all  principal and interest on
the Loans, all Reimbursement Obligations, the Fees and all other Obligations and
amounts  provided for in this Credit  Agreement and the other Loan  Documents to
which it is a party  and  will  cause  to be paid  any  amounts  owing by any of
Subsidiary  of the  Parent,  all in  accordance  with the  terms of this  Credit
Agreement and such other Loan Documents.

         7.2.  MAINTENANCE  OF OFFICE.  Each of the Parent and the Borrower will
maintain  its chief  executive  office in Fall River,  Massachusetts  or at such
other place as the Parent and the Borrower  shall  designate upon written notice
to the Administrative Agent, where notices, presentations and demands to or upon
the Parent or the Borrower in respect of the Loan  Documents to which the Parent
or the Borrower is a party may be given or made.

         7.3. RECORDS AND ACCOUNTS. Each of the Parent and the Borrower will (i)
keep, and cause each of its  Subsidiaries to keep, true and accurate records and
books  of  account  in which  full,  true and  correct  entries  will be made in
accordance  with,  and all  financial  statements  provided  for herein shall be
prepared in accordance with GAAP  consistently  applied;  (ii) maintain adequate
accounts and reserves for all taxes  (including  incomes  taxes),  depreciation,
depletion, obsolescence and amortization of its properties and the properties of
its  Subsidiaries,  contingencies,  and other reserves;  and (iii) at all times,
maintain  independent  certified  public  accountants  as the  Parent's  and the
Borrower's accountants which shall be satisfactory to the Administrative Agent.

         7.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The Parent and
the Borrower will deliver to each of the Lenders:

                  (a) as soon as  practicable,  but in any event not later  than
         ninety (90) days after the end of each Fiscal  Year,  the  consolidated
         balance sheet of the Parent and its Subsidiaries, as at the end of such
         year,  and the related  consolidated  statements of income and retained
         earnings and  consolidated  statement of cash flow for such year,  each
         setting forth in comparative  form the figures for the previous  Fiscal
         Year and all such consolidated financial statements to be in reasonable
         detail,  prepared in accordance  with GAAP  consistently  applied,  and
         certified without  qualification and without  expression of uncertainty
         as to the  ability of the Parent and its  Subsidiaries  to  continue as
         going  concerns,  by  PricewaterhouseCoopers  or by  other  independent
         certified public accountants  satisfactory to the Administrative  Agent
         (PROVIDED,  that for the 2006 Fiscal Year only, such  certification may
         be issued with a going concern  qualification if such  qualification is
         reasonable and necessary in the reasonable  judgment of the independent
         certified  public  accountant),  together with (i) a written  statement
         from such  accountants to the effect that they have read a copy of this
         Credit Agreement, and that, in making the examination necessary to said
         certification,  they have obtained no knowledge of any Default or Event
         of Default,  or, if such accountants  shall have obtained  knowledge of
         any then  existing  Default or Event of Default they shall  disclose in
         such statement any such Default or Event of Default; PROVIDED that such
         accountants  shall not be liable to the  Lenders  for failure to obtain
         knowledge of any Default or Event of Default;  and (ii) a copy of their
         accountants' management letter (if any) for such Fiscal Year;

                  (b) as soon as practicable, but in any event within forty-five
         (45) days after the end of each  Fiscal  Quarter,  unaudited  quarterly
         consolidated and consolidating  financial  statements of the Parent and
         its  Subsidiaries  for such Fiscal Quarter (i.e.,  the consolidated and
         consolidating  balance sheet of the Parent and its Subsidiaries,  as at
         the end of  such  Fiscal  Quarter,  and the  related  consolidated  and
         consolidating   statements   of  income  and   retained   earnings  and
         consolidated and  consolidating  statement of cash flow for such Fiscal
         Quarter) and the unaudited  consolidated  and  consolidating  financial
         statements of the Parent and its Subsidiaries for the period commencing
         at the end of the previous  Fiscal Year and ending with the end of such
         Fiscal  Quarter,  each  prepared in accordance  with GAAP  consistently
         applied,  together with a certification  by the principal  financial or
         accounting  officer(s) of the Parent that the information  contained in
         such financial  statements fairly presents in all material respects the
         financial  condition of the Parent and its Subsidiaries (as a whole) on
         the date thereof (subject to year-end adjustments);
<PAGE>

                  (c) as soon as  practicable,  but in any event  within  thirty
         (30) days after the end of each month in each  Fiscal  Year,  unaudited
         monthly  consolidated and consolidating  financial statements of Parent
         and its  Subsidiaries  for  such  month  (i.e.,  the  consolidated  and
         consolidating  balance sheet of the Parent and its Subsidiaries,  as at
         the end of such month, and the related  consolidated and  consolidating
         statements  of  income  and  retained  earnings  and  consolidated  and
         consolidating  statement of cash flow for such month) and the unaudited
         consolidated and consolidating  financial  statements of the Parent and
         its Subsidiaries  for the period  commencing at the end of the previous
         Fiscal Year and ending with the end of such  month,  each,  prepared in
         accordance   with   GAAP   consistently   applied,   together   with  a
         certification  by the principal  financial or accounting  officer(s) of
         the Parent that the information  contained in such financial statements
         fairly presents in all material respects the financial condition of the
         Parent and its  Subsidiaries  (as a whole) on the date thereof (subject
         to year-end adjustments);

                  (d)   simultaneously   with  the  delivery  of  the  financial
         statements  referred to in  subsections  (a) and (b) above, a statement
         certified by the principal  financial or  accounting  officer(s) of the
         Parent in  substantially  the form of  EXHIBIT B hereto (a  "Compliance
         Certificate")  (i)  setting  forth in  reasonable  detail  computations
         evidencing  compliance  with the  covenants  contained  in ss.9 and (if
         applicable)  reconciliations  to  reflect  changes  in GAAP  since  the
         Balance  Sheet Date and (ii)  stating that such  officer(s)  has caused
         this  Credit  Agreement  to be  reviewed  and has no  knowledge  of any
         Default or Event of Default during such Fiscal Quarter or at the end of
         such year, or if such  officer(s) has such  knowledge,  specifying each
         Default or Event of Default and the nature thereof;

                  (e) as soon as available and in any event no later than within
         fifteen  (15)  days  after  the  end  of  each  calendar  month,  (i) a
         Collateral  Update  Certificate,   (ii)  an  Accounts   Receivable/Loan
         Reconciliation  Report,  (iii) a  summary  of  inventory  by  type  and
         location,  (v) an accounts receivable aging report, and (iv) such other
         information  relating to the  Collateral  as the  Administrative  Agent
         shall reasonably request, in each case,  accompanied by such supporting
         detail and documentation as the  Administrative  Agent shall reasonably
         request;

                  (f) as soon as  available  and in any event no later than 1:00
         p.m.  (Boston time) on Tuesday of each week (or, if such Tuesday is not
         a Business  Day or if the  preceding  Monday is not a Business  Day, in
         each case, on Wednesday of such week) (or with greater frequency as the
         Administrative  Agent may request),  a Borrowing Base  Certificate with
         respect to the  Collateral  of the Borrower as of the close of business
         on the previous Saturday (or, if such day is not a Business Day, on the
         preceding Business Day), together with such other information  relating
         to the Collateral as the Administrative Agent shall reasonably request,
         and  accompanied by such  supporting  detail and  documentation  as the
         Administrative Agent shall reasonably request;

                  (g) not later than December 31st of each  calendar  year,  the
         annual  business  plan  of the  Parent  and  its  Subsidiaries  for the
         succeeding  Fiscal  Year  on a  monthly  basis  in  reasonable  detail,
         including projected  consolidated balance sheets,  statements of income
         and retained  earnings and cash flow  statements  of the Parent and its
         Subsidiaries for the succeeding Fiscal Year on a monthly basis, in each
         case in the same  format as the audited  balance  sheet,  statement  of
         income and retained earnings and cash flow statement respectively;

                  (h) promptly  after the sending or filing  thereof,  copies of
         all reports  which the Parent or any  Subsidiary of the Parent sends to
         any of its security holders, and copies of all reports and registration
         statements  which the Parent or any Subsidiary of the Parent files with
         the  Securities  and Exchange  Commission  or any  national  securities
         exchange  (including,  without  limitation,  all  10-K,  10-Q  and  8-K
         reports),  which reports are required to be sent to security holders or
         so filed by law or by  regulation  or under the  terms of the  Parent's
         listing agreement with NASDAQ or any other stock exchange;
<PAGE>

                  (i)  from  time  to  time  such  other   financial   data  and
         information   (including   accountants'   management  letters)  as  the
         Administrative Agent or any Lender may reasonably request;

                  (j)   simultaneously   with  the  delivery  of  the  financial
         statements   referred  to  in  subsection   (c)  above,   a  Compliance
         Certificate setting forth in reasonable detail computations  evidencing
         compliance with the financial covenant contained in ss.9;

                  (k) promptly after delivery or receipt thereof,  copies of all
         notices and other written  communications  delivered or received by the
         Parent or any of its Subsidiaries in connection with the Term Loans;

                  (l) [intentionally omitted];

                  (m) on Wednesday of each week, a comparison of actual  results
         for the immediately  prior one week period to the previously  projected
         results for such one week period as set forth in the Projections; and

                  (n) within five (5) Business Days after the end of each month,
         updated  13-week  projections  reflecting any changes to the previously
         provided Projections. Without limiting the generality of the foregoing,
         such  projections  shall  detail,  on a  weekly  basis,  the  projected
         outstanding  amount of Revolving  Loans and the Maximum  Drawing Amount
         for all Letters of Credit for such period.

         7.5. NOTICES.

                  7.5.1.  DEFAULTS.  The Parent and the Borrower  will  promptly
         notify the  Administrative  Agent in writing of the  occurrence  of any
         Default or Event of Default. If any Person shall give any notice to the
         Parent or its  Subsidiaries  or take any other  action in  respect of a
         claimed default (whether or not constituting an Event of Default) under
         this  Credit  Agreement  or any other note,  evidence of  indebtedness,
         indenture or other  obligation for borrowed money in excess of $500,000
         to which or with respect to which the Parent or any of its Subsidiaries
         is a party or  obligor,  whether  as  principal,  guarantor,  surety or
         otherwise,  the Parent shall  forthwith  give written notice thereof to
         the  Administrative  Agent,  describing  the  notice or action  and the
         nature of the claimed  default.  The Borrower shall promptly notify the
         Administrative  Agent in writing of the  occurrence  of any  default or
         event of default under the Term Loan  Agreement,  stating the nature of
         such default or event of default.

                  7.5.2. NOTICE OF LITIGATION AND JUDGMENTS.  The Parent and the
         Borrower will give notice to the Administrative Agent in writing within
         fifteen (15) days of Senior Management becoming aware of any litigation
         or  proceedings  threatened  in writing or any pending  litigation  and
         proceedings affecting the Parent or any of its Subsidiaries or to which
         the Parent or any of its  Subsidiaries  is or becomes a party involving
         (i) an uninsured  claim  against the Parent or any of its  Subsidiaries
         that would  reasonably  be  expected  to result in damages of more than
         $1,000,000  against  the  Parent or any of its  Subsidiaries  or have a
         material  adverse effect on the Borrower and the Guarantors  taken as a
         whole or (ii) any litigation  proceeding against Persons with which the
         Parent or any of its Subsidiaries has a business  relationship which is
         likely to  materially  and  adversely  affect the  business,  financial
         condition,  assets or  operations  of the Borrower  and the  Guarantors
         (taken as a whole) and stating the nature and status of such litigation
         or  proceedings.  The  Parent  will give  notice to the  Administrative
         Agent,   in   writing,   in  form  and  detail   satisfactory   to  the
         Administrative  Agent, within ten (10) days of any judgment not covered
         by  insurance,  final or  otherwise,  against  the Parent or any of its
         Subsidiaries in an amount in excess of $1,000,000.
<PAGE>

                  7.5.3.  NOTIFICATION OF CLAIM AGAINST  COLLATERAL.  The Parent
         and the Borrower will, immediately upon becoming aware thereof,  notify
         the  Administrative  Agent and each of the  Lenders  in  writing of any
         setoff,   claims   (including,   with   respect  to  the  Real  Estate,
         environmental  claims),  withholdings  or  other  defenses  in  amounts
         greater  than  $250,000  to  which  any  of  the  Collateral,   or  the
         Administrative  Agent's  rights  with  respect to the  Collateral,  are
         subject.

                  7.5.4. NOTICES CONCERNING INVENTORY COLLATERAL. The Parent and
         the Borrower shall provide to the Administrative Agent prompt notice of
         (a)  any  quarterly  physical  count  of  the  Parent's  or  any of its
         Subsidiaries'  inventory,  together with a copy of the results  thereof
         certified by the Parent or such  Subsidiary,  (b) any  determination by
         the Parent or any of its Subsidiaries  that the inventory levels of the
         Parent  or  such   Subsidiary  are  not  adequate  to  meet  the  sales
         projections  of the Parent or such  Subsidiary,  and (c) any failure of
         the  Parent  or any of its  Subsidiaries  to  pay  rent  at any  leased
         location, which failure continues for more than ten (10) days following
         the day on which  such rent is due and  payable  by the  Parent or such
         Subsidiary.

                  7.5.5.   NOTIFICATION  OF  ADDITIONAL   INTELLECTUAL  PROPERTY
         RIGHTS.  Within ten (10) days of the end of each  Fiscal  Quarter,  the
         Parent and the  Borrower  will (a) notify the  Administrative  Agent in
         writing of (i) any patents,  patent  applications,  patent  application
         disclosures  filed with any patent office during such Fiscal Quarter or
         which  the  intellectual  property  committee  of the  Parent  or  such
         Subsidiary  has  approved  for filing  during such Fiscal  Quarter as a
         patent  application,  registered  copyrights  or mask works  registered
         during such Fiscal Quarter, applications for registration of copyrights
         or mask works filed during such Fiscal  Quarter,  trademark and service
         mark  registrations  during such Fiscal Quarter,  trademark and service
         mark  registration  applications  filed  during  such  Fiscal  Quarter,
         trademarks,  service  marks and trade names for which the  intellectual
         property committee of the Parent or such Subsidiary has approved filing
         trademark registration  applications during such Fiscal Quarter, all of
         the  foregoing  whether a foreign or United  States  right and  whether
         owned by the  Parent or such  Subsidiary,  to the  extent not listed on
         SCHEDULE 6.6, (ii) the abandonment of any of the foregoing  during such
         Fiscal Quarter and (b) deliver to the  Administrative  Agent (i) a list
         of the fifty  (50)  most  valuable  copyrights  of the  Parent  and its
         Subsidiaries as of the end of such Fiscal Quarter (based on the revenue
         derived  therefrom)  and (ii) evidence that such fifty (50)  copyrights
         have been  registered  with the  United  States  Copyright  Office,  or
         applications  regarding the same have been filed with the United States
         Copyright Office.

                  7.5.6.  ENVIRONMENTAL EVENTS. The Parent and the Borrower will
         promptly  give  notice  to the  Administrative  Agent  and  each of the
         Lenders (a) of any violation of any  Environmental  Law that the Parent
         or any of its Subsidiaries  reports in writing or is reportable by such
         Person in writing (or for which any written report  supplemental to any
         oral report is made) to any Governmental  Authority and (b) upon Senior
         Management  becoming  aware  thereof,   of  any  inquiry,   proceeding,
         investigation,  or other action,  including a notice from any agency of
         potential environmental  liability, of any Governmental Authority that,
         in the case of  clauses  (a) or (b) above,  could  have a material  and
         adverse  affect on the financial  position,  business,  operations,  or
         affairs of the Borrower and the Guarantors (taken as a whole).

                  7.5.7.  NOTIFICATION REGARDING THE REAL PROPERTY. The Borrower
         will promptly give notice to the  Administrative  Agent and each of the
         Lenders of receipt or  knowledge of any notice or  correspondence  by a
         Governmental  Authority concerning the Real Estate along with a copy of
         any  such  notice  or  correspondence  by the  Governmental  Authority,
         including,  but not limited to any notice of casualty  loss and eminent
         domain proceedings.
<PAGE>

         7.6.  LEGAL  EXISTENCE;   MAINTENANCE  OF  PROPERTIES.  (a)  Except  as
permitted by ss.8.5,  the Parent and the Borrower will do and will cause each of
their  Subsidiaries to do all things necessary to (i) in the case of each of the
Parent and the Borrower,  maintain in full force and effect its legal  existence
and  good  standing  under  the  laws of its  jurisdiction  of  organization  or
incorporation,  (ii) in the case of each of their  Subsidiaries  (excluding  the
Borrower),  maintain  in full  force and  effect  its legal  existence  and good
standing under the laws of its  jurisdiction of  organization  or  incorporation
except  where the failure to do so would not have a material  adverse  affect on
the  financial  condition,  properties  or  business  of the  Borrower  and  the
Guarantors, taken as a whole, (iii) maintain its qualification to do business in
each  state or other  jurisdiction  in which the  failure  to do so would have a
material  adverse  effect  on the  condition,  financial  or  otherwise,  of the
Borrower and the  Guarantors  (taken as a whole),  and (iv)  maintain all of its
rights  and  franchises,  except  where the  failure to  maintain  such right or
franchise  would  not have a  material  adverse  effect  on the  conduct  of the
business of the Borrower and the Guarantors, taken as a whole.

                  (b) Each of the Parent and the  Borrower (i) will cause all of
         its  properties  and  those of its  Subsidiaries  used or useful in the
         conduct of the Parent's business or the business of its Subsidiaries to
         be maintained and kept in good condition,  repair and working order and
         supplied with all necessary  equipment,  (ii) will cause to be made all
         necessary repairs, renewals, replacements, betterments and improvements
         thereof,  all as in the  judgment of the Parent and the Borrower may be
         necessary so that the business  carried on in connection  therewith may
         be properly and advantageously  conducted at all times, and (iii) will,
         and  will  cause  each  of its  Subsidiaries  to,  continue  to  engage
         primarily  in the  businesses  now  conducted by them and in related or
         complementary businesses; PROVIDED that nothing in this ss.7.6(b) shall
         prevent  either  the  Parent or the  Borrower  from  discontinuing  the
         operation and  maintenance  of any of its properties or any of those of
         its  Subsidiaries  if such  discontinuance  is, in the  judgment of the
         Parent  and the  Borrower,  desirable  in the  conduct  of its or their
         business and that do not in the aggregate  materially  adversely affect
         the business of the Parent and its Subsidiaries on consolidated basis.

         7.7. INSURANCE. Each of the Parent and the Borrower will and will cause
each of its  Subsidiaries  to,  maintain  with  financially  sound and reputable
insurers  insurance  with respect to its  properties  and business  against such
casualties  and  contingencies  as  shall  be in  accordance  with  the  general
practices of  businesses  engaged in similar  activities  in similar  geographic
areas and in amounts,  containing such terms, in such forms and for such periods
as may be  reasonable  and  prudent  and in  accordance  with  the  terms of the
Security  Documents.  Each of the Parent and the Borrower  will,  and will cause
each of its Subsidiaries to, maintain insurance,  in form, substance and amounts
satisfactory  to the  Administrative  Agent,  on  the  Mortgaged  Properties  in
accordance with the terms of the Mortgages.

         7.8.  TAXES.  Each of the Parent and the Borrower  will, and will cause
each of its  Subsidiaries  to, duly pay and  discharge,  or cause to be paid and
discharged,  before the same shall become  overdue,  all Taxes,  assessments and
other  governmental  charges imposed upon it and its real properties,  sales and
activities,  or any part thereof,  or upon the income or profits  therefrom,  as
well as all claims for labor, materials, or supplies that if unpaid might by law
become a Lien or charge upon any of its  property;  PROVIDED  that any such Tax,
assessment,  charge,  levy or claim need not be paid if the  validity  or amount
thereof shall  currently be contested in good faith by  appropriate  proceedings
and if the Parent,  the Borrower or such Subsidiary  shall have set aside on its
books  adequate  reserves with respect  thereto;  and PROVIDED  FURTHER that the
Parent and each  Subsidiary of the Parent will pay all such Taxes,  assessments,
charges,  levies or claims  forthwith  upon the  commencement  of proceedings to
foreclose  or  otherwise  enforce  any Lien that may have  attached  as security
therefor.
<PAGE>

         7.9. COMPLIANCE WITH LAWS,  CONTRACTS,  LICENSES,  AND PERMITS. Each of
the Parent and the Borrower  will, and will cause each of its  Subsidiaries  to,
comply with (i) the  applicable  laws and  regulations  wherever its business is
conducted,  including  all  environmental  laws,  (ii)  the  provisions  of  its
Governing Documents,  (iii) all agreements and instruments by which it or any of
its  properties  may be bound  and  (iv) all  applicable  decrees,  orders,  and
judgments,  PROVIDED,  that in each case, such  compliance  shall be required by
this Credit Agreement only where noncompliance with ss.ss.7.9(i)-(iv) would have
a material  adverse  effect on the  business,  assets,  operations  or financial
condition of the Borrower and the Guarantors  (taken as a whole), or the ability
of either  the Parent or the  Borrower  to fulfill  its  obligations  under this
Credit  Agreement or the other Loan Documents.  If any  authorization,  consent,
approval,  permit or license from any officer,  agency or instrumentality of any
government  or any  central  bank or other  fiscal or monetary  authority  shall
become  necessary  or required in order that the Parent,  the Borrower or any of
their Subsidiaries may fulfill any of their obligations  hereunder or any of the
other Loan Documents to which the Parent,  the Borrower or such  Subsidiary is a
party, the Parent and the Borrower will, or (as the case may be) will cause such
Subsidiary to,  promptly take or cause to be taken all  reasonable  steps within
the  power of the  Parent,  the  Borrower  or such  Subsidiary  to  obtain  such
authorization,  consent,  approval,  permit or license,  and upon request of the
Administrative  Agent, to furnish the Administrative  Agent and the Lenders with
evidence thereof.

         7.10.  EMPLOYEE BENEFIT PLANS. Each of the Parent and the Borrower will
(i)  promptly  upon  filing (if  required by  applicable  law) the same with the
Department   of  Labor  or  Internal   Revenue   Service  upon  request  of  the
Administrative  Agent,  furnish to the  Administrative  Agent a copy of the most
recent actuarial statement required to be submitted under ss.103(d) of ERISA and
Annual  Report,  Form 5500,  with all required  attachments,  in respect of each
Guaranteed  Pension Plan and (ii) promptly upon receipt or dispatch,  furnish to
the  Administrative  Agent any  notice,  report or demand  sent or  received  in
respect of a Guaranteed  Pension Plan under  ss.ss.302,  4041, 4042, 4043, 4063,
4065,  4066 and 4068 of ERISA,  or in respect  of a  Multiemployer  Plan,  under
ss.ss.4041A, 4202, 4219, 4242, or 4245 of ERISA.

         7.11. USE OF PROCEEDS.  The proceeds of the Loans and Letters of Credit
contemplated  to be advanced or made  available  to the  Borrower  shall be used
solely  for  working  capital  and  general  business  purposes,  subject to the
restrictions set forth in this Credit Agreement.

         7.12. CERTAIN CHANGES. Each of the Parent and the Borrower shall notify
the Administrative  Agent, in writing,  not less than thirty (30) days prior (i)
to any  change  in its  chief  executive  office,  its  name or the  type of its
organization,  (ii) the  acquisition  of any real estate  pursuant to ss.7.16 or
(iii)  the  acquisition  of any  asset  in any  jurisdiction  other  than  those
jurisdictions   specified  on  the  Parent's  and  the   Borrower's   Perfection
Certificate.

         7.13. CONDUCT OF BUSINESS.  Except as permitted by ss.8.5,  each of the
Parent and the Borrower  will and will cause their  Subsidiaries  to continue to
engage  primarily in the businesses  engaged in by the Parent,  the Borrower and
their  Subsidiaries  on the Closing Date, or such  businesses as are  reasonably
related  or  complementary  to the  businesses  engaged  in by the  Parent,  the
Borrower and their Subsidiaries on the Closing Date.

         7.14. FURTHER ASSURANCES. Each of the Parent and the Borrower will, and
will cause each of its  Subsidiaries  to,  cooperate  with the  Lenders  and the
Administrative  Agent and execute such further  instruments and documents as the
Lenders or the  Administrative  Agent shall  reasonably  request to carry out to
their  satisfaction the  transactions  contemplated by this Credit Agreement and
the other Loan Documents.
<PAGE>

         7.15. INSPECTION OF PROPERTIES AND BOOKS, ETC.

                  7.15.1.  GENERAL. The Parent and the Borrower shall permit the
         Lenders,  through the Administrative Agent or any of the Lenders' other
         designated representatives,  at the Borrower's expense (such expense to
         include a $850 per day field examination  charge plus all out of pocket
         expenses related  thereto),  to visit and inspect any of the properties
         of the  Parent  or any of its  Subsidiaries,  to  examine  the books of
         account of the Parent and its Subsidiaries  (and to make copies thereof
         and  extracts  therefrom),  and to discuss the  affairs,  finances  and
         accounts of the Parent and its Subsidiaries  with, and to be advised as
         to the same by, its and their officers, and to conduct examinations and
         verifications  (whether by internal  commercial  finance  examiners  or
         independent  auditors  satisfactory to the Administrative  Agent (which
         may be affiliated  with one or more of the Lenders)) of all  components
         included  in the  Borrowing  Base,  all at such  reasonable  times  and
         intervals  and with  prior  notice as the  Administrative  Agent or any
         Lender may reasonably  request,  which report shall indicate whether or
         not the  information set forth in the Borrowing Base  Certificate  most
         recently  delivered is accurate  and complete in all material  respects
         based  upon a  review  by  such  auditors  of the  Accounts  Receivable
         (including verification with respect to the amount, aging, identity and
         credit of the respective  account debtors and the billing  practices of
         the Borrower) and inventory  (including  verification  as to the value,
         location and respective  types).  The  Administrative  Agent may at the
         Borrower's expense, participate in or observe any physical count of any
         inventory of the Parent or such Subsidiary included in the Collateral.

                  7.15.2. APPRAISALS. At the request of the Administrative Agent
         or the Required  Lenders,  which requests may be made annually (or with
         such other frequency as the Administrative Agent shall request upon the
         occurrence and  continuation of a Default or an Event of Default),  the
         Parent and the Borrower  will obtain and deliver to the  Administrative
         Agent and the Lenders  appraisal reports in form and substance and from
         appraisers  satisfactory to the Administrative  Agent,  stating (a) the
         then  current  fair market,  Net Orderly  Liquidation  Value and forced
         liquidation values of all or any portion of the inventory, equipment or
         real estate owned by the Parent or any of its  Subsidiaries and (b) the
         then current  business value of the Parent and its  Subsidiaries.  Each
         such  appraisal  shall  be  conducted  and made at the  expense  of the
         Borrower.  Notwithstanding the foregoing, prior to an Event of Default,
         the  Administrative  Agent and the Required  Lenders shall not have the
         right to request such annual  appraisals of equipment or Real Estate if
         the  Term  Loan  Agent  has (a)  requested  and  received  such  annual
         appraisals and (b) copies of such annual  appraisals have been provided
         to the Administrative Agent.

                  7.15.3.    COMMUNICATIONS    WITH   ACCOUNTANTS.    Upon   the
         Administrative  Agent's reasonable request,  each of the Parent and the
         Borrower will request that the Parent's and the Borrower's  independent
         certified public accountants communicate with the Administrative Agent,
         and, if  accompanied by the  Administrative  Agent,  the Lenders,  with
         respect  to  the  financial  condition  of  the  Parent  or  any of its
         Subsidiaries;   PROVIDED  that  the  Parent  and  the  Borrower   shall
         participate in all such communications.

                  7.15.4.  ENVIRONMENTAL  ASSESSMENTS.  No more  frequently than
         once during each  calendar  year (or with such other  frequency  as the
         Administrative Agent shall request upon the occurrence and continuation
         of a Default or an Event of Default), the Administrative Agent may, for
         the  purpose  of  assessing  and  ensuring  the value of any  Mortgaged
         Property,  obtain one or more  environmental  assessments  or audits of
         such Mortgaged  Property prepared by a  hydrogeologist,  an independent
         engineer  or other  qualified  consultant  or  expert  approved  by the
         Administrative  Agent to evaluate or confirm (a) whether any  Hazardous
         Substances are present in the soil or water at such Mortgaged  Property
         and (b)  whether  the  use and  operation  of such  Mortgaged  Property
         complies with all  Environmental  Laws.  Environmental  assessments may
         include  without   limitation   detailed  visual  inspections  of  such
         Mortgaged Property including any and all storage areas,  storage tanks,
         drains,  dry wells and leaching areas,  and the taking of soil samples,
         surface water samples and ground water  samples,  as well as such other
         investigations   or   analyses  as  the   Administrative   Agent  deems
         appropriate.  All such environmental assessments shall be conducted and
         made at the expense of the Borrower.  Notwithstanding the foregoing, so
         long as no Event of Default has  occurred and is  continuing,  prior to
         the repayment in full of the Term Loans, the Administrative Agent shall
         not have the right to request such annual environmental  assessments so
         long as any copies of such annual environmental  assessments  requested
         and  received  by  the  Term  Loan  Agent  have  been  provided  to the
         Administrative Agent.
<PAGE>

         7.16.  ADDITIONAL MORTGAGED PROPERTY. At any time following the Closing
Date,  upon  request  of the  Administrative  Agent,  each of the Parent and the
Borrower shall,  and shall cause each of its  Subsidiaries to, forthwith (but in
any event within sixty (60) days following any such request therefor) deliver to
the  Administrative  Agent  for the  benefit  of the  Lenders  a fully  executed
mortgage  or deed of trust over any or all  parcels of Real  Estate  acquired or
leased by the Parent,  the Borrower or such  Subsidiary  after the Closing Date,
each of which shall be in form and substance  satisfactory to the Administrative
Agent and shall be deemed to be a Security  Document  hereunder,  together  with
such  title  insurance  policies,   surveys,   environmental  site  assessments,
evidences of  insurance  with the  Administrative  Agent named as loss payee and
additional  insured,  legal opinions and other documents and  certificates  with
respect to such Real Estate as the Administrative  Agent may reasonably request.
Each of the Parent and the Borrower further agrees that, following the taking of
such actions with respect to such Real Estate,  the  Administrative  Agent shall
have,  for the benefit of the Lenders,  a valid and  enforceable  first priority
(subject to the Lien of the Term Loan Agent on Fixed Asset Collateral)  mortgage
or deed of trust  over  such Real  Estate,  free and  clear of all  defects  and
encumbrances except for Permitted Liens.

         7.17. BANK ACCOUNTS.

                  7.17.1. GENERAL.

                           (a) Each of the Parent  and the  Borrower  will,  and
                  will  cause  each of their  Subsidiaries  to,  maintain  their
                  principal   accounts  for  operation,   administration,   cash
                  management  and other deposit  accounts for the conduct of the
                  Parent's, the Borrower's and their Subsidiaries' business with
                  the Cash Management Bank.

                           (b) Without  limiting  the  generality  of (a) above,
                  each of the Parent and the Borrower  will, and will cause each
                  of its  Subsidiaries  to, (i)  establish a depository  account
                  with the Cash  Management Bank (the  "Concentration  Account")
                  which will be  structured  to assure  that all amounts in such
                  account shall only be applied in accordance with  ss.ss.2.11.2
                  and 2.12, (ii) instruct all account debtors and other obligors
                  of the Parent,  the Borrower or any  Subsidiary of the Parent,
                  pursuant to notices of assignment and  instruction  letters in
                  form and substance  satisfactory to the Administrative  Agent,
                  to remit all cash  proceeds  of Accounts  Receivable  to local
                  depository  accounts maintained by the Parent, the Borrower or
                  any Subsidiary of the Parent ("Local Accounts") with financial
                  institutions which have entered into agency account agreements
                  and, if applicable, lock box agreements (collectively, "Agency
                  Account Agreements") in form and substance satisfactory to the
                  Administrative  Agent,  or the  Concentration  Account,  (iii)
                  direct all  depository  institutions  with Local  Accounts  to
                  cause  all  funds  held  in  each  such  Local  Account  to be
                  transferred  no less  frequently  than once each week to,  and
                  only to, the Concentration  Account;  PROVIDED that the Parent
                  and its  Subsidiaries  may maintain an aggregate  amount of no
                  more than $150,000 in such Local Accounts,  which amount shall
                  not be subject to such transfers,  (iv) at all times,  subject
                  to the Intercreditor  Agreement,  ensure that immediately upon
                  the Parent's,  the  Borrower's  or any of their  Subsidiaries'
                  receipt  of  any  funds  constituting  cash  proceeds  of  any
                  Collateral,  all such amounts  shall have been  deposited in a
                  Local  Account or the  Concentration  Account.  Subject to the
                  Intercreditor  Agreement,  the Borrower hereby agrees that all
                  amounts   received   by  the   Administrative   Agent  in  the
                  Concentration  Account will be the sole and exclusive property
                  of  the   Administrative   Agent,  for  the  accounts  of  the
                  applicable Lenders and the Administrative Agent, to be applied
                  in accordance with ss.2.11 or ss.2.12 as applicable
<PAGE>

         7.18.  DOMESTIC  SUBSIDIARIES.  The Parent  shall  cause each  Domestic
Subsidiary  of the Parent  (other than the  Borrower)  to be a Guarantor  at all
times.

         7.19. [INTENTIONALLY OMITTED].

         7.20. FINANCIAL CONSULTANT.  The Parent and the Borrower shall continue
to retain,  at the Borrower's  and  Guarantors'  expense,  Alvarez & Marsal (the
"Financial   Consultant")   on  terms  and   conditions   satisfactory   to  the
Administrative  Agent for a period of not less than three (3)  months  following
the Closing Date,  as its financial  consultant.  Parent  acknowledges  that the
Financial  Consultant  has  been  chosen  solely  by  Parent  and the  Financial
Consultant will be an agent only of Parent, and not of the Administrative  Agent
or any Lender, in all respects.  At any time and from time to time, the Borrower
and the Guarantors shall make the Financial  Consultant,  its officers and other
consultants of the Parent and its Subsidiaries  available,  whether by telephone
or in person, to review and discuss the Parent's and its Subsidiaries' financial
condition; PROVIDED that the Parent shall have the option to participate in such
communications.

             8. NEGATIVE COVENANTS OF THE PARENT AND THE BORROWER.

         Each of the Parent and the Borrower  covenants and agrees that, so long
as any Loan, Unpaid Reimbursement  Obligation or Letter of Credit is outstanding
or any Lender has any obligation to make any Loans or the  Administrative  Agent
has any  obligations  to cause the  Issuing  Bank to issue,  extend or renew any
Letter of Credit:

                  8.1. INVESTMENTS.  Neither the Parent nor the Borrower will or
         will permit any of their  Subsidiaries  to make any  Investment  in any
         Person, except for Investments which consist of:

                           (a)  marketable  direct or guaranteed  obligations of
                  the United  States of America that mature  within one (1) year
                  from the date of purchase by the Parent or any  Subsidiary  of
                  the Parent;

                           (b) demand deposits, certificates of deposit, bankers
                  acceptances  and time  deposits of United  States banks having
                  total assets in excess of $100,000,000;

                           (c) securities  commonly known as "COMMERCIAL  PAPER"
                  issued by a corporation  organized and existing under the laws
                  of the United  States of America or any state  thereof that at
                  the time of purchase have been rated and the ratings for which
                  are not less than "P 1" if rated by Moody's, and not less than
                  "A 1" if rated by S&P;

                           (d) overnight  Investments in money market funds with
                  portfolios  comprised  of the items  described  in clauses (a)
                  through (c) above;

                           (e) Investments consisting of the Guaranties;
<PAGE>

                           (f)  Investments  existing  on the  date  hereof  and
                  listed on SCHEDULE 8.1;

                           (g)   Investments   with   respect  to   Indebtedness
                  permitted  by  ss.8.2(d)  so  long  as  such  entities  remain
                  Subsidiaries of the Borrower;

                           (h)   Investments  (i)  by  the  Parent  in  Domestic
                  Subsidiaries  of  the  Parent  and  (ii)  by the  Borrower  in
                  Domestic Subsidiaries of the Borrower;

                           (i)  Investments  consisting of loans and advances to
                  employees for moving, entertainment, travel, housing and other
                  similar  expenses in the  ordinary  course of business  not to
                  exceed $250,000 in the aggregate at any time outstanding; and

                           (j)  Notes  receivable  and  securities  received  in
                  connection  with the  insolvency or inability to pay of any of
                  the Parent's or the Borrower's account debtors in an aggregate
                  amount not to exceed at any time the greater of (i) $3,000,000
                  and (ii) ten percent (10%) of the  outstanding  face amount of
                  the Borrower's Accounts Receivable at such time;

         PROVIDED,  HOWEVER,  such Investments shall be permitted hereunder only
to the extent such Investments (if held by the Parent or any Domestic Subsidiary
of the Parent) are subject to the first priority  perfected Lien in favor of the
Administrative  Agent  securing  the  Obligations  free of all Liens  other than
Permitted Liens.

         8.2.  RESTRICTIONS  ON  INDEBTEDNESS.  The Parent and the Borrower will
not, and will not permit any of their  Subsidiaries to, create,  incur,  assume,
guarantee or be or remain liable, contingently or otherwise, with respect to any
Indebtedness other than:

                  (a) Indebtedness created hereunder;

                  (b)  Indebtedness  existing on the  Closing  Date which is set
         forth in SCHEDULE 8.2;

                  (c)  other  Indebtedness   incurred  after  the  Closing  Date
         (determined on a consolidated  basis without  duplication in accordance
         with GAAP) in respect of  Capitalized  Leases  and/or  secured by Liens
         permitted under ss.8.3(h), in an aggregate principal amount at any time
         outstanding not in excess of $2,500,000;

                  (d)  Indebtedness of a Domestic  Subsidiary of the Borrower to
         the  Borrower;  PROVIDED  that,  in each  case,  such  Indebtedness  is
         evidenced by a note which is pledged to the Administrative Agent;

                  (e) Indebtedness of the Parent or any Subsidiary of the Parent
         in respect of Derivative Agreements;

                  (f) Indebtedness of the Parent and its Subsidiaries consisting
         of (i) the Term Loan  Obligations;  provided that the principal  amount
         thereof  does not  exceed  the  Priority  Term  Loan  Debt and (ii) any
         refinancings  thereof;  PROVIDED  that  the  principal  amount  of such
         Indebtedness is not increased at the time of such  refinancing and such
         refinancing and the intercreditor arrangements with the holders of such
         Indebtedness are otherwise on terms and conditions  satisfactory to the
         Administrative Agent; and

                  (g) Indebtedness of the Parent and its Subsidiaries consisting
         of the financing of insurance  premiums incurred in the ordinary course
         of business.
<PAGE>

         8.3. RESTRICTIONS ON LIENS.

                  8.3.1.  PERMITTED  LIENS.  Neither the Parent nor the Borrower
         will, nor will they permit any of their Subsidiaries to, create, incur,
         assume or permit to exist any Lien on any of its  property or assets of
         any character now owned or hereafter  acquired by it, or assign or sell
         any income or revenues  (including  accounts  receivable)  or rights in
         respect of any thereof,  except (the following being called  "PERMITTED
         LIENS"):

                           (a) Liens  created  hereunder or under the other Loan
                  Documents;

                           (b) any Lien on any  property  or asset of the Parent
                  or any  Subsidiary  of the Parent  existing on the date hereof
                  and set forth in SCHEDULE  8.3.1,  PROVIDED that (i) such Lien
                  shall not apply to any other  property  or asset of the Parent
                  or any  Subsidiary  of the  Parent  and (ii) such  Lien  shall
                  secure  only  those  obligations  which it secures on the date
                  hereof;

                           (c) Liens imposed by any  Governmental  Authority for
                  taxes,  assessments or charges not yet delinquent or which are
                  being  contested in good faith and by appropriate  proceedings
                  if adequate  reserves with respect  thereto are  maintained on
                  the books of the  Parent  and  Subsidiaries  of the  Parent in
                  accordance with GAAP and which reserves shall be acceptable to
                  the Administrative Agent;

                           (d)    landlords',     carriers',     warehousemen's,
                  mechanics',  materialmen's,  repairmen's  or other like Liens,
                  and  vendors'  Liens  imposed  by  statute  or common  law not
                  securing  the  repayment  of  Indebtedness,   arising  in  the
                  ordinary course of business which are not overdue for a period
                  of more than sixty (60) days or which are being  contested  in
                  good faith and by appropriate  proceedings  and Liens securing
                  judgments   (including,   without   limitation,   pre-judgment
                  attachments);

                           (e) pledges or deposits under worker's  compensation,
                  unemployment  insurance and other social security  legislation
                  and  pledges or deposits  to secure the  performance  of bids,
                  tenders,  trade  contracts  (other than for  borrowed  money),
                  leases  (other  than  Capitalized  Leases),  utility  purchase
                  obligations,  statutory obligations,  surety and appeal bonds,
                  performance  bonds  and  other  obligations  of a like  nature
                  incurred in the ordinary course of business;

                           (f) easements, rights-of-way,  restrictions and other
                  similar  encumbrances  incurred  in  the  ordinary  course  of
                  business and encumbrances  consisting of zoning  restrictions,
                  easements, licenses,  restrictions on the use of Real Property
                  or  minor   imperfections  in  title  thereto  which,  in  the
                  aggregate,  are not  material in amount,  and which do not, in
                  the aggregate,  materially  detract from the value of the Real
                  Property  of the  Parent or any  Subsidiary  of the  Parent or
                  materially interfere with the ordinary conduct of the business
                  of the Parent or any Subsidiary of the Parent;

                           (g) Liens  consisting of bankers' liens and rights of
                  setoff,  in each case,  arising by operation of law, and Liens
                  on documents presented in letter of credit drawings;

                           (h) Liens on Capital Assets, acquired, constructed or
                  improved  by the  Parent  or  any  Subsidiary  of the  Parent,
                  PROVIDED  that (i) such Liens secure  Indebtedness  (including
                  Indebtedness with respect to Capitalized  Leases) permitted by
                  ss.8.2(c),  (ii)  such  Liens  and  the  Indebtedness  secured
                  thereby are incurred  prior to or within  ninety 90 days after
                  such  acquisition  or the completion of such  construction  or
                  improvement  or were in  effect  at the time the  Parent  or a
                  Subsidiary of the Parent  acquired the assets or stock,  (iii)
                  the  Indebtedness  secured thereby does not exceed the cost of
                  acquiring,  constructing  or  improving  such fixed or capital
                  assets,  and (iv) such security  interests  shall not apply to
                  any  other   property   or   assets  of  the   Parent  or  its
                  Subsidiaries;
<PAGE>

                           (i)  Other  nonconsensual  Liens;  PROVIDED  that the
                  aggregate  amount  of  obligations  secured  thereby  does not
                  exceed $100,000 at any time;

                           (j) Liens  granted to the Term Loan  Agent  under the
                  Term Loan Documents to secure the Indebtedness permitted under
                  ss.8.2(f),  and any Liens  securing any permitted  refinancing
                  thereof; and

                           (k)  Liens on  insurance  policies  and the  proceeds
                  thereof pursuant to insurance premium  financing  arrangements
                  permitted under ss.8.2(g).

                  8.3.2.   RESTRICTIONS   ON  NEGATIVE   PLEDGES  AND   UPSTREAM
         LIMITATIONS. The Parent and the Borrower will not, nor will they permit
         any of their  Subsidiaries  to (a)  enter  into or  permit to exist any
         arrangement or agreement  (excluding this Credit  Agreement,  the other
         Loan  Documents  and  the  Term  Loan  Documents)   which  directly  or
         indirectly  prohibits  the  Parent  or  any of  its  Subsidiaries  from
         creating, assuming or incurring any Lien upon its properties,  revenues
         or  assets  or those of any of its  Subsidiaries  whether  now owned or
         hereafter  acquired,  or (b)  enter  into any  agreement,  contract  or
         arrangement (excluding this Credit Agreement,  the other Loan Documents
         and the Term Loan Documents)  restricting the ability of any Subsidiary
         of  the  Parent  and  the   Borrower  to  pay  or  make   dividends  or
         distributions  in cash or kind to the Parent or the  Borrower,  to make
         loans, advances or other payments of whatsoever nature to the Parent or
         the Borrower,  or to make transfers or distributions of all or any part
         of its  assets to the Parent or the  Borrower;  in each case other than
         customary anti-assignment  provisions contained in leases and licensing
         agreements entered into by the Parent or any Subsidiary in the ordinary
         course  of its  business,  but  only if  consents  by the  counterparty
         thereto have been  obtained by the Parent or its  Subsidiaries  in form
         and substance satisfactory to the Administrative Agent.

                  8.4. RESTRICTED  PAYMENTS.  The Parent, the Borrower and their
         Subsidiaries   will  not  make  any  Restricted   Payments  other  than
         Distributions  to the Parent from a Subsidiary  of the Parent or to the
         Borrower from a Subsidiary of the Borrower.

         8.5. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS.

                  8.5.1.  MERGERS AND  ACQUISITIONS.  Neither the Parent nor the
         Borrower  will, or will permit any of their  Subsidiaries  to, become a
         party to any merger or  consolidation,  or agree to or effect any asset
         acquisition or stock acquisition  (other than the acquisition of assets
         in the  ordinary  course of business  consistent  with past  practices)
         except  for  (i)  the  merger  or  consolidation  of one or more of the
         Subsidiaries  of the  Borrower  with and into  the  Borrower,  (ii) the
         merger or consolidation of two or more Subsidiaries of the Borrower.

                  8.5.2.  DISPOSITION  OF  ASSETS.  Neither  the  Parent nor the
         Borrower  will, or will permit any of their  Subsidiaries  to, become a
         party to or agree to or effect any  disposition  of any  assets,  other
         than (i) the sale of inventory,  the licensing of intellectual property
         and the  disposition of obsolete  assets,  in each case in the ordinary
         course of business consistent with past practices and (ii) prior to the
         indefeasible payment in full of the Term Loan Obligations,  the sale of
         Fixed Asset  Collateral so long as, (x) the sale of such Real Estate is
         permitted under the Term Loan Agreement and (y) all of the net proceeds
         from such sale are applied in accordance  with the Term Loan  Agreement
         as in effect on the date hereof.
<PAGE>

         8.6. SALE AND  LEASEBACK.  Neither the Parent nor the Borrower will, or
will permit any of their  Subsidiaries to, enter into any arrangement,  directly
or indirectly, whereby the Parent or any Subs idiary of the Parent shall sell or
transfer  any  property  owned by it in order then or  thereafter  to lease such
property  (other  than  short-term  or  transitional   leases  entered  into  in
connection  with the  disposition  of any Real Estate  and/or  consolidation  of
operations)  that  Parent or any  Subsidiary  of the  Parent  intends to use for
substantially the same purpose as the property being sold or transferred.

         8.7.  CHANGE OF FISCAL YEAR. The Parent will not at any time change its
Fiscal Year without the prior written consent of the Required Lenders.

         8.8. EMPLOYEE BENEFIT PLANS.  Neither the Parent,  the Borrower nor any
ERISA Affiliate will:

                  (a) engage in any "prohibited  transaction" within the meaning
         of ss.406  of ERISA or  ss.4975  of the Code  which  could  result in a
         material liability for the Parent or any of its Subsidiaries; or

                  (b)  permit   any   Guaranteed   Pension   Plan  to  incur  an
         "accumulated funding deficiency",  as such term is defined in ss.302 of
         ERISA, whether or not such deficiency is or may be waived; or

                  (c) fail to  contribute to any  Guaranteed  Pension Plan to an
         extent  which,  or terminate  any  Guaranteed  Pension Plan in a manner
         which,  could result in the  imposition of a Lien or encumbrance on the
         assets of the Parent or any of its  Subsidiaries  pursuant to ss.302(f)
         or ss.4068 of ERISA; or

                  (d)  amend  any  Guaranteed   Pension  Plan  in  circumstances
         requiring  the  posting  of  security  pursuant  to  ss.307 of ERISA or
         ss.401(a)(29) of the Code.

         8.9.  COMPLIANCE WITH  ENVIRONMENTAL  LAWS. The Parent and the Borrower
will not, and will not permit any of their  Subsidiaries  to, (a) use any of the
Real Estate or any  portion  thereof for the  handling,  processing,  storage or
disposal of  Hazardous  Substances,  (b) cause or permit to be located on any of
the Real Estate any underground tank or other underground storage receptacle for
Hazardous  Substances,  (c) generate any Hazardous Substances on any of the Real
Estate,  (d) conduct  any  activity at any Real Estate or use any Real Estate in
any manner so as to cause a release (i.e. releasing, spilling, leaking, pumping,
pouring,  emitting,  emptying,   discharging,   injecting,  escaping,  leaching,
disposing or dumping) or threatened release of Hazardous  Substances on, upon or
into the Real Estate or (e) otherwise conduct any activity at any Real Estate or
use any Real Estate in any manner that would  violate any  Environmental  Law or
bring such Real Estate in violation of any  Environmental  Law, unless,  in each
case,  such  violation,  use,  condition,   generation  or  activity  could  not
reasonably  be expected to have a material  adverse  effect on the value of such
Real Estate or the business,  assets,  operations or financial  condition of the
Borrower and the  Guarantors  (taken as a whole),  or the ability of the Parent,
the Borrower or any of their  Subsidiaries to fulfill its obligations under this
Credit Agreement or the other Loan Documents.

         8.10.  CHANGE  IN TERMS OF  GOVERNING  DOCUMENTS.  The  Parent  and the
Borrower  shall not effect or permit any change in or amendment to the Governing
Documents of the Parent or any of its  Subsidiaries,  which could  reasonably be
expected to adversely affect the Lenders.

         8.11.  CREATION OF  SUBSIDIARIES.  Neither the Parent nor the  Borrower
shall, or shall permit any of their  `Subsidiaries to, create or permit to exist
any  Subsidiary  unless (a) one hundred  percent  (100%) of the Capital Stock or
other  equity  interests  of such  Subsidiary  are owned by a  Guarantor  or the
Borrower,  (b) prior to the  formation  of such  Subsidiary,  the Parent and the
Borrower  shall  notify  the  Administrative  Agent and the  Lenders  thereof in
writing and deliver to the  Administrative  Agent an updated  SCHEDULE 6.18, (c)
contemporaneously with the formation of any Domestic Subsidiary,  the Parent and
the Borrower shall, and shall cause each of their  Subsidiaries to, (i) take all
steps as may be  necessary  or  advisable  in the opinion of the  Administrative
Agent to pledge to the Administrative  Agent, for the benefit of the Lenders and
the  Administrative  Agent,  on a perfected,  first-priority  basis,  all of the
Capital Stock or other equity interests of such Domestic  Subsidiary pursuant to
a pledge  agreement in form and  substance  satisfactory  to the  Administrative
Agent,  which such pledge  agreement shall be a Pledge  Agreement and a Security
Document  hereunder,  (ii) cause any such Domestic Subsidiary to guaranty all of
the  Obligations  hereunder  pursuant  to  a  guaranty  in  form  and  substance
satisfactory  to the  Administrative  Agent,  which  such  guaranty  shall  be a
Guaranty and a Security Document  hereunder,  (iii) cause any such Subsidiary to
take  all  steps  as  may be  necessary  or  advisable  in  the  opinion  of the
Administrative  Agent to grant to the  Administrative  Agent, for the benefit of
the Lenders and the Administrative  Agent, a first priority (subject to the Lien
of the Term Loan Agent on Fixed Asset  Collateral),  perfected security interest
in  substantially  all of its assets as collateral  security for such  Guaranty,
pursuant to security documents,  mortgages,  pledges and other documents in form
and substance  satisfactory to the Administrative Agent, each of which documents
shall be a Security Document  hereunder,  and (iv) deliver to the Administrative
Agent all such  evidence of corporate  or other  authorization,  legal  opinions
(including local counsel opinions where  applicable) and other  documentation as
the  Administrative  Agent  may  request,  and (d)  contemporaneously  with  the
formation  of any Foreign  Subsidiary,  the Parent and the Borrower  shall,  and
shall cause each of their Subsidiaries to, take all steps as may be necessary or
advisable  in  the  opinion  of  the  Administrative  Agent  to  pledge  to  the
Administrative  Agent,  for the benefit of the  Lenders  and the  Administrative
Agent,  sixty-five  percent (65%) of the Capital Stock or other equity interests
of such Foreign Subsidiary  pursuant to a pledge agreement in form and substance
satisfactory to the Administrative Agent, which such pledge agreement shall be a
Pledge Agreement and a Security Document hereunder.
<PAGE>

         8.12.  TRANSACTIONS  WITH AFFILIATES.  The Parent and the Borrower will
not, and will not permit any of their Subsidiaries to, engage in any transaction
with any Affiliate (excluding Domestic Subsidiaries of the Parent) of the Parent
(other than for services by individuals as employees,  officers and  directors),
including  any  contract,  agreement  or  other  arrangement  providing  for the
furnishing  of  services  to or by,  providing  for  rental of real or  personal
property  to or  from,  or  otherwise  requiring  payments  to or from  any such
Affiliate or, to the knowledge of the Parent and the Borrower,  any corporation,
partnership, trust or other entity in which any such Affiliate has a substantial
interest or is an officer, director, trustee or partner, on terms more favorable
to such Person than would have been obtainable on an  arm's-length  basis in the
ordinary course of business.

         8.13.  AGENCY  ACCOUNT.  The Parent and the Borrower will not, and will
not permit any of their  Subsidiaries  to, (a) establish any bank accounts other
than those listed on SCHEDULE  6.20,  without the  Administrative  Agent's prior
written consent, (b) violate directly or indirectly any Agency Account Agreement
or other bank agency or lock box agreement in favor of the Administrative  Agent
for the benefit of the Lenders and the Administrative Agent with respect to such
account,  (c) deposit into any of the payroll  accounts  listed on SCHEDULE 6.20
any amounts in excess of amounts  necessary to pay current  payroll  obligations
from such accounts  (other than balances not in excess of $250,000 in accordance
with  the  Parent's  and the  Borrower's  usual  practices),  or (d)  cause  the
aggregate  balance  maintained  in all  deposit  accounts  (other  than  payroll
accounts  referred to in clause (c)) which are not subject to an Agency  Account
Agreement in favor of the Administrative Agent to exceed $750,000.

         8.14.  BUSINESS  ACTIVITIES.  The Parent and the Borrower will not, and
will not permit any of their  Subsidiaries  to,  engage  directly or  indirectly
(whether  through  Subsidiaries or otherwise) in any type of business other than
the businesses conducted by them on the Closing Date and in related businesses.

         8.15.  CHANGES  RELATING  TO TERM LOAN  DOCUMENTS.  The  Parent and the
Borrower will not, and will not permit any of their  Subsidiaries  to, amend the
terms of the Term Loan  Agreement  without  the  prior  written  consent  of the
Administrative Agent.

             9. FINANCIAL COVENANTS OF THE PARENT AND THE BORROWER.

                  9.1. FIXED CHARGE COVERAGE  RATIO.  Each of the Parent and the
         Borrower  covenants  and  agrees  that,  so  long as any  Loan,  Unpaid
         Reimbursement  Obligation  or Letter of  Credit is  outstanding  or any
         Lender has any obligation to make any Loans or the Administrative Agent
         has any obligation to cause the Issuing Bank to issue,  extend or renew
         any  Letters  of  Credit,  and  based  on  the  consolidated  financial
         statements of the Parent and its  Subsidiaries  delivered in accordance
         with the terms  hereof:  (a) at any time during any Fiscal  Quarter (x)
         ending  prior  to or at the end of FQ3 of 2008  and  (y)  during  which
         Excess  Availability  (prior  to the  application  of the  Availability
         Reserve) is less than the sum of (1) $4,250,000  plus (2) any increases
         in the  Availability  Reserve  following  the  Closing  Date  plus  (3)
         $500,000, the Parent and the Borrower shall not permit the Fixed Charge
         Coverage  Ratio,  determined as of the end of the most  recently  ended
         Fiscal Quarter,  to be less than 1.0:1.0 and (b) at any time during any
         Fiscal Quarter (x) ending after FQ3 of 2008 and (y) during which Excess
         Availability (prior to the application of the Availability  Reserve) is
         less  than  the sum of (1)  $4,250,000  plus (2) any  increases  in the
         Availability  Reserve  following the Closing Date plus (3)  $2,500,000,
         the Parent and the Borrower shall not permit the Fixed Charge  Coverage
         Ratio,  determined  as of the end of the  most  recently  ended  Fiscal
         Quarter, to be less than 1.0:1.0.

         9.2. [INTENTIONALLY OMITTED].

         9.3. CAPITAL  EXPENDITURES.  During any period  referenced in the table
set forth below, the Parent and the Borrower will not, and will not allow any of
their  Subsidiaries  to, make  Capital  Expenditures  that exceed the  aggregate
amount set forth in the table below opposite such period:

----------------------------------------------- ------------------------------
                  Period                                        Amount

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

             Fiscal Year 2006                                 $10,000,000
----------------------------------------------- ------------------------------

             Fiscal Year 2007                                 $12,000,000
----------------------------------------------- ------------------------------

Fiscal Year 2008 and for each Fiscal Year                     $15,000,000
                thereafter
----------------------------------------------- ------------------------------

                             10. CLOSING CONDITIONS.

         The obligations of the Lenders to amend and restate the Existing Credit
Agreement  shall be  subject to the  satisfaction  of the  following  conditions
precedent,   in  each  case,   in  form  and  substance   satisfactory   to  the
Administrative Agent and the Lenders:
<PAGE>

         10.1. LOAN  DOCUMENTS.  Each of the Loan Documents shall have been duly
executed and delivered by the respective parties thereto, shall be in full force
and  effect  and  shall be in form  and  substance  satisfactory  to each of the
Lenders.  Each Lender  shall have  received a fully  executed  copy of each such
document.

         10.2.  CERTIFIED  COPIES OF  GOVERNING  DOCUMENTS.  Each of the Lenders
shall  have  received  from  the  Guarantors,  the  Borrower  and  each  of  its
Subsidiaries a copy,  certified by a duly  authorized  officer of such Person or
other appropriate Person to be true and complete on the Closing Date, of each of
its  Governing  Documents  as in  effect  on  such  date of  certification  or a
certification  that such Governing  Documents have not been amended or otherwise
modified since the Original Closing Date.

         10.3.  CORPORATE  OR OTHER  ACTION.  All  corporate  (or other)  action
necessary  for the valid  execution,  delivery  and  performance  by each of the
Guarantors,  the Borrower and each of its  Subsidiaries of this Credit Agreement
and the other Loan  Documents  to which it is or is to become a party shall have
been duly and  effectively  taken,  and  evidence  thereof  satisfactory  to the
Lenders shall have been provided to each of the Lenders.

         10.4. INCUMBENCY  CERTIFICATE.  Each of the Lenders shall have received
from  each of the  Guarantors,  the  Borrower  and each of its  Subsidiaries  an
incumbency  certificate,  dated  as  of  the  Closing  Date,  signed  by a  duly
authorized  officer of such  Guarantor,  the  Borrower or such  Subsidiary,  and
giving the name and bearing a specimen signature of each individual who shall be
authorized:  (a) to sign, in the name and on behalf of each such Person, each of
the Loan Documents to which the Borrower,  a Guarantor or such  Subsidiary is or
is to become a party; (b) in the case of the Borrower, to make Loan Requests and
Conversion  Requests and to apply for Letters of Credit; and (c) to give notices
and to take other action on its behalf under the Loan Documents.

         10.5.  VALIDITY OF LIENS. The Security  Documents shall be effective to
create in favor of the Administrative Agent a legal, valid and enforceable first
priority  (subject to the Lien of the Term Loan Agent on Fixed Asset Collateral)
perfected  security  interest  in and Lien  upon the  Collateral.  All  filings,
recordings,  deliveries of instruments and other actions  necessary or desirable
in the opinion of the Administrative Agent to protect and preserve such security
interests  shall have been duly effected.  The  Administrative  Agent shall have
received   evidence   thereof  in  form  and  substance   satisfactory   to  the
Administrative Agent.

         10.6.   PERFECTION   CERTIFICATES   AND   UCC   SEARCH   RESULTS.   The
Administrative  Agent  shall  have  received  from each of the  Guarantors,  the
Borrower  and  its  Subsidiaries  a  completed  and  fully  executed  Perfection
Certificate  and the results of UCC searches (and the equivalent  thereof in all
applicable foreign jurisdictions) with respect to the Collateral,  indicating no
Liens  other  than   Permitted   Liens  and  otherwise  in  form  and  substance
satisfactory to the Administrative Agent.

         10.7.  CERTIFICATES OF INSURANCE.  The Administrative  Agent shall have
received (a) a certificate  of insurance from an  independent  insurance  broker
dated as of the  Closing  Date,  naming the  Administrative  Agent as loss payee
and/or  additional  insured,  as  applicable,  identifying  insurers,  types  of
insurance,  insurance  limits,  and policy terms,  and otherwise  describing the
insurance obtained in accordance with the provisions of the Security  Agreements
and  (b)  certified  copies  of  all  policies  evidencing  such  insurance  (or
certificates  therefore signed by the insurer or an agent authorized to bind the
insurer).

         10.8. AGENCY ACCOUNT AGREEMENTS.  The Parent and its Subsidiaries shall
have established the Concentration  Account,  and the Administrative Agent shall
have received an Agency Account  Agreement  executed by the Cash Management Bank
and, to the extent required by ss.8.13,  each depository  institution with which
the Parent or any Subsidiary of the Parent maintains a Local Account.

         10.9.   BORROWING  BASE  AND  COLLATERAL   UPDATE   CERTIFICATES.   The
Administrative  Agent  shall  have  received  an  executed  (a)  Borrowing  Base
Certificate,   which  Borrowing  Base  Certificate  shall   demonstrate   Excess
Availability  (after giving effect to the payment of all fees and expenses,  the
issuance  of all  Letters  of Credit  and the  funding of the Term Loans and all
Revolving  Loans to be paid,  issued or funded on the Closing  Date) of not less
than the sum of (i)  $1,000,000  plus (ii)  accounts  payable that are more than
seven (7) days past due in excess of  $3,250,000,  and (b) a  Collateral  Update
Certificate,   in  each  case,  in  form  and  substance   satisfactory  to  the
Administrative Agent.
<PAGE>

         10.10. ACCOUNTS RECEIVABLE AGING REPORT. The Administrative Agent shall
have received from the Borrower the most recent Accounts Receivable aging report
of the Borrower dated as of a date which shall be no more than fifteen (15) days
prior  to  the  Closing   Date  and  the  Borrower   shall  have   notified  the
Administrative  Agent in writing on the Closing Date of any  material  deviation
from the Accounts  Receivable values reflected in such Accounts Receivable aging
report and shall have provided the Administrative  Agent with such supplementary
documentation as the Administrative Agent may reasonably request.

         10.11.  PAYMENT OF CLOSING  FEES.  The Borrower  shall have paid to the
Administrative Agent the Fees required to be paid by them on the Closing Date.

         10.12.  EXISTING CREDIT AGREEMENT.  (a) The Administrative  Agent shall
have received (i) payment in full of all principal of, and interest and fees on,
the  Term  Loan  (as  defined  in  the  Existing  Credit  Agreement),  (ii)  the
termination fee required  pursuant to ss.2.3 of the Existing Credit Agreement as
a result of the $5,000,000  reduction in the Total Commitment (as defined in the
Existing  Credit  Agreement)  and  (iii)  the  deferred  amendment  fee equal to
$319,900  earned in  connection  with the Fifth  Amendment  (as  defined  in the
Existing  Credit  Agreement) and (b) all  commitments  under the Existing Credit
Agreement of the Lenders party to this Credit  Agreement shall be evidenced only
by this Credit Agreement.

         10.13.   INTERCREDITOR   AGREEMENT;   TERM  LOAN  DOCUMENTS.   (a)  The
Intercreditor  Agreement  shall have been duly  executed  and  delivered  by the
respective  parties  thereto,  shall be in full force and effect and shall be in
form and substance  satisfactory to each of the  Administrative  Agent,  (b) the
Administrative  Agent  shall  have  received  certified  copies of the Term Loan
Documents and (c) the Administrative Agent shall have received evidence that the
Borrower has received  proceeds of the Term Loans in an amount  satisfactory  to
the Administrative Agent.

         10.14.  OPINIONS OF COUNSEL. Each of the Lenders and the Administrative
Agent shall have received a favorable legal opinion addressed to the Lenders and
the  Administrative  Agent,  dated as of the Closing Date, in form and substance
satisfactory  to the Lenders and the  Administrative  Agent,  from Wilmer Cutler
Pickering Hale and Dorr LLP, counsel to the Parent and its Subsidiaries.

         10.15. [INTENTIONALLY OMITTED].

         10.16. [INTENTIONALLY OMITTED].

         10.17. [INTENTIONALLY OMITTED].

         10.18. [INTENTIONALLY OMITTED].
<PAGE>

         10.19.  NO MATERIAL  ADVERSE  CHANGE.  Since the Balance Sheet Date, as
determined by the  Administrative  Agent, there has occurred no material adverse
change in the financial  condition,  business,  assets,  liabilities or business
prospects of the Borrower and the Guarantors, taken as a whole.

         10.20.  LANDLORD WAIVERS.  The Administrative Agent shall have received
landlord waivers, each in form and substance  satisfactory to the Administrative
Agent,  relating to each of the leased  properties  listed on SCHEDULE  10.20(A)
hereto.

         10.21.  LANDLORD  CONSENTS.  The Parent and its Subsidiaries shall have
delivered  to  the   Administrative   Agent  all   consents   required  for  the
Administrative Agent to receive, as part of the Security Documents, a collateral
assignment of each material  leasehold of personal  property,  and a mortgage of
each  material  leasehold  of real  property,  together  in each  case with such
estoppel certificates as the Administrative Agent may request.

         10.22.  COLLATERAL  EXAMINATIONS/APPRAISALS.  The Administrative  Agent
shall have  received  the  results of  collateral  examinations  and  appraisals
performed  with  respect  to  the   Collateral,   each  in  form  and  substance
satisfactory to the Administrative Agent.

         10.23.  FINANCIAL STATEMENT AND PROJECTIONS.  The Administrative  Agent
shall have  received the financial  statements  and  projections  referred to in
ss.6.2, each in form and substance satisfactory to the Administrative Agent.

                        11. CONDITIONS TO ALL BORROWINGS.

         The   obligations  of  the  Lenders  to  make  any  Loan,  and  of  the
Administrative  Agent to cause the  Issuing  Bank to issue,  extend or renew any
Letter of Credit,  in each case whether on or after the Closing Date, shall also
be subject to the satisfaction of the following conditions precedent:

         11.1. REPRESENTATIONS TRUE; NO DEFAULT OR EVENT OF DEFAULT. Each of the
representations  and  warranties  of the  Parent  and  any  of its  Subsidiaries
contained in this Credit Agreement,  the other Loan Documents or in any document
or instrument  delivered pursuant to or in connection with this Credit Agreement
(other than the representations and warranties contained in ss.ss.6.23(b), 6.26,
6.27, 6.28 and 6.29) shall be true as of the date as of which they were made and
shall  also be true at and as of the  time  of the  making  of such  Loan or the
issuance, extension or renewal of such Letter of Credit, with the same effect as
if made at and as of that time (except to the extent of changes  resulting  from
transactions  contemplated  or permitted by this Credit  Agreement and the other
Loan  Documents  and changes  occurring in the ordinary  course of business that
singly or in the aggregate are not  materially  adverse,  and to the extent that
such  representations and warranties relate expressly to an earlier date) and no
Default  or Event of Default  shall  have  occurred  and be  continuing,  and no
condition shall exist on such date which constitutes an Event of Default.

         11.2. NO LEGAL IMPEDIMENT.  No change shall have occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable opinion
of any  Lender  would make it  illegal  for such  Lender to make such Loan or to
participate in the issuance, extension or renewal of such Letter of Credit or in
the reasonable opinion of the Administrative Agent would make it illegal for the
Issuing Bank to issue, extend or renew such Letter of Credit.

         11.3.  GOVERNMENTAL  REGULATION.  Each Lender shall have  received such
statements in substance and form reasonably  satisfactory to such Lender as such
Lender  shall  require  for  the  purpose  of  compliance  with  any  applicable
regulations of the  Comptroller of the Currency or the Board of Governors of the
Federal Reserve System.
<PAGE>

         11.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the
transactions contemplated by this Credit Agreement, the other Loan Documents and
all other documents  incident  thereto shall be satisfactory in substance and in
form to the  Lenders  and to the  Administrative  Agent  and the  Administrative
Agent's Special  Counsel,  and the Lenders,  the  Administrative  Agent and such
counsel shall have received all  information and such  counterpart  originals or
certified or other  copies of such  documents  as the  Administrative  Agent may
reasonably request.

         11.5.  PAYMENT OF FEES.  The Borrower  shall have  complied  with their
obligations  to pay all Fees,  Reimbursement  Obligations  and each other amount
arising  hereunder at any time  subsequent  to the Closing Date and becoming due
and  payable  on or  before  the  Drawdown  Date of such Loan or the date of the
issuance of such Letter of Credit.

         11.6.  EXCHANGE   LIMITATIONS.   There  exists  no  reason  whatsoever,
including,  without  limitation,  by reason of the  application of any so-called
"currency  exchange" laws, rules or regulations (as in effect at the time of any
proposed  borrowings  hereunder) which could reasonably be expected to interfere
with the Borrower satisfying any of its Obligations in full at such time as such
Obligations become due and payable pursuant to the terms hereof.

         11.7.  VALIDITY OF LIENS. The Security  Documents shall be effective to
create in favor of the Administrative Agent a legal, valid and enforceable first
priority  (subject  to the  Liens of the Term  Loan  Agent  on the  Fixed  Asset
Collateral) perfected security interest in and Lien upon all material components
of the  Collateral  under  applicable  United States  federal and state law. All
filings,  recordings,  deliveries of instruments and other actions  necessary or
desirable  in the opinion of the  Administrative  Agent to protect and  preserve
such security interests shall have been duly effected.  The Administrative Agent
shall have received  evidence thereof in form and substance  satisfactory to the
Administrative Agent.

         11.8. FINANCIAL COVENANTS.  There is no reasonable expectation that the
Parent and the Borrower were not in compliance  with all covenants  contained in
Article 9 at the end of their immediately  preceding Fiscal Quarter if they have
not yet delivered their Compliance Certificate for that Fiscal Quarter (it being
understood  that this ss.11.8 shall not impair the measurement of such covenants
as of such Fiscal Quarter end date).

                   12. EVENTS OF DEFAULT; ACCELERATION; ETC.

         12.1.  EVENTS OF  DEFAULT  AND  ACCELERATION.  If any of the  following
events  ("Events of Default" or, if the giving of notice or the lapse of time or
both is required, then, prior to such notice or lapse of time, "Defaults") shall
occur:

                  (a) the Borrower  shall fail to pay any principal of the Loans
         or any  Reimbursement  Obligation  when the same  shall  become due and
         payable, whether at the stated date of maturity or any accelerated date
         of maturity or at any other date fixed for payment;

                  (b) the  Parent,  the  Borrower  or any of their  Subsidiaries
         shall fail to pay any  interest on the Loans,  the Fees,  or other sums
         due hereunder or under any of the other Loan  Documents,  when the same
         shall become due and payable, whether at the stated date of maturity or
         any accelerated date of maturity or at any other date fixed for payment
         and such failure shall continue for three (3) days after written notice
         of such  failure  has been given to the Parent and the  Borrower by the
         Administrative Agent;

                  (c)  either the  Parent or the  Borrower  shall fail to comply
         with  any of its  covenants  contained  in  ss.ss.7.1  7.2,  7.4,  7.5,
         7.6(a)(i),  7.6(b)(iii), 7.7, 7.10, 7.11, 7.12, 7.13, 7.14, 7.15, 7.16,
         7.17,  7.18,  7.20,  Article 8 or Article 9 of this Credit Agreement or
         any of the covenants contained in any of the Mortgages;
<PAGE>

                  (d)  the  Parent  or any of its  Subsidiaries  shall  fail  to
         perform any term,  covenant or agreement  contained herein or in any of
         the other Loan Documents (other than those specified  elsewhere in this
         ss.12.1) for thirty (30) days after written  notice of such failure has
         been given to the Parent and the Borrower by the Administrative Agent;

                  (e) any representation or warranty of the Parent or any of its
         Subsidiaries  in  this  Credit  Agreement  or  any of  the  other  Loan
         Documents or in any other document or instrument  delivered pursuant to
         or in connection  with this Credit  Agreement  shall prove to have been
         false in any material respect upon the date when made or deemed to have
         been made or repeated;

                  (f)  the  Parent  or any of its  Subsidiaries  shall  make  an
         assignment  for the  benefit  of  creditors,  or admit in  writing  its
         inability to pay or  generally  fail to pay its debts as they mature or
         become due, or shall petition or apply for the appointment of a trustee
         or other custodian,  liquidator or receiver of the Parent or any of its
         Subsidiaries or of any substantial  part of the assets of the Parent or
         any of its  Subsidiaries or shall commence any case or other proceeding
         relating to the Parent or any of its Subsidiaries under any bankruptcy,
         reorganization,   arrangement,   insolvency,   readjustment   of  debt,
         dissolution or liquidation or similar law of any  jurisdiction,  now or
         hereafter  in  effect,  or shall  take any  action to  authorize  or in
         furtherance  of any of  the  foregoing,  or if  any  such  petition  or
         application  (including  bankruptcy  application) shall be filed or any
         such case or other proceeding shall be commenced  against the Parent or
         any of its Subsidiaries or the Parent or any of its Subsidiaries  shall
         indicate its approval thereof,  consent thereto or acquiescence therein
         or such petition or application  shall not have been  dismissed  within
         sixty (60) days following the filing thereof;

                  (g) a decree  or  order  (including  a  bankruptcy  order)  is
         entered appointing any such trustee, custodian,  liquidator or receiver
         or  adjudicating  the  Parent or any of its  Subsidiaries  bankrupt  or
         insolvent,  or approving a petition or  bankruptcy  application  in any
         such  case or other  proceeding,  or a decree  or  order  (including  a
         bankruptcy order) for relief is entered in respect of the Parent or any
         Subsidiary of the Parent in an involuntary  case under  bankruptcy laws
         as now or hereafter constituted;

                  (h) there shall remain in force, undischarged, unsatisfied and
         unstayed,  for more than thirty (30) days,  whether or not consecutive,
         any final  judgment  against  the  Parent  and any of its  Subsidiaries
         (considered collectively) that, with other outstanding final judgments,
         undischarged,  against  the  Parent  and its  Subsidiaries  (considered
         collectively) exceeds in the aggregate $1,000,000;

                  (i) (A) the Parent, the Borrower or any ERISA Affiliate incurs
         any  liability  to the PBGC or a Guaranteed  Pension  Plan  pursuant to
         Title IV of ERISA in an aggregate amount exceeding  $1,000,000,  or the
         Parent,  the  Borrower or any ERISA  Affiliate  is assessed  withdrawal
         liability  pursuant  to  Title  IV of  ERISA  by a  Multiemployer  Plan
         requiring aggregate annual payments exceeding $1,000,000, or any of the
         following  occurs with respect to a  Guaranteed  Pension  Plan:  (i) an
         ERISA Reportable Event, or a failure to make a required  installment or
         other payment (within the meaning of  ss.302(f)(1) of ERISA),  PROVIDED
         that the Administrative  Agent determines in its reasonable  discretion
         that such event (A) could be  expected  to result in  liability  of the
         Parent  or any of its  Subsidiaries  to the  PBGC  or  such  Guaranteed
         Pension Plan in an aggregate amount exceeding  $1,000,000 and (B) could
         constitute  grounds for the termination of such Guaranteed Pension Plan
         by the PBGC,  for the  appointment  by the  appropriate  United  States
         District Court of a trustee to administer such Guaranteed  Pension Plan
         or for the  imposition  of a lien in favor of such  Guaranteed  Pension
         Plan; or (ii) the  appointment  by a United States  District Court of a
         trustee  to  administer  such  Guaranteed  Pension  Plan;  or (iii) the
         institution by the PBGC of  proceedings  to terminate  such  Guaranteed
         Pension Plan;
<PAGE>

                  (j) the Parent or any of its Subsidiaries shall fail to pay at
         maturity,  or within any applicable period of grace, any obligation for
         Indebtedness  in excess of $500,000,  or fail to observe or perform any
         material  term,  covenant or agreement  contained  in any  agreement by
         which it is bound,  evidencing  or securing  Indebtedness  in excess of
         $500,000 for such period of time as would permit  (assuming  the giving
         of appropriate  notice if required) the holder or holders thereof or of
         any obligations issued thereunder to accelerate the maturity thereof;

                  (k)  if  any  of  the  Loan  Documents   shall  be  cancelled,
         terminated, revoked or rescinded or the Administrative Agent's security
         interests,  mortgages or liens in all or a  substantial  portion of the
         Collateral  shall  cease to be  perfected,  or shall  cease to have the
         priority  contemplated by the Security  Documents and the Intercreditor
         Agreement,  in each case  otherwise  than in accordance  with the terms
         thereof  or with  the  express  prior  written  agreement,  consent  or
         approval  of the  Lenders,  or any action at law,  suit or in equity or
         other  legal  proceeding  to cancel,  revoke or rescind any of the Loan
         Documents  shall  be  commenced  by or on  behalf  of the  Parent,  its
         Subsidiaries,  the Guarantors or any of their respective  stockholders,
         or any court or any  other  governmental  or  regulatory  authority  or
         agency of competent  jurisdiction  shall make a determination  that, or
         issue a judgment,  order,  decree or ruling to the effect that, any one
         or more of the Loan Documents is illegal,  invalid or  unenforceable in
         accordance with the terms thereof;

                  (l) if any material  covenant,  agreement or obligation of the
         Parent or the Borrower  contained in or evidenced by the Loan Documents
         shall cease to be legal,  valid,  binding, or enforceable in accordance
         with the terms  thereof  other  than as a result of a default or waiver
         thereof by the Administrative Agent;

                  (m) a Change of Control shall occur;

                  (n) there shall occur any material  damage to, or loss,  theft
         or  destruction  of, any  Collateral,  whether or not  insured,  or any
         strike, lockout, labor dispute, embargo,  condemnation,  expropriation,
         act of God or public enemy, or other  casualty,  which in any such case
         causes,  for more than thirty (30)  consecutive  days, the cessation or
         substantial curtailment of revenue producing activities at any facility
         of the Parent or any of its  Subsidiaries if such event or circumstance
         is not  covered by  business  interruption  insurance  and would have a
         material adverse effect on the business, assets, operation or financial
         condition of the Borrower and the Guarantors (taken as a whole), or the
         ability of the Parent or any  Subsidiary  of the Parent to fulfill  its
         obligations under this Credit Agreement or the other Loan Documents;

                  (o) the Parent or any of its  Subsidiaries  shall be enjoined,
         restrained  or in any way  prevented  by the order of any  Governmental
         Authority  from  conducting  any part of their  business and such order
         shall  continue  in effect for more than  thirty  (30) days unless such
         order would not have a material adverse effect on the business, assets,
         operation  or financial  condition  of the Borrower and the  Guarantors
         (taken as a whole),  or the ability of the Parent or any  Subsidiary of
         the Parent to fulfill its  obligations  under this Credit  Agreement or
         the other Loan Documents;

                  (p) there shall occur the loss,  suspension or revocation  of,
         or  failure  to renew,  any  license  or permit  now held or  hereafter
         acquired  by  the  Parent  or any of its  Subsidiaries  if  such  loss,
         suspension,  revocation  or  failure  to renew  would  have a  material
         adverse  effect  on  the  business,   assets,  operation  or  financial
         condition of the Borrower and the Guarantors (taken as a whole), or the
         ability of the Parent or any  Subsidiary  of the Parent to fulfill  its
         obligations under this Credit Agreement or the other Loan Documents;
<PAGE>

                  (q) any "event of default" under the Term Loan Agreement shall
         occur and be continuing; or

                  (r)  the   subordination   provisions  in  the   Intercreditor
         Agreement  relative  to  the  liens  of  the  Term  Loan  Agent  in the
         Collateral  (other than the Fixed Asset  Collateral)  shall  cease,  in
         whole or in part, to be effective or cease to be legally valid, binding
         and enforceable against the Term Loan Agent and the holders of the Term
         Loans,

then,  and in any  such  event,  so  long as the  same  may be  continuing,  the
Administrative Agent may, and upon the request of the Required Lenders shall, by
notice in writing to the  Borrower,  declare all amounts  owing with  respect to
this  Credit  Agreement  and the  other  Loan  Documents  and all  Reimbursement
Obligations to be, and they shall thereupon  forthwith  become,  immediately due
and payable without  presentment,  demand,  protest or other notice of any kind,
all of which are hereby expressly waived by each of the Parent and the Borrower;
provided that in the event of any Event of Default specified in ss.ss.12.1(f) or
12.1(g), all such amounts shall becOme immediately due and payable automatically
and  without any  requirement  of notice  from the  Administrative  Agent or any
Lender.

         12.2.  TERMINATION OF COMMITMENTS.  If any one or more of the Events of
Default specified in ss.12.1(f) or ss.12.1(g) shall occur, Any unused portion of
the credit hereunder shall forthwith  terminate and each of the Lenders shall be
relieved  of all  further  obligations  to make Loans to the  Borrower,  and the
Administrative  Agent shall be relieved of all further  obligations to cause the
Issuing Bank to issue, extend or renew Letters of Credit for the accounts of the
Borrower.  If any other Event of Default shall have occurred and be  continuing,
the  Administrative  Agent may and,  upon the request of the  Required  Lenders,
shall,  by notice to the Borrower,  terminate  the unused  portion of the credit
hereunder,  and upon such notice  being given such unused  portion of the credit
hereunder shall terminate  immediately and each of the Lenders shall be relieved
of all further  obligations to make Loans to the Borrower and the Administrative
Agent shall be relieved of all further  obligations to cause the Issuing Bank to
issue,  extend or renew Letters of Credit for the accounts of the  Borrower.  No
termination  of the  credit  hereunder  shall  relieve  the Parent or any of its
Subsidiaries of any of the  Obligations.  No termination of the credit hereunder
shall relieve the Lenders of their  obligation to fund their  participations  in
the Letters of Credit as otherwise set out in this Credit Agreement.

         12.3. REMEDIES.  In case any one or more of the Events of Default shall
have  occurred  and be  continuing,  and whether or not the  Lenders  shall have
accelerated the maturity of the Loans pursuant to ss.12.1,  each Lender, if owed
any amount with respect to the LoanS or the Reimbursement Obligations, may, with
the consent of the Required  Lenders but not  otherwise,  proceed to protect and
enforce  its  rights  by suit in  equity,  action  at law or  other  appropriate
proceeding,  whether for the specific  performance  of any covenant or agreement
contained  in  this  Credit  Agreement  and  the  other  Loan  Documents  or any
instrument  pursuant  to which the  Obligations  to such  Lender are  evidenced,
including  as  permitted  by  applicable  law  the  obtaining  of the  ex  parte
appointment  of a  receiver,  and,  if such  amount  shall have  become  due, by
declaration  or otherwise,  proceed to enforce the payment  thereof or any other
legal or equitable  right of such Lender.  No remedy herein  conferred  upon any
Lender or the  Administrative  Agent or the purchaser of any Letter of Credit is
intended to be  exclusive of any other remedy and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter  existing at law or in equity or by statute or any other  provision
of law.
<PAGE>

         12.4. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that, following
the  occurrence  or  during  the  continuance  of  any  Event  of  Default,  the
Administrative  Agent or any Lender,  as the case may be, receives any monies in
connection with the enforcement of any of the Security  Documents,  or otherwise
with respect to the realization  upon any of the Collateral,  such monies shall,
subject to the  Intercreditor  Agreement,  be  distributed  for  application  as
follows:

                  (a)  FIRST,  to the  payment  of,  or (as the case may be) the
         reimbursement of the  Administrative  Agent and the Issuing Bank for or
         in respect of all amounts in respect of  Administrative  Agent Advances
         and all fees,  indemnities,  costs,  expenses,  disbursements and other
         amounts   (including  charges  and  disbursements  of  counsel  to  the
         Administrative  Agent and the Issuing  Bank) and losses  payable to the
         Administrative  Agent and the Issuing  Bank or incurred or sustained by
         the  Administrative  Agent and the  Issuing  Bank in their  capacity as
         such, including,  without limitation, in connection with the collection
         of such monies by the  Administrative  Agent and the Issuing Bank,  for
         the exercise, protection or enforcement by the Administrative Agent and
         the  Issuing  Bank of all or any of the  rights,  remedies,  powers and
         privileges of the Administrative  Agent and the Issuing Bank under this
         Credit  Agreement  or any of the other Loan  Documents or in respect of
         the Collateral or in support of any provision of adequate  indemnity to
         the  Administrative  Agent and the  Issuing  Bank  against any Taxes or
         liens which by law shall have, or may have, priority over the rights of
         the Administrative Agent and the Issuing Bank to such monies;

                  (b) SECOND,  to the payment of that portion of the Obligations
         constituting  fees,  indemnities,  costs,  expenses,  disbursements and
         other amounts  (including  charges and  disbursements of counsel to the
         Lenders  but  excluding   principal,   interest  and  Cash   Management
         Obligations)  payable to the Lenders  (including  amounts payable under
         ss.5.7),  ratably among them in proportion tO the amounts  described in
         this clause SECOND payable to them;

                  (c) THIRD,  to the payment of that portion of the  Obligations
         constituting  accrued  and  unpaid  interest  on the  Loans  and  other
         Obligations,  ratably among the Lenders in proportion to the respective
         amounts described in this clause THIRD payable to them;

                  (d) FOURTH,  ratably (a) to the payment of that portion of the
         Obligations  constituting unpaid principal of the Loans,  ratably among
         the Lenders in proportion to the respective  amounts  described in this
         clause FOURTH payable to them and (b) to the  Administrative  Agent for
         the  account  of  the  Issuing   bank,   to  cash   collateralize   the
         Reimbursement Obligations;

                  (e) FIFTH,  to all Cash  Management  Obligations  owing to any
         Lender,  the  Administrative  Agent,  the Cash  Management  Bank or any
         Affiliate thereof, ratably among such Persons;

                  (f)  SIXTH,  to  all  other   Obligations  in  such  order  or
         preference as the Required  Lenders may determine;  provided,  however,
         that (i)  distributions  shall be made  with  respect  to each  type of
         Obligation  owing to the Lenders  among the Lenders pro rata,  and (ii)
         the Administrative Agent may in its discretion make proper allowance to
         take into account any Obligations not then due and payable;

                  (g) SEVENTH,  upon payment and  satisfaction  in full or other
         provisions  for  payment in full  satisfactory  to the  Lenders and the
         Administrative  Agent of all of the Obligations,  to the payment of any
         obligations  required  to be paid  pursuant to  ss.9-608(a)(1)(C)  or 9
         615(a)(3)  of  the  Uniform  Commercial  Code  of the  Commonwealth  of
         Massachusetts; and
<PAGE>

                  (h)  EIGHTH,  the  excess,  if any,  shall be  returned to the
         Borrower or to such other Persons as are entitled thereto.

                                  13. SETOFF.

         Regardless of the adequacy of any  collateral,  if any Event of Default
shall have occurred and be continuing, any deposits or other sums credited by or
due from any of the  Lenders to the  Borrower or any of the  Guarantors  and any
securities  or other  property of the Borrower or any of the  Guarantors  in the
possession  of such Lender or any of its  Affiliates  may, at any time,  without
demand or notice (any such notice being expressly waived by the Borrower and the
Guarantors),  in whole  or in  part,  be  applied  to or set off by such  Lender
against  the  payment  of  Obligations  and  any and all  other  liabilities  or
obligations,  direct, or indirect, absolute or contingent, due or to become due,
now existing or hereafter  arising,  of the Borrower or any of the Guarantors to
such Lender  regardless  of the  adequacy of any other  collateral  securing the
Loan. Each of the Lenders agrees with each other Lender that (i) if an amount to
be set  off is to be  applied  to  Indebtedness  of the  Borrower  or any of the
Guarantors  to such Lender,  such amount shall be applied  ratably to such other
Indebtedness  and to the  Indebtedness  evidenced by the Notes of such Lender or
constituting  Reimbursement  Obligations  owed to such Lender,  and (ii) if such
Lender shall  receive from the  Borrower or any  Guarantor or any other  source,
whether by  voluntary  payment,  exercise of the right of setoff,  counterclaim,
cross action, enforcement of the claim evidenced by the Notes in the name of, or
constituting Reimbursement  Obligations,  such Lender by proceedings against the
Borrower at law or in equity or by proof thereof in bankruptcy,  reorganization,
liquidation, receivership or similar proceedings, or otherwise, and shall retain
and apply to the payment of its Notes, or the Reimbursement  Obligations owed to
such Lender any amount in excess of its ratable portion of the payments received
by  all  of  the  Lenders  with  respect  to the  debt  evidenced  by the  Notes
corresponding  to, and  Reimbursement  Obligations  owed to, all of the Lenders,
such Lender will make such disposition and  arrangements  with the other Lenders
with respect to such excess, either by way of distribution, pro tanto assignment
of claims,  subrogation or otherwise as shall result in each Lender receiving in
respect  of the  debt  evidenced  by the  Notes  in its  name  or  Reimbursement
Obligations  owed it, its  proportionate  payment as contemplated by this Credit
Agreement; provided that if all or any part of such excess payment is thereafter
recovered from such Lender, such disposition and arrangements shall be rescinded
and the amount  restored to the extent of such recovery,  but without  interest.
ANY AND ALL RIGHTS TO REQUIRE ANY LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT  TO ANY  OTHER  COLLATERAL  WHICH  SECURES  THE  OBLIGATIONS,  PRIOR  TO
EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH  DEPOSITS,  CREDITS OR OTHER
PROPERTY OF THE BORROWER OR ANY GUARANTOR ARE HEREBY KNOWINGLY,  VOLUNTARILY AND
IRREVOCABLY WAIVED.

                         14. THE ADMINISTRATIVE AGENT.

         14.1. AUTHORIZATION.

                  (a) The Administrative Agent is authorized to take such action
         on behalf of each of the Lenders and to exercise all such powers as are
         hereunder  and under any of the other Loan  Documents  and any  related
         documents  delegated to the  Administrative  Agent,  together with such
         powers as are  reasonably  incident  thereto,  including the authority,
         without  the  necessity  of any  notice to or  further  consent  of the
         Lenders,  from  time to time to take any  action  with  respect  to any
         Collateral or the Security Documents which may be necessary to perfect,
         maintain  perfected or insure the priority of the security  interest in
         and  liens  upon  the  Collateral  granted  pursuant  to  the  Security
         Documents,  and,  PROVIDED  that  no  duties  or  responsibilities  not
         expressly  assumed  herein or  therein  shall be  implied  to have been
         assumed by the Administrative Agent.
<PAGE>

                  (b) The relationship between the Administrative Agent and each
         of the  Lenders is that of an  independent  contractor.  The use of the
         term  "Administrative  Agent"  is for  convenience  only and is used to
         describe,  as  a  form  of  convention,   the  independent  contractual
         relationship  between the Administrative Agent and each of the Lenders.
         Nothing contained in this Credit Agreement nor the other Loan Documents
         shall be  construed  to  create  an  agency,  trust or other  fiduciary
         relationship between the Administrative Agent and any of the Lenders.

                  (c) As an independent  contractor  empowered by the Lenders to
         exercise certain rights and perform certain duties and responsibilities
         hereunder and under the other Loan Documents,  the Administrative Agent
         is  nevertheless  a  "REPRESENTATIVE"  of the Lenders,  as that term is
         defined in Article 1 of the Uniform  Commercial  Code,  for purposes of
         actions for the benefit of the  Lenders  and the  Administrative  Agent
         with respect to all collateral security and guaranties  contemplated by
         the  Loan  Documents.  Such  actions  include  the  designation  of the
         Administrative Agent as "SECURED PARTY", "MORTGAGEE" or the like on all
         financing  statements  and other  documents  and  instruments,  whether
         recorded or otherwise, relating to the attachment, perfection, priority
         or enforcement of any security  interests,  mortgages or deeds of trust
         in collateral security intended to secure the payment or performance of
         any of the  Obligations,  all for the  benefit of the  Lenders  and the
         Administrative Agent.

                  (d) The  Administrative  Agent is  authorized  and directed to
         consent to any sale or other disposition of Collateral  permitted to be
         sold or  disposed  of  hereunder,  and to  release  its  liens  on such
         Collateral,  and the  Administrative  Agent is  authorized to rely on a
         certification  from the  Borrower  that  such  sale or  disposition  is
         permitted  hereunder.

                  (e) The  Administrative  Agent is  authorized  and directed to
         execute and deliver the  Intercreditor  Agreement  and any mortgage and
         leasehold mortgage  subordination  agreements in favor of the Term Loan
         Agent  on  behalf  of the  Lenders  and to act in  accordance  with the
         provisions  thereof.  Each of the  Lenders  agrees  to be  bound by the
         provisions thereof.

         14.2. EMPLOYEES AND ADMINISTRATIVE AGENTS. The Administrative Agent may
exercise its powers and execute its duties by or through employees or agents and
shall be  entitled to take,  and to rely on,  advice of counsel  concerning  all
matters  pertaining to its rights and duties under this Credit Agreement and the
other Loan Documents.  The Administrative Agent may utilize the services of such
Persons  as the  Administrative  Agent in its  sole  discretion  may  reasonably
determine,  and all  reasonable  fees and expenses of any such Persons  shall be
paid by the Borrower.

         14.3. NO LIABILITY.  Neither the Administrative  Agent (in its capacity
as Administrative  Agent,  lender of the swing line loans and/or Cash Management
Bank) nor any of its  shareholders,  directors,  officers or  employees  nor any
other Person  assisting them in their duties nor any agent or employee  thereof,
shall be liable to any Lender for any waiver,  consent or approval  given or any
action taken,  or omitted to be taken,  in good faith by it or them hereunder or
under any of the other Loan Documents,  or in connection  herewith or therewith,
or be  responsible  for the  consequences  of any oversight or error of judgment
whatsoever,  except that the  Administrative  Agent or such other Person, as the
case may be, may be liable for losses  due to its  willful  misconduct  or gross
negligence.
<PAGE>

         14.4. NO REPRESENTATIONS.

                  14.4.1.   GENERAL.  The  Administrative  Agent  shall  not  be
         responsible  for the  execution or validity or  enforceability  of this
         Credit  Agreement,  the  Letters  of  Credit,  any  of the  other  Loan
         Documents or any  instrument at any time  constituting,  or intended to
         constitute,  collateral security for any of the Loan Documents,  or for
         the  value  of  any  such  collateral  security  or for  the  validity,
         enforceability,  or  collectibility  of any  such  amounts  owing  with
         respect  to  any  of  the  Loan  Documents,  or  for  any  recitals  or
         statements,  warranties or representations made herein or in any of the
         other Loan  Documents or in any  certificate  or  instrument  hereafter
         furnished  to  it  by  or on  behalf  of  the  Parent  or  any  of  its
         Subsidiaries, or be bound to ascertain or inquire as to the performance
         or observance of any of the terms, conditions,  covenants or agreements
         herein or in any  instrument at any time  constituting,  or intended to
         constitute,  collateral  security  for any of the Loan  Documents or to
         inspect any of the properties, books or records of the Parent or any of
         its  Subsidiaries.  The  Administrative  Agent  shall  not be  bound to
         ascertain whether any notice,  consent,  waiver or request delivered to
         it by the Parent or the Borrower shall have been duly  authorized or is
         true, accurate and complete.  The Administrative Agent has not made nor
         does it now make any representations or warranties, express or implied,
         nor does it assume any  liability to the  Lenders,  with respect to the
         credit  worthiness or financial  conditions of the Parent or any of its
         Subsidiaries.  Each Lender acknowledges that it has,  independently and
         without reliance upon the Administrative Agent or any other Lender, and
         based upon such information and documents as it has deemed appropriate,
         made its own credit  analysis  and  decision  to enter into this Credit
         Agreement.

                  14.4.2.   CLOSING   DOCUMENTATION,   ETC.   For   purposes  of
         determining  compliance  with the conditions  set forth in ss.10,  each
         Lender thaT has executed this Credit  Agreement shall be deemed to have
         consented  to,  approved or  accepted,  or to be satisfied  with,  each
         document  and  matter   either  sent,   or  made   available,   by  the
         Administrative Agent to such Lender for consent,  approval,  acceptance
         or  satisfaction,  or  required  thereunder  to be to be  consent to or
         approved by or acceptable  or  satisfactory  to such Lender,  unless an
         officer of the Administrative  Agent active upon the Borrower's account
         shall  have  received  notice  from such  Lender  not less than one (1)
         Business  Day  prior  to the  Closing  Date  specifying  such  Lender's
         objection  thereto and such objection  shall not have been withdrawn by
         notice to the  Administrative  Agent to such  effect on or prior to the
         Closing Date.

         14.5. PAYMENTS.

                  14.5.1.  PAYMENTS TO  ADMINISTRATIVE  AGENT.  A payment by the
         Borrower  to the  Administrative  Agent  hereunder  or under any of the
         other Loan  Documents for the account of any Lender shall  constitute a
         payment to such Lender.  The  Administrative  Agent agrees  promptly to
         distribute  to each  Lender  such  Lender's  pro rata share of payments
         received  by the  Administrative  Agent for the  account of such Lender
         except as otherwise  expressly  provided  herein or in any of the other
         Loan Documents.

                  14.5.2.  DISTRIBUTION  BY  ADMINISTRATIVE  AGENT.  If  in  the
         opinion  of the  Administrative  Agent the  distribution  of any amount
         received  by it in such  capacity  hereunder  or under any of the other
         Loan  Documents  might  involve it in  liability,  it may refrain  from
         making  distribution  until its right to make  distribution  shall have
         been  adjudicated by a court of competent  jurisdiction.  If a court of
         competent  jurisdiction  shall  adjudge  that any amount  received  and
         distributed by the Administrative Agent is to be repaid, each Person to
         whom any such  distribution  shall have been made shall either repay to
         the  Administrative  Agent  its  proportionate  share of the  amount so
         adjudged  to be repaid or shall pay over the same in such manner and to
         such Persons as shall be determined by such court.

                  14.5.3.  DELINQUENT LENDERS.  Notwithstanding  anything to the
         contrary  contained  in this Credit  Agreement or any of the other Loan
         Documents,  any  Lender  that  fails  (i)  to  make  available  to  the
         Administrative  Agent its PRO RATA share of any Loan or to purchase any
         Letter of Credit  Participation  in  accordance  with the terms of this
         Credit  Agreement or (ii) to comply with the  provisions  of ss.13 with
         respect to making dispositions and arrangements with the other Lenders,
         where such Lender's share oF any payment received, whether by setoff or
         otherwise,  is in excess of its pro rata share of such payments due and
         payable to all of the  Lenders,  in each case as,  when and to the full
         extent  required by the provisions of this Credit  Agreement,  shall be
         deemed  delinquent  (a  "Delinquent  Lender")  and  shall  be  deemed a
         Delinquent  Lender until such time as such delinquency is satisfied.  A
         Delinquent Lender shall be deemed to have assigned any and all payments
         due to it from the Borrower,  whether on account of outstanding  Loans,
         Unpaid Reimbursement  Obligations,  interest, fees or otherwise, to the
         remaining  applicable  non-delinquent  Lenders for  application to, and
         reduction of, their respective pro rata shares of all outstanding Loans
         and Unpaid  Reimbursement  Obligations.  The  Delinquent  Lender hereby
         authorizes the Administrative  Agent to distribute such payments to the
         applicable non-delinquent Lenders in proportion to their respective pro
         rata   shares  of  all   applicable   outstanding   Loans  and   Unpaid
         Reimbursement  Obligations. A Delinquent Lender shall be deemed to have
         satisfied in full a delinquency when and if, as a result of application
         of the assigned payments to all applicable outstanding Loans and Unpaid
         Reimbursement  Obligations of the non-delinquent  Lenders, the Lenders'
         respective  PRO  RATA  shares  of  all  outstanding  Loans  and  Unpaid
         Reimbursement  Obligations have returned to those in effect immediately
         prior to such  delinquency  and without giving effect to the nonpayment
         causing such delinquency.
<PAGE>

         14.6.  HOLDERS OF LETTERS OF CREDIT  PARTICIPATION.  The Administrative
Agent may deem and treat the purchaser of any Letter of Credit  Participation as
the absolute owner or purchaser  thereof for all purposes  hereof until it shall
have been  furnished  in  writing  with a  different  name by such payee or by a
subsequent holder, assignee or transferee.

         14.7. INDEMNITY. The Lenders ratably agree hereby to indemnify and hold
harmless the Administrative  Agent and the Issuing Bank from and against any and
all  claims,  actions  and suits  (whether  groundless  or  otherwise),  losses,
damages,  costs,  expenses  (including any expenses for which the Administrative
Agent  and/or  the  Issuing  Bank has not been  reimbursed  by the  Borrower  as
required by ss.15), and liabilities of every nature and character arising out of
or related to this Credit  Agreement  or any of the other Loan  Documents or the
transactions  contemplated or evidenced hereby or thereby, or the Administrative
Agent's and/or the Issuing Bank's actions taken hereunder or thereunder,  except
to  the  extent  that  any  of  the  same  shall  be  directly   caused  by  the
Administrative  Agent's  or the  Issuing  Bank's  willful  misconduct  or  gross
negligence.

         14.8.  ADMINISTRATIVE AGENT AS LENDER. In its individual capacity, Bank
of  America  shall have the same  obligations  and the same  rights,  powers and
privileges  in  respect  to its  Commitment  and the Loans made by it and as the
purchaser  of any  Letter of Credit  Participation  as it would have were it not
also the Administrative Agent.

         14.9.  RESIGNATION.  The Administrative Agent may resign at any time by
giving  sixty (60) days prior  written  notice  thereof to the  Lenders  and the
Borrower.  Upon any such resignation,  the Required Lenders shall have the right
to  appoint a  successor  Administrative  Agent.  Unless a  Default  or Event of
Default shall have occurred and be  continuing,  such  successor  Administrative
Agent  shall  be  reasonably   acceptable  to  the  Borrower.  If  no  successor
Administrative  Agent shall have been so appointed  by the Required  Lenders and
shall have accepted such appointment  within thirty (30) days after the retiring
Administrative  Agent's  giving  of  notice of  resignation,  then the  retiring
Administrative  Agent  may,  on  behalf  of the  Lenders,  appoint  a  successor
Administrative  Agent, which shall be a financial institution having a rating of
not less than A or its  equivalent  by Standard & Poor's  Corporation.  Upon the
acceptance of any appointment as  Administrative  Agent hereunder by a successor
Administrative  Agent,  such  successor  Administrative  Agent  shall  thereupon
succeed to and become vested with all the rights, powers,  privileges and duties
of the retiring  Administrative  Agent,  and the retiring  Administrative  Agent
shall be  discharged  from its  duties  and  obligations  hereunder.  After  any
retiring  Administrative  Agent's  resignation,  the  provisions  of this Credit
Agreement and the other Loan Documents  shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was acting
as Administrative Agent.
<PAGE>

         14.10.  NOTIFICATION  OF DEFAULTS  AND EVENTS OF  DEFAULT.  Each Lender
hereby  agrees  that,  upon  learning of the  existence of a Default or Event of
Default,  it  shall  promptly  notify  the  Administrative  Agent  thereof.  The
Administrative  Agent  hereby  agrees that upon receipt of any notice under this
ss.14.10 it shall  promptly  notify the other  Lenders of the  existence of such
Default or Event oF Default.

         14.11.  DUTIES IN THE CASE OF ENFORCEMENT.  Subject to the terms of the
Intercreditor Agreement, in case one or more Events of Default have occurred and
shall be continuing,  and whether or not  acceleration of the Obligations  shall
have  occurred,  the  Administrative  Agent  shall,  if (a) so  requested by the
Required Lenders and (b) the Lenders have provided to the  Administrative  Agent
such additional  indemnities and assurances  against expenses and liabilities as
the  Administrative  Agent  may  reasonably  request,  proceed  to  enforce  the
provisions of the Security  Documents  authorizing the sale or other disposition
of all or any part of the  Collateral  and  exercise all or any such other legal
and  equitable  and other  rights or  remedies as it may have in respect of such
Collateral.  The Required Lenders may direct the Administrative Agent in writing
as to the  method  and the  extent  of any such sale or other  disposition,  the
Lenders hereby agreeing to indemnify and hold the Administrative Agent, harmless
from all  liabilities  incurred  in respect of all  actions  taken or omitted in
accordance with such directions, PROVIDED that the Administrative Agent need not
comply  with any such  direction  to the extent  that the  Administrative  Agent
reasonably believes the Administrative Agent's compliance with such direction to
be unlawful or commercially unreasonable in any applicable jurisdiction.

         14.12. ADMINISTRATIVE AGENT MAY FILE PROOFS OF CLAIM.

                  (a) In case of the pendency of any  receivership,  insolvency,
         liquidation,  bankruptcy,   reorganization,   arrangement,  adjustment,
         composition or other judicial, administrative or like proceeding or any
         assignment  for the benefit of creditors  relative to the Parent or any
         of its Subsidiaries,  the Administrative Agent (irrespective of whether
         the  principal  of  any  Loan,   Reimbursement   Obligation  or  Unpaid
         Reimbursement  Obligation  shall  then be due  and  payable  as  herein
         expressed or by  declaration or otherwise and  irrespective  of whether
         the  Administrative  Agent shall have made any demand on the  Borrower)
         shall be entitled and empowered,  by intervention  in such  proceeding,
         under any such assignment or otherwise:

                           (i) to file and prove a claim for the whole amount of
                  the principal and interest  owing and unpaid in respect of the
                  Loans,   Reimbursement  Obligations  or  Unpaid  Reimbursement
                  Obligations  and all  other  Obligations  that are  owing  and
                  unpaid and to file such other documents as may be necessary or
                  advisable  in order to have the claims of the  Lenders and the
                  Administrative  Agent  (including any claim for the reasonable
                  compensation,  expenses,  disbursements  and  advances  of the
                  Lenders  and the  Administrative  Agent and  their  respective
                  agents and counsel  and all other  amounts due the Lenders and
                  the  Administrative  Agent under  ss.ss.2.2,  4.6, 5.1 and 15)
                  allowed in such proceeding or under any sUch assignment; and

                           (ii)  subject  to  the  Intercreditor  Agreement,  to
                  collect and receive  any monies or other  property  payable or
                  deliverable on any such claims and to distribute the same;

                  (b) Any custodian,  receiver,  assignee, trustee,  liquidator,
         sequestrator or other similar  official in any such proceeding or under
         any such  assignment  is hereby  authorized by each Lender to make such
         payments  to the  Administrative  Agent  and,  in the  event  that  the
         Administrative  Agent  shall  consent  to the  making of such  payments
         directly  to the  Lenders,  nevertheless  to pay to the  Administrative
         Agent  any  amount  due  for  the  reasonable  compensation,  expenses,
         disbursements and advances of the  Administrative  Agent and its agents
         and counsel,  and any other amounts due the Administrative  Agent under
         ss.ss.2.2, 4.6, 5.1 and 15).
<PAGE>

                  (c)   Nothing    contained    herein   shall   authorize   the
         Administrative  Agent to consent to or accept or adopt on behalf of any
         Lender  any  plan  of   reorganization,   arrangement,   adjustment  or
         composition affecting the Obligations owed to such Lender or the rights
         of any  Lender  or to  authorize  the  Administrative  Agent to vote in
         respect of the claim of any Lender in any such  proceeding or under any
         such assignment.

                                 15. EXPENSES.

         The Borrower  agrees to pay (i) the  reasonable  costs of producing and
reproducing  this  Credit  Agreement,  the other  Loan  Documents  and the other
agreements and instruments  mentioned  herein,  (ii) without  duplication of any
amounts paid by the  Borrower  pursuant to ss.5.2.2,  any Taxes  (including  any
interest and penalties in respect thereto) payable by the Administrative  Agent,
thE Issuing Bank,  the Cash  Management  Bank or any of the Lenders  (other than
Excluded  Taxes) on or with  respect to the  transactions  contemplated  by this
Credit  Agreement (the Borrower hereby agreeing to indemnify the  Administrative
Agent,  the Issuing Bank, the Cash  Management Bank and each Lender with respect
thereto),   (iii)  the  reasonable  fees,  expenses  and  disbursements  of  the
Administrative   Agent's   Special   Counsel   or  any  local   counsel  to  the
Administrative Agent incurred in connection with the preparation, administration
or interpretation of the Loan Documents and other instruments  mentioned herein,
each  closing  hereunder,  amendments,  modifications,  approvals,  consents  or
waivers hereto or hereunder, and proposed amendments, modifications,  approvals,
consents or waivers hereto or hereunder,  (iv) the reasonable fees, expenses and
disbursements of the Administrative  Agent incurred by the Administrative  Agent
in connection  with the  preparation  and  syndication of the Loan Documents and
other instruments mentioned herein,  including,  without limitation,  collateral
examination,  appraisal  expenses and environmental  audits,  (v) the reasonable
fees,  expenses and  disbursements of the  Administrative  Agent incurred by the
Administrative  Agent in connection with the administration or interpretation of
the Loan Documents and other instruments  mentioned herein,  including,  without
limitation, collateral examination, appraisal expenses and environmental audits,
inspections,  testing and reports,  (vi) all reasonable  out-of-pocket  expenses
(including  without  limitation   reasonable   attorneys'  fees  and  costs  and
reasonable  consulting,  accounting,  appraisal,  investment banking and similar
professional fees and charges) incurred by the Issuing Bank, the Cash Management
Bank,  the  Administrative  Agent  or any  Lender  in  connection  with  (A) the
enforcement of or preservation of rights under any of the Loan Documents against
any  of  the  Guarantors,  the  Borrower  or  any  of  its  Subsidiaries  or the
administration  thereof  after the  occurrence of a Default or Event of Default,
and (B) any  litigation,  proceeding  or dispute  whether  arising  hereunder or
otherwise,  in any way related to any  Lender's,  the Issuing  Bank's,  the Cash
Management Bank's or the Administrative Agent's relationship with any the Parent
or any of its  Subsidiaries,  unless such  Lender,  the Issuing  Bank,  the Cash
Management  Bank or the  Administrative  Agent,  as applicable,  is conclusively
determined to have breached its obligations  hereunder,  (vii) any fees,  costs,
expenses and bank charges,  including bank charges for returned checks, incurred
by the  Administrative  Agent, the Issuing Bank, the Cash Management Bank or any
of their Affiliates in establishing, maintaining or handling of any accounts for
the collection of any of the Collateral,  (viii) all reasonable  fees,  expenses
and  disbursements  of  the  Issuing  Bank,  the  Cash  Management  Bank  or the
Administrative  Agent  incurred in connection  with UCC  searches,  UCC filings,
intellectual  property  searches,   intellectual   property  filings,   mortgage
recordings  and other  personal and real property  searches and filings and (ix)
all  title  insurance   premiums  and  surveyor,   engineering,   appraisal  and
examination  charges.  The Borrower and each of the  Guarantors  authorizes  the
Administrative Agent, the Issuing Bank, the Cash Management Bank and the Lenders
to debit any account maintained by such Persons with the  Administrative  Agent,
the  Issuing  Bank,  the Cash  Management  Bank,  the  Lenders,  or any of their
Affiliates,  in payment of amounts due  hereunder.  The  covenants of this ss.15
shall survive payment or satisfaction of all otheR Obligations.
<PAGE>

                              16. INDEMNIFICATION.

         The Borrower  agrees to indemnify and hold harmless the  Administrative
Agent, the Issuing Bank, the Arranger, the Cash Management Bank and the Lenders,
together with each of their Affiliates and their officers, directors, employees,
agents, attorneys and advisors, from and against any and all claims, actions and
suits  whether  groundless  or  otherwise,  and  from  and  against  any and all
liabilities,  losses, damages and expenses of every nature and character arising
out  of  this  Credit  Agreement  or  any of the  other  Loan  Documents  or the
transactions contemplated hereby including,  without limitation,  (i) any actual
or proposed  use by the Borrower or any of its  Subsidiaries  of the proceeds of
any of the Loans or Letters of Credit,  (ii) the reversal or  withdrawal  of any
provisional  credits granted by the Administrative  Agent, the Issuing Bank, the
Arranger,  the Cash Management Bank or any of their Affiliates upon the transfer
of funds  from  bank  agency  or lock box  accounts  or in  connection  with the
provisional  honoring of checks or other  items,  (iii) the Parent or any of its
Subsidiaries  entering  into or performing  this Credit  Agreement or any of the
other Loan  Documents,  (iv) any actual or alleged  infringement  of any patent,
copyright,  trademark, service mark or similar right of the Parent or any of its
Subsidiaries comprised in the Collateral,  or (v) with respect to the Parent and
its Subsidiaries and their  respective  properties and assets,  the violation of
any  environmental  law,  the  presence,  disposal,  escape,  seepage,  leakage,
spillage,  discharge,  emission,  release or threatened release of any Hazardous
Substances  or  any  action,  suit,   proceeding  or  investigation  brought  or
threatened with respect to any Hazardous Substances (including,  but not limited
to,  claims  with  respect  to  wrongful  death,  personal  injury  or damage to
property), in each case including,  without limitation,  the reasonable fees and
disbursements  of counsel  incurred in connection  with any such  investigation,
litigation or other proceeding,  PROVIDED,  HOWEVER, that the Borrower shall not
be liable to the  Administrative  Agent, the Arranger the Issuing Bank, the Cash
Management  Bank, any Lender,  any of their Affiliates or any of their officers,
directors, employees, agents and advisors for any of the foregoing to the extent
that they arise from such  Person's  gross  negligence,  breach of  contract  or
willful misconduct. In litigation, or the preparation therefor, the Lenders, the
Issuing Bank,  the Arranger,  the Cash  Management  Bank and the  Administrative
Agent  shall be entitled  to select  their own  counsel  and, in addition to the
foregoing indemnity, the Borrower agrees to pay promptly the reasonable fees and
expenses  of such  counsel.  If, and to the extent that the  obligations  of the
Borrower under this ss.16 are unenforceable for any reason,  the Borrower hereby
agrees tO make the maximum  contribution  to the payment in satisfaction of such
obligations which is permissible  under applicable law. The covenants  contained
in this  ss.16  shall  survive  payment  or  satisfaction  in full of all  other
Obligations.  Each of the AdministrativE  Agent, the Issuing Bank, the Arranger,
the Cash  Management  Bank and the Lenders agree to promptly notify the Borrower
of any such  claim,  action,  suit,  liability,  loss,  damage or expense  after
becoming  aware of the same;  PROVIDED  that the failure to provide  such notice
shall not affect the Borrower's obligations under this Article 16.

                        17. SURVIVAL OF COVENANTS, ETC.

         All covenants, agreements,  representations and warranties made herein,
in any of the other Loan Documents or in any documents or other papers delivered
by or on behalf of the Parent or any of its  Subsidiaries  pursuant hereto shall
be deemed to have been relied upon by the Lenders and the Administrative  Agent,
notwithstanding  any investigation  heretofore or hereafter made by any of them,
and  shall  survive  the  making  by the  Lenders  of any of the  Loans  and the
issuance, extension or renewal of any Letters of Credit, as herein contemplated,
and shall  continue  in full force and effect so long as any Letter of Credit or
any amount due under this Credit  Agreement  or any of the other Loan  Documents
remains  outstanding  or any Lender has any  obligation to make any Loans or the
Administrative  Agent has any obligation to issue, extend or renew any Letter of
Credit,  and for such further time as may be  otherwise  expressly  specified in
this Credit  Agreement.  All  statements  contained in any  certificate or other
paper delivered to any Lender or the  Administrative  Agent at any time by or on
behalf of the Parent or any of its Subsidiaries pursuant hereto or in connection
with the transactions  contemplated hereby shall constitute  representations and
warranties by the Parent or such Subsidiary hereunder.
<PAGE>

                       18. ASSIGNMENT AND PARTICIPATION.

         18.1. GENERAL CONDITIONS. The provisions of this Credit Agreement shall
be  binding  upon and  inure to the  benefit  of the  parties  hereto  and their
respective  successors  and assigns  permitted  hereby,  except that neither the
Borrower  nor the Parent may assign or  otherwise  transfer any of its rights or
obligations  hereunder  without the prior written  consent of each Lender and no
Lender  may  assign or  otherwise  transfer  any of its  rights  or  obligations
hereunder  except (a) to an Eligible  Assignee in accordance with the provisions
of ss.18.2,  (b) by way of  participation  in accordance  with the provisions of
ss.18.4 or (c) by way of pledge or assignment of a security  interest subject to
the  restrictions of ss.18.6 (and any other attempted  assignment or transfer by
any party  hereto  shall bE null and void).  Nothing in this  Credit  Agreement,
expressed or implied,  shall be construed to confer upon any Person  (other than
the parties hereto,  their respective  successors and assigns  permitted hereby,
Participants  to the extent  provided in ss.18.4  and,  to thE extent  expressly
contemplated hereby, the Related Parties of each of the Administrative Agent and
the Lenders) any legal or equitable right, remedy or claim under or by reason of
this Credit Agreement or any of the other Loan Documents.

         18.2.  ASSIGNMENTS.  Any Lender  may at any time  assign to one or more
Eligible  Assignees  all or a portion of its rights and  obligations  under this
Credit Agreement  (including all or a portion of its Commitment and the Loans at
the time owing to it); provided that:

                  (a)  except  in the  cases  of an  assignment  of  the  entire
         remaining amount of the assigning Lender's  Commitment and the Loans at
         the  time  owing  to it or of an  assignment  to a  Lender  or a Lender
         Affiliate,  the  aggregate  amount of the  Commitment  (which  for this
         purpose  includes Loans  outstanding  thereunder) or, if the applicable
         Commitment is not then in effect, the principal  outstanding balance of
         the  Loan of the  assigning  Lender  subject  to each  such  assignment
         (determined as of the date on which the Assignment and Acceptance  with
         respect to such  assignment is delivered to the  Administrative  Agent)
         shall not be less than  $10,000,000  unless each of the  Administrative
         Agent and, so long as no Default or Event of Default has  occurred  and
         is continuing,  the Borrower  otherwise consents (each such consent not
         to be unreasonably withheld or delayed);

                  (b) each partial  assignment shall be made as an assignment of
         a  proportionate   part  of  all  the  assigning  Lender's  rights  and
         obligations under this Credit Agreement with respect to the Loan or the
         Commitment assigned,  it being understood that NON-PRO RATA assignments
         of  or  among  any  of  the   Commitments,   the  Revolving  Loans  and
         Reimbursement Obligations are not permitted;

                  (c) any  assignment  of a  Commitment  must be approved by the
         Administrative  Agent and the Issuing Bank (whether or not the proposed
         assignee  is  itself  a Lender  with a  commitment  or would  otherwise
         qualify as an Eligible Assignee); and

                  (d) the parties to each  assignment  shall execute and deliver
         to the Administrative Agent an Assignment and Acceptance, together with
         a processing and recordation fee of $3,500,  and the Eligible Assignee,
         if it shall not be a Lender,  shall deliver to the Administrative Agent
         an Administrative Questionnaire.
<PAGE>

         Subject to acceptance and recording thereof by the Administrative Agent
pursuant  to  ss.18.3,  from and  after the  effective  datE  specified  in each
Assignment and Acceptance,  the Eligible Assignee thereunder shall be a party to
this  Credit  Agreement  and,  to the extent of the  interest  assigned  by such
Assignment and Acceptance have the rights and obligations of a Lender under this
Credit  Agreement,  and the assigning Lender  thereunder shall, to the extent of
the interest  assigned by such Assignment and  Acceptance,  be released from its
obligations  under this Credit  Agreement (and, in the case of an Assignment and
Acceptance  covering all of the assigning  Lender's rights and obligations under
this Credit  Agreement,  such Lender shall cease to be a party hereto) but shall
continue to be entitled to the benefits of (i)  ss.ss.5.2.2,  5.7, 5.8, and 5.10
with respect to facts and circumstances occurring prior to the effective date of
such assignment and (ii) ss.16  notwithstanding such assignment.  Any assignment
or transfer  by a Lender oF rights or  obligations  under this Credit  Agreement
that does not comply with this  paragraph  shall be treated for purposes of this
Credit  Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with ss.18.4.

         18.3.  REGISTER.  The  Administrative  Agent,  acting  solely  for this
purpose  as an agent  of the  Borrower,  shall  maintain  at the  Administrative
Agent's Office a copy of each  Assignment  and Acceptance  delivered to it and a
register for the recordation of the names and addresses of the Lenders,  and the
Commitments  of,  and  principal  amounts  of the Loans  owing to,  each  Lender
pursuant to the terms hereof from time to time (the "Register").  The entries in
the Register shall be conclusive, and the Borrower, the Administrative Agent and
the  Lenders  may treat each  Person  whose  name is  recorded  in the  Register
pursuant  to the terms  hereof as a Lender  hereunder  for all  purposes of this
Credit Agreement,  notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrower and any Lender,  at any reasonable time
and from time to time upon reasonable prior notice.

         18.4.  PARTICIPATIONS.  Any Lender may at any time, without the consent
of, or notice to, the Parent,  the Borrower or the  Administrative  Agent,  sell
participations   to  any  Person  (other  than  a  natural   person)   (each,  a
"Participant")  in all or a portion of such Lender's  rights and/or  obligations
under this Credit Agreement (including all or a portion of its Commitment and/or
the Loans owing to it);  PROVIDED that (a) such Lender's  obligations under this
Credit  Agreement  shall remain  unchanged,  (b) such Lender shall remain solely
responsible to the other parties hereto for the performance of such  obligations
and (c) the Parent, the Borrower, the Administrative Agent and the other Lenders
shall  continue to deal solely and directly with such Lender in connection  with
such Lender's rights and obligations under this Credit Agreement.  Any agreement
or  instrument  pursuant  to which a Lender  sells  such a  participation  shall
provide  that such  Lender  shall  retain the sole right to enforce  this Credit
Agreement and to approve any amendment,  modification or waiver of any provision
of this Credit Agreement; PROVIDED that such agreement or instrument may provide
that such Lender will not, without the consent of the Participant,  agree to any
amendment,  modification  or waiver that would  reduce the  principal  of or the
interest  rate on any  Loans,  extend  the term or  increase  the  amount of the
Commitment of such Lender as it relates to such  Participant,  reduce the amount
of any  Commitment  Fee or Letter of Credit  Fees to which such  Participant  is
entitled  or extend  any  regularly  scheduled  payment  date for  principal  or
interest.  Subject  to  ss.18.5,  the Parent  and the  Borrower  agree thaT each
Participant shall be entitled to the benefits of ss.ss.5.2.2,  5.7, 5.8 and 5.10
to the same  extent as if it were a Lender  and Had  acquired  its  interest  by
assignment pursuant to ss.18.2. To the extent permitted by law, each Participant
also  shall be  entitled  tO the  benefits  of ss.13 as though it were a Lender,
provided  such  Participant  agrees to be  subject  to ss.13 as though it were a
Lender.

         18.5. PAYMENTS TO PARTICIPANTS.  A Participant shall not be entitled to
receive any greater payment under  ss.ss.5.2.2,  5.7 and 5.8 than the applicable
Lender would have been  entitled to receive  with  respect to the  participation
sold to such Participant.

         18.6.  MISCELLANEOUS  ASSIGNMENT  PROVISIONS.  A Lender may at any time
grant a security  interest in all or any portion of its rights under this Credit
Agreement to secure obligations of such Lender, including without limitation (a)
any pledge or  assignment  to secure  obligations  to any of the twelve  Federal
Reserve Banks organized under ss.4 of the Federal Reserve Act, 12 U.S.C.  ss.341
and (b) wIth respect to any Lender that is a Fund,  to any lender or any trustee
for, or any other  representative  of, holders of obligations owed or securities
issued  by such Fund as  security  for such  obligations  or  securities  or any
institutional  custodian for such Fund or for such lender; PROVIDED that no such
grant shall release such Lender from any of its obligations  hereunder,  provide
any voting rights  hereunder to the secured party  thereof,  substitute any such
secured  party  for such  Lender  as a party  hereto  or  affect  any  rights or
obligations of the Parent, the Borrower or the Administrative Agent hereunder.
<PAGE>

         18.7.  ASSIGNEE  OR  PARTICIPANT  AFFILIATED  WITH THE  PARENT.  If any
assignee  Lender is an Affiliate of the Parent,  then any such  assignee  Lender
shall have no right to vote as a Lender hereunder or under any of the other Loan
Documents  for  purposes  of  granting  consents  or waivers or for  purposes of
agreeing to amendments or other  modifications  to any of the Loan  Documents or
for purposes of making requests to the Administrative  Agent pursuant to ss.12.1
or ss.12.2, and the determination of the Required Lenders shall for All purposes
of this Credit  Agreement and the other Loan Documents be made without regard to
such  assignee   Lender's   interest  in  any  of  the  Loans  or  Reimbursement
Obligations. If any Lender sells a participating interest in any of the Loans or
Reimbursement  Obligations to a Participant,  and such Participant is the Parent
or an Affiliate of the Parent, then such transferor Lender shall promptly notify
the Administrative Agent of the sale of such participation.  A transferor Lender
shall have no right to vote as a Lender hereunder or under any of the other Loan
Documents  for  purposes  of  granting  consents  or waivers or for  purposes of
agreeing to  amendments  or  modifications  to any of the Loan  Documents or for
purposes of making requests to the  Administrative  Agent pursuant to ss.12.1 or
ss.12.2 to the  extent  that such  participation  is  beneficially  owned by the
Parent or any  Affiliate of the Parent,  and The  determination  of the Required
Lenders  shall for all  purposes  of this  Credit  Agreement  and the other Loan
Documents be made without  regard to the interest of such  transferor  Lender in
the Loans or Reimbursement Obligations to the extent of such participation.

         18.8.  NEW NOTES.  Upon its  receipt of an  Assignment  and  Acceptance
executed by the parties to such  assignment,  together with each Note subject to
such  assignment,  the  Administrative  Agent  shall (a) record the  information
contained  therein in the Register,  and (b) give prompt  notice  thereof to the
Borrower  and the Lenders  (other than the  assigning  Lender).  Within five (5)
Business  Days after receipt of such notice,  the Borrower,  at its own expense,
shall,  if  applicable,  execute and  deliver to the  Administrative  Agent,  in
exchange for each surrendered  Note, a new Note to the order of such Assignee in
an  amount  equal  to the  amount  assumed  by such  Assignee  pursuant  to such
Assignment and Acceptance and, if the assigning Lender has retained some portion
of its obligations hereunder, a new Note to the order of the assigning Lender in
an amount  equal to the amount  retained by it  hereunder.  Such new Notes shall
provide that they are  replacements  for the surrendered  Notes,  shall be in an
aggregate  principal  amount  equal to the  aggregate  principal  amount  of the
surrendered  Notes,  shall be dated the effective  date of such  Assignment  and
Acceptance  and shall  otherwise  be in  substantially  the form of the assigned
Notes.

         18.9. SPECIAL PURPOSE FUNDING VEHICLE.  Notwithstanding anything to the
contrary  contained in this ss.18, any Lender (a "GrantinG Lender") may grant to
a special purpose funding vehicle (an "SPC") of such Granting Lender, identified
as such in writing from time to time  delivered  by the  Granting  Lender to the
Administrative Agent and the Borrower, the option to provide to the Borrower all
or any part of any Loan that such Granting  Lender would  otherwise be obligated
to make to the Borrower  pursuant to this Credit  Agreement,  PROVIDED  that (a)
nothing  herein shall  constitute a commitment  to make any Loan by any SPC, (b)
the  Granting  Bank's  obligations  under this  Credit  Agreement  shall  remain
unchanged,  (c) the Granting  Lender shall retain the sole right to enforce this
Credit  Agreement and to approve any  amendment,  modification  or waiver of any
provision of this Credit Agreement and (d) if an SPC elects not to exercise such
option or otherwise  fails to provide all or any part of such Loan, the Granting
Lender shall be obligated to make such Loan  pursuant to the terms  hereof.  The
making  of a Loan  by an SPC  hereunder  shall  utilize  the  Commitment  of the
Granting  Lender  to the same  extent,  and as if,  such  Loan  were made by the
Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for
any expense  reimbursement,  indemnity or similar payment  obligation under this
Credit  Agreement  (all  liability  for which  shall  remain  with the  Granting
Lender). In furtherance of the foregoing, each party hereto hereby agrees (which
agreement shall survive the termination of this Credit Agreement) that, prior to
the date that is one year and one day after the later of (i) the payment in full
of all outstanding senior indebtedness of any SPC and (ii) the Maturity Date, it
will not institute  against,  or join any other person in  instituting  against,
such SPC any bankruptcy, reorganization,  arrangement, insolvency or liquidation
proceedings  or  similar  proceedings  under  the laws of the  United  States of
America or any State  thereof.  In  addition,  notwithstanding  anything  to the
contrary contained in this ss.18.9,  any SPC may (A) with notice to, but (except
as  specified  below)  without the prioR  written  consent  of, the Parent,  the
Borrower or the  Administrative  Agent and  without  paying any  processing  fee
therefor,  assign all or a portion of its interests in any Loans to its Granting
Lender or to any  financial  institutions  (consented  to by the  Administrative
Agent  and,  so long as no  Default  or Event of  Default  has  occurred  and is
continuing,  the Borrower,  which consents shall not be unreasonably withheld or
delayed)  providing  liquidity and/or credit facilities to or for the account of
such SPC to fund the Loans made by such SPC or to  support  the  securities  (if
any) issued by such SPC to fund such Loans and (B)  disclose  on a  confidential
basis any  non-public  information  relating to its Loans (other than  financial
statements  referred to in  ss.ss.6.2 or 7.4) to any rating  agency,  commercial
paper  dealer  or  provider  of a  surety,  guarantee  or  credit  or  liquidity
enhancement  to such SPC. In no event shall the  Borrower be obligated to pay to
an SPC that has made a Loan any greater amount than the Borrower would have been
obligated to pay under this Credit  Agreement  if the  Granting  Lender had made
such Loan.  An amendment to this ss.18.9  without thE written  consent of an SPC
shall be  ineffective  insofar as it alters the rights and  obligations  of such
SPC.
<PAGE>

                               19. NOTICES, ETC.

         Except as otherwise  expressly  provided in this Credit Agreement,  all
notices and other  communications  made or required to be given pursuant to this
Credit  Agreement or any Letter of Credit  Applications  shall be in writing and
shall be (i)  delivered  in hand,  (ii) mailed by United  States  registered  or
certified first class mail, postage prepaid, (iii) sent by overnight courier, or
(iv) sent by telegraph,  telecopy,  facsimile or telex and confirmed by delivery
via courier or postal service, addressed as follows:

                  (a) if to the Parent or the Borrower,  at 941 Grinnell Street,
         Fall River, MA 02721,  Attention:  Chief  Financial  Officer or at such
         other U.S.  address for notice as the Parent or the Borrower shall last
         have furnished in writing to the Person giving the notice;

                  (b) if to the  Administrative  Agent,  at One Federal  Street,
         Boston,  Massachusetts 02110, USA, Attention:  Matthew O'Keefe, or such
         other  address for notice as the  Administrative  Agent shall last have
         furnished in writing to the Person giving the notice; and

                  (c) if to  any  Lender,  at  such  Lender's  address  for  its
         Domestic  Lending Office set forth on SCHEDULE 1 hereto,  or such other
         address for notice as such Lender shall have last  furnished in writing
         to the Person giving the notice.

Any such notice or demand shall be deemed to have been duly given or made and to
have become effective (i) if delivered by hand,  overnight  courier or facsimile
to a  responsible  officer of the party to which it is directed,  at the time of
the receipt thereof by such officer or the sending of such facsimile and (ii) if
sent by registered or certified  first-class mail, postage prepaid, on the third
Business Day following the mailing thereof.
<PAGE>

                               20. GOVERNING LAW.

         THIS CREDIT  AGREEMENT AND, EXCEPT AS OTHERWISE  SPECIFICALLY  PROVIDED
THEREIN,  EACH OF THE OTHER LOAN  DOCUMENTS ARE CONTRACTS  UNDER THE LAWS OF THE
COMMONWEALTH  OF  MASSACHUSETTS  AND  SHALL FOR ALL  PURPOSES  BE  CONSTRUED  IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID  COMMONWEALTH OF  MASSACHUSETTS
(EXCLUDING  THE LAWS  APPLICABLE  TO  CONFLICTS  OR CHOICE OF LAW).  EACH OF THE
PARENT AND THE BORROWER  AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE
COMMONWEALTH OF  MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS
TO THE  NONEXCLUSIVE  JURISDICTION  OF SUCH COURT AND  SERVICE OF PROCESS IN ANY
SUCH SUIT BEING MADE UPON THE PARENT  AND THE  BORROWER  BY MAIL AT THE  ADDRESS
SPECIFIED  IN SS.19.  EACH OF THE  PARENT  AND THE  BORROWER  HEREBY  WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY
SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.

                                 21. HEADINGS.

         The captions in this Credit  Agreement are for convenience of reference
only and shall not define or limit the provisions hereof.

                               22. COUNTERPARTS.

         This  Credit  Agreement  and any  amendment  hereof may be  executed in
several counterparts and by each party on a separate counterpart,  each of which
when  executed and  delivered  shall be an original,  and all of which  together
shall  constitute one instrument.  In proving this Credit Agreement it shall not
be necessary to produce or account for more than one such counterpart  signed by
the party against whom  enforcement  is sought.  Delivery by facsimile by any of
the parties  hereto of an executed  counterpart  hereof or of any  amendment  or
waiver hereto shall be as effective as an original executed  counterpart  hereof
or of such amendment or waiver and shall be considered a representation  that an
original  executed  counterpart  hereof or such amendment or waiver, as the case
may be, will be delivered.

                           23. ENTIRE AGREEMENT, ETC.

         The Loan  Documents are intended by the parties as the final,  complete
and exclusive statement of the transactions evidenced by the Loan Documents. All
prior or contemporaneous promises,  agreements and understandings,  whether oral
or written,  are deemed to be superseded by the Loan Documents,  and no party is
relying on any  promise,  agreement or  understanding  not set forth in the Loan
Documents.

                           24. WAIVER OF JURY TRIAL.

         EACH  PARTY  HERETO   MUTUALLY   HEREBY   KNOWINGLY,   VOLUNTARILY  AND
INTENTIONALLY  WAIVES ITS RIGHT TO A JURY  TRIAL  WITH  RESPECT TO ANY ACTION OR
CLAIM BASED  HEREON  ARISING  OUT OF,  UNDER OR IN  CONNECTION  WITH THIS CREDIT
AGREEMENT  OR ANY  OF THE  OTHER  LOAN  DOCUMENTS,  ANY  RIGHTS  OR  OBLIGATIONS
HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS OR ANY
COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS  OF ANY PARTY,  INCLUDING  ANY COURSE OF  CONDUCT,  COURSE OF  DEALINGS,
STATEMENTS OR ACTIONS OF THE ADMINISTRATIVE  AGENT OR ANY LENDER RELATING TO THE
ADMINISTRATION OF THE LOANS OR ENFORCEMENT OF THE LOAN DOCUMENTS AND AGREES THAT
IT WILL NOT SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.  Except as  prohibited by law, each
party  hereto  hereby  waives  any right it may have to claim or  recover in any
litigation  referred  to in  the  preceding  sentence  any  special,  exemplary,
punitive or consequential  damages or any damages other than, or in addition to,
actual  damages.  Each of the  Parent and the  Borrower  (i)  certifies  that no
representative,  agent or attorney of any Lender or the Administrative Agent has
represented,  expressly  or  otherwise,  that such Lender or the  Administrative
Agent  would not,  in the event of  litigation,  seek to enforce  the  foregoing
waivers and (ii) acknowledges that this waiver constitutes a material inducement
for the  Administrative  Agent and the Lenders to execute this Credit  Agreement
and make the Loans.
<PAGE>

                    25. CONSENTS, AMENDMENTS, WAIVERS, ETC.

         Any consent or approval  required or permitted by this Credit Agreement
to be given by all of the  Lenders  may be  given,  and any term of this  Credit
Agreement,  the other Loan Documents or any other  instrument  related hereto or
mentioned herein may be amended, and the performance or observance by the Parent
or any of its Subsidiaries of any terms of this Credit Agreement, the other Loan
Documents or such other instrument or the continuance of any Default or Event of
Default may be waived (either  generally or in a particular  instance and either
retroactively or prospectively)  with, but only with, the written consent of the
Required Lenders.  Notwithstanding the foregoing, no amendment,  modification or
waiver shall:

                  (a) without the written  consent of the Parent,  the  Borrower
         and each Lender directly affected thereby:

                           (i) reduce or  forgive  the  principal  amount of any
                  Loans or  Reimbursement  Obligations,  or  reduce  the rate of
                  interest on the Loans or the amount of the Commitment  Fees or
                  Letter of Credit Fees (other than interest  accruing  pursuant
                  to ss.5.11  following the effective  date of any waiver by the
                  Required Lenders of the Event of Default relating thereto);

                           (ii)  increase the amount of the Total  Commitment or
                  any Lender's  Commitment or extend the expiration  date of the
                  Total Commitment or any Lender's Commitment;

                           (iii)  postpone  or extend the  Maturity  Date or any
                  other regularly  scheduled dates for payments of principal of,
                  or interest on, the Loans or Reimbursement  Obligations or any
                  fees or other  amounts  payable  to such  Lender  or waive any
                  Event of Default  relating  thereto (it being  understood that
                  (A) a waiver of the  application  of the Default Rate, (B) any
                  vote to rescind any  acceleration  made pursuant to ss.12.1 of
                  amounts owing with respect to the Loans and other  ObligationS
                  and  (C)  any  modifications  of the  provisions  relating  to
                  amounts   or  timing  of   prepayments   of  Loans  and  other
                  Obligations  shall  require  only the approval of the Required
                  Lenders); or

                           (iv)  release  the  Borrower  from  any   Obligations
                  consisting  of  principal,   interest,   fees,   reimbursement
                  obligations,   expenses,   or  indemnities,   release  all  or
                  substantially   all  of  the  Collateral  or  release  all  or
                  substantially  all  of  the  Guarantors  from  their  guaranty
                  obligations under the Guaranties (excluding,  if the Parent or
                  any  Subsidiary  of the  Parent  becomes  a debtor  under  the
                  federal Bankruptcy Code, the release of "cash collateral",  as
                  defined  in  Section  363(a) of the  federal  Bankruptcy  Code
                  pursuant  to a cash  collateral  stipulation  with the  debtor
                  approved by the Required Lenders);
<PAGE>

                  (b)  without the written  consent of all of the  Lenders,  (i)
         amend or waive this ss.25 or the definition of Required  Lenders,  (ii)
         increase the advance rates set forth in the definition of the Borrowing
         Base,  (iii) amend the definition of  Availability  Reserve,  Borrowing
         Base, Eligible Accounts Receivable,  Eligible Finished Goods Inventory,
         Eligible Inventory, Eligible Raw Materials Inventory, Net Book Value or
         Net Orderly  Liquidation  Value,  in each case, in a manner which would
         result in more credit being made  available to the Borrower  hereunder;
         or (iv) amend or waive ss.12.4;

                  (c) without the written consent of the  Administrative  Agent,
         amend or waive ss.2.6.2,  ss.2.16,  ss.4,  ss.14, the amount or Time of
         payment of the Administrative  Agent's Fee or any Letter of Credit Fees
         payable for the Administrative Agent's or the Issuing Bank's account or
         any  other  provision  applicable  to the  Administrative  Agent or the
         Issuing Bank;

                  (d) without the written consent of the Cash  Management  Bank,
         amend or waive any provision applicable to the Cash Management Bank;

                  (e) without the written consent of the Issuing Bank,  amend or
         waive ss.4 or any other provision applicable to the Issuing Bank; or

                  (f) in the  event of any  change in the  Person  acting as the
         Administrative  Agent,  the Issuing  Bank or the Cash  Management  Bank
         hereunder, without the written consent of the Person formerly acting as
         Administrative  Agent,  Issuing Bank or Cash Management  Bank, amend or
         waive any provision of this Credit Agreement accruing to the benefit of
         such Person in respect of all  actions  taken or omitted to be taken by
         either of them prior to such change.

No waiver  shall  extend to or affect any  obligation  not  expressly  waived or
impair any right consequent  thereon.  No course of dealing or delay or omission
on the part of the  Administrative  Agent or any Lender in exercising  any right
shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice
to or demand  upon the Parent or the  Borrower  shall  entitle the Parent or the
Borrower to other or further notice or demand in similar or other circumstances.

                               26. SEVERABILITY.

         The  provisions  of this Credit  Agreement are severable and if any one
clause or provision hereof shall be held invalid or unenforceable in whole or in
part in any jurisdiction,  then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction,  and shall
not in any manner affect such clause or provision in any other jurisdiction,  or
any other clause or provision of this Credit Agreement in any jurisdiction.  The
parties  agree that they will  negotiate in good faith to replace any  provision
hereof so held  invalid  or  unenforceable  with a valid  provision  which is as
similar as possible to the invalid or unenforceable provision.

                              27. CONFIDENTIALITY.

         Each of the  Administrative  Agent,  the Lenders  and the Issuing  Bank
agrees to maintain the  confidentiality  of the  Information (as defined below),
except that  Information  may be disclosed (a) to its  Affiliates and to its and
its Affiliates' respective partners,  directors,  officers,  employees,  agents,
advisors and  representatives  in connection with this Credit  Agreement and the
transactions  contemplated  hereby (it being understood that the Persons to whom
such  disclosure  is made will be  informed of the  confidential  nature of such
Information and instructed to keep such  Information  confidential),  (b) to the
extent  requested by any regulatory  authority  purporting to have  jurisdiction
over  it  (including  any  self-regulatory   authority,  such  as  the  National
Association  of  Insurance  Commissioners),   (c)  to  the  extent  required  by
applicable laws or regulations or by any subpoena or similar legal process,  (d)
to any other party hereto,  (e) in connection  with the exercise of any remedies
hereunder or under any other Loan Document or any action or proceeding  relating
to this  Agreement  or any other  Loan  Document  or the  enforcement  of rights
hereunder  or  thereunder,  (f) subject to an  agreement  containing  provisions
substantially  the same as those of this  Article 27, to (i) any  assignee of or
Participant  in, or any  prospective  assignee of or Participant  in, any of its
rights  or  obligations  under  this  Credit  Agreement  or (ii) any  actual  or
prospective counterparty (or its advisors) to any swap or derivative transaction
relating to the Parent and its obligations or the Borrower and its  obligations,
(g) with the  consent of the Parent or (h) to the extent  such  Information  (x)
becomes publicly available other than as a result of a breach of this Article 27
or (y) becomes available to the  Administrative  Agent, any Lender,  the Issuing
Bank or any of their  respective  Affiliates on a  nonconfidential  basis from a
source other than the Borrower.
<PAGE>

         For  purposes  of this  Section,  "INFORMATION"  means all  information
received from the Parent or any Subsidiary of the Parent  relating to the Parent
or any  Subsidiary of the Parent or any of their  respective  businesses,  other
than any such  information  that is available to the  Administrative  Agent, any
Lender or the Issuing Bank on a nonconfidential basis prior to disclosure by the
Parent or any  Subsidiary  of the Parent.  Any Person  required to maintain  the
confidentiality  of  Information as provided in this Section shall be considered
to have complied  with its  obligation to do so if such Person has exercised the
same degree of care to maintain the  confidentiality of such Information as such
Person would accord to its own confidential information.

         Each of the  Administrative  Agent,  the Lenders  and the Issuing  Bank
acknowledges   that  (a)  the  Information  may  include   material   non-public
information concerning the Parent or a Subsidiary of the Parent, as the case may
be, (b) it has  developed  compliance  procedures  regarding the use of material
non-public   information  and  (c)  it  will  handle  such  material  non-public
information  in accordance  with  applicable  Law,  including  Federal and state
securities  Laws.  To the extent  practicable  and possible in  compliance  with
applicable law,  regulation,  proceeding or court order, each of the Lenders and
the Administrative Agent shall, prior to disclosure thereof, notify the Borrower
of  any  request  for  disclosure  of any  such  non-public  information  by any
governmental  agency or  representative  thereof (other than any such request in
connection with an examination of the financial condition of such Lender by such
governmental agency) or pursuant to legal process.

         The  Parent  and  the  Borrower   hereby   acknowledge   that  (a)  the
Administrative  Agent will make  available  to the Lenders and the Issuing  Bank
materials  and/or  information  provided  by or on behalf of the  Parent and the
Borrower hereunder (collectively,  "BORROWER MATERIALS") by posting the Borrower
Materials on IntraLinks or another similar  electronic  system (the  "PLATFORM")
and (b) certain of the Lenders may be "public-side"  Lenders (i.e., Lenders that
do not wish to  receive  material  non-public  information  with  respect to the
Parent, the Borrower or their securities) (each, a "PUBLIC LENDER").  The Parent
and the Borrower  hereby agree that (w) all  Borrower  Materials  that are to be
made  available  to Public  Lenders  shall be clearly and  conspicuously  marked
"PUBLIC"  which,  at a minimum,  shall mean that the word "PUBLIC"  shall appear
prominently  on the  first  page  thereof;  (x) by  marking  Borrower  Materials
"PUBLIC,"  the Parent and the Borrower  shall be deemed to have  authorized  the
Administrative  Agent,  the Issuing Bank and the Lenders to treat such  Borrower
Materials as not containing any material non-public  information with respect to
the Parent, the Borrower or its securities for purposes of United States Federal
and state securities laws (PROVIDED,  HOWEVER,  that to the extent such Borrower
Materials  constitute  Information,  they  shall be treated as set forth in this
Article 27); (y) all Borrower Materials marked "PUBLIC" are permitted to be made
available through a portion of the Platform  designated  "Public  Investor;" and
(z) the  Administrative  Agent shall be entitled to treat any Borrower Materials
that are not marked  "PUBLIC" as being suitable only for posting on a portion of
the Platform not designated "Public Investor."
<PAGE>

                              28. USA PATRIOT ACT.

         Each  Lender  hereby   notifies  the  Borrower  that  pursuant  to  the
requirements  of the USA PATRIOT Act (Title III of Pub. L. 107-56  (signed  into
law October 26, 2001)) (the "ACT"), it is required to obtain,  verify and record
information that identifies the Borrower,  which  information  includes the name
and address of the Borrower and other information that will allow such Lender to
identify the Borrower in accordance with the Act.

                      29. DESIGNATION OF PERMITTED LIENS.

         The  designation of a Lien as a Permitted Lien is not, and shall not be
deemed to be, an  acknowledgment by the  Administrative  Agent or the Lenders to
any Person that the Lien shall have priority over any Lien of the Administrative
Agent granted in any Loan Document.

                         30. TRANSITIONAL ARRANGEMENTS

         On the Closing Date, this Agreement shall supersede the Existing Credit
Agreement in its entirety.  On the Closing Date,  the rights and  obligations of
the parties  evidenced by the Existing  Credit  Agreement  shall be evidenced by
this Credit Agreement and the other Loan Documents,  and the Existing Letters of
Credit  issued by any Issuing Bank for the account of the Borrower  prior to the
Closing  Date  shall be  converted  into  Letters of Credit  under  this  Credit
Agreement.

         All interest and fees and expenses,  if any, owing or accruing under or
in respect of the Existing  Credit  Agreement  through the Closing Date shall be
calculated  as of the  Closing  Date  (pro  rated in the case of any  fractional
periods),  and  shall  be paid in full at the  times  that  interest,  fees  and
expenses  under this Credit  Agreement  are required to be paid pursuant to this
Credit  Agreement.  Commencing on the Closing Date,  the Commitment Fee shall be
payable  by the  Borrower  to the  Administrative  Agent for the  account of the
Lenders in accordance with ss.2.2.

<PAGE>

         IN WITNESS  WHEREOF,  the  undersigned  have duly  executed this Credit
Agreement as a sealed instrument as of the date first set forth above.

                     QUAKER FABRIC CORPORATION OF FALL RIVER
                     QUAKER FABRIC CORPORATION

                     By:  /s/ Paul J. Kelly
                        ---------------------------------------------
                              Name:    Paul J. Kelly
                              Title:   Vice President Finance

<PAGE>

                     BANK OF AMERICA, N.A.,
                     individually and as Administrative Agent,
                     Issuing Bank and Cash Management Bank

                     By:  /s/  Matthew T. O'Keefe
                        ---------------------------------------------
                              Name:    Matthew T. O'Keefe
                              Title:   Senior Vice President

<PAGE>

                     WELLS FARGO FOOTHILL, LLC

                          By:
                             ----------------------------------------
                              Name:
                              Title:

<PAGE>

                           MERRILL LYNCH CAPITAL, A DIVISION OF
                           MERRILL LYNCH BUSINESS FINANCIAL
                           SERVICES INC.

                          By:
                             ----------------------------------------
                              Name:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}]]