Document:

July 30, 1999

Beta Oil & Gas, Inc.

901 Dove Street, Suite 230

Newport beach, CA 92660

Attention:  Mr. J. Chris Steinhauser

                  Chief Financial Officer and Director

   RE: Participation AgreementSarah

White ProspectGreens 
Lake AreaGalveston 
County, Texas

Dear Mr. Steinhauser:

This is the Participation Agreement between Texoil Company
(“Texoil”) and Beta Oil & Gas, Inc. (“Beta” or
“Non-Operator”) relative to the drilling of an initial test well and
subsequent operations in and on Texoil’s Sarah White Prospect, Greens Lake
Area, Galveston County, Texas. The terms of this Participation Agreement are as
follows: 

1.

OPERATING AGREEMENT

1.1  Concurrently  with the execution of this  Agreement,  the parties hereto are executing the attached  Operating
Agreement,  identified  as  Exhibit  "A" and made a part  hereof  for all  purposes  ("Operating  Agreement").  The
Operating Agreement designates  Cliffwood  Production Co. as "Operator".  Cliffwood Production Co. will control all
operations on the lands and leases  covered by this  Participation  Agreement.  In the event of a conflict  between
the Participation Agreement and the Operating Agreement, then the Participation Agreement shall prevail.

Page 2Participation 
AgreementSarah 
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Oil & Gas, Inc.

1.2 The liens and security interests granted to Non-Operator by
Cliffwood Production Co., as Operator, and Texoil Company, as Non-Operator
(“Texoil Companies”) under Article VII.B. of the Operating Agreement
(a) shall attach to the interests of both the Texoil Companies owned or
hereafter acquired by either of the Texoil Companies within the Contract Area
for the Operating Agreement including the oil, gas and mineral leases and
personal property or fixtures on or used or obtained for use in connection
therewith, to secure the performance of all of the obligations of both of the
Texoil Companies under the Operating Agreement, including, but not limited to,
those set forth in Article VII.B. of the Operating Agreement, and (b) shall
include all of the interests and rights set forth in Article VII.B. The other
Non-Operators shall have all of the applicable rights and remedies described in
Articles VII.B., and the Texoil Companies shall have all of the applicable
obligations described in Article VII.B., the same as if fully set forth in this
Section. 

1.3 If Texoil Company, its affiliates or joint ventures
controlled by Texoil or its affiliates, no longer own an interest in the
Contract Area, Cliffwood Production Co. shall resign as Operator, except for
selection of a new Operator pursuant to the Operating Agreement. 

2.

LEASES AND LEASE BURDENS

        Texoil
represents that it is the present owner and holder of the Oil, Gas and Mineral
Leases described on Exhibit “A” to the Operating Agreement
(“Leases”) covering approximately 1886.95 gross and 1173.25 net acres,
subject to the royalty interests reserved by the Lessors and overriding
royalties in the amount of two percent (2%) in favor of Dennis Drake in the
Leases and the overriding royalty reserved by Texoil as defined below
(“Lease Burdens”). Texoil shall retain an overriding royalty interest
in the Leases equal to the difference between (i) twenty-five percent (25%) and
(ii) the sum of lessors’ royalties and overriding royalty in favor of
Dennis Drake, proportionately reduced to the working interest acquired by Beta. 

Page 3Participation 
AgreementSarah 
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Oil & Gas, Inc

3.

PROSPECT ACQUISITION FEE

3.1 As consideration for Beta’s interest in the Leases and
the geological and geophysical information and data furnished by Texoil, Beta
agrees to pay Texoil the sum of Twenty-Five Thousand and No/100ths Dollars
($25,000.00), in cash, with the execution of this Participation Agreement as a
“Prospect Acquisition Fee”. The Prospect Acquisition Fee does not
include costs related to the drilling of the Initial Test Well or the cost of
oil, gas and mineral leases acquired subsequent to the date of this
Participation Agreement, nor does it include the rental costs due subsequent to
the date of this Agreement for any of the Leases in the prospect. 

3.2 Beta and Texoil will bear equally on a 50/50 basis all costs
related to the prospect including, but not limited to, any and all lease
acquisition costs and rentals. Burlington Resources Oil & Gas Company
(“BR”) presently controls thirty percent (30%) of this prospect.
Attached hereto as Exhibit “B” is a land plat identifying the Sarah
White Prospect. 

3.3 Should Burlington elect not to participate in the Initial
Test Well, Texoil will use its best efforts to secure a farmout of such
interest. However, Burlington has the right to make a non-consent election and
forfeit all its interest in this prospect. Should the terms of any farmout from
Burlington provide for a carried working interest or reversionary working
interest greater than those retained by Texoil in Article 4 below, then
Texoil’s carried and reversionary interest will be proportionately reduced
by Burlington’s working interest, presently thirty percent (30%). For
example, Beta’s working interest (i) after Casing Point but prior to Payout
and (ii) after Payout would be revised to 25.75% and 23.175%, respectively. Beta
will assume its proportionate share of the terms of the Burlington farmout in
this prospect. 

3.4 It is Texoil’s intent to sell approximately 60% of the
working interest before Casing Point in this prospect to third parties. 

Page 4Participation 
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4.

INTEREST OWNERSHIP & PAYOUT

4.1 Subject to Section 3.3, Beta will bear a twenty-seven and
one-half percent (27.5%) working interest to Casing Point on the Initial Test
Well and will earn a twenty-five percent (25%) working interest after Casing
Point and prior to Payout (as defined below). The net revenue interest in the
Initial Test Well and prospect are presently estimated at seventy-four and
one-half percent (74.5%). 

4.2 In addition, the working and net revenue interest referenced
immediately above will be proportionately reduced by ten percent (10%) at Payout
of the subject prospect and well. Such reversionary interest will be owned by
Texoil. Payout shall be defined as the first day of the month immediately
following that point in time when the cumulative net revenues derived from the
Initial Test Well shall equal total unrecovered costs paid by Beta including the
Prospect Acquisition Fee, leasehold, rentals and related costs, the cost of
drilling and completing said well plus the costs of production facilities, all
pre-production or other costs related thereto and all costs related to the
marketing and transportation of production and costs of operating the Initial
Test Well until Payout. 

5.

ASSIGNMENT

        Within fifteen
(15) days following Beta’s acceptance of the Participation Agreement and
payment of the Prospect Acquisition Fee, Texoil will execute and deliver an
Assignment (with a special warranty and subject to the Lease Burdens) to Beta
and Beta’s working interest (cost bearing, not net revenue), subject to the
other provisions of this Participation Agreement and the Operating Agreement,
shall be as follows: 

Drilling to Casing Point in the Initial Test Well:     27.50%

Working Interest after Casing Point but prior to Payout of the Initial Well:     25.00%

After Payout Working Interest in the Initial Test Well:     22.50%

Working Interest in Subsequent Wells:     22.50%

Page 5

Participation Agreement

Sarah White Prospect

Beta Oil &Gas, Inc.

6.

TITLE MATERIAL

        Within ninety
(90) days from the date of this Participation Agreement and at the written
request of Beta, Texoil will furnish Beta with copies of all the Leases and any
corresponding title material associated with the prospect. 

7.

INITIAL TEST WELL

7.1 Before operations are commenced on the Initial Test Well,
Operator will furnish Beta with an Authority For Expenditure (“AFE”)
to drill, evaluate and plug and abandon the well(s). No more than thirty (30)
days before operations are commenced on the well, Operator will call for
Beta’s working interest share of the AFE, and Beta will pay its share of
the AFE within twenty (20) days following receipt of the AFE. If Beta has not
paid its share of AFE costs within said twenty (20) days, then Operator will
send a final notice to Beta, granting Beta an additional five (5) business days
to pay Beta’s share of said AFE costs. If all Non-Operators (including new
participants) do not tender the AFE costs and Texoil does not drill the Initial
Test Well, Texoil will return to Beta its AFE costs applicable to the Initial
Test Well. 

7.2 In the event Beta fails to timely pay its share of the AFE,
Beta’s rights hereunder will terminate without notice and the interest of
Beta shall be subject to Article 9 below. The Prospect Acquisition Fee and any
other costs previously paid will not be refunded. 

7.3 Subject to the receipt of the amount of the AFE from all
Non-Operators, availability of a suitable drilling rig and approval of title to
the drillsite lease, Operator will commence operations to drill the Initial Test
Well at a legal location that is acceptable to all Non-Operators. Operator will
thereafter drill said Initial Test Well with due diligence and in a workmanlike
manner to the depth agreed upon between the parties. The estimated objective
formation(s) and depths of the Initial Test Well are the (1) 6,700’ Miocene
sand, (2) 11,630' TVD/11,750’ MD Banfield sand, (3) 11,950’
TVD/12,202’ MD Upper Schenck sand, (4) 13,170’ TVD/14,123’ MD
Upper “S” sand, and (5) 13,650’ TVD/14,879’ MD Second Andrau
sand; the estimated total measured depth is 

Page 6
Participation Agreement
Sarah White
Prospect
Beta Oil & Gas, Inc.

15,272' (13,900' TVD).  The objective formation and depths are defined as "Authorized Depth".

7.4 At such time as the Initial Test Well has been drilled to
the Authorized Depth agreed upon by the parties, Operator will run a Dual
Induction or other equivalent open hole electrical log from the total depth
drilled to the bottom of the surface casing, and such other methods and tools of
evaluation that will insure proper evaluation of all formations in the well
indicating hydrocarbons, if under the then existing conditions, such methods of
evaluation are prudent (“Casing Point”). 

7.5 Within twenty-four (24) hours following Casing Point and all
logs, cores, and other tests have been completed, and the results thereof
furnished to the Non-Operator(s), each Non-Operator shall elect to: 

(a)     complete the well as an oil or gas well, or

(b)     deepen the well, or

(c)     sidetrack the well, or

(d)     plug and abandon the well.

7.6 An election by a Non-Operator or Non-Operators representing
the largest percentage interest in the Initial Test Well, to complete the well
as an oil or gas well shall take precedence over an election to deepen the well,
which shall take precedence over an election to sidetrack the well, which shall
take precedence over an election to plug and abandon the well; provided,
however, that said well will not be plugged and abandoned if at least one
Non-Operator elects to complete said well and agrees to bear all costs
attributable to such operation. If Non-Operators cannot agree on the sand or
formation in which to complete the well, an election by a Non-Operator or
Non-Operators representing the largest percentage interest in the well to
complete in a deeper sand or formation shall take precedence over an election to
complete in a shallower sand or formation. 

7.7 If less than all Non-Operators elect to complete the well as
an oil or gas well, deepen or sidetrack the well, Article VI.B.2. of the
Operating Agreement shall not apply to such operations and the interest of the
non-participating Non-Operators shall be subject to Article 9 below. 

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8.

RELEASE OF LEASES & PAYMENT OF RENTAL
OBLIGATIONS

8.1 If a Non-Operator elects to release, surrender or otherwise
let a Lease or interest therein expire, the interest of the party electing to
surrender a Lease shall be subject to Article 9 below. 

8.2 Operator will be responsible for preparing and circulating
monthly delay rental obligation calendars to the Non-Operators. Monthly delay
rental calendars will be provided to the Non-Operators within forty-five (45)
days of a rental becoming due. Upon receipt of the calendar, Non-Operators will
have fifteen (15) days from receipt to make a formal written election. Failure
to respond within the fifteen (15) day time period will result in a forfeiture
of Non-Operators interest in and to those Leases. Non-Operators will then be
subject to the provisions of Article 9 below. 

9.

DEFAULT/NON-CONSENT

9.1  In the event a Non-Operator:

(a)     fails to timely pay in advance its share of the AFE for the Initial Test Well;

(b)     elects not to  participate  in the  completion,  deepening  or  sidetracking  of the Initial  Test Well at
             Casing Point;

(c)     elects to release a Lease or fails to pay for a Lease, renewal or extension; and

(d)     elects not to pay a delay rental obligation

and if the “Non-Consent Operation(s)", as defined
below, are conducted timely, the “Non-Consenting Party”, as defined
below, shall reassign all of its interest in the well or Leases to those parties
who have elected to acquire the interest of the Non-Consenting Party
(“Available Interest”). Provided, however, (i) if Beta participated in
drilling the Initial Test Well to the objective depth, and (ii) the
Non-Operators representing the 

Page 8Participation 
AgreementSarah 
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ProspectBeta 
Oil & Gas, Inc.

largest percentage interest in the Initial Test Well elected to
deepen or sidetrack such well, and (iii) Beta elects not to participate in the
deepening or sidetracking operation, then Beta shall retain all its rights down
to the depth drilled prior to such deepening or sidetracking operation and only
the interest of Beta in the deepening or sidetracking operation as to the
Contract Area shall be subject to Section 9.3 below. 

9.2 The elections pursuant to 9.1 (a) – (d) above are
herein referred to as “Non-Consent Operation(s)” and such
non-participating or defaulting Non-Operator is referred to as a
“Non-Consenting Party”. 

9.3 Operator will advise the other Non-Operators of the amount
of Available Interest. The other Non-Operators will, within twenty-four (24)
hours (exclusive of Saturdays, Sundays and legal holidays) after receipt of such
notice, advise Operator of each Non-Operator’s election to: 

(a)     limit  such  Non-Operator's  interest  in the well,  operation  or Lease to which the  Available  Interest
          applies, to such Non-Operator's original interest; or

(b)     in addition to such Non-Operator's  original interest,  acquire such Non-Operator's  proportionate  share,
          or more, of the Available Interest.

9.4 Failure to timely advise Operator of (a) or (b) above shall
constitute an election to limit participation to such Non-Operator’s
original interest, under (a) above. 

9.5 If the non-defaulting parties do not acquire all of the
Available Interest, Texoil will use its best efforts to obtain new participants
for the remaining Available Interest under terms and conditions of Texoil’s
choice. In the event Texoil receives an offer from a prospective participant for
the Available Interest on terms more favorable than the terms on which
Non-Operators acquired their interest, Texoil shall not be required to offer
such more favorable terms to Non-Operators. 

9.6 Reassignment of the Available Interest by a Non-Consenting
Party shall be made immediately upon demand, without warranty, except as against
the acts of the assignor and free and clear of overriding royalty or similar
burden, except the Lease Burdens. Reassignment shall not relieve such
Non-Consenting Party of obligations and liabilities incurred prior to the date
of the Non-Consent Operation. 

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10.

MISCELLANEOUS

10.1 Beta or its representatives shall have the right, from time
to time, by appointment, to review and interpret, during normal business hours,
any seismic, lease data or other records in the possession of Texoil without
charge to Beta. 

10.2 This Participation Agreement will extend to and be binding
upon Beta and Texoil, their representatives, successors and assigns forever. 

10.3 Beta and Texoil agree to jointly solicit industry partners for
this prospect. 

10.4 Texoil agrees to use its best efforts to advise Beta prior
to executing any agreements with additional working interest participants in
this prospect. Beta will have the right to approve the proposed new participant.
Beta’s approval will not be unreasonably withheld. 

10.5 If  Cliffwood  Production  Co.  elects not to operate this  prospect,  Beta will have the right to approve the
proposed new Operator.  Beta's approval will not be unreasonably withheld.

Page 10
Participation Agreement
Sarah White
Prospect
Beta Oil & Gas, Inc.

If the foregoing correctly reflects Beta’s understanding of
the Participation Agreement, return one (1) executed copy of the Participation
Agreement and the Prospect Acquisition Fee to Texoil on or before, 5:00 p.m.,
September 16, 1999. If this Participation Agreement is not timely executed and
returned this Participation Agreement may not thereafter be accepted without
Texoil’s written consent. 

Sincerely,Texoil 
Company

Cliffwood Production Co.

   By:/s/Frank Lodzinski

Frank A. LodzinskiPresident

AGREED TO AND ACCEPTED this 14th day of September, 1999.

BETA OIL & GAS, INC.

By:/s/J. Chris Steinhauser

Printed Name:J. Chris Steinhauser

Title:Chief Financial OfficerAMENDED AND RESTATED
                                CREDIT AGREEMENT
                          dated as of February 17, 2000
                                      among
                             Cluett American Corp.,
                        Vestar Capital Partners III, L.P.
                                       and
                             BANK OF AMERICA, N. A.

<PAGE>

i

                                TABLE OF CONTENTS

SECTION 1  DEFINITIONS                                                  1
           -----------
         1.1      Definitions.      1
         1.2      Computation of Time Periods.                          7
SECTION 2  CREDIT FACILITIES                                            7
         2.1      Loans    7
         2.2      Letter of Credit Facility.
SECTION 3  OTHER PROVISIONS RELATING TO CREDIT FACILITIES               11
           ----------------------------------------------
         3.1      Default Rate.                                         11
         3.2      Extension and Conversion.                             11
         3.3      Prepayments.                                          11
         3.4      Termination and Reduction of Commitment.              12
         3.5      Fees.                                                 12
         3.6      Capital Adequacy.                                     13
         3.7      Limitation on Eurodollar Loans.                       13
         3.8      Illegality.                                           14
         3.9      Requirements of Law.                                  14
         3.10     Treatment of Affected Loans.                          15
         3.11     Taxes.                                                15
         3.12     Compensation.                                         16
         3.13     Payments, Computations, Etc.                          16
         3.14     Evidence of Debt.                                     17
SECTION 4  GUARANTY                                                     17
           --------
         4.1      The Guaranty.                                         17
         4.2      Obligations Unconditional.                            17
         4.3      Reinstatement.                                        18
         4.4      Certain Additional Waivers.                           18
         4.5      Remedies.                                             18
         4.6      Guarantee of Payment; Continuing Guarantee.           19
         4.7      Deposit of Capital Call Notices.                      19
SECTION 5  CONDITIONS                                                   19
           ----------
         5.1      Closing Conditions.                                   19
         5.2      Conditions to all Extensions of Credit.
SECTION 6  REPRESENTATIONS AND WARRANTIES                               20
           ------------------------------
         6.1      Existence and Power.                                  20
         6.2      Authorization.                                        21
         6.3      No Conflicts.                                         21
         6.4      Consents.                                             22
         6.5      Enforceable Obligations.                              22
         6.6      Permitted Investment.                                 22
         6.7      Venture Capital Operating Company.                    22
         6.8      Deposited Notices.                                    22
         6.9      Limitations on Actions.                               23
SECTION 7  AFFIRMATIVE COVENANTS                                        23
           ---------------------
         7.1      Outstanding Subscriptions.                            23
         7.2      General Partner.                                      23
         7.3      Plan Assets, etc.                                     23
         7.4      Receipt of the Funds Pursuant to the Deposited Notices23
SECTION 8  NEGATIVE COVENANTS                                           23
           ------------------
         8.1      Limitations on Actions.                               23
SECTION 9  EVENTS OF DEFAULT                                            24
           -----------------
         9.1      Events of Default.                                    24
         9.2      Acceleration; Remedies.                               25
         9.3      Cash Collateral Account.                              25
         9.4      Allocation of Fund Payments.                          26
         9.5      Receipt of Funds Pursuant to the Deposited Notices.   26
SECTION 10  MISCELLANEOUS                                               26
            -------------
         10.1     Notices.                                              26
         10.2     Right of Set-Off; Adjustments.                        28
         10.3     Benefit of Agreement.                                 29
         10.4     No Waiver; Remedies Cumulative.                       29
         10.5     Expenses; Indemnification.                            29
         10.6     Amendments, Waivers and Consents.                     30
         10.7     Counterparts.                                         30
         10.8     Headings.                                             30
         10.9     Survival.                                             30
         10.10    Governing Law; Submission to Jurisdiction; Venue.     30
         10.11    Severability.                                         31
         10.12    Entirety.                                             31
         10.13    Binding Effect; Termination.                          31
         10.14    Limitation on Recourse to the Fund.                   31
         10.15    Confidentiality.                                      32

                                    EXHIBITS

Exhibit A                  Form of Capital Call Notice
Exhibit 2.1(b)(i)          Form of Notice of Borrowing
Exhibit 3.2                Form of Notice of Extension/Conversion
Exhibit 5.1(d)             Form of Officer's Certificate

<PAGE>

                      AMENDED AND RESTATED CREDIT AGREEMENT

THIS AMENDED AND RESTATED  CREDIT  AGREEMENT,  dated as of February 17, 2000 (as
     amended, modified,  restated or supplemented from time to time, the "Credit
     Agreement"),  is by and among Cluett American Corp., a Delaware corporation
     (the  "Borrower"),  Vestar Capital  Partners III, L.P., a Delaware  limited
     partnership  (the "Fund"),  and BANK OF AMERICA,  N. A. (the "Bank").  ----
     ---- W I T N E S S E T H

         WHEREAS,  the  Borrower,  the Fund and the  Bank  are  parties  to that
certain  Credit  Agreement  dated as of November 9, 1999 (the  "Existing  Credit
Agreement"); and

         WHEREAS,  the Borrower,  the Fund and the Bank have agreed to amend and
restate the Existing Credit Agreement as set forth herein;

         NOW,  THEREFORE,  IN  CONSIDERATION  of the premises and other good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged, the parties hereto agree as follows:

                                    SECTION 1

                                   DEFINITIONS

1.1  Definitions.

         As used in this Credit  Agreement,  the following  terms shall have the
meanings specified below unless the context otherwise requires:

                "Adjusted Base Rate" means the Base Rate plus 0.50%.
                  ------------------                      ----

                "Adjusted Eurodollar Rate" means the Eurodollar Rate plus 1.50%.
                  ------------------------                ----

                  "Affiliate"  means,  with  respect  to any  Person,  any other
         Person (i) directly or indirectly controlling or controlled by or under
         direct or indirect  common control with such Person or (ii) directly or
         indirectly  owning or holding ten  percent  (10%) or more of the Voting
         Equity  Interests  in such  Person.  For  purposes of this  definition,
         "control"  when  used with  respect  to any  Person  means the power to
         direct  the  management  and  policies  of  such  Person,  directly  or
         indirectly,  whether  through the  ownership of voting  securities,  by
         contract or otherwise;  and the terms  "controlling"  and  "controlled"
         have meanings correlative to the foregoing.

                  "Applicable  Lending  Office" means the office of the Bank (or
         of an  Affiliate of the Bank) as the Bank may from time to time specify
         to the Borrower by written notice as the office by which its Eurodollar
         Loans are made and maintained.

                  "Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
         United  States Code, as amended,  modified,  succeeded or replaced from
         time to time.

                  "Bank"  shall have the  meaning  assigned  to such term in the
         heading hereof, together with any successors or assigns.

                  "Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
         United  States Code, as amended,  modified,  succeeded or replaced from
         time to time.

                  "Bankruptcy  Event"  means,  with  respect to any Person,  the
         occurrence of any of the following  with respect to such Person:  (i) a
         court or governmental  agency having jurisdiction in the premises shall
         enter a decree or order  for  relief in  respect  of such  Person in an
         involuntary case under any applicable  bankruptcy,  insolvency or other
         similar  law now or  hereafter  in effect,  or  appointing  a receiver,
         liquidator,  assignee,  custodian,  trustee,  sequestrator  (or similar
         official) of such Person or for any substantial part of its Property or
         ordering the winding up or  liquidation  of its affairs;  or (ii) there
         shall be commenced  against such Person an  involuntary  case under any
         applicable bankruptcy, insolvency or other similar law now or hereafter
         in effect, or any case,  proceeding or other action for the appointment
         of a receiver,  liquidator,  assignee, custodian, trustee, sequestrator
         (or similar official) of such Person or for any substantial part of its
         Property or for the winding up or liquidation of its affairs,  and such
         involuntary case or other case, proceeding or other action shall remain
         undismissed,  undischarged  or  unbonded  for a period  of  sixty  (60)
         consecutive  days; or (iii) such Person shall commence a voluntary case
         under any applicable bankruptcy, insolvency or other similar law now or
         hereafter in effect,  or consent to the entry of an order for relief in
         an involuntary  case under any such law, or consent to the  appointment
         or taking possession by a receiver,  liquidator,  assignee,  custodian,
         trustee,  sequestrator (or similar  official) of such Person or for any
         substantial part of its Property or make any general assignment for the
         benefit of creditors;  or (iv) such Person shall be unable to, or shall
         admit in writing  its  inability  to, pay its debts  generally  as they
         become due.

                  "Base Rate"  means,  for any day,  the rate per annum equal to
         the higher of (a) the Federal  Funds Rate for such day plus one-half of
         one percent  (0.5%) and (b) the Prime Rate for such day.  Any change in
         the Base Rate due to a change in the Prime  Rate or the  Federal  Funds
         Rate shall be  effective  on the  effective  date of such change in the
         Prime Rate or Federal Funds Rate.

                  "Base Rate Loan"  means any Loan  bearing  interest  at a rate
         determined by reference to the Base Rate.

                  "Borrower" shall have the meaning assigned to such term in the
         heading hereof, together with any permitted successors or assigns.

                  "Borrower Obligations" means, without duplication,  all of the
         obligations of the Borrower to the Bank,  whenever arising,  under this
         Credit Agreement (including,  but not limited to, any interest accruing
         after  the  occurrence  of a  Bankruptcy  Event  with  respect  to  the
         Borrower, regardless of whether such interest is an allowed claim under
         the Bankruptcy Code).

                  "Business  Day" means a day other than a  Saturday,  Sunday or
         other day on which commercial banks in Charlotte, North Carolina or New
         York, New York are authorized or required by law to close, except that,
         when used in connection with a Eurodollar  Loan, such day shall also be
         a day on which dealings between banks are carried on in Dollar deposits
         in London, England.

                  "Capital Call Notice"  means a capital call notice  satisfying
         the  requirements  of  Section  3.1 of the  Partnership  Agreement  and
         substantially in the form of Exhibit A attached hereto.

                  "Cash  Collateral  Account" shall have the meaning assigned to
         such term in Section 9.3.

                  "Cash  Equivalents"  shall have the  meaning  assigned to such
         term in the Existing Credit Agreement.

                  "Closing Date" means the date hereof.

                  "Code"  means the Internal  Revenue Code of 1986,  as amended,
         and any successor  statute  thereto,  as  interpreted  by the rules and
         regulations issued  thereunder,  in each case as in effect from time to
         time.  References  to sections of the Code shall be  construed  also to
         refer to any successor sections.

                  "Commitment"  means the commitment of the Bank in an aggregate
         principal amount at any time outstanding of up to the Committed Amount,
         to make Loans to the  Borrower in  accordance  with the  provisions  of
         Section  2.1(a)  and issue  Letters  of Credit  for the  account of the
         Borrower in accordance with the provisions of Section 2.2(a).

                  "Committed  Amount"  shall have the  meaning  assigned to such
         term in Section 2.1(a).

                  "Continue", "Continuation", and "Continued" shall refer to the
         continuation  pursuant to Section 3.2 hereof of a Eurodollar  Loan from
         one Interest Period to the next Interest Period.

                  "Convert",  "Conversion",  and  "Converted"  shall  refer to a
         conversion  pursuant  to Section  3.2 or  Sections  3.7  through  3.10,
         inclusive, of a Base Rate Loan into a Eurodollar Loan.

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

                  "Deposited  Notices"  means  a  collective  reference  to  the
         Capital  Call  Notices  delivered  by the Fund to the Bank  pursuant to
         Section 5.1(b) and maintained on deposit with the Bank as  contemplated
         by Section 4.7.

                  "Dollars"  and "$" means  dollars  in lawful  currency  of the
         United States of America.

                  "Equity  Interest"  means  (i) in the  case of a  corporation,
         capital stock,  (ii) in the case of an association or business  entity,
         any  and  all  shares,  interests,  participations,   rights  or  other
         equivalents (however designated) of capital stock, (iii) in the case of
         a partnership,  partnership  interests (whether general or limited) and
         (iv) in the case of a limited liability company, membership interests.

                  "Eurodollar Loan" means any Loan that bears interest at a rate
         based upon the Eurodollar Rate.

                  "Eurodollar  Rate"  means,  for any  Eurodollar  Loan  for any
         Interest  Period  therefor,  the rate per annum  (rounded  upwards,  if
         necessary,  to the nearest  1/100 of 1%)  determined  by the Bank to be
         equal to the quotient  obtained by dividing (a) the  Interbank  Offered
         Rate for such  Eurodollar  Loan for such Interest Period by (b) 1 minus
         the Eurodollar  Reserve  Requirement  for such Eurodollar Loan for such
         Interest Period.

                  "Eurodollar  Reserve  Requirement"  means,  at any  time,  the
         maximum rate at which  reserves  (including,  without  limitation,  any
         marginal, special, supplemental, or emergency reserves) are required to
         be maintained under  regulations  issued from time to time by the Board
         of Governors of the Federal Reserve System (or any successor) by member
         banks of the Federal Reserve System against "Eurocurrency  liabilities"
         (as such term is used in Regulation D of such Board).  Without limiting
         the effect of the foregoing,  the Eurodollar Reserve  Requirement shall
         reflect any other  reserves  required to be  maintained  by such member
         banks with respect to (i) any category of  liabilities  which  includes
         deposits by reference to which the  Adjusted  Eurodollar  Rate is to be
         determined,  or (ii) any  category  of  extensions  of  credit or other
         assets which include  Eurodollar  Loans.  The Adjusted  Eurodollar Rate
         shall be adjusted  automatically on and as of the effective date of any
         change in the Eurodollar Reserve Requirement.

                  "Event of  Default"  shall have the  meaning  assigned to such
         term in Section 9.1.

                  "Existing Credit Agreement" means the Credit Agreement,  dated
         as of May 18,  1998,  among Cluett  American  Corp.,  as borrower,  the
         guarantors  party  thereto,  the  lenders  party  thereto  and  Bank of
         America,  N.A.,  as  agent  for such  lenders,  as  amended,  modified,
         restated or supplemented from time to time.

                  "Federal  Funds Rate"  means,  for any day, the rate per annum
         (rounded  upwards,  if necessary,  to the nearest 1/100 of 1%) 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 on such day, as published by the Federal  Reserve
         Bank of New York on the Business Day next succeeding such day; provided
         that (a) if such day is not a Business  Day, the Federal Funds Rate for
         such day shall be such rate on such  transactions on the next preceding
         Business Day as so published on the next  succeeding  Business Day, and
         (b) if no such rate is so  published on such next  succeeding  Business
         Day,  the  Federal  Funds Rate for such day shall be the  average  rate
         charged to the Bank (in its  individual  capacity)  on such day on such
         transactions as determined by the Bank.

                  "Fund"  shall have the  meaning  assigned  to such term in the
         heading hereof.

                  "GAAP" means generally accepted  accounting  principles in the
         United  States as in effect from time to time set forth in the opinions
         and pronouncements of the Accounting  Principles Board and the American
         Institute  of  Certified  Public  Accountants  and the  statements  and
         pronouncements  of the  Financial  Accounting  Standards  Board and the
         rules and regulations of the Securities and Exchange  Commission  which
         are applicable as of the date of determination.

         "General Partner" means Vestar Associates III, L.P., a Delaware limited
         partnership, as general partner of the Fund.

                  "Governmental  Authority" means any Federal,  state,  local or
         foreign court or governmental  agency,  authority,  instrumentality  or
         regulatory body.

                  "Guaranty  Obligations"  means,  with  respect to any  Person,
         without  duplication,  any  obligations  of  such  Person  (other  than
         endorsements   in  the  ordinary   course  of  business  of  negotiable
         instruments  for  deposit or  collection)  guaranteeing  or intended to
         guarantee any  Indebtedness of any other Person in any manner,  whether
         direct or indirect,  and including  without  limitation any obligation,
         whether or not contingent, (i) to purchase any such Indebtedness or any
         Property  constituting  security  therefor,  (ii) to advance or provide
         funds  or  other  support  for the  payment  or  purchase  of any  such
         Indebtedness or to maintain working capital,  solvency or other balance
         sheet condition of such other Person (including without limitation keep
         well  agreements,  maintenance  agreements,  comfort letters or similar
         agreements  or   arrangements)   for  the  benefit  of  any  holder  of
         Indebtedness of such other Person, (iii) to lease or purchase Property,
         securities or services primarily for the purpose of assuring the holder
         of such Indebtedness,  or (iv) to otherwise assure or hold harmless the
         holder of such Indebtedness against loss in respect thereof. The amount
         of any Guaranty Obligation  hereunder shall (subject to any limitations
         set forth  therein) be deemed to be an amount equal to the  outstanding
         principal  amount  (or  maximum  principal  amount,  if  larger) of the
         Indebtedness in respect of which such Guaranty Obligation is made.

                  "Hedging   Agreements"  means  any  interest  rate  protection
         agreement or foreign currency exchange agreement.

                  "Indebtedness"  means,  with  respect to any  Person,  without
         duplication, (a) all obligations of such Person for borrowed money, (b)
         all obligations of such Person evidenced by bonds, debentures, notes or
         similar  instruments,  or upon which interest  payments are customarily
         made,  (c) all  obligations  of such Person under  conditional  sale or
         other title retention agreements relating to Property purchased by such
         Person (other than customary  reservations or retentions of title under
         agreements  with  suppliers  entered  into in the  ordinary  course  of
         business),  (d) all obligations of such Person issued or assumed as the
         deferred  purchase  price of  Property or  services  purchased  by such
         Person  (other  than  trade debt  incurred  in the  ordinary  course of
         business  and due within six months of the  incurrence  thereof)  which
         would appear as liabilities on a balance sheet of such Person,  (e) all
         obligations of such Person under take-or-pay or similar arrangements or
         under commodities agreements, (f) all Indebtedness of others secured by
         (or for which the holder of such  Indebtedness  has an existing  right,
         contingent or otherwise,  to be secured by) any Lien on, or payable out
         of the proceeds of production from,  Property owned or acquired by such
         Person,  whether  or not the  obligations  secured  thereby  have  been
         assumed, (g) all Guaranty Obligations of such Person, (h) the principal
         portion  of all  obligations  of such  Person  under  any lease by that
         Person as lessee which,  in accordance  with GAAP,  should be accounted
         for as a capital  lease on the balance  sheet of such  Person,  (i) all
         obligations  of such Person under Hedging  Agreements,  (j) the maximum
         amount of all standby letters of credit issued or bankers'  acceptances
         facilities  created  for  the  account  of  such  Person  and,  without
         duplication,  all drafts drawn thereunder (to the extent unreimbursed),
         (k) all preferred  Equity  Interests issued by such Person and which by
         the terms  thereof  could be (at the request of the holders  thereof or
         otherwise)  subject  to  mandatory  sinking  fund  payments,  mandatory
         redemption or other  acceleration  (other than as a result of any event
         or  condition  that  does not in fact  result in a  redemption  of such
         preferred  Equity  Interests)  prior  to the  Maturity  Date,  (l)  the
         principal portion of all obligations of such Person under any synthetic
         lease, tax retention operating lease, off-balance sheet loan or similar
         off-balance   sheet  financing   product  where  such   transaction  is
         considered   borrowed  money  indebtedness  for  tax  purposes  but  is
         classified as an operating  lease for  accounting  purposes and (m) the
         Indebtedness  of any  partnership  or  unincorporated  joint venture in
         which  such  Person is a general  partner  or a joint  venturer  to the
         extent such Person is liable therefor.

                  "Interbank  Offered Rate" means,  for any Eurodollar  Loan for
         any Interest Period therefor,  the rate per annum (rounded upwards,  if
         necessary,  to the nearest 1/100 of 1%) appearing on Telerate Page 3750
         (or any  successor  page)  as the  London  interbank  offered  rate for
         deposits  in Dollars at  approximately  11:00  a.m.  (London  time) two
         Business Days prior to the first day of such Interest Period for a term
         comparable to such Interest Period.  If for any reason such rate is not
         available,  the term  "Interbank  Offered  Rate"  shall  mean,  for any
         Eurodollar  Loan for any Interest Period  therefor,  the rate per annum
         (rounded upwards,  if necessary,  to the nearest 1/100 of 1%) appearing
         on Reuters  Screen LIBO Page as the London  interbank  offered rate for
         deposits  in Dollars at  approximately  11:00  a.m.  (London  time) two
         Business Days prior to the first day of such Interest Period for a term
         comparable to such Interest Period; provided, however, if more than one
         rate is  specified on Reuters  Screen LIBO Page,  the  applicable  rate
         shall be the  arithmetic  mean of all such rates (rounded  upwards,  if
         necessary, to the nearest 1/100 of 1%).

                  "Interest  Payment Date" means (a) as to Base Rate Loans,  the
         last  Business  Day of each  fiscal  quarter  of the  Borrower  and the
         Maturity  Date  and (b) as to  Eurodollar  Loans,  the last day of each
         applicable Interest Period and the Maturity Date, and in addition where
         the applicable  Interest  Period for a Eurodollar  Loan is greater than
         three months, then also the date three months from the beginning of the
         Interest Period and each three months thereafter.

                  "Interest  Period" means, as to Eurodollar  Loans, a period of
         one,  two,  three or six months'  duration,  as the Borrower may elect,
         commencing,  in each  case,  on the  date of the  borrowing  (including
         continuations and conversions thereof);  provided,  however, (a) if any
         Interest  Period would end on a day which is not a Business  Day,  such
         Interest Period shall be extended to the next  succeeding  Business Day
         (except that where the next  succeeding  Business Day falls in the next
         succeeding  calendar month,  then on the next preceding  Business Day),
         (b) no Interest  Period shall extend  beyond the Maturity  Date and (c)
         where  an  Interest  Period  begins  on a day  for  which  there  is no
         numerically  corresponding  day in the  calendar  month  in  which  the
         Interest  Period is to end, such Interest  Period shall end on the last
         Business Day of such calendar month.

                  "Letter  of Credit"  means any letter of credit  issued by the
         Bank for the account of the  Borrower in  accordance  with the terms of
         Section 2.2.

                  "Lien"  means,  with respect to any  Property,  any  mortgage,
         lien, pledge,  charge,  security interest or encumbrance of any kind in
         respect of such Property,  whether or not filed,  recorded or otherwise
         perfected under applicable law (including any conditional sale or other
         title retention agreement,  any lease in the nature thereof, any option
         or  other  agreement  to sell or give a  security  interest  in and any
         filing  of or  agreement  to give any  financing  statement  under  the
         Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

                  "Limited Partners" means the limited partners of the Fund.

                  "Loans"  shall  have  the  meaning  assigned  to such  term in
         Section  2.1(a).  The term "Loan" shall also mean a portion of any Loan
         bearing  interest at the Adjusted Base Rate or the Adjusted  Eurodollar
         Rate and referred to as a Base Rate Loan or a Eurodollar Loan.

                  "LOC Committed Amount" shall have the meaning assigned to such
         term in Section 2.2(a).

                  "LOC Documents"  means,  with respect to any Letter of Credit,
         any application therefor, and any agreements,  instruments,  guarantees
         or other documents  (whether  general in application or applicable only
         to such Letter of Credit) governing or providing for (i) the rights and
         obligations of the parties  concerned or at risk or (ii) any collateral
         security for such obligations.

                  "LOC  Obligations"  means,  at any  time,  the  sum of (i) the
         maximum  amount  which  is,  or at  any  time  thereafter  may  become,
         available  to be  drawn  under  Letters  of  Credit  then  outstanding,
         assuming  compliance with all requirements for drawings  referred to in
         such Letters of Credit plus (ii) the  aggregate  amount of all drawings
         under  Letters  of  Credit  honored  by the  Bank  but not  theretofore
         reimbursed by the Borrower.

                  "Material  Adverse Effect" means a material  adverse effect on
         (i) the  condition  (financial  or  otherwise),  operations,  business,
         assets,  liabilities  or results of  operations  of the Fund,  (ii) the
         ability  of the Fund to  perform  any  material  obligation  under this
         Credit  Agreement  or (iii) the rights and  remedies  of the Bank under
         this CreditAgreement.

                  "Maturity Date" means December 31, 2001.
                   -------------

                  "Notice of Borrowing"  means a written  notice of borrowing in
         substantially  the form of Exhibit  2.1(b)(i),  as  required by Section
         2.1(b)(i).

                  "Notice of  Extension/Conversion"  means the written notice of
         extension or  conversion in  substantially  the form of Exhibit 3.2, as
         required by Section 3.2.

                  "Obligations"   means,   with   respect   to  the  Fund,   all
         Indebtedness,   all  other  obligations  that  would  be  reflected  as
         liabilities  on a balance sheet of the Fund and the purchase price that
         the Fund  (directly  or  indirectly,  including,  but not  limited  to,
         through any Subsidiary of the Fund) or the General  Partner has agreed,
         pursuant  to  a  binding  contract,   to  pay  for  any  investment  or
         acquisition that has not yet closed. The Obligations of the Fund at any
         time shall include the payment  obligations of the Fund under Section 4
         of this Credit Agreement.

                  "Other Taxes" shall have the meaning  assigned to such term in
         Section 3.11(b).

                  "Partners" means a collective reference to the General Partner
         and the Limited Partners.

                  "Partnership Agreement" means that certain limited partnership
         agreement, dated as of November 22, 1996, among the General Partner and
         the individuals and entities party thereto, as limited partners.

                  "Person"  means any  individual,  partnership,  joint venture,
         firm,  corporation,  limited liability company,  association,  trust or
         other  enterprise  (whether or not  incorporated)  or any  Governmental
         Authority.

                  "Plan Asset  Regulations"  means the plan asset regulations of
         the Department of Labor, 29 CFR ss. 2510.3-101 et seq., as amended, and
         the advisory opinions and rulings issued thereunder.

                  "Prime Rate" means the per annum rate of interest  established
         from time to time by the Bank as its prime rate,  which rate may not be
         the lowest rate of interest charged by the Bank to its customers.

                  "Property"  means  any  interest  in any kind of  property  or
         asset, whether real, personal or mixed, or tangible or intangible.

                  "Remaining Capital Commitment  Balance" means, with respect to
         any Limited Partner at any time, an amount equal to the total remaining
         amount of capital  contributions that such Limited Partner is obligated
         at  such  time  to  make  to the  Fund  pursuant  to the  terms  of the
         Partnership Agreement.

                  "Subsidiary"  means,  as to any  Person at any  time,  (a) any
         corporation  more than 50% of whose  Equity  Interests  of any class or
         classes  having by the terms thereof  ordinary  voting power to elect a
         majority of the directors of such corporation  (irrespective of whether
         or not at such time,  any class or classes  of such  corporation  shall
         have or might  have  voting  power by  reason of the  happening  of any
         contingency)  is  at  such  time  owned  by  such  Person  directly  or
         indirectly through Subsidiaries, and (b) any partnership,  association,
         joint  venture  or  other  entity  of which  such  Person  directly  or
         indirectly through  Subsidiaries owns at such time more than 50% of the
         Equity Interests.

                 "Taxes"  shall  have  the  meaning  assigned  to such  term in
         Section 3.11.

                  "Unused  Fee" shall have the meaning  assigned to such term in
         Section 3.5.

                  "Unused Committed Amount" means, for any period, the amount by
         which (a) the then  applicable  Committed  Amount exceeds (b) the daily
         average sum for such period of (i) the outstanding  aggregate principal
         amount  of all  Loans  plus (ii) the  outstanding  aggregate  principal
         amount of all LOC Obligations.

                  "Unused  Fee  Calculation   Period"  shall  have  the  meaning
         assigned to such term in Section 3.5.

                  "Voting Equity  Interests"  means, with respect to any Person,
         Equity  Interests  issued  by such  Person  the  holders  of which  are
         ordinarily,  in the absence of contingencies,  entitled to vote for the
         election of directors (or persons performing similar functions) of such
         Person,  even  though  the right so to vote has been  suspended  by the
         happening of such a contingency.

1.2  Computation of Time Periods.

         For  purposes of  computation  of periods of time  hereunder,  the word
         "from" means "from and  including"  and the words "to" and "until" each
         mean "to but excluding."

                                    SECTION 2

                                CREDIT FACILITIES

2.1  Loans.

                  (a) Commitment. Subject to the terms and conditions hereof and
         in reliance upon the  representations  and warranties set forth herein,
         the Bank agrees to make  available  to the  Borrower  revolving  credit
         loans requested by the Borrower in Dollars  ("Loans") from time to time
         from the Closing Date until the Maturity  Date, or such earlier date as
         the Commitment shall have been terminated as provided herein; provided,
         however,  that the sum of the aggregate principal amount of outstanding
         Loans shall not exceed  SEVEN  MILLION FIVE  HUNDRED  THOUSAND  DOLLARS
         ($7,500,000) (as such aggregate maximum amount may be reduced from time
         to time as provided in Section 3.4, the "Committed Amount").  Loans may
         consist  of Base  Rate  Loans or  Eurodollar  Loans,  or a  combination
         thereof, as the Borrower may request;  provided,  however, that no more
         than 5 Eurodollar Loans shall be outstanding  hereunder at any time (it
         being  understood  that,  for purposes  hereof,  Eurodollar  Loans with
         different  Interest Periods shall be considered as separate  Eurodollar
         Loans,  even if they  begin  on the  same  date,  although  borrowings,
         extensions  and  conversions  may, in  accordance  with the  provisions
         hereof,  be  combined  at  the  end of  existing  Interest  Periods  to
         constitute a new Eurodollar Loan with a single Interest Period).  Loans
         hereunder  may  be  repaid  and  reborrowed  in  accordance   with  the
         provisions hereof.

                  (b)      Loan Borrowings.
                           ---------------

                           (i) Notice of Borrowing. The Borrower shall request a
                  Loan  borrowing  by  written  notice  (or  telephonic   notice
                  promptly  confirmed  in  writing)  to the Bank (a  "Notice  of
                  Borrowing")  not  later  than  11:00  A.M.  (Charlotte,  North
                  Carolina time) on the Business Day of the requested  borrowing
                  in the case of Base Rate Loans,  and on the third Business Day
                  prior to the date of the  requested  borrowing  in the case of
                  Eurodollar   Loans.   Each  Notice  of   Borrowing   shall  be
                  irrevocable  and shall  specify (A) that a Loan is  requested,
                  (B) the  date of the  requested  borrowing  (which  shall be a
                  Business  Day),  (C)  the  aggregate  principal  amount  to be
                  borrowed,  and (D) whether the borrowing shall be comprised of
                  Base Rate Loans,  Eurodollar  Loans or a combination  thereof,
                  and if Eurodollar Loans are requested,  the Interest Period(s)
                  therefor.  Each Notice of Borrowing  shall be  acknowledged in
                  writing by the Fund. If the Borrower  shall fail to specify in
                  any such Notice of Borrowing (I) an applicable Interest Period
                  in the case of a  Eurodollar  Loan,  then such notice shall be
                  deemed to be a request for an Interest Period of one month, or
                  (II) the type of Loan  requested,  then such  notice  shall be
                  deemed to be a request for a Base Rate Loan hereunder.

                            (ii) Minimum Amounts. Each Eurodollar  Loan or  Base
                  Rate  Loan  that  is  a Loan shall be in integral multiples of
                  $100,000 (or the remaining amount of the  Committed Amount, if
                  less).

                           (iii)   Advances.   The  Bank  will  make  each  Loan
                  borrowing  available to the Borrower by crediting  the account
                  of the  Borrower  on  the  books  of the  Bank  by  1:00  P.M.
                  (Charlotte,  North Carolina time) on the date specified in the
                  applicable  Notice  of  Borrowing  in  Dollars  and  in  funds
                  immediately available to the Borrower.

                    (c)Repayment.  The  Borrower  hereby  promises to pay to the
                    order of the Bank, on the Maturity Date (unless  accelerated
                    sooner  pursuant to Section 9.2),  the  principal  amount of
                    Seven Million Five Hundred Thousand Dollars ($7,500,000) or,
                    if less than such  principal  amount,  the aggregate  unpaid
                    principal  amount  of  all  Loans  then   outstanding.

                   (d) Interest. Subject to the provisions of Section 3.1,

                           (i) Base Rate  Loans.  During  such  periods as Loans
                  shall be  comprised  in whole or in part of Base  Rate  Loans,
                  such Base Rate Loans  shall bear  interest at a per annum rate
                  equal to the Adjusted Base Rate.

                           (ii) Eurodollar  Loans.  During such periods as Loans
                  shall be  comprised in whole or in part of  Eurodollar  Loans,
                  such Eurodollar  Loans shall bear interest at a per annum rate
                  equal to the Adjusted Eurodollar Rate.

         The  Borrower  hereby  promises  to pay in  arrears to the order of the
         Bank, on each  Interest  Payment Date (or at such other times as may be
         specified herein), accrued interest on the Loans.

2.2  Letter of Credit Facility.

                  (a) Issuance.  Subject to the terms and conditions  hereof and
         of the LOC Documents,  if any, and any other terms and conditions which
         the  Bank   may   reasonably   require   and  in   reliance   upon  the
         representations  and  warranties  set forth herein,  the Bank agrees to
         issue  standby and trade Letters of Credit in Dollars from time to time
         from  the  Closing  Date  until  the date  five  (5) days  prior to the
         Maturity Date as the Borrower may request,  in a form acceptable to the
         Bank; provided, however, that (i) the LOC Obligations outstanding shall
         not at any time exceed  SEVEN  MILLION FIVE  HUNDRED  THOUSAND  DOLLARS
         ($7,500,000)  (the  "LOC  Committed  Amount")  and  (ii) the sum of the
         aggregate  principal  amount of outstanding  Loans plus LOC Obligations
         outstanding  shall not at any time  exceed  the  Committed  Amount.  No
         Letter of Credit  shall (x) have an original  expiry date more than one
         year  from the  date of  issuance  or (y) as  originally  issued  or as
         extended,  have an expiry date extending beyond the Maturity Date. Each
         Letter of Credit  shall  comply  with the related  LOC  Documents.  The
         issuance  and expiry dates of each Letter of Credit shall be a Business
         Day.

                  (b) Notice. The request for the issuance of a Letter of Credit
         shall be  submitted  by the  Borrower  to the Bank at least  three  (3)
         Business Days prior to the requested date of issuance.

                  (c)  Reimbursement.  In the  event of any  drawing  under  any
         Letter of Credit,  the Bank will promptly  notify the Borrower.  Unless
         the  Borrower  shall  immediately  notify  the Bank  that the  Borrower
         intends to otherwise reimburse the Bank for such drawing,  the Borrower
         shall be  deemed  to have  requested  that the Bank  make a Loan in the
         amount  of the  drawing  as  provided  in  subsection  (d) below on the
         related Letter of Credit, the proceeds of which will be used to satisfy
         the  related  reimbursement  obligations.   The  Borrower  promises  to
         reimburse  the Bank on the day on which the Bank  notifies the Borrower
         of a drawing under any Letter of Credit  (either with the proceeds of a
         Loan obtained  hereunder or otherwise) in same day funds  provided such
         notice is  received  by the  Borrower  from the Bank on or before  2:00
         P.M.(Charlotte,  North Carolina time)  (otherwise such payment shall be
         made on or before 12:00 Noon  (Charlotte,  North  Carolina time) on the
         Business  Day next  succeeding  the day such notice is  received).  The
         unreimbursed  amount of any drawing under a Letter of Credit shall bear
         interest  at a per  annum  rate  equal  to (i)  for the  first  two (2)
         Business Days following the date of the related  drawing,  the Adjusted
         Base Rate and (ii)  thereafter,  the  Adjusted  Base Rate plus 2%.  The
         Borrower's  reimbursement  obligations  hereunder shall be absolute and
         unconditional  under all  circumstances  irrespective  of any rights of
         setoff,  counterclaim  or defense to payment the  Borrower may claim or
         have against the Bank,  the  beneficiary  of the Letter of Credit drawn
         upon or any other  Person,  including  without  limitation  any defense
         based on any failure of the  Borrower to receive  consideration  or the
         legality,  validity,  regularity or  unenforceability  of the Letter of
         Credit.

                  (d) Repayment  with Revolving  Loans.  On any day on which the
         Borrower shall have requested, or been deemed to have requested, a Loan
         advance to reimburse a drawing under a Letter of Credit, a Loan advance
         comprised  of Base Rate  Loans (or  Eurodollar  Loans to the extent the
         Borrower has complied  with the  procedures of Section  2.1(b)(i)  with
         respect thereto) shall be immediately made to the Borrower by the Bank.

                  (e)   Designation   of  a  Subsidiary  as  an  Account  Party.
         Notwithstanding  anything  to the  contrary  set  forth in this  Credit
         Agreement,  including  without  limitation  Section 2.2(a), a Letter of
         Credit issued hereunder may contain a statement to the effect that such
         Letter of  Credit is issued  for the  account  of a  Subsidiary  of the
         Borrower,  provided that notwithstanding  such statement,  the Borrower
         shall be the  actual  account  party for all  purposes  of this  Credit
         Agreement for such Letter of Credit and such statement shall not affect
         the Borrower's reimbursement obligations hereunder with respect to such
         Letter of Credit.

                  (f)      Renewal,  Extension.  The  renewal  or  extension  of
         any Letter of Credit  shall,  for  purposes  hereof,  be treated in all
         respects the same as the issuance of a new Letter of Credit hereunder.

                  (g)  Uniform  Customs  and  Practices.  The  Bank may have the
         Letters of Credit be subject to The Uniform  Customs and  Practice  for
         Documentary Credits (the "UCP") or the International  Standby Practices
         1998 (the "ISP98"), in either case as published as of the date of issue
         by the International  Chamber of Commerce, in which case the UCP or the
         ISP98,  as applicable,  may be  incorporated  therein and deemed in all
         respects to be a part thereof.

                  (h)      Indemnification; Nature of Bank's Duties.
                           ----------------------------------------

                           (i) In addition to its other  obligations  under this
                  Section 2.2, the Borrower  hereby  agrees to pay, and protect,
                  indemnify and save the Bank harmless from and against, any and
                  all claims,  demands,  liabilities,  damages,  losses,  costs,
                  charges and expenses  (including  reasonable  attorneys' fees)
                  that the Bank may  incur or be  subject  to as a  consequence,
                  direct  or  indirect,  of (A) the  issuance  of any  Letter of
                  Credit or (B) the failure of the Bank to honor a drawing under
                  a Letter of Credit as a result of any act or omission, whether
                  rightful or  wrongful,  of any present or future de jure or de
                  facto  government or Governmental  Authority (all such acts or
                  omissions, herein called "Government Acts").

                           (ii)  As  between  the  Borrower  and the  Bank,  the
                  Borrower  shall  assume  all risks of the acts,  omissions  or
                  misuse of any Letter of Credit by the beneficiary thereof. The
                  Bank  shall not be  responsible:  (A) for the form,  validity,
                  sufficiency,  accuracy,  genuineness  or legal  effect  of any
                  document  submitted  by  any  party  in  connection  with  the
                  application for and issuance of any Letter of Credit,  even if
                  it should in fact prove to be in any or all respects  invalid,
                  insufficient,  inaccurate,  fraudulent or forged;  (B) for the
                  validity or  sufficiency  of any  instrument  transferring  or
                  assigning  or  purporting  to transfer or assign any Letter of
                  Credit  or the  rights  or  benefits  thereunder  or  proceeds
                  thereof,  in whole or in part, that may prove to be invalid or
                  ineffective  for  any  reason;  (C)  for  errors,   omissions,
                  interruptions  or delays in  transmission  or  delivery of any
                  messages,  by mail,  cable,  telegraph,  telex  or  otherwise,
                  whether or not they be in cipher; (D) for any loss or delay in
                  the  transmission  or otherwise  of any  document  required in
                  order to make a  drawing  under a Letter  of  Credit or of the
                  proceeds  thereof;  and (E) for any consequences  arising from
                  causes  beyond  the  control of the Bank,  including,  without
                  limitation,  any  Government  Acts.  None of the  above  shall
                  affect, impair, or prevent the vesting of the Bank's rights or
                  powers hereunder.

                           (iii)  In  furtherance   and  extension  and  not  in
                  limitation of the specific  provisions  hereinabove set forth,
                  any  action  taken  or  omitted  by  the  Bank,  under  or  in
                  connection   with  any   Letter  of  Credit  or  the   related
                  certificates, if taken or omitted in good faith, shall not put
                  the Bank under any resulting  liability to the Borrower or the
                  Fund.  It is the  intention  of the  parties  that this Credit
                  Agreement  shall be  construed  and  applied  to  protect  and
                  indemnify  the Bank against any and all risks  involved in the
                  issuance  of the  Letters  of Credit,  all of which  risks are
                  hereby assumed by the Borrower, including, without limitation,
                  any and all  Government  Acts. The Bank shall not, in any way,
                  be liable  for any  failure  by it or  anyone  else to pay any
                  drawing  under  any  Letter  of  Credit  as a  result  of  any
                  Government  Acts or any other cause  beyond the control of the
                  Bank.

                           (iv)  Nothing in this  subsection  (h) is intended to
                  limit the reimbursement  obligations of the Borrower contained
                  in subsection (c) above. The obligations of the Borrower under
                  this  subsection  (h) shall  survive the  termination  of this
                  Credit  Agreement.  No act or omission of any current or prior
                  beneficiary  of a Letter of Credit  shall in any way affect or
                  impair the rights of the Bank to enforce  any right,  power or
                  benefit under this Credit Agreement.

                           (v)   Notwithstanding   anything   to  the   contrary
                  contained in this  subsection  (h), the Borrower shall have no
                  obligation  to indemnify  the Bank in respect of any liability
                  incurred by the Bank (A)  arising out of the gross  negligence
                  or willful misconduct of the Bank, or (B) caused by the Bank's
                  failure to pay under any Letter of Credit  after  presentation
                  to it of a  request  strictly  complying  with the  terms  and
                  conditions  of such Letter of Credit,  unless such  payment is
                  prohibited by any Government Act.

                  (i) Conflict with LOC Documents.  In the event of any conflict
         between  this Credit  Agreement  and any LOC  Document  (including  any
         letter of credit application), this Credit Agreement shall control.

                                                                   SECTION 3

                           OTHER PROVISIONS RELATING TO CREDIT FACILITIES

3.1  Default Rate.

         Upon the  occurrence,  and  during the  continuance,  of default in the
payment  of any amount  hereunder,  such  overdue  amount  shall bear  interest,
payable on demand,  at a per annum  rate 2%  greater  than the rate which  would
otherwise  be  applicable  (or if no rate is  applicable,  whether in respect of
interest, fees or other amounts, then the Adjusted Base Rate plus 2%).

3.2  Extension and Conversion.

         The  Borrower  shall have the option,  on any  Business  Day, to extend
existing Loans into a subsequent permissible Interest Period or to convert Loans
into Loans of another interest rate type; provided,  however, that (i) except as
provided in Section 3.8,  Eurodollar Loans may be converted into Base Rate Loans
or extended as Eurodollar Loans for new Interest Periods only on the last day of
the Interest Period applicable  thereto unless the Borrower makes payment of any
amounts  payable  pursuant to Section 3.12 in connection with such conversion or
extension,  (ii) no Eurodollar Loan may be extended and no Base Rate Loan may be
converted  into  Eurodollar  Loans  when any  Default  or Event of Default is in
existence and the Bank has determined  that such  conversion or extension is not
appropriate,  (iii) Loans extended as, or converted into, Eurodollar Loans shall
be subject to the terms of the  definition  of  "Interest  Period"  set forth in
Section  1.1 and  shall  be in such  minimum  amounts  as  provided  in  Section
2.1(b)(ii),  (iv) no more than 5 Eurodollar Loans shall be outstanding hereunder
at any time (it being  understood  that, for purposes  hereof,  Eurodollar Loans
with  different  Interest  Periods shall be  considered  as separate  Eurodollar
Loans, even if they begin on the same date, although borrowings,  extensions and
conversions  may, in accordance with the provisions  hereof,  be combined at the
end of existing  Interest  Periods to  constitute a new  Eurodollar  Loan with a
single  Interest  Period),  and (v) any request for extension or conversion of a
Eurodollar  Loan which shall fail to specify an Interest  Period shall be deemed
to be a request  for an Interest  Period of one month.  Each such  extension  or
conversion   shall  be  effected   by  the   Borrower  by  giving  a  Notice  of
Extension/Conversion (or telephonic notice promptly confirmed in writing) to the
office of the Bank  specified  in specified  in Section  10.1,  or at such other
office as the Bank may  designate  in writing,  prior to 11:00 A.M.  (Charlotte,
North  Carolina time) on the Business Day of, in the case of the conversion of a
Eurodollar  Loan into a Base Rate Loan,  and on the third Business Day prior to,
in the case of the  extension of a Eurodollar  Loan as, or  conversion of a Base
Rate Loan  into,  a  Eurodollar  Loan,  the date of the  proposed  extension  or
conversion,  specifying the date of the proposed  extension or  conversion,  the
Loans to be so extended or  converted,  the types of Loans into which such Loans
are to be converted and, if appropriate,  the applicable  Interest  Periods with
respect thereto.  Each request for extension or conversion shall be irrevocable.
In the event the  Borrower  fails to  request  extension  or  conversion  of any
Eurodollar  Loan in  accordance  with this  Section,  or any such  conversion or
extension is not  permitted or required by this  Section,  then such  Eurodollar
Loan shall be  automatically  converted  into a Base Rate Loan at the end of the
Interest Period applicable thereto.

3.3  Prepayments.

                  (a)      Voluntary Prepayments.    The Borrower shall have the
         right to prepay  Loans in whole or in part from time to time.

                  (b)      Mandatory Prepayments.
                           ---------------------

                           (i) Committed Amount.If,  at any time, the sum of the
                  aggregate  principal  amount  of  outstanding  Loans  plus LOC
                  Obligations outstanding shall exceed the Committed Amount, the
                  Borrower hereby  promises to prepay the Loans  immediately and
                  (after all Loans and have been repaid) cash  collateralize the
                  LOC  Obligations  in an amount  sufficient  to eliminate  such
                  excess.

                           (ii) Other.  Notwithstanding  any  provision  of this
                  Credit Agreement to the contrary, the Borrower hereby promises
                  to prepay  each Loan on or before  the date 30 days after such
                  Loan  is  advanced  by the  Bank;  provided  that  each of the
                  parties   hereto  agrees  that  the  Fund  may,  in  its  sole
                  discretion,  waive the  obligation of the Borrower  under this
                  Section 3.3(b)(ii) with respect to any Loan.

                  (c) Generally. All prepayments under this Section 3.3(a) shall
         be subject to Section 3.12, but otherwise  without  premium or penalty,
         and be accompanied by interest on the principal  amount prepaid through
         the date of prepayment.

3.4  Termination and Reduction of Commitment.

                  (a) Voluntary  Reductions.  The Borrower may from time to time
         permanently  reduce or terminate  the  Committed  Amount in whole or in
         part in integral multiples of $100,000 (or, if less, the full remaining
         amount of the then  applicable  Committed  Amount)  upon five  Business
         Days' prior  written  notice to the Bank;  provided,  however,  no such
         termination or reduction  shall be made which would cause the aggregate
         principal amount of outstanding Loans plus LOC Obligations  outstanding
         to  exceed  the  Committed  Amount  unless,   concurrently   with  such
         termination or reduction,  the Loans are repaid to the extent necessary
         to eliminate such excess.

                  (b)      Maturity  Date.   The  Commitment  of the  Bank shall
         automatically terminate on the Maturity Date.
                           -------------

                  (c) General.  The Borrower shall pay to the Bank in accordance
         with the  terms of  Section  3.5,  on the date of each  termination  or
         reduction of the Committed  Amount,  the Unused Fee accrued through the
         date of such  termination  or reduction on the amount of the  Committed
         Amount so terminated or reduced.

3.5  Fees.

                  (a) Unused Fee. In consideration of the Commitment of the Bank
         hereunder,  the Borrower  hereby promises to pay to the Bank a fee (the
         "Unused Fee") on the Unused  Committed  Amount  computed at a per annum
         rate for each day during the applicable  Unused Fee Calculation  Period
         (hereinafter  defined) at a rate equal to 50 basis  points.  The Unused
         Fee shall  commence to accrue on the Closing  Date and shall be due and
         payable  in  arrears  on the last  business  day of each  March,  June,
         September  and  December  (and any date  that the  Committed  Amount is
         reduced as provided in Section  3.4(a) and the  Maturity  Date) for the
         immediately  preceding  quarter (or portion thereof) (each such quarter
         or portion thereof for which the Unused Fee is payable  hereunder being
         herein  referred to as an "Unused Fee Calculation  Period"),  beginning
         with the first of such dates to occur after the Closing Date.

                  (b)      Letter of Credit Fees.
                           ---------------------

                           (i)  Standby  Letter  of  Credit   Issuance  Fee.  In
                  consideration  of the  issuance  of standby  Letters of Credit
                  hereunder,  the Borrower  promises to pay to the Bank a fee of
                  3.0% per annum on the average daily maximum  amount  available
                  to be drawn under each such standby Letter of Credit  computed
                  for  each  day  from  the  date  of  issuance  to the  date of
                  expiration;  such fee will be payable  quarterly in arrears on
                  the last  Business  Day of each  March,  June,  September  and
                  December and the Maturity Date for the  immediately  preceding
                  quarter (or a portion thereof).

                           (ii)  Trade   Letter  of  Credit   Drawing   Fee.  In
                  consideration  of the  issuance  of trade  Letters  of  Credit
                  hereunder,  the Borrower  promises to pay to the Bank a fee of
                  1.5% per annum on the average daily maximum  amount  available
                  to be drawn  under each such trade  Letter of Credit  computed
                  for  each  day  from  the  date  of  issuance  to the  date of
                  expiration;  such fee will be payable  quarterly in arrears on
                  the last  Business  Day of each  March,  June,  September  and
                  December and the Maturity Date for the  immediately  preceding
                  quarter (or a portion thereof).

                           (iii)  Fronting  Fees,  etc.  In addition to the fees
                  payable  pursuant to clauses (i) and (ii) above,  the Borrower
                  promises  to pay to the Bank (i) a letter of  credit  fronting
                  fee of 0.125% per annum on the average  daily  maximum  amount
                  available to be drawn under each Letter of Credit computed for
                  each day from the date of issuance  to the date of  expiration
                  (which  fronting fee shall be payable  quarterly in arrears on
                  the last  Business  Day of each  March,  June,  September  and
                  December and the Maturity Date for the  immediately  preceding
                  quarter (or a portion thereof)) and (ii) the customary charges
                  from time to time of the Bank with  respect  to the  issuance,
                  amendment,   transfer,   administration,    cancellation   and
                  conversion of, and drawings under, such Letters of Credit.

3.6  Capital Adequacy.

         If the Bank has determined, after the date hereof, that the adoption or
the becoming  effective of, or any change in, or any change by any  Governmental
Authority,  central bank or comparable agency charged with the interpretation or
administration   thereof  in  the   interpretation  or  administration  of,  any
applicable law, rule or regulation regarding capital adequacy,  or compliance by
the Bank with any request or directive  regarding  capital adequacy  (whether or
not having the force of law) of any such  authority,  central bank or comparable
agency,  has the effect of reducing the rate of return on the Bank's  capital or
assets as a consequence of its  commitments or obligations  hereunder to a level
below  that  which  the  Bank  could  have  achieved  but  for  such   adoption,
effectiveness,  change or  compliance  (taking  into  consideration  the  Bank's
policies with respect to capital adequacy) by an amount deemed by the Bank to be
material,  then,  upon notice  from the Bank to the  Borrower  setting  forth in
reasonable detail the change and the calculation of such reduced rate of return,
the Borrower  shall be obligated  to pay to the Bank such  additional  amount or
amounts as will compensate the Bank for such reduction.  Each  determination  by
the Bank of amounts owing under this Section shall,  absent  demonstrable error,
be conclusive and binding on the parties hereto.

3.7  Limitation on Eurodollar Loans.

         If on or  prior  to the  first  day  of any  Interest  Period  for  any
Eurodollar Loan:

                  (a)  the  Bank  determines  (which   determination   shall  be
         conclusive)  that by reason of  circumstances  affecting  the  relevant
         market, adequate and reasonable means do not exist for ascertaining the
         Eurodollar Rate for such Interest Period; or

                  (b)  the  Bank  determines  (which   determination   shall  be
         conclusive)  that the  Eurodollar  Rate will not  adequately and fairly
         reflect  the  cost to the Bank of  funding  Eurodollar  Loans  for such
         Interest Period;

then the Bank shall give the Borrower prompt notice thereof, and so long as such
condition  remains in  effect,  the Bank  shall be under no  obligation  to make
additional  Eurodollar  Loans,  Continue  Eurodollar Loans, or Convert Base Rate
Loans into  Eurodollar  Loans and the Borrower  shall, on the last day(s) of the
then current Interest  Period(s) for the outstanding  Eurodollar  Loans,  either
prepay such  Eurodollar  Loans or Convert such  Eurodollar  Loans into Base Rate
Loans in  accordance  with the  terms of this  Credit  Agreement.  The Bank will
promptly  withdraw  any  determination  pursuant to this  Section 3.7 as soon as
circumstances allow.

3.8  Illegality.

         Notwithstanding  any other provision of this Credit  Agreement,  in the
event that it becomes unlawful for the Bank or its Applicable  Lending Office to
make, maintain or fund Eurodollar Loans hereunder,  then the Bank shall promptly
notify the Borrower  thereof and the Bank's  obligation  to make,  Convert into,
Continue or maintain  Eurodollar Loans shall be suspended until such time as the
Bank may again  make,  maintain,  and fund  Eurodollar  Loans (in which case the
provisions of Section 3.10 shall be applicable).

3.9  Requirements of Law.

         If, after the date hereof, the adoption of any applicable law, rule, or
regulation,  or any change in any applicable  law,  rule, or regulation,  or any
change in the  interpretation  or  administration  thereof  by any  Governmental
Authority, central bank, or comparable agency charged with the interpretation or
administration  thereof,  or compliance by the Bank (or its  Applicable  Lending
Office) with any request or  directive  (whether or not having the force of law)
of any such Governmental Authority, central bank, or comparable agency:

                  (i) shall subject the Bank (or its Applicable  Lending Office)
         to any tax,  duty,  or other  charge  with  respect to any Loans or its
         obligation  to make  Loans,  or  change  the basis of  taxation  of any
         amounts  payable to the Bank (or its Applicable  Lending  Office) under
         this Credit Agreement in respect of any Loans (other than Taxes defined
         in Section  3.11(a) and taxes  imposed on the overall net income of the
         Bank by the jurisdiction in which such Bank has its principal office or
         such Applicable Lending Office);

                  (ii) shall impose,  modify,  or deem  applicable  any reserve,
         special deposit,  assessment,  or similar  requirement  (other than the
         Eurodollar  Reserve  Requirement  utilized in the  determination of the
         Adjusted Eurodollar Rate) relating to any extensions of credit or other
         assets of, or any deposits with or other liabilities or commitments of,
         such Bank (or its Applicable Lending Office),  including the Commitment
         of the Bank hereunder; or

                  (iii)  shall  impose  on the Bank (or its  Applicable  Lending
         Office) or the London  interbank  market any other condition  affecting
         this  Credit   Agreement  or  any  of  such  extensions  of  credit  or
         liabilities or commitments;

and the result of any of the  foregoing is to increase,  by an amount  deemed by
the Bank (or its Applicable Lending Office) to be material, the cost to the Bank
(or its Applicable Lending Office) of making,  Converting into,  Continuing,  or
maintaining any Eurodollar  Loans or to reduce any sum received or receivable by
such Bank (or its Applicable  Lending Office) under this Credit Agreement,  then
the  Borrower  shall pay to the Bank on demand  such  amount or  amounts as will
compensate the Bank for such  increased cost or reduction.  If the Bank requests
compensation by the Borrower under this Section 3.9, the Borrower may, by notice
to the Bank, suspend the obligation of the Bank to make, Convert into,  Continue
or maintain the affected Loans, until the event or condition giving rise to such
request  ceases to be in effect (in which case the  provisions  of Section  3.10
shall be applicable);  provided that such suspension  shall not affect the right
of the Bank to receive the  compensation  so requested.  The Bank shall promptly
notify the Borrower of any event of which it has knowledge,  occurring after the
date  hereof,  which will  entitle  the Bank to  compensation  pursuant  to this
Section 3.9 and will  designate a different  Applicable  Lending  Office if such
designation will avoid the need for, or reduce the amount of, such  compensation
and will not, in the judgment of the Bank, be otherwise  disadvantageous  to it.
If the Bank claims  compensation under this Section 3.9, it shall furnish to the
Borrower a statement  setting forth in reasonable  detail the calculation of the
additional  amount  or  amounts  to be  paid  to it  hereunder  which  shall  be
conclusive in the absence of demonstrable error. In determining such amount, the
Bank may use any reasonable averaging and attribution methods.

3.10  Treatment of Affected Loans.

         If the  obligation  of the  Bank to make,  Convert  into,  Continue  or
maintain  Eurodollar  Loans  shall be  suspended  pursuant to Section 3.8 or 3.9
hereof,  the Bank's Eurodollar Loans shall be automatically  Converted into Base
Rate Loans on the last day(s) of the then current  Interest  Period(s)  for such
Eurodollar  Loans (or,  in the case of a  Conversion  required  by  Section  3.8
hereof,  on such  earlier  date  required  by law as the Bank may specify to the
Borrower) and, unless and until the Bank gives notice as provided below that the
circumstances  specified  in Section  3.8 or 3.9  hereof  that gave rise to such
Conversion no longer exist:

                  (a) to the extent that the Bank's  Eurodollar  Loans have been
         so  Converted,  all payments and  prepayments  of principal  that would
         otherwise  be applied to the Bank's  Eurodollar  Loans shall be applied
         instead to its Base Rate Loans; and

                  (b) all Loans that would otherwise be made or Continued by the
         Bank as  Eurodollar  Loans shall be made or  Continued  instead as Base
         Rate Loans, and all Base Rate Loans of the Bank that would otherwise be
         Converted into Eurodollar Loans shall remain as Base Rate Loans.

3.11  Taxes.

                  (a) Any and all payments by the Borrower to or for the account
         of the Bank  hereunder  shall be made  free  and  clear of and  without
         deduction  for any and all  present or future  taxes,  duties,  levies,
         imposts, deductions,  charges or withholdings, and all liabilities with
         respect  thereto,  excluding taxes imposed on the Bank as a result of a
         present or former  connection  between it and the  jurisdiction  of the
         Governmental  Authority imposing such tax or any political  subdivision
         or taxing authority  thereof or therein (other than any such connection
         arising  solely from the Bank having  executed,  delivered or performed
         its obligations or received a payment under,  or enforced,  this Credit
         Agreement)  (all such  non-excluded  taxes,  duties,  levies,  imposts,
         deductions,  charges,  withholdings,  and liabilities being hereinafter
         referred to as "Taxes").  If the  Borrower  shall be required by law to
         deduct  any Taxes  from or in  respect  of any sum  payable  under this
         Credit Agreement to the Bank, (i) the sum payable shall be increased as
         necessary  so that after  making  all  required  deductions  (including
         deductions for Taxes  applicable to additional  sums payable under this
         Section  3.11) the Bank  receives  an amount  equal to the sum it would
         have received had no such deductions been made, (ii) the Borrower shall
         make such  deductions,  (iii) the  Borrower  shall pay the full  amount
         deducted to the  relevant  taxation  authority  or other  authority  in
         accordance  with applicable law, and (iv) the Borrower shall furnish to
         the Bank, at its address referred to in Section 10.1, the original or a
         certified copy of a receipt evidencing payment thereof. Notwithstanding
         the foregoing,  no additional sums shall be payable pursuant to Section
         3.11(a)(i) or 3.11(c) with respect to Taxes unless  imposed as a result
         of a change in treaty, law or regulation.

                  (b) In  addition,  the  Borrower  agrees  to pay  any  and all
         present or future  stamp or  documentary  taxes and any other excise or
         property  taxes or  charges  or  similar  levies  which  arise from any
         payment  made under this  Credit  Agreement  or from the  execution  or
         delivery  of, or  otherwise  with  respect to,  this  Credit  Agreement
         (hereinafter referred to as "Other Taxes").

                  (c) The  Borrower  agrees to  indemnify  the Bank for the full
         amount of Taxes and Other Taxes  (including,  without  limitation,  any
         Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts
         payable under this Section 3.11) paid by the Bank and any liability for
         penalties,  interest,  and expenses  arising  therefrom or with respect
         thereto.

                  (d) If the Borrower is required to pay  additional  amounts to
         or for the account of the Bank pursuant to this Section 3.11,  then the
         Bank will agree to use reasonable efforts to change the jurisdiction of
         its  Applicable  Lending  Office so as to  eliminate or reduce any such
         additional  payment which may thereafter  accrue if such change, in the
         reasonable   judgment  of  the  Bank,  is  not   otherwise   materially
         disadvantageous to the Bank.

                  (e) Within  thirty  (30) days after the date of any payment of
         Taxes,  the  Borrower  shall  furnish  to the  Bank the  original  or a
         certified copy of a receipt evidencing such payment.

                  (f) Without  prejudice to the survival of any other  agreement
         of the  Borrower  hereunder,  the  agreements  and  obligations  of the
         Borrower  contained in this Section 3.11 shall survive the repayment of
         the Loans,  LOC  Obligations  and other  obligations  under this Credit
         Agreement and the termination of the Commitment hereunder.

                  (g) If the Bank  receives a refund with  respect to Taxes paid
         by the  Borrower,  which  in the  good  faith  judgment  of the Bank is
         allocable  to such  payment,  the Bank shall  promptly pay such refund,
         together with any other amounts paid by the Borrower in connection with
         such refunded Taxes, to the Borrower, net of all out-of-pocket expenses
         of the Bank incurred in obtaining such refund, provided,  however, that
         the  Borrower  agrees to promptly  return such refund to the Bank if it
         receives  notice  from the Bank that the Bank is required to repay such
         refund.  The Bank agrees that it will contest such Taxes or liabilities
         if the Bank determines,  in its reasonable judgment,  that it would not
         be materially disadvantaged or prejudiced as a result of such contest.

3.12  Compensation.

         Upon the request of the Bank,  the Borrower  shall pay to the Bank such
amount or amounts as shall be sufficient (in the reasonable opinion of the Bank)
to compensate it for any loss,  cost, or expense  (excluding loss of anticipated
profits) incurred by it as a result of:

                  (a) any payment,  prepayment,  or  Conversion  of a Eurodollar
         Loan for any reason (including, without limitation, the acceleration of
         the Loans pursuant to Section 9.2) on a date other than the last day of
         the Interest Period for such Loan; or

                  (b) any  failure by the  Borrower  for any reason  (including,
         without limitation, the failure of any condition precedent specified in
         Section 5 to be satisfied) to borrow,  Convert,  Continue,  or prepay a
         Eurodollar   Loan  on  the  date  for   such   borrowing,   Conversion,
         Continuation,  or  prepayment  specified  in  the  relevant  notice  of
         borrowing,  prepayment,  Continuation,  or Conversion under this Credit
         Agreement.

Such  indemnification  may include an amount equal to the excess, if any, of (a)
the amount of interest which would have accrued on the amount so prepaid, or not
so  borrowed,  converted  or  continued,  for the  period  from the date of such
prepayment or of such failure to borrow,  convert or continue to the last day of
the applicable Interest Period (or, in the case of a failure to borrow,  convert
or continue,  the Interest  Period that would have commenced on the date of such
failure) in each case at the Eurodollar Rate over (b) the amount of interest (as
reasonably  determined by the Bank) which would have accrued to the Bank on such
amount by placing  such amount on deposit for a  comparable  period with leading
banks in the interbank  Eurodollar market. If the Bank claims compensation under
this Section 3.12, it shall furnish to the Borrower a statement setting forth in
reasonable  detail the  calculation  of the  amounts to be paid to it  hereunder
which shall be conclusive in the absence of demonstrable error. The covenants of
the Borrower set forth in this Section 3.12 shall  survive the  repayment of the
Loans, LOC Obligations and other obligations under this Credit Agreement and the
termination of the Commitment hereunder.

3.13  Payments, Computations, Etc.

         Except  as  otherwise   specifically   provided  herein,  all  payments
hereunder  shall be made to the Bank in  immediately  available  funds,  without
setoff, deduction, counterclaim or withholding of any kind, at the Bank's office
specified in Section 10.1 not later than 2:00 P.M.  (Charlotte,  North  Carolina
time) on the date when due. Any payment received after such time shall be deemed
to have been received on the next  succeeding  Business Day. The Borrower shall,
at the time it makes any  payment  under this Credit  Agreement,  specify to the
Bank the Borrower Obligations to which such payment is to be applied (and in the
event that it fails so to specify,  or if such application would be inconsistent
with the terms  hereof,  the Bank shall apply such payment in such manner as the
Bank may determine to be appropriate).  Whenever any payment  hereunder shall be
stated  to be due on a day which is not a  Business  Day,  the due date  thereof
shall be extended to the next  succeeding  Business  Day  (subject to accrual of
interest and fees for the period of such extension),  except that in the case of
Eurodollar  Loans,  if the  extension  would cause the payment to be made in the
next following  calendar  month,  then such payment shall instead be made on the
next preceding  Business Day. Except as expressly provided otherwise herein, all
computations of interest and fees shall be made on the basis of actual number of
days elapsed  over a year of 360 days,  except with  respect to  computation  of
interest  on Base  Rate  Loans  which  (unless  the Base Rate is  determined  by
reference to the Federal Funds Rate) shall be calculated  based on a year of 365
or 366 days, as appropriate.  Interest shall accrue from and include the date of
borrowing, but exclude the date of payment.

3.14  Evidence of Debt.

                  (a) The Bank shall maintain an account or accounts  evidencing
         each Loan made by the Bank from time to time,  in which  such  accounts
         shall be recorded (i) the amount, type and Interest Period of each such
         Loan  hereunder,  (ii) the amount of any principal or interest  payable
         and paid or to become due and payable to the Bank  hereunder  and (iii)
         the amount of any sum  received by the Bank  hereunder  from or for the
         account  of the  Borrower.  The Bank will make  reasonable  efforts  to
         maintain the accuracy of its account or accounts and to promptly update
         its account or accounts from time to time, as necessary.

                  (b) The entries  made in the accounts  maintained  pursuant to
         subsection  (a) of this Section  3.14 shall be prima facie  evidence of
         the existence and amounts of the  obligations  of the Borrower  therein
         recorded;  provided,  however, that the failure of the Bank to maintain
         any such account, or any error therein,  shall not in any manner affect
         the obligation of the Borrower to pay the Borrower Obligations owing to
         the Bank.

                                    SECTION 4

                                    GUARANTY

4.1  The Guaranty.

         The Fund hereby  guarantees  to the Bank as  hereinafter  provided  the
prompt  payment of the Borrower  Obligations in full when due (whether at stated
maturity, as a mandatory  prepayment,  by acceleration or otherwise) strictly in
accordance with the terms thereof. The Fund hereby further agrees that if any of
the  Borrower  Obligations  are not paid in full  when due  (whether  at  stated
maturity,  as a mandatory  prepayment,  by acceleration or otherwise),  the Fund
will promptly pay the same, without any demand or notice whatsoever, and that in
the case of any  extension  of time of payment or renewal of any of the Borrower
Obligations,  the  same  will be  promptly  paid in full  when due  (whether  at
extended maturity, as a mandatory  prepayment,  by acceleration or otherwise) in
accordance with the terms of such extension or renewal.

4.2  Obligations Unconditional.

         The  obligations  of the  Fund  under  Section  4.1  are  absolute  and
unconditional,  irrespective of the value, genuineness,  validity, regularity or
enforceability  of any of this Credit Agreement,  or any substitution,  release,
impairment  or exchange  of any other  guarantee  of or security  for any of the
Borrower  Obligations,  and, to the fullest extent  permitted by applicable law,
irrespective  of  any  other  circumstance   whatsoever  which  might  otherwise
constitute a legal or equitable  discharge or defense of a surety or  guarantor,
it being  the  intent  of this  Section  4.2 that  the  obligations  of the Fund
hereunder shall be absolute and unconditional  under any and all  circumstances.
The  Fund  agrees  that  it  shall  have no  right  of  subrogation,  indemnity,
reimbursement  or contribution  against the Borrower for amounts paid under this
Section 4 until  such time as the Bank has been paid in full and the  Commitment
under this Credit Agreement has been terminated. Without limiting the generality
of the foregoing, it is agreed that, to the fullest extent permitted by law, the
occurrence  of any one or more of the  following  shall not alter or impair  the
liability of the Fund hereunder which shall remain absolute and unconditional as
described above:

                  (a) at any time or from  time to time,  without  notice to the
         Fund,  the time for any  performance  of or compliance  with any of the
         Borrower  Obligations  shall  be  extended,   or  such  performance  or
         compliance shall be waived;

                  (b)      any of the acts mentioned in any of the provisions of
         this Credit Agreement shall be done or omitted;

                  (c) the maturity of any of the Borrower  Obligations  shall be
         accelerated,  or any of the  Borrower  Obligations  shall be  modified,
         supplemented or amended in any respect,  or any right under this Credit
         Agreement  or any other  agreement  or  instrument  referred to in this
         Credit  Agreement  shall be waived or any other guarantee of any of the
         Borrower  Obligations  or any  security  therefor  shall  be  released,
         impaired or exchanged in whole or in part or otherwise dealt with;

                  (d)      any  Lien  granted  to, or  in favor of, the  Bank as
         security for any of the Borrower Obligations shall fail to attach or be
         perfected; or

                  (e) any of the Borrower  Obligations shall be determined to be
         void or voidable (including, without limitation, for the benefit of any
         creditor  of the Fund) or shall be  subordinated  to the  claims of any
         Person (including, without limitation, any creditor of the Fund).

With respect to its  obligations  hereunder,  the Fund hereby  expressly  waives
diligence,  presentment,  demand of payment, protest and all notices whatsoever,
and any requirement that the Bank exhaust any right,  power or remedy or proceed
against  any Person  under  this  Credit  Agreement  or any other  agreement  or
instrument  referred to in this Credit  Agreement,  or against any other  Person
under any other guarantee of, or security for, any of the Borrower Obligations.

4.3  Reinstatement.

The  obligations  of the  Fund  under  this  Section  4 shall  be  automatically
reinstated  if and to the extent that for any reason any payment by or on behalf
of any Person in respect of the  Borrower  Obligations  is  rescinded or must be
otherwise restored by any holder of any of the Borrower Obligations,  whether as
a result of any proceedings in bankruptcy or  reorganization  or otherwise,  and
the Fund agrees  that it will  indemnify  the Bank on demand for all  reasonable
costs and expenses (including, without limitation, fees and expenses of counsel)
incurred  by the  Bank  in  connection  with  such  rescission  or  restoration,
including  any such costs and expenses  incurred in defending  against any claim
alleging  that such payment  constituted a  preference,  fraudulent  transfer or
similar payment under any bankruptcy, insolvency or similar law.

4.4  Certain Additional Waivers.

         Without  limiting the  generality of the provisions of this  Section 4,
the Fund hereby  specifically  waives the benefits of N.C. Gen.  Stat.ss.ss.26-7
through 26-9, inclusive, to the extent applicable.  The Fund further agrees that
it shall have no right of  recourse to security  for the  Borrower  Obligations,
except  through  the  exercise of rights of subrogation pursuant to Section 4.2.
4.5  Remedies.

         The Fund  agrees  that,  to the  fullest  extent  permitted  by law, as
between the Fund, on the one hand, and the Bank, on the other hand, the Borrower
Obligations  may be  declared  to be  forthwith  due and  payable as provided in
Section 9.2 (and shall be deemed to have become automatically due and payable in
the  circumstances  provided in said  Section  9.2) for  purposes of Section 4.1
notwithstanding  any  stay,  injunction  or other  prohibition  preventing  such
declaration (or preventing the Borrower Obligations from becoming  automatically
due and  payable)  as against  any other  Person and that,  in the event of such
declaration   (or  the  Borrower   Obligations   being  deemed  to  have  become
automatically due and payable), the Borrower Obligations (whether or not due and
payable by any other Person) shall forthwith  become due and payable by the Fund
for purposes of Section 4.1.

4.6  Guarantee of Payment; Continuing Guarantee.

         The  guarantee  in this  Section 4 is a guaranty  of payment and not of
collection  and shall continue in effect until such time as (a) all principal of
and interest accrued to such date which constitute  Borrower  Obligations  shall
have been paid in full in cash,  (b) all fees,  expenses and other  amounts then
due and payable which constitute  Borrower  Obligations  shall have been paid in
cash, (c) all outstanding Letters of Credit shall have been (i) terminated, (ii)
fully cash  collateralized  or (iii) secured by one or more letters of credit on
terms and conditions,  and with one or more financial  institutions,  reasonably
satisfactory  to the Bank and (d) the  Commitment  shall  have been  expired  or
terminated in full.

4.7  Deposit of Capital Call Notices.

         The Fund hereby agrees that each of the Capital Call Notices  delivered
by the Fund to the Bank pursuant to Section  5.1(b) shall be held by the Bank on
deposit  and  shall be  delivered  by the Bank to the  Partners  only  under the
circumstances  contemplated  by, and otherwise in accordance  with the terms of,
Section 9.2.

                                    SECTION 5

                                   CONDITIONS

5.1  Closing Conditions.

         The  obligation of the Bank to enter into this Credit  Agreement and to
make the initial  Loans or to issue the initial  Letter(s) of Credit,  whichever
shall occur first, shall be subject to satisfaction of the following  conditions
(in form and substance acceptable to the Bank):

                  (a)      Executed Credit Agreement.   Receipt  by the  Bank of
         duly executed copies of this Credit Agreement.
                           -------------------------

                  (b)      Deposited  Notices.Receipt by the Bank of an original
         Capital  Call Notice for each Limited  Partner,  in  each case executed
         by the  General  Partner and  directing  such  Limited  Partner to wire
         transfer funds to the Bank in an amount equal to such Limited Partner's
         pro rata share of the original Committed Amount (i.e., $7,500,000).

                  (c)      Legal Opinion.  Receipt of a legal opinion of Simpson
         Thacher & Bartlett,  counsel for the Fund, in form and
                           -------------
         substance reasonably satisfactory to the Bank.

                  (d)      Officer's  Certificates.  Receipt  by  the Bank  of a
         certificate  in the form of Exhibit  5.1(d) duly executed
         by an  Executive  Officer of the general partner of the General Partner
         as of the Closing Date

5.2  Conditions to all Extensions of Credit.

         The  obligations  of the Bank to make any Loan or issue or  extend  any
Letter of Credit  (including  the  initial  Loans and the initial  Letter(s)  of
Credit) are subject to satisfaction  of the following  conditions in addition to
satisfaction on the Closing Date of the conditions set forth in Section 5.1:

                  (a) The Borrower  shall have  delivered (i) in the case of any
         Loan,  an  appropriate  Notice of Borrowing and (ii) in the case of any
         Letter of Credit,  the Bank shall have received an appropriate  request
         for issuance in accordance with the provisions of Section 2.2(b);

                  (b) The  representations and warranties set forth in Section 6
         shall,  subject  to the  limitations  set  forth  therein,  be true and
         correct in all  material  respects  as of such date  (except  for those
         which expressly relate to an earlier date);

                  (c) There shall not have been  commenced  against the Borrower
         or the  Fund an  involuntary  case  under  any  applicable  bankruptcy,
         insolvency  or other  similar law now or  hereafter  in effect,  or any
         case,  proceeding  or other action for the  appointment  of a receiver,
         liquidator,  assignee,  custodian,  trustee,  sequestrator  (or similar
         official) of such Person or for any substantial part of its Property or
         for the winding up or liquidation of its affairs,  and such involuntary
         case  or  other  case,   proceeding   or  other   action  shall  remain
         undismissed, undischarged or unbonded;

                  (d)      No Default  or Event of  Default  shall  exist and be
         continuing  either  prior to or after  giving  effect thereto; and

                  (e) Immediately after giving effect to the making of such Loan
         (and the  application  of the  proceeds  thereof) or to the issuance of
         such Letter of Credit, as the case may be, (i) the aggregate  principal
         amount of outstanding Loans plus LOC Obligations  outstanding shall not
         exceed  the  Committed  Amount and (ii) the LOC  Obligations  shall not
         exceed the LOC Committed Amount.

The  delivery of each Notice of  Borrowing,  each request for a Letter of Credit
pursuant  to  Section  2.2(b)  and each  Notice  of  Extension/Conversion  shall
constitute a representation and warranty by the Borrower (with respect to itself
only) and the Fund of the  correctness  of the matters  specified in subsections
(b), (c), (d) and (e) above.

                                    SECTION 6

                         REPRESENTATIONS AND WARRANTIES

6.1  Existence and Power.

                  (a) The Fund  hereby  represents  to the Bank that each of the
         Fund and the General Partner is a limited  partnership  duly organized,
         validly  existing and in good  standing  under the laws of the State of
         Delaware,  and is in good standing as a foreign limited  partnership in
         each  other  jurisdiction  where  ownership  of its  properties  or the
         conduct  of its  business  requires  it to be so  other  than  in  such
         jurisdictions where failure to be in good standing could not reasonably
         be expected to have a Material  Adverse  Effect,  and has all power and
         authority  under  such  laws  and  its  partnership  agreement  and all
         material governmental licenses, authorizations,  consents and approvals
         required to carry on its business as now conducted.

                  (b) The Fund  hereby  represents  to the Bank that the general
         partner  of the  General  Partner  (i) is  duly  incorporated,  validly
         existing  and in good  standing  under  the  laws of the  state  of its
         incorporation,   (ii)  has  all  corporate  power  pursuant  to  proper
         authorization to enable it to act as the general partner of the General
         Partner and to enter into this Credit  Agreement on the Fund's  behalf,
         and (iii) is duly  qualified to do business and is in good  standing in
         each other  jurisdiction  where it is required to be qualified in order
         to act as the  general  partner of the General  Partner,  other than in
         such  jurisdictions  where the failure to be so  qualified  and in good
         standing  could not  reasonably be expected to have a Material  Adverse
         Effect.

                  (c) The  Borrower  hereby  represents  to the  Bank  that  the
         Borrower  (i) is  duly  incorporated,  validly  existing  and  in  good
         standing  under  the  laws of the  State of  Delaware  and (ii) has all
         corporate  power  pursuant to proper  authorization  to enter into this
         Credit Agreement.

6.2  Authorization.

                  (a) The Fund hereby  represents  to the Bank that the Fund has
         the partnership or other  necessary power and authority,  and the legal
         right,  to  enter  into  this  Credit  Agreement  and  to  perform  its
         obligations  hereunder and  consummate  the  transactions  contemplated
         hereby and has by proper  action  duly  authorized  the  execution  and
         delivery of this Credit  Agreement and the Deposited  Notices.  Without
         limiting the  generality  of the above,  the Fund has by proper  action
         duly  authorized  (i) the execution and delivery of one or more Capital
         Call  Notices to each Partner in order to fund the  obligations  of the
         Fund under Section 4, (ii) the  depositing of such Capital Call Notices
         with the Bank in the manner  contemplated  by Section 4.7 and (iii) the
         authorizing  of the Bank to deliver such Capital Call Notices on behalf
         of the Fund in accordance with the terms of Section 9.2(c).

                  (b) The  Borrower  hereby  represents  to the  Bank  that  the
         Borrower has the corporate power and authority, and the legal right, to
         enter  into  this  Credit  Agreement  and to  perform  its  obligations
         hereunder,  to obtain  extensions of credit hereunder and to consummate
         the  transactions  contemplated  hereby and has by proper  action  duly
         authorized the execution and delivery of this Credit Agreement.

6.3  No Conflicts.

                  (a) The Fund hereby  represents  to the Bank that  neither the
         execution  and  delivery by the Fund of this Credit  Agreement  nor the
         consummation of the transactions  contemplated  herein, nor performance
         by the Fund of and compliance with the terms and provisions hereof will
         (i) violate or conflict with any provision of the Partnership Agreement
         or  other   governance   document,   (ii)  violate  any  material  law,
         regulation,  order,  writ,  judgment,   injunction,  decree  or  permit
         applicable to it, (iii) violate or conflict with contractual provisions
         of, or cause an event of default under, any indenture,  loan agreement,
         mortgage,  deed of trust,  contract or other agreement or instrument to
         which it is a party or by which it may be bound, the violation of which
         could  reasonably be expected to have a Material Adverse Effect or (iv)
         result  in or  require  the  creation  of any Lien  (other  than  those
         contemplated  in or in connection  with this Credit  Agreement) upon or
         with respect to the Fund's Properties.

                  (b) The Borrower  hereby  represents  to the Bank that neither
         the execution and delivery by the Borrower of this Credit Agreement nor
         the  consummation  of  the  transactions   contemplated   herein,   nor
         performance  by the  Borrower  of and  compliance  with the  terms  and
         provisions  hereof will (i) violate or conflict  with any  provision of
         its  articles  or  certificate  of  incorporation  or  bylaws  or other
         organizational or governing  documents,  (ii) violate any material law,
         regulation,  order,  writ,  judgment,   injunction,  decree  or  permit
         applicable to it, (iii) violate or conflict with contractual provisions
         of, or cause an event of default under, any indenture,  loan agreement,
         mortgage,  deed of trust,  contract or other agreement or instrument to
         which it is a party or by which it may be bound, the violation of which
         could  reasonably be expected to have a material  adverse effect on the
         business,  assets,  operations,  results  of  operations  or  financial
         condition of the Borrower and its Subsidiaries taken as a whole or (iv)
         result  in or  require  the  creation  of any Lien  (other  than  those
         contemplated  in or in connection  with this Credit  Agreement) upon or
         with respect to the Borrower's Properties.

6.4  Consents.

                  (a) The Fund  hereby  represents  to the Bank that no consent,
         approval,  authorization  or  order  of,  or  filing,  registration  or
         qualification with, any court or Governmental Authority or other Person
         is required in connection  with the execution,  delivery or performance
         by the Fund of this Credit Agreement or with the execution and delivery
         by the General Partner on the Fund's behalf of the Deposited Notices.

                  (b)  The  Borrower  hereby  represents  to the  Bank  that  no
         consent, approval,  authorization or order of, or filing,  registration
         or  qualification  with, any court or  Governmental  Authority or other
         Person is  required  in  connection  with the  execution,  delivery  or
         performance by the Borrower of this Credit Agreement.

6.5  Enforceable Obligations.

                  (a) The Fund  hereby  represents  to the Bank that this Credit
         Agreement  has  been  duly  executed  and  delivered  by the  Fund  and
         constitutes  legal,   valid  and  binding   obligations  of  the  Fund,
         enforceable  against the Fund in accordance with its terms,  subject to
         applicable    bankruptcy,     insolvency,     fraudulent    conveyance,
         reorganization,   moratorium  or  laws  affecting   creditors'   rights
         generally and subject to general  principles  of equity,  regardless of
         whether considered in proceedings in equity or at law and by an implied
         covenant of good faith and fair dealing.

                  (b) The  Borrower  hereby  represents  to the Bank  that  this
         Credit  Agreement  has been duly executed and delivered by the Borrower
         and constitutes legal,  valid and binding  obligations of the Borrower,
         enforceable against the Borrower in accordance with its terms,  subject
         to   applicable   bankruptcy,    insolvency,   fraudulent   conveyance,
         reorganization,   moratorium  or  laws  affecting   creditors'   rights
         generally and subject to general  principles  of equity,  regardless of
         whether considered in proceedings in equity or at law and by an implied
         covenant of good faith and fair dealing.

6.6  Permitted Investment.

         The Fund hereby  represents to the Bank that (a) the  incurrence of the
obligations of the Fund set forth in this Credit  Agreement are permitted by the
Partnership  Agreement,  and (b) the Limited Partners shall be obligated to make
additional  capital  contributions  (each in a pro rata amount in  proportion to
such Limited Partner's total capital commitment obligation to the Fund under the
Partnership  Agreement) for the purpose of providing funds to or for the account
of the Fund in an aggregate  amount at least equal to the  Committed  Amount for
the  purpose  of  providing  funds to the Fund  sufficient  to repay in full the
Borrower Obligations, if so requested by the General Partner.

6.7  Venture Capital Operating Company.

         The  Fund  hereby  represents  to the Bank  that the Fund is a  venture
capital operating company within the meaning of the Plan Asset Regulations,  or,
the Fund satisfies  another exception under the Plan Asset Regulations such that
the assets of the Fund are not "plan  assets"  within the meaning and as defined
in the Plan Asset Regulations.

6.8  Deposited Notices.

         The Fund hereby represents to the Bank that each Deposited Notice, when
delivered by the Bank to the applicable  Limited  Partner in accordance with the
terms of Section 9.2(c), will give rise to a legal, valid and binding obligation
on the part of such  Limited  Partner to pay to the Bank (for the account of the
Fund) such Limited  Partner's  pro rata share of the original  Committed  Amount
($7,500,000),  enforceable  against such Limited  Partner in accordance with the
terms of such Deposited Notice and the Partnership Agreement.

6.9  Limitations on Actions.

         The Fund  hereby  represents  to the Bank that the Fund is not aware of
any event or  condition  that  could (i) have a material  adverse  effect on the
ability of the Fund to perform its obligations under this Credit Agreement, (ii)
render invalid or unenforceable  any of the Deposited Notices or (iii) otherwise
modify  the  obligations  of any of the  Partners  and/or  any  Person  becoming
Partners  subsequent  to the Closing  Date which arise upon the due delivery of,
and as contemplated by, the Deposited Notices.

                                    SECTION 7

                              AFFIRMATIVE COVENANTS

         The  Fund  hereby  covenants  and  agrees  that so long as this  Credit
Agreement is in effect:

7.1  Outstanding Subscriptions.

         The Fund will cause the aggregate  Remaining Capital Commitments of all
Limited  Partners  to equal or exceed the sum of (i) the  Committed  Amount plus
(ii) all other Obligations of the Fund.

7.2  General Partner.

         The Fund will  cause (i) Vestar  Associates  III,  L.P.  to be the sole
general partner of the Fund at all times and (ii) Vestar Associates  Corporation
III to be the sole general partner of the General Partner at all times.

7.3  Plan Assets, etc.

         The Fund shall either (i) be a venture capital operating company within
the meaning of the Plan Asset  Regulations,  or (ii) satisfy  another  exception
under the Plan Asset  Regulations such that the assets of the Fund are not "plan
assets" within the meaning and as defined in the Plan Asset Regulations.

7.4  Receipt of the Funds Pursuant to the Deposited Notices.
     ------------------------------------------------------

         Immediately  upon  receipt  by the  Fund  or any of its  Affiliates  of
payment by any Limited Partner in respect of a Deposited Notice delivered by the
Bank pursuant to Section  9.2(c),  the Fund shall (i) notify the Bank in writing
specifying  the Limited  Partner  making such payment and the amount thereof and
(ii) forward,  or cause to be forwarded,  the funds representing such payment to
the Parent.

                                    SECTION 8

                               NEGATIVE COVENANTS

         The  Fund  hereby  covenants  and  agrees  that so long as this  Credit
Agreement is in effect:

8.1  Limitations on Actions.

         The Fund  shall not take any action  that  could (i) render  invalid or
unenforceable  any of  the  Deposited  Notices  or  (ii)  otherwise  modify  the
obligations  of  any  of  the  Partners  and/or  any  Person  becoming  Partners
subsequent  to the  Closing  Date which arise upon the due  delivery  of, and as
contemplated by, the Deposited Notices.

                                    SECTION 9

                                EVENTS OF DEFAULT

9.1  Events of Default.

                  An Event of  Default  shall  exist  upon  the  occurrence  and
continuation  of any of the  following  specified  events  (each  an  "Event  of
Default"):

                  (a)      Payment.  The Borrower shall

                           (i)  default in the payment when due of any principal
                                of any of the Loans, or

                           (ii)  default,  and such default  shall  continue for
                  five (5) or more Business Days, in the payment when due of any
                  interest on the Loans,  or of any fees or other  amounts owing
                  hereunder or in connection herewith; or

                  (b) Representations. Any representation, warranty or statement
         made or deemed to be made by the  Borrower or the Fund herein or in any
         statement or certificate delivered or required to be delivered pursuant
         hereto or thereto  shall prove  untrue in any  material  respect on the
         date as of which it was made or deemed to have been made; or

                  (c)      Covenants.
                           ---------

                           (i)    The Fund shall default in the due  performance
                  or  observance  of any term,  covenant or agreement
                  contained in Section 7 or Section 8; or

                           (ii) The  Borrower  or the Fund shall  default in the
                  due  performance or observance by it of any term,  covenant or
                  agreement  (other than those referred to in  subsections  (a),
                  (b) or (c)(i) of this  Section  9.1)  contained in this Credit
                  Agreement and such default  shall  continue  unremedied  for a
                  period of at least 30 days after the earlier of a  responsible
                  officer of the  Borrower  or the Fund  becoming  aware of such
                  default or notice thereof by the Bank; or

                  (d)  Guaranties.  The guaranty  given by the Fund hereunder or
         any provision  thereof  shall cease to be in full force and effect,  or
         the Fund or any Person acting by or on behalf of the Fund shall deny or
         disaffirm the Fund's obligations under such guaranty, or the Fund shall
         default in the due  performance or observance of any term,  covenant or
         agreement on its part to be  performed or observed  pursuant to Section
         4; or

                  (e)    Bankruptcy, etc.  Any Bankruptcy Event shall occur with
                         respect to the Borrower or the Fund; or
                           ---------------

                  (f)  Defaults  under  Other  Agreements.  With  respect to any
         Indebtedness  (other than  Indebtedness  outstanding  under this Credit
         Agreement)  in excess of $20  million  in the  aggregate  for the Fund,
         (A)(1) the Fund shall  default in any payment  (beyond  the  applicable
         grace  period with  respect  thereto,  if any) with respect to any such
         Indebtedness, or (2) the occurrence and continuance of a default in the
         observance or performance relating to such Indebtedness or contained in
         any instrument or agreement  evidencing,  securing or relating thereto,
         or any other event or  condition  shall occur or condition  exist,  the
         effect of which  default or other event or  condition  is to cause,  or
         permit, the holder or holders of such Indebtedness (or trustee or agent
         on behalf  of such  holders)  to cause  (determined  without  regard to
         whether any notice or lapse of time is required), any such Indebtedness
         to  become  due  prior  to  its  stated  maturity;   or  (B)  any  such
         Indebtedness  shall be  declared  due and  payable,  or  required to be
         prepaid other than by a regularly scheduled required prepayment,  prior
         to the stated maturity thereof; provided, however, that notwithstanding
         the  foregoing,  no Default or Event of Default  shall exist under this
         Section  9.1(f) with respect to a default  which is being  contested in
         good faith by appropriate proceedings; or

                  (g) Judgments.  The Fund shall fail within 30 days of the date
         due and  payable to pay,  bond or  otherwise  discharge  any  judgment,
         settlement or order for the payment of money (to the extent not paid or
         fully covered by insurance  provided by a carrier who has  acknowledged
         coverage and has the ability to perform) which judgment,  settlement or
         order,  when aggregated  with all other such judgments,  settlements or
         orders due and unpaid at such time,  exceeds $20 million,  and which is
         not stayed on appeal (or for which no motion for stay is pending) or is
         not otherwise being executed.

9.2  Acceleration; Remedies.

         Upon the occurrence of an Event of Default,  and at any time thereafter
unless and until such Event of Default  has been  waived by the Bank or cured to
the  satisfaction  of the Bank, the Bank shall by written notice to the Borrower
and the Fund take any of the following actions:

                  (a) Termination  of the  Commitment.  Declare  the  Commitment
                      terminated  whereupon the Commitment  shall be immediately
                      terminated.

                  (b)  Acceleration.  Declare  the unpaid  principal  of and any
         accrued  interest  in  respect  of all  Loans  and any  and  all  other
         indebtedness or obligations of any and every kind owing by the Borrower
         and the Fund to the Bank  hereunder to be due  whereupon the same shall
         be immediately due and payable without presentment,  demand, protest or
         other  notice  of any  kind,  all of which  are  hereby  waived  by the
         Borrower and the Fund.

                  (c) Delivery of Deposited  Notices.  After at least 2 Business
                      Days' prior written notice thereof by the Bank to
                           ------------------------------
         the Fund, deliver the Deposited Notices to the Limited Partners.

                  (d) Cash  Collateral.  Direct the  Borrower or the Fund to pay
         (and the  Borrower  and the Fund each agree  that upon  receipt of such
         notice,  or upon the  occurrence  of an Event of Default  under Section
         9.1(e),  they will  immediately pay) to the Bank additional cash, to be
         held by the Bank in a cash  collateral  account as additional  security
         for the LOC  Obligations  in respect of subsequent  drawings  under all
         then  outstanding  Letters of Credit in an amount  equal to the maximum
         aggregate  amount  which may be drawn under all Letters of Credits then
         outstanding.

         Notwithstanding  the  foregoing,  if an Event of Default  specified  in
Section 9.1(e) shall occur,  then the Commitment shall  automatically  terminate
and all Loans, all accrued  interest in respect thereof,  all accrued and unpaid
fees  and  other  indebtedness  or  obligations  owing  to  the  Bank  hereunder
automatically shall immediately become due and payable without the giving of any
notice or other action by the Bank. In the event any of the Borrower Obligations
are not paid when due at any stated or accelerated maturity, the Borrower agrees
to pay, in addition to the  principal  and  interest,  all costs of  collection,
including reasonable  attorneys' fees. The rights of the Bank under this Section
9.2 are  independent  and in addition to such rights as the Bank may have at law
or in  equity or  otherwise  based on the  failure  of the Fund to  perform  any
covenant, agreement or undertaking made by it in this Credit Agreement.

9.3  Cash Collateral Account.

         To the  extent  that  payments  made  by the  Fund  (including  capital
contributions  made by the  Partners)  pursuant to the exercise of rights by the
Bank under Section 4 and Sections 9.2(c) and (d) exceed the amounts necessary to
satisfy  the  obligations  of the Fund to make  payment in full of the  Borrower
Obligations, such amounts shall be held by the Bank in a cash collateral account
subject to the sole  dominion  and  control  of the Bank (the  "Cash  Collateral
Account") until this Credit Agreement is terminated in accordance with the terms
of Section 10.13(b). The Bank shall charge the Cash Collateral Account from time
to time for the payment when due of all amounts  payable by the Fund  hereunder.
Any  balance  remaining  in the Cash  Collateral  Account  at the time that this
Credit  Agreement is terminated in accordance with the terms of Section 10.13(b)
promptly shall be turned over by the Bank to the Fund in such manner as the Fund
at the time shall  specify to the Bank.  At the request of the Fund,  amounts on
deposit in the Cash  Collateral  Account  shall be  invested by the Bank in Cash
Equivalents.  Any income earned on such Cash Equivalents will be for the account
of the Fund and shall be distributed  not less than quarterly by the Bank to the
Fund. To the extent that any loss is incurred in respect of such  investments by
the Bank on behalf of the Fund, the Fund not less than quarterly will deliver to
the  Bank,  for  deposit  in the Cash  Collateral  Account,  additional  amounts
sufficient to offset such losses.

9.4  Allocation of Fund Payments.

         All  amounts  collected  or  received  by the Bank from the Fund or any
Partner  pursuant  to or in  connection  with  this  Credit  Agreement  and  the
Deposited  Notices  shall be  applied by the Bank  solely to the  payment of the
obligations of the Fund under Section 4.1.

9.5  Receipt of Funds Pursuant to the Deposited Notices.

         The Bank agrees that, promptly after receipt by the Bank of any capital
contribution  by any  Limited  Partner  pursuant  to the  exercise of the Bank's
rights under Section 4.1 and Section  9.2(c),  the Bank shall notify the Fund of
the amount of such capital  contribution and the identity of the Limited Partner
making such capital contribution.

                                   SECTION 10

                                  MISCELLANEOUS

10.1  Notices.

         Except as otherwise  expressly  provided herein,  all notices and other
communications  shall  have been duly  given  and  shall be  effective  (a) when
delivered,  (b) when transmitted via telecopy (or other facsimile device) to the
number set out below,  (c) the Business Day  following the day on which the same
has been  delivered  prepaid  to a  reputable  national  overnight  air  courier
service,  or (d) the third  Business Day  following the day on which the same is
sent by certified  or  registered  mail,  postage  prepaid,  in each case to the
respective  parties at the address set forth below,  or at such other address as
such party may specify by written notice to the other parties hereto:

         if to the Borrower:

                  Cluett American Corp.
                  48 W. 38th Street
                  New York, New York  10018
                  Attn:  Chief Executive Officer
                  Telephone:        (212) 984-8915
                  Telecopy:         (212) 984-8925

         with copies to:

                  Vestar Capital Partners III, L.P.
                  245 Park Avenue
                  41st Floor
                  New York, New York  10167
                  Attn:  Norman W. Alpert
                  Telephone:  (212) 351-1606
                  Telecopy:  (212) 808-4922

                  and

                  Vestar Capital Partners III, L.P.
                  245 Park Avenue
                  41st Floor
                  New York, New York  10167
                  Attn:  Brian P. Schwartz
                  Telephone:  (212) 351-1651
                  Telecopy:  (212) 808-4922

                  and

                  Simpson Thacher & Bartlett
                  425 Lexington Avenue
                  New York, New York  10017
                  Attn:  Marissa Wesely
                  Telephone:  (212) 455-7173
                  Telecopy:  (212) 455-2502

         if to the Fund:

                  Vestar Capital Partners III, L.P.
                  245 Park Avenue
                  41st Floor
                  New York, New York  10167
                  Attn:  Norman W. Alpert
                  Telephone:  (212) 351-1606
                  Telecopy:  (212) 808-4922

                  with copies to:

                  Vestar Capital Partners III, L.P.
                  245 Park Avenue
                  41st Floor
                  New York, New York  10167
                  Attn:  Brian P. Schwartz
                  Telephone:  (212) 351-1651
                  Telecopy:  (212) 808-4922

                  and

                  Simpson Thacher & Bartlett
                  425 Lexington Avenue
                  New York, New York  10017
                  Attn:  Marissa Wesely
                  Telephone:  (212) 455-7173
                  Telecopy:  (212) 455-2502

         if to the Bank:

                  Bank of America, N. A.
                  Independence Center, 15th Floor
                  NC1-001-15-04
                  101 North Tryon Street
                  Charlotte, North Carolina 28255
                  Attn:  Agency Services--Ret Taylor
                  Telephone:  (704) 386-9368
                  Telecopy:    (704) 409-0012

         with a copy to:

                  Bank of America, N.A.
                  100 North Tryon Street

                  Bank of America Corporate Center, 13th Floor
                  NC1-007-13-06
                  Charlotte, North Carolina  28255
                  Attn:  Bob Klawinski
                  Telephone:  (704) 387-0467
                  Telecopy:   (704) 386-9607

10.2  Right of Set-Off; Adjustments.

         Upon the occurrence and during the  continuance of any Event of Default
under Section 9.1(a), the Bank (and each of its Affiliates) is hereby authorized
at any time and from time to time,  to the fullest  extent  permitted by law, to
set off and apply any and all  deposits  (general  or  special,  time or demand,
provisional or final) at any time held and other  indebtedness at any time owing
by the Bank (or any of its  Affiliates)  to or for the credit or the  account of
the Borrower or the Fund against any and all of the  obligations  of such Person
now or hereafter existing under this Credit Agreement or otherwise, irrespective
of whether the Bank shall have made any demand under hereunder or thereunder and
although such  obligations may be unmatured.  The Bank agrees promptly to notify
the Borrower or the Fund, as applicable,  after any such set-off and application
made by the Bank; provided,  however, that the failure to give such notice shall
not affect the validity of such set-off and application.  The rights of the Bank
under this Section 10.2 are in addition to other rights and remedies (including,
without limitation, other rights of set-off) that the Bank may have.

10.3  Benefit of Agreement.

         This Credit Agreement shall be binding upon and inure to the benefit of
and be  enforceable  by the  respective  successors  and  assigns of the parties
hereto;  provided  that (i)  neither  the  Borrower  nor the Fund may  assign or
transfer any of its interests and  obligations  without prior written consent of
the Bank and (ii) the Bank may not assign or transfer any of its  interests  and
obligations hereunder without prior written consent of the Borrower and the Fund
except during the continuance of an Event of Default.

10.4  No Waiver; Remedies Cumulative.

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

10.5  Expenses; Indemnification.

         (a) The Borrower  agrees to pay on demand all costs and expenses of the
Bank in connection with the preparation,  execution,  delivery,  administration,
modification,  and amendment of this Credit Agreement and the other documents to
be delivered hereunder,  including,  without limitation, the reasonable fees and
expenses of counsel for the Bank  (including the cost of internal  counsel) with
respect  thereto  and with  respect  to  advising  the Bank as to its rights and
responsibilities under this Credit Agreement. The Borrower further agrees to pay
on demand all costs and expenses of the Bank  (including the reasonable fees and
expenses  of  counsel)  in  connection  with the  enforcement  (whether  through
negotiations,  legal proceedings, or otherwise) of this Credit Agreement and the
other documents to be delivered hereunder.

         (b) The  Borrower  agrees to indemnify  and hold  harmless the Bank and
each of its  Affiliates and their  respective  officers,  directors,  employees,
agents, and advisors (each, an "Indemnified Party") from and against any and all
claims, damages, losses,  liabilities,  costs, and expenses (including,  without
limitation, reasonable attorneys' fees and excluding taxes) that may be incurred
by or asserted or awarded  against any  Indemnified  Party, in each case arising
out of or in connection with or by reason of (including,  without limitation, in
connection with any investigation,  litigation,  or proceeding or preparation of
defense in connection therewith) this Credit Agreement,  any of the transactions
contemplated  herein or the actual or proposed use of the proceeds of the Loans,
except to the extent such  claim,  damage,  loss,  liability,  cost,  or expense
results from any Indemnified Party's gross negligence or willful misconduct.  In
the case of an  investigation,  litigation  or  other  proceeding  to which  the
indemnity  in this  Section  10.5  applies,  such  indemnity  shall be effective
whether or not such  investigation,  litigation  or proceeding is brought by the
Borrower or the Fund, their respective  directors,  shareholders or creditors or
an Indemnified Party or any other Person or any Indemnified Party is otherwise a
party  thereto.  The  Borrower  and the Fund each agrees not to assert any claim
against the Bank, any of its Affiliates,  or any of their respective  directors,
officers,  employees,   attorneys,  agents,  and  advisers,  on  any  theory  of
liability, for special, indirect, consequential, or punitive damages arising out
of or  otherwise  relating to this  Credit  Agreement,  any of the  transactions
contemplated herein or the actual or proposed use of the proceeds of the Loans.

         (c) Without  prejudice  to the  survival of any other  agreement of the
Borrower or the Fund  hereunder,  the agreements and obligations of the Borrower
and the Fund  contained in this Section 10.5 shall  survive the repayment of the
Loans, LOC Obligations and other obligations under this Credit Agreement and the
termination of the Commitment hereunder.

10.6  Amendments, Waivers and Consents.

         Except  as  otherwise  provided  in  Section  3.3(b)(ii),  none  of the
provisions of this Credit Agreement may be amended,  changed, waived, discharged
or terminated unless such amendment, change, waiver, discharge or termination is
in writing and executed by the Bank, the Borrower and the Fund.

10.7  Counterparts.

         This Credit  Agreement may be executed in  counterparts,  each of which
when so executed  and  delivered  shall be an  original,  but all of which shall
constitute  one and the same  instrument.  It shall not be  necessary  in making
proof of this  Credit  Agreement  to produce  or account  for more than one such
counterpart for each of the parties hereto.  Delivery by facsimile by any of the
parties hereto of an executed  counterpart of this Credit  Agreement shall be as
effective  as an  original  executed  counterpart  hereof  and shall be deemed a
representation that an original executed counterpart hereof will be delivered.

10.8  Headings.

         The headings of the sections  and  subsections  hereof are provided for
convenience  only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.

10.9  Survival.

         All indemnities set forth herein,  including,  without  limitation,  in
Section  2.2(h),  3.11, 3.12 or 10.5 shall survive the execution and delivery of
this Credit  Agreement,  the making of the Loans, the issuance of the Letters of
Credit,  the repayment of the Loans, LOC Obligations and other obligations under
this Credit Agreement and the termination of the Commitment  hereunder,  and all
representations  and  warranties  made by the  Borrower or the Fund herein shall
survive delivery of this Credit Agreement and the making of the Loans hereunder.

10.10  Governing Law; Submission to Jurisdiction; Venue.

                  (a) THIS CREDIT  AGREEMENT AND THE RIGHTS AND  OBLIGATIONS  OF
         THE  PARTIES   HEREUNDER   SHALL  BE  GOVERNED  BY  AND  CONSTRUED  AND
         INTERPRETED  IN ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK. Any
         legal action or proceeding with respect to this Credit Agreement may be
         brought in the courts of the State of New York in New York  County,  or
         of the United  States for the  Southern  District of New York,  and, by
         execution and delivery of this Credit Agreement,  each of the Borrower,
         the Fund and the Bank  hereby  irrevocably  accepts  for  itself and in
         respect  of  its   property,   generally   and   unconditionally,   the
         nonexclusive  jurisdiction  of such courts.  Each of the Borrower,  the
         Fund  and the Bank  further  irrevocably  consents  to the  service  of
         process out of any of the  aforementioned  courts in any such action or
         proceeding by the mailing of copies  thereof by registered or certified
         mail,  postage  prepaid,  to it at the  address  set  out  for  notices
         pursuant to Section 10.1,  such service to become  effective  three (3)
         days after such mailing.  Nothing  herein shall affect the right of the
         Bank to  serve  process  in any  other  manner  permitted  by law or to
         commence legal proceedings or to otherwise proceed against the Borrower
         or the Fund in any other jurisdiction.

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

                  (c) TO THE  EXTENT  PERMITTED  BY LAW,  EACH OF THE BANK,  THE
         BORROWER AND THE FUND HEREBY  IRREVOCABLY  WAIVES ALL RIGHT TO TRIAL BY
         JURY  IN ANY  ACTION,  PROCEEDING  OR  COUNTERCLAIM  ARISING  OUT OF OR
         RELATING  TO THIS CREDIT  AGREEMENT  OR THE  TRANSACTIONS  CONTEMPLATED
         HEREBY.

10.11  Severability.

         If any  provision of any of this Credit  Agreement is  determined to be
illegal,  invalid or unenforceable,  such provision shall be fully severable and
the  remaining  provisions  shall  remain in full  force and effect and shall be
construed  without  giving  effect  to the  illegal,  invalid  or  unenforceable
provisions.

10.12  Entirety.

         This Credit  Agreement  represents the entire  agreement of the parties
hereto and thereto, and supersedes all prior agreements and understandings, oral
or written, if any, including any commitment letters or correspondence  relating
to this Credit Agreement or the transactions contemplated herein.

10.13  Binding Effect; Termination.

                  (a) This Credit  Agreement shall become effective at such time
         on or after the  Closing  Date when it shall have been  executed by the
         Borrower,  the Fund and the Bank, and thereafter this Credit  Agreement
         shall be binding  upon and inure to the  benefit of the  Borrower,  the
         Fund and the Bank and their respective successors and assigns.

                  (b) The term of this  Credit  Agreement  shall be until all of
         the  Borrower   Obligations  then  outstanding  have  been  irrevocably
         satisfied in full and the  Commitment  hereunder  shall have expired or
         been terminated.

10.14  Limitation on Recourse to the Fund.

         The Bank  agrees  that its rights in respect of any claim or  liability
under this Credit Agreement  asserted by it against the Fund shall be limited to
satisfaction  out  of,  and  enforcement   against,  the  assets  of  the  Fund.
Notwithstanding  anything  to the  contrary  contained  herein  or in any  other
document,  certificate or instrument  executed by the Fund pursuant hereto,  the
Bank  acknowledges  and agrees  that no  officer,  employee,  partner,  servant,
controlling Person, manager,  agent,  authorized  representative or Affiliate of
the Fund (collectively,  the "Non-Recourse Persons") shall have any liability to
the Bank (such liability, including such as may arise by operation of law, being
hereby  expressly  waived) for the payment of any sums now or hereafter owing by
the Fund  under  this  Credit  Agreement  or for the  performance  of any of the
obligations  of the Fund  contained  herein  or shall  otherwise  be  liable  or
responsible with respect thereto.  If any Event of Default shall occur or if any
claim of the Bank against the Fund or alleged  liability to the Bank of the Fund
shall be asserted under this Credit Agreement, the Bank agrees that it shall not
have the right to  proceed  directly  or  indirectly  against  the  Non-Recourse
Persons or against their  respective  properties and assets for the satisfaction
of any such claim or liability or for any deficiency  judgment in respect of any
such claim or liability.  Notwithstanding any of the foregoing,  it is expressly
understood  and agreed,  however,  that nothing  contained in this Section 10.14
shall in any  manner  or any way  constitute  or be  deemed  (i) to  excuse  any
obligations of any Partner to make additional capital  contributions to the Fund
pursuant  to  the  terms  of the  Partnership  Agreement,  (ii)  to  impair  the
enforceability  of any of the rights arising from this Credit Agreement or (iii)
to restrict the remedies available to the Bank to realize upon the assets of the
Fund.  The foregoing  acknowledgments,  agreements and waivers shall survive the
termination   of  this  Credit   Agreement  and  shall  be  enforceable  by  any
Non-Recourse Person.

10.15 Confidentiality.

         The  Bank  agrees  to  keep  confidential  any  non-public  information
furnished or made  available to it by the Borrower or the Fund  pursuant to this
Credit  Agreement;  provided  that nothing  herein  shall  prevent the Bank from
disclosing such information (a) to any of its Affiliate, (b) to any other Person
if reasonably  incidental to the  administration of the credit facility provided
herein,  (c) as required by any law, rule, or regulation,  (d) upon the order of
any  court or  administrative  agency,  (e) upon the  request  or  demand of any
regulatory agency or authority having jurisdiction over the Bank, (f) that is or
becomes  available  to the  public or that is or becomes  available  to the Bank
other than as a result of a  disclosure  by the Bank  prohibited  by this Credit
Agreement, (g) in connection with any litigation to which the Bank or any of its
Affiliates may be a party,  (h) to the extent  necessary in connection  with the
exercise of any remedy under this Credit Agreement and (i) subject to provisions
substantially similar to those contained in this Section 10.15, to any actual or
proposed participant or assignee.

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

BORROWER:                           Cluett American Corp.,
--------
                                            a Delaware corporation

                                            By:
                                            Name:
                                            Title:

FUND:                                       Vestar Capital Partners III, L.P.,
----
                                            a Delaware limited partnership

                                            By:    Vestar Associates III, L.P.,
                                                   its General Partner

                                            By: Vestar Associates corp.III,
                                                   its General Partner

                                            By:
                                            Name:
                                            Title:

BANK:                               BANK OF AMERICA, N. A.
----

                                            By: /s/ Robert A. Klawinski
                                            Name: Robert A. Klawinski
                                            Title:   Managing Director

<PAGE>

                                    Exhibit A

                   [Letterhead of Vestar Associates III, L.P.]

[Name and address of partner]

Re:  Vestar Capital Partners III, L.P.-- Cluett American Corp. $7.5 Million Line
     of Credit

Dear ___________:

         Pursuant to Section  3.1(a) of the Agreement of Limited  Partnership of
Vestar Capital  Partners III, L.P.,  Vestar  Associates  III, L.P. (the "General
Partner")  is calling  for  payment of the  Capital  Contribution  to be made in
connection  with  Vestar/Cluett  American  Corp.  Your  pro  rata  share  of the
$7,500,000 Capital Contribution for your $__________  commitment is $__________.
Kindly  pay  either by  certified  or  cashier's  check or by wire  transfer  of
immediately  available  funds to the  account  set forth below (or to such other
account as Bank of America,  N.A.  shall have  notified you in writing) no later
than the tenth (10th) business day following the date of this letter.

Via Check:                                                    or Via Bank Wire:
---------                                                     -----------------

Payable to:       Bank of America, N.A.         Payable to:Bank of America, N.A.

Send to:      Bank of America, N.A..            Bank of America, N.A.
              100 North Tryon Street            Charlotte, North Carolina
              Bank of America Corporate Center  ABA Routing No.: 053-000-196
              Charlotte, North Carolina 28255   Account No.: 1366212250600
              Attn: Robert A. Klawinski         For Credit to:Corporate Services
              Telephone: (704) 387-0467         Reference:  Vestar Capital
              Account No. 1366212250600                     Partners III, L.P.
              For Credit to: Corporate Services Amount: $______________
              Reference:  Vestar Capital
                          Partners III, L.P.
              Amount: $______________

If you have any questions, please feel free to call me at (212) 351-1651.

                            Very truly yours,

                            Vestar Associates III, L.P.,

                            General Partner of Vestar Capital Partners III, L.P.

                            By:      Vestar Associates Corporation III,
                                     its General Partner

                            By: __________________________________
                            Name: Brian P. Schwartz

                         Title: Chief Financial Officer

<PAGE>

                                Exhibit 2.1(b)(i)

                                             FORM OF NOTICE OF BORROWING

                                     [Date]

Bank of America, N.A.
101 North Tryon Street

Independence Center, 15th Floor

NC1-001-15-04
Charlotte, North Carolina  28255
Attention:  Agency Services

Ladies and Gentlemen:

         The undersigned,  Cluett American Corp. (the "Borrower"), refers to the
Amended and Restated Credit Agreement dated as of February 17, 2000 (as amended,
modified,  restated or supplemented from time to time, the "Credit  Agreement"),
among the Borrower,  Vestar Capital  Partners III, L.P. (the "Fund") and Bank of
America,  N. A. (the  "Bank").  Capitalized  terms used herein and not otherwise
defined  herein  shall have the  meanings  assigned  to such terms in the Credit
Agreement.  The  Borrower  hereby  gives  notice  pursuant to Section 2.1 of the
Credit  Agreement  that it  requests a Loan under the Credit  Agreement,  and in
connection  therewith sets forth below the terms on which such Loan is requested
to be made:

(A)      Date of Borrowing (which is a Business Day)    _______________________

(B)      Principal Amount of Borrowing                  _______________________

(C)      Interest rate basis                            _______________________

(D)      Interest Period and the last day thereof       _______________________

         In accordance  with the  requirements  of Section 5.2, (i) the Borrower
(with respect to itself only) and the Fund hereby  reaffirm the  representations
and warranties  set forth in the Credit  Agreement as provided in subsection (b)
of such Section and (ii) the Borrower (with respect to itself only) and the Fund
confirm  that the matters  referenced  in  subsections  (c), (d) and (e) of such
Section are true and correct.

         This Notice of Borrowing may be executed in counterparts, each of which
when so executed  and  delivered  shall be an  original,  but all of which shall
constitute one and the same instrument.

                                                     Cluett American Corp.

                                                     By:
                                                     Name:
                                                     Title:

Acknowledged and consented to this __ day of ________, ____:

Vestar Capital Partners III, L.P.,
a Delaware limited partnership

By:      Vestar Associates III, L.P.,
         its General Partner

         By:      Vestar Associates corporation III,
                  its General Partner

                  By:
                  Name:
                  Title:

<PAGE>

                                   Exhibit 3.2

                     FORM OF NOTICE OF EXTENSION/CONVERSION

                                     [Date]

Bank of America, N.A.
101 North Tryon Street

Independence Center, 15th Floor

NC1-001-15-04
Charlotte, North Carolina  28255
Attention:  Agency Services

Ladies and Gentlemen:

         The undersigned,  Cluett American Corp. (the "Borrower"), refers to the
Amended and Restated Credit Agreement dated as of February 17, 2000 (as amended,
modified,  restated or supplemented from time to time, the "Credit  Agreement"),
among the Borrower,  Vestar Capital  Partners III, L.P. (the "Fund") and Bank of
America,  N. A. (the  "Bank").  Capitalized  terms used herein and not otherwise
defined  herein  shall have the  meanings  assigned  to such terms in the Credit
Agreement.  The  Borrower  hereby  gives  notice  pursuant to Section 3.2 of the
Credit  Agreement  that  it  requests  an  extension  or  conversion  of a  Loan
outstanding under the Credit Agreement,  and in connection  therewith sets forth
below the terms on which such extension or conversion is requested to be made:

(A)      Date of Extension or Conversion
         (which is the last day of the
         the applicable Interest Period)                _______________________

(C)      Principal Amount of Extension or Conversion    _______________________

(D)      Interest rate basis                            _______________________

(E)      Interest Period and the last day thereof       _______________________

         In accordance  with the  requirements  of Section 5.2, (i) the Borrower
(with respect to itself only) and the Fund hereby  reaffirm the  representations
and warranties  set forth in the Credit  Agreement as provided in subsection (b)
of such Section and (ii) the Borrower (with respect to itself only) and the Fund
confirm  that the matters  referenced  in  subsections  (c), (d) and (e) of such
Section are true and correct.

         This Notice of  Extension/Conversion  may be executed in  counterparts,
each of which when so executed and  delivered  shall be an original,  but all of
which shall constitute one and the same instrument.

                                                     Cluett American Corp.

                                                     By:
                                                     Name:
                                                     Title:

Acknowledged and consented to this __ day of ________, ____:

Vestar Capital Partners III, L.P.,
a Delaware limited partnership

By:      Vestar Associates III, L.P.,
         its General Partner

         By:      Vestar Associates corporation III,
                  its General Partner

                  By:
                  Name:
                  Title:

<PAGE>

34

                                 Exhibit 5.1(d)

                          FORM OF OFFICER'S CERTIFICATE

<PAGE>                                  [Attached.]

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