Document:

AMENDED AND RESTATED CREDIT AGREEMENT

                            Dated as of May __, 2001

                                      Among

                             ISOLYSER COMPANY, INC.
                             MICROTEK MEDICAL, INC.

                          THE GUARANTORS NAMED HEREIN,

                            THE LENDERS NAMED HEREIN,

                                       and

                   THE CHASE MANHATTAN BANK (formerly known as
                            Chemical Bank), AS AGENT

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                                TABLE OF CONTENTS

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I.       DEFINITIONS ..............................................................................................1
         SECTION 1.01. Certain Defined Terms ......................................................................1
         SECTION 1.02. Accounting Terms ...........................................................................21

II.      THE LOANS ................................................................................................21
         SECTION 2.01. Term Loan Commitments and Revolving Credit Commitments .....................................21
         SECTION 2.02. Loans ......................................................................................22
         SECTION 2.03. Notice of Loans ........................................................................... 25
         SECTION 2.04. Notes; Repayment of Loans ................................................................. 25
         SECTION 2.05. Interest on Loans ......................................................................... 28
         SECTION 2.06. Fees ...................................................................................... 28
         SECTION 2.07. Termination and Reduction of Revolving Credit Commitments and Term Loan Commitments ........28
         SECTION 2.08. Interest on Overdue Amounts; Alternate Rate of Interest ....................................30
         SECTION 2.09. Prepayment of Loans ........................................................................30
         SECTION 2.10. Increased Costs ............................................................................35
         SECTION 2.11. Change in Legality .........................................................................36
         SECTION 2.12. Indemnity ..................................................................................37
         SECTION 2.13. Pro Rata Treatment .........................................................................38
         SECTION 2.14. Sharing of Setoffs .........................................................................39
         SECTION 2.15. Taxes ......................................................................................40
         SECTION 2.16. Payments and Computations ..................................................................43
         SECTION 2.17. Issuance of Letters of Credit ............................................................. 43
         SECTION 2.18. Payment of Letters of Credit; Reimbursement ............................................... 44
         SECTION 2.19. Agent's Actions with respect to Letters of Credit ......................................... 46
         SECTION 2.20. Letter of Credit Fees ..................................................................... 46

III.     COLLATERAL SECURITY ..................................................................................... 47
         SECTION 3.01. Security Documents ........................................................................ 47
         SECTION 3.02. Filing and Recording .......................................................................47

IV.      REPRESENTATIONS AND WARRANTIES .......................................................................... 48
         SECTION 4.01. Organization, Legal Existence ............................................................. 48
         SECTION 4.02. Authorization ............................................................................. 48
         SECTION 4.03. Governmental Approvals .....................................................................49
         SECTION 4.04. Binding Effect .............................................................................49
         SECTION 4.05. Material Adverse Change ................................................................... 49
         SECTION 4.06. Litigation; Compliance with Laws; etc. .................................................... 49
         SECTION 4.07. Financial Statements ...................................................................... 49
         SECTION 4.08. Federal Reserve Regulations ............................................................... 50

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         SECTION 4.09. Taxes ......................................................................................51
         SECTION 4.10. Employee Benefit Plans .................................................................... 51
         SECTION 4.11. No Material Misstatements ................................................................. 53
         SECTION 4.12. Investment Company Act; Public Utility Holding Company Act ................................ 53
         SECTION 4.13. Security Interest .......... ...............................................................53
         SECTION 4.14. Use of Proceeds ........................................................................... 54
         SECTION 4.15. Subsidiaries .............................................................................. 54
         SECTION 4.16. Title to Properties; Possession Under Leases; Trademarks .................................. 54
         SECTION 4.17. Solvency .................................................................................. 55
         SECTION 4.18. Permits, etc ...............................................................................56
         SECTION 4.19. Compliance with Environmental Laws .........................................................56
         SECTION 4.20. No Change in Credit Criteria or Collection Policies ........................................57

V.       CONDITIONS OF CREDIT EVENTS ..............................................................................57
         SECTION 5.01. All Credit Events ..........................................................................57
         SECTION 5.02. First Borrowing ............................................................................58

VI.      AFFIRMATIVE COVENANTS ....................................................................................61
         SECTION 6.01. Legal Existence ............................................................................61
         SECTION 6.02. Businesses and Properties ..................................................................61
         SECTION 6.03. Insurance ..................................................................................62
         SECTION 6.04. Taxes ......................................................................................62
         SECTION 6.05. Financial Statements, Reports, etc. ........................................................63
         SECTION 6.06. Litigation and Other Notices ...............................................................65
         SECTION 6.07. ERISA ......................................................................................66
         SECTION 6.08. Maintaining Records; Access to Properties and Inspections; Right to
                           Conduct of Field Examinations ..........................................................67
         SECTION 6.09. Use of Proceeds ............................................................................68
         SECTION 6.10. Fiscal Year-End ............................................................................68
         SECTION 6.11. Further Assurances .........................................................................68
         SECTION 6.12. Additional Grantors and Guarantors .........................................................68
         SECTION 6.13. Environmental Laws .........................................................................69
         SECTION 6.14. Pay Obligations to Lenders and Perform Other Covenants .....................................71
         SECTION 6.15. Purchase Price Adjustments .................................................................71

VII.     NEGATIVE COVENANTS .......................................................................................71
         SECTION 7.01. Liens ......................................................................................72
         SECTION 7.02. Sale and Lease-Back Transactions ...........................................................73
         SECTION 7.03. Indebtedness ...............................................................................73
         SECTION 7.04. Dividends, Distributions and Payments ......................................................74
         SECTION 7.05. Consolidations, Mergers and Sales of Assets ................................................75
         SECTION 7.06. Investments ................................................................................75

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         SECTION 7.07.Capital Expenditures ........................................................................76
         SECTION 7.08. Leverage Ratio .............................................................................77
         SECTION 7.09. EBITDA .....................................................................................77
         SECTION 7.10. Business ...................................................................................77
         SECTION 7.11. Sales of Receivables .......................................................................77
         SECTION 7.12. Use of Proceeds ............................................................................77
         SECTION 7.13. ERISA.......................................................................................78
         SECTION 7.14. Accounting Changes .........................................................................78
         SECTION 7.15. Prepayment or Modification of Subordinated Indebtedness;
                           Modification of Charter Documents ......................................................78
         SECTION 7.16. Transactions with Affiliates. ..............................................................78
         SECTION 7.17. Negative Pledges, Etc. .....................................................................79

VIII.    EVENTS OF DEFAULT ........................................................................................79

IX.      AGENT              83

X.       MANAGEMENT, COLLECTION AND STATUS OF RECEIVABLES AND OTHER COLLATERAL.....................................88
         SECTION 10.01.    Collection of Receivables; Management of Collateral ....................................88
         SECTION 10.02.    Receivables Documentation ..............................................................90
         SECTION 10.03.    Status of Receivables and Other Collateral ............. ...............................91
         SECTION 10.04.    Monthly Statement of Account ...........................................................92
         SECTION 10.05.    Collateral Custodian ...................................................................92

XI.      MISCELLANEOUS ........     .93
         SECTION 11.01.    Notices ................................................................................93
         SECTION 11.02.    Survival of Agreement ..................................................................93
         SECTION 11.03.    Successors and Assigns; Participations ................................................ 94
         SECTION 11.04.    Expenses; Indemnity ......... ......................................................... 98
         SECTION 11.05.    Applicable Law ........... .............................................................99
         SECTION 11.06.    Right of Setoff ........................................................................99
         SECTION 11.07.    Payments on Business Days .............................................................100
         SECTION 11.08.    Waivers; Amendments ...................................................................100
         SECTION 11.09.    Severability ..........................................................................102
         SECTION 11.10.    Entire Agreement; Waiver of Jury Trial, etc ...........................................102
         SECTION 11.11.    Confidentiality .......................................................................103
         SECTION 11.12.    Submission to Jurisdiction ............................................................103
         SECTION 11.13.    Counterparts; Facsimile Signature .....................................................104
         SECTION 11.14.    Headings and Terms Generally ..........................................................104
         SECTION 11.15.    Transitional Arrangements .............................................................105

XII.     GUARANTEES ..............................................................................................105

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XIII.    CONFIRMATION OF SECURITY DOCUMENTS ......................................................................107

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     EXHIBITS

     EXHIBIT A   Form of Term Note EXHIBIT B Form of Revolving Credit Note
     EXHIBIT C   Form of Opinion of Counsel EXHIBIT D Form of Security Agreement
     EXHIBIT E   Form of Assignment and Acceptance
     EXHIBIT F   Form of Pledge Agreement
     EXHIBIT G   Form of Security Agreement - Patent and Trademarks

     SCHEDULES

     SCHEDULE 1.01              Eligible Inventory Locations
     SCHEDULE 2.01(a)           Term Loan Commitments
     SCHEDULE 2.01(b)           Revolving Credit Commitments
     SCHEDULE 2.02              Domestic Lending Offices
     SCHEDULE 2.03              Eurodollar Lending Offices
     SCHEDULE 4.01              Qualified Jurisdictions
     SCHEDULE 4.05              Material Adverse Change
     SCHEDULE 4.06(a)           Litigation
     SCHEDULE 4.06(b)           Compliance with Laws
     SCHEDULE 4.15              Subsidiaries
     SCHEDULE 4.19              Environmental Law Compliance
     SCHEDULE 6.05(g)           Inventory Designations
     SCHEDULE 6.05(j)           Borrowing Base Certificate
     SCHEDULE 6.13              Hazardous Materials
     SCHEDULE 7.01              Existing Liens
     SCHEDULE 7.03              Existing Indebtedness

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     AMENDED AND  RESTATED  CREDIT  AGREEMENT  dated as of May __,  2001,  among
ISOLYSER COMPANY,  INC., a Georgia corporation  ("Isolyser"),  MICROTEK MEDICAL,
INC., a Delaware  corporation  ("Microtek";  and together with Isolyser,  each a
"Borrower" and, jointly and severally,  the  "Borrowers"),  the Guarantors named
herein and  signatories  hereto,  the financial  institutions  from time to time
party hereto,  initially  consisting of those  financial  institutions  named in
Schedules 2.01(a) and 2.01(b) annexed hereto (collectively,  the "Lenders"), and
THE CHASE  MANHATTAN BANK (formerly  known as Chemical  Bank),  as agent for the
Lenders (in such capacity, the "Agent").

     The  Borrowers  have  applied to the  Lenders  for Loans (such term and all
other  capitalized  terms used in this paragraph having the respective  meanings
ascribed to such terms above or hereinafter) up to an aggregate principal amount
of  $17,500,000  in the form of (a) Term Loans to the  Borrowers in an aggregate
principal  amount not in excess of $0 outstanding and (b) Revolving Credit Loans
to the Borrowers at any time and from time to time prior to the Revolving Credit
Termination  Date in an aggregate  principal amount not in excess of $17,500,000
at any time  outstanding.  The proceeds of the  Revolving  Credit Loans shall be
used to refinance  outstanding  Obligations  under the Isolyser Credit Agreement
and for working  capital and  general  corporate  purposes.  The  Grantors  will
provide  Collateral in accordance  with the provisions of this Agreement and the
Security  Documents.  The Lenders are  severally,  and not  jointly,  willing to
extend  such  Loans  to the  Borrowers  subject  to  the  terms  and  conditions
hereinafter set forth. Accordingly,  the Borrowers, the Guarantors,  the Lenders
and the Agent hereby agree to amend and restate the Isolyser Credit Agreement to
read in its entirety as follows:

I.   DEFINITIONS

     SECTION 1.01.  Certain Defined Terms.  For purposes  hereof,  the following
terms shall have the meanings specified below: ---------------------

          "Adjusted LIBO Rate" shall mean,  with respect to any Eurodollar  Loan
for any  Interest  Period,  an  interest  rate per annum  (rounded  upwards,  if
necessary,  to the next 1/16 of 1%) equal to the product of (i) the LIBO Rate in
effect  for such  Interest  Period and (ii)  Statutory  Reserves.  For  purposes
hereof, "Statutory Reserves" shall mean a fraction (expressed as a decimal), the
numerator of which is the number one and the  denominator of which is the number
one minus the aggregate of the maximum reserve percentages  (including,  without
limitation, any marginal, special, emergency, or supplemental reserves)

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to which any  Lender is  subject  with  respect  to the  Adjusted  LIBO Rate for
eurocurrency  funding  (currently  referred to as "Eurocurrency  Liabilities" as
defined in  Regulation  D). Such  reserve  percentages  shall  include,  without
limitation, those imposed under Regulation D or any other comparable regulation.
Eurodollar Loans shall be deemed to constitute  eurocurrency funding and as such
shall be deemed to be subject to such reserve requirements without benefit of or
credit for proration,  exemptions or offsets which may be available from time to
time to any Lender under  Regulation  D.  Statutory  Reserves  shall be adjusted
automatically  on and as of the  effective  date of any  change  in any  reserve
percentage.

          "Affiliate" of any person shall mean any other person which,  directly
or indirectly, controls or is controlled by or is under common control with such
person and, without  limiting the generality of the foregoing,  includes (i) any
person  which  beneficially  owns or  holds 5% or more of any  class  of  voting
securities  of such person or 5% or more of the equity  interest in such person,
(ii) any person of which such  person  beneficially  owns or holds 5% or more of
any class of voting  securities  or in which such  person  beneficially  owns or
holds 5% or more of the equity  interest in such person and (iii) any  director,
officer or employee of such  person.  For the purposes of this  definition,  the
term "control" (including,  with correlative meanings, the terms "controlled by"
and "under common control with"), as used with respect to any person,  means the
possession,  directly  or  indirectly,  of the  power to  direct  or  cause  the
direction of the  management  and policies of such person,  whether  through the
ownership of voting securities or by contract or otherwise.

          "Agent"  shall have the meaning  assigned to such term in the preamble
to this Agreement.

          "Alternate  Base Loan" shall mean a Loan based on the  Alternate  Base
Rate in accordance with Article II hereof.

          "Alternate  Base  Rate"  shall  mean,  for any day,  a rate per  annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of
(a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such
day plus 1%, and (c) the Federal Funds Effective Rate in effect on such day plus
1/2 of 1%.  "Prime  Rate"  shall mean the rate of  interest  per annum  publicly
announced  from  time to time by the Agent at its  principal  office in New York
City as its prime rate in effect at such time. "Base CD Rate" shall mean the sum
of (a) the product of (i) the  Three-Month  Secondary CD Rate and (ii) Statutory
Reserves and (b) the Assessment Rate. "Three-Month Secondary CD.

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Rate"  shall  mean,  for any day,  the  secondary  market  rate for  three-month
certificates of deposit reported as being in effect on such day (or, if such day
shall not be a  Business  Day,  the next  preceding  Business  Day) by the Board
through the public information telephone line of the Federal Reserve Bank of New
York (which rate will, under the current practices of the Board, be published in
Federal Reserve  Statistical  Release  H.15(519)  during the week following such
day),  or,  if such  rate  shall  not be so  reported  on such day or such  next
preceding  Business  Day, the average of the  secondary  market  quotations  for
three-month certificates of deposit of major money center banks in New York City
received at  approximately  10:00 a.m.,  New York City time, on such day (or, if
such day shall not be a Business Day, on the next preceding Business Day) by the
Agent  from three New York City  negotiable  certificate  of deposit  dealers of
recognized  standing selected by it. "Statutory  Reserves" shall mean a fraction
(expressed  as a  decimal),  the  numerator  of which is the  number one and the
denominator  of which is the number  one minus the  maximum  reserve  percentage
(including any marginal,  special, emergency or supplemental reserves) expressed
as a decimal,  established by the Board and any other banking authority to which
the Agent is subject for new negotiable  nonpersonal time deposits in dollars of
over $100,000 with  maturities  approximately  equal to three months.  Statutory
Reserves shall be adjusted  automatically on and as of the effective date of any
change in any reserve percentage. "Assessment Rate" shall mean, for any day, the
annual  assessment rate in effect on such day that is payable by a member of the
Bank  Insurance Fund  classified as  "well-capitalized"  and within  supervisory
subgroup "B" (or comparable successor risk classification) within the meaning of
C.F.R.  Part 327 (or any successor  provision) to the Federal Deposit  Insurance
Corporation  for insurance by such  Corporation of time deposits made in dollars
at the  offices of such  member in the  United  States;  provided  that if, as a
result of any change in any law, rule or regulation, it is no longer possible to
determine the Assessment  Rate as aforesaid,  then the Assessment  Rate shall be
such annual rate as shall be determined by the Agent to be representative of the
cost of such  insurance to the Lenders.  "Federal  Funds  Effective  Rate" shall
mean, for any day, the weighted average of the rates on overnight  Federal funds
transactions  with  members of the Federal  Reserve  System  arranged by Federal
funds brokers,  as published on the next succeeding  Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a  Business  Day,  the  average  of  the  quotations  for  the  day  of  such
transactions  received  by  the  Agent  from  three  Federal  funds  brokers  of
recognized  standing  selected  by it. If for any  reason  the Agent  shall have
determined (which  determination shall be conclusive absent manifest error) that
it is unable to ascertain the Base CD Rate or the Federal Funds  Effective Rate,
or both,  for any reason,  including,  the  inability or failure of the Agent to

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obtain sufficient  quotations in accordance with the terms hereof, the Alternate
Base Rate shall be determined  without  regard to clause (b) or (c), or both, of
the first sentence of this definition,  as appropriate,  until the circumstances
giving rise to such inability no longer exist.  Any change in the Alternate Base
Rate due to a change in the Prime Rate,  the Base CD Rate or the  Federal  Funds
Effective  Rate shall be effective on the  effective  date of such change in the
Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.

          "Applicable  Lending  Office" shall mean, with respect to each Lender,
such Lender's  Domestic Lending Office in the case of an Alternate Base Loan and
such Lender's Eurodollar Lending Office in the case of a Eurodollar Loan.

          "Assignment  and  Acceptance"  shall mean an assignment and acceptance
entered  into  by a  Lender  and an  assignee  and  accepted  by the  Agent,  in
substantially the form of Exhibit E annexed hereto.

          "Availability"  shall  mean at any time (i) the lesser at such time of
(x) the Total Revolving Credit Commitment and (y) the Borrowing Base, minus (ii)
the sum at such  time  of (x) the  unpaid  principal  balance  of,  and  accrued
interest  and  fees  on  the  Revolving   Credit  Loans,   minus  (iii)  without
duplication,  all reserves  established  pursuant to this  Agreement  including,
without  limitation,  reserves relating to dilution or to reflect any deficiency
in, or absence of, any  landlord's  waiver and pursuant to Sections  7.01(b) and
7.01(c) hereof and (y) the Letter of Credit Usage.

          "Board"  shall  mean the Board of  Governors  of the  Federal  Reserve
System of the United States. "Borrowers" shall have the meaning assigned to such
term in the preamble to this Agreement.

          "Borrowing  Base"  shall  have the  meaning  assigned  to such term in
Section 2.01(b) hereof.

          "Business  Day" shall mean any day,  other than a Saturday,  Sunday or
other day on which  commercial banks in New York City are authorized or required
by law to remain closed,  except that, if any  determination of a "Business Day"
shall relate to a Eurodollar  Loan,  the term  "Business  Day" shall in addition
exclude any day on which banks are not open for  dealings in dollar  deposits in
the London interbank market..

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          "Capitalized Lease Obligation" shall mean an obligation to pay rent or
other  amounts under any lease of (or other  arrangement  conveying the right to
use) real and/or personal property which obligation is required to be classified
and accounted  for as a capital lease on a balance sheet  prepared in accordance
with GAAP, and for purposes  hereof the amount of such  obligation  shall be the
capitalized amount thereof determined in accordance with GAAP.

          "Change in Law" means (a) the adoption of any law,  rule or regulation
after the date of this Agreement,  (b) any change in any law, rule or regulation
or in the  interpretation or application  thereof by any Governmental  Authority
after the date of this  Agreement or (c)  compliance  by any Lender or the Agent
(or, for purposes of Section 2.10(b), by any lending office of such Lender or by
such  Lender's  or the  Agent's  holding  company,  if any)  with  any  request,
guideline  or  directive  (whether  or not  having  the  force  of  law)  of any
Governmental Authority made or issued after the date of this Agreement.

          "Closing Date" shall mean May __, 2001.

          "Code" shall mean the Internal  Revenue Code of 1986 and the rules and
regulations promulgated thereunder, as amended from time to time.

          "Collateral"  shall mean all  collateral  and security as described in
the Security Documents.

          "Commitment"  shall mean, with respect to each Lender,  the sum of the
Term Loan  Commitment of such Lender as set forth in Schedule  2.01(a),  and the
Revolving Credit Commitment of such Lender as set forth in Schedule 2.01(b),  as
each may be adjusted  from time to time  pursuant to this  Agreement  including,
without limitation, Section 2.07.

          "Commitment  Fee" shall have the meaning set forth in Section  2.06(a)
hereof.

          "Consolidated" shall mean, in respect of any person, as applied to any
financial or accounting  term, such term  determined on a consolidated  basis in
accordance  with GAAP (except as otherwise  required  herein) for the person and
all consolidated subsidiaries thereof.

          "Contaminant"  shall  mean  all  Hazardous  Materials  and  all  those
substances  which are regulated by or form the basis of liability under Federal,
state or local environmental,  health and safety statutes or regulations, or any
other  material or  substance  which  constitutes  a  materialhealth,  safety or
environmental hazard to any person or property.

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<PAGE>

          "Credit Event" shall mean each borrowing and each issuance of a Letter
of Credit hereunder.

          "Customer"  shall mean and include the account  debtor or obligor with
respect to any Receivable.

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

          "Deka Acquisition  Agreement" shall mean the Asset Purchase  Agreement
made as of February 9, 2001 by and among Microtek,  Deka Medical,  Inc., and all
of the  stockholders  of Deka Medical,  Inc.,  set forth on the signature  pages
thereto,  as amended.  "dollars" or the symbol "$" shall mean lawful currency of
the United States of America.

          "Domestic Lending Office" shall mean, with respect to any Lender,  the
office of such Lender  specified as its "Domestic  Lending Office"  opposite its
name in Schedule  2.02  annexed  hereto,  or such other office of such Lender as
such Lender may from time to time specify to the Borrowers and the Agent.

          "Eligible  Inventory"  shall mean  inventory  of the  Borrowers or the
Guarantors   comprised   solely  of  raw  materials  and  finished   goods  (and
specifically excluding work in process, supplies and costs not normally included
as costs of  manufacturing  inventory of the Borrowers or the Guarantors)  which
is, in the opinion of the Agent, not obsolete, slow-moving or unmerchantable and
is and at  all  times  shall  continue  to be  acceptable  to the  Agent  in all
respects;  provided,  however, that Eligible Inventory shall in no event include
inventory   which  (i)is  on   consignment,   is  not  in  conformity  with  the
representations and warranties made by the Borrowers under the Loan Documents or
is not located at one of the addresses for locations of Collateral  set forth on
Schedule  1.01 hereto and with  respect to which the Agent has not been  granted
and has not perfected a valid, first priority security interest, (ii) is located
at a location not owned by the Borrower as to which the Agent has not received a
waiver, in form and substance  satisfactory to the Agent, executed and delivered
by the  landlord,  bailee,  warehouse or processor (as the case may be) or (iii)
which is in transit. Standards of eligibility may be fixed and revised from time
to time solely by the Agent. In determining eligibility, the Agent may, but need
not, rely on reports and schedules furnished by the Borrowers, but reliance by

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the Agent  thereon  from time to time  shall not be deemed to limit the right of
the Agent to revise  standards of eligibility at any time as to both present and
future  inventory of the Borrowers and the Guarantors.  If the inventory is sold
under a licensed trademark,  the Agent shall have obtained a waiver, in form and
substance  satisfactory  to the Agent,  from the  licensor  with  respect to the
rights of the Agent to use the  trademark to sell or  otherwise  dispose of such
inventory.

          "Eligible Receivables" shall mean Receivables created by the Borrowers
or the Guarantors in the ordinary course of business  arising out of the sale or
lease of goods or  rendition  of services by the  Borrowers  or the  Guarantors,
which are and at all times shall  continue to be  acceptable to the Agent in all
respects.  Standards of  eligibility  may be fixed and revised from time to time
solely by the Agent in the Agent's  reasonable  business  judgment.  In general,
without  limiting the foregoing,  a Receivable shall in no event be deemed to be
an Eligible  Receivable unless: (a) all payments due on the Receivable have been
invoiced and the underlying goods shipped or services performed, as the case may
be; (b) the payment due on the  Receivable is not more than 60 days past due and
90 days past the  invoice  date;  (c) the  payments  due on more than 50% of all
Receivables  from the same  Customer  are less than 60 days past due and 90 days
past the invoice date; (d) the  Receivable  arose from a completed and bona fide
transaction  (and with respect to a sale of goods,  a transaction in which title
has  passed  to  the  Customer)   which   requires  no  further  act  under  any
circumstances  on the part of the Borrowers or the  Guarantors in order to cause
such  Receivable to be payable in full by the Customer (e) the  Receivable is in
full conformity with the representations and warranties made by the Borrowers or
the Guarantors to the Agent and the Lenders with respect thereto and is free and
clear of all security  interests and Liens of any nature  whatsoever  other than
any security interest deemed to be held by the Borrowers,  the Guarantors or any
security  interest  created  pursuant to the Security  Documents or permitted by
Section 7.01 hereof;  (f) the  Receivable  constitutes  an "account" or "chattel
paper" within the meaning of the Uniform  Commercial  Code of the state in which
the  Receivable  is  located;  (g)  the  Customer  has  not  asserted  that  the
Receivable,  and  the  Borrowers  or the  Guarantors  are  not  aware  that  the
Receivable,  arises  out of a bill and hold,  consignment  or  progress  billing
arrangement  or is subject to any setoff,  contras,  net-out  contract,  offset,
deduction,  dispute,  credit,  counterclaim  or other defense arising out of the
transactions  represented by the  Receivables or  independently  thereof and the
Customer  has  finally  accepted  the  goods  from the  sale  out of  which  the
Receivable  arose and has not  objected to its  liability  thereon or  returned,
rejected or repossessed any of such goods,except for complaints made or

                                       7
<PAGE>

goods  returned in the  ordinary  course of business  for which,  in the case of
goods returned, goods of equal or greater value have been shipped in return; (h)
the Receivable  arose in the ordinary course of business of the Borrowers or the
Guarantors;  (i) the  Customer is not (x) the United  States  government  or the
government  of any state or  political  subdivision  thereof or therein,  or any
agency or department of any thereof  (provided,  however,  the  Receivables  due
under any Veterans  Administration programs or any hospital owned or operated by
the  United  States  government  or the  government  of any  state or  political
subdivision thereof shall be deemed to be Eligible Receivables if they otherwise
meet the  eligibility  criteria  set forth  herein) or (y) an  Affiliate  of the
Borrowers  or any  subsidiary  of any  thereof or a supplier  or creditor of the
Borrowers  or the  Guarantors  or any  subsidiary  thereof  (provided  that such
Receivable  shall only be  ineligible  to the extent of amounts  payable by such
Borrower or subsidiary to such supplier or  outstanding to such  creditor);  (j)
the Customer is a United  States person or an obligor in the United States or an
obligor located in another jurisdiction if the applicable  Receivable is covered
by a letter of credit or credit insurance in favor of, or assigned to, the Agent
in form and substance  satisfactory  to the Agent;  (k) the Receivable  complies
with all material  requirements of all applicable laws and regulations,  whether
Federal,  state or local (including,  without  limitation,  usury laws and laws,
rules and regulations  relating to truth in lending,  fair credit billing,  fair
credit reporting,  equal credit opportunity,  fair debt collection practices and
privacy);  (l) to the  knowledge  of  the  Borrowers  and  the  Guarantors,  the
Receivable  is in full  force and  effect  and  constitutes  a legal,  valid and
binding  obligation of the Customer  enforceable  in accordance  with its terms,
except as the enforceability  thereof may be limited by bankruptcy,  insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally and by general equity principles; (m) the Receivable is denominated in
and provides for payment by the Customer in dollars;  (n) the Receivable has not
been and is not  required to be charged off or written off as  uncollectible  in
accordance with GAAP or the customary business practices of the Borrowers or the
Guarantors;  (o) the Agent on behalf of the Lenders possesses a valid, perfected
first priority  security  interest in such Receivable as security for payment of
the Obligations; (p) the Receivable is not with respect to a Customer located in
New Jersey,  Minnesota,  Indiana or any other state denying  creditors access to
its courts in the  absence of a Notice of  Business  Activities  Report or other
similar filing,  unless Borrowers have either qualified as a foreign corporation
authorized to transact business in such state or have filed a Notice of Business
Activities  Report or similar  filing with the  applicable  state agency for the
then current year;  (q) an event as described in paragraph (e) or (f) of Article
VIII  has  notoccurred  with  respect  to the  Customer;  and (r) the  Agent  is

                                       8
<PAGE>

satisfied with the credit  standing of the Customer in relation to the amount of
credit extended.

          "Employee Note" shall mean the unsecured,  subordinated,  non-interest
bearing  promissory notes of Microtek to the order of the persons  identified on
Schedule 2.1(b)(iii) to the Deka Acquisition Agreement, in an original aggregate
principal amount not to exceed  $1,250,000,  all of which notes shall be in form
and substance satisfactory to the Agent.

          "Environmental  Claim"  shall mean any  written  notice of  violation,
claim,  deficiency,  demand,  abatement  or  other  order  by  any  governmental
authority  or any person for personal  injury  (including  sickness,  disease or
death),  tangible or  intangible  property  damage,  damage to the  environment,
nuisance, pollution,  contamination or other adverse effects on the environment,
or for fines,  penalties or deed or use  restrictions,  resulting  from or based
upon (i) the  existence,  or the  continuation  of the  existence,  of a Release
(including,   without   limitation,   sudden  or   non-sudden,   accidental   or
nonaccidental  Releases), of, or exposure to, any Contaminant at, in, by or from
any  of  the  properties  of the  Borrowers  or  their  subsidiaries,  (ii)  the
environmental aspects of the transportation,  storage,  treatment or disposal of
Contaminants  in connection  with the operation of any of the  properties of the
Borrowers or their subsidiaries or (iii) the violation,  or alleged violation by
Borrowers or any of their  subsidiaries,  of any statutes,  ordinances,  orders,
rules,  regulations,  Permits or licenses of or from any governmental authority,
agency or court  relating to  environmental  matters  connected  with any of the
properties  of  the  Borrowers  or  their  subsidiaries,  under  any  applicable
Environmental Law.

          "Environmental  Laws"  shall  mean  the  Comprehensive   Environmental
Response,  Compensation,  and  Liability  Act (42 U.S.C.  ss.9601 et seq.),  the
Hazardous  Material  Transportation Act (49 U.S.C.ss.1801 et seq.), the Resource
Conservation  and Recovery Act (42  U.S.C.ss.6901  et seq.),  the Federal  Water
Pollution  Control Act (33 U.S.C.ss.1251 et seq.), the Oil Pollution Act of 1990
(33 U.S.C.  ss.2701 et seq.), the Safe Drinking Water Act (42 U.S.C.ss.300f,  et
seq.),  the  Clear Air Act (42  U.S.C.ss.7401  et  seq.),  the Toxic  Substances
Control Act, as amended (15  U.S.C.ss.2601  et seq.),  the Federal  Insecticide,
Fungicide,  and Rodenticide Act (7 U.S.C.ss.  136 et seq.), and the Occupational
Safety  and  Health Act (29  U.S.C.ss.651  et seq.),  as such laws have been and
hereafter may be amended or supplemented,  and any related or analogous  present
or future Federal, state or local,  statutes,  rules,  regulations,  ordinances,
licenses,   permits   and   interpretations   and  orders  of   regulatory   and
administrative bodies.

                                       9
<PAGE>

          "ERISA"  shall mean the  Employee  Retirement  Income  Security Act of
1974, as amended, and the rules and regulations  promulgated  thereunder,  as in
effect from time to time.

          "ERISA  Affiliate"  shall mean any trade or  business  (whether or not
incorporated)  which together with any of the Borrowers or any subsidiary of any
thereof  would be treated as a single  employer  under Section 302 of Title I or
Title IV of ERISA r with respect to Section 412 or Section  414(b),  (c), (m) or
(o) of the Code.

          "Eurodollar  Lending  Office" shall mean,  with respect to any Lender,
the office of such Lender specified as its

          "Eurodollar Lending Office" opposite its name in Schedule 2.03 annexed
hereto (or, if no such office is specified,  its Domestic  Lending  Office),  or
such other office of such Lender as such Lender may from time to time specify to
the Borrowers and the Agent.

          "Eurodollar Loan" shall mean a Loan based on the Adjusted LIBO Rate in
accordance with Article II hereof.

          "Event of  Default"  shall have the  meaning  assigned to such term in
Article VIII hereof.

          "Final Maturity Date" shall mean June 30, 2004.

          "Financial  Officer" shall mean, with respect to any person, the chief
financial officer or chief executive officer of such person.

          "FIRREA" shall mean the Financial  Institutions  Reform,  Recovery and
Enforcement Act of 1989, as amended from time to time.

          "Fiscal  Year" shall mean the fiscal year of each of the Borrowers for
accounting purposes which in each case ends on December 31 of each year.

          "Funded Debt" shall mean,  with respect to any person,  as of the date
of determination thereof, all Indebtedness (including Subordinated Indebtedness)
of such person and its subsidiaries on a Consolidated  basis outstanding at such
time  (including the current  portion  thereof) which matures more than one year
after the date of calculation  (including amounts  outstanding in the final year
of the Term Loan or any other Funded Debt), and any such  Indebtedness  maturing
within one year from such date of  calculation  which is renewable or extendable
at the  option  of the  obligor  to a date more than one year from such date and
including in any event the Revolving Credit Loans.

                                       10
<PAGE>

          "Funds from Operations" shall mean, with respect to any person for any
period,  the sum for such  period of (i) Net Income  plus (ii)  depreciation  of
tangible property plus (iii)  amortization of intangible  property plus (iv) for
the fiscal quarters ending March 31, 2001, June 30, 2001, and September 30, 2001
only,  $9,200,000,  which represents the  restructuring  charges incurred in the
fourth quarter of Fiscal Year 2000.

          "GAAP"  shall have the meaning  assigned to such term in Section  1.02
hereof.

          "Governmental  Authority"  shall  mean the  government  of the  United
States of  America,  any  other  nation or any  political  subdivision  thereof,
whether state or local, and any agency, authority,  instrumentality,  regulatory
body,  court,  central bank or other entity exercising  executive,  legislative,
juridical,  taxing,  regulatory  or  administrative  powers or  functions  of or
pertaining to government.

          "Grantor" shall mean any Grantor, Pledgor or Debtor, as such terms are
as defined in any of the Security Documents.

          "Guarantee" shall mean any obligation, contingent or otherwise, of any
person  guaranteeing  or having the economic  effect of  guaranteeing  or giving
financial  assistance  in  respect  of  the  repayment  of any  Indebtedness  or
obligation of any other person in any manner,  whether  directly or  indirectly,
and shall include, without limitation,  any obligation of such person, direct or
indirect, to (i) purchase or pay (or advance or supply funds for the purchase or
payment of) such  Indebtedness  or  obligation  or to purchase (or to advance or
supply  funds  for  the  purchase  of) any  security  for  the  payment  of such
Indebtedness or obligation,  (ii) purchase property,  securities or services for
the purpose of assuring  the owner of such  Indebtedness  or  obligation  of the
payment of such  Indebtedness or obligation,  or (iii) maintain working capital,
equity  capital,  available  cash or other  financial  condition  of the primary
obligor  so as to  enable  the  primary  obligor  to pay  such  Indebtedness  or
obligation;  provided,  however,  that  the term  Guarantee  shall  not  include
endorsements  for collection or collections  for deposit,  in either case in the
ordinary course of business.

          "Guarantor"   shall  mean,   collectively,   the  Borrowers  and  each
subsidiary  thereof  which  is on the  Closing  Date  or  thereafter  becomes  a
guarantor of the Obligations.

          "Hazardous Material" shall mean any pollutant, contaminant,  chemical,
or  industrial  or  hazardous,  toxic or dangerous  goods,  waste,  substance or
material, defined or regulated as such in (or for purposes of) any Environmental

                                       11
<PAGE>

Law and any other toxic,  reactive,  or flammable chemicals,  including (without
limitation) any asbestos,  any petroleum  (including crude oil or any fraction),
any radioactive  substance and any polychlorinated  biphenyls;  provided, in the
event that any  Environmental Law is amended so as to broaden the meaning of any
term  defined  thereby,  such  broader  meaning  shall apply  subsequent  to the
effective date of such amendment; and provided,  further, to the extent that the
applicable  laws of any state  establish  a meaning  for  "hazardous  material,"
"hazardous  substance,"  "hazardous  waste," "solid waste" or "toxic  substance"
which is broader than that  specified  in any Federal  Environmental  Law,  such
broader meaning shall apply.

          "Indebtedness"  shall  mean,  with  respect  to any  person,  (a)  all
obligations  of such person for  borrowed  money or with  respect to deposits or
advances of any kind,  (b) all  obligations  of such person  evidenced by bonds,
debentures,  notes or other similar  instruments or upon which interest  charges
are  customarily  paid,  (c) all  obligations  of such  person for the  deferred
purchase price of property or services,  except current accounts payable arising
in the  ordinary  course of business  and not  overdue  beyond such period as is
commercially  reasonable for such person's business, (d) all obligations of such
person under  conditional sale or other title retention  agreements  relating to
property purchased by such person and all Capitalized Lease Obligations, (e) all
payment  obligations  of such person with  respect to interest  rate,  commodity
price or currency protection agreements, foreign currency exchange agreements or
other interest or currency exchange rate or commodity price hedging  agreements,
(f) all  obligations  of such  person as an  account  party  under any letter of
credit or in respect of bankers'  acceptances,  (g) all obligations of any third
party secured by property or assets of such person (regardless of whether or not
such person is liable for repayment of such obligations),  (h) all Guarantees of
such person and (i) the redemption  price of all redeemable  preferred  stock of
such person,  but only to the extent that such stock is redeemable at the option
of the holder or requires  sinking fund or similar payments at any time prior to
the Final  Maturity  Date.  The  Indebtedness  of any person  shall  include the
Indebtedness of any other entity (including any partnership in which such person
is a general  partner) to the extent such person is liable  therefor as a result
of such person's  ownership  interest in or other relationship with such entity,
except to the extent the terms of such Indebtedness  provide that such person is
not liable therefor.

          "Indemnitees"  shall have the meaning assigned to such term in Section
11.04(c) hereof.

                                       12
<PAGE>

          "Information"  shall have the meaning assigned to such term in Section
11.11 hereof.

          "Interest  Margin" shall mean, with respect to any Loan, the amount as
set forth below as corresponds to the Leverage Ratio set forth below,  initially
determined on December 31, 2000. The Interest Margin may be adjusted  thereafter
following  the  delivery  of the  financial  statements  to the  Agent  required
pursuant  to  Section   6.05(a)  or  (b),  as  applicable,   together  with  the
corresponding  compliance certificates required pursuant to Section 6.05(e) and,
if the Borrowers believe they are entitled to a lower Interest Margin, a written
request  for an  Interest  Margin  adjustment,  commencing  with  the  financial
statements and  certificates for the period ending September 30, 2001, or if the
Borrowers shall fail to timely deliver such statements and  certificates for any
such period,  then at the highest  Interest  Margin  provided  for herein,  such
adjustments to be made (i) to a higher Interest Margin, at the discretion of the
Agent, or (ii) to a lower Interest  Margin,  within five (5) Business Days after
delivery of the Borrowers' request for an Interest Margin adjustment;  provided,
however,  that  any  adjustment  shall  not  be  effected  with  respect  to any
Eurodollar Loan until the continuation or conversion thereof at its expiration:

                                               Interest             Interest
                                              Margin for           Margin for
                                              Eurodollar            Alternate
             Leverage Ratio                     Loans              Base Loans
             --------------                     -----              ----------
             Less than 1.50:1.00                 1.05                 0.50
             Equal to or greater than
             1.50:1.00 but less than
             2.25:1.00                           2.00                 1.00
             Equal to or greater than
             2.25:1.00 but less than
             3.00:1.00                           2.50                 1.50
             Equal to or greater than
             3.00:1.00                           3.00                 2.00

          On the Closing  Date,  (a) the Interest  Margin for  Eurodollar  Loans
shall be 2.50% and (b) the Interest Margin for.

                                       13
<PAGE>

Alternate Base Loans shall be 1.50%; each of which may thereafter be adjusted in
accordance with the provisions hereof.

          "Interest  Payment  Date"  shall mean (i) in the case of an  Alternate
Base Loan, the first Business Day of each month  commencing  June 1, 2001 (which
shall cover the period from May 1, 2001 for Loans outstanding under the Isolyser
Credit Agreement that are being continued and extended under this Agreement) and
(ii) with respect to any Eurodollar Loan (which shall include those  outstanding
under the Isolyser Credit  Agreement that are being continued and extended under
this Agreement), the last day of the Interest Period applicable thereto, and, in
addition,  in respect  of any  Eurodollar  Loan of more than  three (3)  months'
duration, each earlier day which is three (3) months after the first day of such
Interest Period.

          "Interest  Period" shall mean, as to any  Eurodollar  Loan, the period
commencing  on the date of such  Eurodollar  Loan and ending on the  numerically
corresponding day (or, if there is no numerically corresponding day, on the last
day) in the calendar month that is one (1), two (2), three (3) or six (6) months
thereafter,  as the  Borrowers may elect with respect to its  Eurodollar  Loans;
provided, however, that (x) if an Interest Period would end on a day that is not
a Business Day, such  Interest  Period shall be extended to the next  succeeding
Business Day unless,  with respect to  Eurodollar  Loans,  such next  succeeding
Business Day would fall in the next calendar  month, in which case such Interest
Period shall end on the next  preceding  Business  Day,  (y) no Interest  Period
shall end later than the Final  Maturity Date and (z) interest shall accrue from
and including the first day of an Interest  Period to but excluding the last day
of such Interest Period.

          "Isolyser  Credit  Agreement" shall mean the Credit Agreement dated as
of November  28,  1994,  as amended and  restated as of August 30,  1996,  among
Isolyser and certain  Affiliates as borrowers and guarantors,  the lenders named
therein and the Agent, as further amended to the Closing Date.

          "Lender" shall have the meaning  assigned to such term in the preamble
to this Agreement.

          "Letter of Credit"  shall have the  meaning  assigned  to such term in
Section 2.17 hereof.

          "Letter of Credit  Usage"  shall mean at any time,  (i) the  aggregate
undrawn amount of all  outstanding  Letters of Credit at such time plus (ii) the
unreimbursed drawings at such time under all such Letters of Credit.

                                       14
<PAGE>

          "Leverage  Ratio"  shall mean with  respect to any person the ratio of
(i) Funded  Debt,  less cash,  cash  equivalents  and  investments  permitted by
Section 7.06(a) through (e), at the end of any fiscal quarter to (ii) Funds from
Operations of such person for the four most recent  consecutive  fiscal quarters
ending at the end of such fiscal quarter.

          "LIBO Rate" shall mean,  with respect to any  Eurodollar  Loan for any
Interest Period, an interest rate per annum (rounded upwards,  if necessary,  to
the next 1/16 of 1%) equal to the rate at which  dollar  deposits  approximately
equal in principal amount to the Agent's portion of such Eurodollar Loan and for
a maturity  equal to the applicable  Interest  Period are offered in immediately
available  funds to the  principal  London  office  of the  Agent in the  London
interbank market at approximately 11:00 A.M., London time, two (2) Business Days
prior to the first day of such Interest Period.

          "Lien" shall mean, with respect to any asset, (i) any mortgage,  lien,
pledge,  encumbrance,  charge or security interest in or on such asset, (ii) the
interest of a vendor or a lessor under any conditional  sale agreement,  capital
lease or other title retention  agreement  relating to such asset,  (iii) in the
case of securities,  any purchase option, call or similar right of a third party
with respect to such  securities or (iv) any other right of or arrangement  with
any creditor to have such creditor's claim satisfied out of such assets,  or the
proceeds therefrom, prior to the general creditors of the owner thereof.

          "Loan" shall mean the Term Loan or any Revolving Credit Loan.

          "Loan  Documents" shall mean this Agreement,  each Security  Document,
each  Guarantee  executed  and  delivered  at  any  time  with  respect  to  the
Obligations, the Notes and each other document,  instrument, or agreement now or
hereafter  delivered  to the  Agent or any  Lender  in  connection  herewith  or
therewith.

          "Loan Party" shall mean each  Borrower,  each Grantor,  each Guarantor
and each subsidiary thereof.

          "Margin  Stock"  shall  have  the  meaning  assigned  to such  term in
Regulation U.

          "Material  Adverse Effect" shall mean a material adverse effect on (i)
the business,  assets, prospects,  operations or financial or other condition of
any person or its subsidiaries, (ii) the ability of any Loan Party to perform or
pay the Obligations in accordance with the terms hereof or of any other.

                                       15
<PAGE>

          Loan Document or (iii) the Agent's Lien on any material portion of the
Collateral or the priority of such Lien.

          "Microtek  Credit  Agreement" shall mean the Credit Agreement dated as
of October 1, 1991,  as amended  and  restated  as of  November  30,  1995 among
Microtek, the guarantors and lenders named therein and the Agent.

          "Mortgages"  shall mean the real  property  mortgages  and/or deeds of
trust  executed by the  Grantor(s) at any time and from time to time in favor of
the Agent, for the benefit of the Lenders, as amended,  modified or supplemented
from time to time.

          "Multiemployer  Plan" shall mean a "multiemployer  plan" as defined in
Section 4001(a)(3) of ERISA.

          "Net  Amount of  Eligible  Inventory"  shall  mean,  at any time,  the
aggregate  value,  computed  at the lower of cost (on a FIFO  basis) and current
market value, of Eligible Inventory of the Borrowers.

          "Net  Amount of  Eligible  Receivables"  shall mean and include at any
time, without duplication, the gross amount of Eligible Receivables at such time
less (i) sales,  excise or similar  taxes and (ii) returns,  discounts,  claims,
credits  and  allowances  of any  nature  at any time  issued,  owing,  granted,
outstanding, available or claimed.

          "Net  Income"  shall mean,  with respect to any person for any period,
the aggregate  income (or loss) of such person for such period which shall be an
amount  equal to net  revenues  and other proper items of income for such person
less the  aggregate  for such  person of any and all items  that are  treated as
expenses  under  GAAP,  and less  Federal,  state and local  income  taxes,  but
excluding any extraordinary gains or losses or any gains or losses from the sale
or  disposition  of assets  other than in the ordinary  course of business,  all
computed and calculated in accordance with GAAP.

          "Notes" shall mean the Term Notes and the Revolving Credit Notes.

          "Obligations" shall mean all obligations, liabilities and Indebtedness
of the Borrowers to the Lenders and the Agent, whether now existing or hereafter
created, direct or indirect, due or not, whether created directly or acquired by
assignment,   participation  or  otherwise,  including  without  limitation  all
obligations,  liabilities and  Indebtedness of the Borrowers with respect to the
Security  Documents and other Loan  Documents,  the principal of and interest on
the Revolving  Credit Loans,  the Term.  Loans and the payment or performance of

                                       16
<PAGE>

all other  obligations,  liabilities,  and Indebtedness of the Borrowers and the
other Loan Parties to the Lenders and the Agent hereunder,  under the Letters of
Credit or under  any one or more of the  other  Loan  Documents  (including  the
payment of amounts that would become due but for the  operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, and interest that, but for the
filing of a petition in bankruptcy with respect to any Borrower, would accrue on
such  obligations,  whether or not a claim is allowed  against such Borrower for
such  interest  in  the  related  bankruptcy   proceeding),   including  without
limitation all fees,  costs,  expenses and indemnity  obligations  hereunder and
thereunder.

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

          "PBGC" shall mean the Pension Benefit Guaranty Corporation.

          "Pension Plan" shall mean any employee pension benefit plan within the
meaning of Section 3(2) of ERISA which is subject to the  provisions of Title IV
of ERISA or Section 412 of the Code with  respect to which any of the  Borrowers
or any ERISA Affiliate has liability.

          "Permits" shall have the meaning assigned to such term in Section 4.18
hereof.  "person" shall mean any natural  person,  corporation,  business trust,
limited liability company,  association,  company,  joint venture,  partnership,
limited liability partnership or Governmental Authority.

          "Plan" shall mean any employee benefit plan other than a multiemployer
plan within the  meaning of Section  3(3) of ERISA and which is  maintained  (in
whole or in part) for employees of the  Borrowers,  any  subsidiary or any ERISA
Affiliate.

          "Pledge  Agreement" shall mean the Pledge Agreement dated as of August
30, 1996 between the Grantors and the Agent, for the benefit of the Lenders,  in
substantially  the form of Exhibit F annexed  hereto,  as  amended,  modified or
supplemented from time to time.

          "Protection  Agreement" shall mean the Shareholder  Protection  Rights
Agreement  between Isolyser and Suntrust Bank, as amended by the First Amendment
to Shareholder Protection Rights Agreement, as in effect on October 9, 1997.

                                       17
<PAGE>

          "Receivables"  shall  mean  and  include  all  of the  Borrowers'  and
Guarantors'  accounts,   instruments,   documents,  chattel  paper  and  general
intangibles,  whether  secured or  unsecured,  whether now existing or hereafter
created or arising,  and whether or not  specifically  assigned to the Agent for
the ratable benefit of the Lenders.

          "Register"  shall have the  meaning  assigned  to such term in Section
11.03(e) hereof.

          "Regulation  D" shall mean  Regulation D of the Board,  as the same is
from  time to time in  effect,  and all  official  rulings  and  interpretations
thereunder or thereof.

          "Regulation  T" shall mean  Regulation T of the Board,  as the same is
from  time to time in  effect,  and all  official  rulings  and  interpretations
thereunder or thereof.

          "Regulation  U" shall mean  Regulation U of the Board,  as the same is
from  time to time in  effect,  and all  official  rulings  and  interpretations
thereunder or thereof.

          "Regulation  X" shall mean  Regulation X of the Board,  as the same is
from  time to time in  effect,  and all  official  rulings  and  interpretations
thereunder or thereof.

          "Release"  shall  mean  any  releasing,  spilling,  leaking,  seepage,
pumping,  pouring,  emitting,  emptying,   discharging,   injecting,   escaping,
leaching,  disposing or dumping,  in each case as defined in Environmental  Law,
and shall include any

          "Threatened  Release," as defined in Environmental Law;  provided,  in
the event that any  Environmental Law is amended so as to broaden the meaning of
any term defined  thereby,  such broader  meaning shall apply  subsequent to the
effective date of such amendment.

          "Remedial  Work"  shall  mean  any  investigation,   site  monitoring,
containment, cleanup, removal, restoration or other remedial work of any kind or
nature with  respect to any  property  of the  Borrowers  or their  subsidiaries
(whether such property is owned, leased, subleased or used), including,  without
limitation, with respect to Contaminants and the Release thereof.

          "Repayment  Date"  shall  have the  meaning  assigned  to such term in
Section 2.04(c) hereof.

          "Reportable Event" shall mean a Reportable Event as defined in Section
4043(b) of ERISA with  respect  to which the notice  requirements  have not been
waived.

                                       18
<PAGE>

          "Required  Lenders"  shall  mean  Lenders  having  67%  of  the  Total
Commitment.

          "Responsible  Officer"  shall mean,  with  respect to any person,  any
president or chief executive officer, any financial vice president, or the chief
financial officer or controller, of such person.

          "Revolving  Credit  Alternate Base Loan" shall mean a Revolving Credit
Loan that is an Alternate Base Loan.

          "Revolving Credit Commitment" shall mean, with respect to each Lender,
the  commitment  of such Lender to make  Revolving  Credit Loans  hereunder  and
participate in Letters of Credit in an aggregate  amount at any time outstanding
not in excess  of the  amount  opposite  the name of such  Lender in the  column
entitled

          "Revolving  Credit  Commitment"  in the table  appearing  in  Schedule
2.01(b), or if applicable, the amount set forth in the Assignment and Acceptance
pursuant to which such Lender became a Lender  hereunder,  as such amount may be
(a) reduced  from time to time  pursuant to this  Agreement  including,  without
limitation,  Section 2.07 hereof and (b) reduced or increased  from time to time
pursuant to assignments by or to such Lender pursuant to Section 11.03 hereof.

          "Revolving  Credit Eurodollar Loan" shall mean a Revolving Credit Loan
that is a Eurodollar Loan.

          "Revolving  Credit  Loan"  shall  mean a  Revolving  Credit  Loan made
pursuant to Sections 2.01 and 2.02 hereof.

          "Revolving  Credit Notes" shall mean the Revolving Credit Notes of the
Borrowers,  executed  and  delivered  as provided  in Section  2.04  hereof,  in
substantially  the form of Exhibit B annexed  hereto,  as  amended,  modified or
supplemented from time to time.

          "Revolving Credit Termination Date" shall mean the earlier to occur of
(i) the Final  Maturity  Date and (ii) such date as the  Revolving  Credit Loans
shall  otherwise be payable in full and the Revolving  Credit  Commitment  shall
terminate,  expire  or be  cancelled  in  accordance  with  the  terms  of  this
Agreement.

          "Security  Agreement"  shall mean the  Amended and  Restated  Security
Agreement dated as of August 30, 1996, between the Grantor(s) and the Agent, for
the  benefit  of the  Lenders,  substantially  in the form of  Exhibit D annexed
hereto, as amended, modified or supplemented from time to time.

                                       19
<PAGE>

          "Security  Agreement - Patents and Trademarks"  shall mean the Amended
and Restated Security  Agreement and Mortgage - Patent and Trademarks,  dated as
of August 30, 1996 between the  Grantors  and the Agent,  for the benefit of the
Lenders,  substantially  in the form of Exhibit G annexed  hereto,  as hereafter
amended, modified or supplemented from time to time.

          "Security Documents" shall mean the Security Agreement, the Mortgages,
the Pledge Agreement,  the Security  Agreement  -Patents and Trademarks and each
other agreement now existing or hereafter created providing  collateral security
for the payment or performance of any Obligations.

          "Services Agreement" shall mean that certain Services Agreement, dated
as of January  __,  2000 (and  executed  on  January  21,  2000) by and  between
Isolyser and MINDHARBOR, Inc. as in effect on June 30, 2000.

          "Subordinated  Indebtedness"  shall mean,  with  respect to any of the
Borrowers,  Indebtedness  subordinated  in right  of  payment  to such  person's
monetary  obligations  under  this  Agreement  upon  terms  satisfactory  to and
approved in writing by the Agent,  to the extent it does not by its terms mature
or become subject to any mandatory prepayment or amortization of principal prior
to the Final Maturity Date, and shall in any event include the  Indebtedness  of
Microtek pursuant to the Employee Notes.

          "Subsidiary"  shall mean, with respect to any person, any corporation,
limited liability company, partnership,  association or other business entity of
which securities or other ownership interests  representing more than 50% of the
equity or more than 50% of the  ordinary  voting  power  are,  at the time as of
which  any  determination  is being  made,  owned  or  controlled,  directly  or
indirectly,  by the  parent of such  person or one or more  subsidiaries  of the
parent of such person.

          "Taxes"  shall  have the  meaning  assigned  to such  term in  Section
2.15(a)  hereof.  "Term  Alternate  Base Loan" shall mean a Term Loan that is an
Alternate Base Loan.

          "Term  Eurodollar  Loan"  shall mean a Term Loan that is a  Eurodollar
Loan.

          "Term Loans" shall mean the Term Loans made  pursuant to Sections 2.01
and 2.02.

                                       20
<PAGE>

          "Term Loan  Commitment"  shall mean, with respect to each Lender,  the
commitment  of such Lender to make Term Loans  hereunder in an aggregate  amount
not in excess  of the  amount  opposite  the name of such  Lender in the  column
entitled "Term Loan Commitment" in the table appearing in Schedule  2.01(a),  or
if applicable, the amount set forth in the Assignment and Acceptance pursuant to
which such Lender became a Lender  hereunder,  as such amount may be (a) reduced
from time to time  pursuant to this  Agreement  including,  without  limitation,
Section 2.07 hereof and (b) reduced or increased  from time to time  pursuant to
assignments by or to such Lender pursuant to Section 11.03 hereof.

          "Term Notes" shall mean the Term Notes of the Borrowers,  executed and
delivered as provided in Section  2.04, in  substantially  the form of Exhibit A
hereto, as amended, modified or supplemented from time to time.

          "Total  Commitment" shall mean the sum of the Lenders' Total Term Loan
Commitment and Total  Revolving  Credit  Commitment,  as the same may be reduced
from time to time pursuant to Section 2.07 hereof.

          "Total Revolving Credit Commitment" shall mean the sum of the Lenders'
Revolving  Credit  Commitments,  as the same may be  reduced  from  time to time
pursuant to this Agreement, including, without limitation, Section 2.07.

          "Total Term Loan  Commitment"  shall mean the sum of the Lenders' Term
Loan Commitments,  as the same may be reduced from time to time pursuant to this
Agreement, including, without limitation, Section 2.07.

          "Transactions" shall have the meaning assigned to such term in Section
4.02 hereof.

          SECTION 1.02.  Accounting Terms.  Unless otherwise  expressly provided
herein,  each  accounting term used herein shall have the meaning given it under
generally  accepted  accounting  principles  in effect  from time to time in the
United  States  applied on a basis  consistent  with those used in preparing the
financial  statements  referred to in Section  6.05 hereof  ("GAAP");  provided,
however,  that each reference in Article VII hereof, or in the definition of any
term used in  Article  VII  hereof,  to GAAP shall mean GAAP as in effect on the
date hereof.

                                       21
<PAGE>

II. THE LOANS

     SECTION 2.01. Term Loan Commitments and Revolving Credit  Commitments.  (a)
Subject  to the  terms  and  conditions  herein  set  forth  including,  without
limitation,  those  set  forth in  Section  2.03  below,  and  relying  upon the
representations and warranties herein set forth, each Lender,  severally and not
jointly, agrees to make its Term Loan to the Borrowers on the Closing Date in an
amount  not to exceed in the  aggregate  the amount of such  Lender's  Term Loan
Commitment set forth opposite its name in Schedule 2.01(a) annexed hereto.

          (b)  Subject  to  the  terms  and  conditions  and  relying  upon  the
representations and warranties herein set forth, each Lender,  severally and not
jointly, agrees to make Revolving Credit Loans to the Borrowers, at any time and
from time to time from the date hereof to the Revolving Credit Termination Date,
in an  aggregate  principal  amount at any time  outstanding  not to exceed  the
amount of such Lender's  Revolving Credit Commitment set forth opposite its name
in Schedule 2.01(b) annexed hereto,  as such Revolving Credit  Commitment may be
reduced from time to time in accordance  with the provisions of this  Agreement.
Not-withstanding  the  foregoing,  the aggregate  principal  amount of Revolving
Credit Loans  outstanding at any time to the Borrowers  shall not exceed (1) the
lesser of (A) the Total  Revolving  Credit  Commitment  (as such  amount  may be
reduced pursuant to the terms of this Agreement  including,  without limitation,
Section 2.07 hereof) and (B) an amount equal to the sum of (i) up to eighty-five
percent  (85%)  of the  Net  Amount  of  Eligible  Receivables  of  each  of the
Borrowers,  such percentage,  as it relates to any Borrower, shall be subject to
reduction  at  any  time  by  the  Agent  in its  reasonable  business  judgment
including,  without limitation, by reason of the Agent determining (based upon a
field examination) that the dilution  percentage of such Borrower's  Receivables
is in excess of five percent (5%),  plus (ii) the lesser of (a)  $8,500,000  and
(b) up to fifty percent (50%) of the Net Amount of Eligible Inventory minus such
reserves against inventory in amounts as the Agent may establish and revise from
time to time at the  Agent's  sole  discretion  (this  clause 1 (B)  referred to
herein as the  "Borrowing  Base"),  minus (2) the Letter of Credit Usage at such
time (not to exceed $1,000,000 at any time). The Borrowing Base will be computed
monthly and a compliance certificate from a Responsible Officer of the Borrowers
presenting  its  computation  will be delivered to the Agent in accordance  with
Section 6.05 hereof.  Subject to the foregoing and within the foregoing  limits,
the Borrowers may borrow,  repay (or,  subject to the provisions of Section 2.09
hereof,  prepay) and  reborrow  Revolving  Credit  Loans,  on and after the date
hereof and prior to the Revolving Credit Termination Date, subject to the terms,

                                       22
<PAGE>

provisions and limitations set forth herein, including,  without limitation, the
requirement  that no Revolving Credit Loan shall be made hereunder if the amount
thereof exceeds the Availability outstanding at such time.

     SECTION 2.02.  Loans. (a) The Revolving Credit Loans made by the Lenders on
any date shall be in any minimum aggregate  principal amount as may be requested
by the Borrowers;  provided, however, that the Eurodollar Loans made on any date
shall be in a minimum aggregate principal amount of $1,000,000.

          (b) Loans  shall be made  ratably by the  Lenders in  accordance  with
their respective Term Loan Commitments or Revolving Credit  Commitments,  as the
case may be; provided,  however, that the failure of any Lender to make any Loan
shall  not in  itself  relieve  any  other  Lender  of its  obligation  to  lend
hereunder.  The Term Loans shall be made by the Lenders against delivery of Term
Notes,  payable to the order of the Lenders, as referred to in Section 2.04. The
initial  Revolving Credit Loans shall be made by the Lenders against delivery of
Revolving Credit Notes,  payable to the order of the Lenders,  as referred to in
Section 2.04 hereof.

          (c) Each Loan shall be either an  Alternate  Base Loan or a Eurodollar
Loan as the Borrowers may request  pursuant to Section 2.03 hereof.  Each Lender
may fulfill  its  obligations  under this  Agreement  by causing its  Applicable
Lending Office to make such Loan; provided,  however,  that the exercise of such
option shall not affect the  obligation  of the  Borrowers to repay such Loan in
accordance  with the term of the  applicable  Note. Not more than three (3) Term
Eurodollar  Loans  and  three  (3)  Revolving  Credit  Eurodollar  Loans  may be
outstanding at any one time.

          (d) Subject to the  provisions  of  paragraph  (e) below,  each Lender
shall make its Term  Loans and  Revolving  Credit  Loans on the  proposed  dates
thereof  by paying  the amount  required  to the Agent in New York,  New York in
immediately  available  funds not later than 12:00 noon, New York City time, and
the Agent  shall as soon as  practicable,  but in no event later than 3:00 p.m.,
New York City  time,  credit the  amounts so  received  to the  general  deposit
account of the Borrowers  with the Agent in immediately  available  funds or, if
Loans are not to be made on such  date  because  any  condition  precedent  to a
borrowing  herein  specified  is not met,  return the amounts so received to the
respective Lenders.

          (e) The  Borrowers  shall  have  the  right  at any  time  upon  prior
irrevocable  written,  facsimile or  telephonic  notice  (promptly  confirmed by

                                       23
<PAGE>

written or  facsimile  notice) to the Agent given in the manner and at the times
specified  in Section 2.03 with  respect to the Loans into which  conversion  or
continuation  is to be made, to convert all or any portion of  Eurodollar  Loans
into Alternate Base Loans, to convert all or any portion of Alternate Base Loans
into Eurodollar Loans (specifying the Interest Period to be applicable thereto),
to  convert  the  Interest  Period  with  respect  to all or any  portion of any
Eurodollar Loans to another permissible  Interest Period, and to continue all or
any portion of any  Eurodollar  Loans into a subsequent  Interest  Period of the
same duration,  subject to the terms and conditions of this Agreement (including
the last sentence of Section 2.02(c) hereof) and to the following:

                    (i) in the case of a  conversion  or  continuation  of fewer
          than all the Loans, the aggregate  principal amount of Loans converted
          or continued  shall be in any minimum  amount in the case of Alternate
          Base  Loans  and  shall  not be less  than  $1,000,000  in the case of
          Eurodollar Loans and shall be an integral multiple of $100,000;

                    (ii) accrued  interest on a Loan (or portion  thereof) being
          converted or continued  shall be paid by the  Borrowers at the time of
          conversion or continuation;

                    (iii) if any Eurodollar  Loan is converted at any time other
          than the end of an Interest Period applicable  thereto,  the Borrowers
          shall make such payments associated therewith as are required pursuant
          to Section 2.12;

                    (iv) any portion of a Revolving Credit Loan which is subject
          to an  Interest  Period  ending on a date that is less than  three (3)
          months  prior  to the  Revolving  Credit  Termination  Date may not be
          converted  into,  or  continued  as, a  Eurodollar  Loan and  shall be
          automatically  converted  at the end of such  Interest  Period into an
          Alternate Base Loan;

                    (v) any  portion of a Term  Eurodollar  Loan  required to be
          paid on any Repayment  Date occurring less than three (3) months after
          the end of the then current  Interest Period  applicable to such Loan,
          may not be converted into, or continued as, a Term Eurodollar Loan and
          shall be  automatically  converted at the end of such Interest  Period
          into a Term Alternate Base Loan; and

                                       24
<PAGE>

                    (vi)  no  Event  of  Default  shall  have  occurred  and  be
          continuing.

          The Interest Period applicable to any Eurodollar Loan resulting from a
conversion  shall be specified by the  Borrowers  in the  irrevocable  notice of
conversion  delivered pursuant to this Section;  provided,  however,  that if no
such Interest  Period shall be specified,  the Borrowers shall be deemed to have
selected an  Interest  Period of three (3) months'  duration.  If the  Borrowers
shall not have  given  timely  notice to  continue  any  Eurodollar  Loan into a
subsequent Interest Period (and shall not otherwise have given notice to convert
such Loan),  such Loan (unless  repaid or required to be repaid  pursuant to the
terms hereof) shall,  subject to (iv) and (v) above,  automatically be converted
into an Alternate Base Loan. The Agent shall promptly  advise the Lenders of any
notice  given  pursuant  to this  Section  and of each  Lender's  portion of the
continuation or conversion hereunder.

     SECTION 2.03.  Notice of Loans. The Borrowers shall,  through a Responsible
Officer of any of the Borrowers,  give the Agent irrevocable written,  facsimile
or telephonic notice (promptly confirmed by written or facsimile notice) of each
borrowing (including,  without limitation,  a conversion as permitted by Section
2.02(e)  hereof)  not later than 11:00 A.M.,  New York City time,  (i) three (3)
Business Days before a proposed Eurodollar Loan borrowing or conversion and (ii)
on the same  Business Day with respect to an  Alternate  Base Loan  borrowing or
conversion (except that no such confirmation will be required,  unless requested
by the Agent, to the extent that the proceeds of such borrowing are requested to
be disbursed to the Borrowers'  controlled  disbursement account maintained with
the Agent). Such notice shall specify (w) whether the Loans then being requested
are to be Term  Loans or  Revolving  Credit  Loans  and  whether  they are to be
Alternate Base Loans or Eurodollar  Loans, (x) the date of such borrowing (which
shall be a  Business  Day) and  amount  thereof  and (y) if such Loans are to be
Eurodollar Loans, the Interest Period with respect thereto. If no election as to
the type of Loan is  specified  in any such  notice,  all  such  Loans  shall be
Alternate Base Loans.  If no Interest Period with respect to any Eurodollar Loan
is specified in any such  notice,  then an Interest  Period of three (3) months'
duration shall be deemed to have been selected.  The Agent shall promptly advise
the  Lenders of any  notice  given  pursuant  to this  Section  2.03 and of each
Lender's portion of the requested borrowing.

     SECTION  2.04.  Notes;  Repayment  of Loans.  (a) The Term  Loans made by a
Lender shall be evidenced by a single Term Note,  duly executed on behalf of the
Borrowers, in substantially the form of Exhibit A annexed hereto,  delivered and
payable to such Lender in a principal  amount equal to its Term Loan  Commitment
on such date.

                                       25
<PAGE>

     All  Revolving  Credit  Loans  made by a Lender to the  Borrowers  shall be
evidenced  by a single  Revolving  Credit Note,  duly  executed on behalf of the
Borrowers,  dated the  Closing  Date,  in  substantially  the form of  Exhibit B
annexed hereto, delivered and payable to such Lender in a principal amount equal
to its Revolving Credit Commitment in respect of the Borrowers on such date. The
outstanding  balance of each  Revolving  Credit  Loan,  as evidenced by any such
Revolving  Credit  Note,  shall  mature and be due and payable on the  Revolving
Credit Termination Date.

          (b) Each  Revolving  Credit Note shall bear  interest from its date on
the outstanding principal balance thereof, as provided in Section 2.05 hereof.

          (c) The aggregate  principal amount of the Term Loans, as evidenced by
the Term Notes, shall be payable in consecutive  quarterly  installments,  which
shall be in the amount of $0 with a final payment on the Final  Maturity Date in
such amount as shall  constitute the payment in full of the Term Loans (the date
of each  such  repayment,  a  "Repayment  Date"),  and  such  payments  shall be
distributed  ratably among the Lenders in accordance with their  respective Term
Loan Commitments.

     To the extent not previously  paid, the Term Loans shall be due and payable
on the Final Maturity Date.  Each Term Note shall bear interest from its date on
the  outstanding  principal  balance  thereof,  as provided in Section 2.05. All
principal  payments in respect of the Term Loans shall be accompanied by accrued
interest  on the  principal  amount  being  repaid  to the date of  payment.  No
scheduled payment of principal in respect of the Term Loans shall be made to the
extent that a lesser  principal  payment  would result in the payment in full of
the outstanding amount of the Term Loans, and such lesser amount is paid.

          (d) Each  Lender,  or the Agent on its  behalf,  shall,  and is hereby
authorized  by the Borrowers  to,  endorse on the schedule  attached to the Term
Note  or  Revolving  Credit  Note,  as  applicable,  of  such  Lender  (or  on a
continuation of such schedule  attached to such Note and made a part thereof) an
appropriate  notation  evidencing  the  date  and  amount  of  each  Loan to the
Borrowers  from such Lender,  as well as the date and amount of each payment and
prepayment  with respect  thereto;  provided,  however,  that the failure of any
person to make such a notation on a Note shall not affect any obligations of the
Borrowers  under such Note. Any such notation shall be conclusive and binding as
to the date and amount of such Loan or portion thereof, or payment or prepayment
of principal or interest thereon, absent manifest error.

                                       26
<PAGE>

          (e) Each of the Borrowers  shall be jointly and severally  liable with
the other Borrower(s) for the Obligations,  and each of the Obligations shall be
secured by all of the Collateral.  Each of the Borrowers acknowledges that it is
a co-borrower hereunder and is jointly and severally liable under this Agreement
and the other Loan Documents. All Loans and Letters of Credit extended to any of
the Borrowers or requested by any of the  Borrowers  shall be deemed to be Loans
and  Letters  of  Credit  extended  for each of the  Borrowers,  and each of the
Borrowers hereby  authorizes each other of the Borrowers to effectuate Loans and
Letters  of Credit  on its  behalf.  Notwithstanding  anything  to the  contrary
contained in this  Agreement or any of the other Loan  Documents,  the Agent and
the  Lenders  shall be  entitled  to rely  upon  any  request,  notice  or other
communication  received  by them  from any of the  Borrowers  on  behalf  of all
Borrowers,  and shall be entitled to treat their giving of any notice  hereunder
to any of the Borrowers as notice to each and all Borrowers.

     Each of the  Borrowers  agrees that the joint and several  liability of the
Borrowers  provided for in this subsection (e) shall not be impaired or affected
by any  modification,  supplement,  extension  or  amendment  or any contract or
agreement  to which the other  Borrower(s)  may  hereafter  agree (other than an
agreement  signed by the  Agent  and the  Lenders  specifically  releasing  such
liability),  nor by any delay,  extension of time, renewal,  compromise or other
indulgence  granted  by the  Agent  or any  Lender  with  respect  to any of the
Obligations,  nor by any other  agreements or  arrangements  whatsoever with the
other Borrower(s) or with any other person, each of the Borrowers hereby waiving
all notice of such delay, extension, release, substitution,  renewal, compromise
or other  indulgence,  and hereby  consenting  to be bound  thereby as fully and
effectually as if it had expressly  agreed thereto in advance.  The liability of
each of the Borrowers is direct and  unconditional as to all of the Obligations,
and may be enforced without requiring the Agent or any Lender first to resort to
any other right,  remedy or security.  Each of the  Borrowers  hereby  expressly
waives  promptness,  diligence,  notice of acceptance  and any other notice with
respect to any of the Obligations,  the Notes,  this Agreement or any other Loan
Document  and any  requirement  that the Agent or any  Lender  protect,  secure,
perfect or insure any Lien or any property  subject thereto or exhaust any right
or take any  action  against  any of the  Borrowers  or any other  person or any
Collateral.

     Each of the Borrowers hereby  irrevocably  subordinates and makes junior to
the Obligations each of the other Borrower's."claims" (as defined in Section

                                       27
<PAGE>

101(5)  of the  Bankruptcy  Code)  to  which  such  Borrowers  are or  would  be
entitledby  virtue of the provisions of the first  paragraph of this  subsection
(e) or the  performance of such  Borrower's  obligations  thereunder  including,
without limitation, any right of subrogation (whether contractual, under Section
509  of  the  Bankruptcy  Code  or  otherwise),   reimbursement,   contribution,
exoneration or similar right, or indemnity, or any right of recourse to security
for any of the Obligations  unless and until all of the Obligations to the Agent
and the Lenders have been indefeasibly paid in full.

     SECTION 2.05. Interest on Loans.

          (a) Subject to the  provisions  of Section  2.05(c)  and Section  2.08
hereof,  each  Alternate Base Loan shall bear interest at a rate per annum equal
to the Alternate Base Rate plus the applicable Interest Margin.

          (b) Subject to the  provisions  of Section  2.05(c)  and Section  2.08
hereof,  each  Eurodollar  Loan shall bear interest at a rate per annum equal to
the Adjusted LIBO Rate plus the applicable Interest Margin.

          (c)  Interest  on each  Loan  shall  be  payable  in  arrears  on each
applicable  Interest  Payment Date, the Revolving  Credit  Termination Date with
respect to  outstanding  Revolving  Credit Loans and on the Final Maturity Date.
Interest on each Alternate Base Loan and Eurodollar Loan shall be computed based
on the number of days elapsed in a year of 360 days.  The Agent shall  determine
each  interest  rate  applicable  to the  Loans and shall  promptly  advise  the
Borrowers and the Lenders of the interest rate so determined.

          SECTION 2.06.  Fees. (a) The Borrowers shall pay each Lender,  through
the  Agent,  (i) on the first  Business  Day of each  January,  April,  July and
October  commencing  July,  2001,  (ii)  on the  date  of any  reduction  of the
Revolving  Credit  Commitments  pursuant to Section 2.07 hereof and (iii) on the
Revolving Credit Termination Date, in immediately  available funds, a commitment
fee (the  "Commitment  Fee") of three-eighths of one percent (3/8%) per annum on
the average  daily unused  amount of the  Revolving  Credit  Commitment  of such
Lender during the quarter (or shorter period  commencing with the date hereof or
ending with the  Revolving  Credit  Termination  Date) ending on such date.  The
Commitment  Fee due to each Lender  under this  Section  2.06 shall  commence to
accrue  on the  date  hereof  and  cease to  accrue  on the  earlier  of (i) the
Revolving  Credit  Termination  Date and (ii) the  termination  of the Revolving
Credit Commitment of such Lender pursuant to Section 2.07 hereof. The Commitment
Fee shall be  calculated  on the basis of the actual number of days elapsed in a
year of 360 days.

                                       28
<PAGE>

          (b) The  Borrower  shall  pay to the  Agent  for its  own  account  an
administration  fee of $35,000 per annum,  payable on the Closing  Date and each
anniversary thereof.

     SECTION 2.07. Termination and Reduction of Revolving Credit Commitments and
Term  Loan  Commitments.  (a) Upon at  least  three  (3)  Business  Days'  prior
irrevocable  written notice (or facsimile notice promptly  confirmed in writing)
to the Agent, the Borrowers may at any time in whole permanently  terminate,  or
from  time to time  in part  permanently  reduce,  the  Total  Revolving  Credit
Commitment,  ratably among the Lenders in  accordance  with the amounts of their
Revolving Credit Commitments; provided, however, that the Total Revolving Credit
Commitment shall not be reduced at any time to an amount less than the Revolving
Credit Loans outstanding  under the Revolving Credit  Commitments and the Letter
of Credit  Usage at such time.  Each partial  reduction  of the Total  Revolving
Credit  Commitment shall be in a minimum of $500,000 or an integral  multiple of
$100,000.

          (b)  Simultaneously  with any  termination  or  reduction of the Total
Revolving Credit Commitment  pursuant to paragraph (a) of this Section 2.07, the
Borrowers  shall  pay to each  Lender,  through  the  Agent,  the  amount of the
Commitment Fee due and owing under Section  2.06(a) hereof through and including
the date of such  termination or reduction on the amount of the Revolving Credit
Commitment of such Lender so terminated or reduced.

          (c) The Revolving Credit Commitment of each Lender shall automatically
and  permanently  terminate on the Revolving  Credit  Termination  Date, and all
Revolving  Credit Loans still  outstanding on such date shall be due and payable
in full together with accrued interest thereon.

          (d) The Total Term Loan Commitment shall be permanently reduced by the
amount of any repayment or prepayment of the outstanding principal amount of the
Term Loans on the date of any such  repayment or prepayment.  In any event,  all
amounts  due and owing  under the Total  Term Loan  Commitment  shall be due and
payable on the Final Maturity Date.

          (e)  Simultaneously  with (x) the termination of the Total  Commitment
and  repayment in full of the  Obligations  in  accordance  with this  Agreement
including,  without limitation, this Section 2.07 (referred to in this paragraph
(e) as a  "Termination")  or (y) any permanent  reduction of the Total Revolving
Credit Commitment in accordance with this Agreement

                                       29
<PAGE>

including, without limitation, Section 2.07(a) above (referred to in this
paragraph (e) as a "Reduction"), at any time during the period from the Closing
Date to but not including June 30, 2003 the Borrowers shall pay to the Agent for
the ratable benefit of the Lenders (such amounts, "Prepayment Fees") the
following amounts: (i) from the Closing Date to but not including June 30, 2003,
an amount equal to one percent (1%) of (x) the Total Commitment then in effect
immediately prior to a Termination and (y) the amount of the Total Revolving
Credit Commitment so reduced in the event of a Reduction. No such Prepayment
Fees shall be due and owing to a Lender (other than The Chase Manhattan Bank) in
the event that the termination of such Lender's Total Revolving Credit
Commitment is a result of any actions permitted under Section 11.08(c) hereof.

     SECTION 2.08. Interest on Overdue Amounts;  Alternate Rate of Interest. (a)
If the Borrowers shall default in the payment of the principal of or interest on
any  Loan or any  other  amount  becoming  due  hereunder,  by  acceleration  or
otherwise,  and/or  any other  Default  or Event of  Default  as a result of any
non-compliance with Article VII hereof shall occur the Borrowers shall on demand
from  time to  time  pay  interest,  to the  extent  permitted  by  law,  on all
Obligations  outstanding  up to the date of  actual  payment  of such  defaulted
amount  (after as well as  before  judgment)  and/or  the cure or waiver of such
Default  or Event of Default at a rate per annum  equal to two  percent  (2%) in
excess of the interest  rate  applicable  to  Alternate  Base Loans at such time
hereunder.

          (b) In the  event,  and on  each  occasion,  that  on the  day two (2)
Business Days prior to the  commencement of any Interest Period for a Eurodollar
Loan the Agent shall have  determined that dollar deposits in the amount of each
Eurodollar Loan are not generally  available in the London interbank  market, or
that the rate at which  dollar  deposits  are  being  offered  will not  reflect
adequately  and  fairly  the cost to any  Lender of making or  maintaining  such
Eurodollar Loan during such Interest  Period,  or that  reasonable  means do not
exist for  ascertaining  the  Adjusted  LIBO  Rate,  the Agent  shall as soon as
practicable  thereafter  give  written  notice  (or  facsimile  notice  promptly
confirmed in writing) of such  determination  to the  Borrowers and the Lenders,
and any request by the Borrowers for the making of a Eurodollar Loan pursuant to
Section 2.03 hereof or conversion or  continuation of any Loan into a Eurodollar
Loan pursuant to Section 2.02 hereof shall, until the circumstances  giving rise
to such notice no longer exist,  be deemed to be a request for an Alternate Base
Loan. Each  determination by the Agent made hereunder shall be conclusive absent
manifest error.

                                       30
<PAGE>

     SECTION 2.09.  Prepayment of Loans. (a) Subject to the terms and conditions
contained in this Section 2.09 and else-where in this  Agreement,  the Borrowers
shall  have the  right to  prepay  any Loan at any time in whole or from time to
time in part (except in the case of a Eurodollar Loan only on the last day of an
Interest Period) without penalty (except as otherwise provided for herein).

          (b) On the date of any termination or reduction of the Total Revolving
Credit  Commitment  pursuant  to Section  2.07(a)  hereof or  elsewhere  in this
Agreement,  the Borrowers  shall pay or prepay so much of the  Revolving  Credit
Loans as shall be  necessary  in order that the  Availability  equals or exceeds
zero following such termination or reduction.  Any prepayments  required by this
paragraph (b) shall be applied to outstanding  Revolving  Credit  Alternate Base
Loans up to the full  amount  thereof  before  they are  applied to  outstanding
Revolving Credit Eurodollar Loans;  provided,  however, that the Borrowers shall
not be required to make any prepayment of any  Eurodollar  Loan pursuant to this
Section until the last day of the Interest  Period with respect  thereto so long
as an amount equal to such  prepayment  is deposited by the  Borrowers in a cash
collateral  account  with  the  Agent  to be  held  in  such  account  on  terms
satisfactory to the Agent (if not previously  applied,  such cash collateral may
be applied  by the Agent on the last day of the  applicable  Interest  Period to
repay outstanding Eurodollar Loans as they become due).

          (c) The Borrowers shall make prepayments of the Revolving Credit Loans
from time to time  such that the  Availability  equals  or  exceeds  zero at all
times.  Any  prepayments  required  by this  paragraph  (c) shall be  applied to
outstanding  Revolving Credit Alternate Base Loans up to the full amount thereof
before  they are  applied to  outstanding  Revolving  Credit  Eurodollar  Loans;
provided,  however,  that  the  Borrowers  shall  not be  required  to make  any
prepayment of any Eurodollar Loan pursuant to this Section until the last day of
the  Interest  Period with  respect  thereto so long as an amount  equal to such
prepayment is deposited by the Borrowers in a cash  collateral  account with the
Agent to be held in such  account  on terms  satisfactory  to the  Agent (if not
previously applied, such cash collateral may be applied by the Agent on the last
day of the applicable  Interest Period to repay outstanding  Eurodollar Loans as
they become due).

          (d)  Within  five  (5) days of the  sale of any of  tangible  property
subject to the  Security  Agreement  (excluding  sales of assets in the ordinary
course of  business,  sales of such  property  not in excess of  $100,000 in the
aggregate  during any Fiscal Year, and sales  consented to by the Agent) subject

                                       31
<PAGE>

to Section 7.05 hereof and the  SecurityAgreement,  the  Borrowers  shall make a
mandatory  prepayment  of the Loans in an amount  equal to 100% of the  proceeds
received (net of taxes due and any reasonable  expenses of sale), which proceeds
shall be applied as set forth in paragraph  (f) below;  provided,  however,  the
Borrowers may provide the Agent with notice  (written or telephonic)  within the
five (5) day period,  that such proceeds  shall be applied within 90 days of the
date of such sale to the  acquisition  by the Borrowers of capital assets useful
in the business of the Borrowers  and having a fair market value (as  determined
in good faith by the  Borrowers) at least equal to that of the assets sold;  and
provided further,  that the mandatory  prepayment required by this paragraph (d)
shall be made on the 91st day following the notice to the Agent, unless prior to
such date the Borrowers  provide the Agent with (i) a description  of the assets
acquired with such proceeds,  and (ii) the location(s) where such assets will be
kept, at which time,  the mandatory  prepayment  shall be paid as reduced by the
amount of such acquisition.  Nothing contained in this paragraph (d) shall be or
be deemed to be a consent to the sale of any assets.

          (e) (i) Except as provided  in clause  (ii) below,  not later than the
five (5)  days  following  the  receipt  by the  Agent  or any  Borrower  or any
subsidiary of any Borrower (x) of any net proceeds of any insurance  required to
be maintained  pursuant to Section 6.03 hereof on account of each separate loss,
damage or injury in excess of  $500,000  (or, if there  shall be  continuing  an
Event of  Default,  of any amount of net  proceeds)  to any  Collateral  of such
Borrower  or  such  subsidiary,  or (y)  of any  net  proceeds  of any  business
interruption insurance required to be maintained pursuant to Section 6.03 hereof
in excess of $500,000 (or, if there shall be continuing an Event of Default, the
full amount of net proceeds), such Borrower or subsidiary shall notify the Agent
of such receipt in writing or by telephone  promptly  confirmed in writing,  and
not  later  than the day  following  receipt  by the Agent or such  Borrower  or
subsidiary of any such proceeds, there shall become due and payable a prepayment
of the Loans in an amount equal to 100% of such proceeds.  Prepayments from such
net proceeds shall be applied as set forth in paragraph (f) below.

                    (ii) In the case of the receipt of net proceeds described in
          clause  (i) above with  respect  to the loss,  damage or injury to any
          asset of a Borrower or any  subsidiary  of a Borrower  (other than net
          proceeds of any business  interruption  insurance),  the Borrowers may
          elect, by written notice delivered to the Agent not later than the day
          on which a prepayment would otherwise be required under clause (i), to
          apply  all or a  portion  of such  net  proceeds  for the  purpose  of
          replacing,  repairing,  restoring or rebuilding the relevant  tangible
          property, and, in such event, any required prepayment under clause (i)

                                       32
<PAGE>

          above  shall be  reduced  dollar  for  dollar  by the  amount  of such
          election.  An election  under this clause (ii) shall not be  effective
          unless:  (x) at the time of such election there is continuing no Event
          of Default;  (y) the Borrowers shall have certified to the Agent that:
          (1) the net proceeds of the insurance adjustment for such loss, damage
          or injury,  together with other funds available to the Borrowers shall
          be sufficient to complete such  replacement,  repair,  restoration  or
          rebuilding in accordance  with all applicable  laws,  regulations  and
          ordinances;  and (2) to the best knowledge of the Borrowers,  no Event
          of Default has arisen or will arise as a result of such loss,  damage,
          injury,  replacement,  repair or rebuilding;  and (z) if the amount of
          net proceeds in question exceeds $1,000,000,  the Borrowers shall have
          obtained the written consent of the Required Lenders to such election.

                    (iii) In the event of an election  under  clause (ii) above,
          pending  application of the net proceeds to the required  replacement,
          repairs, restoration or rebuilding, the Borrowers shall not later than
          the time at which  prepayment  would have been, in the absence of such
          election,  required under clause (i) above, apply such net proceeds to
          the prepayment of the outstanding  principal  balance,  if any, of the
          Revolving  Credit Loans (not in permanent  reduction of the  Revolving
          Credit  Commitment),  and deposit  (the  "Special  Deposit")  with the
          Agent, the balance,  if any, of such net proceeds remaining after such
          application,  pursuant  to  agreements  in form,  scope and  substance
          reasonably  satisfactory to the Agent. The Special  Deposit,  together
          with all earnings on such Special  Deposit,  shall be available to the
          Borrowers   solely  for  the   replacement,   repair,   rebuilding  or
          restoration  of the tangible  property  suffering the injury,  loss or
          damage in respect of which such  prepayment  and Special  Deposit were
          made or to such other  purpose as to which the  Required  Lenders  may
          consent in writing;  provided,  however, that at such time as an Event
          of Default  shall  occur,  the  balance  of the  Special  Deposit  and
          earnings  thereon may be applied by Agent to repay the  Obligations in
          such order as the Agent  shall  elect.  The Agent shall be entitled to
          require proof, as a condition to the making of any withdrawal from the
          Special  Deposit,  that the  proceeds  of such  withdrawal  are  being
          applied for the purposes permitted hereunder.

          (f) When making a prepayment, whether mandatory or otherwise, pursuant
to paragraph  (a),  (b),  (c), (d) or (e) above,  the  Borrowers  (other than as
provided in Section 10.01  hereof)  shall  furnish to the Agent,  not later than
11:00 a.m. (New York City time) (i) three (3) Business Days prior to the date of
such prepayment of Alternate Base Loans and (ii) five (5) Business Days prior to
the  date  of  such  prepayment  of  Eurodollar  Loans,  written,  facsimile  or
telephonic  notice  (promptly  confirmed  by  written  or  facsimile  notice) of

                                       33
<PAGE>

prepayment  which shall specify the prepayment date and the principal  amount of
each Loan (or portion thereof) to be prepaid,  which notice shall be irrevocable
and shall commit the Borrowers to prepay such Loan by the amount stated  therein
on the date stated therein.  All prepayments  (other than as provided in Section
10.01 hereof) shall be accompanied by accrued  interest on the principal  amount
being prepaid to the date of prepayment.  Prepayments made pursuant to paragraph
(d) above shall be applied first,  to  outstanding  Term Alternate Base Loans in
the inverse  order of their  maturity up to the full amount  thereof and then to
outstanding  Term Eurodollar  Loans in the inverse order of their maturity up to
the full amount thereof.  Prepayments  made pursuant to paragraph (e) above from
the proceeds of any  insurance  on account of any loss,  damage or injury to the
Collateral shall be applied as follows: (A) first, to outstanding Term Alternate
Base Loans in the inverse order of their  maturity up to the full amount thereof
and then to  outstanding  Term  Eurodollar  Loans in the inverse  order of their
maturity up to the full amount thereof and, (B) second, to outstanding Revolving
Credit  Alternate Base Loans up to the full amount thereof and then to Revolving
Credit Eurodollar Loans up to the full amount thereof;  provided,  however, that
if at the time of the making of any  prepayment in  accordance  with clause (B),
there are undrawn Letters of Credit  outstanding,  then in the discretion of the
Agent, after payment in full of the outstanding Revolving Credit Loans, all or a
portion of any remaining  amount required to be prepaid (not to exceed an amount
equal to the aggregate undrawn amount of all such outstanding Letters of Credit)
shall be deposited by the Borrowers in a cash  collateral  account to be held by
the Agent for the  benefit of the Lenders  for  application  by the Agent to the
payment of any drawing made under any such Letters of Credit.  Prepayments  made
pursuant to paragraph  (e) above from the proceeds of any business  interruption
insurance  shall be applied as  follows:  (A) first,  to  outstanding  Revolving
Credit  Alternate Base Loans up to the full amount thereof and then to Revolving
Credit Eurodollar Loans up to the full amount thereof;  provided,  however, that
if at the time of the making of any  prepayment in  accordance  with clause (A),
there are undrawn Letters of Credit  outstanding,  then in the discretion of the
Agent, after payment in full of the outstanding Revolving Credit Loans, all or a
portion of any remaining  amount required to be prepaid (not to exceed an amount
equal to the aggregate undrawn amount of all such outstanding Letters of Credit)
shall be deposited by the Borrowers in a cash  collateral  account to be held by
the Agent for the  benefit of the Lenders  for  application  by the Agent to the
payment of any drawing made under any such Letters of Credit and, (B) second, to
outstanding  Term Alternate Base Loans in the inverse order of their maturity up
to the full amount thereof and then to outstanding  Term Eurodollar Loans in the
inverse order of their maturity up to the full amount  thereof.  Notwithstanding

                                       34
<PAGE>

the foregoing, the Borrowers shall not be required to make any prepayment of any
Term or  Revolving  Credit  Eurodollar  Loan  required  pursuant to this Section
2.09(f) until the last day of the Interest  Period with respect  thereto so long
as an amount equal to such  prepayment is deposited by the Borrowers into a cash
collateral  account with the Agent to be held in such account  pursuant to terms
satisfactory to the Agent (if not previously  applied,  such cash collateral may
be applied by the Agent on the last day of the  applicable  Interest  Periods to
repay outstanding Eurodollar Loans as they become due).

          (g) All  prepayments  under  this  Section  2.09  shall be  subject to
Section 2.12 hereof.

          (h) Except as  otherwise  expressly  provided  in this  Section  2.09,
payments  with respect to any  paragraph of this Section 2.09 are in addition to
payments  made or required to be made under any other  paragraph of this Section
2.09.

          (i) All prepayments of the Term Loans under this Section 2.09 shall be
applied in the  inverse  order of the  Repayment  Dates.  The amount of the Term
Loans prepaid may not be reborrowed.

     SECTION 2.10. Increased Costs. (a) If any Change in Law shall:

                    (i) impose,  modify or deem applicable any reserve,  special
          deposit or similar  requirement against assets of deposits with or for
          the account  of, or credit  extended  by, any Lender  (except any such
          reserve requirement reflected in the Adjusted LIBO Rate) or the Agent;
          or

                    (ii)  impose  on any  Lender  or  the  Agent  or the  London
          interbank  market any other  condition  affecting  this  Agreement  or
          Eurodollar  Loans  made by such  Lender  or any  Letter  of  Credit or
          participation;  and the  result  of any of the  foregoing  shall be to
          increase  the  cost  to such  Lender  of  making  or  maintaining  any
          Eurodollar  Loan (or of  maintaining  its  obligation to make any such
          Loan)  or to  increase  the  cost  to  such  Lender  or the  Agent  of
          participating  in, issuing or  maintaining  any Letter of Credit or to
          reduce the amount of any sum received or  receivable by such Lender or
          the Agent hereunder (whether principal,  interest or otherwise),  then
          the  Borrowers  will pay to such Lender or the Agent,  as the case may
          be, for such additional costs incurred or reduction suffered.

                                       35
<PAGE>

          (b) If any  Lender  or the  Agent  determines  that any  Change in Law
regarding capital requirements has or would have the effect of reducing the rate
of return on such  Lender's  or the  Agent's  capital or on the  capital of such
Lender's or the  Agent's  holding  company,  if any,  as a  consequence  of this
Agreement or the Loans made by, or  participation  in Letters of Credit held by,
such Lender, or the Letters of Credit issued by the Agent, to a level below that
which such Lender or the Agent or such Lender's or the Agent's  holding  company
could have achieved but for such Change in Law (taking into  consideration  such
Lenders or the Agent's policies and the policies of such Lender's or the Agent's
holding  company with respect to capital  adequacy),  then from time to time the
Borrowers  will pay to such  Lender  or the  Agent,  as the  case  may be,  such
additional amount or amounts as will compensate such Lender or the Agent or such
Lender's or the Agent's holding company for any such reduction suffered.

          (c) A  certificate  of Lender or the Agent setting forth the amount or
amounts, supported by calculations in reasonable detail, necessary to compensate
such  Lender  or the  Agent or its  holding  company,  as the  case  may be,  as
specified  in  paragraph  (a) or (b) of this  Section  shall be delivered to the
Borrowers and shall be conclusive absent manifest error. The Borrowers shall pay
such  lender or the Agent,  as the case may be,  the amount  shown as due on any
such certificate within ten days after receipt thereof.

          (d)  Failure or delay on the part of any Lender or the Agent to demand
compensation  pursuant to this  Section  shall not  constitute  a waiver of such
Lender's or the Agent's  right to demand such  compensation;  provided  that the
Borrowers  shall not be required to compensate a Lender or the Agent pursuant to
this Section for any increased  costs or reductions  incurred more than 180 days
prior to the date that such  Lender or the Agent,  as the case may be,  notifies
the  Borrowers  of the  Change in Law  giving  rise to such  increased  costs or
reductions and of such Lender's or the Agent's  intention to claim  compensation
therefor;  provided  further  that,  if the  Change in Law  giving  rise to such
increased costs or reductions is  retroactive,  then the 180-day period referred
to above shall be extended to include the period of retroactive effect thereof.

          (e) Any Lender  claiming any additional  amounts  payable  pursuant to
this  Section  2.10 agrees to use its best  efforts  (consistent  with legal and
regulatory  restrictions) to designate a different  Applicable Lending Office if
the making of such a designation  would avoid the need for, or reduce the amount
of, any such  additional  amounts and would not, in the  reasonable  judgment of
such Lender, be otherwise materially disadvantageous to such Lender.

                                       36
<PAGE>

     SECTION  2.11.  Change in  Legality.  (a)  Notwithstanding  anything to the
contrary  herein  contained,  if any change in any law or  regulation  or in the
interpretation   thereof  by  any  governmental   authority   charged  with  the
administration or  interpretation  thereof shall make it unlawful for any Lender
to make or maintain any Eurodollar  Loan or to give effect to its obligations to
make  Eurodollar  Loans as  contemplated  hereby,  then,  by  written  notice to
Borrowers and to the Agent, such Lender may:

                    (i) declare that  Eurodollar  Loans will not  thereafter  be
          made by such  Lender  hereunder,  whereupon  the  Borrowers  shall  be
          prohibited from requesting Eurodollar Loans from such Lender hereunder
          unless such declaration is subsequently withdrawn; and

                    (ii) require that all outstanding  Eurodollar  Loans, as the
          case may be, made by it be converted to Alternate Base Loans, in which
          event (A) all such Eurodollar Loans shall be  automatically  converted
          to  Alternate  Base Loans as of the  effective  date of such notice as
          provided in  paragraph  (b) below and (B) all  payments  of  principal
          which  would  otherwise  have  been  applied  to repay  the  converted
          Eurodollar  Loans shall instead be applied to repay the Alternate Base
          Loans resulting from the conversion of such Eurodollar Loans.

          (b) For purposes of Section 2.11(a) hereof,  a notice to the Borrowers
by any Lender shall be effective, if lawful, on the last day of the then current
Interest Period or, if there are then two or more current Interest  Periods,  on
the last day of each such Interest Period, respectively;  otherwise, such notice
shall be effective  with respect to the  Borrowers on the date of receipt by the
Borrowers.

     SECTION 2.12.  Indemnity.  The Borrowers shall indemnify the Agent and each
Lender against any loss or reasonable  expense  (including,  but not limited to,
any loss or  reasonable  expense  sustained  or incurred or to be  sustained  or
incurred  by reason of or in  connection  with the  execution  and  delivery  or
assignment  of, or payment  under,  any Letter of Credit,  or in  liquidating or
employing deposits from third parties acquired to affect or maintain any Loan or
part thereof as a Eurodollar Loan) which the Agent or such Lender may sustain or
incur as a  consequence  of the  following  events  (regardless  of whether such
events  occur as a result  of the  occurrence  of an  Event  of  Default  or the
exercise of any right or remedy of the Agent or the Lenders under this Agreement
or any other  agreement,  or at law): any failure of the Borrowers to fulfill on
the date of any Credit Event the  applicable  conditions  set forth in Article V
hereof applicable to it; any failure of the Borrowers to borrow hereunder after

                                       37
<PAGE>

irrevocable  notice of borrowing pursuant to Section 2.03 hereof has been given;
any payment,  prepayment or conversion of a Eurodollar Loan on a date other than
the  last day of the  relevant  Interest  Period;  any  default  in  payment  or
prepayment of the  principal  amount of any Loan or any part thereof or interest
accrued  thereon,  or with  respect  to any Letter of Credit as and when due and
payable  (at the due date  thereof,  by  irrevocable  notice  of  prepayment  or
otherwise);  or the  occurrence  of an Event of Default.  Without  limiting  the
foregoing, the Borrowers further agree to indemnify and hold harmless the Agent,
each Lender as well as their respective officers and directors,  each person who
controls the Agent or Lender within the meaning of Section 15 of the  Securities
Act of  1933  or any  applicable  state  securities  law  and  their  respective
successors,  from and against any and all claims, damages, losses,  liabilities,
costs or  expenses,  joint or  several,  to which they or any of them may become
subject under any Federal or state securities law, rule or regulation, at common
law or otherwise, insofar as such claims, damages, losses, liabilities, costs or
expenses  arise out of or are based upon the execution and delivery by the Agent
or any Lender of any Letter of Credit or the execution and delivery of any other
document in connection therewith. Such loss or reasonable expense shall include,
without limitation,  an amount equal to the excess, if any, of (i) the amount of
interest  which would have  accrued on the  principal  or other  amount so paid,
prepaid  or  converted  or not  borrowed  for the  period  from the date of such
payment,  prepayment  or  conversion  or  failure to borrow to, in the case of a
Loan,  the last day of the  Interest  Period for such Loan (or, in the case of a
failure to borrow,  the Interest Period for such Loan which would have commenced
on the date of such failure to borrow),  at the applicable  rate of interest for
such Loan  provided for herein over (ii) the amount of interest  (as  reasonably
determined by such Lender) that would be realized by such Lender in  reemploying
the funds so paid,  prepaid  or  converted  or not  borrowed  in  United  States
Treasury obligations with comparable maturities for comparable periods. Any such
Lender shall provide to the Borrowers a statement,  signed by an officer of such
Lender,  explaining  any loss or expense and setting forth,  if applicable,  the
computation  pursuant to the preceding  sentence,  and such  statement  shall be
conclusive absent manifest error. The Borrowers shall pay such Lender the amount
shown as due on any such statement within ten (10) days after the receipt of the
same.  The  indemnities   contained  herein  shall  survive  the  expiration  or
termination of this Agreement and of the Letters of Credit.

     SECTION 2.13. Pro Rata  Treatment.  (a) Except as permitted  under Sections
2.10,  2.11 and 2.15  hereof,  each  borrowing,  each payment or  prepayment  of
principal of the Notes, each payment of interest on the Notes, each payment

                                       38
<PAGE>

of any fee or other amount  payable  hereunder  and each  reduction of the Total
Revolving  Credit  Commitment and Total Term Loan  Commitment  shall be made pro
rata  among  the  Lenders  in  the  proportions   that  their  Revolving  Credit
Commitments  bear to the Total  Revolving  Credit  Commitment or that their Term
Loan Commitments bears to the Total Term Loan Commitment, as the case may be.

          (b)  Notwithstanding  the  occurrence or  continuance  of a Default or
Event of Default or other  failure  of any  condition  to the making of Loans or
occurrence  of other Credit Events  hereunder,  unless the Agent shall have been
notified in writing by any Lender  prior to the date of a proposed  Credit Event
that such  Lender will not make the amount  that would  constitute  its pro rata
share of the borrowing on such date available to the Agent, the Agent may assume
that such Lender has made such amount  available to the Agent on such date,  and
the Agent may, in reliance upon such assumption, make available to the Borrowers
a corresponding  amount. If such amount is made available to the Agent on a date
after such Credit  Event date,  such Lender  shall pay to the Agent on demand an
amount equal to the product of (i) the daily  average  Federal funds rate during
such period as quoted by the Agent,  times (ii) the amount of such  Lender's pro
rata share of such  borrowing,  times (iii) a fraction the numerator of which is
the number of days that elapse from and including  such Credit Event date to the
date on which such Lender's pro rata share of such  borrowing  shall have become
immediately  available  to the  Agent  and the  denominator  of which is 360.  A
certificate  of the Agent  submitted  to any Lender with  respect to any amounts
owing  under this  subsection  shall be  conclusive  in the  absence of manifest
error.  If such Lender's pro rata share of such Credit Event is not in fact made
available  to the  Agent  by such  Lender  within  three  Business  Days of such
borrowing  date, the Agent (without  releasing such Lender from any liability it
might have to the Agent or any  Borrower by reason of the failure to fund) shall
be entitled to recover such amount with  interest  thereon at the rate per annum
applicable to the Loans hereunder, on demand, from the Borrowers.

     SECTION  2.14.  Sharing of Setoffs.  Each  Lender  agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
the Borrowers,  including, but not limited to, a secured claim under Section 506
of Title 11 of the United  States Code or other  security  or  interest  arising
from,  or in lieu of, such  secured  claim,  received  by such Lender  under any
applicable  bankruptcy,  insolvency or other  similar law or  otherwise,  obtain
payment  (voluntary or  involuntary) in respect of a Note and exposure under the
Letter of Credit  Usage  held by it as a result  of which the  unpaid  principal
portion of the Notes and exposure under the Letter of Credit Usage held by it

                                       39
<PAGE>

shall be proportionately less than the unpaid principal portion of the Notes and
exposure under the Letter of Credit Usage held by any other Lender,  it shall be
deemed to have  simultaneously  purchased from such other Lender a participation
in the Notes and  exposure  under the Letter of Credit  Usage held by such other
Lender,  so that the aggregate unpaid principal amount of the Notes and exposure
under the Letter of Credit Usage and  participations  in Notes or exposure under
the  Letter of Credit  Usage held by it shall be in the same  proportion  to the
aggregate  unpaid  principal amount of all Notes or exposure under the Letter of
Credit Usage then  outstanding as the principal  amount of the Notes or exposure
under the Letter of Credit  Usage held by it prior to such  exercise of banker's
lien,  setoff  or  counterclaim  was to the  principal  amount  of all  Notes or
exposure under the Letter of Credit Usage  outstanding prior to such exercise of
banker's  lien,  setoff or  counterclaim;  provided,  however,  that if any such
purchase or purchases or adjustments shall be made pursuant to this Section 2.14
and the payment giving rise thereto shall thereafter be recovered, such purchase
or purchases or  adjustments  shall be rescinded to the extent of such  recovery
and the purchase price or prices or adjustments  restored without interest.  The
Borrowers  expressly  consent to the foregoing  arrangements  and agree that any
Lender holding a participation in a Note and exposure under the Letter of Credit
Usage  deemed to have  been so  purchased  may  exercise  any and all  rights of
banker's lien,  setoff or counterclaim  with respect to any and all moneys owing
by the  Borrowers  to such  Lender  as fully as if such  Lender  held a Note and
exposure under the Letter of Credit Usage in the amount of such participation.

     SECTION  2.15.  Taxes.  (a) Any and all  payments  by or on  account of any
obligation of the Borrowers  hereunder shall be made, in accordance with Section
2.16 hereof,  free and clear of and without deduction for any and all present or
future taxes, levies, imposts,  deductions,  charges or withholdings in any such
case  imposed  by the  United  States  or  any  political  subdivision  thereof,
excluding:

                    (i) in the case of the Agent and each Lender,  taxes imposed
          or based on its net income,  and franchise or capital taxes imposed on
          it, (A) if the Agent or such Lender is organized under the laws of the
          United  States or any  political  subdivision  thereof  and (B) if the
          Agent or such  Lender is not  organized  under the laws of the  United
          States or any political  subdivision thereof, and its principal office
          or Applicable  Lending Office is located in the United States,  and in
          the case of both (A) and (B),  withholding  taxes payable with respect
          to  payments to the Agent or such  Lender at its  principal  office or
          Applicable Lending Office under laws (including,  without  limitation,

                                       40
<PAGE>

          any treaty, ruling, determination or regulation) in effect on the date
          hereof,  but not any increase in  withholding  tax resulting  from any
          subsequent change in such laws (other than withholding with respect to
          taxes  imposed or based on its net income or with respect to franchise
          or capital taxes), and

                    (ii) taxes (including  withholding  taxes) imposed by reason
          of the  failure  of the Agent or any  Lender,  in either  case that is
          organized  outside the United States,  to comply with Section  2.15(f)
          hereof (or the inaccuracy at any time of the  certificates,  documents
          and other evidence delivered thereunder).

(all such nonexcluded taxes, levies, imposts, deductions,  charges, withholdings
and  liabilities  being  hereinafter  referred to as "Taxes").  If the Borrowers
shall be  required  by law to deduct  any Taxes  from or in  respect  of any sum
payable  hereunder  to the Lenders or the Agent,  (x) the sum  payable  shall be
increased by the amount  necessary so that after making all required  deductions
(including without limitation  deductions  applicable to additional sums payable
under this Section  2.15) such Lender or the Agent (as the case may be) receives
an amount equal to the sum it would have  received had no such  deductions  been
made, (y) the Borrowers  shall make such  deductions and (z) the Borrowers shall
pay  the  full  amount  deducted  to  the  relevant  Governmental  Authority  in
accordance with applicable law.

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

          (c) The  Borrowers  will  indemnify  each Lender and the Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any  jurisdiction  (except as specified in clauses (a)(i)
and (ii)) on amounts payable under this Section 2.15) paid by such Lender or the
Agent (as the case may be) and any liability (including penalties,  interest and
expenses which are not the result of the gross negligence or willful  misconduct
of the Agent or any Lender)  arising  therefrom  or with respect  thereto.  This
indemnification  shall be made  within 30 days from the date such  Lender or the
Agent (as the case may be) makes written demand therefor. If any Lender receives
a refund in  respect  of any Taxes or Other  Taxes for  which  such  Lender  has

                                       41
<PAGE>

received payment from the Borrowers hereunder, such Lender shall promptly notify
the Borrowers of such refund and such Lender shall, within 30 days of receipt of
a request by the Borrowers,  repay such refund to the  Borrowers,  provided that
the  Borrowers,  upon the  request of such  Lender,  agree to return such refund
(plus any penalties, interest or other charges) to such Lender in the event such
Lender is required to repay such refund.

          (d)  Within 30 days  after the date of any  payment  of Taxes or Other
Taxes  withheld by the  Borrowers  in respect of any payment to any Lender,  the
Borrowers will furnish to the Agent, at its address referred to in Section 11.01
hereof,  such  certificates,  receipts and other  documents as may be reasonably
required to evidence payment thereof.

          (e)  Without   prejudice  to  the  survival  of  any  other  agreement
hereunder,  the agreements and obligations  contained in this Section 2.15 shall
survive the payment in full of principal and interest hereunder.

          (f) Each Lender that is organized outside of the United States that is
entitled to an exemption from or reduction of  withholding  tax under the law of
the jurisdiction in which the Borrowers are located, or any treaty to which such
jurisdiction  is a party,  with respect to payments under this  Agreement  shall
deliver  to the  Borrowers  (with a copy to the  Agent),  at the  time or  times
prescribed by applicable law, such properly completed and executed documentation
prescribed  by applicable  law or reasonably  requested by the Borrowers as will
permit such payments to be made without  withholding  or at a reduced rate.  The
Borrowers  shall be  entitled  to rely on such forms in their  possession  until
receipt of any  revised or  successor  form.  If the Agent or a Lender  fails to
provide a  certificate,  document or other  evidence  required  pursuant to this
Section 2.15(f),  then (i) the Borrowers shall be entitled to deduct or withhold
on payments to the Agent or such Lender as a result of such failure, as required
by law,  and (ii) the  Borrowers  shall  not be  required  to make  payments  of
additional amounts with respect to such withheld Taxes pursuant to clause (x) of
Section  2.15(a) to the extent such  withholding is required solely by reason of
the failure of the Agent or such Lender to provide  the  necessary  certificate,
document or other evidence.

          (g) Each Lender and the Agent  shall use its best  efforts to avoid or
minimize  any  amounts  which  might  otherwise  be  payable  pursuant  to  this
subsection  2.15  (including  seeking refunds of any amounts that are reasonably
believed not to have been  correctly or legally  asserted);  provided,  however,
that such efforts  shall not include the taking of any actions by such Lender or
the Agent that would result in any tax, costs or other expense to such Lender or

                                       42
<PAGE>

the Agent (other than a tax,  cost or other expense for which such Lender or the
Agent shall have been  reimbursed or  indemnified  by the Borrowers  pursuant to
this  Agreement  or  otherwise)  or any  action  which  would  or  might  in the
reasonable  opinion of such Lender or the Agent have an adverse  effect upon its
business,  operations or financial  condition or otherwise be disadvantageous to
such Lender or the Agent.

     SECTION 2.16.  Payments and  Computations.  The  Borrowers  shall make each
payment  hereunder and under any instrument  delivered  hereunder not later than
12:00  noon  (New York  City  time) on the day when due in  lawful  money of the
United  States (in freely  transferable  dollars) to the Agent at its offices at
1166 Avenue of the Americas,  New York,  New York  10036-2708 for the account of
the Lenders, in immediately  available funds. The Agent may charge, when due and
payable,  the Borrowers' account with the Agent for all interest,  principal and
Commitment  Fees or other  fees  owing to the  Agent or the  Lenders  on or with
respect to this Agreement  and/or the Loans and other Loan Documents.  If at any
time there is not sufficient  availability to cover any of the payments referred
to in the prior  sentence,  and in any event upon the occurrence of any Event of
Default,  the Borrowers shall make any such payments upon demand. If at any time
insufficient  funds are received by and  available to the Agent to pay fully all
amounts of principal,  unreimbursed  drawings under Letters of Credit,  interest
and fees then due  hereunder,  such funds  shall be applied  (i) first,  towards
payment of  interest  and fees then due  hereunder,  ratably  among the  parties
entitled thereto in accordance with the amounts of interest and fees then due to
such parties,  and (ii) second,  towards  payment of principal and  unreimbursed
drawings under Letters of Credit then due  hereunder,  ratably among the parties
entitled  thereto in accordance  with the amounts of principal and  unreimbursed
drawings under Letters of Credit then due to such parties.

     SECTION  2.17.  Issuance  of  Letters of  Credit.  Upon the  request of the
Borrowers,  and subject to the conditions set forth in Article V hereof and such
other  conditions  to the opening of Letters of Credit as the Agent  requires of
its  customers  generally,  the Agent  shall from time to time open  standby and
commercial letters of credit (each, a "Letter of Credit") for the account of the
Borrowers, the aggregate undrawn amount of all outstanding Letters of Credit not
at any time to exceed  $1,000,000;  provided however that the face amount of any
Letter of Credit  that the  Borrowers  may request the Agent to open at any time
shall not exceed the lesser of (A) the Total Revolving Credit Commitment at such
time (as such  may  have  been  reduced  in  accordance  with the  terms of this
Agreement) minus the unpaid principal amount of all Revolving Credit Loans

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<PAGE>

outstanding at such time minus the undrawn amount of all outstanding  Letters of
Credit at such time,  and (B) the  Borrowing  Base at such time minus the unpaid
principal  amount of all Revolving  Credit Loans  outstanding at such time minus
the  undrawn  amount of all  outstanding  Letters  of Credit at such  time.  The
issuance  of each  Letter of Credit  shall be made on at least 5 Business  Days'
prior written  notice from the Borrowers to the Agent,  at its Domestic  Lending
Office,  which written notice shall be an application  for a Letter of Credit on
the Agent's  customary  form.  The Agent shall not at any time be  obligated  to
issue any Letter of Credit if such issuance  would  conflict  with, or cause the
Agent or any lender to exceed any limits imposed by, any applicable requirements
of law. The expiration date of any (i) commercial  Letter of Credit shall not be
later than six (6) months  from the date of issuance  thereof  and (ii)  standby
Letter of Credit  shall not be more than  twelve  (12)  months  from the date of
issuance  thereof,  and,  in any  event,  no  Letter  of  Credit  shall  have an
expiration date later than the Revolving Credit Termination Date. The Letters of
Credit  shall be issued with respect of  transactions  occurring in the ordinary
course of business of the Borrowers.

     SECTION  2.18.  Payment  of  Letters  of  Credit;  Reimbursement.  Upon the
issuance  of any Letter of Credit,  the Agent  shall  notify  each Lender of the
principal amount,  the number, and the expiration date thereof and the amount of
such  Lender's  participation  therein.  By the  issuance  of a Letter of Credit
hereunder  and without  further  action on the part of the Agent or the Lenders,
each Lender hereby accepts from the Agent a participation  (which  participation
shall be  nonrecourse  to the  Agent) in such  Letter  of  Credit  equal to such
Lender's  pro rata  (based on its  Revolving  Credit  Commitment)  share of such
Letter of Credit,  effective  upon the  issuance of such Letter of Credit.  Each
Lender hereby absolutely and unconditionally assumes, as primary obligor and not
as a surety,  and agrees to pay and  discharge,  and to  indemnify  and hold the
Agent harmless from liability in respect of, such Lender's pro rata share of the
amount of any drawing  under a Letter of Credit.  Each Lender  acknowledges  and
agrees that its  obligation to acquire  participations  in each Letter of Credit
issued by the Agent and its  obligation to make the payments  specified  herein,
and the right of the Agent to receive the same, in the manner specified  herein,
are absolute  and  unconditional  and shall not be affected by any  circumstance
whatsoever,  including,  without limitation, the occurrence and continuance of a
Default or an Event of Default  hereunder,  and that each such payment  shall be
made without any offset,  abatement,  withholding or reduction  whatsoever.  The
Agent shall review,  on behalf of the Lenders,  each draft and any  accompanying
documents presented under a Letter of Credit and shall notify each Lender of any
such  presentment.  Promptly after it shall have  ascertained that any draft and
any accompanying documents presented under such Letter of Credit appear on their
face to be in

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<PAGE>

substantial  conformity  with the terms and  conditions of the Letter of Credit,
the Agent  shall give  telephonic  or  facsimile  notice to the  Lenders and the
Borrowers of the receipt and amount of such draft and the date on which  payment
thereon will be made, and the Lenders  shall,  by 11:00 A.M., New York City time
on the date such payment is to be made, pay the amounts required to the Agent in
New York, New York in immediately available funds, and the Agent, not later than
3:00 p.m. on such day, shall make the appropriate  payment to the beneficiary of
such Letter of Credit.  If the  Lenders  shall pay any draft  presented  under a
Letter of Credit,  then the Agent,  on behalf of the  Lenders,  shall charge the
general  deposit account of the Borrowers with the Agent for the amount thereof,
together  with the  Agent's  customary  overdraft  fee in the  event  the  funds
available in such account  shall not be  sufficient to reimburse the Lenders for
such  payment  and the  Borrowers  shall  not  otherwise  have  discharged  such
reimbursement  obligation by 11:00 a.m., New York City time, on the date of such
payment. If the Lenders have not been reimbursed with respect to such drawing as
provided  above,  the Borrowers  shall pay to the Agent,  for the account of the
Lenders,  the amount of the drawing  together  with interest on such amount at a
rate per annum  (computed on the basis of the actual number of days elapsed over
a year of 360  days)  equal to the  rate  applicable  to  Alternate  Base  Loans
hereunder  plus two percent  (2%),  payable on demand.  The  obligations  of the
Borrowers under this Section 2.18 to reimburse the Lenders and the Agent for all
drawings  under  Letters  of  Credit  shall  be  joint  and  several,  absolute,
unconditional and irrevocable and shall be satisfied strictly in accordance with
their terms, irrespective of:

          (a) any lack of validity or enforceability of any Letter of Credit;

          (b) the existence of any claim,  setoff,  defense or other right which
the  Borrowers or any other person may at any time have against the  beneficiary
under any Letter of Credit,  the Agent or any Lender  (other than the defense of
payment in accordance with the terms of this Agreement or a defense based on the
gross negligence or willful  misconduct of the Agent or any Lender) or any other
person in connection with this Agreement or any other transaction;

          (c) any draft or other document  presented  under any Letter of Credit
proving to be forged, fraudulent,  invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;

                                       45
<PAGE>

          (d)  payment  by the Agent or any  Lender  under any  Letter of Credit
against presentation of a draft or other document which does not comply with the
terms of such Letter of Credit; and

          (e) any other circumstance or event whatsoever, whether or not similar
to any of the foregoing.

          It is understood that in making any payment under any Letter of Credit
(x) the Agent's and any Lender's exclusive  reliance on the documents  presented
to it under such Letter of Credit as to any and all  matters set forth  therein,
including,  without  limitation,  reliance on the amount of any draft  presented
under such  Letter of Credit,  whether or not the amount due to the  beneficiary
equals  the  amount of such  draft and  whether  or not any  document  presented
pursuant to such Letter of Credit proves to be insufficient  in any respect,  if
such  document on its face appears to be in order,  and whether or not any other
statement  or any other  document  presented  pursuant  to such Letter of Credit
proves to be forged or invalid or any statement  therein proves to be inaccurate
or untrue in any respect  whatsoever and (y) any noncompliance in any immaterial
respect of the  documents  presented  under such Letter of Credit with the terms
thereof  shall,  in  each  case,  not be  deemed  willful  misconduct  or  gross
negligence of the Agent or any Lender.

     SECTION 2.19. Agent's Actions with respect to Letters of Credit. Any Letter
of  Credit  may,  in the  discretion  of the  Agent  or its  correspondents,  be
interpreted by them (to the extent not inconsistent  with such Letter of Credit)
in accordance with the Uniform  Customs and Practice for Documentary  Credits of
the International  Chamber of Commerce, as adopted or amended from time to time,
or any other rules,  regulations  and customs  prevailing at the place where any
Letter of Credit is available or the drafts are drawn or  negotiated.  The Agent
and its  correspondents may accept and act upon the name,  signature,  or act of
any party  purporting to be the executor,  administrator,  receiver,  trustee in
bankruptcy,  or other legal representative of any party designated in any Letter
of Credit in the place of the name, signature, or act of such party.

     SECTION  2.20.  Letter of Credit Fees.  The  Borrowers  agree to pay to the
Agent for the ratable  benefit of the Lenders  with  respect to each (i) standby
Letter of Credit,  a letter of credit fee equal to two percent  (2%) of the face
amount  thereof per annum  payable to the Agent at its Domestic  Lending  Office
quarterly in advance in immediately  available funds and (ii) commercial  Letter
of Credit, a letter of credit fee equal to (x) one-half of one percent (1/2%) of
the face amount thereof with respect to any commercial Letter of Credit with an

                                       46
<PAGE>

expiration.date  of not more than 90 days from the date of  issuance  thereof or
(y) with respect to any commercial  Letter of Credit with an expiration  date of
more than 90 days from the date of  issuance  thereof,  a fee on the face amount
thereof equal to the product of two percent (2%) multiplied by a fraction having
a  numerator  equal  to the  number  of days  such  letter  of  credit  is to be
outstanding and a denominator of three hundred sixty (360), in each case payable
to the Agent at its  Domestic  Lending  Office on the date of  issuance  of such
commercial  Letter of Credit in  immediately  available  funds.  The Agent shall
disburse  to each  Lender  such  Lender's  pro rata share of any  payment of the
Letter of Credit fees referred to in the prior sentence in immediately available
funds within two (2) Business Days of the last day of the month during which the
Agent  received any such payment.  The Borrowers  shall also pay to the Agent at
its Domestic  Lending Office for the Agent's own account,  issuance,  processing
amendment and other standard fees charged by the Agent for such transactions.

III. COLLATERAL SECURITY

     SECTION 3.01. Security  Documents.  The Obligations shall be secured by the
Collateral  described in the Security Documents and are entitled to the benefits
thereof.  The  Borrowers  shall duly  execute and  deliver,  or cause each other
Grantor to duly  execute and deliver the  Security  Documents,  all  consents of
third parties necessary to permit the effective granting of the Liens created in
such agreements,  financing  statements  pursuant to the Uniform Commercial Code
and other documents, all in form and substance satisfactory to the Agent, as may
be  reasonably  required  by the  Agent to grant to the  Agent on  behalf of the
Lenders a valid,  perfected and enforceable  first priority Lien on and security
interest in (subject only to the Liens  permitted under Section 7.01 hereof) the
Collateral.

     SECTION 3.02. Filing and Recording. The Borrowers shall, at their sole cost
and expense,  cause all  instruments and documents given as evidence of security
pursuant  to this  Agreement  to be duly  recorded  and/or  filed  or  otherwise
perfected in all places  necessary,  in the opinion of the Agent,  and take such
other  actions as the Agent may  reasonably  request,  in order to  perfect  and
protect the Liens of the Agent and Lenders in the Collateral.  The Borrowers, to
the extent  permitted by law,  hereby  authorize the Agent to file any financing
statement  in respect of any Lien  created  pursuant to the  Security  Documents
which may at any time be required or which, in the opinion of the Agent,  may at
any time be desirable although the same may have been executed only by the Agent
or, at the option of the Agent,  to sign such  financing  statement on behalf of
the Borrowers and file the same, and the Borrowers hereby irrevocably designate

                                       47
<PAGE>

the  Agent,  its  agents,   representatives  and  designees  as  its  agent  and
attorney-in-fact  for  this  purpose.  In the  event  that any  re-recording  or
refiling  thereof (or the filing of any statements of continuation or assignment
of any financing  statement) is required to protect and preserve such Lien,  the
Borrowers  shall,  at the  Borrowers'  cost and  expense,  cause  the same to be
recorded and/or refiled at the time and in the manner requested by the Agent.

IV.  REPRESENTATIONS AND WARRANTIES

     Each of the  Borrowers  and each of the  Guarantors  jointly and  severally
represents and warrants to each of the Lenders that both before and after giving
effect to the consummation of the Transactions:

     SECTION 4.01. Organization,  Legal Existence.  Each of the Loan Parties and
their  subsidiaries  is a legal entity duly organized,  validly  existing and in
good standing under the laws of the  jurisdiction of its  organization,  has the
requisite power and authority to own its property and assets and to carry on its
business as now  conducted  and as  currently  proposed to be  conducted  and is
qualified  to do  business in every  jurisdiction  where such  qualification  is
required (all such jurisdictions  being listed in Schedule 4.01 annexed hereto).
Each of the Borrowers has the  corporate  power to execute,  deliver and perform
its obligations under this Agreement and the other Loan Documents to which it is
a party,  and with respect to the  Borrowers to borrow  hereunder and to execute
and deliver the Notes.

     SECTION 4.02.  Authorization.  The execution,  delivery and  performance by
each of the Loan Parties of this  Agreement and each of the other Loan Documents
to which it is a party, the borrowings hereunder by the Borrowers, the execution
and delivery by the  Borrowers of the Notes and the grant of security  interests
in  the  Collateral   created  by  the  Security   Documents(collectively,   the
"Transactions") (a) have been duly authorized by all requisite corporate and, if
required,  stockholder  action and (b) will not (i) violate (A) any provision of
law, statute, rule or regulation or the certificate or articles of incorporation
or other applicable  constitutive  documents or the by-laws of the Loan Parties,
or their  respective  subsidiaries,  as the case  may be,  (B) any  order of any
Governmental  Authority  binding  upon the  Loan  Parties,  or their  respective
subsidiaries, or (C) any provision of any material indenture, agreement or other
instrument to which the Loan Parties, or their respective  subsidiaries,  or any
of  their  respective  properties  or  assets  are or may be  bound,  (ii) be in
conflict with, result in a breach of or constitute (alone or with notice or

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<PAGE>

lapse of time or both) a default  under any  material  indenture,  agreement  or
other instrument  referred to in (b)(i)(C) above or (iii) result in the creation
or imposition of any Lien of any nature  whatsoever  (other than in favor of the
Agent, for the benefit of the Lenders, as contemplated by this Agreement and the
Security  Documents)  upon any property or assets of the Loan Parties,  or their
respective subsidiaries.

     SECTION  4.03.  Governmental  Approvals.  No  registration  or filing with,
consent or approval  of, or other  action by, any  Governmental  Authority is or
will be required in connection with the Transactions,  other than any which have
been made or obtained.

     SECTION 4.04.  Binding  Effect.  This  Agreement and each of the other Loan
Documents  to which it is a party  constitutes,  and each of the Notes when duly
executed and delivered will constitute, a legal, valid and binding obligation of
the applicable Loan Party enforceable against such Loan Party in accordance with
its terms.

     SECTION 4.05. Material Adverse Change. Except as set forth in Schedule 4.05
annexed  hereto,  there has been no  material  adverse  change in the  business,
assets,  operations  or  financial  condition  of any  Borrower  or any of their
subsidiaries since December 31, 2000.

     SECTION  4.06.  Litigation;  Compliance  with Laws;  etc. (a) Except as set
forth in Schedule  4.06(a) annexed hereto,  there are not any actions,  suits or
proceedings at law or in equity or by or before any  Governmental  Authority now
pending or, to the knowledge of any Responsible  Officer of any Borrower overtly
threatened by written communication against or affecting any of the Loan Parties
or any of their  subsidiaries or the businesses,  assets or rights of any of the
Loan  Parties  or  any  of  their  subsidiaries  (i)  which  involve  any of the
Transactions or (ii) as to which it is probable (within the meaning of Statement
of  Financial  Accounting  Standards  No.  5)  that  there  will  be an  adverse
determination and which, if adversely determined,  would, individually or in the
aggregate,  materially  impair the ability of any of the Loan  Parties or any of
their subsidiaries to conduct business substantially as now conducted, or have a
Material Adverse Effect.

          (b) Except as set forth in Schedule  4.06(b) annexed  hereto,  no Loan
Party or  subsidiary  thereof is in  violation  of any law,  or in default  with
respect to any judgment,  writ,  injunction,  decree,  rule or regulation of any
court or  Governmental  Authority  which could  reasonably be expected to have a
Material Adverse Effect.

                                       49
<PAGE>

     SECTION  4.07.  Financial  Statements.  (a) The Borrowers  have  heretofore
furnished to the Agent Consolidated  balance sheets and statements of income and
cash  flows of (x)  Isolyser  dated  as of  December  31,  2000  audited  by and
accompanied by the opinion of independent  public  accountants  and (y) Isolyser
dated as of February 28, 2001  prepared by  management  for the two month period
then ended.  Such balance sheets and statements of income and cash flows present
fairly the  Consolidated  financial  condition  and results of operations of the
applicable  person  and its  subsidiaries  as of the dates  and for the  periods
indicated,  and such balance sheets and the notes thereto  disclose all material
liabilities,  direct or contingent,  of such person and its subsidiaries,  as of
the dates thereof.

          (b) The Borrowers  have  heretofore  furnished to the Agent monthly in
the case of Fiscal Years ending December 31, 2001 and annually for the next four
Fiscal Years projected income  statements,  balance sheets and cash flows of the
Borrowers on a  Consolidated  basis,  together  with a schedule  confirming  the
ability of the  Borrowers  to  consummate  the  Transactions  and  demonstrating
prospective compliance with all financial covenants contained in this Agreement,
such  projections  disclosing all  assumptions  made by Borrowers in formulating
such  projections  and giving effect to the  Transactions.  The  projections are
based upon reasonable estimates and assumptions,  all of which are reasonable in
light of the  conditions  which existed at the time the  projections  were made,
have been prepared on the basis of the assumptions  stated therein,  and reflect
as of the Closing Date the  reasonable  estimate of the Borrowers of the results
of operations and other information projected therein.

          (c) The  financial  statements  referred to in this  Section 4.07 have
been prepared in accordance with GAAP.

     SECTION 4.08. Federal Reserve Regulations.  (a) No Loan Party or subsidiary
thereof is engaged principally,  or as one of its important  activities,  in the
business of extending  credit for the purpose of purchasing  or carrying  Margin
Stock.

          (b) No  part of the  proceeds  of the  Loans  will  be  used,  whether
directly or indirectly, and whether immediately, incidentally or ultimately, (i)
to purchase or carry Margin Stock or to extend  credit to others for the purpose
of  purchasing  or carrying  Margin Stock or to refund  indebtedness  originally
incurred for such purpose, or (ii) for any purpose which entails a violation of,
or which is  inconsistent  with, the provisions of the Regulations of the Board,
including, without limitation, Regulation T, U or X thereof. If requested by any

                                       50
<PAGE>

Lender,  the  Borrowers or any  subsidiary  of any thereof shall furnish to such
Lender a statement on Federal Reserve Form U-1 referred to in said Regulation U.

     SECTION  4.09.  Taxes.  The  Loan  Parties  and  each of  their  respective
subsidiaries  has  filed or caused to be filed  all  Federal,  state,  local and
foreign  tax  returns  which are  required to be filed by it, on or prior to the
date  hereof,  other  than tax  returns  in  respect  of taxes  that (x) are not
franchise,  capital or income  taxes,  (y) in the aggregate are not material and
(z) would not, if unpaid,  result in the  imposition of any material Lien on any
property  or assets of any Loan  Party or any of its  subsidiaries.  Each of the
Loan  Parties and each of their  subsidiaries  has paid or caused to be paid all
taxes  shown to be due and payable on such filed  returns or on any  assessments
received by it,  other than (i) any taxes or  assessments  the validity of which
such Loan Party or such  subsidiary is  contesting in good faith by  appropriate
proceedings, and with respect to which such Loan Party or such subsidiary shall,
to the extent required by GAAP have set aside on its books adequate reserves and
(ii) taxes other than income,  capital or franchise  taxes that in the aggregate
are not material and which would not, if unpaid, result in the imposition of any
material  Lien on any  property  or  assets  of any  Loan  Party or any of their
subsidiaries.  Except as set forth on Schedule 4.06(a), (i)no Federal income tax
returns of any Loan Party or any of their  subsidiaries have been audited by the
United  States  Internal  Revenue  Service and (ii) none of the Loan  Parties or
their  subsidiaries  thereof has as of the date hereof requested or been granted
any extension of time to file any Federal,  state,  local or foreign tax return,
other than in the ordinary course of business. None of the Loan Parties or their
subsidiaries  are  party  to or  have  any  obligation  under  any  tax  sharing
agreement.

     SECTION 4.10.  Employee  Benefit  Plans.  With respect to the provisions of
ERISA:

                    (i) No Reportable  Event has occurred or is continuing  with
          respect to any Pension Plan.

                    (ii)  No  prohibited  transaction  (within  the  meaning  of
          Section 406 of ERISA or Section  4975 of the Code) has  occurred  with
          respect  to any Plan  subject  to Part 4 of  Subtitle  B of Title I of
          ERISA.

                    (iii) None of the  Borrowers or any ERISA  Affiliate is now,
          or has been during the preceding  five years,  obligated to contribute
          to a Pension Plan or a Multiemployer Plan. None of the Loan Parties or
          any ERISA  Affiliate has (A) ceased  operations at a facility so as to

                                       51
<PAGE>

          become  subject to the  provisions  of Section  4062(e) of ERISA,  (B)
          withdrawn  as a  substantial  employer so as to become  subject to the
          provisions of Section 4063 of ERISA,  (C) ceased making  contributions
          to any Pension Plan subject to the  provisions  of Section  4064(a) of
          ERISA to which any of the Loan  Parties,  any  subsidiary or any ERISA
          Affiliate  made  contributions,  (D)  incurred  or  caused  to occur a
          "complete withdrawal" (within the meaning of Section 4203 of ERISA) or
          a "partial  withdrawal"  (within the meaning of Section 4205 of ERISA)
          from a  Multiemployer  Plan  that is a  Pension  Plan  so as to  incur
          withdrawal  liability  under Section 4201 of ERISA (without  regard to
          subsequent reduction or waiver of such liability under Section 4207 or
          4208 of ERISA),  or (E) been a party to any  transaction  or agreement
          under which the provisions of Section 4204 of ERISA were applicable.

                    (iv) No notice of intent  to  terminate  a Pension  Plan has
          been  filed,  nor  has  any  Plan  been  terminated  pursuant  to  the
          provisions of Section 4041(e) of ERISA.

                    (v) The PBGC has not instituted proceedings to terminate (or
          appoint  a trustee  to  administer)  a  Pension  Plan and no event has
          occurred or condition exists which might constitute  grounds under the
          provisions  of Section  4042 of ERISA for the  termination  of (or the
          appointment of a trustee to administer) any such Plan.

                    (vi) With  respect to each  Pension  Plan that is subject to
          the  provisions of Title I,  Subtitle B, Part 3 of ERISA,  the funding
          method used in connection  with such Plan is  acceptable  under ERISA,
          and the  actuarial  assumptions  and methods used in  connection  with
          funding such Pension Plan satisfy the  requirements  of Section 302 of
          ERISA.   The  assets  of  each  such  Pension  Plan  (other  than  the
          Multiemployer  Plans) are at least equal to the  present  value of the
          greater of (i) accrued  benefits  (both vested and  non-vested)  under
          such  Plan,  or (ii)  "benefit  liabilities"  (within  the  meaning of
          Section  4001(a)(16) of ERISA) under such Plan, in each case as of the
          latest   actuarial   valuation  date  for  such  Plan  (determined  in
          accordance  with the same actuarial  assumptions  and methods as those
          used by the Plan's  actuary in its  valuation  of such Plan as of such
          valuation  date).  No such Pension Plan has incurred any  "accumulated
          funding  deficiency" (as defined in Section 412 of the Code),  whether
          or not waived.

                    (vii) There are no actions,  suits or claims  pending (other
          than  routine  claims  for  benefits)  or,  to  the  knowledge  of the
          Borrowers or any ERISA  Affiliate,  which could reasonably be expected
          to be  asserted,  against  any Plan or the  assets  of any such  Plan,
          which, if adversely determined, could reasonably be expected to have a

                                       52
<PAGE>

          Material Adverse Effect.  No civil or criminal action brought pursuant
          to the  provisions  of Title I, Subtitle B, Part 5 of ERISA is pending
          or threatened  against any  fiduciary or any Plan which,  if adversely
          determined,  could  reasonably be expected to have a Material  Adverse
          Effect. None of the Plans or any fiduciary thereof (in its capacity as
          such)  has  been  the  direct  or  indirect   subject  of  any  audit,
          investigation or examination by any governmental or quasi-governmental
          agency which, if adversely determined, could reasonably be expected to
          have a Material Adverse Effect.

                    (viii) All of the Plans comply currently,  and have complied
          in the past, both as to form and operation,  with their terms and with
          the provisions of ERISA and the Code, and all other  applicable  laws,
          rules and  regulations  except where the lack of compliance  could not
          reasonably  be  expected  to  have  a  Material  Adverse  Effect;  all
          necessary  governmental approvals for the Plans have been obtained and
          a favorable determination as to the qualification under Section 401(c)
          of the Code of each of the Plans which is an employee  pension benefit
          plan  (within the  meaning of Section  3(2) of ERISA) has been made by
          the Internal  Revenue  Service and a  recognition  of  exemption  from
          federal  income  taxation  under Section 501(a) of the Code of each of
          the funded  employee  welfare  benefit  plans  (within  the meaning of
          Section 3(1) of ERISA) has been made by the Internal  Revenue Service,
          and nothing has occurred since the date of each such  determination or
          recognition letter that would adversely affect such qualification.

     SECTION 4.11. No Material Misstatements. No information,  report, financial
statement, exhibit or schedule prepared or furnished by or on behalf of any Loan
Party to the Agent or any Lender in connection  with any of the  Transactions or
this Agreement, the Security Documents, the Notes or any other Loan Documents or
included  therein  contained or contains any  material  misstatement  of fact or
omitted or omits to state any material  fact  necessary  to make the  statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading.

     SECTION 4.12.  Investment  Company Act; Public Utility Holding Company Act.
No Loan Party or subsidiary thereof is an "investment company" as defined in, or
is otherwise subject to regulation under, the Investment Company Act of 1940. No
Loan Party or subsidiary  thereof is a "holding company" as that term is defined
in or is otherwise  subject to  regulation  under,  the Public  Utility  Holding
Company Act of 1935.

     SECTION 4.13. Security Interest. Each of the Security Documents creates and
grants  to the  Agent,  for the  benefit  of the  Lenders,  a legal,  valid  and
perfected first (except as permitted pursuant to Section 7.01 hereof)

                                       53
<PAGE>

priority  Lien in the  Collateral  identified  therein.  Such  collateral is not
subject to any other Liens  whatsoever,  except Liens  permitted by Section 7.01
hereof.

     SECTION 4.14. Use of Proceeds. (a) All proceeds of each borrowing under the
Revolving  Credit  Commitment  on the  Closing  Date,  if any,  shall be used to
refinance outstanding Obligations under the Isolyser Credit Agreement.

          (b) All  proceeds of each  subsequent  borrowing  under the  Revolving
Credit  Commitment  after the Closing  Date shall be used to provide for working
capital  requirements of the Borrowers or for general corporate  purposes of the
Borrowers.

     SECTION 4.15.  Subsidiaries.  As of the Closing Date, Schedule 4.15 annexed
hereto  sets  forth  each  subsidiary  of each  Borrower,  its  jurisdiction  of
incorporation,  its  capitalization  and ownership of capital stock of each such
subsidiary.

     SECTION 4.16. Title to Properties; Possession Under Leases; Trademarks. (a)
Each of the Loan Parties and each  subsidiary has good and marketable  title to,
or valid  leasehold  interest in, all of its  respective  properties  and assets
shown on the most recent balance sheet referred to in Section 4.07(a) hereof and
all assets and properties  acquired since the date of such balance sheet, except
for such  properties  as are no  longer  used or useful  in the  conduct  of its
business or as have been  disposed of in the ordinary  course of  business,  and
except for minor defects in title that do not interfere  with the ability of any
of the Loan  Parties or any  subsidiary  thereof to conduct its  business as now
conducted.  All such assets and properties are free and clear of all Liens other
than those permitted by Section 7.01 hereof.

          (b)  Each of the Loan  Parties  and  each of  their  subsidiaries  has
complied with all obligations  under all leases to which it is a party and under
which it is in  occupancy,  and all such leases are in full force and effect and
each of the Loan  Parties and each of their  subsidiaries  enjoys  peaceful  and
undisturbed possession under all such leases.

          (c) Each of the Loan  Parties and each of their  subsidiaries  owns or
controls all material  trademarks,  trademark  rights,  trade names,  trade name
rights, copyrights,  patents, patent rights and licenses which are necessary for
the  conduct of the  business  of such Loan Party and such  subsidiary.  No Loan
Party  nor  any  subsidiary  thereof  is  infringing  upon or  otherwise  acting
adversely to any of such trademarks,  trademark rights,  trade names, trade name
rights,  copyrights,  patent  rights or  licenses  owned by any other  person or
persons. There is no claim
or  action  by  any  such  other  person  pending,  or to the  knowledge  of any
Responsible  Officer  of any of the  Loan  Parties  or any  subsidiary  thereof,
overtly  threatened  by  written  communication,  against  any  Borrower  or any
subsidiary  thereof with respect to any of the rights or property referred to in
this  Section  4.16(c)  which,  if adversely  determined,  could  reasonably  be
expected to have a Material Adverse Effect.

     SECTION  4.17.  Solvency.  (a) The fair salable value of the assets of each
Borrower and its Consolidated subsidiaries is not less than the amount that will
be  required  to be paid  on or in  respect  of the  probable  liability  on the
existing debts and other liabilities (including contingent  liabilities) of such
Borrower and its Consolidated subsidiaries, as they become absolute and mature.

          (b) The assets of each Borrower and its  Consolidated  subsidiaries do
not constitute unreasonably small capital for such Borrower and its Consolidated
subsidiaries  to carry out their business as now conducted and as proposed to be
conducted  including  the capital  needs of such  Borrower and its  Consolidated
subsidiaries,  taking into account the particular  capital  requirements  of the
business  conducted  by such  Borrower  and its  Consolidated  subsidiaries  and
projected capital requirements and capital availability thereof.

          (c) No  Borrower  nor any  subsidiary  thereof  intends to incur debts
beyond its ability to pay such debts as they  mature  (taking  into  account the
timing and amounts of cash to be received by such Borrower and such  subsidiary,
and of amounts to be payable on or in respect of debt of such  Borrower and such
subsidiary).  The cash flow of each Borrower and its Consolidated  subsidiaries,
after taking into account all anticipated  uses of the cash of such Borrower and
its Consolidated  subsidiaries,  will at all times be sufficient to pay all such
amounts  on or in  respect  of  debt  of  such  Borrower  and  its  Consolidated
subsidiaries when such amounts are required to be paid.

          (d) No  Borrower  nor  any  subsidiary  thereof  believes  that  final
judgments  against it in actions for money  damages  presently  pending  will be
rendered at a time when, or in an amount such that, it will be unable to satisfy
any such judgments  promptly in accordance with their terms (taking into account
the maximum  reasonable  amount of such  judgments  in any such  actions and the
earliest  reasonable time at which such judgments  might be rendered).  The cash
flow of such  Borrower  and its  Consolidated  subsidiaries,  after  taking into
account  all  other  anticipated  uses  of the  cash of  such  Borrower  and its
Consolidated  subsidiaries  (including  the  payments  on or in  respect of debt
referred to in paragraph (c) of this  Section),  will at all times be sufficient
to pay all such judgments promptly in accordance with their terms.

                                       55
<PAGE>

     SECTION 4.18.  Permits,  etc. Except as would not reasonably be expected to
have a Material  Adverse  Effect,  each  Borrower  and each of its  subsidiaries
possesses all licenses,  permits,  approvals  and consents,  including,  without
limitation,  all environmental,  health and safety licenses,  permits, approvals
and  consents  (collectively,  "Permits")  of all  Governmental  Authorities  as
required to conduct  properly  its business as  presently  conducted,  each such
Permit is and will be in full force and  effect,  each of the Loan  Parties  and
each subsidiary is in compliance in all material respects with all such Permits,
and no event (including,  without limitation,  any violation of any law, rule or
regulation)  has occurred which allows the revocation or termination of any such
Permit or any restriction thereon.

     SECTION 4.19.  Compliance with  Environmental  Laws. Except as disclosed in
Schedule  4.19  hereto:  (i)  the  operations  of the  Loan  Parties  and  their
subsidiaries  comply in all material respects with all applicable  Environmental
Laws;  (ii) the Loan  Parties and their  subsidiaries  and all of their  present
facilities  or  operations,  as well as to the knowledge of the Loan Parties and
their subsidiaries  their past facilities or operations,  are not subject to any
judicial  proceeding or  administrative  proceeding or any  outstanding  written
order or agreement with any  governmental  authority or private party respecting
(a) any  Environmental  Law, (b) any  Remedial  Work,  or (c) any  Environmental
Claims arising from the Release of a Contaminant into the environment;  (iii) to
the best of the  knowledge of the Loan Parties and their  subsidiaries,  none of
their operations is the subject of any Federal or state investigation evaluating
whether any Remedial  Work is needed to respond to a Release of any  Contaminant
into the  environment;  (iv) none of the Loan Parties or any subsidiaries of the
Loan Parties nor any predecessor of any of the Loan Parties or any subsidiary of
any Loan Party has filed any notice under any  Environmental Law indicating past
or present treatment,  storage, or disposal of a Hazardous Material or reporting
a spill or Release of a Contaminant into the environment; (v) to the best of the
knowledge of the Loan Parties and their  subsidiaries,  none of the Loan Parties
or their  subsidiaries  has any  contingent  liability  in  connection  with any
Release of any Contaminant into the environment;  (vi) none of the operations of
the Loan Parties or their subsidiaries  involve the generation,  transportation,
treatment or disposal of Hazardous  Materials in violation of any  Environmental
Law; (vii) none of the Loan Parties nor their  subsidiaries have disposed of any
Contaminant  by placing it in or on the ground or waters of any premises  owned,
leased or used by any of them and to the knowledge of the Loan Parties and their

                                       56
<PAGE>

subsidiaries  neither has any lessee,  prior owner,  or other person;  (viii) no
underground  storage  tanks or surface  impoundments  are on any property of the
Loan  Parties  and  their  subsidiaries;  and  (ix)  no  Lien  in  favor  of any
governmental  authority for (A) any  liability  under any  Environmental  Law or
regulations,  or (B) damages arising from or costs incurred by such governmental
authority in response to a Release of a Contaminant  into the  environment,  has
been  filed  or  attached  to  the  property  of  the  Loan  Parties  and  their
subsidiaries.

     SECTION 4.20. No Change in Credit  Criteria or Collection  Policies.  There
has been no material change in credit criteria or collection policies concerning
account  receivables of any of the Borrowers  since  December 31, 2000.  Without
duplication,  all Eligible  Receivables of the Borrowers are valid,  binding and
enforceable  obligations  of account  debtors and are not subject to any claims,
defenses or setoffs.  All account receivables (other than Eligible  Receivables)
are valid, binding and enforceable obligations of account debtors.

V.   CONDITIONS OF CREDIT EVENTS

     The  obligation  of each  Lender to make Loans and issue  Letters of Credit
hereunder shall be subject to the following conditions precedent:

     SECTION 5.01. All Credit Events. On each date on which a Credit Event is to
occur:

          (a) The Agent  shall have  received a notice of (or a request  for the
issuance of a Letter of Credit  pursuant to Section  2.17  hereof)  borrowing as
required by Section 2.03 hereof.

          (b) The  representations and warranties set forth in Article IV hereof
and in any documents delivered herewith, including, without limitation, the Loan
Documents,  shall be true and  correct in all  material  respects  with the same
effect  as  though  made  on  and  as of  such  date  (except  insofar  as  such
representations and warranties relate expressly to an earlier date).

          (c) Each  Borrower  shall be in  compliance  with  all the  terms  and
provisions contained herein on its part to be observed or performed,  and at the
time of and  immediately  after such Credit Event no Default or Event of Default
shall have occurred and be continuing.

                                       57
<PAGE>

          (d) The  submission  of a notice of  borrowing  or a  request  for the
issuance of a Letter of Credit shall be deemed a representation by the Borrowers
(i) as to the  compliance  with (b) and (c) above and (ii) with  respect to each
Revolving Credit Loan and each Letter of Credit, demonstrating that after giving
effect thereto the Availability is zero or greater.

          SECTION  5.02.  First  Borrowing.  The  obligations  of the Lenders in
respect  of the  first  Credit  Event  hereunder  is  subject  to the  following
additional conditions precedent:

          (a) The Lenders shall have received the favorable  written  opinion of
counsel for the Borrowers and each of the Guarantors and Grantors, substantially
in the form of Exhibit C hereto,  dated the Closing Date, addressed to the Agent
and the Lenders and satisfactory to the Agent.

          (b) The Lenders shall have received (i) a certificate of the Secretary
of each Borrower,  Grantor and Guarantor,  dated the Closing Date and certifying
(A) that the copy of such person's  By-laws  attached to the  Certificate of its
Secretary  delivered on or about August 30, 1996 (the "Prior Closing Date") is a
true  and  complete  copy  of  its  By-Laws  as in  effect  on the  date  of the
certificate  delivered pursuant to this paragraph and such By-laws have not been
amended  since the Prior  Closing Date (B) that  attached  thereto is a true and
complete  copy of a  resolution  adopted  by such  person's  Board of  Directors
authorizing the execution, delivery and performance of this Agreement, the other
Loan Documents and the Credit Events  hereunder,  as  applicable,  and that such
resolution has not been modified,  rescinded or amended and is in full force and
effect,  (C) that such  person's  certificate  or articles of  incorporation  or
constitutive documents has not been amended since the date of the last amendment
thereto shown on the certificate of good standing delivered on the Prior Closing
Date from the Secretary of State of the state of its incorporation and (D) as to
the  incumbency  and  specimen  signature  of  each of  such  person's  officers
executing this Agreement,  the Notes,  each Security  Document or any other Loan
Document delivered in connection  herewith or therewith,  as applicable;  (ii) a
certificate of another of such person's  officers as to incumbency and signature
of its Secretary;  and (iii) such other documents as the Agent or any Lender may
reasonably request.

          (c) Each Lender  shall have  received its  Revolving  Credit Note duly
executed by the Borrowers, payable to its order and otherwise complying with the
provisions of Section 2.04 hereof.

                                       58
<PAGE>

          (d) The Agent shall have  received the Security  Documents,  each duly
executed by the applicable Grantors, together with any documents or certificates
to be delivered thereunder and updated endorsements for existing title insurance
policies satisfactory to the Agent.

          (e)  Each  document  (including,   without  limitation,  each  Uniform
Commercial Code financing  statement)  required by law or requested by the Agent
to be filed, registered or recorded in order to create in favor of the Agent for
the benefit of the Lenders a first priority  perfected  security interest in the
Collateral  shall have been  properly  filed,  registered  or  recorded  in each
jurisdiction  in which the filing,  registration  or  recordation  thereof is so
required or requested.  The Agent shall have received an acknowledgment copy, or
other  evidence  satisfactory  to it,  of  each  such  filing,  registration  or
recordation.

          (f) The Agent shall have  received  the results of a search of tax and
other Liens, and judgments and of the Uniform  Commercial Code filings made with
respect to each  Borrower  and each Grantor in the  jurisdictions  in which such
person's  chief  executive  office is  located.  With  respect  to any Liens not
permitted  pursuant  to Section  7.01  hereof,  the Agent  shall  have  received
termination statements in form and substance satisfactory to it.

          (g) The Lenders and the Agent shall have received and determined to be
in form and substance  satisfactory  to them:

                    (i) the most recent  (dated  within  thirty (30) days of the
          Closing Date) schedule and aging of accounts  receivable and inventory
          designations of the Borrowers;

                    (ii)  evidence  of  the  compliance  by the  Borrowers  with
          Section  6.03  hereof;

                    (iii) the  financial  statements  described  in Section 4.07
          hereof;

                    (iv) evidence that the  Transactions  are in compliance with
          all applicable laws and regulations;

                    (v) evidence of the compliance by the Borrowers with Section
          6.13  hereof;

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<PAGE>

                    (vi)  evidence of payment of an amendment  fee in the amount
          of  $100,000  and all other fees owed to the Agent and the  Lenders by
          the  Borrowers  under  this  Agreement,   the  Commitment   Letter  or
          otherwise;

                    (vii)  evidence  that all  requisite  third  party  consents
          (including,  without limitation,  consents with respect to each of the
          Borrowers and each of the Grantors and Guarantors) to the Transactions
          have been  received;

                    (viii)  evidence that,  except as disclosed on Schedule 4.05
          annexed  hereto,  there  has been no  material  adverse  change in the
          business,  assets,  operations  or  financial  condition of any of the
          Borrowers or any of their  subsidiaries  since  December 31, 2000; and

                    (ix)   evidence   that  there  are  no  actions,   suits  or
          proceedings  at law or in  equity  or by or  before  any  governmental
          instrumentality or other agency or regulatory authority now pending or
          threatened against or affecting any Borrower or any subsidiary thereof
          or any of their respective businesses,  assets or rights which involve
          any of the Transactions.

          (h) The Agent shall have  received and had the  opportunity  to review
and determine to be in form and substance  satisfactory  to it a schedule of all
Liens,  litigations  and contingent  liabilities  with respect to the Borrowers,
their subsidiaries, Grantors or Guarantors.

          (i) Kaye  Scholer  LLP,  counsel  to the Agent,  shall  have  received
payment in full for all legal fees charged, and all costs and expenses incurred,
by such counsel  through the Closing Date in  connection  with the  transactions
contemplated  under this  Agreement,  the Security  Documents and the other Loan
Documents and instruments in connection herewith and therewith.

          (j) The corporate  structure and capitalization of the Borrowers shall
be satisfactory to the Lenders in all respects.

          (k) All legal matters in  connection  with the  Transactions  shall be
satisfactory  to the Agent,  the Lenders and their  respective  counsel in their
sole discretion.

          (l) The  Borrowers  shall have  executed and  delivered to the Agent a
disbursement  authorization  letter  with  respect  to the  disbursement  of the
proceeds of the Credit  Events made on the Closing  Date,  in form and substance
satisfactory to the Agent;

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<PAGE>

          (m) The Agent shall have received a Certificate,  substantially in the
form of  Schedule  6.05(j)  hereto,  executed  by the  Financial  Officer of the
Borrowers  demonstrating  compliance as at March 31, 2001 with the  Availability
requirements.

          (n) The Agent shall have received such other  documents as the Lenders
or the Agent or Agent's counsel shall reasonably deem necessary.

VI.  AFFIRMATIVE COVENANTS

     Each of the  Borrowers  covenants and agrees with each Lender that, so long
as this Agreement  shall remain in effect or the principal of or interest on any
Note,  any  amount  under any  Letter of  Credit  or any fee,  expense  or other
Obligation payable hereunder or in connection with any of the Transactions shall
be unpaid, it will, and will cause each of its subsidiaries and, with respect to
Section 6.07 hereof, each ERISA Affiliate, to:

     SECTION 6.01. Legal Existence.  Do or cause to be done all things necessary
to preserve, renew and keep in full force and effect its legal existence.

     SECTION 6.02.  Businesses  and  Properties.  At all times do or cause to be
done all things  necessary to preserve,  renew and keep in full force and effect
the rights, licenses, Permits, franchises,  patents, copyrights,  trademarks and
trade names material to the conduct of its businesses; maintain and operate such
businesses in the same general manner in which they are presently  conducted and
operated;  maintain title to all inventory located in the Dominican  Republic in
the name of one of the Borrowers;  comply with all laws, rules,  regulations and
governmental  orders  (whether  Federal,  state  or  local)  applicable  to  the
operation  of  such  businesses  whether  now in  effect  or  hereafter  enacted
(including,  without  limitation,  all applicable laws,  rules,  regulations and
governmental orders relating to employment  matters,  public and employee health
and safety and all  Environmental  Laws) the lack of compliance with which would
have a Material  Adverse  Effect;  take all  actions  which may be  required  to
obtain,  preserve,  renew and extend all Permits and other  authorizations which
are material to the  operation of such  businesses;  and at all times  maintain,
preserve and protect all property material to the conduct of such businesses and
keep such property in good repair,  working order and condition and from time to
time make, or cause to be made, all needful and

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<PAGE>

proper repairs,  renewals,  additions,  improvements  and  replacements  thereto
necessary in order that the business  carried on in connection  therewith may be
properly conducted at all times.

     SECTION  6.03.  Insurance.  (a) Keep its  insurable  properties  adequately
insured at all times by financially sound and reputable  insurers,  (b) maintain
such other insurance,  to such extent and against such risks, including fire and
other risks insured against by extended coverage, as is customary with companies
similarly  situated and in the same or similar  businesses,  provided,  however,
that such  insurance  shall  insure the property of the  Borrowers  and Grantors
against all risk of physical  damage,  including,  without  limitation,  loss by
fire,  explosion,  theft,  fraud and such other  casualties as may be reasonably
satisfactory  to the Agent,  but in no event at any time in an amount  less than
the replacement  value of the Collateral,  (c) maintain in full force and effect
public  liability  insurance  against  claims  for  personal  injury or death or
property  damage  occurring upon, in, about or in connection with the use of any
properties  owned,  occupied  or  controlled  by  any  Borrower  or  any  of its
subsidiaries,  in such amount as the Agent shall reasonably deem necessary,  (d)
maintain product liability and business interruption insurance to such extent as
is  customary  with  companies  similarly  situated  and in the same or  similar
businesses (and to the extent business interruption  insurance is so maintained,
assign  such  insurance  to the Agent for its own benefit and the benefit of the
Lenders),  and (e) maintain such other insurance as may be required by law or as
may be  reasonably  requested by the Agent for  purposes of assuring  compliance
with this Section  6.03.  All  insurance  covering  tangible  personal  property
subject to a Lien in favor of the Agent for its own  benefit and for the benefit
of the Lenders granted pursuant to the Security Documents shall provide that, in
the case of each  separate loss the full amount of insurance  proceeds  shall be
payable  to the Agent  and shall  further  provide  for at least 30 days'  prior
written  notice to the Agent of the  cancellation  or  substantial  modification
thereof.  The  Agent  shall be  named  as an  additional  insured  on all  other
insurance.

     SECTION  6.04.  Taxes.  Pay and  discharge  promptly  when  due all  taxes,
assessments  and  governmental  charges  or levies  imposed  upon it or upon its
income or profits or in respect  of its  property  before the same shall  become
delinquent or in default, as well as all lawful claims for labor,  materials and
supplies  or  otherwise,  which,  if unpaid,  might give rise to Liens upon such
properties  or any  part  thereof  provided,  however,  that  such  payment  and
discharge  shall not be required  with respect to (i) any such tax,  assessment,
charge,  levy or  claim  so long as the  validity  or  amount  thereof  shall be
contested in good faith by appropriate proceedings and the applicable party,

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<PAGE>

shall have set aside on its books  adequate  reserves  with  respect  thereto in
accordance  with GAAP and such  contest  operates to suspend  collection  of the
contested tax,  assessment,  charge, levy or claims and enforcement of a Lien or
(ii) any  tax,  assessment,  charge,  levy or  claims,  the  failure  to pay and
discharge  when due which,  individually  or in the  aggregate  would not have a
Material Adverse Effect.

     SECTION 6.05.  Financial  Statements,  Reports,  etc. Furnish to the Agent,
with copies for each of the Lenders:

          (a) within 90 days after the end of each Fiscal Year, (i) Consolidated
and  consolidating  balance sheets and  Consolidated  and  consolidating  income
statements   showing  the  financial   condition  of  the  Borrowers  and  their
subsidiaries  as of the  close  of such  Fiscal  Year and the  results  of their
operations during such year, and (ii) a Consolidated and consolidating statement
of shareholders'  equity and a Consolidated and consolidating  statement of cash
flow,  as of  the  close  of  such  Fiscal  Year,  all  the  foregoing  to be in
comparative form with the prior Fiscal Year and with respect to the Consolidated
financial statements to be audited by independent public accountants  acceptable
to the Agent  (which  report  shall not  contain any  qualification  except with
respect  to new  accounting  principles  mandated  by the  Financial  Accounting
Standards Board), and to be in form and substance acceptable to the Agent;

          (b) within 45 days after the end of each of the first three (3) fiscal
quarters of the Borrowers,  unaudited  Consolidated  and  consolidating  balance
sheets  and  Consolidated  and  consolidating   income  statements  showing  the
financial  condition  and  results  of  operations  of the  Borrowers  and their
subsidiaries  as  of  the  end  of  each  such  quarter,   a  Consolidated   and
consolidating   statements  of  shareholders'  equity  and  a  Consolidated  and
consolidating  statement of cash flow as of the end of each such fiscal  quarter
prepared and  certified  by the  Financial  Officer of each of the  Borrowers as
presenting  fairly the  financial  condition  and results of  operations  of the
Borrowers and their  subsidiaries and as having been prepared in accordance with
GAAP, in each case subject to normal year-end audit adjustments;

          (c)   within  30  days   after  the  end  of  each   month   unaudited
unconsolidated  balance  sheets  and income  statements  showing  the  financial
condition  and results of operations of the Borrowers as of the end of each such
month and for the year to date period, a statement of  shareholders'  equity and

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<PAGE>

an  unconsolidated  statement  of cash flow as of the end of each such month and
for the year to date period  prepared and certified by the Financial  Officer of
the  Borrowers  as  presenting  fairly the  financial  condition  and results of
operations of the Borrowers and their  subsidiaries  and as having been prepared
in  accordance  with  GAAP,  in each  case  subject  to  normal  year-end  audit
adjustments and accompanied by a certificate of the Financial Officer certifying
that,  to the best of his or her  knowledge,  no Default or Event of Default has
occurred  (but not  including  calculations  demonstrating  compliance  with the
covenants  set forth in  Sections  7.07,  7.08 and 7.09  hereof)  and, if such a
Default  or Event of  Default  has  occurred,  specifying  the nature and extent
thereof and any  corrective  action  taken or proposed to be taken with  respect
thereto;

          (d) promptly after the same become publicly available,  copies of such
registration  statements,  annual,  periodic and other  reports,  and such proxy
statements and other information,  if any, as shall be filed by the Borrowers or
any  subsidiaries  with the Securities and Exchange  Commission  pursuant to the
requirements  of the Securities  Act of 1933 or the  Securities  Exchange Act of
1934;

          (e)  concurrently  with  any  delivery  under  (a)  or  (b)  above,  a
certificate  of the  firm or  person  referred  to  therein  (which  certificate
furnished by the  independent  public  accountants  referred to in paragraph (a)
above may be limited to accounting matters and disclaim responsibility for legal
interpretations)  certifying  that to the best of its,  his or her  knowledge no
Default or Event of Default has occurred (including  calculations  demonstrating
compliance,  as of the dates of the financial statements being furnished at such
time,  with the covenants set forth in Sections 7.07, 7.08 and 7.09 hereof) and,
if such a Default or Event of Default has  occurred,  specifying  the nature and
extent  thereof  and any  corrective  action  taken or proposed to be taken with
respect  thereto and, in the case of a certificate  furnished by the independent
public  accountants,  stating  whether any change in GAAP or in the  application
thereof has  occurred  since the date of the audited  financials  referred to in
Section 4.07 and if any such change has occurred,  specifying the effect of such
change on the  financial  statements  accompanying  its  certificate;  provided,
however,  that any certificate  delivered  concurrently  with (a) above shall be
signed  by the  Financial  Officer  of  each  of the  Borrowers;

          (f) as soon as  available,  but in no event  later than 180 days after
the end of each Fiscal  Year, a management  letter  prepared by the  independent

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public accountants who reported on the financial  statements delivered under (a)
above, with respect to the internal audit and financial controls of any Borrower
and its subsidiaries;

          (g) within 15 days of the end of each fiscal month,  an aging schedule
of the Receivables in the form of the aging schedule of Receivables  dated March
31, 2001  previously  furnished to the Agent,  an aging  schedule of payables in
form  satisfactory to the Agent and a certificate,  substantially in the form of
Schedule 6.05(g) hereto, executed by the Financial Officer of the Borrowers with
respect to inventory designations;

          (h) within 30 days  prior to the  beginning  of each  Fiscal  Year,  a
summary  of  business  plans and  financial  operation  projections  (including,
without limitation,  with respect to capital expenditures) for the Borrowers and
their respective  subsidiaries  for such Fiscal Year (including  monthly balance
sheets,  statements of income and of cash flow) and annual  projections  through
the next two Fiscal Years  prepared by  management  and in form,  substance  and
detail (including,  without limitation,  principal assumptions)  satisfactory to
the Agent;

          (i) as soon as  practicable,  copies of all reports,  forms,  filings,
loan documents and financial  information  submitted to its  shareholders or, if
requested by the Agent, submitted to governmental agencies;

          (j) within 15 days after the end of each fiscal month,  a certificate,
substantially in the form of Schedule 6.05(j) hereto,  executed by the Financial
Officer of the  Borrowers  demonstrating  compliance as at the end of each month
with the Availability requirements; and

          (k) such other  information  as the Agent or any Lender may reasonably
request  regarding the  Borrower's  operations,  business  affairs and financial
condition,  including, without limitation,  monthly, or if so requested upon the
occurrence and  continuance of any Event of Default or if a lockbox  arrangement
shall at any time be established, daily, reports as to sales and collections and
debit and credit adjustments.

     SECTION 6.06.  Litigation and Other Notices.  Give the Agent prompt written
notice of the following:

          (a)  the  issuance  by any  court  or  Governmental  Authority  of any
injunction, order, decision or other restraint prohibiting, or having the effect

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of prohibiting, the making of the Loans or occurrence of other Credit Events, or
invalidating,  or having  the  effect of  invalidating,  any  provision  of this
Agreement,  the Notes or the other  Loan  Documents,  or the  initiation  of any
litigation or similar proceeding seeking any such injunction, order, decision or
other restraint;

          (b) the  filing or  commencement  of any  action,  suit or  proceeding
against any Borrower or any of its subsidiaries,  whether at law or in equity or
by or before any  court,  arbitrator  or  Governmental  Authority,  (i) which is
material and is brought by or on behalf of any governmental agency or authority,
or in which  injunctive or other equitable  relief is sought or (ii) as to which
it is  probable  (within  the  meaning  of  Statement  of  Financial  Accounting
Standards  No. 5) that  there  will be an adverse  determination  and which,  if
adversely determined, would (A) reasonably be expected to result in liability of
one or more Borrowers or a subsidiary thereof in an aggregate amount of $500,000
or more, not reimbursable by insurance,  or (B) materially  impairs the right of
any  Borrower  or a  subsidiary  thereof to perform its  obligations  under this
Agreement, any Note or any other Loan Document to which it is a party;

          (c) any Default or Event of Default,  specifying the nature and extent
thereof  and the  action  (if any) which is  proposed  to be taken with  respect
thereto;

          (d) notices given or received (or copies  thereof) with respect to any
Subordinated Indebtedness; and

          (e) any  development in the business or affairs of any Borrower or any
of its subsidiaries which has had or which is likely, in the reasonable judgment
of any Responsible Officer of such Borrower, to have, a Material Adverse Effect.

     SECTION 6.07.  ERISA. (a) Pay and discharge  promptly any liability imposed
upon it pursuant to the provisions of Title IV of ERISA; provided, however, that
neither the Borrowers nor any ERISA  Affiliate shall be required to pay any such
liability  if (1)  the  amount,  applicability  or  validity  thereof  shall  be
diligently  contested  in good faith by  appropriate  proceedings,  and (2) such
person shall have set aside on its books reserves  which,  in the opinion of the
independent  certified  public  accountants  of such person,  are adequate  with
respect thereto.

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<PAGE>

          (b) Deliver to the Agent,  promptly,  and in any event within 30 days,
after (i) the occurrence of any  Reportable  Event, a copy of the materials that
are filed with the PBGC,  or the  materials  that would have been required to be
filed if the 30-day  notice  requirement  to the PBGC was not  waived,  (ii) any
Borrower or any ERISA  Affiliate or an  administrator  of any Pension Plan files
with participants, beneficiaries or the PBGC a notice of intent to terminate any
such  Plan,  a copy of any such  notice,  (iii)  the  receipt  of  notice by any
Borrower or any ERISA Affiliate or an administrator of any Pension Plan from the
PBGC of the PBGC's  intention  to  terminate  any  Pension  Plan or to appoint a
trustee to  administer  any such Plan,  a copy of such  notice,  (iv) the filing
thereof with the Internal Revenue Service,  if requested by the Agent, copies of
each annual report that is filed on Treasury Form 5500 with respect to any Plan,
together  with  certified  financial  statements  (if  any) for the Plan and any
actuarial  statements  on Schedule B to such Form 5500,  (v) any Borrower or any
ERISA  Affiliate  knows or has  reason to know of any event or  condition  which
might  constitute  grounds under the provisions of Section 4042 of ERISA for the
termination of (or the appointment of a trustee to administer) any Pension Plan,
an explanation  of such event or condition,  (vi) the receipt by any Borrower or
any ERISA Affiliate of an assessment of withdrawal  liability under Section 4201
of ERISA  from a  Multi-employer  Plan,  a copy of such  assessment,  (vii)  any
Borrower  or any  ERISA  Affiliate  knows or has  reason to know of any event or
condition  which might cause any one of them to incur a liability  under Section
4062,  4063,  4064 or 4069 of ERISA or  Section  412(n) or 4971 of the Code,  an
explanation  of such event or  condition,  and (viii) any  Borrower or any ERISA
Affiliate knows or has reason to know that an application is to be, or has been,
made to the  Secretary  of the  Treasury  for a waiver  of the  minimum  funding
standard  under  the  provisions  of  Section  412 of the  Code,  a copy of such
application,  and in each case  described  in clauses (i) through  (iii) and (v)
through (vii) together with a statement signed by the Financial  Officer setting
forth details as to such Reportable  Event,  notice,  event or condition and the
action which such Borrower or such ERISA Affiliate proposes to take with respect
thereto.

     SECTION 6.08.  Maintaining  Records;  Access to Properties and Inspections;
Right to Conduct of Field Examinations. Maintain financial records in accordance
with accepted  financial  practices  and, upon  reasonable  notice (which may be
telephonic),  at all  reasonable  times and as often as any Lender may  request,
permit any authorized representative designated by such Lender to

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visit and inspect the  properties  and  financial  records of the  Borrowers and
their  subsidiaries  and to make  extracts from such  financial  records at such
Lender's expense,  and permit any authorized  representative  designated by such
Lender to discuss the affairs, finances and condition of the Borrowers and their
subsidiaries  with the appropriate  Financial Officer and such other officers as
the Borrowers  shall deem  appropriate  and the  Borrowers'  independent  public
accountants,  as applicable. The Agent agrees that it shall schedule any meeting
with  any  such  independent  public  accountant  through  the  Borrowers  and a
Responsible  Officer of one or more Borrowers shall have the right to be present
at any such meeting. At the Borrowers'  expense,  the Agent shall have the right
to conduct field  examination and appraisals of tangible personal  property,  as
often as it may  reasonably  request,  including  determining  the existence and
condition  of the  accounts  receivables,  inventory,  books and  records of the
Borrowers and their  subsidiaries  and reviewing their compliance with the terms
and conditions of this Agreement and the other Loan Documents.

     SECTION 6.09.  Use of Proceeds.  Use the proceeds of the Credit Events only
for the purposes set forth in Section 4.14 hereof.

     SECTION 6.10. Fiscal Year-End.  Cause its Fiscal Year to end on December 31
in each year.

     SECTION 6.11. Further Assurances. Execute any and all further documents and
take all further  actions which may be required under  applicable  law, or which
the Agent may reasonably  request, to grant,  preserve,  protect and perfect the
first priority Lien created by the Security Documents in the Collateral.

     SECTION 6.12. Additional Grantors and Guarantors. Promptly inform the Agent
of the creation or acquisition of any direct or indirect  subsidiary (subject to
the  provisions  of Section  7.06  hereof) and (i) cause each direct or indirect
subsidiary  not in  existence  on the date  hereof as to which any  Borrower  or
subsidiary  thereof owns at least a 60% ownership interest therein to enter into
a Guarantee in form and substance  satisfactory to the Agent, and to execute the
Security Documents,  as applicable,  as a Grantor and cause each such subsidiary
to pledge its accounts  receivable and all other assets pursuant to the Security
Agreement and the Borrowers shall, or shall cause their appropriate subsidiaries
to,  pledge  to the  Agent  pursuant  to  documentation  in form  and  substance
satisfactory  to the  Agent,  any  equity  interests  of the  Borrowers  or such
subsidiaries in such subsidiary and (ii) with respect to each direct or indirect
subsidiary  not in  existence  on the date  hereof as to which any  Borrower  or
subsidiary  thereof owns more than a 50% ownership  interest but less than a 60%
ownership   interest  therein,   the  Borrowers  shall,  or  shall  cause  their
appropriate  subsidiaries  to, pledge to the Agent pursuant to  documentation in
form and  substance  satisfactory  to the  Agent,  any equity  interests  of the
Borrowers or such subsidiaries in such subsidiary.

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     SECTION  6.13.  Environmental  Laws.  (a)  Comply,  and cause each of their
subsidiaries  to comply,  in all material  respects  with the  provisions of all
Environmental  Laws, and shall keep their properties and the properties of their
subsidiaries  free of any Lien imposed  pursuant to any  Environmental  Law. The
Borrowers  shall not cause or suffer or  permit,  and shall not suffer or permit
any of their  subsidiaries  to cause or suffer or permit,  the  property  of the
Borrowers  or  their  subsidiaries  to be used for the  generation,  production,
processing,  handling,  storage,  transporting  or  disposal  of  any  Hazardous
Material, except for Hazardous Materials used, generated,  produced,  processed,
handled,  stored,  transported or disposed of in the ordinary course of business
of the Borrowers and their  subsidiaries  and disclosed in Schedule 6.13 hereto,
in which case such Hazardous Materials shall be used, stored, generated, treated
and disposed of only in compliance with Environmental Law.

          (b) Supply to the Agent copies of all Permits and all  submissions  by
the Borrowers or any of their  subsidiaries to any governmental  body and of the
reports  of all  environmental  audits  and of all  other  environmental  tests,
studies or  assessments  (including the data derived from any sampling or survey
of asbestos,  soil, or subsurface or other materials or conditions)  that may be
conducted  or  performed  (by or on  behalf  of the  Borrowers  or any of  their
subsidiaries) on or regarding the properties owned, operated, leased or occupied
by the Borrowers or any of their  subsidiaries  or regarding any conditions that
might have been  affected by Hazardous  Materials on or Released or removed from
such properties.  The Borrowers shall also permit and authorize, and shall cause
their subsidiaries to permit and authorize, the consultants,  attorneys or other
persons that prepare such submissions or reports or perform such audits,  tests,
studies or assessments to discuss such  submissions,  reports or audits with the
Agent and the Lenders.

          (c) Promptly  (and in no event more than two  Business  Days after the
Borrowers become aware or are otherwise informed of such event) provide oral and
written notice to the Agent upon the happening of any of the following:

                    (i) any Borrower,  any  subsidiary  of any Borrower,  or any
          tenant or other  occupant  of any  property  of such  Borrower or such
          subsidiary receives notice of any claim,  complaint,  charge or notice
          of a violation or potential violation of any Environmental Law;

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<PAGE>

                    (ii) there has been a spill or other  Release  of  Hazardous
          Materials  upon,  under or about or  affecting  any of the  properties
          owned, operated,  leased or occupied by any Borrower or any subsidiary
          of any Borrower,  or Hazardous  Materials at levels or in amounts that
          may have to be reported,  remedied or responded to under Environmental
          Law are detected on or in the soil or groundwater;

                    (iii) any Borrower or any  subsidiary  of any Borrower is or
          may be liable for any costs of cleaning up or otherwise  responding to
          a Release of Hazardous Materials;

                    (iv) any part of the properties owned,  operated,  leased or
          occupied by any Borrower or any  subsidiary  of any Borrower is or may
          be subject to a Lien under any Environmental Law; or

                    (v)  any  Borrower  or  any   subsidiary   of  any  Borrower
          undertakes any Remedial Work with respect to any Hazardous Materials.

          (d) Timely  undertake  and complete any Remedial  Work required by any
Environmental Law.

          (e) Without in any way limiting  the scope of Section  11.04(c) and in
addition to any obligations  thereunder,  each Borrower  hereby  indemnifies and
agrees  to hold  the  Agent  and the  Lenders  harmless  from  and  against  any
liability,  loss, damage, suit, action or proceeding arising out of its business
or  the  business  of  its  subsidiaries   pertaining  to  Hazardous  Materials,
including,  but not limited  to,  claims of any  governmental  body or any third
person  arising under any  Environmental  Law or under tort,  contract or common
law. To the extent laws of the United  States or any  applicable  state or local
law in which property owned, operated, leased or occupied by any Borrower or any
subsidiary of any Borrower is located  provide that a Lien upon such property of
such  Borrower or such  subsidiary  may be obtained for the removal of Hazardous
Materials  which  have been or may be  Released,  no later than sixty days after
notice is given by the Agent to such Borrower or such subsidiary,  such Borrower
or such  subsidiary  shall  deliver to the Agent a report  issued by a qualified
third party engineer  certifying as to the existence of any Hazardous  Materials
located  upon or beneath the  specified  property.  To the extent any  Hazardous
Materials  located therein or thereunder  either subject the property to Lien or
require  removal to  safeguard  the health of any persons,  the removal  thereof
shall be an affirmative covenant of the Borrowers hereunder.

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          (f) In the event that any Remedial Work is required to be performed by
any  Borrower  or  any   subsidiary  of  any  Borrower   under  any   applicable
Environmental  Law, any judicial  order,  or by any  governmental  entity,  such
Borrower or such subsidiary shall commence all such Remedial Work at or prior to
the time required therefor under such  Environmental Law or applicable  judicial
orders and thereafter  diligently prosecute to completion all such Remedial Work
in  accordance   with  and  within  the  time  allowed  under  such   applicable
Environmental Laws or judicial orders.

     SECTION 6.14. Pay Obligations to Lenders and Perform Other  Covenants.  (a)
Make full and  timely  payment  of the  Obligations,  whether  now  existing  or
hereafter arising, (b) duly comply with all the terms and covenants contained in
this Agreement  (including,  without limitation,  the borrowing  limitations and
mandatory prepayments in accordance with Article II hereof) in each of the other
Loan Documents, all at the times and places and in the manner set forth therein,
(c)  except for the filing of  continuation  statements  and the making of other
filings by the Agent as secured party or assignee, at all times take all actions
necessary  to maintain the Liens and  security  interests  provided for under or
pursuant to this  Agreement  and the Security  Documents as valid and  perfected
first Liens on the  property  intended to be covered  thereby  (subject  only to
Liens  expressly  permitted  hereunder) and supply all  information to the Agent
necessary for such maintenance and (d) maintain Availability at zero or greater.

     SECTION 6.15. Purchase Price Adjustments. In the event there is a reduction
in the purchase price pursuant to the terms of the Deka  Acquisition  Agreement,
and any Borrower receives a payment from Deka Medical,  Inc., or from the escrow
fund  established  under  the  terms of the  Deka  Acquisition  Agreement,  such
Borrower  shall,  within  five (5)  Business  Days of  receipt  thereof,  make a
prepayment of the Loans in an amount equal to 100% of such payment received from
Deka Medical,  Inc., or the escrow fund. Any such prepayment shall be applied in
the same manner as set forth in Section 2.09(f) for prepayments made pursuant to
paragraph (e) of Section 2.09.

VII. NEGATIVE COVENANTS

     Each of the  Borrowers  covenants and agrees with each Lender that, so long
as this Agreement  shall remain in effect or the principal of or interest on any
Note,  any  amount  under any Letter of  Credit,  or any fee,  expense or amount
payable hereunder or in connection with any of the Transactions shall be unpaid,
it will not and will not cause or permit  any of its  subsidiaries  and,  in the
case of  Section  7.13  hereof,  any ERISA  Affiliate  to,  either  directly  or
indirectly (without the prior written consent of the Required Lenders):

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     SECTION 7.01. Liens. Incur,  create,  assume or permit to exist any Lien on
any of its  property  or assets  (including  the stock of any direct or indirect
subsidiary or any real property),  whether owned at the date hereof or hereafter
acquired,  or assign or convey any rights to or security interests in any future
revenues, except:

          (a) Liens  incurred  and pledges  and  deposits  made in the  ordinary
course of  business  in  connection  with  workers'  compensation,  unemployment
insurance,  old-age  pensions and other social security  benefits (not including
any lien described in Section 412(m) of the Code);

          (b)  Liens  imposed  by  law,  such  as  carriers',   ware-housemen's,
mechanics',  materialmen's and vendors' liens and other similar liens,  incurred
in good faith in the ordinary course of business and securing  obligations which
are not overdue  for a period of more than 15 days or which are being  contested
in good faith by appropriate  proceedings as to which any Borrower or any of its
subsidiaries,  as the case may be, shall,  to the extent  required by GAAP, have
set aside on its books adequate reserves;

          (c) Liens securing the payment of taxes,  assessments and governmental
charges or levies,  that are not delinquent or if  delinquent,  do not aggregate
more  than  $500,000  and  are  being  diligently  contested  in good  faith  by
appropriate  proceedings  (and as to which  no  proceeding  has  been  commenced
against  any  property  or  assets of any  Borrower  or its  subsidiaries  or if
commenced has been stayed in a manner satisfactory to the Agent) and as to which
adequate  reserves  have been  established  in accordance  with GAAP;  provided,
however,  that in no event shall the  aggregate  amount of such reserves be less
than the aggregate amount secured by such Liens;

          (d)   zoning   restrictions,    easements,   licenses,   reservations,
provisions,  covenants, conditions, waivers, restrictions on the use of property
or minor  irregularities  of title  (and with  respect to  leasehold  interests,
mortgages,  obligations, liens and other encumbrances incurred, created, assumed
or  permitted  to exist and arising by,  through or under a landlord or owner of
the leased property,  with or without consent of the lessee) which do not in the
aggregate  materially  detract  from the  value of its  property  or  assets  or
materially impair the use thereof in the operation of its business;

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          (e) Liens upon any equipment acquired through the purchase or lease by
any  Borrower  or  any  of  its  subsidiaries  which  are  created  or  incurred
contemporaneously  with such acquisition to secure or provide for the payment of
any part of the purchase  price of, or lease payments on, such equipment (but no
other  amounts  and not in  excess  of the  purchase  price or lease  payments);
provided,  however,  that any such Lien shall not apply to any other property of
the Borrowers or any of their subsidiaries;  and provided,  further,  that after
giving effect to such purchase or lease,  compliance is maintained  with Section
7.07 hereof;

          (f)  Liens  existing  on the date of this  Agreement  and set forth in
Schedule 7.01 annexed hereto but not the extension,  renewal or refunding of the
Indebtedness secured thereby;

          (g) Liens  created in favor of the Agent for its own  benefit  and the
benefit of the Lenders;  (h) Liens securing the  performance  of bids,  tenders,
leases,  contracts (other than for the repayment of borrowed  money),  statutory
obligations,  surety,  customs and appeal  bonds and other  obligations  of like
nature,  incurred as an incident to and in the ordinary course of business;  (i)
judgment  Liens  securing  judgments and decrees,  which would not constitute an
Event of Default under paragraph (j) of Article VIII; or

          (j) existing  Liens  securing the  performance  of  Capitalized  Lease
Obligations;  provided,  however  the  total  amount  to be  payable  under  all
Capitalized Lease Obligations shall not exceed $1,000,000.

     SECTION 7.02. Sale and Lease-Back Transactions. Enter into any arrangement,
directly  or  indirectly,  with any person  whereby  any  Borrower or any of its
subsidiaries shall sell or transfer any property,  real or personal, and used or
useful in its business, whether now owned or hereafter acquired, and there-after
rent or lease  such  property  or other  property  which such  Borrower  or such
subsidiary  intends to use for substantially the same purpose or purposes as the
property being sold or transferred.

     SECTION 7.03.  Indebtedness.  Incur, create,  assume or permit to exist any
Indebtedness  other  than (i)  Indebtedness  secured  by Liens  permitted  under
Section 7.01, (ii)  Indebtedness  (including,  without  limitation,  Guarantees)
existing on the date hereof and listed in Schedule 7.03 annexed hereto,  but not

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the  extension,  renewal  or  refunding  thereof,  (iii)  Indebtedness  incurred
hereunder,  (iv) Indebtedness to trade creditors incurred in the ordinary course
of  business,   (v)  Guarantees   constituting  the  endorsement  of  negotiable
instruments for deposit or collection in the ordinary  course of business,  (vi)
Guarantees of the  Obligations  and Guarantees of loans made to key employees in
connection with the exercise of stock options for Isolyser's stock provided that
the Indebtedness guaranteed does not exceed $200,000 in the aggregate at any one
time outstanding,  (vii) purchase money  Indebtedness to the extent permitted by
Sections  7.01(e)  and  7.07  hereof,  (viii)  Subordinated  Indebtedness,  (ix)
Indebtedness  of any  subsidiary of Isolyser or any other  Borrower  (which is a
Guarantor)  owing to Isolyser or such other  Borrower,  (x)  Indebtedness of any
Borrower  owing to any subsidiary of any Borrower  (which is a Guarantor),  (xi)
unsecured Indebtedness not in excess of $1,000,000 outstanding at any time (xii)
an  unsecured  promissory  note of  Microtek  to the order of  Lingeman  Medical
Products,  Inc.  in the  original  principal  amount  of  $675,000,  but not the
modification,  prepayment,  increase, extension or refunding thereof without the
consent  of the Agent or waiver of any  right of  setoff  with  respect  thereto
without  the  consent  of the  Agent,  (xii)  the  Employee  Notes,  but not the
modification,  prepayment,  increase, extension or refunding thereof without the
consent  of the Agent or waiver of any  right of  setoff  with  respect  thereto
without the consent of the Agent and (xiii) the deferred  purchase price payable
under that certain Asset Purchase Agreement dated as of February 16, 2001 by and
among Isolyser,  Advanced Microbial Solutions, LLC and Microbasix,  LLC provided
that such deferred purchase price will not exceed $200,000 and 200,000 shares of
Isolyser common stock,  subject to adjustments for stock splits, share dividends
and other customary anti-dilution protection mechanisms.

     SECTION  7.04.  Dividends,  Distributions  and  Payments.  Declare  or pay,
directly and  indirectly,  any cash  dividends  or make any other  distribution,
whether in cash, property,  securities or a combination thereof, with respect to
(whether by reduction of capital or  otherwise)  any shares of its capital stock
or directly or  indirectly  redeem,  purchase,  retire or otherwise  acquire for
value (or permit any  subsidiary to purchase or acquire) any shares of any class
of its capital stock or set aside any amount for any such purpose other than (i)
dividends  by any  subsidiary  of Isolyser or any other  Borrower to Isolyser or
such other Borrower or any wholly-owned  subsidiary of any thereof, (ii) so long
as no Event of Default has occurred or is  continuing,  redemption  of shares of
Isolyser in connection  with any exercise of stock options to purchase  Isolyser
shares,  (iii) the issuance of stock by  MINDHARBOR,  Inc. to its  management in
accordance with the provisions of the Services Agreement; (iv) the repurchase

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from time to time by  Isolyser  of its  issued  and  outstanding  common  stock;
provided  that (x) no Event of Default  shall have occurred and be continuing on
the  date of any such  stock  repurchase  or would  occur  after  giving  effect
thereto,  (y) the aggregate number of shares  repurchased shall not exceed 5% of
the number of shares of common stock issued and outstanding on June 30, 2000 and
(z) Isolyser shall not use proceeds of a Revolving  Credit Loan to fund any such
repurchase; and (v) the implementation of the Protection Agreement in accordance
with its terms.

     SECTION 7.05. Consolidations,  Mergers and Sales of Assets. Alter its legal
structure or consolidate  with or merge into any other person,  or sell,  lease,
transfer  or assign to any  persons  or  otherwise  dispose of  (whether  in one
transaction or a series of transactions)  any portion of its assets (whether now
owned or hereafter  acquired),  or sell any of its  inventory  other than in the
normal course of business, or permit another person to merge into it, or acquire
all or  substantially  all the  capital  stock or assets  of any  other  person;
provided that  MINDHARBOR,  Inc. may issue stock to its management in accordance
with the provisions of the Services Agreement.

     SECTION 7.06. Investments. Own, purchase or acquire any stock, obligations,
assets  (not in the  ordinary  course  of  business)  or  securities  of, or any
interest in, or make any capital  contribution  or loan or advance to, any other
person, or make any other investments, except:

          (a)  certificates of deposit,  time deposits and money market accounts
in dollars of any commercial banks registered to do business in any state of the
United States (i) having  capital,  surplus and  undivided  profits in excess of
$500,000,000  and (ii) whose long-term debt rating is at least  investment grade
as determined  by either  Standard & Poor's  Ratings Group or Moody's  Investors
Service,  Inc. and  certificates  of deposit in dollars  offered by money market
mutual funds meeting the criteria in (c) below;

          (b)  readily  marketable  direct  obligations  of  the  United  States
government  or any agency  thereof which are backed by the full faith and credit
of the United States;

          (c)  investments  in money market mutual funds having assets in excess
of $2,500,000,000;

          (d)  commercial  paper at the time of  acquisition  having the highest
rating  obtainable  from  either  Standard  & Poor's  Ratings  Group or  Moody's
Investors Service, Inc.;

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          (e)  federally  tax  exempt  securities  rated A or  better  by either
Standard & Poor's Ratings Group or Moody's Investors Service, Inc.;

          (f)  investments  in  the  stock  of  any  subsidiary  of  any  of the
Borrowers;

          (g)  investments  in any person to the extent  permitted  pursuant  to
Section 7.03 hereof;

          (h)  advances of not more than  $500,000 in the  aggregate  at any one
time  outstanding  to persons in the  ordinary  course of  business  in order to
enable such persons to procure  materials  necessary to produce products ordered
by the  Borrowers  or for other  business  purposes  which will result in direct
benefits to the Borrowers;

          (i)  loans  and  advances  by the  Borrowers  to  subsidiaries  of the
Borrowers  incorporated in the United Kingdom, 65% of the capital stock of which
has been  pledged  to the  Agent  pursuant  to a pledge  agreement,  in form and
substance  satisfactory  to the  Agent,  and as to which the Agent  shall have a
first priority perfected  security interest,  provided that the aggregate amount
of such loans and advances at any time outstanding shall not exceed $1,000,000;

          (j) investments in the stock of MINDHARBOR, Inc. and Global Resources,
Inc. and Consolidated Ecoprogress Technology, Inc. existing on the Closing Date,
but not any additional investments therein;

          (k) loans and advances by the Borrowers to MINDHARBOR, Inc. and Global
Resources,  Inc.,  and if pursuant to a promissory  note,  such note shall be in
form and substance satisfactory to the Agent, provided that the Agent shall have
a first  priority  perfected  security  interest  therein and in any  collateral
therefor,  and  further  provided  that the  aggregate  amount of such loans and
advances at any time outstanding shall not exceed $1,000,000; and

          (l) subject to Section 6.12,  investments  in the stock of any person,
which as a  result  of such  investment  becomes  a  subsidiary  of a  Borrower;

provided  that,  in each case  mentioned in (a),  (b),  (d) and (e) above,  such
obligations  shall  mature  not more than one year from the date of  acquisition
thereof.

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     SECTION 7.07. Capital Expenditures. Permit the aggregate amount of payments
made for  capital  expenditures  including  Capitalized  Lease  Obligations  and
Indebtedness  secured by Liens permitted under Section 7.01(e) hereof, to exceed
(i)  $2,700,000  for the Fiscal  Year  ending on  December  31,  2001,  and (ii)
$2,500,000 for the Fiscal Year ending on December 31, 2002, and each Fiscal Year
thereafter.

     SECTION 7.08.  Leverage  Ratio.  Permit the Leverage Ratio of the Borrowers
and their subsidiaries on a Consolidated basis to be greater than (i)
3.50:1.00 for the fiscal quarter ending on March 31, 2001, (ii) 3.50:1.00 for
the fiscal quarter ending on June 30, 2001,(iii) 2.50:1.00 for the fiscal
quarter ending on September 30, 2001, (iv) 2.00:1.00 for the fiscal quarter
ending on December 31, 2001 and each fiscal quarter thereafter through and
including the fiscal quarter ending on September 30, 2003 and (v) 1.50: 1.00 for
the fiscal quarter ending on December 31, 2003 and each fiscal quarter
thereafter.

     SECTION 7.09. EBITDA. Permit EBITDA of the Borrowers and their subsidiaries
on a Consolidated  basis to be less than (i) $700,000 for the one quarter period
ending on March 31, 2001,  (ii)  $2,450,000 for the two quarter period ending on
June 30, 2001, (iii) $4,800,000 for the three quarter period ending on September
30, 2001,  (iv)  $8,000,000 for the four quarter  periods ending on December 31,
2001,  March 31, 2002, June 30, 2002 and September 30, 2002, (v) $10,000,000 for
the four quarter  periods ending on December 31, 2002,  March 31, 2003, June 30,
2003,  and  September 30, 2003,  (vi)  $11,000,000  for the four quarter  period
ending  on  December  31,  2003 and each four  quarter  period  thereafter.  For
purposes  hereof,  EBITDA  shall mean for the  applicable  period the sum of Net
Income, depreciation and amortization, federal, state and local income taxes and
interest  expense for such period,  computed and  calculated in accordance  with
GAAP.

     SECTION 7.10. Business. Alter the nature of its business as operated on the
date of this Agreement in any material respect.

     SECTION 7.11. Sales of Receivables. Sell, assign, discount, transfer,
or otherwise dispose of any accounts receivable, promissory notes, drafts or
trade acceptances or other rights to receive payment held by it, with or without
recourse, except (i) for the purpose of collection or settlement in the ordinary
course of business or (ii) the sale of any such accounts to the Agent for the
ratable benefit of the Lenders.

     SECTION 7.12.  Use of Proceeds.  Permit the proceeds of any Credit Event to
be used for any purpose which entails a violation of, or is  inconsistent  with,
Regulation T, U or X of the Board, or for any purpose other than those set forth
in Section 4.14 hereof.

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     SECTION 7.13. ERISA. (a) Engage in any transaction in connection with which
any Borrower or any ERISA  Affiliate could be subject to either a material civil
penalty  assessed  pursuant  to the  provisions  of  Section  502 of  ERISA or a
material tax imposed under the provisions of Section 4975 of the Code.

          (b)  Terminate  any  Pension  Plan in a "distress  termination"  under
Section 4041 of ERISA, or take any other action which could result in a material
liability of any Borrower or any ERISA Affiliate to the PBGC.

          (c) Fail to make  payment  when due of all  amounts  which,  under the
provisions of any Plan,  any Borrower or any ERISA  Affiliate is required to pay
as contributions  thereto, or, with respect to any Pension Plan, permit to exist
any material "accumulated funding deficiency" (within the meaning of Section 302
of ERISA and  Section  412 of the Code),  whether or not  waived,  with  respect
thereto.

          (d) Adopt an amendment to any Pension Plan  requiring the provision of
security under Section 307 of ERISA or Section 401(a)(29) of the Code.

     SECTION 7.14.  Accounting  Changes.  Make, or permit any subsidiary to make
any change in their accounting treatment or financial reporting practices except
as required or permitted by GAAP or change the Fiscal Year from December 31.

     SECTION 7.15.  Prepayment or  Modification  of  Subordinated  Indebtedness;
Modification of Charter Documents.  (a) Directly or indirectly  prepay,  redeem,
purchase or retire in advance of maturity any Indebtedness,  including,  without
limitation,  any Subordinated  Indebtedness,  other than  Indebtedness  incurred
hereunder.

          (b) Modify, amend or otherwise alter in any material respect the terms
and provisions of any Subordinated Indebtedness.

          (c)  Modify,   amend  or  alter  their  certificates  or  articles  of
incorporation.

     SECTION   7.16.   Transactions   with   Affiliates.   Except  as  otherwise
specifically  set forth in this  Agreement,  directly  or  indirectly  purchase,
acquire or lease any property from, or sell,  transfer or lease any property to,
or enter into any other  transaction  with,  Affiliate or agent of any Borrower,

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except (a) at prices and on terms not less favorable to it than that which would
have been obtained in an arm's-length  transaction with a  non-affiliated  third
party and (b) (i) the Services agreement dated June 1, 2000 between Isolyser and
Global  Resources,  Inc.  and  Addendum to same dated June 21, 2000 and (ii) the
Services Agreement dated January __, 2001 between Isolyser and MindHarbor, Inc.,
each as in effect on the Closing Date.

      SECTION 7.17. Negative Pledges, Etc. Enter into any agreement (other
than this Agreement or any other Loan Document) which (a) prohibits the creation
or assumption of any Lien upon any of the Collateral, including, without
limitation, any hereafter acquired property, (b) specifically prohibits the
amendment or other modification of this Agreement or any other Loan Document or
(c) restricts or imposes any conditions upon the ability of any subsidiary to
pay dividends or other distributions with respect to any shares of its capital
stock or to make or repay loans or advances to the Borrowers or any other
subsidiary or to guaranty Indebtedness of the Borrowers or any other subsidiary.

VIII. EVENTS OF DEFAULT

     In case of the  happening of any of the  following  events  (herein  called
"Events of Default"):

          (a) any  representation  or  warranty  made or deemed made by any Loan
Party or subsidiary thereof in or in connection with this Agreement,  any of the
Security  Documents,  the Notes or other Loan  Documents  or any  Credit  Events
hereunder,  shall prove to have been incorrect in any material respect when made
or deemed to be made;

          (b) default  shall be made in the payment of any principal of any Note
when and as the same  shall  become  due and  payable,  whether  at the due date
thereof or at a date fixed for prepayment thereof or by acceleration  thereof or
otherwise;

          (c) default  shall be made in the payment of any interest on any Note,
or any fee or any other amount payable hereunder, or under the Notes, Letters of
Credit,  or any other Loan Document or in connection with any other Credit Event
or the Transactions when and as the same shall become due and payable;

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          (d) default shall be made in the due  observance or performance of any
covenant,  condition or agreement to be observed or performed on the part of any
Loan Party pursuant to the terms of this Agreement, any of the Notes, any of the
Security Documents or any other Loan Document;

          (e) any Loan Party shall (i)  voluntarily  commence any  proceeding or
file any petition seeking relief under Title 11 of the United States Code or any
other   Federal,   state  or  foreign   bankruptcy,   insolvency,   liquidation,
reorganization  or similar law, (ii) consent to the  institution  of, or fail to
contravene in a timely and appropriate manner, any such proceeding or the filing
of any such  petition,  (iii)  apply  for or  consent  to the  appointment  of a
receiver,  trustee,  custodian,  sequestrator  or similar  official for any Loan
Party or for a substantial  part of its property or assets,  (iv) file an answer
admitting the material  allegations  of a petition  filed against it in any such
proceeding,  (v) make a general  assignment  for the benefit of creditors,  (vi)
become unable, admit in writing its inability or fail generally to pay its debts
as they become due,  (vii) be wound up or (viii) take  corporate  action for the
purpose of effecting any of the foregoing;

          (f) an  involuntary  proceeding  shall be commenced or an  involuntary
petition shall be filed in a court of competent  jurisdiction seeking (i) relief
in respect of any Loan Party, or of a substantial part of the property or assets
of any Loan Party, under Title 11 of the United States Code or any other Federal
state or foreign bankruptcy,  insolvency,  receivership or similar law, (ii) the
appointment of a receiver, trustee, custodian,  sequestrator or similar official
for any Loan Party or for a substantial  part of the property of any Loan Party,
or (iii) the winding-up or liquidation of any Loan Party; and such proceeding or
petition shall continue  undismissed for 30 days or an order or decree approving
or ordering any of the foregoing  shall  continue  unstayed and in effect for 30
days;  (g) default  shall be made with respect to any  Indebtedness  of any Loan
Party (excluding  Indebtedness  out-standing hereunder) which individually or in
the  aggregate  exceeds  $250,000 if the effect of any such default  shall be to
accelerate,  or to permit the holder or obligee of any such Indebtedness (or any
trustee on behalf of such holder or obligee)  at its option to  accelerate,  the
maturity of such Indebtedness;

          (h) (i) a  Reportable  Event  shall have  occurred  with  respect to a
Pension  Plan,  (ii) the filing by any Loan Party,  any ERISA  Affiliate,  or an

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administrator  of any Plan of a notice of intent to  terminate  such a Plan in a
"distress  termination" under the provisions of Section 4041 of ERISA, (iii) the
receipt of notice by any Loan Party, any ERISA Affiliate, or an administrator of
a Plan that the PBGC has  instituted  proceedings  to  terminate  (or  appoint a
trustee to  administer)  such a Pension Plan,  (iv) any other event or condition
exists which might,  in the opinion of the Agent,  constitute  grounds under the
provisions of Section 4042 of ERISA for the  termination of (or the  appointment
of a trustee to  administer)  any Pension  Plan by the PBGC,  (v) a Pension Plan
shall fail to maintain the minimum funding  standard  required by Section 412 of
the Code for any plan year or a waiver  of such  standard  is sought or  granted
under the provisions of Section  412(d) of the Code,  (vi) any Loan Party or any
ERISA  Affiliate  has  incurred,  or is likely to incur,  a liability  under the
provisions of Section 4062, 4063, 4064 or 4201 of ERISA, (vii) any Loan Party or
any ERISA  Affiliate  fails to pay the full  amount of an  installment  required
under Section  412(m) of the Code,  (viii) the  occurrence of any other event or
condition  with respect to any Plan which would  constitute  an event of default
under any other agreement entered into by any Loan Party or any ERISA Affiliate,
and in each case in clauses  (i) through  (viii) of this  subsection  (h),  such
event or condition,  together with all other such events or conditions,  if any,
could subject any Loan Party or any ERISA  Affiliate to any taxes,  penalties or
other  liabilities  which,  in the  opinion of the Agent,  could have a Material
Adverse  Effect with respect to any Loan Party or any ERISA  Affiliate;

          (i) any Loan Party or any ERISA Affiliate (i) shall have been notified
by the  sponsor  of a  Multiemployer  Plan  that it has  incurred  any  material
withdrawal  liability  to such  Multiemployer  Plan,  and  (ii)  does  not  have
reasonable  grounds for contesting such withdrawal  liability and is not in fact
contesting such withdrawal  liability in a timely and appropriate  manner;

          (j) a judgment  (not  reimbursed  by  insurance  policies  of any Loan
Party) or decree, order or arbitration award for the payment of money, a fine or
penalty which when taken together with all other such judgments,  decrees, fines
and  penalties  shall  exceed  $500,000  shall be  rendered  by a court or other
tribunal against any Loan Party or non-monetary judgment,  decree or order which
has or could  reasonably be expected to have a Material  Adverse Effect shall be
so rendered  and (i) shall  remain  undischarged  or unbonded for a period of 30
consecutive  days during which the execution of such judgment,  decree,  fine or
penalty shall not have been stayed  effectively or (ii) any judgment creditor or

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other person shall legally commence actions to levy upon assets or properties to
enforce such judgment, decree, fine or penalty;

          (k) any  material  damage to, or loss,  theft or  destruction  of, any
material  Collateral,  whether or not  insured,  or any strike,  lockout,  labor
dispute,  embargo,  condemnation,  act of God or public enemy, or other casualty
which  causes,  for more than thirty (30)  consecutive  days beyond the coverage
period of any  applicable  business  interruption  insurance,  the  cessation or
substantial  curtailment  of revenue  producing  activities at any facility of a
Loan Party or subsidiary thereof, if in the case of any of the foregoing, if any
such event or circumstance could have a Material Adverse Effect;

          (l) this  Agreement,  any Note,  any of the  Security  Documents,  any
Guarantee or other Loan Documents  shall for any reason cease to be, or shall be
asserted by any Loan Party or any subsidiary  thereof not to be, a legal,  valid
and binding obligation of any Loan Party or subsidiary  thereof,  enforceable in
accordance  with its terms,  or the Lien  purported  to be created by any of the
Security  Documents shall for any reason cease to be, or be asserted by any Loan
Party or subsidiary  thereof not to be, a valid,  first priority  perfected Lien
(except to the extent  otherwise  permitted  under this  Agreement or any of the
Security Documents); or

          (m) the filing of any Lien for taxes exceeding  individually or in the
     aggregate $500,000;

then,  and in any such event (other than an event  described in paragraph (e) or
(f) above), and at any time thereafter during the continuance of such event, the
Agent may,  and upon the  written  request of the  Required  Lenders  shall,  by
written  notice (or  facsimile  notice  promptly  confirmed  in  writing) to the
Borrowers,  take any or all of the  following  actions at the same or  different
times:  (i) terminate  forthwith all or any portion of the Total  Commitment and
the  obligations  of the Lenders to make Loans and the Agent to issue Letters of
Credit hereunder; (ii) demand that the Borrowers provide to the Lenders, and the
Borrowers upon such demand agree to provide,  cash collateral in an amount equal
to the  aggregate  Letter  of  Credit  Usage to be held by the Agent for its own
benefit  and the  ratable  benefit  of the  Lenders  on terms  and  pursuant  to
documents and agreements  satisfactory  in all respects to the Agent;  and (iii)
declare  the Notes and any  amounts  then  owing to the  Lenders  on  account of
drawings under any Letters of Credit to be forthwith due and payable,  whereupon

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the principal of such Notes, together with accrued interest and fees thereon and
any amounts  then owing to the Lenders on account of drawings  under any Letters
of Credit and other liabilities of the Borrowers accrued hereunder, shall become
forthwith  due  and  payable  both  as  to  principal   and  interest,   without
presentment,  demand,  protest or any other notice of any kind, all of which are
hereby  expressly waived by the Borrowers,  anything  contained herein or in the
Notes to the contrary notwithstanding; provided, however, that with respect to a
default  described in paragraph (e) or (f) above,  the Total  Commitment and the
obligation  of the  Lenders to make  Loans and of the Agent to issue  Letters of
Credit shall  automatically  terminate and the principal of the Notes,  together
with accrued interest and fees thereon and any amounts then owing to the Lenders
on account of drawings under any Letters of Credit and any other  liabilities of
the Borrowers accrued hereunder shall automatically become due and payable, both
as to principal  and interest,  without  presentment,  demand,  protest or other
notice of any kind, all of which are hereby  expressly  waived by the Borrowers,
anything contained herein or in the Notes to the contrary notwithstanding.

IX. AGENT

     In order to expedite the transactions  contemplated by this Agreement,  The
Chase  Manhattan  Bank is  hereby  appointed  to act as Agent on  behalf  of the
Lenders. Each of the Lenders and each subsequent holder of any Note or issuer of
any Letter of Credit by its acceptance thereof, irrevocably authorizes the Agent
to take such  action on its  behalf  and to  exercise  such  actions  and powers
hereunder  and under the  Security  Documents  and other Loan  Documents  as are
specifically  delegated  to or required of the Agent by the terms hereof and the
terms thereof  together with such powers as are reasonably  incidental  thereto.
Neither the Agent nor any of its directors,  officers, employees or agents shall
be  liable as such for any  action  taken or  omitted  to be taken by it or them
hereunder or under any of the Security  Documents and other Loan Documents or in
connection  herewith or therewith (a) at the request or with the approval of the
Required  Lenders  (or,  if  otherwise   specifically   required   hereunder  or
thereunder,  the  consent of all the  Lenders)  or (b) in the  absence of its or
their own gross negligence or willful misconduct.

     The Agent is hereby expressly authorized on behalf of the Lenders,  without
hereby limiting any implied  authority,  (a) to receive on behalf of each of the
Lenders  any  payment  of  principal  of or  interest  on the Notes  outstanding
hereunder and all other amounts  accrued  hereunder which are paid to the Agent,
and  promptly to  distribute  to each Lender its proper share of all payments so

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received, (b) to distribute to each Lender copies of all notices, agreements and
other  material as provided for in this  Agreement or in the Security  Documents
and other Loan Documents as received by the Agent (c) to maintain, in accordance
with its customary business practices, ledgers and records reflecting the status
of the Loans, the Collateral and related matters,  (d) to open and maintain bank
accounts  and  lock  boxes as the  Agent  deems  necessary  and  appropriate  in
accordance with the Loan Documents with respect to the  Collateral,  (e) to take
all actions with respect to this Agreement and the Security  Documents and other
Loan Documents as are specifically  delegated to the Agent, and (f) to incur and
pay such expenses as the Agent may deem  necessary or  appropriate in connection
with the foregoing.

     In the event that (a) any Borrower  fails to pay when due the  principal of
or interest on any Note, any amount  payable under any Letter of Credit,  or any
fee payable hereunder or (b) the Agent receives written notice of the occurrence
of a  Default  or an  Event of  Default  (the  Agent  being  deemed  not to have
knowledge  of any Default or Event of Default  unless and until  written  notice
thereof is given to the Agent by any  Borrower or a Lender),  the Agent within a
reasonable time shall give written notice thereof to the Lenders, and shall take
such action with respect to such Event of Default or other condition or event as
it shall be directed to take by the Required Lenders;  provided,  however, that,
unless and until the Agent shall have  received such  directions,  the Agent may
take such  action or refrain  from taking  such  action  hereunder  or under the
Security Documents or other Loan Documents with respect to a Default or Event of
Default as it shall deem advisable in the best interests of the Lenders.

     The Agent shall not be  responsible in any manner to any of the Lenders for
the effectiveness,  enforceability,  perfection, value, genuineness, validity or
due execution of this Agreement, the Notes or any of the other Loan Documents or
Collateral  or  any  other  agreements  or  certificates,   requests,  financial
statements,  notices or  opinions  of counsel or for any  recitals,  statements,
warranties or  representations  contained herein or in any such instrument or be
under any obligation to ascertain or inquire as to the performance or observance
of  any  of  the  terms,  provisions,   covenants,  conditions,   agreements  or
obligations  of this  Agreement or any of the other Loan  Documents or any other
agreements on the part of the Borrowers and,  without limiting the generality of
the foregoing,  the Agent shall,  in the absence of acknowledge to the contrary,
be entitled to accept any  certificate  furnished  pursuant to this Agreement or
any of the other Loan  Documents  as  conclusive  evidence  of the facts  stated
therein and shall be entitled to rely on any note, notice, consent, certificate,
affidavit,  letter,  telegram,  teletype  message,  statement,  order  or  other

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document  which it  believes in good faith to be genuine and correct and to have
been signed or sent by the proper person or persons. It is understood and agreed
that the Agent may  exercise its rights and powers  under other  agreements  and
instruments to which it is or may be a party,  and engage in other  transactions
with the Borrowers, as though it were not Agent of the Lenders hereunder.

     The Agent  shall  promptly  give  notice to the  Lenders of the  receipt or
sending of any notice,  schedule,  report,  projection,  financial  statement or
other  document or  information  pursuant to this  Agreement or any of the other
Loan Documents and shall promptly forward a copy thereof to each Lender.

     Neither the Agent nor any of its directors,  officers,  employees or agents
shall have any  responsibility  to the  Borrowers  on account of the  failure or
delay in  performance or breach by any Lender other than the Agent of any of its
obligations  hereunder or to any Lender on account of the failure of or delay in
performance  or  breach by any other  Lender  or the  Borrowers  of any of their
respective obligations hereunder or in connection herewith.

     The Agent may consult with legal counsel  selected by it in connection with
matters  arising under this Agreement or any of the other Loan Documents and any
action taken or suffered in good faith by it in  accordance  with the opinion of
such counsel  shall be full  justification  and  protection to it. The Agent may
exercise any of its powers and rights and perform any duty under this  Agreement
or any of the other Loan Documents through agents or attorneys.

     The Agent and the Borrowers may deem and treat the payee of any Note as the
holder  thereof until written  notice of transfer  shall have been  delivered as
provided herein by such payee to the Agent and the Borrowers.

     With  respect to the Loans made  hereunder,  the Notes issued to it and any
other Credit Event  applicable to it, the Agent in its  individual  capacity and
not as an Agent  shall have the same  rights,  powers and duties  hereunder  and
under any other  agreement  executed in connection  herewith as any other Lender
and may exercise the same as though it were not the Agent, and the Agent and its
affiliates may accept deposits from,  lend money to and generally  engage in any
kind of business with the Borrowers or other affiliate thereof as if it were not
the Agent.

     Each  Lender  agrees  (i) to  reimburse  the  Agent in the  amount  of such
Lender's  pro rata share  (based on its  Commitment  hereunder)  of any expenses
incurred  for its  benefit  and for the  benefit  of the  Lenders  by the Agent,

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<PAGE>

including  counsel  fees and  compensation  of  agents  and  employees  paid for
services rendered on behalf of the Lenders,  not reimbursed by the Borrowers and
(ii) to  indemnify  and  hold  harmless  the  Agent  and  any of its  directors,
officers,  employees or agents,  on demand, in the amount of its pro rata share,
from  and  against  any  and  all  liabilities,  obligations,  losses,  damages,
penalties,  actions,  judgments,  suits, costs, expenses or disbursements of any
kind or nature  whatsoever  which may be imposed  on,  incurred  by or  asserted
against it in its capacity as the Agent or any of them in any way relating to or
arising out of this  Agreement or any of the other Loan  Documents or any action
taken or omitted by it or any of them under this  Agreement  or any of the other
Loan  Documents,  to the  extent  not  reimbursed  by the  Borrowers;  provided,
however,  that no Lender  shall be liable to the Agent for any  portion  of such
liabilities,  obligations, losses, damages, penalties, actions, judgment, suits,
costs, expenses or disbursements  resulting from the gross negligence or willful
misconduct of the Agent or any of its directors,  officers, employees or agents.
The foregoing  agreement  shall survive the repayment of all Obligations and the
termination of this Agreement.

     With  respect to the  release of  Collateral,  Lenders  hereby  irrevocably
authorize the Agent,  at its option and in its  discretion,  to release any Lien
granted to or held by the Agent upon any property  covered by this  Agreement or
the other Loan  Documents  (i) upon  termination  of the Total  Commitments  and
payment and satisfaction of all Obligations;  (ii)  constituting  property being
sold or disposed of in compliance with the provisions of this Agreement (and the
Agent may rely in good faith conclusively on any certificate  delivered pursuant
to any of the Loan Documents,  without further inquiry);  or (iii)  constituting
property  leased to any of the Borrowers or any  subsidiary  under a lease which
has expired or been  terminated in a transaction  permitted under this Agreement
or is about to  expire  and  which  has not  been,  and is not  intended  by the
applicable  Borrower or such  subsidiary to be,  renewed or extended;  provided,
however,  that (x) the Agent  shall not be  required  to execute  any release on
terms  which,  in the Agent's  opinion,  would  expose the Agent to liability or
create any obligation or entail any  consequence  other than the release of such
Liens without recourse or warranty, and (y) such release shall not in any manner
discharge, affect or impair the Obligations or any Liens upon (or obligations of
any Loan  Party,  in respect  of),  all  interests  retained  by any Loan Party,
including  (without  limitation)  the  proceeds of any sale,  all of which shall
continue to  constitute  part of the property  covered by this  Agreement or the
Loan Documents.

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<PAGE>

     With respect to perfecting  Lenders' security interest in Collateral which,
in accordance  with Article 9 of the Uniform  Commercial  Code or any comparable
provision of any Lien perfection statute in any applicable jurisdiction,  can be
perfected only by possession,  each Lender hereby  appoints each other Lender as
its agent for the purpose of perfecting such interest.  Should any Lender (other
than the Agent)  obtain  possession  of any such  Collateral,  such Lender shall
notify the Agent,  and,  promptly upon the Agent's  request,  shall deliver such
Collateral to the Agent or in  accordance  with the Agent's  instructions.  Each
Lender agrees that it will not have any right individually to enforce or seek to
enforce this  Agreement or any Loan  Document or to realize upon any  Collateral
for the Loans, it being  understood and agreed that such rights and remedies may
be exercised only by the Agent.

     In the event that a petition  seeking  relief  under Title 11 of the United
States  Code or any other  Federal,  state or  foreign  bankruptcy,  insolvency,
liquidation  or similar law is filed by or against any Loan Party,  the Agent is
authorized  to file a proof of claim on behalf of itself and the Lenders in such
proceeding  for the total amount of  Obligations  owed by such Loan Party.  With
respect  to any such  proof of claim  which  the Agent  may  file,  each  Lender
acknowledges  that  without  reliance on such proof of claim,  such Lender shall
make its own evaluation as to whether an individual proof of claim must be filed
in respect of such  Obligations  owed to such  Lender and, if so, take the steps
necessary to prepare and timely file such individual claim.

     Each Lender  acknowledges  that it has,  independently and without reliance
upon the Agent or any other Lender and based on such  documents and  information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this  Agreement  and any other Loan Document to which such Lender is party.
Each Lender also acknowledges  that it will,  independently and without reliance
upon the Agent or any other Lender and based on such  documents and  information
as it shall deem appropriate at the time,  continue to make its own decisions in
taking or not taking action under or based upon this  Agreement,  any other Loan
Document, any related agreement or any document furnished hereunder.

     Subject to the  appointment and acceptance of a successor Agent as provided
below,  the  Agent may  resign  at any time by  notifying  the  Lenders  and the
Borrowers.  Upon any such  resignation,  the  Lenders  shall  have the  right to
appoint a successor Agent. If no successor Agent shall have been so appointed by
such Lenders and shall have accepted such  appointment  within 30 days after the
retiring Agent gives notice of its resignation,  then the retiring Agent may, on
behalf of the Lenders,  appoint a successor  Agent which shall be a bank with an

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office (or an affiliate with an office) in New York, New York, having a combined
capital  and  surplus  of at  least  $500,000,000.  Upon the  acceptance  of any
appointment  as Agent  hereunder  by a  successor  bank,  such  successor  shall
thereupon succeed to and become vested with all the rights,  powers,  privileges
and duties of the retiring Agent and the retiring Agent shall be discharged from
its duties and obligations hereunder and under each of the other Loan Documents.
The fees  payable by the  Borrowers  to a  successor  Agent shall be the same as
those  payable  to its  predecessor  unless  otherwise  agreed  as  between  the
Borrowers  and such  successor.  After any Agent's  resignation  hereunder,  the
provisions of this Article  shall  continue in effect for its benefit in respect
of any actions taken or omitted to be taken by it while it was acting as Agent.

     The  Lenders  hereby  acknowledge  that the Agent shall be under no duty to
take any discretionary action permitted to be taken by the Agent pursuant to the
provisions of this Agreement or any of the other Loan Documents  unless it shall
be requested in writing to do so by the Required  Lenders.  The Lenders  further
hereby  acknowledge  that the Agent is not  acting as the  fiduciary  of, or the
trustee for, any of the Lenders and except as expressly  set forth  herein,  the
Agent  shall not have any duty to  disclose,  and  shall  not be liable  for the
failure to disclose, any information communicated to the Agent by or relating to
the Borrowers or any of their respective subsidiaries.

X.   MANAGEMENT, COLLECTION AND STATUS OF RECEIVABLES AND OTHER COLLATERAL

     SECTION 10.01.  Collection of  Receivables;  Management of Collateral.  (a)
Upon the  occurrence  and during the  continuance of any Default or any Event of
Default,  or if Availability  shall at any time be less than $3,000,000,  and if
the Agent in its sole  discretion so requests,  the Borrowers will, at their own
cost and expense, (i) arrange for remittances on Receivables to be made directly
to  lockboxes  designated  by the Agent or in such other manner as the Agent may
direct,  and (ii)  promptly  deposit,  or cause to be  deposited,  all  payments
received  by the  Borrowers  on account of  Receivables,  whether in the form of
cash, checks,  notes, drafts, bills of exchange,  money orders or otherwise,  in
one or more accounts designated by the Agent in precisely the form received (but
with any  endorsements  of the Borrowers  necessary for deposit or  collection),
subject to withdrawal by the Agent only, as hereinafter provided, and until such
payments are deposited, such payments shall be deemed to be held in trust by the
Borrowers for and as the Lenders'  property and shall not be commingled with the
Borrowers'  other funds.  All  remittances  and payments  that are  deposited in

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accordance with the foregoing will, after one Business Day (or two Business Days
in the case of  deposits  that are made  after  2:00 p.m.,  New York  time),  be
applied by the Agent to reduce the outstanding  balance of the Revolving  Credit
Loans, subject to final collection in cash of the item deposited.

     Upon the occurrence and  continuance of an Event of Default,  the Agent may
send a notice of assignment  and/or notice of the Agent's  security  interest to
any and all Customers or any third party holding or otherwise concerned with any
of the Collateral, and thereafter the Agent shall have the sole right to collect
the  Receivables  and/or take  possession  of the  Collateral  and the books and
records  relating  thereto.  The Borrowers shall not,  without the Agent's prior
written  consent,  grant any extension of the time of payment of any Receivable,
compromise  or settle  any  Receivable  for less than the full  amount  thereof,
release,  in whole or in part,  any person or  property  liable for the  payment
thereof, or allow any credit or discount whatsoever thereon except, prior to the
occurrence and continuance of an Event of Default, as permitted by Section 10.03
hereof.

          (b) (i) Each of the  Borrowers  hereby  constitutes  the  Agent or the
Agent's designee as such Borrower's  attorney-in-fact with power to endorse such
Borrower's name upon any notes,  acceptances,  checks,  drafts,  money orders or
other evidences of payment or Collateral  that may come into its possession;  to
sign such  Borrower's  name on any  invoice  or bill of lading  relating  to any
Receivables,   drafts  against  Customers,   assignments  and  verifications  of
Receivables and notices to Customers; to send verifications of Receivables; upon
the occurrence of an Event of Default,  to notify the Postal Service authorities
to change the address for delivery of mail  addressed  to such  Borrower to such
address  as the  Agent  may  designate;  and to do all  other  acts  and  things
necessary to carry out this Agreement. All acts of said attorney or designee are
hereby ratified and approved,  and said attorney or designee shall not be liable
for any acts of  omission  or  commission,  for any error of judgment or for any
mistake of fact or law,  provided  that the Agent or its  designee  shall not be
relieved  of  liability  to the  extent  it is  determined  by a final  judicial
decision that its act, error or mistake  constituted gross negligence or willful
misconduct. This power of attorney being coupled with an interest is irrevocable
until all of the  Obligations  are paid in full and this Agreement and the Total
Commitment is terminated.

                    (ii)  The  Agent,  without  notice  to  or  consent  of  the
          Borrowers,  upon the occurrence and during the continuance of an Event
          of Default, (A) may sue upon or otherwise collect,  extend the time of
          payment of, or compromise or settle for cash credit or otherwise  upon
          any terms,  any of the Receivables or any  securities,  instruments or
          insurance  applicable thereto and/or release the obligor thereon;  (B)
          is  authorized  and  empowered  to  accept  the  return  of the  goods
          represented by any of the Receivables; and (C) shall have the right to
          receive, endorse, assign and/or deliver in its name or the name of any
          of the Borrowers any and all checks,  drafts and other instruments for
          the payment of money  relating to the  Receivables,  and each Borrower
          hereby waives notice of  presentment,  protest and  non-payment of any
          instrument so endorsed.

          (c) Nothing  herein  contained  shall be construed to  constitute  any
Borrower as agent of the Agent or any Lender for any purpose whatsoever, and the
Agent shall not be responsible or liable for any shortage, discrepancy,  damage,
loss or  destruction  of any  part of the  Collateral  wherever  the same may be
located  and  regardless  of the  cause  thereof  (except  to the  extent  it is
determined  by a final  judicial  decision that the Agent's or a Lender's act or
omission constituted gross negligence or willful misconduct).  The Agent and the
Lenders shall not, under any circumstances or in any event whatsoever,  have any
liability  for any  error or  omission  or delay  of any kind  occurring  in the
settlement,  collection or payment of any of the  Receivables  or any instrument
received in payment thereof or for any damage resulting therefrom (except to the
extent it is  determined by a final  judicial  decision that the Agent's or such
Lender's  error,  omission  or delay  constituted  gross  negligence  or willful
misconduct).  The Agent and the  Lenders do not,  by  anything  herein or in any
assignment  or otherwise,  assume any of the  Borrowers'  obligations  under any
contract or agreement  assigned to the Agent or the  Lenders,  and the Agent and
the  Lenders  shall not be  responsible  in any way for the  performance  by the
Borrowers of any of the terms and conditions thereof.

          (d) If any of the Receivables includes a charge for any tax payable to
any governmental tax authority,  the Agent is hereby authorized (but in no event
obligated)  in its  discretion  to pay the amount  thereof to the proper  taxing
authority  for  the  account  of  the  applicable  Borrower  and to  charge  the
Borrowers'  account  therefor.  The  Borrowers  shall  notify  the  Agent if any
Receivables include any tax due to any such taxing authority and, in the absence
of such  notice,  the Agent shall have the right to retain the full  proceeds of
such  Receivables and shall not be liable for any taxes that may be due from any
Borrower by reason of the sale and delivery creating such Receivables.

     SECTION 10.02. Receivables  Documentation.  The Borrowers will, in addition
to the monthly Receivables agings delivered pursuant to this Agreement,  at such
intervals  as  the  Agent  may  reasonably  require,  furnish,  or  cause  to be
furnished,  such further  schedules and/or  information as the Agent may require
relating to the Receivables,  including,  without limitation, sales invoices. In
addition,  the Borrowers shall notify the Agent of any non-compliance in respect
of the  representations,  warranties  and  covenants  contained in Section 10.03
hereof.  The items to be  provided  under this  Section  10.02 are to be in form
satisfactory to the Agent and are to be executed and delivered to the Agent from
time  to  time  solely  for  its  convenience  in  maintaining  records  of  the
Collateral;  the Borrowers' failure to give any of such items to the Agent shall
not affect,  terminate,  modify or otherwise  limit the Agent's Lien or security
interest in the Collateral.

     SECTION 10.03.  Status of Receivables and Other  Collateral.  Each Borrower
covenants,  represents and warrants  that: (a) it shall be the sole owner,  free
and clear of all  Liens  except  in favor of the  Agent or  otherwise  permitted
hereunder,  of and fully  authorized  to sell,  transfer,  pledge and/or grant a
security  interest in each and every item of said Collateral owned by it; (b) it
will not seek to qualify,  or maintain the  qualification of, a Receivable as an
Eligible  Receivable  unless such  Receivable  shall be a good and valid account
representing  an  undisputed  bona  fide  indebtedness  incurred  or  an  amount
indisputably owed by the Customer therein named, for a fixed sum as set forth in
the invoice  relating thereto with respect to an absolute sale and delivery upon
the specified terms of goods sold by a Borrower,  or work, labor and/or services
theretofore rendered by a Borrower; (c) it will not seek to qualify, or maintain
the  qualification  of, a  Receivable  as an  Eligible  Receivable  unless  such
Receivable or portion thereof which it seeks to so qualify is not subject to any
defense,  offset,  counterclaim,  discount or  allowance  (as of the time of its
creation)  except as may be stated in the invoice  relating thereto or discounts
and allowances as may be customary in such Borrower's business;  (d) none of the
transactions  underlying or giving rise to any Eligible Receivable shall violate
any applicable state or Federal laws or regulations,  and all documents relating
to any  Eligible  Receivable  shall be  legally  sufficient  under  such laws or
regulations  and shall be legally  enforceable  in  accordance  with their terms
(subject as to  enforcement  of remedies to applicable  bankruptcy,  insolvency,
reorganization,  moratorium and other similar laws affecting the  enforcement of
creditors'  rights  generally  from  time  to  time  in  effect  and to  general
principles  of  equity);  (e) it will  not  seek to  qualify,  or  maintain  the
qualification  of, a Receivable as an Eligible  Receivable unless to the best of
its  knowledge,  each  Customer,  guarantor  or  endorser  with  respect to such
Receivable  is solvent and will  continue  to be fully able to pay all  Eligible
Receivables  on which it is  obligated in full when due; (f) it will not seek to
qualify, or maintain the qualification of, a Receivable as an Eligible

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Receivable unless all documents and agreements relating to such Receivable shall
be true and correct and in all respects what they purport to be; (g) it will not
seek to qualify,  or maintain the  qualification of, a Receivable as an Eligible
Receivable unless to the best of its knowledge,  all signatures and endorsements
that appear on all documents and agreements relating to such Receivable shall be
genuine and all  signatories  and endorsers with respect thereto shall have full
capacity to contract;  (h) it shall maintain books and records pertaining to the
Collateral  in such  detail,  form and  scope as are  customary  for  businesses
similarly  situated;   (i)  it  will  not  seek  to  qualify,  or  maintain  the
qualification  of, a Receivable as an Eligible  Receivable  unless it shall have
immediately  notified the Agent as to any accounts arising out of contracts with
the United States or any  department,  agency or  instrumentality  thereof,  and
shall have executed any instruments and taken any steps required by the Agent in
order  that all monies  due or to become  due under any such  contract  shall be
assigned to the Agent and notice  thereof given to the United States  Government
under the Federal  Assignment of Claims Act; (j)it will not seek to qualify,  or
maintain the qualification of, a Receivable as an Eligible  Receivable unless it
will,  immediately upon learning thereof,  report to the Agent any material loss
or destruction  of, or  substantial  damage to, any of the  Collateral,  and any
other matters  affecting the value,  enforceability  or collectibility of any of
the  Collateral;  (k) if any  amount  payable  under or in  connection  with any
Receivable is evidenced by a promissory note or other instrument,  as such terms
are defined in the Uniform  Commercial  Code, such promissory note or instrument
shall be immediately pledged,  endorsed,  assigned and delivered to the Agent as
additional  collateral;  (l) it nor any other  Borrower  shall not  re-date  any
invoice or sale or make sales on extended  dating  beyond that  customary in the
industry;  (m) it and each other  Borrower shall conduct a physical count of its
inventory  at such  intervals as the Agent may  reasonably  request and promptly
supply the Agent with a copy of such counts accompanied by a report of the value
(based on the lower of cost (on a FIFO basis or market value) of such inventory;
and (n) it nor any other  Borrower is not nor shall it be entitled to pledge the
Lenders' credit on any purchases or for any purpose whatsoever.

     SECTION 10.04.  Monthly Statement of Account. The Agent shall render to the
Borrowers  each  month  a  statement  of the  Borrowers'  account,  which  shall
constitute  an account  stated and shall be deemed to be correct and accepted by
and be binding  upon the  Borrowers  (absent  manifest  error)  unless the Agent
receives a written  statement of the Borrowers'  exceptions within 30 days after
such statement was rendered to the Borrowers.

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     SECTION 10.05. Collateral Custodian. Upon the occurrence and continuance of
an Event of Default,  the Agent may at any time and from time to time employ and
maintain in the premises of the Borrowers a custodian  selected by the Agent who
shall have full  authority  to do all acts  necessary to protect the Agent's and
Lenders'  interests and to report to the Agent  thereon.  The  Borrowers  hereby
agree to  cooperate  with any such  custodian  and to do whatever  the Agent may
reasonably  request to preserve the Collateral.  All costs and expenses incurred
by the Agent by reason of the  employment of the  custodian  shall be charged to
the Borrowers' account and added to the Obligations.

XI.  MISCELLANEOUS

     SECTION  11.01.   Notices.   Except  in  the  case  of  notices  and  other
communications  expressly  permitted  to be given  by  telephone,  all  notices,
consents  and other  communications  provided for herein shall be in writing and
shall be delivered by hand or overnight  courier  service or mailed by certified
or registered mail or sent by telecopy addressed,

          (a) if to all or any of the Borrowers, Guarantors, or Grantors, at 512
Lehmberg  Road,  Columbus,  Mississippi  39702 (and if by U.S. Mail, to P.O. Box
2487, Columbus,  Mississippi 39704)Fax:  662-329-9170,  Attention:  Mr. Dan Lee,
Chief Financial Officer, with a copy to Arnall Golden Gregory, 2800 One Atlantic
Center,   1201  West  Peachtree  Street,   Atlanta,   Georgia   30309-3450  Fax:
404-873-8529, Attention: Stephen D. Fox, Esq.;

          (b) if to the Agent,  at The Chase  Manhattan Bank, 1166 Avenue of the
Americas, New York, New York 10036 Fax: 212-899-2929, Attention: Isolyser Credit
Executive,  with a copy to Kaye  Scholer LLP at 425 Park Avenue,  New York,  New
York 10022 Fax: 212-836-6475, Attention: Jeffrey M. Epstein, Esq.; and (c) if to
any  Lender,  at the address  (or  telecopy  number) set forth below its name in
Schedule 2.01 annexed hereto or in the  Assignment  and  Acceptance  pursuant to
which such Lender became a party hereto.

Any party hereto may change its address or telecopy number for notices and other
communications   by  notice  to  the  other  parties.   All  notices  and  other
communications  given to any party hereto in accordance  with the  provisions of
this Agreement shall be deemed to have been given on the date of receipt if hand
delivered  or three  days after  being sent by  registered  or  certified  mail,
postage prepaid, return receipt requested, if by mail, or upon receipt if by any

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telex, facsimile or other  telecommunications  equipment, in each case addressed
to such party as provided in this Section 11.01 or in accordance with the latest
unrevoked direction from such party.

     SECTION  11.02.   Survival  of  Agreement.   All   covenants,   agreements,
representations  and warranties  made by any Borrower or any subsidiary  thereof
herein and in the  certificates  or other  instruments  prepared or delivered in
connection with this Agreement,  any of the Security Documents, any Guarantee or
any other Loan  Document,  shall be  considered  to have been relied upon by the
Lenders  and  shall  survive  the  making  by the  Lenders  of the Loans and the
execution  and  delivery to the Lenders of the Notes and the  occurrence  of any
other  Credit  Event and shall  continue in full force and effect as long as the
principal  of or any  accrued  interest  on the Notes or any other fee or amount
payable  under  the  Notes or this  Agreement  or any  other  Loan  Document  is
outstanding  and  unpaid  and so  long as the  Total  Commitment  has  not  been
terminated.

     SECTION 11.03. Successors and Assigns; Participations. (a) Whenever in this
Agreement  any of the parties  hereto is referred  to, such  reference  shall be
deemed to include the successors  and assigns of such party;  and all covenants,
promises and agreements by or on behalf of any Loan Party,  any ERISA Affiliate,
any subsidiary of any thereof,  the Agent or the Lenders,  that are contained in
this  Agreement  shall  bind  and  inure  to the  benefit  of  their  respective
successors and assigns.  Without  limiting the generality of the foregoing,  the
Borrowers  specifically confirm that any Lender may at any time and from time to
time pledge or  otherwise  rant a security  interest in any Loan or any Note (or
any part  thereof)  to any  Federal  Reserve  Bank.  No  Borrower  may assign or
transfer any of its rights or obligations  hereunder without the written consent
of all the Lenders.

          (b) Each  Lender,  without the consent of the  Borrowers or the Agent,
may sell  participations  to one or more  banks or  other  entities  in all or a
portion of its rights and obligations under this Agreement  (including,  without
limitation,  all or a portion of its Revolving  Credit  Commitment and Term Loan
Commitment)  and the Loans  owing to it and  undrawn  Letters  of Credit and the
Notes held by it; provided,  however,  that (i) such Lender's  obligations under
this Agreement (including,  without limitation,  its Revolving Credit Commitment
and Term Loan Commitment) shall remain unchanged,  (ii) such Lender shall remain
solely  responsible  to the other  parties  hereto for the  performance  of such
obligations,  (iii) the banks or other entities buying  participations  shall be
entitled to the cost protection provisions contained in Sections 2.10(a) (except

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to 95 the extent  that  application  of such  Section  2.10(a) to such banks and
entities would cause the Borrowers to make duplicate payments thereunder),  2.12
and 2.16 hereof,  but only to the extent any of such Sections would be available
to the Lender which sold such participation,  and (iv) the Borrowers,  the Agent
and the other  Lenders  shall  continue  to deal solely and  directly  with such
Lender in  connection  with such  Lender's  rights  and  obligations  under this
Agreement;  provided,  further,  however, that such Lender shall retain the sole
right and responsibility to enforce the obligations of the Loan Parties relating
to the Loans, including, without limitation, the right to approve any amendment,
modification  or  waiver  of  any  provision  of  this  Agreement,   other  than
amendments, modifications or waivers with respect to decreasing any fees payable
hereunder  or the amount of  principal  or the rate of  interest  payable on the
Loans,  or extending the dates fixed for any payment of principal of or interest
on, the Loans or increasing or extending the  Commitments  or the release of all
Collateral.

          (c) Each  Lender may assign by  novation,  to any one or more banks or
other entities  without the prior written  consent of the Borrowers but with the
prior written  consent of the Agent,  all or a portion of its interests,  rights
and  obligations  under this Agreement and the other Loan Documents  (including,
without limitation, all or a portion of its Revolving Credit Commitment and Term
Loan  Commitment and the same portion of the Loans and undrawn Letters of Credit
at the time  owing to it and the Note or Notes held by it),  provided,  however,
that  (i)  each  such  assignment  shall be of a  constant,  and not a  varying,
percentage of all of the assigning  Lender's rights and  obligations  under this
Agreement,  which  shall  include  the same  percentage  interest  in the Loans,
Letters of Credit and Notes,  (ii) the amount of the Revolving Credit Commitment
and Term Loan Commitment of the assigning Lender being assigned pursuant to each
such  assignment  (determined as of the date the Assignment and Acceptance  with
respect to such  assignment  is  delivered  to the Agent)  shall be in a minimum
principal amount of $2,000,000  (unless to another Lender,  in which event there
shall be no minimum  requirement)  in the  aggregate  for the  Revolving  Credit
Commitment  and Term Loan  Commitment of such Lender,  (iii) the parties to each
such assignment  shall execute and deliver to the Agent,  for its acceptance and
recording in the Register (as defined  below),  an  Assignment  and  Acceptance,
together  with  any  Note  subject  to  such  assignment  and a  processing  and
recordation  fee of $5,000 and (iv) the  Assignee,  if it shall not be a Lender,
shall deliver to the Agent an Administrative  Questionnaire in the form provided
to such Assignee by the Agent.  Upon such  execution,  delivery,  acceptance and
recording and after receipt of the written consent of the Agent,  from and after
the effective date specified in each Assignment and Acceptance,  which effective
date shall be at least five (5) Business Days after the execution  thereof,  (x)

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the assignee  thereunder  shall be a party hereto and, to the extent provided in
such  Assignment  and  Acceptance,  have the rights and  obligations of a Lender
hereunder  and  under the  other  Loan  Documents  and (y) the  Lender  which is
assignor  thereunder  shall,  to the  extent  provided  in such  Assignment  and
Acceptance,  be released from its obligations  under this Agreement (and, in the
case of an Assignment and Acceptance covering all or the remaining portion of an
assigning  Lender's  rights and obligations  under this  Agreement,  such Lender
shall  cease to be a party  hereto  but shall  continue  to be  entitled  to the
benefits of Sections 2.10, 2.12, 2.16 and 11.04, as well as any fees accrued for
its account hereunder and not yet paid).

          (d) By executing  and  delivering an Assignment  and  Acceptance,  the
Lender which is assignor  thereunder and the assignee thereunder confirm to, and
agree with,  each other and the other parties hereto as follows:  (i) other than
the representation and warranty that it is the legal and beneficial owner of the
interest being assigned thereunder free and clear of any adverse claim, and that
its Commitment and the outstanding  balance of its Loans and  participations  in
Letters of Credit,  in each case without  giving effect to  assignments  thereof
which  have  not  become  effective,  are as set  forth in such  Assignment  and
Acceptance,  such Lender  makes no  representation  or  warranty  and assumes no
responsibility  with respect to any  statements,  warranties or  representations
made  in or in  connection  with  this  Agreement  or the  execution,  legality,
validity, enforceability,  perfection, genuineness, sufficiency or value of this
Agreement,  the other Loan Documents or any Collateral  with respect  thereto or
any other instrument or document furnished pursuant hereto or thereto; (ii) such
Lender makes no representation  or warranty and assumes no  responsibility  with
respect  to the  financial  condition  of any Loan Party or the  performance  or
observance by any Loan Party of any of their respective  obligations  under this
Agreement,  any  Guarantees  or any of the  other  Loan  Documents  or any other
instrument or document furnished pursuant hereto or thereto; (iii) such assignee
represents  and  warrants  that it is  legally  authorized  to enter  into  such
Assignment  and  Acceptance  and  confirms  that it has  received a copy of this
Agreement, any Guarantees and of the other Loan Documents,  together with copies
of financial  statements  and such other  documents  and  information  as it has
deemed  appropriate  to make its own credit  analysis and decision to enter into
such  Assignment  and  Acceptance;  (iv) such assignee will,  independently  and
without  reliance  upon the Agent,  such Lender or any other Lender and based on
such  documents  and  information  as it shall  deem  appropriate  at the  time,
continue to make its own credit  decisions in taking or not taking  action under
this Agreement; (v) such assignee appoints and authorizes the Agent to take such
action as the  Agent on its  behalf  and to  exercise  such  powers  under  this

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Agreement as are delegated to the Agent by the terms hereof,  together with such
powers as are reasonably  incidental thereto; and (vi) such assignee agrees that
it will perform in accordance with their terms all of the  obligations  which by
the terms of this Agreement are required to be performed by it as a Lender.

         (e) The Agent shall maintain at its address referred to in Section
11.01 hereof a copy of each Assignment and Acceptance delivered to it and a
register for the recordation of the names and addresses of the Lenders and the
Revolving Credit Commitment and Term Loan Commitment of, and principal amount of
the Loans owing to, each Lender from time to time (the "Register"). The entries
in the Register shall be conclusive, in the absence of manifest error, and the
Borrowers, the Agent and the Lenders may treat each person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrowers or
any Lender at any reasonable time and from time to time upon reasonable prior
notice. Effective upon the assignment of an interest hereunder, Schedules
2.01(a) and (b) shall be amended by the Agent to reflect such assignment.

          (f) Upon its receipt of an Assignment  and  Acceptance  executed by an
assigning Lender and an assignee together with any Note or Notes subject to such
assignment,   any  processing  and   recordation   fee  and,  if  required,   an
Administrative  Questionnaire  and the written consent to such  assignment,  the
Agent  shall,  if such  Assignment  and  Acceptance  has been  completed  and is
precisely in the form of Exhibit E annexed  hereto,  (i) accept such  Assignment
and Acceptance,  (ii) record the information  contained  therein in the Register
and (iii) give prompt notice  thereof to the Lenders and the  Borrowers.  Within
five (5) Business Days after receipt of such notice, the Borrowers, at their own
expense, shall execute and deliver to the Agent in exchange for each surrendered
Note or Notes a new Note or Notes to the  order of such  assignee  in an  amount
equal  to  its  portion  of  the  Term  Loan  Commitment  and  Revolving  Credit
Commitment, assumed by it pursuant to such Assignment and Acceptance and, if the
assigning  Lender has retained any Term Loan  Commitment  and  Revolving  Credit
Commitment  hereunder,  a new Note or Notes to the order of the assigning Lender
in an amount equal to the Term Loan Commitment and Revolving  Credit  Commitment
retained  by it  hereunder.  Such  new Note or  Notes  shall be in an  aggregate
principal  amount equal to the aggregate  principal  amount of such  surrendered
Note or Notes,  or, with respect to the Term Notes,  the principal amount of the
Term Notes outstanding at such time as evidenced by the Term Note or Notes shall
be  dated  the  effective  date of such  Assignment  and  Acceptance  and  shall
otherwise  be in  substantially  the form of  Exhibit  A and  Exhibit  B.  Notes
surrendered to the Borrowers shall be cancelled by the Borrowers.

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          (g)  Notwithstanding  any other provision  herein,  any Lender may, in
connection  with any  assignment  or  participation  or proposed  assignment  or
participation  pursuant  to this  Section  11.03,  disclose  to the  assignee or
participant or proposed  assignee or participant,  any  information,  including,
without limitation, any Information, relating to the Borrowers furnished to such
Lender by or on behalf  of the  Borrowers  in  connection  with this  Agreement;
provided,  however,  that prior to any such  disclosure,  each such  assignee or
participant  or proposed  assignee or  participant  shall agree to preserve  the
confidentiality  of any  confidential  Information  relating  to  the  Borrowers
received from such Lender.

     SECTION 11.04.  Expenses;  Indemnity.  (a) Each Borrower  agrees to pay all
reasonable  out-of-pocket  expenses incurred by the Agent in connection with the
preparation  of this  Agreement  and  the  other  Loan  Documents  or  with  any
amendments,  modifications,  waivers,  extensions,  renewals,  renegotiations or
"workouts" of the provisions  hereof or thereof (whether or not the transactions
hereby contemplated shall be consummated) or incurred by the Agent or any of the
Lenders  in  connection  with the  enforcement  or  protection  of its rights in
connection  with this  Agreement or any of the other Loan  Documents or with the
Loans made or the Notes or Letters of Credit issued hereunder,  or in connection
with any pending or threatened action,  proceeding, or investigation relating to
the  foregoing,   including  but  not  limited  to  the   reasonable   fees  and
disbursements  of counsel for the Agent and ongoing field  examination  expenses
and  charges,  and, in  connection  with such  enforcement  or  protection,  the
reasonable  fees and  disbursements  of counsel for the  Lenders.  The  Borrower
further  indemnifies  the Lenders from and agrees to hold them harmless  against
any documentary taxes, assessments or charges made by any governmental authority
by reason of the execution and delivery of this Agreement or the Notes.

          (b) Each  Borrower  indemnifies  the Agent and each  Lender  and their
respective directors, officers, employees and agents against, and agrees to hold
the Agent,  each Lender and each such person  harmless from, any and all losses,
claims, damages,  liabilities and related expenses, including reasonable counsel
fees and expenses, incurred by or asserted against the Lender or any such person
arising out of, in any way connected  with, or as a result of (i) the use of any
of the proceeds of the Loans,  (ii) this Agreement,  the Guarantees,  any of the
Security Documents or the other documents  contemplated hereby or thereby, (iii)
the  performance  by  the  parties  hereto  and  thereto  of  their   respective
obligations hereunder and thereunder (including but not limited to the making of

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the Total Commitment) and consummation of the transactions  contemplated  hereby
and thereby,  (iv) breach of any  representation or warranty,  or (v) any claim,
litigation,  investigation  or  proceedings  relating  to any of the  foregoing,
whether or not the  Agent,  any  Lender or any such  person is a party  thereto;
provided, however, that such indemnity shall not, as to the Agent or any Lender,
apply to any such losses,  claims,  damages,  liabilities or related expenses to
the extent that they result from the gross  negligence or willful  misconduct of
the Agent or any Lender.

          (c) Each Borrower indemnifies,  and agrees to defend and hold harmless
the  Agent  and  the  Lenders   and  their   respective   officers,   directors,
shareholders,  agents and employees  (collectively,  the "Indemnitees") from and
against any loss, cost, damage,  liability,  lien, deficiency,  fine, penalty or
expense  (including,   without  limitation,   reasonable   attorneys'  fees  and
reasonable expenses for investigation,  removal,  cleanup and remedial costs and
modification  costs incurred to permit,  continue or resume normal operations of
any property or assets or business of the Borrowers or any  subsidiary  thereof)
arising from a violation of, or failure to comply with any Environmental Law and
to remove any Lien arising  therefrom  except to the extent  caused by the gross
negligence or willful misconduct of any Indemnitee, which any of the Indemnitees
may incur or which may be claimed or recorded  against any of the Indemnitees by
any person.

          (d) The provisions of this Section 11.04 shall remain operative and in
full  force  and  effect  regardless  of the  expiration  of the  term  of  this
Agreement,  the  consummation  of  the  transactions  contemplated  hereby,  the
repayment of any of the Loans, the invalidity or unenforceability of any term or
provision of this  Agreement or the Notes,  or any  investigation  made by or on
behalf of the Agent or any  Lender.  All amounts  due under this  Section  11.04
shall be payable on written demand therefor.

     SECTION 11.05. Applicable Law. THIS AGREEMENT, THE NOTES AND THE OTHER LOAN
DOCUMENTS,  IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL  OBLIGATIONS LAW OF
THE STATE OF NEW YORK SHALL BE CONSTRUED IN ACCORDANCE  WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAWS PRINCIPLES
THEREOF  THAT  WOULD  CALL  FOR  THE  APPLICATION  OF  THE  LAWS  OF  ANY  OTHER
JURISDICTION.

          SECTION  11.06.  Right of Setoff.  If an Event of  Default  shall have
occurred and be continuing, upon the request of the Required Lenders each Lender
shall and is hereby authorized at any time and from time to time, to the fullest

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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 such  Lender  to or for the  credit  or the
account of any Borrower  against any and all of the obligations of the Borrowers
now or  hereafter  existing  under  this  Agreement  and the Notes  held by such
Lender,  irrespective  of whether or not such Lender  shall have made any demand
under  this  Agreement  or  the  Notes  and  although  such  obligations  may be
unmatured.  Each Lender  agrees to notify  promptly the Agent and the  Borrowers
after any such setoff and  application  made by such Lender,  but the failure to
give such notice shall not affect the  validity of such setoff and  application.
The rights of each Lender under this Section are in addition to other rights and
remedies  (including,  without limitation,  other rights of setoff) which may be
available to such Lender.

     SECTION  11.07.  Payments on Business  Days. (a) Should the principal of or
interest on the Notes or any fee or other amount  payable  hereunder  become due
and payable on other than a Business Day, payment in respect thereof may be made
on the next  succeeding  Business  Day  (except as  otherwise  specified  in the
definition of "Interest Period"),  and such extension of time shall in such case
be included in computing interest,  if any, in connection with such payment. (b)
All  payments  by any  Borrower  hereunder  and all  Loans  made by the  Lenders
hereunder  shall be made in lawful  money of the  United  States of  America  in
immediately  available  funds at the  office of the  Agent set forth in  Section
11.01 hereof.

     SECTION 11.08. Waivers;  Amendments.  (a) No failure or delay of any Lender
in exercising any power or right  hereunder  shall operate as a waiver  thereof,
nor shall any single or  partial  exercise  of any such  right or power,  or any
abandonment or discontinuance of steps to enforce such right or power, pre-clude
any other or further  exercise  thereof or the  exercise  of any other  right or
power.  The rights and remedies of the Lenders  hereunder are cumulative and not
exclusive of any rights or remedies which they may otherwise  have. No waiver of
any provision of this Agreement or the Notes nor consent to any departure by any
Borrower  therefrom  shall in any event be  effective  unless  the same shall be
authorized as provided in paragraph  (b) below,  and then such waiver or consent
shall be effective  only in the specific  instance and for the purpose for which
given.  No notice to or demand on any  Borrower in any case shall  entitle it to
any other or further  notice or demand in similar or other  circumstances.  Each
holder of any of the Notes shall be bound by any amendment, modification, waiver
or consent authorized as provided. herein, whether or not

                                      100
<PAGE>

such Note shall  have been  marked to  indicate  such  amendment,  modification,
waiver or consent.

          (b) Neither this  Agreement  nor any  provision  hereof may be waived,
amended or modified  except  pursuant to an agreement or  agreements  in writing
entered into by the Borrowers  and the Required  Lenders or by the Borrowers and
the Agent with the consent of the Required Lenders;  provided,  however, that no
such  agreement  shall  increase the  Revolving  Credit  Commitment or Term Loan
Commitment of any Lender without the prior written  consent of such Lender;  and
provided further, however, that no such agreement shall (i) change the principal
amount of, or extend or advance the  maturity of or the dates for the payment of
principal of or interest on, any Note or reduce the rate of interest on any Note
or decrease any fees payable pro rata to the Lenders,  (ii) change the Revolving
Credit  Commitment or Term Loan  Commitment of any Lender or amend or modify the
provisions of this Section,  Section 2.06, Section 2.13, Section 4.14 or Section
11.04  hereof or the  definition  of "Required  Lenders,"  or (iii)  release any
material  portion of Collateral,  in each case without the prior written consent
of each Lender affected  thereby and provided,  further,  however,  that no such
agreement  shall amend,  modify or otherwise  affect the rights or duties of the
Agent  under this  Agreement  or the other Loan  Documents  without  the written
consent of the Agent.  Each  Lender and holder of any Note shall be bound by any
modification,  amendment or waiver  authorized in  accordance  with this Section
regardless of whether its Notes shall be marked to make reference  thereto,  and
any  consent by any Lender or holder of a Note  pursuant to this  Section  shall
bind any person subsequently  acquiring a Note from it, whether or not such Note
shall be so marked.

          (c) In the event  that the  Borrowers  request,  with  respect to this
Agreement or any other Loan Document,  an amendment,  modification or waiver and
such amendment,  modification  or waiver would require the unanimous  consent of
all of the Lenders in accordance  with Section  11.08(b)  above,  or at any time
that the only Lenders are The Chase  Manhattan Bank and one other Lender and the
consent of both Lenders is required, and such amendment,  modification or waiver
is agreed to in writing by the Borrowers and the Required Lenders but not by all
of the Lenders,  or by The Chase  Manhattan  Bank but not the other Lender where
there are only two Lenders, as applicable,  then notwithstanding anything to the
contrary in Section  11.08(b)  above,  with the written consent of the Borrowers
and such Required  Lenders,  or The Chase  Manhattan  Bank, as  applicable,  the
Borrowers and Required Lenders or The Chase Manhattan Bank, as applicable,  may,
but shall not be obligated to, amend this  Agreement  without the consent of the
Lender or Lenders who did not agree to the proposed  amendment,  modification or

                                      101
<PAGE>

waiver (the "Minority Lenders") solely to provide for (i) the termination of the
Revolving  Credit  Commitment and Term Loan Commitment of each Minority  Lender,
(ii) the  assignment  in  accordance  with  Section  11.03 hereof to one or more
persons of each Minority Lender's  interests,  rights and obligations under this
Agreement  (including,   without  limitation,  all  of  such  Minority  Lender's
Revolving  Credit  Commitment and Term Loan Commitment as well as its portion of
all  outstanding  Loans and undrawn Letters of Credit and the Note or Notes held
by such Minority  Lender) and the other Loan Documents and/or an increase in the
Revolving  Credit  Commitment  and Term Loan  Commitment of one or more Required
Lenders, or The Chase Manhattan Bank, as applicable,  in each case so that after
giving effect thereto the Total Revolving Credit  Commitment and Total Term Loan
Commitment shall be in the same amounts as prior to the events described in this
paragraph,  (iii) the  repayment  to the  Minority  Lenders in full of all Loans
outstanding and accrued  interest  thereon at the time of the assignment  and/or
increase in  Commitments  described  in clause  (ii) above with the  proceeds of
Loans made by such persons who are to become  Lenders by  assignment or with the
proceeds  of Loans made by  Required  Lenders or The Chase  Manhattan  Bank,  as
applicable, who have agreed to increase their Revolving Credit Commitment and/or
Term Loan Commitment,  (iv) the payment to the Minority Lenders by the Borrowers
of all fees and other compensation due and owing such Minority Lenders under the
terms  of this  Agreement  and the  other  Loan  Documents  and (v)  such  other
modifications   as  the  Required  Lenders  or  The  Chase  Manhattan  Bank,  as
applicable,  and Borrowers  shall deem  necessary in order to effect the changes
specified in clauses (i) through (iv) hereof.

     SECTION 11.09. Severability. In the event any one or more of the provisions
contained in this  Agreement or in the Notes or any of the other Loan  Documents
should be held invalid,  illegal or unenforceable in any respect,  the validity,
legality and  enforceability  of the remaining  provisions  contained  herein or
therein shall not in any way be affected or impaired thereby.

     SECTION  11.10.  Entire  Agreement;  Waiver of Jury  Trial,  etc.  (a) This
Agreement, the Notes and the other Loan Documents constitute the entire contract
between the parties hereto  relative to the subject matter hereof.  Any previous
agreement  among  the  parties  hereto  with  respect  to  the  Transactions  is
superseded by this Agreement, the Notes and the other Loan Documents.  Except as
expressly provided herein or in the Notes or the Loan Documents (other than this
Agreement), nothing in this Agreement, the Notes or in the other Loan Documents,
expressed  or implied,  is  intended  to confer  upon any party,  other than the
parties hereto,  any rights,  remedies,  obligations or liabilities  under or by
reason of this Agreement, the Notes or the other Loan Documents.

                                      102
<PAGE>

          (b) EACH PARTY HERETO HEREBY WAIVES,  TO THE FULLEST EXTENT  PERMITTED
BY  APPLICABLE  LAW,  ANY  RIGHT  IT MAY  HAVE TO A TRIAL  BY JURY IN ANY  LEGAL
PROCEEDING  DIRECTLY OR INDIRECTLY  ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS  CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY
OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,  AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,  EXPRESSLY OR OTHERWISE,  THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER  AND (B)  ACKNOWLEDGES  THAT IT AND THE OTHER  PARTIES  HERETO  HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS,  THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.

          (c) Except as  prohibited  by law, each party hereto hereby waives any
right it may have to claim or recover in any litigation referred to in paragraph
(b) of  this  Section  11.10  any  special,  indirect,  exemplary,  punitive  or
consequential  damages or any damages  other than,  or in addition to, actual or
direct damages.

          (d) Each party hereto (i) certifies that no  representative,  agent or
attorney of any Lender has represented, expressly or otherwise, that such Lender
would not, in the event of litigation, seek to enforce the foregoing waivers and
(ii)  acknowledges  that it has been induced to enter into this  Agreement,  the
Notes or the other Loan Documents,  as applicable,  by, among other things,  the
mutual waivers and certifications herein.

     SECTION 11.11. Confidentiality.  The Agent and each of the Lenders agree to
keep confidential (and to cause their respective officers, directors, employees,
agents and representatives to keep confidential) all information,  materials and
documents   furnished   to  the  Agent  or  any  Lender   (the   "Information").
Notwithstanding  the foregoing,  the Agent and each Lender shall be permitted to
disclose Information (i) to such of its officers,  directors,  employees, agents
and  representatives  as need to know such  Information  in connection  with its
participation in any of the Transactions or the administration of this Agreement
or the other Loan Documents;  (ii) to the extent required by applicable laws and
regulations  or by any subpoena or similar  legal  process,  or requested by any
governmental  agency or  authority;  (iii) to the extent  such  Information  (A)
becomes publicly available other than as a result of a breach of this Agreement,
(B) becomes  available to the Agent or such Lender on a  non-confidential  basis
from a source  other  than any Loan Party or (C) was  available  to the Agent or
such Lender on a non-confidential basis prior to its

                                      103
<PAGE>

disclosure to the Agent or such Lender by any Loan Party; (iv) to the extent any
Loan shall have consented to such disclosure in writing;  (v) in connection with
the sale of any  Collateral  pursuant to the provisions of any of the other Loan
Documents; or (vi) pursuant to Section 11.03(g) hereof.

     SECTION  11.12.  Submission  to  Jurisdiction.  (a)  Any  legal  action  or
proceeding  with  respect  to this  Agreement  or the  Notes or any  other  Loan
Document  may be brought in the courts of the State of New York or of the United
States of America for the Southern  District of New York,  and, by execution and
delivery of this  Agreement,  each of the Loan Parties hereby accepts for itself
and in respect of its property, generally and unconditionally,  the jurisdiction
of the aforesaid courts.

          (b) Each of the Loan Parties hereby  irrevocably  waive, in connection
with  any  such  action  or  proceeding,  any  objection,   including,   without
limitation,  any  objection  to the  laying of venue or based on the  grounds of
forum non conveniens,  which it may now or hereafter have to the bringing of any
such action or proceeding in such respective jurisdictions. (c) Each of the Loan
Parties  hereby  irrevocably  consents  to the  service of process 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 each such person,
as the case may be,  at its  address  set forth in  Section  11.01  hereof.  (d)
Nothing  herein  shall  affect  the  right of the  Agent or any  Lender to serve
process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against any Loan Party in any other jurisdiction.

     SECTION 11.13.  Counterparts;  Facsimile  Signature.  This Agreement may be
executed  in  counterparts   (and  by  different  parties  hereto  on  different
counterparts),  each of which shall constitute an original but all of which when
taken together shall  constitute  but one contract,  and shall become  effective
when copies hereof which,  when taken  together,  bear the signatures of each of
the parties  hereto  shall be  delivered  to the Agent.  Delivery of an executed
counterpart  of a  signature  page to this  Agreement  by  telecopier  shall  be
effective as delivery of a manually executed signature page hereto.

     SECTION 11.14.  Headings and Terms Generally.  Article and Section headings
and the Table of Contents used herein are for  convenience of reference only and
are not to affect  the  construction  of, or to be taken into  consideration  in
interpreting, this Agreement.

                                      104
<PAGE>

     The  definitions  of terms herein  shall apply  equally to the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine,  feminine and neuter forms. The words
"include",  "includes"  and  "including"  shall be deemed to be  followed by the
phrase "without limitation". The word "will" shall be construed to have the same
meaning and effect as the word "shall".  Unless the context  requires  otherwise
(a) any  definition  of or  reference  to any  agreement,  instrument  or  other
document herein shall be construed as referring to such agreement, instrument or
other document as from time to time amended,  supplemented or otherwise modified
(subject to any  restrictions on such  amendments,  supplements or modifications
set forth herein),  (b) any reference herein to any person shall be construed to
include such person's successors and assigns,  (c) the words "herein",  "hereof'
and  "hereunder",  and words of similar  import,  shall be construed to refer to
this Agreement in its entirety and not to any particular  provision hereof,  (d)
all references  herein to Articles,  Sections,  Exhibits and Schedules  shall be
construed to refer to Articles and Sections of, and Exhibits and  Schedules  to,
this  Agreement and (e) the words "asset" and  "property"  shall be construed to
have the same  meaning  and  effect  and to  refer to any and all  tangible  and
intangible  assets and  properties,  including  cash,  securities,  accounts and
contract rights.

     SECTION  11.15.  Transitional   Arrangements.   (a)  This  Agreement  shall
supersede  the  Isolyser  Credit  Agreement  in its  entirety,  except  that all
Collateral  thereunder  and security  interests  granted shall  continue for the
benefit of all Obligations under this Agreement.

          (b) Upon its  receipt of its Note or Notes  hereunder  on the  Closing
Date, each Lender will promptly return to the Borrowers, marked "Cancelled", any
note of the  Borrowers  held by such  Lender  pursuant  to the  Isolyser  Credit
Agreement.

          (c) All  commitment,  agent's  and other  fees and  expenses  owing or
accruing under or in respect of the Isolyser  Credit  Agreement shall be paid in
full on the Closing Date,  and all interest owing or accruing under the Isolyser
Credit  Agreement  shall be calculated  as of the Closing Date  (prorated in the
case of any  fractional  periods),  but  shall be paid on the  initial  Interest
Payment Date under this Agreement.

                                      105
<PAGE>

XII. GUARANTEES

     Each Guarantor  unconditionally  guarantees,  as a primary  obligor and not
merely as a surety, jointly and severally with each other Guarantor, the due and
punctual payment of the principal of and interest on each of the Notes, when and
as due,  whether  at  maturity,  by  acceleration,  by notice of  prepayment  or
otherwise,  and  the due and  punctual  payment  and  performance  of all  other
Obligations.  Each Guarantor further agrees that the Obligations may be extended
and renewed,  in whole or in part,  without notice to or further assent from it,
and that it will remain bound upon its guarantee  notwithstanding  any extension
or renewal of any Obligations.

     Each Guarantor waives presentment to, demand of payment from and protest to
the Borrowers of any of the Obligations, and also waives notice of acceptance of
its  guarantee  and notice of  protest  for  nonpayment.  The  obligations  of a
Guarantor  hereunder  shall not be  affected by (a) the failure of any Lender or
the Agent to  assert  any  claim or  demand  or to  enforce  any right or remedy
against  the  Borrowers  or any other  Guarantor  under the  provisions  of this
Agreement,  the Notes or any of the other Loan  Documents or otherwise;  (b) any
rescission,  waiver, amendment or modification of any of the terms or provisions
of this Agreement,  the Notes, any of the other Loan Documents, any guarantee or
any other  agreement;  (c) the release of any security held by the Agent for the
Obligations  or any of them;  (d) the  failure  of any  Lender  or the  Agent to
exercise any right or remedy against any other Guarantor of the Obligations;  or
(e) the  failure  of any  Lender  or the  Agent to take,  register,  perfect  or
preserve any security for any of the Obligations.

     Each Guarantor further agrees that its guarantee constitutes a guarantee of
payment when due and not of collection, and waives any right to require that any
resort be had by the Agent or any  Lender to any  security  (including,  without
limitation,  any  Collateral)  held for  payment  of the  Obligations  or to any
balance of any deposit account or credit on the books of any Lender or the Agent
in favor of any Borrower or any other person.

     The  obligations  of each Guarantor  hereunder  shall not be subject to any
reduction,  limitation,  impairment or  termination  for any reason,  including,
without  limitation,  any claim of waiver,  release,  surrender,  alteration  or
compromise,  and shall not be  subject to any  defense or setoff,  counterclaim,
recoupment or termination whatsoever by reason of the invalidity,  illegality or
unenforceability   of  the  Obligations  or  otherwise.   Without  limiting  the
generality of the foregoing, the obligations of each Guarantor hereunder shall

                                      106
<PAGE>

not be discharged or impaired or otherwise  affected by the failure of the Agent
or any Lender to assert any claim or demand or to enforce any remedy  under this
Agreement,  the Notes or under any other Loan  Document,  any  guarantee  or any
other agreement,  by any waiver or modification of any provision thereof, by any
default,  failure or delay,  willful or  otherwise,  in the  performance  of the
Obligations, or by any other act or omission which may or might otherwise in any
manner or to any extent vary the risk or reduce or  extinguish  the liability of
such Guarantor or otherwise operate as a discharge of such Guarantor as a matter
of law or equity.

     Each  Guarantor  further  agrees that its  guarantee  shall be a continuing
guarantee  and  shall  stand  as a  guarantee  of full  and  final  payment  and
performance  of all  Obligations  from  time to time and  shall  continue  to be
effective or be reinstated,  as the case may be, if at any time payment,  or any
part thereof, of principal of or interest on any Obligation is rescinded or must
otherwise  be  returned  by the  Agent  or any  Lender  upon the  bankruptcy  or
reorganization of any Borrower or otherwise.

     Each  Guarantor  hereby waives and releases in favor of the Lenders and the
Agent all rights of subrogation  against or in respect of each the Borrowers and
its property and all rights of  indemnification,  contribution and reimbursement
from  each  Borrower  and its  property,  in each case in  connection  with this
guarantee and any payments made hereunder, and regardless of whether such rights
arise by operation of law,  pursuant to contract or otherwise until such time as
the Obligations have been fully and finally performed and paid.

     If, in any action to enforce this  guaranty or any  proceeding  to allow or
adjudicate  a claim  under  this  guaranty,  a court of  competent  jurisdiction
determined that  enforcement of this guaranty against any Guarantor for the full
amount of the  Obligations is not lawful under, or would be subject to avoidance
under,  Section  548 of the  United  States  Bankruptcy  Code or any  applicable
provision of comparable  state law, the liability of such  Guarantor  under this
guaranty  shall be  limited to the  maximum  amount  lawful  and not  subject to
avoidance under such law.

     Each Loan  Party  agrees  that in the event a payment  shall be made by any
Loan Party (the  "Claiming  Loan Party") under this  Agreement or any other Loan
Document or assets of such  Claiming  Loan Party  shall be sold  pursuant to any
mortgage,  security  agreement or similar  instrument  or agreement to satisfy a
claim of the  Lenders or Agent,  each other  Loan  Party (a  "Contributing  Loan
Party") shall indemnify the Claiming Loan Party in an amount equal to the amount
of such  payment or the  greater of the book value or the fair  market  value of
such assets, as the case may be, multiplied by a fraction of which the numerator

                                      107
<PAGE>

shall be the net worth of the Contributing Loan Party on the date hereof and the
denominator shall be the aggregate net worth of all the Loan Parties on the date
hereof.

XIII. CONFIRMATION OF SECURITY DOCUMENTS

     Each Loan Party hereby irrevocably and unconditionally confirms in favor of
the Agent and the Lenders that it consents to the terms and  conditions  of this
Agreement as it has been  amended and  restated as of the date hereof,  and that
each  Security  Document to which such Loan Party is a party  shall  continue in
full force and effect and is and shall  continue to be  applicable to all of the
Obligations and to this Agreement.

     IN WITNESS WHEREOF,  the Borrowers,  Guarantors,  the Agent and the Lenders
have caused this  Agreement to be duly executed by their  respective  authorized
officers as of the day and year first above written.

                                     Borrowers:

                                     ISOLYSER COMPANY, INC.

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

                                     MICROTEK MEDICAL, INC.

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

                                     Guarantors:

                                     ISOLYSER - MSI, INC., formerly
                                     known as MEDSURG INDUSTRIES, INC.

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

                                      108
<PAGE>

                                     Lenders:

                                     THE CHASE MANHATTAN BANK, as Lender

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

                                     Agent:

                                     THE CHASE MANHATTAN BANK, as Agent

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

                                      109
<PAGE>

                                                                SCHEDULE 2.01(a)

                              TERM LOAN COMMITMENTS
                              ---------------------
                                                          Approximate Percentage
                                                               of Total Term
Lender                           Term Loan Commitment         Loan Commitment
------                           --------------------         ---------------

The Chase Manhattan Bank
1166 Avenue of the Americas
New York, New York 10036
Attention: Isolyser Credit
Executive                               $0                       N/A

<PAGE>

                                                                SCHEDULE 2.01(b)

                      Schedule 2.01(b) to Credit Agreement

                          Revolving Credit Commitments
                          ----------------------------

                                                        Approximate Percentage
                                   Revolving                    of Total
Lender                        Credit Commitment      Revolving Credit Commitment
------                        -----------------      ---------------------------

The Chase Manhattan Bank
1166 Avenue of the Americas
New York, New York 10036
Attention: Isolyser Credit
Executive                       $17,500,000                    100%

<PAGE>

                                                                   SCHEDULE 2.02

                            Domestic Lending Offices
                            ------------------------

Lender                                      Domestic Lending Office
------                                      -----------------------

The Chase Manhattan Bank                    The Chase Manhattan Bank
                                            1166 Avenue of the Americas
                                            New York, NY  10036
                                            Attn:  Isolyser Credit Executive

                                      <PAGE>

                                                                   SCHEDULE 2.03

                           Eurodollar Lending Offices
                           --------------------------

Lender                                       Eurodollar Lending Office
------                                       -------------------------

The Chase Manhattan Bank                     The Chase Manhattan Bank
                                             1166 Avenue of the Americas
                                             New York, NY  10036
                                             Attn:  Isolyser Credit Executive<PAGE>

                                                                     Exhibit 4.1
                                                                     -----------

                      AMENDMENT NO. 1 TO RIGHTS AGREEMENT

     This Amendment No. 1 dated as of June 12, 2001 (this "Amendment") to the
Rights Agreement dated as of September 10, 1998 (the "Rights Agreement"),
between VIRGINIA COMMONWEALTH FINANCIAL CORPORATION, a Virginia corporation and
successor to SECOND NATIONAL FINANCIAL CORPORATION (the "Company"), and
REGISTRAR AND TRANSFER COMPANY, a New Jersey corporation (the "Rights Agent").

     WHEREAS the Company has duly authorized the execution and delivery of this
Amendment and has done all things necessary to make this Amendment a valid
agreement of the Company. This Amendment is entered into pursuant to Section 27
of the Rights Agreement.

     NOW, THEREFORE, in consideration of the promises and the mutual agreements
herein set forth, the parties hereby agree as follows:

     1.   Defined Terms.  Terms defined in the Rights Agreement and not
otherwise defined herein shall have the meanings given to them in the Rights
Agreement.

     2.   Amendment of Section 1.

          (a) Section 1(a) of the Rights Agreement is hereby amended to add the
     following sentence at the end of the definition of "Acquiring Person":

          "Notwithstanding anything in this Agreement to the contrary, neither
          VFNL or any of its respective Affiliates or Associates shall be deemed
          to be an Acquiring Person, solely by reason of the approval,
          execution, delivery or performance of the Merger Agreement or the VCFC
          Stock Option Agreement or the consummation of the transactions
          contemplated by the Merger Agreement or the VCFC Stock Option
          Agreement."

          (b) Section 1 of the Rights Agreement is further amended to insert the
     following definitions in the proper alphabetical order:

          "Merger Agreement" shall mean, collectively, the Agreement and Plan of
     Reorganization, dated June 12, 2001, between the Company and VFNL, and a
     related Plan of Merger;
<PAGE>

          "VCFC Stock Option Agreement" shall have the meaning assigned to such
     term in the Merger Agreement; and

          "VFNL" shall have the meaning assigned to such term in the Merger
     Agreement.

     3.  Effectiveness.  This Amendment shall be deemed effective as of June 12,
2001, as if executed on such date. Except as amended hereby, the Rights
Agreement shall remain in full force and effect and shall be otherwise
unaffected hereby.

     4.  Miscellaneous.  This Amendment shall be deemed to be a contract made
under the laws of the Commonwealth of Virginia and for all purposes shall be
governed by and construed in accordance with the laws of such state. This
Amendment may be executed in any number of counterparts, each of such
counterparts shall for all purposes be deemed an original and all such
counterparts shall together constitute but one and the same instrument.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and attested, all as of the day and year first above written.

                                 VIRGINIA COMMONWEALTH FINANCIAL CORPORATION

                                 By:  /s/ O. R. Barham, Jr.
                                      ---------------------
                                      O. R. Barham, Jr.
                                      President and Chief Executive Officer

                                 REGISTRAR AND TRANSFER COMPANY,
                                    as Rights Agent

                                 By:  /s/ Kenneth Brotz
                                      -----------------
                                      Kenneth Brotz
                                      Corporate Relations Administrator

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