Document:

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                                                                    Exhibit 10.1

                                                                  EXECUTION COPY

                               CREDIT AGREEMENT

                                 $75,000,000

                                     among

                          LOEHMANN'S OPERATING CO.,
                                 AS BORROWER,

                                 THE LENDERS,

                                     and

                            BANKERS TRUST COMPANY,
                                   as Agent

                        Dated as of September 29, 2000

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TABLE OF CONTENTS

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                                                                          PAGE
                                   ARTICLE 1

                                  DEFINITIONS

<S>                                                                         <C>
1.1     General Definitions..................................................6
1.2     Accounting Terms and Determinations.................................24
1.3     Other Interpretive Provisions.......................................24

                                    ARTICLE 2

                                     LOANS

2.1     Commitments; Delivery of Notes......................................25
2.2     Borrowing Mechanics.................................................26
2.3     Settlements Among Agents and the Lenders............................28
2.4     Mandatory Payment; Mandatory Reduction of Commitments...............29
2.5     Payments and Computations...........................................30
2.6     Maintenance of Account..............................................32
2.7     Statement of Account................................................32
2.8     Withholding and Other Taxes.........................................32
2.9     Affected Lenders....................................................36
2.10    Sharing of Payments.................................................37

                                    ARTICLE 3

                               LETTERS OF CREDIT

3.1     Letters of Credit...................................................38
3.2     Maximum Letter of Credit Outstandings; Final Maturities.............39
3.3     Letter of Credit Requests; Minimum Stated Amount....................39
3.4     Letter of Credit Participations.....................................40
3.5     Agreement to Repay Letter of Credit Drawings........................41
3.6     Increased Costs.....................................................42

                                    ARTICLE 4

                          INTEREST, FEES AND EXPENSES

4.1     Interest on LIBOR Rate Loans........................................43
4.2     Interest on Prime Rate Loans........................................44
4.3     Notice of Continuation and Notice of Conversion.....................44
4.4     Interest After Event of Default.....................................46

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4.5     Unused Line Fee.....................................................46
4.6     Letter of Credit Fees...............................................46
4.7     Reimbursement of Expenses...........................................47
4.8     Authorization to Charge Borrower's Account..........................47
4.9     Indemnification in Certain Events...................................47
4.10    Calculations and Determinations.....................................48

                                    ARTICLE 5

                              CONDITIONS PRECEDENT

5.1     Conditions to Initial Credit Event..................................48
5.2     Conditions to Each Credit Event.....................................49

                                    ARTICLE 6

                         REPRESENTATIONS AND WARRANTIES

6.1     Organization and Qualification......................................50
6.2     Solvency............................................................50
6.3     Rights in Collateral; Priority of Liens.............................50
6.4     No Conflict.........................................................51
6.5     Enforceability......................................................51
6.6     Consents............................................................51
6.7     Financial Data......................................................51
6.8     Locations of Officers, Records and Inventory........................51
6.9     Fictitious Business Names...........................................52
6.10    Subsidiaries........................................................52
6.11    No Judgments or Litigation..........................................52
6.12    No Defaults.........................................................52
6.13    Labor Matters.......................................................52
6.14    Compliance with Law.................................................53
6.15    ERISA...............................................................53
6.16    Intellectual Property...............................................53
6.17    Licenses and Permits................................................53
6.18    Title to Property...................................................54
6.19    Investment Company..................................................54
6.20    Borrower Taxes and Tax Returns......................................54
6.21    Status of Accounts..................................................55
6.22    Material Contracts..................................................55
6.23    Affiliate Transactions..............................................55
6.24    Accuracy and Completeness of Information............................55
6.25    Recording Taxes.....................................................55
6.26    No Adverse Change or Event..........................................56

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6.27    Additional Adverse Facts............................................56
6.28    Credit Card Agreements..............................................56
6.29    Bankruptcy Matters..................................................57

                                    ARTICLE 7

                             AFFIRMATIVE COVENANTS

7.1     Financial Information...............................................57
7.2     Inventory...........................................................60
7.3     Corporate Existence.................................................60
7.4     ERISA...............................................................60
7.5     Books and Records...................................................61
7.6     Collateral Records..................................................61
7.7     Security Interests..................................................61
7.8     Insurance; Casualty Loss............................................62
7.9     Borrower Taxes......................................................63
7.10    Compliance With Laws................................................63
7.11    Use of Proceeds.....................................................63
7.12    Fiscal Year.........................................................64
7.13    Notification of Certain Events......................................64
7.14    Intellectual Property...............................................64
7.15    Maintenance of Property.............................................65
7.16    Further Assurances..................................................65
7.17    Changes in Market...................................................65
7.18    Credit Card Agreements..............................................65

                                    ARTICLE 8

                               NEGATIVE COVENANTS

8.1     Financial Covenants.................................................66
8.2     Capital Expenditures................................................66
8.3     No Additional Indebtedness..........................................66
8.4     No Liens; Judgments.................................................67
8.5     No Sale of Assets...................................................68
8.6     No Corporate Changes................................................68
8.7     No Guaranties.......................................................69
8.8     No Restricted Payments..............................................69
8.9     No Investments......................................................69
8.10    No Affiliate Transactions...........................................70
8.11    Limitation on Transactions Under ERISA..............................70
8.12    No Additional Bank Accounts.........................................70
8.13    Material Amendments of Material Contracts...........................70

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8.14    Additional Restrictive Covenants....................................71
8.15    No Additional Subsidiaries..........................................71
8.16    Limitation on Derivative Transactions...............................71

                                    ARTICLE 9

                         EVENTS OF DEFAULT AND REMEDIES

9.1     Events of Default...................................................71
9.2     Acceleration and Cash Collateralization.............................73
9.3     Remedies............................................................74

                                   ARTICLE 10

                                   THE AGENT

10.1    Appointment of Agent................................................75
10.2    Nature of Duties of Agent...........................................75
10.3    Lack of Reliance on Agent...........................................75
10.4    Certain Rights of Agent.............................................76
10.5    Reliance by Agent...................................................76
10.6    Indemnification of Agent............................................76
10.7    Agent in its Individual Capacity....................................77
10.8    Holders of Notes....................................................77
10.9    Successor Agent.....................................................77
10.10   Collateral Matters..................................................78
10.11   Actions with Respect to Defaults....................................79
10.12   Delivery of Information.............................................79

                                   ARTICLE 11

                                 MISCELLANEOUS

11.1    SUBMISSION TO JURISDICTION; WAIVERS.................................80
11.2    JURY TRIAL..........................................................80
11.3    GOVERNING LAW.......................................................81
11.4    Delays; Partial Exercise of Remedies................................81
11.5    Notices.............................................................81
11.6    Assignability.......................................................81
11.7    Confidentiality.....................................................84
11.8    Indemnification.....................................................84
11.9    Entire Agreement; Successors and Assigns............................85
11.10   Amendments, Etc.....................................................85
11.11   Nonliability of Agent and Lenders...................................86
11.12   Counterparts........................................................86

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11.13   Effectiveness.......................................................86
11.14   Severability........................................................86
11.15   Headings Descriptive................................................86
11.16   Maximum Rate........................................................87
11.17   Right of Setoff.....................................................87
11.18   Defaulting Lender...................................................87
11.19   Rights Cumulative...................................................89
11.20   Third Party Beneficiaries...........................................89
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                                       v
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                                   ANNEXES

ANNEX I           Closing Document List
ANNEX II          Lenders; Aggregate Commitments; Lending Offices

                                   EXHIBITS

EXHIBIT A         Form of Assignment and Assumption Agreement
EXHIBIT B-1       Form of Revolving A Note
EXHIBIT B-2       Form of Revolving B Note
EXHIBIT C         Form of Notice of Borrowing
EXHIBIT C-1       Form of Notice of Continuation
EXHIBIT C-2       Form of Notice of Conversion
EXHIBIT D         Form of U.S. Tax Compliance Certificate
EXHIBIT E         Form of Compliance Certificate
EXHIBIT F         Form of Borrowing Base Certificate

                                  SCHEDULES

SCHEDULE 6.1      Jurisdictions Qualified to Do Business
SCHEDULE 6.8      Principal Places of Business; Chief Executive Offices;
                  Locations of Books and Records; Other Locations of Collateral
SCHEDULE 6.10     Subsidiaries
SCHEDULE 6.11     Outstanding Judgments; Orders; Waivers
SCHEDULE 6.14     Violations and Failures to Comply with Requirements of Law;
                  Environmental Matters
SCHEDULE 6.15     ERISA Matters
SCHEDULE 6.18     Real Estate
SCHEDULE 6.22     Material Contracts
SCHEDULE 6.23     Affiliate Transactions
SCHEDULE 6.27     Additional Adverse Facts
SCHEDULE 6.28     Credit Card Agreements
SCHEDULE 8.3(d)   Existing Indebtedness
SCHEDULE 8.4(b)   Existing Liens
SCHEDULE 8.12     Payroll and Petty Cash Accounts

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CREDIT AGREEMENT

DATED AS OF SEPTEMBER 29, 2000

         Borrower, the Lenders and Agent agree as follows (with certain terms
used herein being defined in ARTICLE 1):

                                    ARTICLE 1

                                   DEFINITIONS

      1.1   GENERAL DEFINITIONS.

                  As used herein, the following terms shall have the meanings
herein specified:

      "ACCOUNTS" means, with respect to any Person, all of such Person's
accounts, whether now existing or existing in the future, including, without
limitation, (i) all accounts receivable of such Person, including, without
limitation, all accounts of such Person created by or arising from the sales of
goods or rendition of services made by such Person under any of its trade names,
or through any of its divisions, (ii) all unpaid seller's rights of such Person
(including rescission, replevin, reclamation and stoppage in transit) relating
to the foregoing or arising therefrom, (iii) all rights of such Person to any
goods represented by any of the foregoing, including returned or repossessed
goods, (iv) all reserves and credit balances held by such Person with respect to
any such accounts receivable or account debtors and (v) all Guarantees or
collateral for any of the foregoing.

      "ACCUMULATED FUNDING DEFICIENCY" shall have the meaning ascribed to that
term in Section 302 of ERISA.

      "ADJUSTED LIBOR RATE" means, for any Interest Period, the rate obtained by
dividing (a) the LIBOR Rate for such Interest Period by (b) a percentage equal
to 1 MINUS the stated maximum rate (stated as a decimal) of all reserves, if
any, required to be maintained against "Eurocurrency liabilities" as specified
in Regulation D (or against any other category of liabilities which includes
deposits by reference to which the interest rate on LIBOR Rate Loans is
determined or any category of extensions of credit or other assets which
includes loans by a non-United States office of any Lender to United States
residents).

      "AFFILIATE" means, with respect to any Person, any Person which directly
or indirectly through one or more intermediaries Controls, is Controlled by, or
is under common Control with, such Person, or any Person who is a director or
officer of such Person or any Subsidiary of such Person.

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      "AGGREGATE COMMITMENT" of any Lender shall mean, collectively, such
Lender's Revolving A Commitment and Revolving B Commitment.

      "AGENT" means BTCo, acting in its capacity as contractual representative
for the Lenders hereunder and any successor Agent appointed pursuant to Section
10.9.

      "APPLICABLE LENDING OFFICE" means, with respect to each Lender, such
Lender's LIBOR Lending Office in the case of a LIBOR Rate Loan, and such
Lender's Domestic Lending Office in the case of a Prime Rate Loan.

      "ASSIGNMENT AND ASSUMPTION AGREEMENT" means an assignment and assumption
agreement entered into by an assigning Lender and an assignee Lender, and
accepted by Agent, in accordance with SECTION 11.6, substantially in the form of
EXHIBIT A.

      "AUDITORS" means a nationally-recognized firm of independent certified
public accountants selected by Borrower and reasonably satisfactory to Agent.
For purposes of this Credit Agreement, Borrower's current firm of independent
certified public accountants, Ernst & Young LLP, shall be deemed to be
satisfactory to Agent.

      "BANKRUPTCY CODE" means title 11 of the United States Code, 11 U.S.C.
ss.101 eT Seq., as amended.

      "BANKRUPTCY COURT" means the United States Bankruptcy Court for the
District of Delaware and any other court having competent jurisdiction over the
Debtor's Case.

      "BANKRUPTCY  DEFAULT" means a Default which is such by virtue of SECTION
9.1(e).

      "BENEFIT PLAN" means an employee pension benefit plan as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) for which the funding
requirements under Section 412 of the Code or Section 302 of ERISA is, or within
the immediately preceding six (6) years was, in whole or in part, the
responsibility of Borrower, any Subsidiary of Borrower or any ERISA Affiliate.

      "BORROWER" means Loehmann's Operating Co., a Delaware corporation.

      "BORROWER'S ACCOUNT" shall have the meaning ascribed to that term in
SECTION 2.6.

      "BORROWER TAXES" shall have the meaning ascribed to that term in SECTION
6.20(b).

      "BORROWING" means a borrowing consisting of Loans of the same Type made on
the same day by the Lenders.

      "BORROWING BASE" means:

            (a) Subject to clause (b) below, at any time, the amount equal at
such time to:

                  (i)   the Fixed Asset Sublimit, PLUS

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                  (ii) eighty five percent (85%) of the Eligible Credit Card
            Receivables, PLUS

                  (iii) seventy-five percent (75%) of the Eligible Inventory
            (such amount being the "ELIGIBLE INVENTORY AMOUNT"), MINUS

                  (iv) the amount of any reserves established by Agent pursuant
            to clause (b) below.

            (b) Agent at any time in the exercise of its Permitted Discretion
shall be entitled to (i) establish and increase or decrease reserves against
Eligible Credit Card Receivables, Eligible Inventory and the Fixed Asset
Sublimit; (ii) reduce the advance rates under clauses (a)(ii) and (iii) above or
(following any such reduction) restore such advance rates to any level equal to
or below the advance rates stated in clauses (a)(ii) and (iii) above, PROVIDED,
that, notwithstanding the foregoing, Agent shall not reduce the advance rate
with respect to Eligible Inventory under clause (a)(iii) above to the extent
that, as a result of any such reduction, the Eligible Inventory Amount is less
at any time, than the lesser at such time of (x) seventy-five percent (75%) of
the Eligible Inventory and (y) ninety percent (90%) of the lowest forced
liquidation valuation of the Eligible Inventory as set forth on the most recent
quarterly appraisal thereof obtained by Agent; (iii) impose additional
restrictions (or eliminate the same) to the standards of eligibility set forth
in the respective definitions of "Eligible Credit Card Receivables", "Eligible
Inventory" and "Fixed Asset Sublimit"; and (iv) establish and increase or
decrease a reserve in the amount of interest payable by Borrower hereunder,
including interest on Loans and Unpaid Drawings.

      "BORROWING BASE CERTIFICATE" shall have the meaning ascribed to that term
in SECTION 7.1(f).

      "BT ACCOUNT" shall have the meaning ascribed to that term in SECTION
2.5(c).

      "BTCO" means Bankers Trust Company, a New York banking corporation, acting
in its individual capacity.

      "BUSINESS DAY" means any day other than a Saturday, Sunday or legal
holiday on which commercial banks in Chicago, Illinois or New York, New York,
are generally closed or authorized to close. When used in connection with LIBOR
Rate Loans, this definition will also exclude any day on which commercial banks
are not open for dealing in Dollar deposits in the London (England, U.K.)
interbank market. When used in connection with any Letter of Credit, the term
"BUSINESS DAY" means any day other than a Saturday, Sunday or legal holiday on
which commercial banks in the domicile of the applicable Issuing Lender are
generally closed or authorized to close.

      "CAPITAL EXPENDITURES" means, of any Person for any period, the sum of (a)
all expenditures capitalized by such Person for financial statement purposes in
accordance with GAAP PLUS, without duplication, (b) the entire capitalized
principal amount of any debt (including obligations under Capitalized Leases)
assumed or incurred by such Person in connection with any such expenditures,

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provided that Capital Expenditures of any Person shall in any event include the
purchase price paid by such Person in connection with the acquisition of any
other Person (including through the purchase of a majority of the Capital
Securities or other ownership interests of such other Person or through merger
or consolidation) to the extent allocable to property, plant or equipment. For
purposes of SECTION 8.2 only, insurance proceeds and any other payments received
on account of any Casualty Loss applied to the repair or replacement of the
property affected by such Casualty Loss shall not constitute Capital
Expenditures.

      "CAPITAL LEASE" means, with respect to any Person, any lease that is
capitalized by such Person for financial statement purposes in accordance with
GAAP.

      "CAPITAL SECURITY" means, with respect to any Person, (a) any share of
capital stock of, or any membership, partnership or other unit of ownership
interest in, such Person and (b) any security convertible into, or any option,
warrant or other right to acquire, any share of capital stock of, or any
membership, partnership or other unit of ownership interest in, such Person.

      "CASH EQUIVALENTS" means (a) securities issued, guarantied or insured by
the United States or any of its agencies with maturities of not more than one
year from the date acquired, (b) certificates of deposit with maturities of not
more than one year from the date acquired issued by a U.S. federal or state
chartered commercial bank of recognized standing, which has capital and
unimpaired surplus in excess of $200,000,000 and which bank or its holding
company has a short-term commercial paper rating of at least A-1 or the
equivalent by Standard & Poor's Corporation and at least P-1 or the equivalent
by Moody's Investors Services, Inc., (c) reverse repurchase agreements with
terms of not more than seven days from the date acquired, for securities of the
type described in clause (a) above and entered into only with commercial banks
having the qualifications described in clause (b) above, (d) commercial paper,
other than commercial paper issued by Borrower or any Affiliate of Borrower,
issued by any Person incorporated under the laws of the United States or any
state thereof and rated at least A-1 or the equivalent thereof by Standard &
Poor's Corporation or at least P-1 or the equivalent thereof by Moody's
Investors Services, Inc., in each case with maturities of not more than one year
from the date acquired, and (e) investments in money market funds which have net
assets of at least $200,000,000 and at least eighty-five percent (85%) of whose
assets consist of securities and other obligations of the type described in
clauses (a) through (d) above.

      "CASUALTY LOSS" means the theft, loss, physical destruction, damage,
taking or any other similar event with respect to any property or assets of
Borrower or any of its Subsidiaries.

      "CHANGE OF CONTROL" means the occurrence of either of the following
events: (i) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), is or becomes the "beneficial owner" (as defined
in Rules 13d03 and 13d-5 under the Exchange Act, except that a Person shall be
deemed to have beneficial ownership of all shares that such Person has the right
to acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 50% of the total
outstanding Voting Stock of Holdings; (ii)

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during any period of two consecutive years, individuals who at the beginning of
such period constituted the Board of Directors of Borrower (together with any
new directors whose election to such Board of Directors or whose nomination for
election by the stockholders of Borrower, was approved by a vote of 66-2/3% of
the directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of such Board of
Directors then in office; (iii) any Credit Party consolidates with or merges
with or into any Person or conveys, transfers or leases all or substantially all
of its assets to any Person, or any corporation consolidates with or merges into
or with any Credit Party, except as otherwise expressly permitted herein; (iv)
any Credit Party is liquidated or dissolved or adopts a plan of liquidation or
dissolution; (v) Holdings ceases to beneficially, directly and of record own and
control, free and clear of all Liens, all of the issued and outstanding Capital
Securities of Parent; (vi) Parent ceases to beneficially, directly and of record
own and control, free and clear of all Liens (other than the Liens of Agent),
all of the issued and outstanding Capital Securities of each of Borrower and
Loehmann's Real Estate Holdings Company, or (vii) a Change of Control as defined
under the Senior Note Indenture.

      "CHANGE IN WORKING CAPITAL" means, with respect to any period, the amount
of Working Capital on the last day of such period, MINUS the amount of Working
Capital on the last day of the period immediately prior to such period.

      "CLOSING DATE" means the date on which the initial Credit Event occurs.

      "CLOSING DOCUMENT LIST" means the Closing Document List attached hereto as
ANNEX I.

      "CODE" means the Internal Revenue Code of 1986, as amended.

      "COLLATERAL" means any and all assets and rights and interests in or to
property of Borrower and each of the other Credit Parties, whether real or
personal, tangible or intangible, on which a Lien is granted or purported to be
granted pursuant to the Collateral Documents.

      "COLLATERAL ACCESS AGREEMENTS" means any landlord waivers, mortgagee
waivers, bailee letters and any similar acknowledgment agreements of any Person,
such as a warehouseman or processor, in possession of Inventory of Borrower, in
each case in form and substance satisfactory to Agent.

      "COLLATERAL DOCUMENTS" means the Security Agreements, the Pledge
Agreement, the Sibling Guaranty, the Parent Guaranty and all other contracts,
instruments and other documents now or hereafter executed and delivered in
connection with this Credit Agreement, pursuant to which Liens are granted or
are purported to be granted to Agent in the Collateral for the benefit of some
or all of Agent, the Lenders and the Issuing Lenders.

      "CONCENTRATION ACCOUNT" shall have the meaning ascribed to that term in
Section 2.5(b).

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      "CONCENTRATION ACCOUNT AGREEMENT" shall have the meaning ascribed to that
term in Section 2.5(b).

      "CONFIRMATION ORDER" means the order entered by the Bankruptcy Court on
September 6, 2000, confirming the Debtor's Reorganization Plan pursuant to
section 1129 of the Bankruptcy Code.

      "CONSOLIDATED ENTITY" means Parent and each of its Subsidiaries which are
such by virtue of clause (a) of the definition thereof, but shall include, in
any event, Borrower and Loehmann's Real Estate Holding Company.

      "CONSOLIDATED NET INCOME" means for any period the consolidated net income
of the Consolidated Entity for such period.

      "CONTINUATION" shall have the meaning ascribed to that term in Section
4.3.

      "CONTROL" means, with respect to any Person, the possession, directly or
indirectly, of the power to (a) vote five percent (5.00%) or more of the
securities having ordinary voting power for the election of directors of such
Person or (b) direct or cause the direction of management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise either alone or in conjunction with others or any group. The words
"CONTROLLING" and "CONTROLLED" have correlative meanings.

      "CONVERT," "CONVERSION" and "CONVERTED" each shall refer to a conversion
of Loans of one Type into Loans of another Type pursuant to Section 4.3.

      "COVERED TAXES" shall have the meaning ascribed to that term in Section
2.8(a).

      "CREDIT AGREEMENT" means this credit agreement, dated as of the date
hereof, as the same may be modified, amended, extended, restated, amended and
restated or supplemented from time to time.

      "CREDIT CARD ACKNOWLEDGMENTS" means, collectively, the agreements by
Credit Card Issuers or Credit Card Processors who are parties to Credit Card
Agreements in favor of Agent acknowledging Agent's first priority Lien on the
monies due and to become due to Borrower (including, without limitation, credits
and reserves) under the Credit Card Agreements, and agreeing to transfer all
such amounts to the BT Account, as the same may hereafter be modified, amended,
extended, exchanged, substituted, restated, amended and restated or supplemented
from time to time.

      "CREDIT CARD AGREEMENTS" means all agreements now or hereafter entered
into by Borrower with any Credit Card Issuer or any Credit Card Processor, as
the same may be modified, amended, extended, restated, amended and restated or
supplemented from time to time.

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      "CREDIT CARD ISSUER" means any person (other than Borrower) who issues or
whose members issue credit cards, including, without limitation, MasterCard or
VISA bank credit or debit cards or other bank credit or debit cards issued
through MasterCard International, Inc., Visa, U.S.A., Inc. or Visa
International, and American Express, Discover, Diners Club, Carte Blanche and
other non-bank credit or debit cards.

      "CREDIT CARD PROCESSOR" means any servicing or processing agent or any
factor or financial intermediary who facilitates, services, processes or manages
the credit authorization, billing transfer and/or payment procedures with
respect to any of Borrower's sales transactions involving credit card or debit
card purchases by customers using credit cards or debit cards issued by any
Credit Card Issuer.

      "CREDIT CARD RECEIVABLES" means collectively, (a) all present and future
rights of Borrower to payment from any Credit Card Issuer, Credit Card Processor
or other third party arising from sales of goods or rendition of services to
customers who have purchased such goods or services using a credit or debit card
and (b) all present and future rights of Borrower to payment from any Credit
Card Issuer, Credit Card Processor or other third party in connection with the
sale or transfer of Accounts arising pursuant to the sale of goods or rendition
of services to customers who have purchased such goods or services using a
credit card or a debit card, including, but not limited to, all amounts at any
time due or to become due from any Credit Card Issuer or Credit Card Processor
under the Credit Card Agreements or otherwise.

      "CREDIT DOCUMENTS" means, collectively, this Credit Agreement, the Notes,
the Letters of Credit, each of the Collateral Documents and all other documents,
agreements, instruments, opinions and certificates now or hereafter executed and
delivered in connection herewith or therewith, as the same may be modified,
amended, extended, restated, amended and restated or supplemented from time to
time.

      "CREDIT EVENT" means (a) the making of a Loan and (b) the issuance of
any Letter of Credit.

      "CREDIT FACILITY INTEREST EXPENSE" means, with respect to a period, that
portion of Interest Expense of the Borrower that is attributable to payments
required to be made under this Credit Agreement.

      "CREDIT PARTIES" means, collectively, Borrower, Holdings, Parent,
Loehmann's Real Estate Holding Company and all other Persons who at any time
hereafter become primarily or secondarily liable for any of the payment or
performance of any of the Obligations or who grant to the Agent for the ratable
benefit of the Lenders a Lien upon any property as security for the Obligations
or for any Guarantee thereof, and any other party to the Credit Documents who
act as debtors, grantors, mortgagors, pledgors, guarantors, assignors or in
other similar capacities and who grant Liens or security interests, pledge
property, or otherwise act as accommodation parties, guarantors, sureties or
otherwise.

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      "DEBTOR" means Loehmann's, Inc., a Delaware corporation., in its capacity
as debtor in possession in the Debtor's Case.

      "DEBTOR'S CASE" means the bankruptcy case initiated by the voluntary
petition for relief under chapter 11 of the Bankruptcy Code filed May 18, 1999
by Borrower in the Bankruptcy Court.

      "DEBTOR'S REORGANIZATION PLAN" means the Second Amended Plan of
Reorganization of Loehmann's, Inc. dated July 28, 2000, as it may have been
modified pursuant to the Confirmation Order.

      "DEFAULT" means an event, condition or default which with the giving of
notice, the passage of time (other than the expiration of applicable grace
periods, if any), or both, would be an Event of Default.

      "DEFAULTING LENDER" shall have the meaning ascribed to that term in
SECTION 11.18(b).

      "DEPOSITARY ACCOUNT" shall have the meaning ascribed to that term in
Section 2.5(b).

      "DEPOSITARY ACCOUNT BANK" shall have the meaning ascribed to that term in
Section 2.5(b).

      "DERIVATIVE CONTRACT" means an agreement, whether or not in writing and
including any master agreement, documenting, evidencing or relating to any
Derivative Transaction between Borrower, or any Subsidiary of Borrower, and
another Person.

      "DERIVATIVE TRANSACTION" means (a) an interest-rate derivative
transaction, including an interest-rate swap, basis swap, forward rate
agreement, interest rate option (including a cap, collar, and floor), and any
other instrument linked to interest rates that gives rise to similar credit
risks (including when-issued securities and forward deposits accepted), (b) an
exchange-rate derivative transaction, including a cross-currency interest-rate
swap, a forward foreign-exchange contract, a currency option, and any other
instrument linked to exchange rates that gives rise to similar credit risks, (c)
an equity derivative transaction, including an equity-linked swap, an
equity-linked option, a forward equity-linked contract, and any other instrument
linked to equities that gives rise to similar credit risk and (d) a commodity
(including precious metal) derivative transaction, including a commodity-linked
swap, a commodity-linked option, a forward commodity-linked contract, and any
other instrument linked to commodities that gives rise to similar credit risks.

      "DISBURSEMENT ACCOUNT" means the operating account of Borrower maintained
with the Disbursement Account Bank.

      "DISBURSEMENT ACCOUNT BANK" means Bankers Trust (Delaware), BTCo, Deutsche
Bank AG, New York Branch, or any other bank selected from time to time by Agent
and reasonably acceptable to Borrower.

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<PAGE>

      "DOL" means the United States Department of Labor and any successor
department or agency.

      "DOLLARS" and the sign "$" shall each mean freely transferable lawful
money of the United States of America.

      "DOMESTIC LENDING OFFICE" means, with respect to any Lender, the office of
such Lender specified as its "Domestic Lending Office" opposite its name on
ANNEX II, as such annex may be amended from time to time.

      "DRAWING" shall have the meaning ascribed to that term in Section 3.5(b).

      "EBITDA" means, for any fiscal period, (a) Consolidated Net Income (other
than extraordinary items) of the Consolidated Entity for such period, PLUS (b)
the amount of all Interest Expense, income tax expense, depreciation and
amortization, including amortization of any goodwill or other intangibles, for
such period, to the extent deducted in calculating Consolidated Net Income for
such period, and PLUS or MINUS (as the case may be) (c) (i) any other non-cash
charges and (ii) any gains and losses attributable to any fixed asset sales,
which have been, in the case of either clause (i) or (ii), subtracted or added,
as the case may be, in calculating Consolidated Net Income for such period, all
determined in accordance with GAAP.

      "ELIGIBLE CREDIT CARD RECEIVABLES" means Credit Card Receivables of
Borrower payable in Dollars and deemed by Agent in its Permitted Discretion to
be eligible for inclusion in the calculation of the Borrowing Base. In
determining the amount to be so included, the face amount of such Credit Card
Receivables shall be reduced by the amount of all applicable claims, credits,
charges or other allowances and by the aggregate amount of all reserves provided
for elsewhere in this Credit Agreement, including any reserves established by
Agent pursuant to the definition of the term "Borrowing Base" set forth herein,
and there shall be excluded any such Credit Card Receivables that Agent
determines to be ineligible pursuant to the definition of the term "Borrowing
Base" set forth herein.

      "ELIGIBLE INVENTORY" means Inventory of Borrower that consists of finished
goods for sale in the ordinary course, deemed by Agent in its Permitted
Discretion to be eligible for inclusion in the calculation of the Borrowing
Base. In determining the amount to be so included, the amount of such Inventory
shall be valued at the lower of cost or market on a basis consistent with
Borrower's current and historical accounting practice, and shall exclude (a) any
goods returned or rejected by Borrower's customers (other than goods which are
in merchantable condition) and goods in transit to third parties (other than to
Borrower's agents and warehouses that are not excluded pursuant to clause
(ii)(B) of the next succeeding sentence), (B) any Inventory that Agent
determines to be ineligible pursuant to the definition of the term "Borrowing
Base" set forth herein, and (C) any reserves established by Agent pursuant to
the definition of the term "Borrowing Base" set forth herein. Unless otherwise
approved in writing by Agent, no Inventory of Borrower shall be deemed Eligible
Inventory if:

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<PAGE>

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

(ii) the Inventory is not stored on property that is either (A) owned or leased
by Borrower or (B) owned or leased by a warehouseman that has contracted with
Borrower to store Inventory on such warehouseman's property (PROVIDED that, with
respect to Inventory of Borrower stored on property leased by Borrower, Borrower
shall have used commercially reasonable efforts to deliver or cause to be
delivered to Agent a Collateral Access Agreement executed by the lessor of such
property, and, with respect to Inventory of Borrower stored on property owned or
leased by a warehouseman, Borrower shall have delivered to Agent a Collateral
Access Agreement executed by such warehouseman), and provided further that
Inventory in transit to any such location shall be Eligible Inventory so long as
Borrower has, and can demonstrate, clear title to such Inventory; or

(iii) the Inventory is not subject to a valid and perfected first priority
security interest in favor of Agent except, with respect to Eligible Inventory
stored at sites described in clause (ii)(B) of this sentence, for Liens for
normal and customary warehousing charges; or

(iv) the Inventory is obsolete or slow moving (in each case as determined by
Agent) or the Inventory does not otherwise conform to the representations and
warranties contained in the Credit Agreement, the Security Agreement or any of
the other Collateral Documents; or

(v) the Inventory was not manufactured in accordance with and does not meet all
standards imposed by all Requirements of Law or by any government agency, or
department or division thereof, having regulatory authority over such goods or
their manufacture, use or sale.

      "ELIGIBLE INVENTORY AMOUNT" shall have the meaning ascribed to such term
in the definition of "Borrowing Base."

      "EQUIPMENT" means, with respect to any Person, all of such Person's
equipment, including machinery, equipment, office equipment and supplies,
computers and related equipment, furniture, furnishings, tools, tooling, jigs,
dies, fixtures, manufacturing implements, fork lifts, trucks, trailers, motor
vehicles, and other equipment.

      "ERISA" means the Employee Retirement Income Security Act of 1974, and all
final or temporary regulations promulgated thereunder and published, generally
applicable rulings entitled to precedential effect.

      "ERISA AFFILIATE" means any Person required at any relevant time to be
aggregated with Borrower or any Subsidiary of Borrower under Sections 414(b),
(c), (m) or (o) of the Code.

      "EVENT(S) OF DEFAULT" shall have the meaning ascribed to that term in
ARTICLE 9 of this Credit Agreement.

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<PAGE>

      "EXPENSES" means all present and future reasonable expenses incurred by or
on behalf of Agent, in its capacity as Agent, in connection with the Credit
Agreement, any other Credit Document or otherwise, whether incurred heretofore
or hereafter, which expenses shall include, without being limited to, the cost
of record searches, the fees and expenses of attorneys (including the allocated
cost of internal counsel) and paralegals, all customary costs and expenses
incurred by Agent in opening bank accounts and lockboxes, depositing checks,
receiving and transferring funds, and any charges imposed on Agent due to
insufficient funds of deposited checks and Agent's standard fee relating
thereto, collateral examination fees and expenses, fees and expenses of
accountants, appraisers, field examiners or other consultants, experts or
advisors employed or retained by Agent, fees and expenses incurred by Agent in
connection with the assignments of or sales of participations in the Loans,
title insurance premiums, real estate survey costs, fees and taxes relative to
the filing of financing statements, costs of preparing and recording any
Mortgages or any other Collateral Documents, all expenses and costs referred to
in Article 4 of this Credit Agreement, all other fees and expenses required to
be paid pursuant to the Fee Letter and all fees and expenses incurred in
connection with releasing Collateral and the amendment or termination of any of
the Credit Documents.

      "EXPIRATION DATE" means the earlier of (a) September 30, 2005 and (b) the
termination or reduction to zero (0) of the Total Commitments.

      "EXPOSURE" shall have the meaning ascribed to that term in the definition
of "MAJORITY LENDERS".

      "FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate
per annum equal, for each day during such period, to the weighted average of the
rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day on such
transactions received by Agent from three Federal Funds brokers of recognized
standing selected by it.

      "FEE LETTER" means that certain fee letter agreement dated September 29,
2000 between Agent and Debtor providing for the payment of certain fees in
connection with this Credit Agreement.

      "FEES" means the Unused Line Fee, the Letter of Credit Fee and the Issuing
Lender Fees, and, without duplication, all fees payable by Borrower under the
Fee Letter.

      "FINANCIAL STATEMENTS" means the consolidated and, unless otherwise
specified, consolidating balance sheets, statements of operations, statements of
cash flows and statements of changes in shareholder's equity of the Consolidated
Entity for the period specified.

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<PAGE>

      "FIXED ASSET LIBOR RATE LOANS" means, at any time, LIBOR Rate Loans, if
any, in an aggregate outstanding principal amount equal to the lesser at such
time of (a) the Fixed Asset Sublimit or (b) the aggregate then outstanding
principal amount of all LIBOR Rate Loans.

      "FIXED ASSET PRIME RATE LOANS" means, at any time, Prime Rate Loans, if
any, in an aggregate outstanding principal amount equal to the lesser at such
time of (a) the Fixed Asset Sublimit MINUS the aggregate then outstanding
principal amount of all Fixed Asset LIBOR Rate Loans or (b) the aggregate then
outstanding principal amount of all Prime Rate Loans.

      "FIXED ASSET SUBLIMIT" means an amount equal to $15,000,000; PROVIDED that
the Fixed Asset Sublimit shall be automatically and permanently reduced by an
amount equal to:

(a) on the first Business Day of each calendar quarter commencing on January 1,
2001, $750,000;

(b) on the date on which any cash payment of principal or interest (including,
without limitation, any Matching Amortization Payments) is made under the Senior
Notes, the amount of such payment;

(c) on each date on which Net Disposition Proceeds are received by or for the
account of Borrower or any Subsidiary of Borrower, an amount equal to the
greater of (i) such Net Disposition Proceeds or (ii) the highest valuation of
the fixed assets in respect of which such Net Disposition Proceeds were
received, as set forth on the most recent appraisal thereof obtained by Agent;
and

(d) on the effective date of any voluntary reduction made by Borrower in the
amount of the Fixed Asset Sublimit, the amount of such reduction.

      "FIXED CHARGE COVERAGE RATIO" means, as determined as of any date for any
period ending on such date, the ratio of (a) EBITDA for such period to (b) the
sum of the following, in each case of the Consolidated Entity, in each case as
determined in accordance with GAAP for such period, (i) income tax expense paid
in cash, (ii) Interest Expense paid in cash, (iii) Capital Expenditures (except
for Capital Expenditures financed with the proceeds of Indebtedness other than
the Loans), (iv) payments of principal on Indebtedness (other than repayments in
the ordinary course of the Loans which do not permanently reduce the Total
Commitments and scheduled reductions in the Fixed Asset Sublimit pursuant to
clause (a) of the definition thereof), and (V) any distributions made by
Borrower to Parent pursuant to Section 8.8(d) hereof.

      "FOREIGN LENDER" means any Lender or Serving Affiliate organized under the
laws of a jurisdiction outside of the United States.

      "FREE CASH FLOW" means, with respect to a period, the sum of (i) EBITDA,
MINUS Capital Expenditures, PLUS (ii) Changes in Working Capital, MINUS (iii)
Credit Facility Interest Expense, MINUS (iv) Required Amortization Payments,
MINUS (v) Senior Notes Interest Expense MINUS (vi) pro forma Matching
Amortization Payments, MINUS (vii) pro forma Tax Payments, in each case for such
period, of the Parent, Borrower and their respective Subsidiaries on a
consolidated basis, all

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<PAGE>

determined in accordance with GAAP, provided, that pro forma Matching
Amortization Payments shall not be subtracted in calculating Free Cash Flow (but
shall, in any event, be paid to Agent in accordance with the terms hereof) if
the Line of Credit exceeds Total Exposure by an amount equal to or greater than
$25,000,000 as of the point in time in which Free Cash Flow is determined.

      "FUNDING BANK" shall have the meaning ascribed to that term in
Section 4.9.

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

      "GOVERNING DOCUMENTS" means, as to any Person, the certificate or articles
of incorporation and by-laws or other organizational or governing documents of
such Person.

      "GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.

      "GUARANTY" of any Person means any Liability, contingent or otherwise, of
such Person (other than an endorsement for collection or deposit in the ordinary
course of business) (a) to pay any Liability of any other Person or to otherwise
protect, or having the practical effect of protecting, the holder of any such
Liability against loss (whether such obligation arises by virtue of such Person
being a partner of a partnership or participant in a joint venture or by
agreement to pay, to keep well, to maintain solvency, assets, level of income or
other financial condition, to purchase assets, goods, securities or services or
to take or pay, or otherwise) or (b) incurred in connection with the issuance by
a third Person of a Guaranty of any Liability of any other Person (whether such
obligation arises by agreement to reimburse or indemnify such third Person or
otherwise). The word "GUARANTEE" when used as a verb has the correlative
meaning.

      "GUARANTY AND LICENSE AGREEMENT" means that certain Guaranty and License
Agreement of even date herewith by and between Borrower and Loehmann's Real
Estate Holding Company whereby Borrower is, among other things, granted a
license to use, occupy and possess the premises subject of each of the leases
assigned to and assumed by Loehmann's Real Estate Holding Company pursuant to
Debtor's Reorganization Plan, and is authorized and directed to make rental
payments with respect to each such lease directly to the landlords thereunder.

      "HIGHEST LAWFUL RATE" means, at any time when any Obligations shall be
outstanding hereunder, the maximum non-usurious interest rate, that then may be
contracted for, taken, reserved, charged or received on the Obligations owing
under this Credit Agreement or any of the other Credit Documents, under (a) the
laws of the State of New York (or the law of any other jurisdiction whose laws
may be mandatorily applicable notwithstanding other provisions of this Credit
Agreement and the other Credit Documents) or (b) if higher, applicable federal
laws, in any case after taking into account, to the extent permitted by
applicable law, any and all relevant payments or charges under this Credit
Agreement and any other Credit Documents executed in connection herewith, and
any available exemptions, exceptions and exclusions.

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<PAGE>

      "HOLDINGS" means Loehmann's Holdings, Inc., a Delaware corporation, formed
on or before the Effective Date pursuant to Debtor's Plan of Reorganization for
purposes of owning and holding all of the issued and outstanding Capital
Securities of Parent.

      "INDEBTEDNESS" of any Person means (in each case, whether such obligation
is with full or limited recourse) (a) any obligation of such Person for borrowed
money, (b) any obligation of such Person evidenced by a bond, debenture, note or
other similar instrument, (c) any obligation of such Person to pay the deferred
purchase price of property or services, except a trade account payable that
arises in the ordinary course of business but only if and so long as the same is
payable on trade terms substantially equivalent to those generally obtainable by
Borrower in the ordinary course of its business as conducted on the Closing
Date, (d) any obligation of such Person as lessee under a Capital Lease, (e) any
Mandatorily Redeemable Obligation of such Person owned by any Person other than
such Person or a Subsidiary of such Person (the amount of such Mandatorily
Redeemable Obligation to be determined for this purpose as the higher of the
liquidation preference of and the amount payable upon redemption of such
Mandatorily Redeemable Obligation), (f) any obligation of such Person to
purchase securities or other property that arises out of or in connection with
the sale of the same or substantially similar securities or property, (g) any
non-contingent obligation of such Person to reimburse any other Person in
respect of amounts paid under a letter of credit or other Guaranty issued by
such other Person to the extent that such reimbursement obligation remains
outstanding after it becomes non-contingent, (h) any Derivative Contract or
similar obligation obligating such Person to make payments, whether periodically
or upon the happening of a contingency, except that if any agreement relating to
such obligation provides for the netting of amounts payable by and to such
Person thereunder or if any such agreement provides for the simultaneous payment
of amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount thereof, (i) any Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) a Lien on any asset of such Person
and (j) any Indebtedness of others Guaranteed by such Person.

      "INTEREST EXPENSE" means the aggregate consolidated interest expense of
the Consolidated Entity in respect of Indebtedness determined on a consolidated
basis in accordance with GAAP, including amortization of original issue discount
on any Indebtedness and of all fees payable in connection with the incurrence of
such Indebtedness (to the extent included in interest expense), the interest
portion of any deferred payment obligation and the interest component of any
Capital Lease obligations.

      "INTEREST PERIOD" means a period, commencing, in the case of the first
Interest Period applicable to a LIBOR Rate Loan, on the date of the making of,
or conversion into, such Loan, and, in the case of each subsequent, successive
Interest Period applicable thereto, on the last day of the immediately preceding
Interest Period. The duration of each such Interest Period shall be one, two,
three or six months, in each case as Borrower may, in an appropriate Notice of
Borrowing, Notice of Continuation or Notice of Conversion, select; PROVIDED that
Borrower may not select any Interest Period that ends after the Expiration Date.
Whenever the last day of any Interest Period would otherwise occur on a day
other than a Business Day, the last day of such Interest Period shall be

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<PAGE>

extended to occur on the next succeeding Business Day, PROVIDED that if such
extension would cause the last day of such Interest Period to occur in the next
following calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day.

      "INTERIM ADVANCE" means a Loan made by Agent to Borrower pursuant to
Section 2.2(b).

      "INTERIM ADVANCE PERIOD" shall have the meaning ascribed to that term in
Section 2.2(b).

      "INTERNAL REVENUE SERVICE" or "IRS" means the United States Internal
Revenue Service and any successor agency.

      "INVENTORY" means, with respect to any Person, all of such Person's
inventory, including: (a) all raw materials, work in process, parts, components,
assemblies, supplies and materials used or consumed in such Person's business;
(b) all goods, wares and merchandise, finished or unfinished, held for sale or
lease or leased or furnished or to be furnished under contracts of service; and
(c) all goods returned to or repossessed by such Person.

      "INVENTORY TURNOVER RATIO" means, as determined in accordance with GAAP as
of any date for any period ending on such date, the ratio of (a) the cost of
goods sold during such period, to (b) the value of the average total Inventory
for such period, valued at book value (as reflected on Borrower's most recent
consolidated balance sheet submitted to Agent pursuant to the terms hereof and
including adequate reserves for obsolete, slow moving or excess quantities), on
a first-in, first-out basis.

      "INVESTMENT" means, as applied to an Investment of or by any Person, all
Guaranties by such Person of any Liabilities of another Person, all expenditures
made and all Liabilities incurred (contingently or otherwise) for or in
connection with the acquisition of stock or other ownership interests or
Indebtedness of, or for loans, advances, capital contributions or similar
transfers of property to, another Person. In determining the aggregate amount of
Investments outstanding at any particular time, (a) the amount of any Investment
represented by a Guaranty shall be taken at not less than the principal amount
of the Liabilities to which such Guaranty is applicable and still outstanding;
(b) there shall be deducted in respect of each such Investment any amount
received as a return of or on capital (but only by sale, repurchase, redemption,
retirement, repayment, liquidating dividend or liquidating distribution); (c)
there shall not be deducted in respect of any Investment any amounts received as
earnings on such Investment, whether as dividends, interest or otherwise; and
(d) there shall not be deducted from the original amount of any Investment, and
such Investment shall be deemed to continue to be "outstanding" in such original
amount notwithstanding, any (i) decrease in the market value thereof or (ii)
amount thereof that may have been forgiven, released, cancelled or otherwise
nullified or held to be invalid.

      "ISSUING LENDER" means BTCo (which, for purposes of this definition, also
shall include any banking affiliate of BTCo, including but not limited to
Deutsche Bank AG, New York Branch, which has agreed to issue Letters of Credit
under this Agreement) or any other Lender acceptable to Agent.

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<PAGE>

      "ISSUING LENDER FEES" shall have the meaning ascribed to that term in
Section 4.6(a).

      "LC INTEREST RATE" means, at any time, a rate per annum equal to the rate
per annum applicable at such time to Prime Rate Loans.

      "LC SUPPORTABLE OBLIGATIONS" means (a) obligations of Borrower or any of
its Subsidiaries with respect to workers' compensation, surety bonds and other
similar statutory obligations and (b) such other obligations of Borrower or any
of its Subsidiaries as are reasonably acceptable to Agent.

      "LENDER" shall, subject to SECTION 11.18(c), mean (a) each Person listed
as a "Lender" on the signature pages hereof and (b) each Person that has been
assigned any or all of the rights and obligations of a Lender pursuant to
SECTION 11.6.

      "LETTER OF CREDIT" shall have the meaning ascribed to that term in
SECTION 3.1(a).

      "LETTER OF CREDIT FEE" shall have the meaning ascribed to that term in
SECTION 4.6(a).

      "LETTER OF CREDIT OUTSTANDINGS" means, at any time, the sum of (a) the
Stated Amounts of all outstanding Letters of Credit and (b) the aggregate amount
of all Unpaid Drawings in respect of Letters of Credit.

      "LETTER OF CREDIT REQUEST" shall have the meaning ascribed to that term in
SECTION 3.3(a).

      "LIABILITY" of any Person means (in each case, whether with full or
limited recourse) any indebtedness, liability, obligation, covenant or duty of
or binding upon, or any term or condition to be observed by or binding upon,
such Person or any of its assets, of any kind, nature or description, direct or
indirect, absolute or contingent, due or not due, contractual or tortuous,
liquidated or unliquidated, whether arising under contract, Requirement of Law,
or otherwise, whether now existing or hereafter arising, and whether for the
payment of money or the performance or non-performance of any act.

      "LIBOR LENDING OFFICE" means, with respect to any Lender, the office of
such Lender specified as its "LIBOR Lending Office" opposite its name on Annex
II (or, if no such office is specified, its Domestic Lending Office), or such
other office or Affiliate of such Lender as such Lender may from time to time
specify to Borrower and Agent.

      "LIBOR RATE" means, with respect to any Interest Period, (a) the rate per
annum for Dollar deposits approximately equal to the principal amount of the
LIBOR Rate Loans for which the LIBOR Rate is being determined and with
maturities comparable to the Interest Period for which such LIBOR Rate would
apply, which appears on the Telerate Page 3750 at approximately 11:00 A.M.,
London time, on the day that is two (2) Business Days prior to the first day of
such Interest Period and (b) if no such rate so appears on the Telerate Page
3750, an interest rate per annum equal to the rate (rounded upward to the
nearest whole multiple of one-sixteenth (1/16) of one percent (1.00%) per annum,
if such rate is not such a multiple) of the offered quotation, if any, to first
class

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<PAGE>

banks in the London (U.K.) interbank market by Deutsche Bank AG, New York
Branch, for Dollar deposits of amounts in immediately available funds comparable
to the principal amount of the LIBOR Rate Loans for which the LIBOR Rate is
being determined with maturities comparable to the Interest Period for which
such LIBOR Rate will apply as of approximately 10:00 A.M. two (2) Business Days
prior to the commencement of such Interest Period. The term "TELERATE PAGE 3750"
means the display designated as Page 3750 on the Telerate Services (or such
other page as may replace such page on such service for the purpose of
displaying a comparable rate).

      "LIBOR RATE LOAN" means a Loan that bears, or is to bear, interest by
reference to the LIBOR Rate.

      "LIEN(S)" means (a) any lien, claim, charge, pledge, security interest,
deed of trust, mortgage, other encumbrance or other arrangement having the
practical effect of the foregoing and shall include the interest of a vendor or
lessor under any conditional sale agreement, Capital Lease or other title
retention agreement and (b) in addition, in the case of any investment property,
any contract or other arrangement, express or implied, under which any Person
has the right to control (within the meaning of Article 8 of the UCC) such
investment property.

      "LINE OF CREDIT" means, at any time, an amount equal at such time to the
Total Commitments, which shall not exceed $75,000,000, as such amount may be
reduced from time to time in accordance with Section 2.5.

      "LOAN" shall mean a Revolving A Loan, Revolving B Loan and any amount
advanced by Agent or any Lender pursuant to SECTION 2.1, 2.2(b) or 2.2(e), or
any other provision of this Credit Agreement.

      "LOEHMANN'S REAL ESTATE HOLDING COMPANY" means Loehmann's Real Estate
Holdings Inc., a Delaware corporation, and a wholly owned subsidiary of Parent.

      "MAJORITY LENDERS" means, at any time, those Lenders having more than 50%
of the aggregate amount of the Total Commitments or, if the Total Commitments
shall have expired or been terminated, Lenders having more than 50% of the
aggregate amount of the outstanding Exposures; and for this purpose, a Lender's
"EXPOSURE" means the aggregate amount of such Lender's outstanding Loans PLUS
such Lender's Proportionate Share of the Letter of Credit Outstandings.

      "MANDATORILY REDEEMABLE OBLIGATION" means a Liability of Borrower or any
Subsidiary of Borrower, or a Liability of another Person Guaranteed by Borrower
or any Subsidiary of Borrower, to the extent that, in either case, it is
redeemable, payable or required to be purchased or otherwise retired or
extinguished (a) at a fixed or determinable date, whether by operation of
sinking fund or otherwise, (b) at the option of any Person other than Borrower
or such Subsidiary or (c) upon the occurrence of a condition not solely within
the control of Borrower or such Subsidiary, such as a redemption required to be
made out of future earnings.

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<PAGE>

      "MATCHING AMORTIZATION PAYMENT" means, with respect to a period, an amount
equal to any cash payment of interest made under the Senior Notes, as permitted
under Section 8.8(d) hereof.

      "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, results of operations, assets, liabilities or condition
(financial or otherwise) of the Credit Parties taken as a whole, (b) the value
of Collateral or the amount which Agent, the Lenders or any Issuing Lender would
be likely to receive (after giving consideration to delays in payment and costs
of enforcement) in the liquidation of such Collateral, (c) any Credit Party's
ability to perform its obligations under the Credit Documents to which it is a
party or (d) the rights and remedies of Agent, the Lenders or any Issuing Lender
under any Credit Document.

      "MATERIAL CONTRACT" means any contract or other arrangement (other than
the Credit Documents), whether written or oral, to which Borrower or any
Subsidiary of Borrower is a party with respect to which breaches,
non-performances, cancellations or failures to renew by any party thereto singly
or in the aggregate could reasonably be expected to have a Material Adverse
Effect, and shall include the Guaranty and License Agreement.

      "MORTGAGES" means all mortgages, deeds of trust, leasehold mortgages and
leasehold deeds of trust granted by Borrower to or for the benefit of Agent, as
the case may be.

      "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA and (a) which is, or within the immediately preceding six
(6) years was, contributed to by Borrower, any Subsidiary of Borrower or any
ERISA Affiliate or (b) with respect to which Borrower or any Subsidiary of
Borrower may incur any liability.

      "NAIC" means the National Association of Insurance Commissioners.

      "NET DISPOSITION PROCEEDS" means proceeds (including, without limitation,
but only as and when paid, any cash received by way of deferred payment pursuant
to a promissory note or similar instrument, receivable or otherwise) received by
or for the account of Borrower or any subsidiary of Borrower from the sale,
lease, transfer or other disposition (including, without limitation, as a result
of any Casualty Loss) of any fixed asset of such Person, net of (a) the costs of
such sale, lease, transfer or other disposition, including reasonable
professional fees, taxes payable as a result thereof and reasonable reserves
associated therewith; and (b) amounts applied to the repayment of Indebtedness
(other than the Obligations) secured by a Lien on the applicable fixed asset.

      "NOTES" shall mean, collectively, the Revolving A Notes and Revolving B
Notes; and "NOTE" shall mean any Revolving A Note or Revolving B Note, in each
case as the same may be modified, amended, extended, restated, amended and
restated, exchanged, substituted or supplemented from time to time.

      "NOTICE OF BORROWING" shall have the meaning ascribed to that term in
Section 2.2(a)(i).

      "NOTICE OF CONTINUATION" shall have the meaning ascribed to that term in
Section 4.3(a).

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      "NOTICE OF CONVERSION" shall have the meaning ascribed to that term in
Section 4.3(b).

      "OBLIGATIONS" means (a) the unpaid principal of and interest on the Loans
and the Notes, (b) the obligation of Borrower to pay to an Issuing Lender the
amounts of all Unpaid Drawings together with interest accrued thereon at the LC
Interest Rate, made under Letters of Credit of such Issuing Lender, (c) the
Fees, (d) the Expenses, (e) all other Liabilities of Borrower to Agent and any
Lender (in its capacity as such and not in its capacity as an Issuing Lender),
which may arise under, out of, or in connection with, the Credit Agreement, the
Notes, any other Credit Document or any other document made, delivered or given
in connection herewith or therewith, and (f) all other Liabilities of Borrower
to an Issuing Lender in respect of its Letters of Credit. As used in clauses
(a), (b) and (c) and wherever else the determination of the amount of "interest"
is relevant, "interest" shall include interest accruing on or after the filing
of, or what would have accrued but for the filing of, any petition in
bankruptcy, or the commencement of any insolvency, reorganization, or like
proceeding, relating to Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding.

      "OTHER TAXES" shall have the meaning ascribed to that term in Section
2.8(b).

      "PARENT" means Loehmann's, Inc., as the Reorganized Debtor under Debtor's
Reorganization Plan, and as owner of all of the issued and outstanding Capital
Securities of Borrower and of Loehmann's Real Estate Holding Company.

      "PARENT GUARANTY" means the Guaranty and Security Agreement of even date
herewith executed by Parent in favor of Agent, as the same may be modified,
amended, extended, exchanged, substituted, restated, amended and restated or
supplemented from time to time.

      "PARTICIPANT"  shall have the  meaning  ascribed to that term in
Section 3.4.

      "PAYMENT" shall have the meaning ascribed to that term in Section 2.10.

      "PAYMENT OFFICE" means the office of Agent located at 130 Liberty Street,
New York, New York 10006, or such other office of Agent as shall be specified by
Agent from time to time in a notice to the other parties hereto.

      "PBGC" means the Pension Benefit Guaranty Corporation and any Person
succeeding to the functions thereof.

      "PERMITTED DISCRETION" means Agent's judgment exercised in good faith
based upon its consideration of any factor which Agent believes in good faith:
(a) will or could reasonably be expected to adversely affect the value of any
real or personal property of any Credit Party, including, without limitation,
any Inventory, Accounts (including Credit Card Receivables), Equipment or
General Intangibles (including leasehold interests in real property) and other
Collateral, in each case of any Credit Party, the enforceability or priority of
Agent's Liens thereon or the amount which Agent, the Lenders or any Issuing
Lender would be likely to receive (after giving consideration to

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<PAGE>

delays in payment and costs of enforcement) in the liquidation of such
Collateral; (b) suggests that any collateral report or financial information
delivered to Agent by any Person on behalf of Borrower is incomplete, inaccurate
or misleading in any material respect; or (c) materially increases the
likelihood of a bankruptcy, reorganization or other insolvency proceeding
involving Borrower or any Subsidiary of Borrower or any of the Collateral. In
exercising such judgment, Agent may consider such factors already included in or
tested by the definition of Eligible Credit Card Receivables or Eligible
Inventory, as well as any of the following: (i) the changes in collection
history and dilution with respect to the Credit Card Receivables; (ii) changes
in demand for, and pricing of, Inventory; (iii) changes in any concentration of
risk with respect to Borrower's Credit Card Receivables and Inventory; and (iv)
any other factors that change the credit risk of lending to Borrower on the
security of Borrower's Credit Card Receivables and Inventory. The burden of
establishing lack of good faith hereunder shall be on Borrower.

      "PERMITTED INVESTMENTS" means (i) cash or Cash Equivalents, (ii)
obligations issued or guaranteed by the U.S. Government, and (iii) any other
securities or debt instruments evidencing the right to receive the principal
and/or interest thereon that Borrower may from time to time select and that are
approved by Agent.

      "PERMITTED LIENS" shall have the meaning ascribed to that term in
Section 8.4.

      "PERMITTED RESTRICTIVE COVENANT" means (a) any covenant or restriction
contained in any Credit Document, (b) any covenant or restriction binding upon
any Person at the time such Person becomes a Subsidiary of Borrower if the same
is not created in contemplation thereof, (c) any covenant or restriction of the
type contained in Section 8.4 that is contained in any contract evidencing or
providing for the creation of or concerning Indebtedness secured by any Purchase
Money Lien so long as such covenant or restriction is limited to the property
purchased therewith, or (d) any covenant or restriction that (i) is not more
burdensome than an existing Permitted Restrictive Covenant that is such by
virtue of clause (b) or (c); (ii) is contained in a contract constituting a
renewal, extension or replacement of the contract (or a similar contract with a
new counterparty entered into in the ordinary course of business) in which such
existing Permitted Restrictive Covenant is contained; and (iii) is binding only
on the Person or Persons bound by such existing Permitted Restrictive Covenant.

      "PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, entity, party or government (including any
division, agency or department thereof), and, as applicable, the successors,
heirs and assigns of each.

      "PLAN" means any employee benefit plan, program or arrangement, whether
oral or written, maintained or contributed to by Borrower, any Subsidiary of
Borrower or any ERISA Affiliate, or with respect to which Borrower, any
Subsidiary of Borrower or any ERISA Affiliate, may incur liability.

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<PAGE>

      "PLEDGE AGREEMENT" means that certain Pledge Agreement of even date
herewith made by Parent in favor of Agent with respect to the Capital Securities
of Borrower and the Capital Securities of Loehmann's Real Estate Holding
Company, as additional security for its obligations under the Parent Guaranty.

      "PRIME LENDING RATE" means the rate that Deutsche Bank AG, New York
Branch, announces from time to time in New York, New York as its prime lending
rate in the United States, as in effect from time to time. The Prime Lending
Rate is a reference rate and does not necessarily represent the lowest or best
rate actually charged to any customer. Deutsche Bank AG, New York Branch, BTCo
and each of the other Lenders may make commercial loans or other loans at rates
of interest at, above or below the Prime Lending Rate.

      "PRIME RATE LOAN" means a Loan that bears, or is to bear, interest by
reference to the Prime Lending Rate.

      "PROHIBITED TRANSACTION" means any transaction that is prohibited under
Code Section 4975 or ERISA Section 406 and not exempt under Code Section 4975 or
ERISA Section 408.

      "PROPORTIONATE SHARE" shall, subject to SECTION 11.18(c), mean, with
respect to any Lender, a fraction (expressed as a percentage), the numerator of
which shall be the amount of such Lender's Aggregate Commitment and the
denominator of which shall be the Total Commitments or, if the Total Commitments
have been terminated, a fraction the numerator of which shall be the principal
amount of such Lender's Exposure and the denominator of which shall be the
aggregate amount of all Exposures of all Lenders then outstanding.

      "PURCHASE MONEY LIENS" means Liens on any item of Equipment of Borrower
acquired after the date of this Credit Agreement to secure the purchase price
thereof, PROVIDED that: (a) each such Lien shall attach only to the property to
be acquired; (b) a description is furnished to Agent for any property so
acquired, the purchase price of which is greater than $100,000; and (c) the debt
incurred in connection with such acquisitions shall not exceed ninety percent
(90%) of the amount of the purchase price of such items of Equipment then being
financed.

      "REAL ESTATE" means all real property directly or indirectly owned or
leased by Borrower, any Subsidiary of Borrower, or Loehmann's Real Estate
Holding Company, together with all fixtures, improvements and other structures
thereon.

      "REDUCED RATE" shall have the meaning ascribed to that term in Section
2.8(e), relating to backup withholding tax.

      "REGULATION D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto.

      "REPORTABLE EVENT" means any of the events described in Section 4043 of
ERISA and the regulations thereunder except for those for which notice has been
made.

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<PAGE>

      "REQUIRED AMORTIZATION PAYMENT" means, with respect to a period, any
mandatory reduction of the Fixed Asset Sublimit (other than Matching
Amortization Payments).

      "REQUIREMENT OF LAW" means, as to any Person, the Governing Documents of
such Person, and any law, treaty, rule, regulation, direction, ordinance,
criterion or guideline or determination of a court or other Governmental
Authority or determination of an arbitrator, in each case applicable to and
binding upon such Person or any of its property or to which such Person or any
of its property is subject.

      "RESTRICTED PAYMENT" means, with respect to any Person, (a) any payment
with respect to or on account of any of the Capital Securities of such Person,
including any dividend or other distribution on, any payment of interest on or
principal of, and any payment on account of any purchase, redemption,
retirement, exchange, defeasance or conversion of, or on account of any claim
relating to or arising out of the offer, sale or purchase of, any such Capital
Securities and (b) any optional payment or prepayment on or redemption
retirement, (including by making payments to a sinking or analogous fund),
repurchase, defeasance or other acquisition of, any Indebtedness (other than
Indebtedness pursuant to this Credit Agreement). For the purposes of this
definition, a "payment" shall include the transfer of any asset or the
incurrence of any Indebtedness or other Liability (the amount of any such
payment to be the fair market value of such asset or the amount of such
obligation, respectively) but shall not include the issuance by such Person to
the holders of a class or series of a class of its Capital Securities of the
same class and, if applicable, series, other than, in the case of Borrower or
any Subsidiary of Borrower, Mandatorily Redeemable Obligations.

      "REVOLVING A COMMITMENT" of any Lender shall, subject to Section
11.18(c)(ii), mean the amount set forth below such Lender's name on Annex 1,
opposite the heading "Revolving A Commitment," as such amount may be reduced
from time to time pursuant to the terms of this Credit Agreement.

      "REVOLVING A LOAN" shall have the meaning ascribed to that term in
Section 2.1(a).

      "REVOLVING A NOTE" means a promissory note of Borrower payable to the
order of a Lender, substantially in the form of EXHIBIT B-1, evidencing the
aggregate Indebtedness of Borrower to such Lender resulting from the Revolving A
Loans made by such Lender or acquired by such Lender pursuant to SECTION 11.6.

      "REVOLVING B COMMITMENT" of any Lender shall, subject to Section
11.18(c)(ii), mean the amount set forth below such Lender's name on ANNEX I,
opposite the heading "Revolving B Commitment," as such amount may be reduced
from time to time pursuant to the terms of this Credit Agreement.

      "REVOLVING B LOAN" shall have the meaning ascribed to that term in
SECTION 2.1(b).

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<PAGE>

      "REVOLVING B NOTE" means a promissory note of Borrower payable to the
order of a Lender, substantially in the form of EXHIBIT B-2, evidencing the
aggregate Indebtedness of Borrower to such Lender resulting from the Revolving B
Loans made by such Lender or acquired by such Lender pursuant to SECTION 11.6.

      "REVOLVER PAYMENTS CASH COLLATERAL ACCOUNT" means an interest bearing cash
collateral account established by Agent and maintained by BTCo for the benefit
of Borrower with respect to which the Agent has a valid, perfected, first
priority Lien.

      "SECURITY AGREEMENTS" means those certain Security Agreements, of even
date herewith, by and among Agent and each of Borrower, Parent and Loehmann's
Real Estate Holding Company.

      "SENIOR NOTE DOCUMENTS" means, collectively, the Senior Note Indenture,
the Senior Notes and all other agreements, instruments and documents executed
and/or delivered by Parent pursuant thereto or in connection therewith, without
giving effect to any modifications, extensions or restatements thereof or
amendments or supplements thereto, except for any of the foregoing previously
consented to in writing by Agent.

      "SENIOR NOTE INDENTURE" means that certain Indenture of even date herewith
between Holdings and United States Trust Company of New York, as trustee
thereunder.

      "SENIOR NOTE INTEREST EXPENSE" means, with respect to a period, an amount
equal to that portion of the Interest Expense that is attributable to payments
required to be made under the Senior Notes.

      "SENIOR NOTES" shall have the meaning ascribed to the term "Securities" in
the Senior Note Indenture.

      "SERVING  AFFILIATE" means an Affiliate of any Lender that is an Issuing
Lender.

      "SETTLEMENT DATE" shall have the meaning ascribed to that term in Section
2.3(b)(i).

      "SIBLING GUARANTY" means that certain Guaranty of even date herewith
executed by Loehmann's Real Estate Holding Company in favor of Agent, as the
same may be modified, amended, extended, exchanged, substituted, restated,
amended and restated or supplemented from time to time.

      "STATED AMOUNT" of each Letter of Credit means, at any time, the maximum
amount available to be drawn thereunder at such time (in each case determined
without regard to whether any conditions to drawing could then be met).

      "SUBSIDIARY" means, with respect to any Person at any time (a) any other
Person the accounts of which would be consolidated with those of such first
Person in its consolidated financial statements as of such time, and (b) any
other Person, the securities of which having ordinary voting

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<PAGE>

power to elect a majority of the board of directors (or other persons having
similar functions), or other ownership interests of which ordinarily
constituting a majority voting interest, are at such time, directly or
indirectly, owned or Controlled by such first Person, or by one or more of its
Subsidiaries, or by such first Person and one or more of its Subsidiaries.

      "SUPER MAJORITY LENDERS" means, at any time, those Lenders having more
than 66-2/3% of the aggregate amount of the Total Commitments or, if the Total
Commitments shall have expired or been terminated, Lenders having more than
66-2/3% of the aggregate amount of the outstanding Exposures.

      "SYNDICATION DATE" means the earlier of (a) the date which is ninety (90)
days after the Closing Date and (b) the date on which Agent notifies Borrower
that the primary syndication has been completed, as determined by Agent in its
sole discretion, which notice shall be promptly given.

      "TAX PAYMENTS" of any Person means, for a period, all payments in cash in
respect of federal, state, local and foreign income taxes and assessments,
including all interest, penalties and additions imposed with respect to such
amounts, paid or payable by such Person and its Subsidiaries.

      "TAX TRANSFEREE" shall have the meaning ascribed to that term in
Section 2.8(a).

      "TAXES" shall have the meaning ascribed to that term in Section 2.8(a).

      "TERMINATION EVENT" means (a) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan; (b) the withdrawal of Borrower, any
Subsidiary of Borrower or any ERISA Affiliate from a Benefit Plan during a plan
year in which such entity was a "substantial employer" as defined in Section
4001(a) (2) of ERISA; (c) the providing of notice of intent to terminate a
Benefit Plan in a distress termination described in Section 4041(c) of ERISA or
the treatment of any amendment as a termination under Section 4041(e) of ERISA;
(d) the institution by the PBGC of proceedings to terminate a Benefit Plan or
Multiemployer Plan; (e) any event or condition (i) that might constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Benefit Plan or Multiemployer Plan, or (ii) that may
result in termination of a Multiemployer Plan pursuant to Section 4041A of
ERISA; or (f) the partial or complete withdrawal within the meaning of Sections
4203 and 4205 of ERISA, of Borrower, any Subsidiary of Borrower or any ERISA
Affiliate from a Multiemployer Plan.

      "TOTAL COMMITMENTS" means the sum of the Aggregate Commitments of all the
Lenders, which in the aggregate shall not exceed $75,000,000.

      "TOTAL EXPOSURE" means, at any time, an amount equal to the sum at such
time of (a) the Letter of Credit Outstandings and (b) the aggregate principal
amount of outstanding Loans.

      "TYPE" means, with respect to any Loan, whether such Loan is a LIBOR Rate
Loan or a Prime Rate Loan.

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<PAGE>

      "UCC" means the Uniform Commercial Code as in effect from time to time in
the State of New York; PROVIDED that if, with respect to any financing statement
or by reason of any provisions of law, the perfection or the effect of
perfection or non-perfection of the Liens granted to Agent pursuant to the
applicable Credit Document is governed by the Uniform Commercial Code as in
effect in a jurisdiction of the United States other than the State of New York.
"UCC" means the Uniform Commercial Code as in effect from time to time in such
other jurisdiction for purposes of the provisions of this Agreement, each Credit
Document and any financing statement relating to such perfection or effect of
perfection or non-perfection.

      "UNPAID DRAWING" shall have the meaning ascribed to that term in
Section 3.5(a).

      "UNUSED LINE FEE" shall have the meaning ascribed to that term in
Section 4.5.

      "WHOLLY OWNED SUBSIDIARY" means, with respect to any Person, any
Subsidiary of such Person all of the Capital Securities of which (except
directors' qualifying shares) are, directly or indirectly, owned or Controlled
by such Person or one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more of such Subsidiaries.

      "WORKING CAPITAL" means, with respect to the Borrower and its Subsidiaries
as of any date, the aggregate current assets (classified on the most recent
consolidated balance sheet of the Borrower and its Subsidiaries submitted
pursuant to the requirements of this Credit Agreement as current assets in
accordance with GAAP, but excluding cash and cash equivalents) minus the
aggregate amount of current liabilities (classified on Borrower's consolidated
balance sheet as aforesaid, as current liabilities in accordance with GAAP, but
excluding any current liabilities on account of unpaid principal on the Loans
and the Notes and on account of accrued Credit Facility Interest Expense).

      1.2 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise defined or
specified herein, all accounting terms used herein shall have the meanings
customarily given in accordance with GAAP, and all financial computations to be
made under this Credit Agreement shall, unless otherwise specifically provided
herein, be made in accordance with GAAP applied on a basis consistent in all
material respects with the Financial Statements delivered to Agent and the
Lenders on the Closing Date. All accounting determinations for purposes of
determining compliance with Section 8.1 shall be made in accordance with GAAP as
in effect on the Closing Date and applied on a basis consistent in all material
respects with the Financial Statements delivered to Agent and the Lenders on the
Closing Date. The Financial Statement required to be delivered hereunder from
and after the Closing Date and all financial records shall be maintained in
accordance with GAAP as in effect as of the date of the Financial Statements
delivered to Agent and the Lenders on the Closing Date or, if GAAP shall change
from the basis used in preparing the Financial Statements delivered to Agent and
the Lenders on the Closing Date, the certificates required to be delivered
pursuant to Section 7.1 demonstrating compliance with the covenants contained
herein shall include calculations setting forth the adjustments necessary to
demonstrate how Borrower is in compliance with the financial covenants based
upon GAAP as in effect on the Closing Date. If Borrower shall

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<PAGE>

change its method of inventory accounting from the first-in-first-out method to
the last-in-last-out method, all calculations necessary to determine compliance
with the covenants contained herein shall be made as if such method of inventory
accounting had not been so changed.

      1.3 Other Interpretive Provisions. Terms not otherwise defined herein
which are defined in the UCC shall have the meanings given them in the UCC. The
words "hereof," "herein" and "hereunder" and words of similar import when used
in this Credit Agreement shall refer to this Credit Agreement as a whole and not
to any particular provision of this Credit Agreement, and references to Article,
Section, Annex, Schedule, Exhibit and like references are references to this
Credit Agreement unless otherwise specified. Any item or list of items set forth
following the word "including," "include" or "includes" is set forth only for
the purpose of indicating that, regardless of whatever other items are in the
category in which such item or items are "included," such item or items are in
such category, and shall not be construed as indicating that the items in the
category are limited to such items or to items similar to such items. An Event
of Default shall "continue" or be "continuing" until such Event of Default has
been waived in accordance with Section 11.10. Except as otherwise specified
herein, all references herein (a) to any Person shall be deemed to include such
Person's successors and assigns, (b) to Borrower contained in the
representations and warranties contained herein shall be deemed to include
Parent, as Borrower's predecessor in interest, to the extent necessary to give
full effect to the intent and scope of such representations and warranties, (c)
to any Requirement of Law defined or referred to herein shall be deemed
references to such Requirement of Law or any successor Requirement of Law as the
same may have been or may be amended or supplemented from time to time and (d)
to any Credit Document or Collateral Document defined or referred to herein
shall be deemed references to such Credit Document or Collateral Document (and,
in the case of any Note or any other instrument, any instrument issued in
substitution therefor) as the terms thereof may have been or may be amended,
supplemented, waived or otherwise modified from time to time, provided that, in
the case of any Letter of Credit, any such amendment, supplement, waiver or
other modification shall have been approved in writing by Agent. Whenever the
context so requires, the neuter gender includes the masculine or feminine, the
masculine gender includes the feminine, and the singular number includes the
plural, and vice versa. Except as otherwise specified herein, all references to
the time of day shall be deemed to be to Chicago time as then in effect.

                                    ARTICLE 2

                                      LOANS

      2.1   TOTAL COMMITMENTS; DELIVERY OF NOTES.

            (a) Subject to the terms and conditions set forth in this Credit
Agreement, on and after the Closing Date and to and excluding the Expiration
Date, each of the Lenders severally agrees to make from time to time loans and
advances to Borrower hereunder (collectively, the "REVOLVING A LOANS"), which
Loans (at the option of Borrower, but subject in any event to the other terms
and provisions hereof) shall be incurred and maintained as and/or converted into
Prime

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<PAGE>

Rate Loans or LIBOR Rate Loans; PROVIDED that no Revolving A Loan shall be made
if, after giving effect to the making of such Revolving A Loan and the
simultaneous application of the proceeds thereof, (i) such Lender's
Proportionate Share of the aggregate outstanding principal amount of all
Revolving A Loans would exceed the Revolving A Commitment of such Lender, (ii)
the aggregate amount of the Exposure of such Lender would exceed the Aggregate
Commitment of such Lender or (iii) Total Exposure would exceed the lesser of (A)
the Total Commitments and (B) subject to SECTION 2.2(b), the Borrowing Base.

            (b) Subject to the terms and conditions set forth in this Credit
Agreement, on and after the Closing Date and to and excluding the Expiration
Date, each of the Lenders severally agrees to make from time to time loans and
advances to Borrower hereunder (collectively, the "REVOLVING B LOANS"), which
Loans (at the option of Borrower, but subject in any event to the other terms
and provisions hereof) shall be incurred and maintained as and/or converted into
Prime Rate Loans or LIBOR Rate Loans; PROVIDED that no Revolving B Loan shall be
made if, after giving effect to the making of such Revolving B Loan and the
simultaneous application of the proceeds thereof, (i) such Lender's
Proportionate Share of the aggregate outstanding principal amount of all
Revolving B Loans would exceed the Revolving B Commitment of such Lender, (ii)
such Lender's Exposure would exceed the Aggregate Commitment of such Lender or
(iii) Total Exposure would exceed the lesser of (A) the Total Commitments and
(B) subject to SECTION 2.2(b), the Borrowing Base.

            (c) Borrower hereby agrees to execute and deliver to each Lender,
(i) a Revolving A Note to evidence the Revolving A Loans made by such Lender to
Borrower and (ii) a Revolving B Note to evidence the Revolving B Loans made by
such Lender to Borrower.

      2.2   BORROWING MECHANICS.

            (a) Except as provided in Sections 2.2(b), 2.3(b) and 3.5(a),
Borrowings shall be made on notice from Borrower to Agent, given not later than
11:00 A.M. on the Business Day on which a proposed Borrowing consisting of Prime
Rate Loans is requested to be made and on the third Business Day prior to the
date of any proposed Borrowing consisting of LIBOR Rate Loans is requested to be
made.

                  (i) Each Notice of Borrowing shall be given by, alternatively,
            telephone, facsimile or electronic E-mail transmission, and, if by
            telephone or electronic E-mail transmission, confirmed in writing,
            substantially in the form of EXHIBIT C (the "NOTICE OF BORROWING").
            Each Notice of Borrowing shall be irrevocable by and binding on
            Borrower.

                  (ii) Borrower shall notify Agent in writing of the names of
            the officers of Borrower authorized to request Loans on behalf of
            Borrower and specifying which of those officers are also, or, if
            none are, the officers that are, authorized to direct the
            disbursement of Loans in a manner contrary to standing disbursement
            instructions,

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<PAGE>

            and shall provide Agent with a specimen signature of each such
            officer. In the absence of a specification of those officers who are
            authorized to vary standing disbursement instructions, Agent may
            assume that each officer authorized to request Loans also has such
            authority. Agent shall be entitled to rely conclusively on the
            authority of such officers' of Borrower to request Loans on behalf
            of Borrower, or to vary standing disbursement instructions, until
            Agent receives written notice to the contrary. Agent shall have no
            duty to verify the authenticity of the signature appearing on any
            Notice of Borrowing or other writing delivered pursuant to this
            Section 2.2(a) and, with respect to an oral or electronic E-mail
            request for Loans, Agent shall have no duty to verify the identity
            of any individual representing himself as one of the officers of
            Borrower authorized to make such request on behalf of Borrower.
            Neither Agent nor any of the Lenders shall incur any liability to
            Borrower as a result of (a) acting upon any telephonic or electronic
            E-mail notice referred to in this Section 2.2(a) if Agent believes
            in good faith such notice to have been given by a duly authorized
            officer of Borrower or other individual authorized to request Loans
            on behalf of Borrower or to direct the disbursement thereof in a
            manner contrary to standing disbursement instructions, or (b)
            otherwise acting in good faith under this Section 2.2(a) and an
            advance made and disbursed pursuant to any such telephonic or
            electronic E-mail notice shall be deemed to be a Loan for all
            purposes of this Credit Agreement.

                  (iii) In its Notice of Borrowing, Borrower may request one or
            more Borrowings on a single day. Each such Borrowing shall, unless
            otherwise specifically provided herein, consist entirely of Loans of
            the same Type and shall, in the case of a Borrowing of LIBOR Rate
            Loans, be in an aggregate amount for all Lenders of not less than
            $3,000,000 or an integral multiple of $1,000,000 in excess thereof.
            The right of Borrower to choose LIBOR Rate Loans is subject to the
            provisions of Section 4.3(c).

            (b) (i) In the event Borrower is unable to comply with (A) the
            Borrowing Base limitation set forth in clause (ii)(B) of the PROVISO
            to Section 2.1(a) or (B) the conditions precedent set forth in
            Section 5.2 to a Credit Event, the Lenders authorize Agent, in its
            sole discretion, to make Loans ("INTERIM ADVANCES") to Borrower
            during the period commencing on the date Agent first receives a
            Notice of Borrowing requesting an Interim Advance until the earliest
            of (1) the twentieth (20th) Business Day after such date, (2) the
            date Borrower is again able to comply with such Borrowing Base
            limitation and conditions precedent, or obtains an amendment or
            waiver with respect thereto and (3) the date the Majority Lenders
            instruct Agent, or Agent determines, to cease making Interim
            Advances (in each case, the "INTERIM ADVANCE PERIOD").

            (ii) Agent shall not, in any event, (A) make any Interim Advance
            during any Interim Advance Period if, after giving effect to such
            Interim Advance, Total

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            Exposure would exceed one hundred ten percent (110%) of Total
            Exposure on the first day of such Interim Advance Period (calculated
            without giving effect to Interim Advances made on such day) and (B)
            make any Interim Advance if, after giving effect to such Interim
            Advance, Total Exposure would exceed the Line of Credit.

            (iii) All amounts received by Agent during an Interim Advance Period
            on account of the Obligations, whether in the form of payments from
            Borrower, collections on the Collateral or otherwise, shall, so long
            as any Interim Advances made during such Interim Advance Period are
            outstanding, be applied by Agent, FIRST, to the repayment of such
            Interim Advances and, SECOND, in accordance with Section 2.5(c).

            (c) The failure of any Lender to make the Loan to be made by it as
part of any Borrowing shall not relieve any other Lender of its obligation, if
any, hereunder to make its Loan on the date of such Borrowing, but no Lender
shall be responsible for the failure of any other Lender to make the Loan to be
made by such other Lender on the date of any Borrowing.

                        (d) In addition to being evidenced, as provided in
            Section 2.6, by Borrower's Account, each Lender's Loans and
            Borrower's obligations to repay such Loans with interest in
            accordance with the terms of this Credit Agreement shall be
            evidenced by this Credit Agreement, the records of such Lender and
            such Lender's Note. The records of each Lender shall be PRIMA FACIE
            evidence of such Lender's Loans and accrued interest thereon and of
            all payments made in respect thereof.

                        (e) Each Lender shall be entitled to earn interest at
            the then applicable rate of interest, calculated in accordance with
            Article 4, on outstanding Loans which it has funded to Agent;
            PROVIDED that in the case of interest accrued but unpaid at the time
            of a Bankruptcy Default and interest accruing thereafter and during
            a Bankruptcy Default, such Lender shall be entitled to receive only
            its Proportionate Share of amounts actually received by Agent in
            respect of such interest; FURTHER PROVIDED that if any amount
            received by Agent in respect of such interest and distributed by it
            is thereafter recovered from Agent, such Lender shall, upon request,
            repay to Agent its Proportionate Share of the amount so recovered to
            the extent received by it, but without interest (unless Agent is
            required to pay interest on the amount recovered, in which case such
            Lender shall be required to pay interest at a like rate).

                        (f) Notwithstanding the obligation of Borrower to send
            written confirmation of a Notice of Borrowing made by telephone or
            electronic E-mail transmission if and when requested by Agent, in
            the event that Agent agrees to accept a Notice of Borrowing made by
            telephone or electronic E-mail transmission, such Notice of
            Borrowing shall be binding on Borrower whether or not written
            confirmation is sent by Borrower or requested by Agent. Agent may
            act prior to the receipt of any requested written confirmation,
            without any liability whatsoever,

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            based upon telephonic or electronic E-mail notice believed by Agent
            in good faith to be from Borrower or its agents. Agent's records of
            the terms of any telephonic or electronic E-mail transmission
            Notices of Borrowing shall be conclusive on Borrower and the Lenders
            in the absence of gross negligence or willful misconduct on the part
            of Agent in connection therewith.

      2.3   SETTLEMENTS AMONG AGENTS AND THE LENDERS.

            (a) Except as provided in Section 2.3(b), Agent shall give to each
Lender prompt notice of each Notice of Borrowing by telecopy or facsimile
transmission. No later than 3:00 P.M. on the date of receipt of each Notice of
Borrowing (unless such Notice of Borrowing specifies the Closing Date as the
date of Borrowing, in which case no later than 11:00 A.M. on the Closing Date),
each Lender will make available for the account of its Applicable Lending
Office, to Agent at the address of Agent set forth on Annex I, in immediately
available funds, its Proportionate Share of such Borrowing requested to be made.
Unless Agent shall have been notified by any Lender prior to the date of
Borrowing that such Lender does not intend to make available to Agent its
portion of the Borrowing to be made on such date, Agent may assume that such
Lender will make such amount available to Agent on the Settlement Date and
Agent, in reliance upon such assumption, may but shall not be obligated to make
available the amount of the Borrowing to be provided by such Lender. If and to
the extent such Lender shall not have so made available to Agent its
Proportionate Share on such date and Agent shall have so made available to
Borrower a corresponding amount on behalf of such Lender, Agent may recover such
amount on demand from such Lender in accordance with Section 11.18. If such
Lender does not pay such corresponding amount promptly upon Agent's demand
therefor, Agent may promptly notify Borrower and Borrower shall immediately
repay such corresponding amount to Agent together with accrued interest thereon
at the applicable rate or rates provided in Sections 4.1, 4.2, and 4.4.

                        (b) Unless the Majority Lenders have instructed Agent to
            the contrary, Agent on behalf of the Lenders may but shall not be
            obligated to make Prime Rate Loans under Section 2.2 without prior
            notice of the proposed Borrowing to the Lenders, subject to the
            following settlement arrangements:

                  (i) The amount of each Lender's Proportionate Share of Loans
            shall be computed weekly (or more frequently in Agent's discretion)
            and shall be adjusted upward or downward on the basis of the amount
            of outstanding Loans as of 5:00 P.M. on the last Business Day of the
            period specified by Agent (such date, the "SETTLEMENT DATE"). Agent
            shall deliver to each of the Lenders promptly after the Settlement
            Date a summary statement of the amount of outstanding Loans for such
            period. The Lenders shall transfer to Agent, or, subject to SECTION
            11.18(c), Agent shall transfer to the Lenders, such amounts as are
            necessary so that (after giving effect to all such transfers) the
            amount of Loans made by each Lender shall be equal to such Lender's
            Proportionate Share of the aggregate amount of Loans outstanding as
            of such Settlement Date. During a Bankruptcy Default, amounts
            required to be

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<PAGE>

            transferred by the Lenders to Agent shall, instead of constituting
            Loans to Borrower, be in the form of participations purchased by the
            Lenders in the outstanding Loans of BTCo. If the summary statement
            is received by the Lenders prior to 12:00 noon on any Business Day,
            each Lender shall make the transfers described above in immediately
            available funds no later than 3:00 P.M. on the day such summary
            statement was received; and if such summary statement is received by
            the Lenders after 12:00 noon on such day, each Lender shall make
            such transfers no later than 3:00 P.M. on the next succeeding
            Business Day. The obligation of each of the Lenders to transfer such
            funds shall be irrevocable and unconditional and without recourse to
            or warranty by Agent. Each of Agent and the Lenders agrees to mark
            its books and records on the Settlement Date to show at all times
            the dollar amount of its Proportionate Share of the outstanding
            Loans.

                  (ii) To the extent that the settlement described above shall
            not yet have occurred, upon repayment of Loans by Borrower, Agent
            may first apply such amounts repaid directly to the amounts made
            available by Agent pursuant to this Section 2.3(b).

                  (iii) Because Agent on behalf of the Lenders may be advancing
            and/or may be repaid Loans prior to the time when the Lenders will
            actually advance and/or be repaid Loans, interest with respect to
            Loans shall be allocated by Agent to each Lender and Agent in
            accordance with the amount of Loans actually advanced by and repaid
            to each Lender and Agent and shall accrue from and including the
            date such Loans are so advanced to but excluding the date such Loans
            are either repaid by Borrower in accordance with Section 2.4 or
            actually settled by the applicable Lender as described in this
            Section 2.3(b).

      2.4   MANDATORY PAYMENT; MANDATORY REDUCTION OF TOTAL COMMITMENTS.

            (a) Except during an Interim Advance Period, the amount by which
Total Exposure exceeds the Borrowing Base at any time shall be immediately due
and payable without the necessity of any notice or demand. Repayments of such
excess amounts shall be applied, FIRST, to the repayment of Revolving A Loans,
SECOND, to the payment of outstanding reimbursement obligations with respect to
Letters of Credit, THIRD, to the repayment of Revolving B Loans, and FOURTH, to
the securing, with cash or Cash Equivalents as provided in the second paragraph
of SECTION 9.2 (but without the requirement of any demand provided for in such
paragraph), of the Letter of Credit Outstandings (in each case to the extent the
same are such by virtue of CLAUSE (a) of the definition thereof)

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<PAGE>

                        (b) (i) On the Expiration Date, the Aggregate Commitment
            of each Lender shall automatically reduce to zero and may not be
            reinstated.

                  (ii) Borrower may reduce or terminate the Line of Credit at
any time and from time to time in whole or in part, without penalty or premium,
by reducing or terminating the Total Commitment, any such reduction or
termination to be pro rata on the amounts at the time of the Total Commitments
and, in the case of any such reduction, to be applied, FIRST, pro rata on the
amounts of the Revolving A Commitments and, SECOND, pro rata on the amounts of
the Revolving B Commitments; PROVIDED that each such reduction must be in an
amount not less than $5,000,000 (and in increments of $1,000,000); and PROVIDED
FURTHER that (A) if Borrower seeks to reduce the Line of Credit to an amount
less than $25,000,000, then the Line of Credit shall be reduced to zero and the
Credit Agreement shall be terminated and (B) once reduced the amount of any such
reductions in the Line of Credit may not be reinstated.

            (iii) Borrower may reduce the Fixed Asset Sublimit at any time and
from time to time in whole or in part, without penalty or premium; PROVIDED that
each such reduction must be in an amount no less than $1,000,000 (and in
increments of $1,000,000); and, PROVIDED FURTHER that, once reduced, the amount
of any such reduction in the Fixed Asset Sublimit may not be reinstated.

            (iv) The amount by which Total Exposure exceeds the aggregate amount
of the Total Commitments at any time shall be immediately due and payable
without the necessity of any notice or demand. Repayments of such excess amounts
shall be applied FIRST, to the repayment of Revolving A Loans, SECOND, to the
payment of outstanding reimbursement obligations with respect to Letters of
Credit, THIRD the repayment of Revolving B Loans, and FOURTH to the securing,
with cash or Cash Equivalents as provided in the second paragraph of SECTION 9.2
(but without the requirement of any demand provided for in such paragraph), of
the Letter of Credit Outstandings (in each case to the extent the same are such
by virtue of CLAUSE (a) of the definition thereof).

      2.5   PAYMENTS AND COMPUTATIONS.

            (a) (i) Borrower shall, subject, in the case of payments in respect
      of Letters of Credit, to SECTION 3.5, make each payment under the Credit
      Documents and under the Notes not later than 2:00 P.M. on the day when due
      in Dollars to Agent at the Payment Office, in immediately available funds.
      The obligations of Borrower to the Lenders with respect to such payments
      shall be discharged by making such payments to Agent pursuant to this
      SECTION 2.5 or by Agent, in its discretion, adding such payments to the
      principal amount of the Loans outstanding by charging such payments to
      Borrower's Account pursuant to SECTION 2.6.

                  (ii) Amounts payable by Borrower in respect of any Letter of
      Credit should be made by Borrower to Agent.

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<PAGE>

            (b) In accordance with its usual and customary business practices in
effect on the Closing Date, from and after the Closing Date, Borrower shall
cause all collections and other amounts received from time to time by or for the
account of Borrower from account debtors, in addition to all other cash proceeds
of Collateral received by or for the account of Borrower from time to time (in
each case, other than payments received from any Credit Card Issuer or Credit
Card Processor) to be deposited promptly following such receipt into accounts
(each a "DEPOSITARY ACCOUNT") established and maintained by Borrower at
financial institutions selected by Borrower and reasonably acceptable to Agent
(each a "DEPOSITARY ACCOUNT Bank"). All available amounts held in each
Depositary Account (net of amounts necessary to comply with ordinary course
minimum balance requirements imposed by the respective Depositary Banks) shall
be transferred each Business Day into an account (the "CONCENTRATION ACCOUNT")
established and maintained by Borrower at one or more financial institutions
selected by Borrower and reasonably acceptable to Agent (each a "CONCENTRATION
ACCOUNT BANK"). On or prior to the Closing Date, the Concentration Account Bank,
Borrower and Agent shall enter into an agreement in form and substance
reasonably satisfactory to Agent (the "CONCENTRATION ACCOUNT AGREEMENT"), which
among other things shall provide for all available amounts held in the
Concentration Account to be wired each Business Day into an account (the "BT
ACCOUNT") maintained by Agent at Bankers Trust Company or Deutsche Bank AG, New
York Branch. Termination of such arrangements shall be subject to prior written
approval of Agent.

                  (c) On or prior to the Closing Date, Borrower, Agent and each
      Credit Card Issuer and Credit Card Processor shall enter into a Credit
      Card Agreement, which among other things shall provide for all amounts
      payable on any Business Day to Borrower under such Credit Card Agreement
      to be wired on such Business Day directly into the BT Account. Termination
      of such arrangements shall be subject to prior written approval of Agent.

                  (d) (i) All amounts received by Agent for distribution
      hereunder or under any other Credit Document shall, subject to Section
      2.2(b)(iii), be applied in the following order:

            FIRST, to the payment of any Fees, Expenses or other Obligations due
            and payable to Agent under any of the Credit Documents, including
            amounts advanced by Agent on behalf of the Lenders pursuant to
            Section 2.3(b);

            SECOND, during a Bankruptcy Default, to the payment of the unpaid
            principal amounts of all Unpaid Drawings payable to each Issuing
            Lender, together with accrued but unpaid interest thereon at the LC
            Interest Rate;

            THIRD, to the ratable payment of any Fees and other Obligations due
            and payable to the Lenders under any of the Credit Documents, other
            than to a Lender in its capacity as an Issuing Lender and other than
            those Obligations specifically referred to in this Section
            2.5(c)(i).

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<PAGE>

            FOURTH, to the ratable payment of interest due on the Loans;

            FIFTH,  to the ratable payment of principal due on the Revolving A
            Loans;

            SIXTH,  to the ratable payment of principal due on the Revolving B
            Loans;

            SEVENTH, to the ratable payment of other Liabilities not
            specifically referred to in this Section 2.5(c)(i) due and payable
            to the Lenders (in their capacities as such, and not in their
            capacity as an Issuing Lender) under the Credit Documents; and

            EIGHTH, to the ratable payment of other Liabilities not specifically
            referred to in this Section 2.5(c)(i) due and payable to the Issuing
            Lenders with respect to Letters of Credit;

            PROVIDED, that, notwithstanding the foregoing, so long as no Event
            of Default arising under Section 9.1(a) hereof shall then have
            occurred and be continuing, any amount received by Agent and
            otherwise required pursuant to the foregoing to be applied to the
            ratable payment of principal due on the Revolving B Loans, may, at
            Borrower's option, be deposited into the Revolver Payments Cash
            Collateral Account until the earlier to occur of (i) receipt by
            Agent of Borrower's written request that such amount be applied to
            reduce the then outstanding principal balance of the Revolving B
            Loan or (ii) the making of any Revolving A Loans by the Lenders
            (whether pursuant to a Notice of Borrowing, a reimbursement of
            amounts drawn under a Letter of Credit, or otherwise), in which case
            such funds shall be applied by Agent immediately to the ratable
            payment of the outstanding principal balance of such Revolving A
            Loans. Borrower hereby irrevocably authorizes and directs Agent to
            make the payments and to apply such funds to the repayment of
            Revolving A Loans as set forth in clause (ii) above.

            (ii) Each Person receiving a payment from Agent pursuant to Section
2.5(c)(i) shall, for all purposes of this Credit Agreement and other Credit
Documents, be deemed to have applied that payment in the order specified in
Section 2.5(c)(i).

      2.6 MAINTENANCE OF ACCOUNT; THE REVOLVER PAYMENTS CASH COLLATERAL ACCOUNT.
(a) Agent shall maintain an account ("BORROWER'S ACCOUNT") on its books in the
name of Borrower in which Borrower will be charged with all loans and advances
made by the Lenders to Borrower or for Borrower's account, including the Loans,
the Fees, the Expenses and any other Obligations. Borrower will be credited, in
accordance with Section 2.5 above, with all amounts received by Agent or the
Lenders from Borrower or from others for Borrower's account, including, as set
forth above, all amounts received by Agent in payment of Accounts and Credit
Card Receivables. In no event shall prior recourse to any Accounts, Credit Card
Receivables or other Collateral be a prerequisite to Agent's right to demand
payment of any Obligation upon its maturity. Further, Agent shall have no
obligation whatsoever to perform in any respect any of the contracts or
obligations relating to the Accounts or Credit Card Receivables.

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<PAGE>

      (b) BTCo shall maintain the Revolver Payments Cash Collateral Account on
its books in the name of Borrower. Borrower hereby assigns, pledges,
hypothecates, transfers and sets over and grants a security interest in the
Revolver Payments Cash Collateral Account to Agent for the ratable benefit of
the Lenders, together with and including any cash, financial assets or
investment property (as such terms are defined in the UCC), or other property
constituting Permitted Investments from time to time credited thereto, all as
additional security for the prompt and complete payment, performance and
observance of the Obligations. Borrower and BTCo hereby agree that any property
deposited and credited to the Revolver Payments Cash Collateral Account shall be
deemed to be a financial asset, as defined in the UCC. So long as no Event of
Default under Section 9.1(a) hereof has occurred and is continuing, Borrower may
utilize the funds from time to time on deposit in the Revolver Payments Cash
Collateral Account to purchase Permitted Investments. In no event shall Borrower
be permitted to withdraw any funds or other property from such account except
with the prior written consent of Agent or otherwise in strict accordance with
the terms of this Agreement. Borrower hereby agrees that BTCo shall comply with
all notifications it receives from Agent directing it to transfer, redeem,
liquidate or otherwise dispose of any property in the Revolver Payments Cash
Collateral Account, without further consent by or notice to Borrower, and BTCo
hereby agrees to abide by and follow the notifications and entitlement orders
issued by Agent with respect to the disposition of the property from time to
time in the Revolver Payments Cash Collateral Account without any notice to or
consent by Borrower.

      2.7 STATEMENT OF ACCOUNT. Reasonably promptly after the end of each month,
Agent shall send Borrower a statement accounting for the charges, loans,
advances and other transactions occurring among and between Agent, the Lenders
and Borrower during that month. The monthly statements shall, absent manifest
error, be an account stated, which is final, conclusive and binding on Borrower.

      2.8   WITHHOLDING AND OTHER TAXES.

            (a) Any and all payments by Borrower hereunder, under the Notes or
in respect of Letters of Credit which are made to or for the benefit of any
Lender (whether in its capacity as a Lender or an Issuing Lender, and as used in
Section 2.8, the term "LENDER" means a Lender in each such capacity, and shall
also include each Serving Affiliate of such Lender) or Agent shall be made, free
and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings and penalties, interests
and all other liabilities with respect thereto ("Taxes"), excluding, (i) in the
case of each such Lender, or Agent, Taxes, one or more of the alternative bases
of which is such Lender's net income (including any such Taxes imposed on branch
profits) and franchise taxes imposed on it by the United States or any political
subdivision thereof, (ii) in the case of each such Lender, Taxes, one or more of
the alternative bases of which is such Lender's net income (including any such
Taxes imposed on branch profits), and franchise Taxes imposed on it under the
laws of which such Lender, or Agent (as the case may be) is organized or by the
jurisdiction of such Lender's Applicable Lending Office or any political
subdivision thereof, (iii) in the case of each such Lender, and Agent, any Taxes
that are in effect and that would apply to a payment of such Lender, or Agent,
as applicable, as of the Closing Date, and

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<PAGE>

(iv) if any Person acquires any interest in this Credit Agreement, any Note or
any participation interest in any Letter of Credit pursuant to the provisions
hereof, or a Foreign Lender or Agent changes the office in which any Loan or any
participation interest in any Letter of Credit is made, accounted for or booked,
or a Foreign Lender if an Issuing Lender, changes the office at which any Letter
of Credit is maintained (any such Person, or such Foreign Lender or Agent in
that event, being referred to as a "TAX TRANSFEREE"), any Taxes to the extent
that they are in effect and would apply to a payment to such Tax Transferee as
of the date of the acquisition of such interest or changes in office, as the
case may be (all such non-excluded Taxes being hereinafter referred to as
"COVERED TAXES"). If Borrower shall be required by law to deduct any Covered
Taxes from or in respect of any sum payable hereunder, under any Note or in
respect of any Letter of Credit to or for the benefit of any Lender, Agent or
any Tax Transferee, (A) the sum payable shall be increased as may be necessary
so that after making all required deductions of Covered Taxes (including
deductions of Covered Taxes applicable to additional sums payable under this
Section 2.8) such Lender, Agent or such Tax Transferee, as the case may be,
receives an amount equal to the sum it would have received had no such
deductions been made, (B) Borrower shall make such deductions and (C) Borrower
shall pay the full amount so deducted to the relevant taxation authority or
other authority in accordance with applicable law; provided, however, that the
Borrower shall not be required to increase any such amounts payable to any
Lender with respect to any Covered Taxes (i) that are attributable to such
Lender's failure to comply with the requirements of Section 2.8(e), or (ii) that
are United States withholding taxes imposed (or branch profits taxes imposed in
lieu thereof) on amounts payable to such Lender at the time the Lender becomes a
party to this Agreement, except to the extent that such Lender's assignor (if
any) was entitled, at the time of such assignment, to receive additional amounts
from the Borrower with respect to such Covered Taxes pursuant to this Section
2.8(a).

            (b) In addition, Borrower agrees to pay any present or future stamp,
documentary, excise, privilege, intangible or similar levies that arise at any
time or from time to time (i) from any payment made under any and all Credit
Documents, (ii) from the transfer of the rights of any Lender under any Credit
Documents to any transferee or (iii) from the execution or delivery by Borrower
of, or from the filing or recording or maintenance of, or otherwise with respect
to the exercise by Agent or the Lenders of their rights under, any and all
Credit Documents (hereinafter referred to as "OTHER TAXES").

            (c) Borrower will indemnify each Lender, Agent, and any Tax
Transferee for the full amount of (i) Covered Taxes imposed on or with respect
to amounts payable hereunder, under any Note or in respect of any Letter of
Credit, (ii) Other Taxes and (iii) any Taxes other than Covered Taxes imposed by
any jurisdiction on amounts payable under this Section 2.8 paid by such Lender,
Agent or such Tax Transferee, as the case may be, and any liability (including
penalties, interest and expenses) arising solely therefrom or with respect
thereto whether or not such Taxes were correctly or legally asserted by the
relevant governmental taxing authority. Payment of this indemnification shall be
made within thirty (30) days from the date such Lender, Agent or such Tax
Transferee certifies and sets forth in writing and with reasonable detail the
calculation thereof as to the amount and type of such Taxes. Any such
certificate submitted by such Lender, Agent or such

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<PAGE>

Tax Transferee in good faith to Borrower shall, absent manifest error, be final,
conclusive and binding on all parties.

            (d) Within 30 days after having received a receipt for Covered Taxes
or Other Taxes, Borrower will furnish to Agent, at its address referred to in
Section 11.5, the original or a certified copy of a receipt evidencing payment
thereof.

            (e) On or before the Closing Date, each Foreign Lender shall deliver
to Agent and Borrower (i) two valid, duly completed copies of either IRS Form
W-8BEN or W-8ECI or successor applicable form, as the case may be, and any other
required form, certifying in each case that such Foreign Lender is entitled to
receive payments under this Credit Agreement, the Notes or any Letter of Credit
payable to it without deduction or withholding of any United States federal
income taxes or with such withholding imposed at a reduced rate (the "REDUCED
RATE") or (ii) in the case of a Foreign Lender claiming exemption from U.S.
federal withholding tax under Section 871(h) or 881(c) of the Internal Revenue
Code of 1986, as amended, with respect to payments of "portfolio interest", a
statement substantially in the form of EXHIBIT D hereto and a Form W-8BEN, or
any subsequent versions thereof or successors thereto, in each case properly
completed and duly executed by such Foreign Lender claiming complete exemption
from, or entitlement to having such withholding imposed at a Reduced Rate on all
payments by the Borrower under this Agreement and the other Loan Documents. Such
forms shall be delivered by each Foreign Lender on or before the date it becomes
a party to this Agreement (or, in the case of any Participant, on or before the
date such Participant purchases the related participation). Each such Foreign
Lender shall also promptly deliver to Agent and Borrower two further copies of
such forms, or successor applicable forms, or other manner of required
certification, as the case may be, on or before the date that any forms
previously delivered by such Foreign Lenders expire or become obsolete or
otherwise are required to be resubmitted as a condition to obtaining an
exemption from a required withholding of United States federal income tax or
entitlement to having such withholding imposed at the Reduced Rate or after the
occurrence of any event requiring a change in the most recent form previously
delivered by it to Borrower and Agent, and such extensions or renewals thereof
as may reasonably be requested by the Borrower and Agent, certifying (A) in the
case of a Form W-8BEN or W-8ECI that such Foreign Lender is entitled to receive
payments under this Credit Agreement, the Notes or any Letter of Credit payable
to it without deduction or withholding of any United States federal income taxes
or with such withholding imposed at a Reduced Rate, unless in any such case any
change in a tax treaty to which the United States is a party, or any change in
law or regulation of the United States or official interpretation thereof has
occurred after the Closing Date and prior to the date on which any such delivery
would otherwise be required that renders all such forms inapplicable or that
would prevent such Foreign Lender from duly completing and delivering any such
form with respect to it, and such Foreign Lender advises Borrower and Agent that
it is not capable of receiving payments without any deduction or withholding of
United States federal income tax or with such withholding at the Reduced Rate,
as the case may be, or (B) in the case of a Form W-8BEN or W-8ECI, a statement
substantially in the form of Exhibit G hereto, that such Foreign Lender is
entitled to an exemption from or Reduced Rate with respect to United States
backup withholding tax.

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            (f) If a Tax Transferee that is organized under the laws of a
jurisdiction outside of the United States acquires an interest in this Credit
Agreement, any Note, any participation interest in any Letter of Credit or any
of the other Credit Documents, or a Foreign Lender changes the office through
which Loans or any other Obligations are made, accounted for or booked, or a
Foreign Lender if an Issuing Lender, changes the office at which any Letter of
Credit is maintained, the transferor, or the applicable Foreign Lender, in the
case of a change of office, shall cause such Tax Transferee to agree that, on or
prior to the effective date of such acquisition or change, as the case may be,
it will deliver to Borrower and Agent (i) two valid, duly completed copies of
IRS Forms W-8BEN or W-8ECI or any successor applicable form, as the case may be,
and any other required form, certifying in each case that such Tax Transferee is
entitled to receive payments under this Credit Agreement, the Notes, each Letter
of Credit and any of the other Credit Documents payable to it without deduction
or withholding of United States federal income tax or with such withholding
imposed at a Reduced Rate or (ii) a statement substantially in the form of
Exhibit G hereto and a valid, duly completed IRS Form W-8BEN or successor
applicable form, as the case may be, to establish an exemption from United
States backup withholding tax. Each Tax Transferee that delivers to Borrower and
Agent a Form W-8BEN or W-8ECI and any other required form, further undertakes to
deliver two further copies of the said Forms or other manner of required
certification, as the case may be, on or before the date that any such form
expires or becomes obsolete or otherwise is required to be resubmitted as a
condition to obtaining an exemption from a required withholding of United States
federal income tax or entitlement to having such withholding imposed at the
Reduced Rate or after the occurrence of any event requiring a change in the most
recent form previously delivered by it to Borrower and Agent, and such
extensions or renewals thereof as may reasonably be requested by Borrower and
Agent, certifying (A) in the case of a Form W-8BEN or W-8ECI that such Tax
Transferee is entitled to receive payments under this Credit Agreement, the
Notes, each Letter of Credit and each of the other Credit Documents without
deduction or withholding of any United States federal income taxes or with such
withholding imposed at the Reduced Rate, unless any change in treaty, law or
regulation or official interpretation thereof has occurred after the effective
date of such acquisition or change and prior to the date on which any such
delivery would otherwise be required that renders all such forms inapplicable or
that would prevent such Tax Transferee from duly completing and delivering any
such form with respect to it, and such Tax Transferee advises Borrower and Agent
that it is not capable of receiving payments (1) without any deduction or
withholding of United States federal income tax or (2) with such withholding at
the Reduced Rate, as the case may be, or (B) in the case of a Form W-8BEN and a
statement substantially in the form of Exhibit G hereto, that such Foreign
Lender is entitled to an exemption from, or a Reduced Rate on, United States
backup withholding tax.

            (g) If any Taxes for which Borrower would be required to make
payment under this Section 2.8 are imposed, the applicable Lender or Agent, as
the case may be, shall use its best efforts to avoid or reduce such Taxes by
taking any appropriate action (including assigning its rights hereunder to a
related entity or a different office) which would not in the sole opinion of
such Lender or Agent be otherwise disadvantageous to such Lender or Agent, as
the case may be.

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            (h) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained in this
Section 2.8 shall survive the payment in full of the Obligations.

            (i) Each Lender shall cause each of its Serving Affiliates that is a
Foreign Lender to take the actions required to be taken by such Serving
Affiliate as a Foreign Lender under Section 2.8(e), (f) and (g).

      2.9 AFFECTED LENDERS. If Borrower is obligated to pay to any Lender
(whether in its capacity as a Lender or an Issuing Lender) or any Serving
Affiliate of such Lender any amount under Sections 2.8 or 4.7, or if any Lender
is a Defaulting Lender, Borrower may, if no Event of Default then exists,
replace such Lender or Serving Affiliate with another lender reasonably
acceptable to Agent, and such Lender hereby agrees to be so replaced or to cause
such Serving Affiliate to be replaced, subject to the following:

            (a) (i) The obligations of Borrower hereunder to the Lender to be
      replaced (in its capacity as a Lender, and including such increased or
      additional costs incurred from the date of notice to Borrower of such
      increase or additional costs through the date such Lender is replaced
      hereunder) shall be paid in full to such Lender concurrently with such
      replacement; and

            (ii) the obligations of Borrower hereunder to the Lender to be
replaced in its capacity as an Issuing Lender, or to its Serving Affiliate in
such capacity, shall continue until (A) each Letter of Credit issued by that
Person has expired or been drawn in full, (B) all outstanding reimbursement
obligations with respect to Letters of Credit, together with interest thereon at
the LC Interest Rate, shall have been paid in full, and (C) all Liabilities in
respect of Letters of Credit, to the extent due, have been paid in full and, to
the extent not due, been secured to the reasonable satisfaction of such Person

            (b) If such replacement is a result of increased costs under
      Sections 2.8 or 4.9, the replacement Lender shall be a bank or other
      financial institution that is not subject to such increased costs which
      caused Borrower's election to replace any Lender hereunder, and each such
      replacement Lender shall execute and deliver to Agent such documentation
      satisfactory to Agent pursuant to which such replacement Lender is to
      become a party hereto, conforming to the provisions of Section 11.6, with
      an Aggregate Commitment equal to that of the Lender being replaced and
      shall make Loans in the aggregate principal amount equal to the aggregate
      outstanding principal amount of the Loans of the Lender being replaced;

            (c) Upon such execution of such documents referred to in clause (b)
      and repayment of the amounts referred to in clause (a), the replacement
      lender shall be a "Lender" with an Aggregate Commitment as specified
      herein above and the Lender being replaced shall cease to be a "Lender"
      hereunder, except with respect to indemnification provisions under this
      Credit Agreement, which shall survive as to such replaced Lender and

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      except to the extent such Lender continues to be an Issuing Lender
      pursuant to Section 2.9(a)(ii);

            (d) Agent shall reasonably cooperate in effectuating the replacement
      of any Lender under this Section 2.9, but at no time shall Agent be
      obligated to initiate any such replacement;

            (e) Any Lender replaced under this Section 2.9 shall be replaced at
      Borrower's sole cost and expense and at no cost or expense to Agent or any
      of the Lenders; and

            (f) If Borrower proposes to replace any Lender pursuant to this
      Section 2.9 because the Lender seeks reimbursement under either Section
      2.8 or 4.9, then it must also replace any other Lender who seeks similar
      levels of reimbursement (as a percentage of such Lender's Aggregate
      Commitment) under such Sections.

      2.10  SHARING OF PAYMENTS.

            (a) (i) If any Lender (including a Lender in its capacity as an
Issuing Lender) shall obtain any payment (whether voluntary, involuntary, and
whether through the exercise of any right of set-off by virtue of its claim in
any applicable bankruptcy, insolvency or other similar proceeding being deemed
secured by a Liability owed by it to any Credit Party, including a claim deemed
secured under Section 506 of the Bankruptcy Code, or otherwise) (each a
"PAYMENT"), on account of (A) the Loans made by it, (B) its participation
interests in Letters of Credit or (C) any of the other Obligations due and
payable to it in excess of its Proportionate Share of payments on account of the
Loans or participation interests in Letters of Credit or such other Obligations
obtained by all the Lenders, such Lender shall forthwith purchase from the other
Lenders such participations in the Loans made by them, in their participation in
Letters of Credit or their other such Obligations as shall be then due and
payable as shall be necessary to cause such purchasing Lender to share the
excess payment ratably with each of them; however, PROVIDED that if all or any
portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each Lender shall be rescinded and each such Lender
shall repay to the purchasing Lender the purchase price to the extent of such
recovery together with an amount equal to such Lender's ratable share (according
to the proportion of (1) the amount of such Lender's required repayment to (2)
the total amount so recovered from the purchasing Lender) of any interest or
other amount paid or payable by the purchasing Lender in respect to the total
amount so recovered. Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section 2.10 may, to the
fullest extent permitted by law, exercise all of its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender were the direct creditor of Borrower in the amount of such
participation.

(ii) For purposes of this Section 2.10, all Unpaid Drawings shall be deemed to
constitute "Loans" made by such Issuing Lender, and such Issuing Lender agrees
that it shall apply all Payments received by it in its capacity as an Issuing
Lender to the payment or the collateralization

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of the Liabilities of Borrower to it that constitute Unpaid Drawings payable to
such Issuing Lender before applying them to any other Liabilities due it.

            (b) If an Issuing Lender is an Affiliate of a Lender, such Lender
shall cause such Affiliate to comply with the provisions of subsection (a)(i) of
Section 2.10 as fully as though such Affiliate were a Lender subject to such
subsection.

                                    ARTICLE 3

                                LETTERS OF CREDIT

      3.1   LETTERS OF CREDIT.

            (a) Subject to and upon the terms and conditions set forth herein,
Borrower may, at any time and from time to time on and after the Closing Date
and prior to the 30th day prior to the Expiration Date, request Agent either to
(i) direct an Issuing Lender to issue for the account of Borrower and for the
benefit of (A) any holder (or any trustee, agent or other similar representative
for any such holders) of LC Supportable Obligations of Borrower or any of its
Subsidiaries, an irrevocable standby letter of credit, in a form customarily
used by the Issuing Lender or in such other form as has been approved by the
Issuing Lender, and (B) sellers of goods to Borrower or any of its Subsidiaries,
an irrevocable trade letter of credit, or (ii) approve the issuance by an
Issuing Lender an irrevocable trade letter of credit upon application made by
Borrower directly to such Issuing Lender pursuant to an application procedure
approved by Agent in advance, in each case in a form customarily used by the
Issuing Lender or in such other form as has been approved by the Issuing Lender,
(each such letter of credit, a "LETTER OF CREDIT" and, collectively, the
"LETTERS OF CREDIT"). All Letters of Credit shall be denominated in Dollars and
shall be issued on a sight basis only.

            (b) Subject to and upon the terms and conditions set forth herein,
Agent agrees that it will, at any time and from time to time on and after the
Closing Date and prior to the 30th day prior to the Expiration Date, following
its receipt of the respective Letter of Credit Request, direct the Issuing
Lender to issue or to approve the issuance for the account of Borrower, one or
more Letters of Credit as are permitted to remain outstanding hereunder without
giving rise to a Default or an Event of Default, PROVIDED that Agent shall not
be under any obligation to direct the Issuing Lender to issue any Letter of
Credit if at the time of such issuance any order, judgment or decree of any
governmental authority or arbitrator shall purport by its terms to enjoin or
restrain the Issuing Lender from issuing such Letter of Credit or any
requirement of law applicable to the Issuing Lender or any request or directive
(whether or not having the force of law) from any governmental authority with
jurisdiction over the Issuing Lender shall prohibit, or request that the Issuing
Lender refrain from, the issuance of letters of credit generally or such Letter
of Credit in particular or shall impose upon the Issuing Lender with respect to
such Letter of Credit any restriction or reserve or capital

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requirement (for which the Issuing Lender is not otherwise compensated
hereunder) not in effect with respect to the Issuing Lender on the date hereof,
or any un-reimbursed loss, cost or expense which was not applicable or in effect
with respect to the Issuing Lender as of the date hereof and which the Issuing
Lender reasonably and in good faith deems material to it. The transmittal by
Borrower of each Letter of Credit Request shall be deemed to be a representation
and warranty made by Borrower, both at the time of such transmittal and at the
time of the issuance of the requested Letter of Credit, that the Letter of
Credit may be issued in accordance with and will not violate any of the
requirements of this ARTICLE 3.

      3.2 MAXIMUM LETTER OF CREDIT OUTSTANDINGS; FINAL MATURITIES.
Notwithstanding anything to the contrary contained in this Agreement, (a) no
Letter of Credit shall be issued if (x) the Stated Amount thereof, when added to
the Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid
on the date of, and prior to the issuance of, the respective Letter of Credit)
at such time would exceed $10,000,000, or (y) after giving effect to such
issuance, the Total Exposure would exceed the lesser of (I) the Total
Commitments and (II) the Borrowing Base; and (b) each Letter of Credit shall by
its terms terminate on or before (x) in the case of standby Letters of Credit,
the date which occurs 12 months after the date of the issuance thereof (although
any such standby Letter of Credit may be extendible for successive periods of up
to 12 months on terms acceptable to Agent and the Issuing Lender), but in no
event later than ten (10) Business Days prior to Expiration Date, and (y) in the
case of trade Letters of Credit, on or before the date which occurs 180 days
after the date of issuance thereof, but in no event later than. the thirtieth
(30th) day prior to the Expiration Date.

      3.3   LETTER OF CREDIT REQUESTS; MINIMUM STATED AMOUNT.

            (a) Whenever Borrower desires Agent to direct or approve the
issuance of a Letter of Credit for its account (or to amend or modify any
existing Letter of Credit), Borrower shall give Agent at least five Business
Days' (or such shorter period as is acceptable to Agent) written notice thereof
(including by way of facsimile). Each notice shall be given to Agent in the form
designated by Agent from time to time (each a "LETTER OF CREDIT REQUEST").

            (b) The making of each Letter of Credit Request shall be deemed to
be a representation and warranty by Borrower to Agent and the Lenders that such
Letter of Credit may be issued in accordance with, and will not violate the
requirements of, Section 3.2. Upon receipt by Agent of a Letter of Credit
Request, then Agent shall, subject to the terms and conditions of this
Agreement, either direct the Issuing Lender to issue (or amend or modify, as the
case may be), or, approve the issuance of, the requested Letter of Credit for
the account of Borrower in accordance with the Issuing Lender's usual and
customary practices. Upon the issuance or modification of, or amendment to, any
standby Letter of Credit, the Issuing Lender shall promptly provide written
confirmation of such issuance, amendment or modification, as the case may be, to
Borrower and Agent, and such notice shall be accompanied by a copy of such
issuance, modification or amendment, as the case may be. Upon receipt of such
notice, Agent shall promptly provide written notice to the Participants of such
issuance, modification or amendment, and if requested, the Agent

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shall provide such Participant with copies of any such issuance, modification or
amendment. With regard to trade Letters of Credit, the Issuing Lender shall, on
the first Business Day of each week, provide the Agent with a report, by
facsimile transmission, of the daily aggregate outstanding trade Letters of
Credit during the previous week. Upon receipt of such report, the Agent shall
provide the Participants with the contents of such report. Notwithstanding
anything to the contrary contained in this Agreement, in the event that any
Lender is a Defaulting Lender, the Issuing Lender shall not be required to issue
any Letter of Credit unless the Issuing Lender has entered into arrangements
satisfactory to it and Borrower to eliminate the Issuing Lender's risk with
respect to the participation in Letters of Credit by such Defaulting Lender,
including by cash collateralizing such Defaulting Lender's Proportionate Share
of the Letter of Credit Outstandings.

      3.4   LETTER OF CREDIT PARTICIPATIONS.

            (a) Immediately upon the issuance by the Issuing Lender of any
Letter of Credit, the Issuing Lender shall be deemed to have sold and
transferred to each Lender (other than the Issuing Lender in its capacity (if
any) as a Lender) and each such Lender (in its capacity under this SECTION 3.4,
a "PARTICIPANT"), shall be deemed irrevocably and unconditionally to have
purchased and received from the Issuing Lender, without recourse or warranty, an
undivided interest and participation, to the extent of such Participant's
Proportionate Share, in such Letter of Credit, each drawing or payment made
thereunder and the obligations of Borrower under this Agreement with respect
thereto, and any security therefor or guaranty pertaining thereto. Upon any
change in the Aggregate Commitments or Proportionate Shares of the respective
Lenders pursuant to SECTION 2.9 or SECTION 11.6, it is hereby agreed that, with
respect to all outstanding Letters of Credit and Unpaid Drawings relating
thereto, there shall be an automatic adjustment to the participations pursuant
to this SECTION 3.4 to reflect the new Proportionate Shares of the assignor and
assignee Lender, as the case may be.

            (b) In determining whether to pay under any Letter of Credit, the
Issuing Lender shall not have any obligation relative to the other Lenders other
than to confirm that any documents required to be delivered under such Letter of
Credit appear to have been delivered and that they appear to substantially
comply on their face with the requirements of such Letter of Credit. Any action
taken or omitted to be taken by the Issuing Lender under or in connection with
any Letter of Credit issued by it shall not create for the Issuing Lender any
resulting liability to Borrower, any other Credit Party, any Lender or any other
Person unless such action is taken or omitted to be taken with gross negligence
or willful misconduct (as determined by a court of competent jurisdiction in a
final and non-appealable decision).

            (c) In the event that the Issuing Lender makes any payment under any
Letter of Credit issued by it and Borrower shall not have reimbursed such amount
in full to the Issuing Lender pursuant to Section 3.5(a), the Issuing Lender
shall promptly notify Agent, which shall promptly notify each Participant of
such failure, and each Participant shall promptly and unconditionally pay to the
Issuing Lender the amount of such Participant's Proportionate Share of such
unreimbursed payment in Dollars and in same day funds. If Agent so notifies,
prior to 12:00 Noon on any

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Business Day, any Participant required to fund a payment under a Letter of
Credit, such Participant shall make available to the Issuing Lender in Dollars
such Participant's Proportionate Share of the amount of such payment on such
Business Day in same day funds. If and to the extent such Participant shall not
have so made its Proportionate Share of the amount of such payment available to
the Issuing Lender, such Participant agrees to pay to the Issuing Lender,
forthwith on demand such amount, together with interest thereon, for each day
from such date until the date such amount is paid to the Issuing Lender at the
overnight Federal Funds Rate for the first three days and at the interest rate
applicable to Loans that are maintained as Prime Rate Loans for each day
thereafter. The failure of any Participant to make available to the Issuing
Lender its Proportionate Share of any payment under any Letter of Credit shall
not relieve any other Participant of its obligation hereunder to make available
to the Issuing Lender its Proportionate Share of any payment under any Letter of
Credit on the date required, as specified above, but no Participant shall be
responsible for the failure of any other Participant to make available to the
Issuing Lender such other Participant's Proportionate Share of any such payment.

            (d) Whenever the Issuing Lender receives a payment of a
reimbursement obligation as to which it has received any payments from the
Participants pursuant to CLAUSE (c) above, the Issuing Lender shall pay to each
such Participant which has paid its Proportionate Share thereof, in Dollars and
in same day funds, an amount equal to such Participant's share (based upon the
proportionate aggregate amount originally funded by such Participant to the
aggregate amount funded by all Participants) of the principal amount of such
reimbursement obligation and interest thereon accruing after the purchase of the
respective participations.

            (e) Upon the request of any Participant, the Issuing Lender shall
furnish to such Participant copies of any Letter of Credit issued by it and such
other documentation as may reasonably be requested by such Participant.

            (f) The obligations of the Participants to make payments to the
Issuing Lender with respect to Letters of Credit shall be irrevocable and not
subject to any qualification or exception whatsoever and shall be made in
accordance with the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following
circumstances:

            (i) any lack of validity or enforceability of this Agreement or
      any of the other Credit Documents;

            (ii) the existence of any claim, setoff, defense or other right
      which any Credit Party or any Subsidiary of any Credit Party may have at
      any time against a beneficiary named in a Letter of Credit, any transferee
      of any Letter of Credit (or any Person for whom any such transferee may be
      acting), Agent, any Participant, or any other Person, whether in
      connection with this Agreement, any Letter of Credit, the transactions
      contemplated herein or any unrelated transactions (including any
      underlying transaction between any Credit Party or any Subsidiary of any
      Credit Party and the beneficiary named in any such Letter of Credit);

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            (iii) any draft, certificate or any 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;

            (iv) the surrender or impairment of any security for the performance
      or observance of any of the terms of any of the Credit Documents; or

            (v) the occurrence of any Default or Event of Default.

      3.5   AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS.

            (a) Borrower agrees to reimburse each Issuing Lender, by making
payment to Agent in immediately available funds at the Payment Office, for any
payment or disbursement made by such Issuing Lender under any Letter of Credit
issued by it (each such amount, so paid until reimbursed, an "UNPAID DRAWING"),
not later than one Business Day following receipt by Borrower of notice of such
payment or disbursement (provided that no such notice shall be required to be
given if an Event of Default under SECTION 9.1(e) shall have occurred and be
continuing, in which case the Unpaid Drawing shall be due and payable
immediately without presentment, demand, protest or notice of any kind (all of
which are hereby waived by Borrower)), with interest on the amount so paid or
disbursed by such Issuing Lender, to the extent not reimbursed prior to 12:00
Noon on the date of such payment or disbursement, from and including the date
paid or disbursed to but excluding the date such Issuing Lender was reimbursed
by Borrower therefor at a rate per annum equal to the Prime Lending Rate in
effect from time to time PLUS one and one-half percent (1.50%); PROVIDED, that,
to the extent such amounts are not reimbursed prior to 12:00 Noon on the third
Business Day following the receipt by Borrower of notice of such payment or
disbursement or following the occurrence and during the continuance of a Default
or an Event of Default, interest shall thereafter accrue on the amounts so paid
or disbursed by the Issuing Lender (and until reimbursed by Borrower) at a rate
per annum equal to the Prime Lending Rate in effect from time to time PLUS one
and one-half percent (1.50%) PLUS two percent (2.00%), with such interest to be
payable on demand. The Issuing Lender shall give Borrower prompt written notice
of each Drawing under any Letter of Credit issued by it, PROVIDED that the
failure to give any such notice shall in no way affect, impair or diminish
Borrower's obligations hereunder.

                  (b) The obligations of Borrower under this SECTION 3.5 to
      reimburse the Issuing Lender with respect to Drawings under Letters of
      Credit issued by it (each a "DRAWING") (including, in each case, interest
      thereon) shall be absolute and unconditional under any and all
      circumstances and irrespective of any setoff, counterclaim or defense to
      payment which Borrower or any Subsidiary of Borrower may have or have had
      against any Lender (including in its capacity as the Issuing Lender or as
      a Participant), including, without limitation, any defense based upon the
      failure of any Drawing under a Letter of Credit to conform to the terms of
      the Letter of Credit or any nonapplication or misapplication by the
      beneficiary of the proceeds of such Drawing; PROVIDED, HOWEVER, that
      Borrower shall not be obligated to reimburse the Issuing Lender for any
      wrongful payment made by the

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      Issuing Lender under a Letter of Credit issued by it as a result of acts
      or omissions constituting willful misconduct or gross negligence on the
      part of the Issuing Lender (as determined by a court of competent
      jurisdiction in a final and non-appealable decision).

            3.6 INCREASED COSTS. If at any time after the Closing Date, the
      introduction of or any change in any applicable law, rule, regulation,
      order, guideline or request or in the interpretation or administration
      thereof by the NAIC or any governmental authority charged with the
      interpretation or administration thereof, or compliance by the Issuing
      Lender or any Participant with any request or directive by the NAIC or by
      any such governmental authority (whether or not having the force of law),
      shall either (i) impose, modify or make applicable any reserve, deposit,
      capital adequacy or similar requirement against letters of credit issued
      by the Issuing Lender or participated in by any Participant, or (ii)
      impose on the Issuing Lender or any Participant any other conditions
      relating, directly or indirectly, to this Agreement or any Letter of
      Credit; and the result of any of the foregoing is to increase the cost to
      the Issuing Lender or any Participant of issuing, maintaining or
      participating in any Letter of Credit, or reduce the amount of any sum
      received or receivable by the Issuing Lender or any Participant hereunder
      or reduce the rate of return on its capital with respect to Letters of
      Credit (except for changes in the rate of tax on, or determined by
      reference to, the net income or profits of the Issuing Lender or such
      Participant pursuant to the laws of the jurisdiction in which it is
      organized or in which its principal office or applicable lending office is
      located or any subdivision thereof or therein), then, upon the delivery of
      the certificate referred to below to Borrower by the Issuing Lender or any
      Participant within ninety days after an officer of the Issuing Lender or
      such Participant, as the case may be, responsible for overseeing the
      transactions contemplated by this Credit Agreement knows or had reason to
      know that such amount is payable by Borrower pursuant to this SECTION 3.6
      (a copy of which certificate shall be sent by the Issuing Lender or such
      Participant to the Agent), Borrower agrees to pay to the Issuing Lender or
      such Participant such additional amount or amounts as will compensate the
      Issuing Lender or such Participant for such increased cost or reduction in
      the amount receivable or reduction on the rate of return on its capital.
      The Issuing Lender or any Participant, upon determining that any
      additional amounts will be payable pursuant to this SECTION 3.6, will give
      prompt written notice thereof to Borrower, which notice shall include a
      certificate submitted to Borrower by the Issuing Lender or such
      Participant (a copy of which certificate shall be sent by the Issuing
      Lender or such Participant to Agent), setting forth in reasonable detail
      the basis for the calculation of such additional amount or amounts
      necessary to compensate the Issuing Lender or such Participant. The
      certificate required to be delivered pursuant to this SECTION 3.6 shall,
      absent manifest error, be final and conclusive and binding on Borrower.

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                                    ARTICLE 4

                           INTEREST, FEES AND EXPENSES

            4.1 INTEREST ON LIBOR RATE LOANS. Subject to the provisions of
      Section 4.4, (a) each LIBOR Rate Loan (other than a Fixed Asset LIBOR Rate
      Loan) shall bear interest on its unpaid principal amount at a rate per
      annum equal to the applicable Adjusted LIBOR Rate PLUS two and one-half
      percent (2.50%) and (b) each Fixed Asset LIBOR Rate Loan shall bear
      interest on its unpaid principal amount at a rate per annum equal to the
      applicable Adjusted LIBOR Rate, PLUS (i) if the Fixed Asset Sublimit in
      effect at such time is equal to or greater than $10,000,000, four percent
      (4.00%) and (ii) if the Fixed Asset Sublimit in effect at such time is
      less than $10,000,000, three percent (3.00%), PROVIDED, that, for purposes
      of the foregoing, Agent shall always assume that the outstanding Fixed
      Asset LIBOR Rate Loans are those LIBOR Rate Loans accruing interest
      hereunder at the highest then applicable Adjusted LIBOR Rate. Such
      interest shall be payable on the last day of each Interest Period with
      respect to such LIBOR Rate Loan (or, in the case of Interest Periods in
      excess of three months on each of the ninetieth (90th) day and the last
      day of such Interest Period), at the date of Conversion of such LIBOR Rate
      Loan (or a portion thereof) to a Prime Rate Loan and at maturity of such
      LIBOR Rate Loan, and after maturity of such LIBOR Rate Loan (whether by
      acceleration or otherwise), upon demand. Agent upon determining the
      Adjusted LIBOR Rate for any Interest Period shall promptly notify Borrower
      and the Lenders by telephone (confirmed promptly in writing) or in writing
      thereof. Each determination by Agent of an interest rate hereunder shall
      be conclusive and binding for all purposes, absent manifest error.

            4.2 INTEREST ON PRIME RATE LOANS. Subject to the provisions of
      SECTION 4.4, (a) each Prime Rate Loan (other than a Fixed Asset Prime Rate
      Loan) shall bear interest on its unpaid principal amount at a rate per
      annum equal to the Prime Lending Rate PLUS one and one-half percent
      (1.50%) and (b) each Fixed Asset Prime Rate Loan shall bear interest on
      its unpaid principal amount at a rate per annum equal to the Prime Lending
      Rate, PLUS (i) if the Fixed Asset Sublimit in effect at such time is equal
      to or greater than $10,000,000, three percent (3.00%) and (ii) if the
      Fixed Asset Sublimit in effect at such time is less than $10,000,000, two
      percent (2.00%). Such interest shall be payable monthly in arrears on the
      first day of each calendar month and at maturity of such Prime Rate Loan,
      and after maturity of such Prime Rate Loan (whether by acceleration or
      otherwise), upon demand. In the event of any change in said Prime Lending
      Rate, the rate hereunder shall change, effective as of the day the Prime
      Lending Rate changes. Each determination by Agent of any interest rate
      hereunder shall be conclusive and binding for all purposes, absent
      manifest error.

            4.3   NOTICE OF CONTINUATION AND NOTICE OF CONVERSION.

                  (a) With respect to any Borrowing consisting of LIBOR Rate
      Loans, Borrower may (so long as no Event of Default has occurred and is
      continuing, subject to the

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      provisions of SECTION 4.3(c)), elect to maintain such Borrowing or any
      portion thereof as consisting of LIBOR Rate Loans by selecting a new
      Interest Period for such Borrowing, which new Interest Period shall
      commence on the last day of the immediately preceding Interest Period.
      Each selection of a new Interest Period (a "CONTINUATION") shall be made
      by notice given not later than 12:00 noon on the third Business Day prior
      to the date of any such Continuation relating to LIBOR Rate Loans, by
      Borrower to Agent. Such notice by Borrower of a Continuation (a "NOTICE OF
      CONTINUATION") shall be in substantially the form of EXHIBIT C-1,
      specifying (i) the date of such Continuation, (ii) the type of Loans
      subject to such Continuation, (iii) the aggregate amount of Loans subject
      to such Continuation and (iv) the duration of the selected Interest
      Period, all of which shall be specified in such manner as is necessary to
      comply with all limitations on Loans outstanding hereunder. Borrower may
      elect to maintain more than one Borrowing consisting of LIBOR Rate Loans
      by combining such Borrowings into one Borrowing and selecting a new
      Interest Period pursuant to this Section 4.3(a); PROVIDED that each of the
      Borrowings so combined shall consist of Loans having Interest Periods
      ending on the same date. If Borrower fails to select a new Interest Period
      for any Borrowing consisting of LIBOR Rate Loans in accordance with this
      Section 4.3(a), such Loans will automatically, on the last day of the then
      existing Interest Period therefor, Convert into Prime Rate Loans.

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                  (b) Borrower may on any Business Day (so long as no Default or
      Event of Default has occurred and is continuing), upon notice (each such
      notice, a "NOTICE OF CONVERSION") given to Agent, and subject to the
      provisions of Section 4.3(c), Convert the entire amount of or a portion of
      all Loans of one type comprising the same Borrowing into Loans of another
      Type; however, PROVIDED that any Conversion of any LIBOR Rate Loans into
      Loans of another Type shall be made on, and only on, the last day of an
      Interest Period for such LIBOR Rate Loans and, upon Conversion of any
      Loans into Loans of another Type, Borrower shall pay accrued interest to
      the date of Conversion on the principal amount Converted. Each such Notice
      of Conversion shall be given not later than 12:00 noon on the Business Day
      prior to the date of any proposed Conversion into Prime Rate Loans and on
      the third Business Day prior to the date of any proposed Conversion into
      LIBOR Rate Loans. Subject to the restrictions specified above, each Notice
      of Conversion shall be in substantially the form of EXHIBIT C-2 hereto
      specifying (i) the requested date of such Conversion, (ii) the Type of
      Loans to be Converted, (iii) the portion of such Type of Loan to be
      Converted, (iv) the Type of Loan such Loans are to be Converted into and
      (v) if such Conversion is into LIBOR Rate Loans, the duration of the
      Interest Period of such Loan. Each Conversion shall be in an aggregate
      amount for the Loans of all Lenders of not less than $5,000,000 or any
      integral multiple of $1,000,000 in excess thereof. Borrower may elect to
      Convert the entire amount of or a portion of all Loans of one Type
      comprising more than one Borrowing into Loans of another Type by combining
      such Borrowings into one Borrowing consisting of Loans of another Type;
      PROVIDED that if the Borrowings so combined consist of LIBOR Rate Loans,
      such Loans shall have Interest Periods ending on the same date.

                  (c) Notwithstanding anything contained in subsections (a) and
      (b) above or elsewhere in this Credit Agreement to the contrary,

            (i) (A) if Agent is unable to determine the LIBOR Rate for LIBOR
      Rate Loans comprising any requested Borrowing, Continuation or Conversion,
      the right of Borrower to select or maintain LIBOR Rate Loans for such
      Borrowing or any subsequent Borrowing shall be suspended until Agent shall
      notify Borrower and the Lenders that the circumstances causing such
      suspension no longer exist, and each Loan comprising such Borrowing shall
      be a loan of a Type that is unaffected by such circumstances, as selected
      by Borrower pursuant to this Credit Agreement;

                  (B) if a Lender shall, at any time, notify Agent that, because
      of a change in applicable law after the date such Lender became a Lender,
      it has become unlawful for such Lender to participate in any requested
      Borrowing, Continuation or Conversion of LIBOR Rate Loans, to continue its
      LIBOR Rate Loans, or to comply with its obligations hereunder in respect
      thereof, that Lender's obligation to participate in any such requested
      Borrowing, Continuation or Conversion shall be discharged by such Lender's
      making its participation therein in the form of a Prime Rate Loan, and any
      of such Lender's LIBOR Rate Loans not otherwise being converted shall be
      converted into Prime Rate Loans on the

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      earlier of (1) the last day of the applicable Interest Period and (2) the
      last day such Lender may lawfully continue to maintain LIBOR Rate Loans,
      PROVIDED that any Prime Rate Loan that, but for this CLAUSE (B), would
      have been a LIBOR Rate Loan shall constitute part of the Borrowing of
      which any such LIBOR Rate Loan was or would have been a part;

            (ii) if the Majority Lenders shall, at least one Business Day before
      the date of any requested Borrowing, Continuation or Conversion, notify
      Agent that the LIBOR Rate for Loans comprising such Borrowing will not
      adequately reflect the cost to such Lenders of making or funding their
      respective Loans for such Borrowing, the right of Borrower to select LIBOR
      Rate Loans for such Borrowing shall be suspended until Agent shall notify
      Borrower and the Lenders (which notification shall be promptly given by
      Agent) that the circumstances causing such suspension no longer exist, and
      each Loan comprising such Borrowing shall be a Loan of a Type that is
      unaffected by such circumstances, as selected by Borrower pursuant to this
      Credit Agreement;

            (iii) Borrower shall borrow, prepay, convert and continue Loans in a
      manner such that (A) the aggregate principal amount of LIBOR Rate Loans
      having the same Interest Period shall at all times be not less than
      $5,000,000, (B) there shall not be, at any one time, more than five
      Interest Periods in effect with respect to LIBOR Rate Loans and (C) no
      payment of LIBOR Rate Loans will have to be made prior to the last day of
      an applicable Interest Period in order to repay the Loans in the amounts
      and on the date specified in SECTION 2.4(b).

            (d) Each Notice of Continuation and Notice of Conversion shall be
irrevocable by and binding on Borrower.

      4.4 INTEREST AFTER EVENT OF DEFAULT. Interest on any amount of overdue
interest on or overdue principal of the Loans, and interest on the amount of
principal under the Loans outstanding as of the date an Event of Default occurs,
and at all times thereafter until the earlier of the date upon which (a) all
Obligations have been paid and satisfied in full or (b) such Event of Default
shall not be continuing, shall be payable on demand at a rate per annum equal to
the rate at which the Loans are bearing interest pursuant to SECTIONS 4.1 AND
4.2 above, PLUS two percent (2%). In the event of any change in said applicable
interest rate, the rate hereunder shall change, effective as of the day the
applicable interest rate changes, so as to remain two percent (2%) per annum
above the then applicable interest rate.

            4.5 UNUSED LINE FEE. Borrower shall pay to Agent, for the ratable
      benefit of the Lenders, a non-refundable fee (the "UNUSED LINE FEE") equal
      to one half of one percent (0.50%) per annum of the unused portion of the
      Line of Credit (with any outstanding Letters of Credit constituting usage
      of the Line of Credit). The Unused Line Fee shall accrue daily from the
      Closing Date until the Expiration Date, and shall be due and payable
      monthly in arrears, on the first Business Day of each month and on the
      Expiration Date.

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            4.6   LETTER OF CREDIT FEES.

            (a) Agent shall be entitled to charge for the account of Borrower,
on the first Business Day of each month, a fee for the ratable benefit of the
Lenders, in an amount equal to one and one-half percent (1.50%) per annum of the
daily Stated Amount of all Letters of Credit, if any, outstanding during the
immediately preceding month (the foregoing fee hereinafter referred to as the
"LETTER OF CREDIT FEE").

                  (b) Agent shall also be entitled to charge for the account of
      Borrower as and when incurred by Agent or any Lender, the customary
      charges, fees, costs and expenses charged to Agent or any Lender for
      Borrower's account by any Issuing Lender (the "ISSUING LENDER FEES") in
      connection with the issuance, transfer, payment or amendment of any
      Letters of Credit by the Issuing Lender thereof. Each determination by
      Agent of Letter of Credit Fees and Issuing Lender Fees shall be conclusive
      and binding for all purposes, absent manifest error.

                  (c) Agent shall also be entitled to charge for the account of
      Borrower the applicable fee with respect to each Letter of Credit set
      forth in the Fee Letter.

                  (d) Upon notice from Agent, after the occurrence of an Event
      of Default until the earlier of the date upon which (i) all Obligations
      shall have been paid and satisfied in full or (ii) such Event of Default
      shall not be continuing, the Letter of Credit Fee payable with respect to
      Letters of Credit shall be payable on demand at a rate per annum equal to
      the Letter of Credit Fee then in effect pursuant to CLAUSE (a) above PLUS
      two percent (2.00%). In the event of any change in such Letter of Credit
      Fee, the Letter of Credit Fee hereunder shall change, effective as of the
      date of such change so as to remain two percent (2.00%) per annum above
      the then applicable Letter of Credit Fee.

      4.7   REIMBURSEMENT OF EXPENSES.

            (a) From and after the Closing Date, Borrower shall promptly
reimburse Agent for all Expenses of Agent as the same are incurred by Agent and
upon receipt of invoices therefor and, if requested by Borrower, such reasonable
backup materials and information as Borrower shall reasonably request.

                  (b) Borrower shall pay to each Lender, upon request, such
      amount or amounts as such Lender determines in good faith are necessary to
      compensate it for any loss, cost or expense incurred by it as a result of
      (i) any payment, prepayment or conversion of a LIBOR Rate Loan on a date
      other than the last day of an Interest Period for such LIBOR Rate Loan or
      (ii) a LIBOR Rate Loan for any reason (other than default by such Lender)
      not being made or converted, or any payment of principal thereof or
      interest thereon not being made, on the date therefor determined in
      accordance with the applicable provisions of this Credit Agreement. At the
      election of such Lender, and without limiting the generality of the
      foregoing, but without duplication, such compensation on account of losses
      may include an

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      amount equal to the excess of (A) the interest that would have been
      received from Borrower under and in accordance with the terms of this
      Credit Agreement on any amounts to be redeployed during an Interest Period
      or its remaining portion over (B) the interest component of the return
      that such Lender determines it could have obtained had it placed such
      amount on deposit in the interbank Dollar market selected by it for a
      period equal to such Interest Period or its remaining portion, as
      applicable.

      4.8 AUTHORIZATION TO CHARGE BORROWER'S ACCOUNT. Borrower hereby authorizes
Agent to charge Borrower's Account with the amount of all Fees, Expenses and
other payments to be paid hereunder, under the Fee Letter and under the other
Credit Documents as and when such payments become due. Borrower confirms that
any charges which Agent may so make to Borrower's Account as herein provided
will be made as an accommodation to Borrower and solely at Agent's discretion.

            4.9 INDEMNIFICATION IN CERTAIN EVENTS. If after the Closing Date,
      either (a) any change in or in the interpretation of any law or regulation
      is introduced, including with respect to reserve requirements, applicable
      to BTCo, Deutsche Bank AG or any other banking or financial institution
      from whom any of the Lenders borrows funds or obtains credit (a "FUNDING
      BANK"), Agent or any of the Lenders, or (b) Agent, a Funding Bank or any
      of the Lenders complies with any future guideline or request from any
      central bank or other Governmental Authority or (c) Agent, a Funding Bank
      or any of the Lenders determines that the adoption of any applicable law,
      rule or regulation regarding capital adequacy, or any change therein, or
      any change in the interpretation or administration thereof by any
      Governmental Authority, central bank or comparable agency charged with the
      interpretation or administration thereof has or would have the effect
      described below, or Agent, a Funding Bank or any of the Lenders complies
      with any request or directive regarding capital adequacy (whether of not
      having the force of law) of any such authority, central bank or comparable
      agency, and in the case of any event set forth in this clause (c), such
      adoption, change or compliance has or would have the direct or indirect
      effect of reducing the rate of return on any of the Lenders' capital as a
      consequence of its obligations hereunder or with respect to any
      participation interest in a Letter of Credit to a level below that which
      such Lender could have achieved but for such adoption, change or
      compliance (taking into consideration Agent's or such Funding Bank's or
      Lender's policies as the case may be with respect to capital adequacy) by
      an amount deemed by such Lender, in good faith, to be material, or any of
      the foregoing events described in clauses (a), (b) or (c) increases the
      cost to Agent, or any of the Lenders of (i) funding or maintaining the
      Line of Credit; or (ii) acquiring or maintaining any participation
      interest in any Letter of Credit, or reduces the amount receivable in
      respect thereof, by Agent, the Issuing Lender of such Letter of Credit or
      any Lender, then Borrower shall upon demand made therefor by Agent within
      ninety (90) days after an officer of Agent, such Issuing Lender or such
      Lender, as the case may be, responsible for overseeing the transactions
      contemplated by this Credit Agreement knows or has reason to know that
      such amount is payable by Borrower pursuant to this Section 4.9, pay to
      Agent, for the account of each applicable Lender or, as applicable, an
      Issuing or a Funding Bank, additional amounts sufficient to indemnify such
      Person against

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<PAGE>

      such increase in cost or reduction in amount receivable, provided that
      Agent, such Issuing Lender or such Lender is generally charging its
      similarly situated borrowers additional amounts resulting from the
      circumstances described herein. A certificate as to the amount of such
      increased cost and setting forth in reasonable detail the calculation
      thereof shall, if requested by Borrower, promptly be submitted to Borrower
      by the Person making such claim, and shall be conclusive absent manifest
      error.

            4.10  CALCULATIONS AND DETERMINATIONS.

            (a) All calculations of (i) interest hereunder and (ii) Fees, shall
be made by Agent, on the basis of a year of 360 days, or, if such computation
would cause the interest and fees chargeable hereunder to exceed the Highest
Lawful Rate, 365/366 days, in each case to the extent applicable for the actual
number of days elapsed (including the first day but excluding the last day)
occurring in the period for which such interest or fees are payable.

                  (b) In making the determinations contemplated by ARTICLE 4,
      Agent and each Lender may make such estimates, assumptions, allocations
      and the like that such Person in good faith determines to be appropriate.

                  (c) Each determination by Agent of an interest rate or payment
      hereunder shall be conclusive and binding for all purposes, absent
      manifest error.

                                    ARTICLE 5

                              CONDITIONS PRECEDENT

      5.1 CONDITIONS TO INITIAL CREDIT EVENT. The initial Credit Event is
subject to the satisfaction or waiver, immediately prior thereto or concurrently
therewith, of the following conditions precedent:

            (a) CLOSING DOCUMENT LIST. Agent and the Lenders shall have received
each of the agreements, opinions, reports, approvals, consents, certificates and
other documents set forth on the Closing Document List attached hereto as ANNEX
I.

                  (b) FEES AND EXPENSES. Agent and each of the Lenders shall
      have received payment in full of those Fees and Expenses referred to in
      the Fee Letter and in Article 4 payable to them on or before the initial
      Credit Event (or an irrevocable authorization to pay such Fees or Expenses
      out of the proceeds of the Loans).

                  (c) CHANGES IN MARKET. There shall not have occurred and be
      continuing a material adverse change in the market for syndicated bank
      credit facilities, or a material disruption of, or material adverse change
      in, financial, banking or capital market conditions, in each case since
      the date hereof, as reasonably determined by Agent.

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<PAGE>

                  (d) BORROWING BASE; UNUSED AVAILABILITY. After giving pro
      forma effect to the funding of the initial Loans, the issuance of the
      initial Letters of Credit, if any, and the payment of all costs, fees and
      expenses incurred by or for the account of Borrower in connection with the
      consummation of Debtor's Reorganization Plan and the execution and
      delivery of this Credit Agreement and the other Credit Documents, there
      shall be unused availability under the Borrowing Base, as determined by
      Agent, of at least $10,000,000.

                  (e) EFFECTIVENESS OF DEBTOR'S REORGANIZATION PLAN. But for the
      occurrence of the Initial Credit Event, all conditions precedent to the
      effectiveness of Debtor's Reorganization Plan, as set forth in Section
      XII(A) thereof, shall have been fully satisfied.

                  (f) ADDITIONAL DOCUMENTS. Borrower shall have executed and
      delivered to Agent and the Lenders all documents which Agent or any Lender
      determines are reasonably necessary to consummate the transactions
      contemplated hereby.

      5.2 CONDITIONS TO EACH CREDIT EVENT. On the date of each Credit Event
(including the initial Credit Event), both immediately before and immediately
after giving effect thereto and to the application of the proceeds therefrom,
the following statements shall be true to the satisfaction of Agent (and each
request for a Credit Event, shall constitute a representation and warranty by
Borrower that on the date of such Credit Event, immediately before and
immediately after giving effect thereto and to the application of the proceeds
therefrom, such statements are true):

            (a) The representations and warranties contained in this Credit
      Agreement and in each other Credit Document are true and correct in all
      material respects on and as of the date of such Credit Event as though
      made on and as of such date, except to the extent that such
      representations and warranties expressly relate solely to an earlier date
      (in which case such representations and warranties shall have been true
      and correct in all material respects on and as of such earlier date);

            (b) No event has occurred and is continuing, or could reasonably be
      expected to result from such Credit Event or the application of the
      proceeds thereof, which would constitute a Default or an Event of Default;

            (c) In the case of the making of any Revolving A Loan, the aggregate
      then outstanding principal amount of the Revolving B Loans shall be equal
      to the aggregate Revolving B Commitments then in effect;

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<PAGE>

            (d) In the case of the making of any Revolving B Loan (other than
      the initial Revolving B Loan), Agent shall have received evidence
      satisfactory to Agent in its sole discretion that the payment of any tax
      on Mortgages levied pursuant to Article 11 of the New York Tax Law (the
      "MORTGAGE TAX") has been made to the appropriate Governmental Authority in
      the State of New York prior to or concurrently with the making of such
      Revolving B Loan; PROVIDED, that Agent may, in its sole discretion,
      withhold (or reserve against availability) the applicable amount of
      Mortgage Tax from the proceeds of such Revolving B Loan and/or use such
      proceeds to pay such Mortgage Tax directly to such Governmental Authority.
      Borrower shall be responsible for computing or otherwise determining the
      amount of any such taxes and agrees that Agent shall be entitled to rely
      and act on any assessment, tax bill or other evidence of tax liability
      received by it for purposes of this Paragraph 5.2(d) and shall be
      indemnified by Borrower with respect to any such actions or failure to
      act; and

            (e) In the case of the issuance of any Letter of Credit, none of the
      events set forth in the proviso to the first sentence of SECTION 3.1(b)
      has occurred and is continuing or would result from the issuance of such
      Letter of Credit.

                                    ARTICLE 6

                         REPRESENTATIONS AND WARRANTIES

      To induce Agent and the Lenders to enter into this Credit Agreement and
each Issuing Lender to issue Letters of Credit, Borrower, with respect to itself
and each Credit Party, as applicable, hereby represents and warrants to Agent,
the Lenders and each Issuing Lender:

      6.1 ORGANIZATION AND QUALIFICATION. Each Credit Party (a) is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation, (b) has the power and authority to own its
properties and assets and to transact the businesses in which it presently is,
or proposes to be, engaged and (c) is duly qualified and is authorized to do
business and is in good standing in each jurisdiction where it presently is, or
proposes to be, engaged in business, except for any failures to be so qualified,
authorized or in good standing which singly or in the aggregate could not
reasonably be expected to have a Material Adverse Effect. SCHEDULE 6.1 lists all
jurisdictions in which each Credit Party is qualified to do business as a
foreign corporation.

      6.2 SOLVENCY. The fair saleable value of the assets of each Credit Party
exceeds all its probable liabilities, including those to be incurred pursuant to
this Credit Agreement and the other Credit Documents. None of Borrower,
Loehmann's Real Estate Holding Company or any of their respective Subsidiaries
(a) has unreasonably small capital in relation to the business in which it is,
or proposes to be, engaged and (b) has incurred, or believes that it will incur
after giving effect to the transactions contemplated by this Credit Agreement
and the other Credit Documents, debts beyond its ability to pay such debts as
they become due.

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      6.3 RIGHTS IN COLLATERAL; PRIORITY OF LIENS. Each Credit Party owns the
property granted by it as Collateral under the Credit Documents, free and clear
of any and all Liens in favor of third parties, except for Permitted Liens. Upon
the proper filing of the UCC financing statements, and the taking of the other
actions specified in the Closing Document List, the Liens granted pursuant to
the Credit Documents will constitute the valid and enforceable first, prior and
perfected Liens on the Collateral, except, in the case of priorities, for
Permitted Liens.

      6.4 NO CONFLICT. The execution, delivery and performance by each Credit
Party of each Credit Document to which it is a party: (a) are within its
corporate power; (b) are duly authorized by all necessary corporate action; (c)
are not in contravention of any Requirement of Law or any indenture, contract,
lease, agreement, instrument or other commitment to which it is a party or by
which it or any of its properties are bound; (d) do not require the consent,
registration or approval of any Governmental Authority or any other Person
(except such as have been duly obtained, made or given, and are in full force
and effect); and (e) will not, except as contemplated herein, result in the
imposition of any Liens upon any of its properties.

      6.5 ENFORCEABILITY. The Credit Agreement and all of the other Credit
Documents to which Borrower or any Subsidiary of Borrower is a party are the
legal, valid and binding obligations of Borrower and such Subsidiary, and are
enforceable against each of them, as the case may be, in accordance with their
terms, except as such enforceability may be limited by (a) the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and (b) general principles of equity.

      6.6 CONSENTS. No consent or authorization of, filing with or other act by
or in respect of, any Governmental Authority or any other Person is required in
connection with any Credit Event hereunder, the grant of the Liens pursuant to
the Credit Documents or with the execution, delivery, performance, validity or
enforceability of this Credit Agreement, the Notes or the other Credit
Documents, nor is any consent or authorization of, filing with or other act by
or in respect of, any Governmental Authority or any other Person required in
connection with the continuing material operations of Borrower or of Loehmann's
Real Estate Holding Company, except, in each case, for the filing of the UCC
financing statements and consents or authorizations which have been obtained or
filings which have been made and which, in each case, are in full force and
effect.

      6.7 FINANCIAL DATA. Borrower has furnished or caused to be furnished to
the Lenders the following Financial Statements, which have been prepared in
accordance with GAAP consistently applied throughout the periods involved: (a)
balance sheets of Parent as of January 29, 2000, and statements of operations,
shareholder's equity and cash flows for the fiscal year ended in January 29,
2000, audited by the Auditors and accompanied by an unqualified opinion thereof;
and (b) an unaudited balance sheet of Parent as of August 31, 2000, and
unaudited statements of operations, shareholder's equity and cash flows for the
period ending August 31, 2000.

      6.8 LOCATIONS OF OFFICERS, RECORDS AND INVENTORY. The address of the
principal place of business and chief executive office of each Credit Party is
set forth on SCHEDULE 6.8. The books

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and records of Borrower and each Subsidiary of Borrower, and all of their
respective chattel paper and records of Accounts, are maintained exclusively at
such locations. There is no location at which Borrower or any Subsidiary of
Borrower has any Collateral (except for vehicles and Inventory in transit for
processing in the ordinary course of business) other than those locations
identified on SCHEDULE 6.8. SCHEDULE 6.8 also contains a complete list of the
legal names and addresses of each warehouse at which Inventory is stored. None
of the receipts received by Borrower from any warehouseman states that the goods
covered thereby are to be delivered to bearer or to the order of a named person
or to a named person and such named person's assigns. Neither Borrower nor any
of its Subsidiaries sells any Inventory on consignment (as such term is defined
in Section 9-114 of the UCC).

      6.9 FICTITIOUS BUSINESS NAMES. Neither Borrower nor any of its
Subsidiaries has used any corporate or fictitious name (including d/b/a's,
tradenames or the like) during the five (5) years preceding the date hereof,
other than the corporate name under which it has executed this Credit Agreement.

      6.10 SUBSIDIARIES. Neither Borrower nor Loehmann's Real Estate Holding
Company has any Subsidiaries. The only Subsidiaries of each Credit Party are
those listed on SCHEDULE 6.10. Parent is the record and beneficial owner of all
of the issued and outstanding Capital Securities of each of the Subsidiaries
listed on SCHEDULE 6.10. There are no proxies, irrevocable or otherwise, with
respect to such Capital Securities, and no Capital Securities of any Subsidiary
of any Credit Party are or may become required to be issued by reason of any
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, Capital Securities of any Subsidiary of such Person, and there
are no contracts, commitments, understandings or arrangements by which any
Subsidiary of any Credit Party is or may become bound to issue additional
Capital Securities convertible into or exchangeable for such Capital Securities.
All of such shares listed on SCHEDULE 6.10 are owned by the indicated Person
free and clear of any Liens. SCHEDULE 6.10 contains a true, correct and complete
list, as to each Subsidiary of each Credit Party, of all jurisdictions in which
such Subsidiary is qualified to do business as a foreign corporation.

      6.11 NO JUDGMENTS OR LITIGATION. Except as set forth on SCHEDULE 6.11, and
for such of the following as could not singly or in the aggregate reasonably be
expected to have a Material Adverse Effect, no judgments, orders, writs or
decrees are outstanding against Borrower or any Subsidiary of Borrower nor is
there now pending or, to the best of Borrower's knowledge after diligent
inquiry, threatened any litigation, contested claim, investigation, arbitration,
or governmental proceeding by or against Borrower or any Subsidiary of Borrower.

      6.12 NO DEFAULTS. Neither Borrower nor any of its Subsidiaries is in
default under any term of any indenture, instrument or other commitment, or any
material contract, lease or agreement, to which Borrower or any Subsidiary of
Borrower is a party or by which Borrower or any Subsidiary of Borrower is bound.
Borrower does not know of any material dispute regarding any such indenture,
instrument, other commitment or such material contract, lease or agreement.

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      6.13  LABOR MATTERS.

            (a) There are no labor controversies pending or, to the best
knowledge of Borrower after diligent inquiry, threatened between Borrower or any
Subsidiary of Borrower and any of their respective employees, except for any of
the foregoing which singly or in the aggregate could not reasonably be expected
to have a Material Adverse Effect.

            (b) No Credit Party is engaged in any unfair labor practice. There
is (i) no unfair labor practice complaint pending against Borrower or any of its
Subsidiaries or, to the best knowledge of Borrower, threatened against any of
them, before the National Labor Relations Board, and no grievance or significant
arbitration proceeding arising out of or under collective bargaining agreements
is so pending against Borrower or any of its Subsidiaries or, to the best
knowledge of Borrower, threatened against any of them, (ii) no strike, labor
dispute, slowdown or stoppage pending against Borrower or any of its
Subsidiaries or, to the best knowledge of Borrower, threatened against any of
them and (iii) no union representation question with respect to the employees of
Borrower or any of its Subsidiaries and no union organizing activities.

      6.14  COMPLIANCE WITH LAW.

            (a) Except as discussed on SCHEDULE 6.14, and for such of the
following as could not singly or in the aggregate reasonably be expected to have
a Material Adverse Effect, neither Borrower nor any of its Subsidiaries has (i)
violated or failed to comply with any Requirement of Law or any requirement of
any self-regulatory organization or (ii) any Liability of which Borrower has
knowledge or reasonably should have knowledge in connection with any release,
generation, storage, use, transportation, disposal or other handling of any
hazardous or toxic waste, substance or constituent, or other substance into the
environment, or (iii) received any notice, letter or other written indication of
potential Liability arising from the release, generation, storage, use,
transportation, disposal or other handling of any hazardous or toxic waste,
substance or constituent or other substance into the environment.

            (b) Except as disclosed on SCHEDULE 6.14, and for such of the
following as could not singly or in the aggregate reasonably be expected to have
a Material Adverse Effect, none of the operations of Borrower or any Subsidiary
of Borrower is the subject of any federal or state investigation evaluating
whether Borrower or such Subsidiary disposed of any hazardous or toxic waste,
substance or constituent or other substance at any site that may require
remedial action, or any federal or state investigation evaluating whether any
remedial action is needed to respond to a release of any hazardous or toxic
waste, substance or constituent, or other substance into the environment.

      6.15 ERISA. No Credit Party and no ERISA Affiliate of any Credit Party,
maintains or contributes to any Plan other than those listed on SCHEDULE 6.15.

      6.16 INTELLECTUAL PROPERTY. Each Credit Party possesses or has legally
enforceable, cognizable rights to such assets, licenses, service marks,
trademarks and trade names as are

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necessary or advisable to continue to conduct its present and proposed business
activities. No Credit Party owns or has any rights to any patents, patent
applications, copyrights and no patents, patent applications, copyrights are
necessary to the conduct of such Person's business activities as currently
conducted or proposed.

      6.17 LICENSES AND PERMITS. Each Credit Party has obtained and holds in
full force and effect, all franchises, licenses, leases, permits, certificates,
authorizations, qualifications, easements, rights of way and other rights and
approvals which are necessary or advisable for the operation of its respective
businesses as presently conducted and as proposed to be conducted, except for
any such failures to obtain or hold in full force and effect which singly or in
the aggregate could not reasonably be expected to have a Material Adverse
Effect. No Credit Party is in violation of the terms of any such franchise,
license, lease, permit, certificate, authorization, qualification, easement,
right of way, right or approval, except for any such violations which singly or
in the aggregate could not reasonably be expected to have a Material Adverse
Effect.

      6.18 TITLE TO PROPERTY. All Real Estate is identified on SCHEDULE 6.18.
Loehmann's Real Estate Holding Company has a valid leasehold interest in, all
its Real Estate, and good title to all its other property, and none of such
property is subject to any Lien, except Permitted Liens. As of the Closing Date,
no Credit Party owns any Real Estate in fee simple.

      6.19 INVESTMENT COMPANY. Neither Borrower nor any of its Subsidiaries is
(a) an investment company or a company controlled by an investment company
within the meaning of the Investment Company Act of 1940, as amended, (b) a
holding company or a Subsidiary of a holding company, or an Affiliate of a
holding company or of a Subsidiary of a holding company, within the meaning of
the Public Utility Holding Company Act of 1935, as amended, or (c) subject to
any other law which purports to regulate or restrict its ability to borrow money
under or to consummate the transactions contemplated by this Credit Agreement or
the other Credit Documents or to perform its obligations hereunder or
thereunder.

      6.20  BORROWER TAXES AND TAX RETURNS.

            (a) Borrower and each Subsidiary of Borrower (and any affiliated
group of which Borrower or any Subsidiary of Borrower are now or have been
members) have timely filed (inclusive of any permitted extensions) with the
appropriate taxing authorities all returns (including information returns) in
respect of Borrower Taxes required to be filed through the date hereof and will
timely file (inclusive of any permitted extensions) any such returns required to
be filed on and after the date hereof and the information filed is complete and
accurate in all material respects. All material deductions taken by Borrower as
reflected in such income tax returns have been taken in accordance with
applicable laws and regulations, except deductions that may have been disallowed
but are being challenged in good faith and for which adequate reserves have been
made in accordance with GAAP. Neither Borrower nor any Subsidiary of Borrower,
nor any group of which Borrower or any Subsidiary of Borrower are now or were
members, have requested any extension

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of time within which to file tax returns (including information returns) in
respect of any Borrower Taxes.

            (b) All taxes, assessments, fees and other governmental charges
payable by Parent or by Borrower and any Subsidiary of Borrower (and any
affiliated group of which Borrower or any Subsidiary of Borrower is now or has
been a member) in respect of their incomes, franchises, businesses, properties
or otherwise ("BORROWER TAXES") in respect of periods beginning prior to the
date hereof, have been timely paid, or will be timely paid, other than any
Borrower Taxes (i) for which an adequate reserve has been established therefor
in accordance with GAAP or (ii) which have been discharged in the Debtor's Case
or have been provided for in, and are paid as and when due in accordance with,
the Debtor's Reorganization Plan. Neither Parent nor Borrower or any Subsidiary
of Borrower has any liability for taxes in excess of the amounts so paid or
reserves so established.

            (c) Except to the extent discharged in the Debtor's Case or provided
for in, and paid as and when due in accordance with the Debtor's Reorganization
Plan, no deficiencies for Borrower Taxes have been claimed, proposed or assessed
by any taxing or other Governmental Authority against Parent, Borrower or any
Subsidiary of Borrower and no Tax Liens have been filed. Except to the extent
discharged in the Debtor's Case or provided for in, and paid as and when due in
accordance with, the Debtor's Reorganization Plan, there are no pending or, to
the best of the knowledge of Borrower, threatened audits, investigations or
claims for or relating to any liability in respect of Borrower Taxes, and there
are no matters under discussion with any governmental authorities with respect
to Borrower Taxes which are likely to result in a material additional liability
for Borrower Taxes. Either the federal income tax returns of Parent have been
audited by the Internal Revenue Service and such audits have been closed, or the
period during which any assessments may be made by the Internal Revenue Service
has expired without waiver or extension, for all years up to and including the
fiscal year ended in January of 1992. Except as set forth in Schedule 6.20, no
extension of a statute of limitations relating to Borrower Taxes is in effect
with respect to Parent, Borrower or any Subsidiary of Borrower.

            (d) Except as set forth on Schedule 6.20, no Credit Party has any
obligation under any written tax sharing agreement or agreement regarding
payments in lieu of Borrower Taxes.

      6.21 STATUS OF ACCOUNTS. Each Account of Borrower is based on an actual
and bona fide sale and delivery of goods or rendition of services to customers,
made by Borrower in the ordinary course of its businesses; the goods and
inventory being sold by Borrower and the Accounts created thereby are the
exclusive property of Borrower and are not and shall not be subject to any Lien
whatsoever other than those arising under the Security Agreements and Borrower's
customers have accepted the goods or services, owe and are obligated to pay the
full amounts stated in the invoices according to their terms, without any
dispute, offset, defense, counterclaim or contra.

      6.22 MATERIAL CONTRACTS. SCHEDULE 6.22 contains a true, correct and
complete list of all the Material Contracts currently in effect on the date
hereof. None of the Material Contracts

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contains any burdensome restrictions on Loehmann's Real Estate Holding Company,
Borrower or any Subsidiary of Borrower or any of their respective properties.
All of the Material Contracts are in full force and effect, and no defaults
currently exist thereunder.

      6.23 AFFILIATE TRANSACTIONS. Except as set forth on SCHEDULE 6.23, neither
Borrower nor any of its Subsidiaries is a party to or bound by any agreement or
arrangement (whether oral or written) to which any Affiliate of Borrower or
Subsidiary of Borrower is a party except (a) in the ordinary course of and
pursuant to the reasonable requirements of Borrower's or such Subsidiary's
business and (b) upon fair and reasonable terms no less favorable to Borrower
and such Subsidiary than it could obtain in a comparable arm's-length
transaction with an unaffiliated Person.

      6.24 ACCURACY AND COMPLETENESS OF INFORMATION. All factual information
furnished by or on behalf of Borrower or any Subsidiary of Borrower in writing
to Agent, any Lender, or the Auditors for purposes of or in connection with this
Credit Agreement or any of the other Credit Documents, or any transaction
contemplated hereby or thereby is or will be true and accurate in all material
respects on the date as of which such information is dated or certified and not
incomplete by omitting to state any material fact necessary to make such
information not misleading at such time.

      6.25 RECORDING TAXES. All mortgage recording taxes, recording fees and
other charges payable in connection with the filing and recording of the Credit
Documents have either been paid in full by Borrower or arrangements for the
payment of such amounts satisfactory to Agent shall have been made.

      6.26 NO ADVERSE CHANGE OR EVENT. Other than as disclosed in the disclosure
statements filed in connection with Debtor's Reorganization Plan, since January
29, 2000, no change in the business, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of Borrower or any Subsidiary
of Borrower (or of Parent, as Borrower's predecessor in interest) has occurred,
and no event has occurred or failed to occur, that has had or could reasonably
be expected to have, either alone or in conjunction with all other such changes,
events and failures, a Materially Adverse Effect. Such an adverse change may
have occurred, and such an event may have occurred or failed to occur, at any
particular time notwithstanding the fact that at such time no Default or Event
of Default shall have occurred and be continuing.

      6.27 ADDITIONAL ADVERSE FACTS. Except for facts and circumstances
disclosed on SCHEDULE 6.27, no fact or circumstance is known to Borrower, as of
the Closing Date, that, either alone or in conjunction with all other such facts
and circumstances, has had or could reasonably be expected to have (so far as
Borrower or any Subsidiary of Borrower can foresee) a Materially Adverse Effect.
If a fact or circumstance disclosed on such Schedule should in the future have a
Materially Adverse Effect, such Materially Adverse Effect shall be a change or
event subject to SECTION 6.26 notwithstanding such disclosure.

      6.28 CREDIT CARD AGREEMENTS. Set forth on SCHEDULE 6.28 is a correct and
complete list of (a) all of the Credit Card Agreements and all other agreements,
documents and instruments

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existing as of the date hereof between or among Borrower, any of its Affiliates,
the Credit Card Issuers, the Credit Card Processors and any of their Affiliates,
(b) the percentage of each sale payable to the Credit Card Issuer or Credit Card
Processor under the terms of the Credit Card Agreements, (c) all other material
fees and charges payable by Borrower under or in connection with the Credit Card
Agreements and (d) the term of such Credit Card Agreements. The Credit Card
Agreements constitute all of the material agreements necessary for Borrower to
operate its business as presently conducted with respect to credit cards and
debit cards and no Accounts of Borrower arise from purchases by customers of
Inventory with credit cards or debit cards, other than those which are issued by
Credit Card Issuers with whom Borrower has entered into one of the Credit Card
Agreements set forth on SCHEDULE 6.28 or with whom Borrower has entered into a
Credit Card Agreement in accordance with SECTION 7.18 hereof. Each of the Credit
Card Agreements constitutes the legal, valid and binding obligations of Borrower
and to the best of Borrower's knowledge, the other parties thereto, enforceable
in accordance with their respective terms in all material respects (except as
such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and subject to general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law), and are in full force and effect. No default or event of
default, or act, condition or event which after notice or passage of time or
both, would constitute a default or an event of default under any of the Credit
card Agreements exists or has occurred. Borrower and the other parties thereto
have complied in all material respects, with all of the terms and conditions of
the Credit Card Agreements to the extent necessary for Borrower to be entitled
to receive all payments thereunder. Borrower has delivered, or caused to be
delivered to Agent, true, correct and complete copies of all of the Credit Card
Agreements.

      6.29  BANKRUPTCY MATTERS.

            (a) The Confirmation Order is a "Final Order" (as such term is
defined in Debtor's Reorganization Plan);

            (b) no motion, request or application seeking relief from or
revocation of the Confirmation Order has been filed under Rule 59 or 60 of the
Federal Rules of Civil Procedure, or any analogous Federal Rule of Bankruptcy
Procedure, or under 11 U.S.C. ss.1144; and

            (c) but for the occurrence of the initial Credit Event, all
conditions precedent to the occurrence of the "Effective Date" (as such term is
defined in the Debtor's Reorganization Plan) have occurred.

      Borrower may, at any time and from time to time, amend any one or more of
the Schedules referred in this Article 6, or create any Schedule with respect to
any representations or warranty in this Article 6, and any representation or
warranty contained herein to which any such Schedule relates shall from and
after the date of any such amendment or creation, as the case may be, refer to
such Schedule as so amended or created, PROVIDED, that in no event may Borrower
amend or

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create any such Schedule if such amendment or creation would reflect or evidence
a Default or Event of Default, except for any such Default or Event of Default
waived pursuant to Section 11.10.

                                    ARTICLE 7

                              AFFIRMATIVE COVENANTS

      Until the Expiration Date and payment and satisfaction of all Obligations:

      7.1 FINANCIAL INFORMATION. Borrower shall furnish or cause to be furnished
to the Lenders the following information within the following time periods:

            (a) as soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Consolidated Entity, (i) audited
Financial Statements as of the close of the fiscal year and for the fiscal year,
together with comparisons to the Financial Statements for the prior year and to
the most recent projections with respect to such fiscal year delivered pursuant
to CLAUSE (d) of this SECTION 7.1, in each case accompanied by (A) an
unqualified opinion of the Auditors, which opinion shall be in scope and
substance satisfactory to Agent in its sole discretion, (B) such Auditors'
"Management Letter" to Parent, (C) a written statement signed by the Auditors
stating that in the course of the regular audit of the business of the
Consolidated Entity which audit was conducted by the Auditors in accordance with
generally accepted auditing standards, the Auditors have not obtained any
knowledge of the existence of any Default or Event of Default under any
provision of this Credit Agreement, or, if such Auditors shall have obtained
from such examination any such knowledge, they shall disclose in such written
statement the existence of the Default or Event of Default and the nature
thereof, it being understood that such Auditors shall have no liability,
directly or indirectly, to anyone for failure to obtain knowledge of any such
Default or Event of Default, (ii) a narrative discussion of the consolidated and
consolidating financial condition and results of operations and the consolidated
and consolidating liquidity and capital resources of the Consolidated Entity for
such fiscal year prepared by the chief executive officer or chief financial
officer of Parent and (iii) a compliance certificate substantially in the form
of EXHIBIT E along with a schedule in form and substance satisfactory to Agent
of the calculations used in determining, as of the end of such fiscal year,
whether Borrower was in compliance with the covenants set forth in SECTIONS 8.1
AND 8.2 of this Credit Agreement for such year. To the extent that Parent's
annual report on Form 10-K contains any of the foregoing items, the Lenders will
accept such Form 10-K in lieu of such items;

            (b) as soon as available and in any event within forty-five (45)
days after the end of each fiscal quarter of the Consolidated Entity (except the
last fiscal quarter of any fiscal year) (i) Financial Statements as at the end
of and for such period and for the fiscal year to date, together with
comparisons to the Financial Statements for the same periods in the prior year
and to the most recent projections with respect to such fiscal year delivered
pursuant to CLAUSE (d) of this SECTION 7.1, all in reasonable detail and duly
certified (subject to year-end audit adjustments) by the chief executive officer
or chief financial officer of the Consolidated Entity as having been prepared in
accordance

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with GAAP, (ii) a narrative discussion of the consolidated and consolidating
financial condition and results of operations and the consolidated and
consolidating liquidity and capital resources of the Consolidated Entity for
such period and for the fiscal year to date prepared by the chief executive
officer or chief financial officer of Parent, and (iii) a compliance certificate
substantially in the form of EXHIBIT E along with a schedule in form and
substance satisfactory to Agent of the calculations used in determining, as of
the end of such fiscal quarter, whether Borrower was in compliance with the
covenants set forth in ARTICLES 7 AND 8 of this Credit Agreement for such
quarter. To the extent that Parent's quarterly report on Form 10-Q contains any
of the foregoing terms, the Lenders will accept such Form 10-Q in lieu of such
items;

            (c) as soon as available and in any event within thirty (30) days
after the end of each month (except the last month of any fiscal quarter, with
respect to which such reports shall be delivered within forty-five (45) days
after the end of the month (other than the last quarter of the fiscal year with
respect to which such reports shall be delivered within ninety (90) days after
the end of the month)), (i) consolidated and consolidating balance sheets for
the Consolidated Entity as at the end of such month and consolidated and
consolidating statements of operations and cash flows for such month and for the
fiscal year to date, together with a comparison to the consolidated and
consolidating balance sheets, statements of operations and statements of cash
flows for the same periods in the prior year, all in reasonable detail and duly
certified (subject to year-end audit adjustments) by the chief executive officer
or chief financial officer of Parent as having been prepared in accordance with
GAAP, (ii) a compliance certificate substantially in the form of EXHIBIT E along
with a schedule in form and substance satisfactory to Agent of the calculations
used in determining, as of the end of such month, whether Borrower was in
compliance with the covenants set forth in ARTICLES 7 AND 8 of this Credit
Agreement for such month;

            (d) not later than forty-five (45) days prior to the end of each
fiscal year commencing with the fiscal year ending January 31, 2001, monthly
projections of the consolidated and consolidating financial condition and
results of operations of the Consolidated Entity for the following fiscal year
and annual projections for each subsequent fiscal year through and including the
fiscal year in which the Expiration Date occurs, including, but not limited to,
projected consolidating balance sheets, consolidated and consolidating
statements of operations, consolidated and consolidating statements of cash
flows and consolidated and consolidating statements of changes in shareholders'
equity for such fiscal years;

            (e) a copy of the state and federal income tax returns of Borrower
and each Subsidiary of Borrower within thirty (30) days after they are filed
with the appropriate taxing authorities, if and when requested by any Lender;

            (f) upon request by Agent at any time and in any event not later
than 12:00 Noon on the second Business Day of each week, and within two (2)
Business Days after the last Business Day of each month (PROVIDED that no weekly
certificate need be delivered for the last week of each month covered by the
monthly certificate), a borrowing base certificate substantially in the form of
EXHIBIT F (a "BORROWING BASE CERTIFICATE"), duly completed, detailing Borrower's
Eligible Credit

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Card Receivables and Eligible Inventory as of each Friday of the immediately
preceding week and as of the last day of such month, as applicable, (or such
other date as Agent may specify in such request), and certified by the chief
executive officer or chief financial officer of Borrower and subject only to
adjustment upon completion of the normal year-end audit of physical inventory.
In addition, each Borrowing Base Certificate shall have attached to it such
additional schedules and/or other information as Agent may reasonably request;

            (g) promptly and in any event within three (3) Business Days after
becoming aware of the occurrence of a Default or Event of Default, a certificate
of the chief executive officer or chief financial officer of Borrower specifying
the nature thereof in reasonable detail;

            (h) within thirty (30) days after the end of each month (except the
last month of any fiscal quarter, with respect to which such reports shall be
delivered within forty-five (45) days after the end of the month (other than the
last quarter of the fiscal year with respect to which such reports shall be
delivered within ninety (90) days after the end of the month)), a comparison of
the actual results of consolidated and consolidating operations, consolidated
and consolidating cash flows and capital expenditures for the Consolidated
Entity for such month and for the period from the beginning of the current
fiscal year through the end of such month (i) with amounts projected for such
month and for the period from the beginning of the current fiscal year through
the end of such month pursuant to SECTION 7.1(d) above and (ii) with actual
results of operations, cash flow and capital expenditures for the Consolidated
Entity for the same periods of the prior fiscal year;

            (i) promptly upon the earlier of the mailing or filing thereof,
copies of all 10-Ks, 10-Qs, 8-Ks, proxy statements, annual reports, quarterly
reports, registration statements and any other filings or other communications
made by Parent to holders of its publicly traded securities or the Securities
Exchange Commission from time to time pursuant to the Securities Exchange Act of
1934, as amended, or the Securities Act of 1933, as amended;

            (j) within ten (10) Business Days after the occurrence thereof,
notice of any Casualty Loss; and

            (k) from time to time, such further information regarding the
Collateral, business affairs and prospects and financial condition of Parent,
Borrower and their respective Subsidiaries as Agent may reasonably request,
including, without limitation, third party appraisals of Borrower's fixed assets
or other Collateral.

      7.2 INVENTORY. Upon the request of Agent from time to time, Borrower shall
provide to Agent written statements listing items of Inventory in reasonable
detail as requested by Agent. Borrower shall conduct or cause to be conducted
(a) so long as an Event of Default shall not have occurred and be continuing,
twice each calendar year in accordance with its usual and customary business
practices in effect on the Closing Date and (b) upon the occurrence and during
the continuance of an Event of Default, at such other times and as of such dates
as Agent shall reasonably request, a physical count of the Inventory and, a copy
of each such count shall be promptly supplied to Agent accompanied by a report
of the cost of such Inventory, as determined

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in a manner consistent with the usual and customary presentation of the cost of
Borrower's Inventory in the Financial Statements. In addition to, and not in
limitation of, the foregoing, at any time and from time to time Agent may
conduct (or engage third parties to conduct) such field examinations,
appraisals, verifications and evaluations of the Inventory as Agent shall deem
necessary or appropriate in the exercise of its sole discretion. If any
Inventory is at any time hereafter stored or located at any warehouse not owned
or leased by Borrower, then Borrower shall promptly deliver to such warehouseman
notification of Agent's security interest in such Inventory and shall take such
other steps as Agent reasonably requires to perfect its security interests
therein.

      7.3 CORPORATE EXISTENCE. Borrower shall, and shall cause each of its
Subsidiaries to, (a) maintain its corporate existence (except that Subsidiaries
of Borrower may merge with wholly- owned Subsidiaries of Borrower upon providing
Agent with ten (10) days prior written notice) and maintain in full force and
effect all licenses, bonds, franchises, leases, trademarks and qualifications to
do business, and all patents, contracts and other rights necessary or desirable
to the profitable conduct of their businesses, except where a failure to
maintain any of the foregoing could singly or in the aggregate reasonably be
expected to have a Material Adverse Effect, and (b) continue in, and limit their
operations to, the same general lines of business as presently conducted by it.

      7.4 ERISA. Borrower shall deliver to Agent and each of the Lenders, at
Borrower's expense, the following information at the times specified below:

            (a) within thirty (30) days after the filing thereof with the DOL,
Internal Revenue Service or PBGC, copies of each annual report (form 5500
series), including SCHEDULE B thereto, filed with respect to each Benefit Plan;

            (b) within thirty (30) days after receipt by Borrower, any
Subsidiary of Borrower or any ERISA Affiliate of each actuarial report for any
Benefit Plan or Multiemployer Plan and each annual report for any Multiemployer
Plan, copies of each such report;

            (c) within ten (10) days upon the occurrence thereof, notification
of any increase in the benefits of any existing Plan or the establishment of any
new Plan or the commencement of contributions to any Plan to which Borrower, any
Subsidiary of Borrower or any ERISA Affiliate was not previously contributing;
and

            (d) within three (3) days upon the occurrence thereof, any event or
condition referred to in CLAUSES (i) THROUGH (vii) of SECTION 9.1(i), whether or
not such event or condition shall constitute an Event of Default.

      Borrower and its Subsidiaries shall establish, maintain and operate all
Plans to comply in all material respects with the provisions of ERISA, the Code,
and all other Requirements of Law, other than to the extent that Borrower or any
such Subsidiary (i) is in good faith contesting by appropriate proceedings the
validity or application of any such provision, law, rule, regulation or
interpretation and (ii) has made an adequate reserve or other appropriate
provision therefor as required in order to be in conformity with GAAP.

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      7.5 BOOKS AND RECORDS. Borrower agrees to maintain, and to cause each of
its Subsidiaries to maintain, books and records, including those pertaining to
the Collateral, in such detail, form and scope as is consistent with good
business practice, and agrees that such books and records will reflect Agent's
and Lenders' respective interests in its Accounts. Borrower agrees that Agent or
its agents may enter upon the premises of Borrower or any Subsidiary of Borrower
at any time and from time to time, during normal business hours and upon
reasonable notice under the circumstances, and at any time at all on and after
the occurrence of a Default, and which has not otherwise been waived pursuant to
SECTION 11.10, for the purposes of (a) conducting field examinations and
appraisals and inspecting, evaluating and verifying the Collateral, (b)
inspecting and/or copying (at Borrower's expense) any and all records pertaining
thereto and (c) discussing the business affairs and prospects and financial
condition of Borrower and each Subsidiary of Borrower with any officers,
employees and directors of Borrower or such Subsidiary or with the Auditors.
Borrower shall give Agent thirty (30) days prior written notice of any change in
the location of any Collateral or in the location of its chief executive office
or place of business from the locations specified in SCHEDULE 6.8, and Borrower
shall execute in advance of such change and cause to be filed and/or delivered
to Agent any financing statements, Collateral Access Agreements or other
documents required by Agent, all in form and substance satisfactory to Agent,
PROVIDED that Borrower shall only be required to use commercially reasonable
efforts to obtain Collateral Access Agreements from lessors of any leased
premises of Borrower. Borrower agrees to advise Agent promptly, in sufficient
detail, of any substantial changes relating to the type, quantity or quality of
the Collateral, or any event which singly or in the aggregate reasonably be
expected to have a material adverse effect on the value of the Collateral or on
the Liens granted for the benefit of Agent, the Lenders and the Issuing Lenders
thereon.

      7.6 COLLATERAL RECORDS. Borrower agrees to execute and deliver, and to
cause each of its Subsidiaries to execute and deliver, to Agent, from time to
time, solely for Agent's convenience in maintaining a record of the Collateral,
such written statements and schedules as Agent may reasonably require, including
those described in SECTION 7.1 of this Credit Agreement, designating,
identifying or describing the Collateral. The failure by Borrower or any
Subsidiary of Borrower, however, to promptly give Agent such statements or
schedules shall not affect, diminish, modify or otherwise limit the Liens on the
Collateral granted pursuant to the Credit Documents.

      7.7 SECURITY INTERESTS. Borrower shall, and shall cause each of its
Subsidiaries to, defend the Collateral against all claims and demands of all
Persons at any time claiming the same or any interest therein. Borrower shall,
and shall cause each of its Subsidiaries to, comply with the requirements of all
state and federal laws in order to grant to Agent, the Lenders and the Issuing
Lenders valid and perfected first priority security interests in the Collateral,
with perfection, in the case of any investment property, being effected by
giving Agent control of such investment property, rather than by the filing of a
UCC financing statement with respect to such investment property. Agent is
hereby authorized by Borrower to file any UCC financing statements covering the
Collateral whether or not Borrower's signatures appear thereon. Borrower shall,
and shall cause each of its Subsidiaries to, do whatever Agent may reasonably
request, from time to time, to effect the purposes of this Credit Agreement and
the other Credit Documents, including filing notices of

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liens, UCC financing statements, fixture filings and amendments, renewals and
continuations thereof; cooperating with Agent's representatives; keeping stock
records; obtaining waivers from landlords and mortgagees and from warehousemen
and their landlords and mortgagees; and, paying claims which might, if unpaid,
become a Lien on the Collateral.

      7.8 INSURANCE; CASUALTY LOSS. Borrower agrees to maintain, and to cause
each of its Subsidiaries to maintain, public liability insurance, third party
property damage insurance and replacement value insurance on the Collateral
under such policies of insurance, with such insurance companies, in such amounts
and covering such risks as are at all times satisfactory to Agent in its
commercially reasonable judgement. All policies covering the Collateral are to
name Agent as an additional insured and the loss payee in case of loss, and are
to contain such other provisions as Agent may reasonably require to fully
protect the interest of the Lenders in the Collateral and to any payments to be
made under such policies. Borrower shall diligently file and prosecute, or cause
to be filed and prosecuted, all claims for any award or payment in connection
with a Casualty Loss with respect to Borrower. Borrower shall receive in trust
and pay to Agent, promptly upon receipt thereof, any and all insurance proceeds
and payments received by Borrower or any of its Subsidiaries on account of any
Casualty Loss exceeding, in the aggregate for any calendar year, $500,000.
Casualty Loss proceeds in an aggregate amount of less than $500,000 in any
calendar year of Borrower may be retained by Borrower and utilized to repair,
restore or replace those assets damaged or lost due to the underlying casualty
so long as (i) no Default or Event of Default then exists or would be created
thereby, (ii) Agent receives evidence reasonably satisfactory to it that the Net
Disposition Proceeds received by Borrower in connection with such Casualty Loss
is sufficient to effectuate such repair, restoration or replacement, and (iii)
Agent determines in its reasonable discretion that such assets can be repaired,
restored or replaced no later than the 180th day prior to the Expiration Date.
To the extent that the aggregate amount of such proceeds and payments exceeds
$500,000 in any calendar year, Agent may, at its election and in its sole
discretion, (a) apply such proceeds and payments to the payment of accrued and
unpaid interest and/or outstanding principal under the Loans or any other
Obligations then due and payable, (b) hold such proceeds as additional
Collateral to secure any other Obligations not then due and payable or (c) pay
such proceeds to Borrower to be used to repair, replace or rebuild the asset or
property or portion thereof that was the subject of the Casualty Loss. After the
occurrence and during the continuance of an Event of Default, (a) no settlement
on account of any such Casualty Loss with respect to Borrower or any Subsidiary
of Borrower shall be made without the consent of the Lenders and (b) Agent may
participate in any such proceedings and Borrower shall deliver to Agent such
documents as may be requested by Agent to permit such participation and shall
consult with Agent, its attorneys and agents in the making and prosecution of
such claim or claims. Borrower hereby irrevocably authorizes and appoints Agent
its attorney-in-fact, and agrees that, upon request, it will cause each
Subsidiary of Borrower to authorize and appoint Agent its attorney-in-fact,
after the occurrence and during the continuance of an Event of Default, to
collect and receive any such award or payment and to file and prosecute such
claim or claims, which power of attorney shall be irrevocable and shall be
deemed to be coupled with an interest, and Borrower shall, upon demand of Agent,
make, execute and deliver, and cause each of its Subsidiary to make, execute and
deliver, any and all assignments and other instruments sufficient for the
purpose of assigning any such award or payment to Agent

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for the benefit of Agent, the Lenders and the Issuing Lenders, free and clear of
any encumbrances of any kind or nature whatsoever.

      7.9 BORROWER TAXES. Borrower agrees to pay, when due, and to cause each of
its Subsidiaries to pay when due, all Borrower Taxes lawfully levied or assessed
against Borrower, any Subsidiary of Borrower or any of their properties,
including any of the Collateral, before any penalty or interest accrues thereon;
PROVIDED that, unless Borrower Taxes have become a federal tax or ERISA Lien on
any of the assets of Borrower or any such Subsidiary, no Borrower Taxes need be
paid if the same are being contested, in good faith, by appropriate proceedings
promptly instituted and diligently conducted and if an adequate reserve or other
appropriate provision shall have been made therefor as required in order to be
in conformity with GAAP.

      7.10  COMPLIANCE WITH LAWS.

            (a) Borrower agrees to comply, and to cause each of its Subsidiaries
to comply, in all material respects, with all Requirements of Law applicable to
its business or its operations or to the Collateral or any part thereof, in
every case where non-compliance could reasonably be expected to have, singly or
in the aggregate, a Material Adverse Effect.

            (b) Within fifteen (15) days after Borrower learns of the enactment
or promulgation of any Requirement of Law which could reasonably be expected to
have a Material Adverse Affect, Borrower shall provide Agent with notice
thereof.

            (c) At the reasonable request of Agent from time to time, but in any
event not more frequently than once in any twelve month period, and at the sole
cost and expense of Borrower, Borrower shall retain an environmental consulting
firm, satisfactory to Agent in its commercially reasonable judgment, to conduct
an environmental review, audit or investigation of the specific items as
requested by Agent relating to the properties of Borrower and its Subsidiaries
located in the United States and provide to Agent and each Lender a copy of any
reports delivered in connection therewith. At the request of Agent, Borrower
shall provide Agent with any additional information relating to environmental
matters and any potential related liability resulting therefrom as Agent may
reasonably request.

      7.11 USE OF PROCEEDS. The initial Loans made to Borrower hereunder shall
be used by Borrower to (a) refinance the DIP Credit Facility (as such term is
defined in the Debtor's Reorganization Plan), (b) pay other allowed
administrative expenses and claims in accordance with the Debtor's
Reorganization Plan, and (c) pay costs and expenses with respect to the
foregoing and this Credit Agreement, which are due and payable on the Closing
Date, including the Fees and Expenses due on the Closing Date pursuant to
ARTICLE 4. The proceeds of any subsequent Loans made hereunder shall be used by
Borrower solely for general corporate purposes. Borrower shall not use any
portion of the proceeds of any such Loans for the purpose of purchasing or
carrying any "margin stock" (as defined in Regulation U of the Board of
Governors of the Federal Reserve System) in any manner which violates the
provisions of Regulation U or X of said Board of

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Governors or for any other purpose in violation of any applicable statute or
regulation, or of the terms and conditions of this Credit Agreement.

      7.12 FISCAL YEAR. Borrower agrees to continue to maintain its fiscal year
as a year ending on or about January 31st in each calendar year unless otherwise
required by law, in which case Borrower will give Agent at least thirty (30)
days prior written notice thereof.

      7.13 NOTIFICATION OF CERTAIN EVENTS. Borrower agrees that it shall
promptly (but, in the case of CLAUSE (g), in any event within five (5) Business
Days after Borrower learns of any such proceeding, change, development or event)
notify Agent of:

            (a) any Material Contract that is terminated or amended or any new
Material Contract that is entered into (in which event Borrower shall provide
Agent with a copy of such Material Contract);

            (b) any material change or amendment of the material terms upon
which suppliers of Borrower or any of its Subsidiaries do business with Borrower
or such Subsidiary;

            (c) the entry of any order, judgment or decree in excess of
$1,000,000 against any Credit Party or any of their respective properties or
assets;

            (d) receipt by Borrower or any of its Subsidiaries of any
notification of a material violation of any Requirement of Law by any Credit
Party from any Governmental Authority;

            (e) any actual or prospective change, development or event which has
had or could reasonably be expected to have a Material Adverse Effect;

            (f) any proceedings being instituted or threatened to be instituted
by or against any Credit Party, before any Governmental Authority or arbitrator
which has had or could reasonably be expected to have a Material Adverse Effect;

            (g) (i) any notice of a material default by Borrower under any of
the Credit Card Agreements or of any default which might result in the Credit
Card Issuer or Credit Card Processor ceasing to make payments or suspending
payments to Borrower, (ii) any notice from any Credit Card Issuer or Credit Card
Processor that such person is ceasing or suspending, or will cease or suspend,
any present or future payments due or to become due to Borrower from such
person, or that such person is terminating or will terminate any of the Credit
Card Agreements, and (iii) the failure of Borrower to comply with any material
terms of the Credit Card Agreements or any terms thereof which might result in
the Credit Card Issuer or Credit Card Processor ceasing or suspending payments
to Borrower; and

            (h) any Event of Default or Default.

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      7.14 INTELLECTUAL PROPERTY. Borrower shall, and shall cause each of its
Subsidiaries to, do and cause to be done all things necessary to preserve and
keep in full force and effect all registrations of patents, copyrights,
trademarks, service marks and other marks, trade names or other trade rights
necessary for the profitable conduct of its business.

      7.15 MAINTENANCE OF PROPERTY. Borrower agrees to keep, and to cause each
of its Subsidiaries to keep, all property useful and necessary to its respective
businesses in good working order and condition (ordinary wear and tear excepted)
in accordance with their past operating practices and not to commit or suffer
any material waste with respect to any of its properties.

      7.16 FURTHER ASSURANCES. Borrower shall take, and shall cause each of its
Subsidiaries to take, all such further actions and execute all such further
documents and instruments as Agent may at any time reasonably determine in its
sole discretion to be necessary or desirable to further carry out and consummate
the transactions contemplated by the Credit Documents, to cause the execution,
delivery and performance of the Credit Documents to be duly authorized and to
perfect or protect the Liens (and the priority status thereof) of Agent on the
Collateral. Borrower shall, and shall cause Loehmann's Real Estate Holding
Company, to exercise commercially reasonable efforts to deliver to Agent within
four (4) months of the Closing Date, fully executed leasehold mortgages or deeds
of trust, in form and substance reasonably satisfactory to Agent, together with
such title insurance policies, legal opinions and other documents as reasonably
requested by Agent with respect to each item of Real Estate listed on Schedule
6.18.

      7.17 CHANGES IN MARKET. Borrower agrees that Agent shall be entitled,
after consultation with Borrower, to change the terms and conditions, pricing
and structure of the credit facilities extended hereunder if Agent determines
that such changes are advisable to ensure the successful initial syndication of
thereof, PROVIDED, that, as a result thereof, the Total Commitments shall not be
reduced to an amount less than $65,000,000.

      7.18 CREDIT CARD AGREEMENTS. Borrower shall (a) observe and perform all
material terms, covenants, conditions and provisions of the Credit Card
Agreements to be observed and performed by it at the times set forth therein;
(b) not do, permit, suffer or refrain from doing anything, as a result of which
there could reasonably be expected to be a default under or breach of any of the
terms of any of the Credit Card Agreements and (c) at all times maintain in full
force and effect the Credit Card Agreements and not terminate, cancel,
surrender, modify, amend, waive or release any of the Credit Card Agreements, or
consent to or permit to occur any of the foregoing; except, that, Borrower may
terminate or cancel any of the Credit Card Agreements in the ordinary course of
the business of Borrower; PROVIDED, that, Borrower shall give Agent not less
than thirty (30) days' prior written notice of its intention to so terminate or
cancel any of the Credit Card Agreements; (d) not enter into any new Credit Card
Agreements with any new Credit Card Issuer unless (i) Agent shall have received
not less than thirty (30) days' prior written notice of the intention of
Borrower to enter into such agreement (together with such other information with
respect thereto as Agent may request) and (ii) Borrower delivers, or causes to
be delivered to Agent, a Credit Card Acknowledgment in favor of Agent; (e) give
Agent immediate written notice of any

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Credit Card Agreement entered into by Borrower after the date hereof, together
with a true, correct and complete copy thereof and such other information with
respect thereto as Agent may request; and (f) furnish to Agent, promptly upon
the request of Agent, such information and evidence as Agent may reasonably
require from time to time concerning the observance, performance and compliance
by Borrower or the other party or parties thereto with the terms, covenants or
provisions of the Credit Card Agreements.

                                    ARTICLE 8

                               NEGATIVE COVENANTS

      Until the Expiration Date and payment and satisfaction of all Obligations,
Borrower agrees that:

      8.1   FINANCIAL COVENANTS.

            (a) MINIMUM EBITDA. Borrower shall not permit its EBITDA for any
twelve month period ending on the last day of each fiscal quarter of Borrower
during the term of this Credit Agreement, to be less than $16,000,000 for any
fiscal quarter ending on or before January 31, 2002 and $15,000,000 for each
fiscal quarter thereafter.

            (b) FIXED CHARGE COVERAGE RATIO. Borrower shall not permit the Fixed
Charge Coverage Ratio for the twelve-month period ending on the last day of each
fiscal quarter of Borrower during the term of this Credit Agreement, to be less
than 1.00 to 1.00.

            (c) INVENTORY TURNOVER RATIO. Borrower shall not permit its
Inventory Turnover Ratio for the twelve-month period ending on the last day of
each fiscal quarter of Borrower during the term of this Credit Agreement, to be
less than 3.00 to 1:00.

      8.2 CAPITAL EXPENDITURES. Borrower shall not and shall not permit any of
its Subsidiaries to, directly or indirectly, make payments for Capital
Expenditures in any fiscal year, in the aggregate for Borrower and its
Subsidiaries combined, in excess of (a) in Borrower's fiscal year ending January
31, 2001, $9,250,000; in Borrower's fiscal year ending January 31, 2002,
$12,500,000; and in each of Borrower's fiscal years ending January 31, 2003 and
thereafter, $6,500,000; provided that if Borrower's Fixed Charge Coverage Ratio
for the fiscal year ending immediately prior to January 31, 2003 or any fiscal
year thereafter is at least 1.25 to 1.00, then Borrower may make payments for
Capital Expenditures in the following fiscal year in an amount not to exceed
$10,000,000; PLUS, in each case, (b) 100% of the amount permitted to be spent on
capital expenditures pursuant to clause (a) of this Section 8.2 in the
immediately preceding fiscal year and not so used. Borrower shall not and shall
not permit any of its Subsidiaries to, directly or indirectly, make any Capital
Expenditures that are not directly related to the businesses conducted on the
Closing Date by Borrower or such Subsidiary.

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      8.3 NO ADDITIONAL INDEBTEDNESS. Borrower shall not and shall not permit
any of its Subsidiaries to, directly or indirectly, incur, create, assume or
suffer to exist any Indebtedness other than:

            (a) Indebtedness secured by Purchase Money Liens not to exceed, in
the aggregate for Borrower and its Subsidiaries combined, $1,000,000 outstanding
at any one time, such Indebtedness to be from parties and to have terms and
conditions satisfactory to Agent;

            (b) Indebtedness arising under this Credit Agreement and the other
Credit Documents; and

            (c) Indebtedness described on SCHEDULE 8.3(d) and any refinancing of
such Indebtedness; PROVIDED that the aggregate principal amount of such
Indebtedness is not increased and such refinancing is on terms and conditions
that are no more restrictive than the terms and conditions of the Indebtedness
being refinanced.

      8.4 NO LIENS; JUDGMENTS. Borrower shall not and shall not permit any of
its Subsidiaries to, directly or indirectly, mortgage, assign, pledge, transfer,
create, incur, assume, suffer to exist or otherwise permit any Lien (whether as
a result of a purchase money or title retention transaction, or other security
interest, judgment or otherwise) to exist on any of its property, assets,
revenues or goods, whether real, personal or mixed, whether now owned or
hereafter acquired, except for the following (the "PERMITTED LIENS"):

            (a)   Liens  granted by  Borrower  or  Subsidiary  pursuant to any
Credit Document;

            (b)   Liens listed on SCHEDULE 8.4(b);

            (c)   Purchase Money Liens;

            (d) Liens of warehousemen, mechanics, material men, workers,
repairmen, common carriers, landlords and other similar Liens arising by
operation of law or otherwise, not waived in connection herewith, for amounts
that are not yet due and payable or which are being diligently contested in good
faith by Borrower or Subsidiary by appropriate proceedings;

            (e) Attachment and judgment Liens securing outstanding liabilities
of Borrower or any Subsidiary of Borrower which individually or in the aggregate
for all such Liens are not in excess of $500,000 for Borrower and its
Subsidiaries combined (exclusive of (i) any amounts that are duly bonded to the
reasonable satisfaction of Agent or (ii) any amount adequately covered by
insurance as to which the insurance company has not disclaimed or disputed in
writing its obligations for coverage);

            (f) Liens for Borrower Taxes not yet due and payable or which are
being diligently contested in good faith by Borrower by appropriate proceedings,
PROVIDED that in any such case an adequate reserve is being maintained by
Borrower for the payment of same;

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            (g) Deposits or pledges to secure obligations arising in the
ordinary course of business under workmen's compensation, social security or
similar laws, or under unemployment insurance;

            (h) Deposits or pledges to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory obligations, surety
and appeal bonds and other obligations of like nature arising in the ordinary
course of business;

            (i) Easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not materially detract
from the value of the property subject thereto or materially interfere with the
ordinary conduct of the business of Borrower or any Subsidiary of Borrower; and

            (j) Extensions and renewals of the foregoing permitted Liens;
PROVIDED that the aggregate amount of such extended or renewed Liens is not
increased and such extended or renewed Liens are on terms and conditions no more
restrictive taken as a whole than the terms and conditions of the Liens being
extended or renewed.

      8.5 NO SALE OF ASSETS. Borrower shall not and shall not permit any of its
Subsidiaries to, directly or indirectly, sell, lease, assign, transfer or
otherwise dispose of any assets other than (a) Inventory in the ordinary course
of business, (b) individual items of Collateral (other than any Capital
Securities of any of its Subsidiaries), with a book value of less than, in the
aggregate for Borrower and its Subsidiaries combined, during any fiscal year,
$250,000, (c) obsolete or worn out property disposed of in the ordinary course
of business and (d) other dispositions of assets, PROVIDED that (i) such other
dispositions are for fair value; (ii) one hundred percent (100%) of the
consideration for each of such other dispositions is received by Borrower in the
form of cash; and (iii) the consideration for such other dispositions during the
term of this Credit Agreement does not exceed, in the aggregate for Borrower and
its Subsidiaries combined, $1,000,000.

      8.6 NO CORPORATE CHANGES. Borrower shall not and shall not permit any of
its Subsidiaries to, directly or indirectly, merge, consolidate or otherwise
alter or modify Borrower's or such Subsidiary's Governing Documents, corporate
name, mailing addresses, principal places of business, structure, status or
existence, or enter into or engage in any operation or activity materially
different from that currently being conducted by Borrower or such Subsidiary,
except that (a) Borrower or any of its Subsidiaries may alter or modify its
Governing Documents so long as such alterations or modifications (i) are not
otherwise prohibited by the terms of this Credit Agreement or any of the other
Credit Documents and (ii) could not singly or in the aggregate reasonably be
expected to have a material adverse effect on the respective rights and remedies
of Agent, the Lenders or any Issuing Lender hereunder or under any of the other
Credit Documents; (b) any Subsidiary of Borrower may be merged or consolidated
with or into Borrower so long as (x) Borrower shall be the continuing or
surviving corporation and (y) no Default or Event of Default shall result
therefrom; and (c) Borrower or any of its Subsidiaries may change its corporate
name, mailing address or principal place of business so long as (x) it shall
have given Agent not less than

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thirty days' prior written notice of its intention to do so, clearly describing
such new name, mailing address or principal place of business, as the case may
be, and providing such other information in connection therewith as Agent may
reasonably request, (y) with respect to such new principal place of business, it
shall have taken all action reasonably required by Agent to maintain Agent's
Liens on the Collateral purported to be granted under the Credit Documents at
all times fully perfected and in full force and effect and (z) it shall have
furnished an opinion of counsel reasonable acceptable to Agent (and in any event
substantially in the form of the opinion, if any, with respect to such matters
accepted by Agent in connection with the initial Loans advanced hereunder) to
the effect that all financing or continuation statements, or amendments or
supplements thereto, have been filed in the appropriate filing office or
offices, and all other actions have been taken, in order to prefect (and
maintain the perfection of) the Liens purported to be granted on the Collateral
under the Credit Documents.

      8.7 NO GUARANTIES. Borrower shall not and shall not permit any of its
Subsidiaries to, directly or indirectly, issue or assume any Guaranty with
respect to the Liabilities of any other Person, including any Subsidiary or
Affiliate of Borrower, except (a) by the endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business, (b) by the giving of indemnities in connection with the sale of
Inventory or other asset dispositions permitted hereunder and (c) Indebtedness
permitted to be incurred pursuant to SECTION 8.3.

      8.8 NO RESTRICTED PAYMENTS. Borrower shall not and shall not permit any of
its Subsidiaries to, directly or indirectly make any Restricted Payment,
PROVIDED, that:

            (a)   any  Subsidiary of Borrower may declare and pay dividends to
Borrower;

            (b) Borrower may make distributions to Parent to permit Parent and
Holdings (contemporaneously with, and in the same amount of, such distributions)
to pay Federal, state and local income tax obligations actually due and payable
in cash by Parent and by Holdings, to the extent such obligations are the direct
result of the net income or loss of Borrower and its Subsidiaries being
attributable to Parent (or net income of Parent being attributable to Holdings,
as applicable) for tax purposes;

            (c) so long as immediately before and after giving effect thereto,
no Event of Default shall have occurred and be continuing, Borrower may make
distributions to Parent to permit Parent (contemporaneously with, and in the
same amount of, such distributions) to pay and/or to make distributions to
permit Holdings and/or Parent to pay, reasonable legal, accounting and other
usual and customary out of pocket fees and expenses incurred as a direct result
of Parent's ownership of the Capital Securities of Borrower (and of Holding's
ownership of the Capital Securities of Parent, as applicable), including
reasonable fees and expenses necessary to maintain the corporate existence and
good standing of Parent or of Holdings (including reasonable and customary fees
of directors and auditors and other reasonable and customary corporate expenses

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relating thereto), as applicable, and to make all applicable filings (including
ongoing securities law compliance) with any Governmental Authority; and

            (d) Borrower may make distributions to Parent to permit Parent
(contemporaneously with, and in the same amount of, such distributions), to make
distributions to Holdings in order to permit Holdings to make (contemporaneously
with, and in the same amount of, such distributions), semi-annual payments of
cash interest in an amount equal to the Senior Note Interest Expense for a given
semi-annual interest period under the Senior Notes, provided all of the
following conditions precedent or concurrent are satisfied: (i) immediately
before and after giving effect thereto, no Event of Default shall have occurred
and be continuing, (ii) Borrower's Free Cash Flow as of the date of such payment
is positive, and (iii) Borrower pays to Agent a Matching Amortization Payment in
an amount equal to the amount of such Senior Interest Expense.

      8.9 NO INVESTMENTS. Borrower shall not and shall not permit any of its
Subsidiaries to, directly or indirectly, make any Investment in any Person other
than:

            (i) Advances or loans made in the ordinary course of business not to
      exceed in the aggregate for Borrower and its Subsidiaries combined,
      $100,000, outstanding at any one time to any one Person and $500,000 in
      the aggregate outstanding at any one time;

            (ii)  Cash Equivalents;

            (iii) Interest-bearing demand or time deposits (including
      certificates of deposit) which are insured by the Federal Deposit
      Insurance Corporation ("FDIC") or a similar federal insurance program;
      however, PROVIDED that Borrower may, in the ordinary course of its
      business, maintain in its disbursement accounts from time to time accounts
      in excess of then applicable FDIC or other program insurance limits;

            (iv) Guaranties permitted under Section 8.7;

            (v) Permitted Investments to be held in and utilizing funds
      available and deposited into the Revolver Payments Cash Collateral
      Account; and

            (vi) Such other Investments as Agent may approve in writing in its
      sole discretion.

      8.10 NO AFFILIATE TRANSACTIONS. Other than as expressly contemplated under
the Guaranty and License Agreement or that certain Tax Sharing Agreement dated
as of the date hereof among certain of the Credit Parties, Borrower shall not
and shall not permit any of its Subsidiaries to, directly or indirectly, enter
into any transaction with, including the purchase, sale, lease or exchange of
property or the rendering of any service to any Subsidiary of Borrower or other
Affiliate of Borrower and whether or not such transaction would otherwise be
permitted under any of the other provisions of the Credit Documents, except in
the ordinary course of and pursuant to the reasonable requirements of Borrower's
or such Subsidiary's business, as the case may be, and upon

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fair and reasonable terms no less favorable to Borrower or such Subsidiary than
could be obtained in a comparable arms-length transaction with an unaffiliated
Person.

            8.11 LIMITATION ON TRANSACTIONS UNDER ERISA. Borrower shall not and
      shall not permit any of its Subsidiaries to, directly or indirectly:

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

                  (b) allow the representation made in Section 6.15 to be untrue
      at any time.

      8.12 NO ADDITIONAL BANK ACCOUNTS. Borrower shall not and shall not permit
any of its Subsidiaries to, directly or indirectly, open, maintain or otherwise
have any checking, savings or other accounts at any bank or other financial
institution, or any other account where money is or may be deposited or
maintained with any Person, other than the Disbursement Account, the Depositary
Accounts, the Concentration Account and the accounts set forth on SCHEDULE 8.12.

            8.13 MATERIAL AMENDMENTS OF MATERIAL CONTRACTS. Borrower shall not
      and shall not permit any of its Subsidiaries to, directly or indirectly,
      without the prior written consent of Agent, amend, modify, cancel or
      terminate or permit the amendment, modification, cancellation or
      termination of, any of the Material Contracts.

            8.14 ADDITIONAL RESTRICTIVE COVENANTS. Borrower shall not and shall
      not permit any of its Subsidiaries to, directly or indirectly, create or
      otherwise cause or suffer to exist or become effective (a) any consensual
      restriction limiting the ability (whether by covenant, event of default,
      subordination or otherwise and including any such the effect of which is
      to require the providing of equal and ratable security to any other Person
      in the event a Lien is granted to or for the benefit of Agent and the
      Lenders) to (i) pay dividends or make any other distributions on shares of
      its Capital Securities held by Borrower or any other Subsidiary of
      Borrower; (ii) pay any Liability owed to Borrower or any other Subsidiary;
      (iii) make any loans or advances to other Investments in Borrower or in
      any other Subsidiary of Borrower; or (iv) create or permit to exist any
      Lien upon the assets of Borrower or any Subsidiary of Borrower, other than
      Liens permitted under Section 8.4; or (b) any contractual obligation which
      may restrict or inhibit in any material respect Agent's rights or ability
      to sell or otherwise dispose of the Collateral or any part thereof after
      the occurrence of an Event of Default; other than Permitted Restrictive
      Covenants.

            8.15 NO ADDITIONAL SUBSIDIARIES. Borrower shall not and shall not
      permit any of its Subsidiaries to, directly or indirectly, form or acquire
      any new Subsidiaries.

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            8.16 LIMITATION ON DERIVATIVE TRANSACTIONS. Borrower shall not and
      shall not permit any of its Subsidiaries to, enter into any Derivative
      Transaction.

                                    ARTICLE 9

                         EVENTS OF DEFAULT AND REMEDIES

            9.1 EVENTS OF DEFAULT. The occurrence of any of the following events
      shall constitute an Event of Default hereunder (whatever the reason for
      such event and whether it shall be voluntary or involuntary, or within or
      without the control of Borrower, any Subsidiary of Borrower or any other
      Credit Party, or be effected by operation of law or pursuant to any
      judgment or order of any court or any order, rule or regulation of any
      governmental or nongovernmental body):

                  (a) failure of Borrower to pay (i) any interest, Fees,
      Expenses or other Obligations (other than an Obligation referred to in
      CLAUSE (ii)) when due, or to the extent that the amount of any such
      payment is greater than the amount by which the Borrowing Base then
      exceeds Total Exposure, then within three (3) Business Days of when due,
      in each case whether at stated maturity, by acceleration, or otherwise, or
      (ii) when due, whether at stated maturity, by acceleration or otherwise
      any (A) principal of any Loan or (B) reimbursement obligation with respect
      to any Letter of Credit; or

                  (b) failure of Borrower or any Subsidiary of Borrower to
      perform, comply with or observe any term, covenant or agreement applicable
      to it contained in Section 2.4(b)(iv) or in 7.1, 7.2, 7.5, 7.6, 7.7, 7.8,
      7.13, 7.17 and 7.18 or Article 8; or

            (c) (i) any representation or warranty made by Borrower, any
      Subsidiary of Borrower or any other Credit Party under this Credit
      Agreement or under any other Credit Document shall prove to have been
      incorrect or misleading in any material respect when made or deemed made;
      or

                  (ii) Borrower, any Subsidiary of Borrower or any other Credit
      Party shall fail to comply with any covenant contained in this Credit
      Agreement (other than under a provision covered by Section 9.1(a) or (b)
      above) or the other Credit Documents (other than a provision covered under
      Section 9.1(a)(ii)(B) above), which failure to comply is not cured within
      ten (10) Business Days of its occurrence; or

            (d) dissolution, liquidation, winding up or cessation of any Credit
Party's businesses, or the failure of any Credit Party to meet its debts as they
mature; or

                  (e) the commencement by or against any Credit Party of any
      bankruptcy, insolvency, arrangement, reorganization, receivership or
      similar proceedings under any

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      federal or state law and, in the event any such proceeding is commenced
      against any Credit Party, such proceeding is not dismissed within
      forty-five (45) days; or

                  (f)   the occurrence of a Change of Control; or

                  (g) (i) an Event of Default occurs under the Senior Note
      Indenture or a default or an event of default occurs under any of the
      other Senior Note Documents (in each case which shall continue beyond any
      expiration of any applicable grace periods), or (ii) the occurrence of a
      default or event of default (in each case which shall continue beyond the
      expiration of any applicable grace periods) which permits, or could
      permit, the acceleration of the maturity of, any note, agreement or
      instrument evidencing any other Indebtedness of Borrower or any of its
      Subsidiaries, and the aggregate principal amount of all such Indebtedness
      with respect to which a default or an event of default has occurred, or
      the maturity of which is permitted to be accelerated, exceeds $500,000; or

                  (h) any covenant, agreement or obligation of any Credit Party
      contained in or evidenced by any of the Credit Documents shall cease to be
      enforceable in accordance with its terms, or any party (other than Agent
      or the Lenders, in its capacity as such, and not in its capacity as an
      Issuing Lender) to any Credit Document shall deny or disaffirm its
      obligations under any of the Credit Documents, or any Credit Document
      shall be cancelled, terminated, revoked or rescinded without the express
      prior written consent of Agent, or any action or proceeding shall have
      been commenced by any Person (other than Agent or a Lender, in its
      capacity as such, and not in its capacity as an Issuing Lender) seeking to
      cancel, revoke, rescind or disaffirm the obligations of any party to any
      Credit Document, or any court or other Governmental Authority shall issue
      a judgment, order, decree or ruling to the effect that any of the
      obligations of any party to any Credit Document are illegal, invalid or
      unenforceable; or

                  (i) (i) any Termination Event shall occur with respect to any
      Benefit Plan of Borrower, any Subsidiary of Borrower or any ERISA
      Affiliate, (ii) any Accumulated Funding Deficiency, whether or not waived,
      shall exist with respect to any such Benefit Plan, (iii) any Person shall
      engage in any Prohibited Transaction involving any such Benefit Plan, (iv)
      Borrower, any Subsidiary of Borrower or any ERISA Affiliate shall be in
      "default" (as defined in ERISA Section 4219(c)(5)) with respect to
      payments owing to any such Benefit Plan that is a Multiemployer Plan as a
      result of such Person's complete or partial withdrawal (as described in
      ERISA Section 4203 or 4205) therefrom, (v) Borrower, any Subsidiary of
      Borrower or any ERISA Affiliate shall fail to pay when due an amount that
      is payable by it to the PBGC or to any such Benefit Plan under Title IV of
      ERISA, (vi) a proceeding shall be instituted by a fiduciary of any such
      Benefit Plan against Borrower, any Subsidiary of Borrower or any ERISA
      Affiliate to enforce ERISA Section 515 and such proceeding shall not have
      been dismissed within 30 days thereafter or (vii) any other event or
      condition shall occur or exist with respect to any such Benefit Plan,
      except that no event or condition referred to in clauses (i) through (vii)
      shall constitute an Event of Default if it, together with

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      all other such events or conditions at the time existing, has not
      subjected, and in the reasonable determination of the Majority Lenders
      will not subject, Borrower or any of its Subsidiaries to any liability
      that, alone or in the aggregate with all such liabilities for all such
      Persons, exceeds $100,000; or

                  (j) entry by the Bankruptcy Court of any order modifying (in
      any manner relevant to the Lenders or their interests), reversing,
      vacating, staying or revoking the Confirmation Order or enjoining the
      consummation of any of the transactions contemplated by the Debtor's
      Reorganization Plan; or

                  (k) either Holdings or Parent engages in any type of business
      activity other than the ownership of the Capital Securities of Parent and
      of Borrower and Loehmann's Real Estate Holding Company, respectively, and
      the performance of its respective obligations under the Credit Documents.

      9.2 ACCELERATION AND CASH COLLATERALIZATION. Upon the occurrence of an
Event of Default and which is continuing, Agent shall, upon the request of the
Majority Lenders, and by delivery of notice to Borrower from Agent, take any or
all of the following actions, without prejudice to the rights of Agent, any
Lender or the holder of any Note to enforce its claims against Borrower: (a)
declare all Obligations to be immediately due and payable (except with respect
to any Event of Default set forth in SECTION 9.1(e), in which case all
Obligations shall automatically become immediately due and payable without the
necessity of any notice or other demand) without presentment, demand, protest or
any other action or obligation of Agent or any Lender; and (b) immediately
terminate the Total Commitments hereunder.

      In addition, upon demand by Agent or the Majority Lenders upon the
occurrence of any Event of Default and which is continuing, Borrower shall
deposit with Agent with cash or Cash Equivalents in an amount equal to 110% of
the Letter of Credit Outstandings (in each case to the extent the same are such
by virtue of CLAUSE (a) of the definition thereof). Such deposit shall be held
by Agent in an interest bearing cash collateral account (which may or may not be
the Revolver Payments Cash Collateral Account) as security for, and to provide
for the payment of, Letter of Credit Outstandings (the Agent to account to
Borrower for any amounts remaining in such account after payment in full of all
Letter of Credit Outstandings).

      If at any time after acceleration of the maturity of the Obligations,
Borrower shall pay all arrears of interest and all payments on account of
principal of the Loans which shall have become due otherwise than by
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in SECTION 4.4) and all Events of
Default and Defaults (other than nonpayment of principal of and accrued interest
on the Loans and other Obligations due and payable solely by virtue of
acceleration) shall be remedied or waived, then by written notice to Borrower,
the Majority Lenders may elect, in the sole discretion of such Majority Lenders,
to rescind and annul the acceleration and its consequences and return any cash
collateral; but such action shall not affect any subsequent Default or Event of
Default or impair any right or remedy

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consequent thereon. The provisions of the preceding sentence are intended merely
to bind the Lenders to a decision which may be made at the election of the
Majority Lenders; they are not intended to benefit Borrower and do not give
Borrower the right to require the Lenders to rescind or annul any acceleration
hereunder or to return any cash collateral, even if the conditions set forth
herein are met.

      9.3 REMEDIES. From and after the occurrence of any Event of Default and
which is continuing, Agent may: (a) remove from any premises where same may be
located any and all documents, instruments, files and records (including the
copying of any computer records), and any receptacles or cabinets containing
same, relating to any or all of the Collateral, or Agent may use (at the expense
of Borrower) such of the supplies or space of Borrower at Borrower's place of
business or otherwise, as may be necessary to properly administer and control
any or all of the Collateral or the handling of collections and realizations
thereon; (b) bring suit, in the name of Borrower or the Lenders and generally
shall have all other rights respecting any or all of the Collateral, including
the right to: accelerate or extend the time of payment, settle, compromise,
release in whole or in part any amounts owing on any or all of the Collateral
and issue credits in the name of Borrower or the Lenders; and (c) foreclose the
security interests created pursuant to the Credit Documents by any available
judicial procedure, or to take possession of any or all of the Collateral
without judicial process and enter any premises where any Collateral may be
located for the purpose of taking possession of or removing same. Agent shall
have the right, without notice or advertisement (other than as expressly
provided below or required pursuant to applicable law), to sell, lease, or
otherwise dispose of all or any part of the Collateral, whether in its then
condition or after further preparation or processing, in the name of Borrower or
the Lenders, or in the name of such other party as Agent may designate, either
at public or private sale or at any broker's board, in lots or in bulk, for cash
or for credit, with or without warranties or representations, and upon such
other terms and conditions as Agent in its sole discretion may deem advisable,
and Agent or any other Lender shall have the right to purchase at any such sale.
If any Collateral shall require rebuilding, repairing, maintenance or
preparation, Agent shall have the right, at its option, to do such of the
aforesaid as is necessary, for the purpose of putting such Collateral in such
saleable form as Agent shall deem appropriate. Borrower agrees, at the request
of Agent, to assemble the Collateral and to make it available to Agent at places
which Agent shall select, whether at the premises of Borrower or elsewhere, and
to make available to Agent the premises and facilities of Borrower for the
purpose of Agent's taking possession of, removing or putting the Collateral in
saleable form. However, if notice of intended disposition of any Collateral is
required by law, it is agreed that ten (10) Business Days notice shall
constitute reasonable notification. Unless expressly prohibited by the licensor
thereof, if any, Agent is hereby granted a license to use all computer software
programs, data bases, processes and materials used by Borrower in connection
with its businesses or in connection with the Collateral. The net cash proceeds
resulting from Agent's exercise of any of the foregoing rights (after deducting
all charges, costs and expenses, including reasonable attorneys' fees) shall be
applied by Agent to the payment of the Obligations, whether due or to become
due, in such order as Agent may elect, and pending such payment shall be held as
security for such payment. Borrower shall remain liable to Agent and the Lenders
for any deficiencies. The

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enumeration of the foregoing rights is not intended to be exhaustive and the
exercise of any right shall not preclude the exercise of any other rights, all
of which shall be cumulative.

                                   ARTICLE 10

                                    THE AGENT

      10.1  APPOINTMENT OF AGENT.

            (a) Each Lender hereby designates BTCo as its contractual
representative to act as herein specified. Each Lender hereby irrevocably
authorizes, and each holder of a Note or a participation interest in a Letter of
Credit by the acceptance of such Note or participation interest shall be deemed
irrevocably to authorize, Agent to take such action on its behalf under the
provisions of this Credit Agreement, the other Credit Documents and any other
instruments and agreements referred to herein or therein and to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto. Agent shall hold all Collateral and
all payments of principal, interest, Fees, charges and Expenses received
pursuant to this Credit Agreement or any other Credit Document for the benefit
of the Lenders and the Issuing Lenders to be distributed as provided herein.
Agent may perform any of its duties hereunder by or through its agents or
employees.

            (b) The provisions of this Article 10 are solely for the benefit of
Agent, the Lenders and the Issuing Lenders, and none of the Credit Parties shall
have any rights as a third party beneficiary of any of the provisions hereof
(other than Section 10.9). In performing its functions and duties under this
Credit Agreement, Agent shall act solely as agent of the Lenders and the Issuing
Lenders and does not assume and shall not be deemed to have assumed any
obligation toward or relationship of agency or trust with or for any Credit
Party.

      10.2 NATURE OF DUTIES OF AGENT. Agent shall have no duties or
responsibilities except those expressly set forth in this Credit Agreement and
the other Credit Documents. Neither Agent nor any of its officers, directors,
employees or agents shall be liable for any action taken or omitted by it as
such hereunder or in connection herewith, unless caused by its or their gross
negligence or willful misconduct. The duties of Agent shall be mechanical and
administrative in nature; Agent shall not have by reason of this Credit
Agreement or the other Credit Documents a fiduciary relationship in respect of
any Lender or any Issuing Lender, and nothing in this Credit Agreement or the
other Credit Documents, expressed or implied, is intended to or shall be so
construed as to impose upon Agent any obligations in respect of this Credit
Agreement or the other Credit Documents except as expressly set forth herein or
therein.

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      10.3  LACK OF RELIANCE ON AGENT.

            (a) Independently and without reliance upon Agent, any Lender or any
Issuing Lender, to the extent it deems appropriate, has made and shall continue
to make (i) its own independent investigation of the financial or other
condition and affairs of each Credit Party in connection with the taking or not
taking of any action in connection herewith and (ii) its own appraisal of (A)
the creditworthiness of each Credit Party, and (B) the Collateral, and, except
as expressly provided in this Credit Agreement, Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Lender
or any Issuing Lender with any credit or other information with respect thereto,
whether coming into its possession before the initial Credit Event or at any
time or times thereafter.

            (b) Agent shall not be responsible to any Lender or Issuing Lender
for any recitals, statements, information, representations or warranties herein
or in any other Credit Document or for the execution, effectiveness,
genuineness, validity, enforceability, collectibility, priority or sufficiency
of this Credit Agreement or any other Credit Document or the financial or other
condition of any Credit Party. Agent shall not be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Credit Agreement or any other Credit Document, or the
financial condition of any Credit Party, or the existence or possible existence
of any Default or Event of Default, unless specifically requested to do so in
writing by any Lender or Issuing Lender, as the case may be.

      10.4 CERTAIN RIGHTS OF AGENT. Agent shall have the right to request
instructions from the Lenders at any time. If Agent shall request instructions
from the Lenders with respect to any act or action (including the failure to
act) in connection with this Credit Agreement, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Majority Lenders (or, to the extent required
pursuant to Section 11.10, the Super Majority Lenders or all Lenders), and Agent
shall not incur liability to any Person by reason of so refraining. Without
limiting the foregoing, no Lender or Issuing Lender shall have any right of
action whatsoever against Agent as a result of Agent acting or refraining from
acting hereunder in accordance with the instructions of the Majority Lenders.

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      10.5 RELIANCE BY AGENT. Agent shall be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex or facsimile transmission, E-mail, telecopier
message, cablegram, order or other documentary, teletransmission or telephone
message believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person. Agent may consult with legal counsel (including
counsel for Borrower with respect to matters concerning Borrower), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts. Agent may, but shall not be
required to, rely on Borrowing Base Certificates and any other schedules or
reports delivered to Agent in connection herewith in determining the amount of
the Borrowing Base and the then eligibility of Credit Card Receivables and
Inventory of Borrower. Reliance thereon by Agent from time to time shall not be
deemed to limit the right of Agent to revise advance rates or standards of
eligibility as provided in the definition of the term "Borrowing Base" set forth
herein.

      10.6 INDEMNIFICATION OF AGENT. To the extent Agent is not reimbursed and
indemnified by Borrower, each Lender will reimburse and indemnify Agent, in
proportion to its respective Aggregate Commitment, for and against any and all
Liabilities, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including counsel fees and disbursements) or disbursements of any kind
or nature whatsoever (including all Expenses) which may be imposed on, incurred
by or asserted against Agent, in any way relating to or arising out of this
Credit Agreement or any other Credit Document; PROVIDED that no Lender shall be
liable for any portion of such Liabilities, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements to the extent it is
determined by a judgment of a court that is binding on Agent, final and not
subject to review on appeal, to be the result of acts or omissions on the part
of Agent, constituting gross negligence or willful misconduct.

      10.7 AGENT IN ITS INDIVIDUAL CAPACITY. With respect to its obligation to
lend under this Credit Agreement, the Loans made by it and the Notes issued to
it, and its participation in Letters of Credit, Agent shall have the same rights
and powers hereunder as any other Lender or holder of a Note or participation
interests and may exercise the same as though it was not performing the duties
specified herein; and the terms "Lenders," "Majority Lenders," "Super Majority
Lenders," "holders of Notes," or any similar terms shall, unless the context
clearly otherwise indicates, include Agent in its individual capacity. Agent may
accept deposits from, lend money to, acquire equity interests in, and generally
engage in any kind of banking, trust, financial advisory or other business with
Borrower or any Affiliate of Borrower as if it were not performing the duties
specified herein, and may accept fees and other consideration from Borrower for
services in connection with this Credit Agreement and otherwise without having
to account for the same to the Lenders or any Issuing Lender.

      10.8  HOLDERS OF NOTES.

            (a) Agent may deem and treat the payee of any Note as the owner
thereof for all purposes hereof unless and until a written notice of the
assignment or transfer thereof shall have

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been filed with Agent. Any request, authority or consent of any Person who, at
the time of making such request or giving such authority or consent, is the
holder of any Note, shall be conclusive and binding on any subsequent holder,
transferee or assignee of such Note or of any Note or Notes issued in exchange
therefor.

      10.9  SUCCESSOR AGENT.

            (a) Agent may, upon five (5) Business Days' notice to the Lenders
and Borrower, resign at any time (effective upon the appointment of a successor
Agent pursuant to the provisions of this Section 10.9) by giving written notice
thereof to the Lenders and Borrower. Upon such resignation, the Majority Lenders
shall have the right, upon five (5) days' notice to Borrower, to appoint a
successor Agent. If no successor Agent (i) shall have been so appointed by the
Majority Lenders and (ii) shall have accepted such appointment, within thirty
(30) days after the retiring Agent's giving of notice of resignation, then, upon
five (5) days' notice, the retiring Agent may, on behalf of the Lenders, appoint
a successor Agent.

            (b) Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent 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 under
this Credit Agreement. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article 10 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this Credit
Agreement.

            (c) In the event of a material breach by Agent of its duties
hereunder, Agent may be removed by the Majority Lenders for cause and the
provisions of this Section 10.9 shall apply to the appointment of a successor
Agent. Such removal of Agent shall also operate, if at the time any such Person
is serving as such, as a removal of BTCo and each of its Serving Affiliates, if
any, as an Issuing Lender subject to Section 10.9(d).

            (d) No removal of BTCo, Deutsche Bank AG or any of its Serving
Affiliates pursuant to Section 10.9(c), as an Issuing Lender, shall be effective
unless its Liabilities under each Letter of Credit are secured with cash or by
letters of credit in form and substance, and issued by issuers, satisfactory to
BTCo, Deutsche Bank AG or such Serving Affiliate.

      10.10 COLLATERAL MATTERS.

            (a) Each Lender and each Issuing Lender authorizes and directs Agent
to enter into the Collateral Documents for the benefit of such Person. Each
Lender and each Issuing Lender hereby agrees, and each holder of any Note by the
acceptance thereof will be deemed to agree, that, except as otherwise set forth
in Section 11.10, any action taken by the Majority Lenders or the Super Majority
Lenders, as the case may be, in accordance with the provisions of this Credit
Agreement or the Collateral Documents, and the exercise by the Majority Lenders
or Super Majority Lenders of the powers set forth herein or therein, together
with such other powers as are reasonably incidental thereto, shall be authorized
and binding upon all of the Lenders and all the Issuing

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Lenders. Agent is hereby authorized on behalf of all of the Lenders and all the
Issuing Lenders, without the necessity of any notice to or further consent from
any Lender or any Issuing Lender from time to time prior to an Event of Default,
to take any action with respect to any Collateral or Collateral Documents which
may be necessary to perfect and maintain perfected the Liens upon the Collateral
granted pursuant to the Collateral Documents.

            (b) Each Lender and each Issuing Lender hereby authorize Agent, at
its option and in its discretion, to release any Lien granted to or held by
Agent upon any Collateral (i) upon termination of the Total Commitments and
payment and satisfaction of all of the Obligations at any time arising under or
in respect of this Credit Agreement or the other Credit Documents or the
transactions contemplated hereby or thereby, (ii) constituting property being
sold or disposed of upon receipt of the proceeds of such sale by Agent, if
Borrower certifies to Agent that such sale or disposition is made in compliance
with Section 8.5 (and Agent may rely conclusively on any such certificate,
without further inquiry) or (iii) if approved, authorized or ratified in writing
by the Majority Lenders, unless such release is required to be approved by all
of the Lenders pursuant to Section 11.10. Upon request by Agent at any time,
each Lender and each Issuing Lender will confirm in writing Agent's authority to
release particular types or items of Collateral pursuant to this Section 10.10.

            (c) Upon any sale and transfer of Collateral which is expressly
permitted pursuant to the terms of this Credit Agreement, or consented to in
writing by the Majority Lenders (or all Lenders, if such release is required to
be approved by all of the Lenders pursuant to Section 11.10), and upon at least
five (5) Business Days' prior written request by Borrower, Agent shall (and is
hereby irrevocably authorized by each Lender and each Issuing Lender, to)
execute such documents as may be necessary to evidence the release of the Liens
granted to Agent for the benefit of Agent, the Lenders and the Issuing Lenders
herein or pursuant hereto upon the Collateral that was sold or transferred;
PROVIDED that (i) Agent shall not be required to execute any such document on
terms which, in Agent's opinion, would expose Agent to or create any Liability
or entail any consequence other than the release of such Liens without recourse
or warranty and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any Liens upon (or obligations of Borrower or any
Credit Party in respect of) all interests retained by Borrower or any Credit
Party, including the proceeds of the sale, all of which shall continue to
constitute part of the Collateral. In the event of any sale or transfer of
Collateral, or any foreclosure with respect to any of the Collateral, Agent
shall be authorized to deduct all of the Expenses reasonably incurred by Agent
from the proceeds of any such sale, transfer or foreclosure.

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            (d) Agent shall have no obligation whatsoever to any Lender, any
Issuing Lender or any other Person to assure that the Collateral exists or is
owned by Borrower or any Subsidiary thereof or is cared for, protected or
insured or that the Liens granted to Agent herein or in any of the Collateral
Documents or pursuant hereto or thereto have been properly or sufficiently or
lawfully created, perfected, protected or enforced or are entitled to any
particular priority, or to exercise or to continue exercising at all or in any
manner or under any duty of care, disclosure or fidelity any of the rights,
authorities and powers granted or available to Agent in this Section 10.10 or in
any of the Collateral Documents, it being understood and agreed that in respect
of the Collateral, or any act, omission or event related thereto, Agent may act
in any manner it may deem appropriate, in its sole discretion, given Agent's own
interest in the Collateral as one of the Lenders and that Agent shall have no
duty or liability whatsoever to the Lenders, except for its gross negligence or
willful misconduct.

      10.11 ACTIONS WITH RESPECT TO DEFAULTS. In addition to Agent's right to
take actions on its own accord as permitted under this Credit Agreement, Agent
shall take such action with respect to a Default or Event of Default as shall be
directed by the Majority Lenders; PROVIDED that until Agent shall have received
such directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable and in the best interests of the Lenders and
the Issuing Lenders; and, further, PROVIDED that Agent shall not be required
under any circumstances to take any action that, in its judgment, (a) is
contrary to any provision of the Credit Documents or applicable law or (b) will
expose it to any liability or expense against which it has not been indemnified
to its satisfaction.

      10.12 DELIVERY OF INFORMATION. Agent shall not be required to deliver to
any Lender or any Issuing Lender originals or copies of any documents,
instruments, notices, communications or other information received by Agent from
Borrower, any Subsidiary of Borrower, the Majority Lenders, any Lender, any
Issuing Lender or any other Person under or in connection with this Credit
Agreement or any other Credit Document except (a) as specifically provided in
this Credit Agreement or any other Credit Document and (b) as specifically
requested from time to time in writing by any Lender, or any Issuing Lender with
respect to a specific document, instrument, notice or other written
communication received by and in the possession of Agent at the time of receipt
of such request and then only in accordance with such specific request.

                                   ARTICLE 11

                                  MISCELLANEOUS

      11.1  SUBMISSION TO JURISDICTION;  WAIVERS.  BORROWER HEREBY IRREVOCABLY
AND UNCONDITIONALLY:

            (a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS TO
WHICH IT IS A PARTY, OR FOR RECOGNITION

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AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NONEXCLUSIVE GENERAL
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, IN EACH CASE LOCATED IN
NEW YORK, NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;

            (b) EXCEPT AS TO ANY JURISDICTION RETAINED BY THE BANKRUPTCY COURT,
CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND
WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH
ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS
BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

            (c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING
MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR
ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO BORROWER AT THE
ADDRESS SET FORTH IN SECTION 11.5 OR AT SUCH OTHER ADDRESS OF WHICH AGENT SHALL
HAVE BEEN NOTIFIED PURSUANT THERETO;

            (d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT OF AGENT OR
ANY LENDER TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT THE RIGHT OF AGENT OR ANY LENDER TO BRING ANY ACTION OR PROCEEDING
AGAINST BORROWER OR ITS PROPERTY IN THE COURTS OF OTHER JURISDICTIONS.

            (e) EXCEPT TO THE EXTENT EXPRESSLY PROVIDED HEREUNDER WAIVES
DUE DILIGENCE, DEMAND, PRESENTMENT AND PROTEST AND ANY NOTICES THEREOF AS
WELL AS NOTICE OF NONPAYMENT.

      11.2 JURY TRIAL. BORROWER, AGENT, EACH ISSUING LENDER AND THE LENDERS EACH
HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING
OUT OF THIS CREDIT AGREEMENT, THE OTHER CREDIT DOCUMENTS OR ANY OTHER AGREEMENTS
OR TRANSACTIONS RELATED HERETO OR THERETO.

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      11.3 GOVERNING LAW. THE RIGHTS AND DUTIES OF BORROWER, AGENT, EACH ISSUING
LENDER AND THE LENDERS UNDER THIS CREDIT AGREEMENT, THE NOTES (INCLUDING MATTERS
RELATING TO THE MAXIMUM PERMISSIBLE RATE) AND THE OTHER CREDIT DOCUMENTS SHALL,
PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401, BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK.

      11.4 DELAYS; PARTIAL EXERCISE OF REMEDIES. No delay or omission of Agent,
any Issuing Lender or any Lender to exercise any right or remedy hereunder or
under any of the other Credit Documents, whether before or after the happening
of any Event of Default, shall impair any such right or shall operate as a
waiver thereof or as a waiver of any such Event of Default. No single or partial
exercise by Agent, any Issuing Lender or any Lender of any right or remedy shall
preclude any other or further exercise thereof, or preclude any other right or
remedy.

      11.5 NOTICES. Except as otherwise provided herein, all notices and
correspondence hereunder shall be in writing and sent by certified or registered
mail, return receipt requested, or by overnight delivery service, with all
charges prepaid, to the following addresses, if to Agent, or any of the Lenders,
then to Bankers Trust Company, 233 South Wacker Drive, Suite 8400, Chicago,
Illinois 60606, Attention: Credit Department, if to any Issuing Lender, to the
address specified in the applicable Letter of Credit Request, and if to
Borrower, then at 2500 Halsey Street, Bronx, New York 10461, Attention: Mr.
Robert Glass, or by facsimile transmission, promptly confirmed in writing sent
by first class mail, if to Agent, or any of the Lenders, at (312) 993-8096, if
to an Issuing Lender, as specified in the applicable Letter of Credit Request,
and if to Borrower at (718) 430-5367. All such notices and correspondence shall
be deemed given (a) if sent by certified or registered mail, three (3) Business
Days after being postmarked, (b) if sent by overnight delivery service, when
received at the above stated addresses or when delivery is refused and (c) if
sent by facsimile transmission, when receipt of such transmission is
acknowledged except, in the case of a notice from Agent to Borrower under
Section 9.2, such notice shall be deemed given when sent by facsimile
transmission.

      11.6  ASSIGNABILITY.

            (a) Borrower shall not have the right to assign this Credit
Agreement or any interest therein except with the prior written consent of
Agent.

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            (b) Any Lender may make, carry or transfer Loans at, to or for the
account of, any of its branch offices or the office of an Affiliate of such
Lender except to the extent such transfer would result in increased costs to
Borrower.

            (c) Each Lender may assign to one or more banks, other financial
institutions or investment funds all or a portion of its rights and obligations
under this Credit Agreement, the Notes and the other Credit Documents; PROVIDED
that, except in the case of an assignment to a Federal Reserve Bank (which may
be made without condition or restriction), (i) such assignment shall be for a
fixed and not varying percentage of the assigning Lender's Loans, participation
interests in Letters of Credit and Aggregate Commitment, (ii) Agent shall
consent to, and Borrower shall receive notice of, such assignment, (iii) for
each such assignment, the parties thereto shall execute and deliver to Agent,
for its acceptance and recording in the Register (as defined below), an
Assignment and Assumption Agreement, together with any Note or Notes subject to
such assignment and a processing and recordation fee of $3,500 and (iv) except
for any assignment covering all or the remaining portion of an assigning
Lender's rights and obligations under this Credit Agreement, the Notes and the
other Credit Documents, no such assignment shall be for less than $10,000,000 of
the assigning Lender's Aggregate Commitment, unless such assignment is to a
then-current holder of a Note. Upon such execution and delivery of the
Assignment and Assumption Agreement to Agent, from and after the date specified
as the effective date in the Assignment and Assumption Agreement (the
"ACCEPTANCE DATE"), (A) the assignee thereunder shall be a party hereto, and, to
the extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Assumption Agreement, such assignee shall have
the rights and obligations of a Lender hereunder and (B) the assignor thereunder
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such Assignment and Assumption Agreement, relinquish its rights
(other than any rights it may have pursuant to Section 11.8, which rights will
survive) and be released from its obligations (other than any obligations it may
have pursuant to Section 11.7, which obligations will survive) under this Credit
Agreement (and, in the case of an Assignment and Assumption Agreement covering
all or the remaining portion of an assigning Lender's rights and obligations
under this Credit Agreement, such Lender shall cease to be a party hereto).

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            (d) By executing and delivering an Assignment and Assumption
Agreement, the assignee thereunder confirms and agrees as follows: (i) other
than as provided in such Assignment and Assumption Agreement, the assigning
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 Credit Agreement or any other Credit Document or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Credit Agreement, the Notes, or any other Credit Document; (ii) such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrower, any other
Credit Parties or any Issuing Lender, the value of the Collateral, or the
performance or observance by (A) Borrower or any other Credit Parties of any of
its obligations under this Credit Agreement or any other Credit Document, or (B)
any Issuing Lender of any of its obligations in respect of any Letter of Credit;
(iii) such assignee confirms that it has received a copy of this Credit
Agreement, together with copies of the Financial Statements referred to in
Section 7.1 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 Assumption Agreement; (iv) such assignee will continue,
independently and without reliance upon Agent, such assigning Lender or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, to make its own credit decisions in taking or not
taking action under this Credit Agreement; (v) such assignee appoints and
authorizes Agent to take such action as agent on its behalf and to exercise such
powers under this Credit Agreement and the other Credit Documents as are
delegated to Agent by their terms, together with such powers as are reasonably
incidental thereto; and (vi) such assignee agrees (for the benefit of Borrower,
Agent and each of the Lenders) that it will perform in accordance with their
terms all of the obligations which by the terms of this Credit Agreement are
required to be performed by it as a Lender.

            (e) Agent shall maintain at its address referred to in Section 11.5
a copy of each Assignment and Assumption Agreement delivered to and accepted by
it and a register for the recordation of the names and addresses of the Lenders
and the Aggregate 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 and binding for all purposes, absent manifest error, and
Borrower, Agent and the Lenders may treat each Person whose name is recorded in
the Register as a Lender hereunder for all purposes of this Credit Agreement.
The Register and copies of each Assignment and Assumption shall be available for
inspection by Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice.

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            (f) Upon its receipt of an Assignment and Assumption Agreement
executed by an assigning Lender, together with the Note or Notes subject to such
assignment, Agent shall, if such Assignment and Assumption Agreement has been
completed and is in substantially the form of EXHIBIT A hereto, (i) accept such
Assignment and Assumption Agreement, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to Borrower. Within
five (5) Business Days after its receipt of such notice, Borrower shall execute
and deliver to Agent in exchange for the surrendered Note or Notes a new Note or
Notes to the order of the assignee in an amount equal to the Aggregate
Commitment assumed by it pursuant to such Assignment and Assumption Agreement
and, if the assigning Lender has retained an Aggregate Commitment hereunder, a
new Note or Notes to the order of the assigning Lender in an amount equal to the
Aggregate Commitment retained by it hereunder. Such new Note or Notes shall
re-evidence the Indebtedness outstanding under the old Note or Notes and shall
be in an aggregate principal amount equal to the aggregate principal amount of
such surrendered Note or Notes, shall be dated the Closing Date and shall
otherwise be in substantially the form of the Note or Notes subject to such
assignments.

            (g) Each Lender may sell participations (without the consent of
Agent, Borrower or any other Lender) to one or more parties in or to all or a
portion of its rights and obligations under this Credit Agreement (including all
or a portion of its Aggregate Commitment, the Loans owing to it and the Note or
Notes held by it); PROVIDED that (i) such Lender's obligations under this Credit
Agreement (including its Aggregate Commitment to Borrower hereunder) shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) such Lender shall
remain the holder of any such Note for all purposes of this Credit Agreement,
(iv) Borrower, Agent, and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Credit Agreement and such Notes and (v) such Lender shall
not transfer, grant, assign or sell any participation under which the
participant shall have rights to approve any amendment or waiver of this Credit
Agreement except to the extent such amendment or waiver would (A) extend the
final maturity date or the date for the payments of any installment of fees or
principal or interest of any Loans or Letter of Credit reimbursement obligations
in which such participant is participating; (B) reduce the amount of any
installment of principal of the Loans or the amount of any Drawing under any
Letter of Credit in which such participant is participating; (C) except as
otherwise expressly provided in this Credit Agreement, reduce the interest rate
applicable to the Loans or the amount of any Drawing under any Letter of Credit
in which such participant is participating; or (D) except as otherwise expressly
provided in this Credit Agreement, reduce any Fees payable hereunder. Each
Lender selling or granting a participation, including a participation sold
pursuant to Section 2.10, shall indemnify Borrower and Agent for any Taxes and
Liabilities that either may sustain as a result of such Lender's failure to
withhold and pay any Taxes applicable to payments by such Lender to its
participant in respect of such participation.

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            (h) Each Lender agrees that, without the prior written consent of
Borrower and Agent, it will not make any assignment hereunder in any manner or
under any circumstances that would require registration or qualification of, or
filings in respect of, any Loan, Note or other Obligation under the securities
laws of the United States of America or of any other jurisdiction.

            (i) In connection with the efforts of any Lender to assign its
rights or obligations or to participate interests, such Lender may disclose any
information in its possession regarding Borrower, subject to Section 11.7.

      11.7 CONFIDENTIALITY. Each Lender agrees that it will use its reasonable
best efforts not to disclose without the prior consent of Borrower (other than
to its employees, auditors, advisors, Affiliates and counsel, or to another
Lender if the disclosing Lender or such disclosing Lender's holding or parent
company in its sole discretion determines that any such party should have access
to such information for use in connection with this Credit Agreement) any
information with respect to Borrower or any of its Subsidiaries, which is
furnished pursuant to this Credit Agreement and which is designated by Borrower
to the Lenders in writing as confidential, PROVIDED that any Lender may disclose
any such information (a) as has become generally available to the public, (b) as
may be required or appropriate in any report, statement or testimony submitted
to or examination conducted by any Governmental Authority having or claiming to
have jurisdiction over such Lender, (c) as may be required or appropriate in
response to any summons or subpoena or in connection with any litigation, (d) in
order to comply with any Requirement of Law, (e) to any prospective or actual
transferee or participant in connection with any contemplated transfer or
participation of any of the Notes or portion of the Total Commitments or any
interest therein by such Lender, PROVIDED that each such other prospective or
actual transferee or participant agrees to be bound by the provisions contained
in this SECTION 11.7, (f) to other financial institutions with respect to which
the respective Lender has a contractual relationship in accordance with such
Lender's regular banking procedures, PROVIDED that each such other financial
institution agrees to be bound by the confidentiality provisions contained in
this Section 11.7, (g) to any nationally recognized rating agency that requires
access to information regarding the respective Lender's investment portfolio in
connection with such rating agency's issuance of ratings with respect to such
Lender, PROVIDED that such Lender advises such rating agency of the confidential
nature of such information, (h) as may be required or appropriate in protecting,
preserving, exercising or enforcing any of its rights in, under or related to
the Collateral or the Credit Documents and (i) as may be required or appropriate
in consulting with any Person with respect to any of the foregoing matters.

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      11.8 INDEMNIFICATION. Borrower shall and hereby agrees to indemnify,
defend and hold harmless Agent, each Issuing Lender and each of the Lenders and
their respective directors, officers, agents, employees, counsel, advisors and
Affiliates from and against (a) any and all losses, claims, damages,
liabilities, deficiencies, judgments or expenses incurred by any of them (except
to the extent that it is finally judicially determined to have resulted from
their own gross negligence or willful misconduct) arising out of or by reason of
any litigations, investigations, claims or proceedings which arise out of or are
in any way related to (i) this Credit Agreement or the transactions contemplated
thereby; (ii) the issuance of Letters of Credit; (iii) the failure of an Issuing
Lender to honor a Drawing under any Letter of Credit, as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or de
facto government or Governmental Authority; (iv) any actual or proposed use by
Borrower of (A) the proceeds of any Loans or (B) any Letter of Credit; or (v)
Agent's, the Lenders' or any Issuing Lender's entering into this Credit
Agreement, the other Credit Documents or any other agreements and documents
relating thereto, including amounts paid in-settlement (which settlements shall
be agreed to by Lender, in its sole discretion, only after notice to and
consultation with Borrower), court costs and the reasonable fees and
disbursements of counsel incurred in connection with any such litigation,
investigation, claim or proceeding or any advice rendered in connection with any
of the foregoing; and (b) any such losses, claims, damages, liabilities,
deficiencies, judgments or expenses that arise directly or indirectly from or in
connection with any federal, state or local environmental laws, acts, rules,
regulations, orders, directions, ordinances, criteria or guidelines. If and to
the extent that the Obligations of Borrower hereunder are unenforceable for any
reason, Borrower hereby agrees to make the maximum contribution to the payment
and satisfaction of such Obligations which is permissible under applicable law.
Borrower's Obligations hereunder shall survive any termination of this Credit
Agreement and the other Credit Documents and the payment in full of the
Obligations, and are in addition to, and not in substitution of, any other of
its Obligations. In addition, Borrower shall, upon demand, pay to Agent and each
Lender all reasonable costs and expenses (including the reasonable fees and
disbursements of counsel and other professionals) paid or incurred by Agent or
such Lender in (i) enforcing or defending its rights under or in respect of this
Credit Agreement, the other Credit Documents or any other document or instrument
now or hereafter executed and delivered in connection herewith, (ii) collecting
the Loans, (iii) foreclosing or otherwise collecting upon the Collateral or any
part thereof and (iv) obtaining any legal, accounting or other advice in
connection with any of the foregoing.

      11.9 ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This Credit Agreement and
the other Credit Documents constitute the entire agreement among Borrower, Agent
and the Lenders (in their capacities as such and not in their capacity, if any,
as an Issuing Lender), supersedes any prior agreements among them, and shall
bind and benefit Borrower, Agent and the Lenders and their respective successors
and permitted assigns.

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      11.10 AMENDMENTS, ETC. No amendment or waiver of any provision of this
Credit Agreement or any Collateral Document, nor consent to any departure by any
Credit Party therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Majority Lenders (or by Agent on their behalf), or
if the Lenders shall not be parties thereto, by the parties thereto and
consented to by the Majority Lenders (or by Agent on their behalf), and each
such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; PROVIDED, that,
notwithstanding the foregoing:

            (a) no amendment, waiver or consent shall, unless in writing and
signed by the Super Majority Lenders, (i) increase the advance rates set forth
in clause (a) of the definition of the term Borrowing Base or (ii) increase the
Fixed Asset Sublimit; and

            (b) no amendment, waiver or consent shall, unless in writing and
signed by all the Lenders, do any of the following: (i) increase the Total
Commitments or subject the Lenders to any additional obligations; (ii) except as
otherwise expressly provided in this Credit Agreement, reduce the principal of,
or interest on, the Notes or any Drawing under any Letter of Credit or any fees
hereunder; (iii) postpone any date fixed for any payment in respect of principal
of, or interest on, the Notes or any Drawing under any Letter of Credit or any
fees hereunder; (iv) change the percentage of the Total Commitments, or any
minimum requirement necessary for the Lenders, the Majority Lenders or the Super
Majority Lenders to take any action hereunder; (v) amend or waive this Section
11.10, or change the respective definitions of Majority Lenders or Super
Majority Lenders; or (vi) except in connection with the financing, refinancing,
sale or other disposition of any Collateral of Borrower permitted under this
Credit Agreement, release Agent's Liens on all or substantially all of the
Collateral and, PROVIDED that no amendment, waiver or consent affecting the
rights or duties of Agent or any Issuing Lender under, (x) in the case of Agent,
any term or provision of this Credit Agreement and (y) in the case of any
Issuing Lender, (1) Sections 3.3(b), 3.4, 3.6 and 3.8 of this Credit Agreement,
(2) any Letter of Credit or (3) any application in respect of any Letter of
Credit, shall in any event be effective, unless in writing and signed by Agent
or such Issuing Lender, as applicable, in addition to the Lenders required
hereinabove to take such action.

Notwithstanding any of the foregoing to the contrary, the consent of Borrower
shall not be required for any amendment, modification or waiver of the
provisions of Article 10 (other than the provisions of Section 10.9 and 10.11).
In addition, Borrower and the Lenders hereby authorize Agent to modify this
Credit Agreement by unilaterally amending or supplementing Annex I from time to
time in the manner requested by Borrower, Agent or any Lender in order to
reflect any assignments or transfers of the Loans permitted for hereunder;
however, PROVIDED that Agent shall promptly deliver a copy of any such
modification to Borrower and each Lender.

      11.11 NONLIABILITY OF AGENT AND LENDERS. The relationship between Borrower
and the Lenders and Agent shall be solely that of borrower and lender. Neither
Agent, any Lender or any Issuing Lender shall have any fiduciary
responsibilities to Borrower. Neither Agent, any Lender or any Issuing Lender
undertakes any responsibility to Borrower to review or inform Borrower of any
matter in connection with any phase of Borrower's business or operations.

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      11.12 COUNTERPARTS. This Credit Agreement may be executed in any number of
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.

      11.13 EFFECTIVENESS. This Credit Agreement shall become effective on the
date on which all of the parties hereto shall have signed a copy hereof (whether
the same or different copies) and shall have delivered the same to Agent
pursuant to Section 11.5 or, in the case of the Lenders, shall have given to
Agent written or facsimile notice (actually received) at such office that the
same has been signed and mailed to it.

      11.14 SEVERABILITY. In case any provision in or obligation under this
Credit Agreement or the Notes or the other Credit Documents shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.

      11.15 HEADINGS DESCRIPTIVE. The headings of the several sections and
subsections of this Credit Agreement, and the Table of Contents, are inserted
for convenience only and shall not in any way affect the meaning or construction
of any provision of this Credit Agreement.

      11.16 MAXIMUM RATE. Notwithstanding anything to the contrary contained
elsewhere in this Credit Agreement or in any other Credit Document, Borrower,
Agent and the Lenders hereby agree that all agreements among them under this
Credit Agreement and the other Credit Documents, whether now existing or
hereafter arising and whether written or oral, are expressly limited so that in
no contingency or event whatsoever shall the amount paid, or agreed to be paid,
to Agent or any Lender for the use, forbearance, or detention of the money
loaned to Borrower and evidenced hereby or thereby or for the performance or
payment of any covenant or obligation contained herein or therein, exceed the
Highest Lawful Rate. If due to any circumstance whatsoever, fulfillment of any
provisions of this Credit Agreement or any of the other Credit Documents at the
time performance of such provision shall be due shall exceed the Highest Lawful
Rate, then, automatically, the obligation to be fulfilled shall be modified or
reduced to the extent necessary to limit such interest to the Highest Lawful
Rate, and if from any such circumstance any Lender should ever receive anything
of value deemed interest by applicable law which would exceed the Highest Lawful
Rate, such excessive interest shall be applied to the reduction of the principal
amount then outstanding hereunder or on account of any other then outstanding
Obligations and not to the payment of interest, or if such excessive interest
exceeds the principal unpaid balance then outstanding hereunder and such other
then outstanding Obligations, such excess shall be refunded to Borrower. All
sums paid or agreed to be paid to Agent or any Lender for the use, forbearance,
or detention of the Obligations and other Indebtedness of Borrower to Agent or
any Lender shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of such Indebtedness
until payment in full so that the actual rate of interest on account of all such
Indebtedness does not exceed the Highest Lawful Rate throughout the entire term
of such

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Indebtedness. The terms and provisions of this Section shall control every other
provision of this Credit Agreement and all agreements among Borrower, Agent and
the Lenders.

      11.17 RIGHT OF SETOFF. In addition to and not in limitation of all rights
of offset that any Lender may have under applicable law, each Lender shall, upon
the occurrence and during the continuance of any Event of Default and whether or
not such Lender has made any demand or all of the Obligations of any Credit
Party are matured, have the right to appropriate and apply to the payment of the
Obligations then due of such Credit Party all deposits (general or special, time
or demand, provisional or final) then or thereafter held by and other
Indebtedness or property then or thereafter owing by such Lender, including any
and all amounts in any Depositary Account, the Concentration Account, the BT
Account or the Disbursement Account. For purposes of this Section 11.17, the
Obligations of Borrower to a Lender shall include, as fully as though such
Obligations were the direct Obligations of Borrower to such Lender, the
Obligations of Borrower in which such Lender has a participation interest
pursuant to ARTICLE 3, in each case, to the extent of such participation. Each
Lender exercising such rights shall promptly notify Agent thereof and any amount
received as a result of the exercise of such rights shall be reallocated as set
forth in Section 2.10. Further, each Lender exercising such rights shall use its
best efforts to promptly notify Borrower thereof, PROVIDED that failure to so
notify Borrower shall not affect the validity of any such exercise or result in
any liability to Agent or any Lender.

      11.18 DEFAULTING LENDER.

            (a) Unless Agent shall have received notice from a Lender, prior to
the time specified in such Section, that such Lender will not make available to
Agent a Loan required to be made by it pursuant to Section 2.2 or its funding
with respect to any participation interest in any Letter of Credit pursuant to
Article 3, Agent may assume that such Lender has made such amounts available to
Agent in accordance with such Sections and Agent in its sole discretion may, in
reliance upon such assumption, make available to Borrower or the applicable
Issuing Lender a corresponding amount on behalf of such Lender.

            (b) If any amount referred to in subsection (a) of this Section
11.18 or in Section 2.3 is not made available to Agent by a Lender (a
"DEFAULTING LENDER") and Agent has made such amount available to Borrower or an
Issuing Lender, Agent shall be entitled to recover such amount on demand from
such Defaulting Lender together with interest as hereinafter provided. If such
Defaulting Lender does not pay such amount forthwith upon Agent's demand
therefor, Agent shall promptly notify Borrower and Borrower shall immediately
(but in no event later than five Business Days after such demand) pay such
amount to Agent together with interest calculated as hereinafter provided. Agent
shall also be entitled to recover from such Defaulting Lender and/or Borrower,
as the case may be, (i) interest on such amount in respect of each day from the
date such corresponding amount was made available by Agent to Borrower to the
date such amount is recovered by Agent, at a rate per annum equal to either (A)
if paid by such Defaulting Lender, the overnight Federal Funds Rate or (B) if
paid by Borrower, the then applicable rate of interest, calculated in accordance
with Section 4.1 or Section 4.2, PLUS (ii) in each case, an amount equal to any
costs (including legal

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expenses) and losses incurred as a result of the failure of such Defaulting
Lender to provide such amount as provided in this Credit Agreement. Nothing
herein shall be deemed to relieve any Lender from its duty to fulfill its
obligations hereunder or to prejudice any rights which Borrower or any Issuing
Lender, may have against any Lender as a result of any default by such Lender
hereunder, including the right of Borrower to seek reimbursement from any
Defaulting Lender for any amounts paid by Borrower under clause (ii) above on
account of such Defaulting Lender's default.

            (c) (i) Notwithstanding anything contained herein to the contrary,
so long as any Lender is a Defaulting Lender or has rejected its Aggregate
Commitment, Agent shall not be obligated to transfer to such Lender (A) any
payments made by Borrower to Agent for the benefit of such Lender or (B) any
amounts contemplated by Section 2.3(b)(i); and, such Lender shall not be
entitled to the sharing of any payments pursuant to Section 2.10. Amounts
otherwise payable to such Lender under Section 2.10 shall instead be paid to
Agent.

                  (ii) For purposes of voting or consenting to matters with
respect to the Credit Documents and determining Proportionate Share, such
Defaulting Lender shall be deemed not to be a "Lender" and such Lender's
Aggregate Commitment shall be deemed to be zero (0).

                  (iii) This Section 11.18(c) shall remain effective with
respect to a Defaulting Lender until (A) the Obligations under this Credit
Agreement shall have been declared or shall have become immediately due and
payable or (B) the Majority Lenders, Agent and Borrower shall have waived such
Lender's default in writing.

                  (iv) Neither the Revolving A Commitment nor the Revolving B
Commitment of any Lender shall be increased or otherwise affected, and
performance by Borrower shall not be excused, by the operation of this Section
11.18(c). Any payments of principal or interest which would, but for this
subsection (c), be paid to any Lender, shall be paid to the Lenders who shall
not be in default under their respective Aggregate Commitments and who shall not
have rejected either their Revolving A Commitment or Revolving B Commitment, for
application to the Loans then due and payable or to the other Obligations then
due and payable or to provide cash collateral to secure Obligations not then due
and payable in such manner and order as shall be determined by Agent.

      11.19 RIGHTS CUMULATIVE. Each of the rights and remedies of Agent, each
Issuing Lender and the Lenders under the Credit Documents shall be in addition
to all of their other rights and remedies under the Credit Documents and
applicable law, and nothing in the Credit Documents shall be construed as
limiting any such rights or remedies.

      11.20 THIRD PARTY BENEFICIARIES. Each Issuing Lender shall be deemed to be
a third party beneficiary of its rights under this Credit Agreement, PROVIDED
that, except as otherwise provided in Section 11.10, such rights may be amended
or waived, and any departure therefrom by any Credit Party consented to, without
their respective consents.

                    BALANCE OF PAGE INTENTIONALLY LEFT BLANK

98
<PAGE>

                           - SIGNATURE PAGE FOLLOWS -

99
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement
to be executed and delivered by their proper and duly authorized officers as of
the date set forth above.

                                   BORROWER:

                                   LOEHMANNS OPERATING CO., a
                                   Delaware corporation,

                                   By
                                      ------------------------------------------
                                   Name:  Robert Glass
                                   Title: President and Chief Operating Officer

                                   AGENT:

                                   BANKERS TRUST COMPANY,
                                   as Agent

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

                                   LENDERS:

                                   BANKERS TRUST COMPANY, as a
                                   Lender

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

1
<PAGE>

ANNEX I
TO
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 29, 2000

                               LENDERS; AGGREGATE
                          COMMITMENTS; LENDING OFFICES

<TABLE>
<CAPTION>
1.                                              BANKERS TRUST COMPANY:
<S>                                             <C>
      Revolving A Commitment:                   $65,000,000

      Revolving B Commitment:                   $10,000,000

      Aggregate Commitment:                     $75,000,000

      Domestic Lending Office and
      LIBOR Lending Office:

      130 Liberty Street
      New York, New York 10006
</TABLE>

<PAGE>

                                    ANNEX II
                                       TO
                                CREDIT AGREEMENT
                         DATED AS OF SEPTEMBER 29, 2000

                              CLOSING DOCUMENT LIST

                                    AttachedATMI, Inc.

                                       and

                               Fleet National Bank

                                RIGHTS AGREEMENT

                          Dated as of October 13, 2000

<PAGE>

                                TABLE OF CONTENTS
                                                                            Page

Section 1.  Certain Definitions..............................................1
Section 2.  Appointment of Rights Agent......................................8
Section 3.  Issuance of Rights Certificates..................................8
Section 4.  Form of Rights Certificates......................................9
Section 5.  Execution, Countersignature and Registration....................10
Section 6.   Transfer, Division, Combination and Exchange of Rights
              Certificates; Mutilated, Destroyed,
               Lost or Stolen Rights  Certificates...........................11
Section 7.   Exercise of Rights; Purchase Price; Expiration Date of Rights...12
Section 8.   Cancellation and Destruction of Rights Certificates.............14
Section 9.   Reservation and Availability of Preferred Stock.................14
Section 10.  Preferred Stock Record Date.....................................15
Section 11.  Adjustments to Purchase Price, Number of Shares or
               Number of Rights..............................................16
Section 12.  Certification of Adjustments....................................23
Section 13.  Consolidation, Merger or Sale or Transfer of Property,
              Assets or Earning Power........................................23
Section 14.  Fractional Rights and Fractional Shares.........................26
Section 15.  Rights of Action................................................27
Section 16.  Agreement of Rights Holders Concerning Transfer and Ownership of
              Rights.........................................................28
Section 17.  Rights Holder Not Deemed a Stockholder..........................28
Section 18.  Concerning the Rights Agent.....................................29
Section 19.  Merger or Consolidation or Change of Name of Rights Agent.......29
Section 20.  Duties of Rights Agent..........................................30
Section 21.  Change of Rights Agent..........................................32
Section 22.  Issuance of New Rights Certificates.............................32
Section 23.  Redemption......................................................33
Section 24.  Notice of Certain Events........................................34
Section 25.  Notices.........................................................35
Section 26.  Amendments and Supplements......................................35
Section 27.  Successors......................................................36
Section 28.  Benefits of this Agreement; Determinations and Actions by the
                Board of Directors...........................................36
Section 29.  Severability....................................................36
Section 30.  Governing Law...................................................37
Section 31.  Counterparts....................................................37
Section 32.  Descriptive Headings............................................37
Section 33.  Grammatical Construction........................................37

<PAGE>

                                RIGHTS AGREEMENT

            Rights  Agreement  dated as of October  13,  2000,  between  ATMI,
Inc., a Delaware  corporation  (the  "Company"),  and Fleet National Bank (the
"Rights Agent").

                                 R E C I T A L S

            The Board of  Directors of the Company has  authorized  and declared
the payment of a dividend of one preferred  share  purchase  right (the "Right")
for each share of Common  Stock (as  defined in  Section 1)  outstanding  on the
Record Date (as  defined in Section 1) and has  authorized  the  issuance of one
Right for each share of Common  Stock  issued  between  the Record  Date and the
Distribution  Date (as such terms are  defined in Section  1),  and,  in certain
cases, following the Distribution Date. Each Right represents,  as of the Record
Date, the right to purchase one  one-hundredth of a share of Preferred Stock (as
defined in Section 1) upon the terms and subject to the  conditions  hereinafter
set forth.

            NOW,  THEREFORE,  in  consideration  of the  premises and the mutual
agreements set forth in this Agreement, the parties hereby agree as follows:

            Section 1. Certain  Definitions.  For purposes of this  Agreement,
the following terms have the meanings indicated:

            (a) (i) "Acquiring  Person" means any Person who or which,  together
with all Affiliates and Associates of such Person,  is (or has previously  been,
at any time  after the date of this  Agreement,  whether  or not such  Person(s)
continues to be) the Beneficial  Owner of 15% or more of the Outstanding  Common
Stock (as defined in this  Section 1).  However,  "Acquiring  Person"  shall not
include any Exempt Person.

                  (ii) A Person does not become an "Acquiring  Person" solely as
the result of (A) an  acquisition  of Common  Stock by the Company or any of its
Subsidiaries which, by reducing the number of shares outstanding,  increases the
proportionate  number of shares beneficially owned by such Person to 15% or more
of the  Outstanding  Common Stock,  or (B) such Person  becoming the  Beneficial
Owner of 15% or more of the  Outstanding  Common  Stock solely as a result of an
Exempt Event;  provided,  however, that if a Person becomes the Beneficial Owner
of 15% or more of the Outstanding  Common Stock solely by reason of such a share
acquisition  by the Company or the  occurrence  of such an Exempt Event and such
Person shall,  after becoming the Beneficial Owner of such Common Stock,  become
the Beneficial  Owner of additional  shares of Common Stock  constituting  1% or
more of the then Outstanding Common Stock by any means whatsoever (other than as
a result of the subsequent  occurrence of an Exempt Event, a stock dividend or a
subdivision  of the  Common  Stock  into a larger  number of shares or a similar
transaction),  then such Person shall be deemed to be an "Acquiring  Person"; or
(C) the  inadvertent  acquisition of beneficial  ownership of 15% or more of the
Common Stock of the Company if the Board of Directors  determines  in good faith
that such acquisition was inadvertent and such Person immediately divests itself
of a  sufficient  number of shares of Common  Stock so that such Person could no
longer be an  "Acquiring  Person";  or (D) if such  Person  is an  Institutional
Investor,  such  Institutional  Investor becoming the Beneficial Owner of 15% or
more of the  Outstanding  Common  Stock  solely by reason of such  Institutional

<PAGE>

Investor's  Regular  Trading   Activities;   provided,   however,   that  if  an
Institutional  Investor  becomes the Beneficial Owner of 20% or more of the then
Outstanding Common Stock other than solely as the result of the events described
in clause (B) or (C) of this  Section  1(a)(ii)  (and in the case of clause (C),
such Institutional Investor immediately divests itself of a sufficient number of
shares of Common  Stock as that it is no longer the  Beneficial  Owner of 20% or
more of the then Outstanding  Common Stock),  then such  Institutional  Investor
shall be deemed an "Acquiring Person."

            (b)  "Affiliate"  of a Person has the meaning  given to such term in
Rule 12b-2 of the General  Rules and  Regulations  under the Exchange Act, as in
effect on the date of this Agreement.

            (c)  "Associate"  of a Person has the meaning  given to such term in
Rule 12b-2 of the General  Rules and  Regulations  under the Exchange Act, as in
effect on the date of this Agreement.

            (d)   Except  as  provided  below,  a  Person  is the  "Beneficial
Owner" of, and "beneficially owns," any securities:

                  (i) which  such  Person or any  Affiliate  or  Associate  of
such Person beneficially owns, directly or indirectly;

                  (ii) which such Person or any  Affiliate  or Associate of such
Person has, directly or indirectly, the right or obligation (whether or not then
exercisable or effective) to acquire  pursuant to any agreement,  arrangement or
understanding  (whether or not in writing),  or upon the exercise of  conversion
rights, exchange rights, rights (other than these Rights),  warrants or options,
or otherwise; provided, however, that a Person will not be deemed the Beneficial
Owner of, or to beneficially  own,  securities  tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any Affiliate or Associate
of such Person  until such  tendered  securities  are  accepted  for purchase or
exchange;  and provided  further,  that prior to the  occurrence of a Triggering
Event, a Person will not be deemed the Beneficial  Owner of, or to  beneficially
own, securities obtainable upon exercise of the Rights;

                  (iii) which such Person or any  Affiliate or Associate of such
Person has,  directly or indirectly,  the right (whether or not then exercisable
or effective) to vote,  or to direct the voting of,  pursuant to any  agreement,
arrangement or  understanding  (whether or not in writing);  provided,  however,
that a Person shall not be deemed the  Beneficial  Owner of, or to  beneficially
own, any security pursuant to this clause (iii) if the agreement, arrangement or
understanding  to vote,  or to direct the voting of,  such  security  (A) arises
solely from a revocable  proxy or consent given in response to a public proxy or
consent  solicitation made pursuant to, and in accordance with, the Exchange Act
and  applicable  rules  and  regulations  thereunder  and (B) is not  also  then
reportable  on  Schedule  13D  under  the  Exchange  Act (or any  comparable  or
successor schedule or report);

                  (iv) which such Person or any  Affiliate  or Associate of such
Person has  "beneficial  ownership" of (as determined  pursuant to Rule 13d-3 of
the General Rules and  Regulations  under the Exchange Act or any  comparable or
successor provision); or

                                      -2-
<PAGE>

                  (v) which are beneficially owned,  directly or indirectly,  by
any other  Person or any  Affiliate  or Associate of such other Person with whom
such Person or any  Affiliate  or  Associate  of such Person has any  agreement,
arrangement  or  understanding  (whether or not in  writing)  for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as described in
subparagraph  (iii) of this Section 1(d)) or disposing of any  securities of the
Company.

            Nothing in this Section 1(d) causes a Person  engaged in business as
an  underwriter  of  securities  to  be  the   "Beneficial   Owner"  of,  or  to
"beneficially own," any securities acquired through such Person's  participation
in good faith in a firm commitment  underwriting until the expiration of 40 days
after the date of such acquisition.

            Notwithstanding  anything in this  Agreement  to the  contrary,  for
purposes of this Agreement, no Person is to be treated as the "Beneficial Owner"
of, or to  "beneficially  own," any securities owned by any other Person that is
an Exempt Person.

            (e)  "Board  of  Directors"  means  the  Board of  Directors  of the
Company,  as the same is constituted from time to time, or if the Company ceases
to exist as a result  of a  Business  Combination  or  otherwise,  the  board of
directors of the Company's successor, if any.

            (f)   "Business  Combination" has the meaning set forth in Section
13(a).

            (g) "Business Day" means any day other than a Saturday,  Sunday or a
day on which  banking  institutions  in the State of New York are  authorized or
obligated by law or executive order to close.

            (h) "Close of Business" on any given date means 5:00 p.m., New York,
New York  time,  on such  date;  provided,  however,  that if such date is not a
Business  Day it shall mean 5:00  p.m.,  New York,  New York  time,  on the next
succeeding Business Day.

            (i) "Common  Stock" when used in any context  applicable  prior to a
Business  Combination  means the common stock,  par value $.01 per share, of the
Company (as the same may be changed by reason of any combination, subdivision or
reclassification  of the Common Stock).  "Common Stock" when used with reference
to any Person  (other than the Company  prior to a Business  Combination)  means
shares of capital stock of such Person (if such Person is a corporation)  of any
class or series,  or units of equity interests in such Person (if such Person is
not a corporation) of any class or series, the terms of which shares or units do
not limit (as a fixed amount and not merely in proportional terms) the amount of
dividends  or income  payable or  distributable  on such  shares or units or the
amount of  property  or assets  distributable  on such  shares or units upon any
voluntary or involuntary  liquidation,  dissolution or winding up of such Person
and do not provide  that such shares or units are subject to  redemption  at the
option  of such  Person,  or any  shares  of  capital  stock or units of  equity
interests into which the foregoing shall be  reclassified or changed;  provided,
however,  that if at any time  there are more  than one such  class or series of
capital  stock of or equity  interests  in such Person,  "Common  Stock" of such
Person will include all such classes and series  substantially in the proportion
of the  total  number of  shares  or other  units of each  such  class or series
outstanding at such time.

                                      -3-
<PAGE>

            (j)  "Current  Market  Price" per share of Common  Stock,  Preferred
Stock or  Equivalent  Shares on any date is the  average  of the  daily  closing
prices per share of such Common Stock,  Preferred Stock or Equivalent Shares for
the 30  consecutive  Trading Days (as defined below in this Section 1(j)) ending
on the last  Trading Day  immediately  prior to such date for the purpose of any
computation  under this Agreement except  computations  made pursuant to Section
11(a)(iii),  and for the 10 consecutive Trading Days immediately  following such
date for the purpose of any  computation  under  Section  11(a)(iii);  provided,
however,  that in the event that the  Current  Market  Price per share of Common
Stock,  Preferred  Stock or  Equivalent  Shares  is  determined  during a period
following the  announcement by the issuer of such Common Stock,  Preferred Stock
or  Equivalent  Shares of (i) a dividend or  distribution  on such Common Stock,
Preferred  Stock or  Equivalent  Shares  other  than a  regular  quarterly  cash
dividend,  or (ii) any  subdivision,  combination  or  reclassification  of such
Common Stock,  Preferred Stock or Equivalent Shares, and prior to the expiration
of  30  Trading  Days  after  the  "ex-dividend"   date  for  such  dividend  or
distribution   or  the  record  date  for  such   subdivision,   combination  or
reclassification,  then, and in each such case, the "Current Market Price" shall
be  appropriately  adjusted to take into  account such  dividend,  distribution,
subdivision, combination or reclassification. The closing price for each Trading
Day shall be the last sale price,  regular way, on such day, or, in case no such
sale takes place on such day,  the average of the closing bid and asked  prices,
regular  way,  on  such  day,  in  either  case  as  reported  in the  principal
consolidated  transaction  reporting system with respect to securities listed or
admitted to trading on the New York Stock  Exchange  ("NYSE")  or, if the Common
Stock,  Preferred  Stock or  Equivalent  Shares  are not listed or  admitted  to
trading on the NYSE,  as  reported  in the  principal  consolidated  transaction
reporting  system with  respect to  securities  listed on the  principal  United
States national securities  exchange on which the Common Stock,  Preferred Stock
or Equivalent  Shares are listed or admitted to trading or, if the Common Stock,
Preferred  Stock or  Equivalent  Shares are not listed or admitted to trading on
any United States national  securities  exchange,  the last quoted sale price on
such day or, if not so quoted,  the average of the high bid and low asked prices
in the  over-the-counter  market  on  such  day,  as  reported  by the  National
Association of Securities Dealers, Inc. Automated Quotation System ("Nasdaq") or
such other  system then in use. If on any such day the Common  Stock,  Preferred
Stock or Equivalent Shares are not quoted by any such system, the average of the
closing bid and asked prices on such day as furnished by a  professional  market
maker making a market in the Common Stock,  Preferred Stock or Equivalent Shares
selected by a majority of the Board of Directors shall be used (which  selection
shall be final, binding and conclusive for all purposes). If on such day no such
market  maker is making a market,  the fair market  value of such shares on such
day as  determined  in good faith by a majority of the Board of Directors or the
Board of  Directors  of the  issuer of such  Common  Stock,  Preferred  Stock or
Equivalent  Shares must be used,  which  determination  must be  described  in a
statement filed with the Rights Agent and shall be final, binding and conclusive
for all  purposes.  The term  "Trading  Day" means a day on which the  principal
United States national securities exchange on which the Common Stock,  Preferred
Stock or  Equivalent  Shares are listed or  admitted  to trading is open for the
transaction of business or, if the Common Stock,  Preferred  Stock of Equivalent
Shares are not listed or  admitted  to  trading  on any United  States  national
securities exchange, but are traded in the over-the-counter  market and reported
by  Nasdaq,  then any day for which  Nasdaq  reports  the high bid and low asked
prices in the over-the-counter  market, or if the Common Stock,  Preferred Stock
or Equivalent Shares are not traded in the over-the-counter  market and reported
by  Nasdaq,  then a  Business  Day.  If the

                                      -4-
<PAGE>

Common Stock,  Preferred  Stock or Equivalent  Shares have not been so listed or
admitted   to  trading   for  30  or  more   Trading   Days  or  traded  in  the
over-the-counter  market and  reported  by Nasdaq for 30 or more  Trading  Days,
"Current  Market  Price"  per  share  means the fair  market  value per share as
determined  in good  faith  by a  majority  of the  Board  of  Directors,  whose
determination  must be described in a statement  filed with the Rights Agent and
shall be final, binding and conclusive for all purposes.

            (k)  "Distribution   Date"  means  the  earlier  of  (i)  the  Stock
Acquisition  Date,  and (ii) the tenth Business Day after the Tender Offer Date.
The Board of Directors of the Company may, at its  election,  defer the date set
forth in clause (ii) of the preceding  sentence to a specified  later date or to
an unspecified later date to be determined by a subsequent action or event.

            (l)  "Equivalent  Shares" means any class or series of capital stock
of the Company, other than the Preferred Stock, which is entitled to participate
on a  proportional  basis  with the  Preferred  Stock  in  dividends  and  other
distributions,  including  distributions  upon the  liquidation,  dissolution or
winding up of the Company.  In calculating  the number of any class or series of
Equivalent Shares for purposes of Section 11, the number of shares, or fractions
of a share,  of such class or series of capital  stock that is  entitled  to the
same  dividend  or  distribution  as a whole share of  Preferred  Stock shall be
deemed to be one share.

            (m)  "Exchange  Act" means the  Securities  Exchange Act of 1934, as
amended, and any successor statute.

            (n) "Exchange Date" means the time at which the Rights are exchanged
pursuant to Section 11(a)(iv).

            (o) "Exempt Event" means with respect to any Person, the acquisition
by such Person of Beneficial  Ownership of Common Stock of the Company solely as
a  result  of the  occurrence  of a  Triggering  Event  and the  effect  of such
Triggering  Event  on the last  proviso  of  clause  (ii) of the  definition  of
Beneficial Owner,  other than a Triggering Event in which such Person becomes an
Acquiring Person.

            (p) "Exempt  Person" means (i) the Company,  (ii) any  Subsidiary of
the Company, (iii) any employee benefit plan of the Company or of any Subsidiary
of the Company,  and (iv) any Person  holding Common Stock for any such employee
benefit plan or for employees of the Company or of any Subsidiary of the Company
pursuant to the terms of any such employee benefit plan.

            (q)   "Expiration  Date"  means the Close of  Business  on October
12, 2010.

            (r)  "Institutional  Investor"  means a  Person  who is  principally
engaged in the business of managing investment funds for unaffiliated securities
investors  and,  as part of such  Person's  duties as agent  for  fully  managed
accounts,  holds or exercises voting or dispositive  power over shares of Common
Stock.

            (s)  "Outstanding  Common  Stock" shall be  determined in accordance
with  the  last  sentence  of  Rule  13d-3(d)(1)(i)  of the  General  Rules  and
Regulations  under the Exchange

                                      -5-
<PAGE>

Act (or any successor or comparable provision); provided, however, that any such
calculation  made for  purposes of  determining  the  particular  percentage  of
outstanding  shares of Common Stock of which any Person is the Beneficial  Owner
shall  also  include  any such other  securities  not then  actually  issued and
outstanding  which such Person would be deemed to be the Beneficial Owner of, or
to "beneficially own," pursuant to Section 1(d).

            (t)  "Person"  means  any  individual,  firm,  corporation,  limited
liability   company,   partnership,    joint   venture,   association,    trust,
unincorporated  organization  or other entity,  and shall include any "group" as
that term is used in Rule  13d-5(b) of the General Rules and  Regulations  under
the Exchange Act (or any successor provision).

            (u)  "Preferred  Stock"  means the  Company's  Junior  Participating
Preferred Stock, par value $.01 per share, having the rights and preferences set
forth in the  Certificate  of  Designation,  Preferences  and Rights of Series A
Junior Participating Preferred Stock attached hereto as Exhibit A.

            (v)  "Principal  Party"  means  (i) in  the  case  of  any  Business
Combination  described  in clause  (i),  (ii) or (iii) of the first  sentence of
Section 13(a),  (A) the Person that is the issuer of any  securities  into which
shares  of Common  Stock of the  Company  are  converted  or for which  they are
exchanged  in such  Business  Combination  or,  if there  is more  than one such
issuer,  the issuer of the Common Stock which has the greatest  aggregate market
value or (B) if no securities are so issued, the Person that survives or results
from such Business  Combination  or, if there is more than one such Person,  the
Person the Common Stock of which has the greatest  aggregate  market value;  and
(ii) in the case of any  Business  Combination  described  in clause (iv) of the
first sentence in Section 13(a),  the Person that receives the greatest  portion
of the property,  assets or earning power transferred  pursuant to such Business
Combination  or, if each  Person  that is a party to such  Business  Combination
receives  the  same  portion  of  the  property,  assets  or  earning  power  so
transferred  or if the Person  receiving  the greatest  portion of the assets or
earning power cannot reasonably be determined,  whichever of such Persons is the
issuer of the  Common  Stock  which has the  greatest  aggregate  market  value;
provided,  however, that in any such case, if the Common Stock of such Person is
not at such  time and has not been  continuously  over  the  preceding  12-month
period  registered  under  Section 12 of the  Exchange  Act and such Person is a
direct or indirect Subsidiary of one or more other Persons,  then (A) "Principal
Party"  refers to whichever  of such other  Persons has Common Stock that is and
has been  continuously  over the  preceding  12-month  period  registered  under
Section 12 of the Exchange  Act; (B) if the Common Stocks of two or more of such
other  Persons  are and have been so  registered,  "Principal  Party"  refers to
whichever of such other  Persons is the issuer of the Common Stock which has the
greatest  aggregate  market  value;  or (C) if the Common  Stock of none of such
other Persons has been so registered,  "Principal  Party" refers to whichever of
such other Persons (other than an individual) is the Person which has the equity
securities  with the greatest  aggregate  market  value.  In case such Person is
owned, directly or indirectly,  by a joint venture formed by two or more Persons
that are not owned,  directly or indirectly,  by the same Person,  the rules set
forth above apply to each of the chains of ownership  having an interest in such
joint  venture as if such Person were a Subsidiary  of both or all of such joint
venturers  and  the  Principal  Parties  in  each  such  chain  shall  bear  the
obligations  set  forth in  Section  13 in the same  ratio  as their  direct  or
indirect interests in such Person bear to the total of such interests.

                                      -6-
<PAGE>

            (w) "Purchase Price" with respect to each Right is initially $175.00
per one  one-hundredth  of a share  of  Preferred  Stock,  shall be  subject  to
adjustment  from time to time as  provided  in  Sections 11 and 13, and shall be
payable in lawful money of the United  States of America in cash or by certified
check or bank draft payable to the order of the Company.

            (x)   "Record  Date"  means the Close of  Business  on November 9,
2000.

            (y)  "Redemption  Date"  means  the time at  which  the  Rights  are
scheduled to be redeemed as provided in Section 23.

            (z)   "Redemption  Price"  has the  meaning  given to such term in
Section 23.

            (aa)  "Regular   Trading   Activities"   means  trading   activities
undertaken in the Institutional Investor's normal course of business and not for
the purpose of  exercising,  either alone or in concert  with any other  Person,
power to direct or cause the  direction  of the  management  and policies of the
Company.

            (bb) "Rights Agent" means Fleet National Bank or any co-Rights Agent
or  successor  Rights Agent  appointed  by the Company  pursuant to Section 2 or
Section 21, respectively.

            (cc)  "Securities Act" means the Securities Act of 1933, as amended,
and any successor statute.

            (dd)  "Stock  Acquisition  Date"  means the first  date  (including,
without  limitation,  any  such  date  which  is on or  after  the  date of this
Agreement  and prior to the issuance of the Rights) of public  disclosure by the
Company,  an Acquiring Person or otherwise that a Person has become an Acquiring
Person.

            (ee)  "Subsidiary"  has the meaning given to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act, as in effect on the
date of this Agreement.

            (ff) "Tender  Offer Date" means the date of  commencement  or public
disclosure  of an  intention to commence  (including  any such  commencement  or
public  disclosure which occurs on or after the date of this Agreement and prior
to the issuance of the Rights) a tender offer or exchange  offer by a Person if,
after acquiring the maximum number of securities  sought pursuant to such offer,
such Person, or any Affiliate or Associate of such Person, would be an Acquiring
Person.

            (ff)  "Triggering   Event"   occurs  when  a  Person   becomes  an
Acquiring Person.

                                      -7-
<PAGE>

            Section 2.  Appointment of Rights Agent. The Company hereby appoints
the Rights  Agent to act as agent for the Company in  accordance  with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company  may from  time to time  appoint  such  co-Rights  Agents as it may deem
necessary or desirable,  upon ten (10) days' prior written  notice to the Rights
Agent.  The Rights Agent shall have no duty to supervise,  and shall in no event
be liable for, the acts or omissions of any such co-Rights Agents.

            Section 3.  Issuance of Rights Certificates.

            (a) Until the  Distribution  Date: (i) the Rights shall be issued in
respect of and shall be evidenced by the certificates representing the shares of
Common  Stock  issued and  outstanding  on the Record  Date and shares of Common
Stock issued or which become  outstanding after the Record Date and prior to the
earliest of the  Distribution  Date, the Redemption  Date, the Exchange Date and
the Expiration Date (which certificates for Common Stock shall be deemed to also
be certificates  evidencing the Rights), and not by separate certificates;  (ii)
the  registered  holders  of such  shares  of  Common  Stock  shall  also be the
registered  holders of the Rights  associated  with such  shares;  and (iii) the
Rights shall be  transferable  only in connection with the transfer of shares of
Common Stock and the surrender for transfer of any  certificate  for such shares
of Common Stock shall also  constitute  the surrender for transfer of the Rights
associated  with the  shares of Common  Stock  represented  thereby.  As soon as
practicable after the Company has notified the Rights Agent of the occurrence of
the  Distribution  Date,  the Company will prepare and execute,  and the Company
will  deliver to the Rights  Agent to be  countersigned,  which the Rights Agent
shall do, and the Rights  Agent shall mail,  by  first-class,  insured,  postage
prepaid  mail,  to each  record  holder of the  Common  Stock as of the Close of
Business on the  Distribution  Date, as shown by the records of the Company,  at
the  address of such  holder  shown on such  records,  one or more  certificates
evidencing the Rights  ("Rights  Certificates"),  in  substantially  the form of
Exhibit B hereto,  evidencing  one Right (as adjusted from time to time pursuant
to this  Agreement)  for each share of Common Stock so held.  From and after the
Distribution   Date,  the  Rights  will  be  evidenced  solely  by  such  Rights
Certificates.  In the event that an adjustment in the number of Rights per share
of  Common  Stock  has been  made  pursuant  to  Section  11(o),  at the time of
distribution of the Rights Certificates,  the Company may make the necessary and
appropriate  adjustments  (in  accordance  with  Section  14(a)) so that  Rights
Certificates  representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights.

            (b) On the Record Date, or as soon as  practicable  thereafter,  the
Company will send a copy of a Summary of Rights to Purchase  Preferred Stock, in
substantially  the form of  Exhibit  C hereto  (the  "Summary  of  Rights"),  by
first-class,  postage-prepaid  mail, to each record holder of Common Stock as of
the close of business on the Record Date (other than any Acquiring Person or any
Associate or Affiliate of any Acquiring  Person),  at the address of such holder
shown on the records of the  Company.  With respect to  certificates  for Common
Stock outstanding as of the Record Date, until the Distribution Date, the Rights
will be evidenced by such  certificates  registered  in the names of the holders
thereof together with the Summary of Rights. Until the Distribution Date (or the
earlier of the  Redemption  Date and the  Expiration  Date),  the  surrender for
transfer of any  certificate  for Common Stock  outstanding  on the Record Date,
with or  without a copy of the  Summary of Rights,  shall  also  constitute  the
transfer of the Rights associated with the Common Stock represented thereby.

                                      -8-
<PAGE>

            (c) Rights  shall be issued in respect of all shares of Common Stock
which are issued or sold by the  Company  after the Record Date but prior to the
earliest of the Distribution Date, the Redemption Date, the Exchange Date or the
Expiration Date. In addition,  in connection with the issuance or sale of Common
Stock by the Company  following the Distribution  Date and prior to the earliest
of the Redemption  Date,  the Exchange Date or the Expiration  Date, the Company
shall,  with  respect  to Common  Stock so issued  or sold  pursuant  to (i) the
exercise of stock  options  issued prior to the  Distribution  Date or under any
employee plan or  arrangement  created prior to the  Distribution  Date, or (ii)
upon the exercise,  conversion  or exchange of securities  issued by the Company
prior  to  the  Distribution   Date,   issue  Rights  and  Rights   Certificates
representing  the appropriate  number of Rights in connection with such issuance
or sale;  provided,  however,  that (x) no such  Rights and Rights  Certificates
shall be issued if,  and to the extent  that,  the  Company  shall be advised by
counsel that such issuance would create a significant  risk of material  adverse
tax  consequences to the Company or the Person to whom such Rights  Certificates
would be issued; and (y) no such Rights and Rights Certificates shall be issued,
if, and to the extent that,  appropriate  adjustment  shall  otherwise have been
made in lieu of the issuance thereof.  Certificates issued after the Record Date
representing  shares of Common Stock outstanding on the Record Date or shares of
Common  Stock  issued  after the Record  Date but prior to the  earliest  of the
Distribution  Date,  the  Redemption  Date, the Exchange Date and the Expiration
Date shall have impressed,  printed,  written on or otherwise  affixed to them a
legend substantially in the following form:

            This  certificate  also  evidences and entitles the holder hereof to
      certain Rights as set forth in a Rights  Agreement  between ATMI, Inc. and
      Fleet  National  Bank, as Rights Agent,  dated as of October 13, 2000 (the
      "Rights Agreement"),  the terms of which are hereby incorporated herein by
      reference  and a copy  of  which  is on file  at the  principal  executive
      offices of ATMI,  Inc.  Under certain  circumstances,  as set forth in the
      Rights Agreement,  such Rights will be evidenced by separate  certificates
      and will no longer be evidenced by this certificate.  ATMI, Inc. will mail
      to the holder of this certificate a copy of the Rights  Agreement  without
      charge  after  receipt  of  a  written  request  therefor.  Under  certain
      circumstances, as set forth in the Rights Agreement, Rights that were, are
      or become  beneficially  owned by Acquiring Persons or their Associates or
      Affiliates (as such terms are defined in the Rights  Agreement) may become
      null  and  void  and the  holder  of any of  such  Rights  (including  any
      subsequent holder) shall not have any right to exercise such Rights.

            Section 4.  Form of Rights Certificates.

            (a) The Rights  Certificates  (and the form of  election to purchase
shares and the form of assignment to be printed on the reverse thereof) shall be
in  substantially  the form of  Exhibit  B hereto  and may  have  such  marks of
identification  or  designation  and such  legends,  summaries  or  endorsements
printed thereon as the Company may deem  appropriate and as are not inconsistent
with the provisions of this Agreement,  or as may be required to comply with any
law or with any rule or  regulation  made  pursuant  thereto or with any rule or
regulation  of any stock  exchange  on which the Rights may from time to time be
listed or any securities  association on whose interdealer  quotation system the
Rights  may be from time to time  authorized  for  quotation,  or to  conform to
usage.  Subject to the provisions of this  Agreement,  the Rights

                                      -9-
<PAGE>

Certificates,  whenever issued,  shall be dated as of the Distribution Date, and
on their face shall  entitle  the  holders  thereof to  purchase  such number of
shares of Preferred  Stock as shall be set forth  therein at the Purchase  Price
set forth therein,  but the number and kind of such  securities and the Purchase
Price shall be subject to adjustment as provided in this Agreement.

            (b) Notwithstanding  any other provision of this Agreement,  (i) any
Rights  Certificate  issued  pursuant to this Agreement that  represents  Rights
beneficially owned or formerly  beneficially owned, on or after the Distribution
Date,  by a Person  known by the  Company to be: (A) an  Acquiring  Person or an
Associate  or  Affiliate  of an  Acquiring  Person;  (B) a  direct  or  indirect
transferee  of an  Acquiring  Person (or of an  Associate  or  Affiliate of such
Acquiring  Person) who becomes or becomes  entitled to be a transferee after the
Acquiring  Person  becomes  such;  or (C) a direct or indirect  transferee of an
Acquiring Person (or of an Associate or Affiliate of such Acquiring  Person) who
becomes or becomes entitled to be a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either (x) a
direct  or  indirect  transfer  (whether  or not  for  consideration)  from  the
Acquiring Person (or from an Associate or Affiliate of such Acquiring Person) to
holders of equity  interests in such  Acquiring  Person (or to holders of equity
interests  in an Associate  or  Affiliate  of such  Acquiring  Person) or to any
Person with whom such  Acquiring  Person (or an  Associate  or Affiliate of such
Acquiring  Person) has any continuing  agreement,  arrangement or  understanding
regarding the transferred  Rights,  or (y) a direct or indirect transfer which a
majority of the Board of Directors has determined is part of a plan, arrangement
or  understanding  which has as a primary  purpose  or effect the  avoidance  of
Section 7(e); or (ii) any Rights  Certificate  issued pursuant to this Agreement
upon  transfer,  exchange,   replacement  or  adjustment  of  any  other  Rights
Certificate  beneficially  owned by a Person  referred to in this Section  4(b),
shall contain (to the extent feasible) the following legend:

            The  Rights  represented  by  this  Rights  Certificate  are or were
      beneficially owned by a Person who was or became an Acquiring Person or an
      Affiliate or  Associate of an Acquiring  Person (as such terms are defined
      in the Rights  Agreement).  Accordingly,  this Rights  Certificate and the
      Rights  represented  hereby may become null and void in the  circumstances
      specified in Section 7(e) of the Rights Agreement.

            Section 5.  Execution, Countersignature and Registration.

            (a) Each  Rights  Certificate  shall be  executed  on  behalf of the
Company  by the  Company's  Chairman  of the  Board,  Chief  Executive  Officer,
President or any Vice President,  either manually or by facsimile signature, and
shall have affixed thereto the Company's seal or a facsimile thereof which shall
be  attested  by the  Company's  Secretary  or an  Assistant  Secretary,  either
manually  or  by  facsimile   signature.   Each  Rights   Certificate  shall  be
countersigned  by the Rights  Agent  either  manually  or, if  permitted  by the
Company, by facsimile signature and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed a Rights
Certificate   shall   cease  to  be  such   officer   of  the   Company   before
countersignature  by the Rights  Agent and issuance and delivery by the Company,
such Rights  Certificate  nevertheless  may be countersigned by the Rights Agent
and issued and delivered with the same force and effect as though the Person who
signed such Rights Certificate had not ceased to be such officer of the Company;
and any Rights  Certificate may be signed on behalf of the

                                      -10-
<PAGE>

Company by any Person who, at the actual  date of the  execution  of such Rights
Certificate,  shall be a proper  officer  of the  Company  to sign  such  Rights
Certificate,  although at the date of the  execution of this  Agreement any such
Person was not such an officer.

            (b) Following the Distribution  Date, the Rights Agent shall keep or
cause  to  be  kept,  at  its  principal  corporate  trust  office,   books  for
registration  and transfer of the Rights  Certificates  issued  hereunder.  Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced by each Rights Certificate, and the
certificate number and the date of issuance of each Rights Certificate.

            Section  6.  Transfer,  Division,  Combination  and  Exchange  of
Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.

            (a) Subject to the  provisions  of Section 14, at any time after the
Close of  Business  on the  Distribution  Date  and at or prior to the  Close of
Business on the  earliest  of the  Redemption  Date,  the  Exchange  Date or the
Expiration  Date,  any  Rights   Certificate  or  Rights   Certificates  may  be
transferred,  divided,  combined or exchanged for another Rights  Certificate or
Rights  Certificates,  entitling the registered holder to purchase a like number
of shares of Preferred  Stock (or,  following a  Triggering  Event or a Business
Combination,  other securities,  cash or other property,  as the case may be) as
the Rights Certificate or Rights Certificates  surrendered  entitled such holder
to purchase immediately prior to such surrender.  Any registered holder desiring
to transfer,  divide, combine or exchange any Rights Certificate shall make such
request in writing delivered to the Rights Agent, and shall surrender the Rights
Certificate  or Rights  Certificates  to be  transferred,  divided,  combined or
exchanged at the principal  corporate office of the Rights Agent.  Thereupon the
Rights  Agent shall  countersign  and deliver to the Person  entitled  thereto a
Rights Certificate or Rights Certificates,  as the case may be, as so requested.
As a condition to such transfer, division,  combination or exchange, the Company
may require payment by the surrendering  holder of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection therewith.  Neither
the  Rights  Agent  nor the  Company  shall  be  obligated  to take  any  action
whatsoever  with  respect  to  the  transfer  of  any  such  surrendered  Rights
Certificate  until the registered  holder shall have duly completed and executed
the form of assignment on the reverse side of such Rights  Certificate and shall
have provided such additional  evidence of the identity of the Beneficial  Owner
(or such former or proposed Beneficial Owner) thereof or such Beneficial Owner's
Affiliates or Associates as the Company shall reasonably request.

            (b) Upon  receipt by the  Company  and the Rights  Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate,  and, in case of loss, theft or destruction,  of indemnity
or security  reasonably  satisfactory to them, and  reimbursement to the Company
and the Rights Agent of all reasonable  expenses  incidental  thereto,  and upon
surrender  to the Rights Agent and  cancellation  of the Rights  Certificate  if
mutilated,  the Company will make and deliver a new Rights  Certificate  of like
tenor to the Rights Agent for  countersignature by the Rights Agent and delivery
to the  registered  owner in lieu of the  Rights  Certificate  so lost,  stolen,
destroyed or mutilated.

                                      -11-
<PAGE>

            Section 7. Exercise of Rights;  Purchase  Price;  Expiration Date
of Rights.

            (a) Each Right shall entitle  (except as otherwise  provided in this
Agreement) the registered holder thereof,  upon the exercise thereof as provided
in this  Agreement,  to purchase,  for the Purchase Price, at any time after the
Distribution Date and prior to the earliest of the Expiration Date, the Exchange
Date or the Redemption Date, one  one-hundredth  (1/100) of a share of Preferred
Stock (or other  securities,  cash or other property or assets,  as the case may
be, as provided herein),  subject to adjustment from time to time as provided in
Sections 11 and 13.

            (b) The registered holder of any Rights Certificate may exercise the
Rights  evidenced  thereby  (except as otherwise  provided in this Agreement) in
whole or in part  (except that no fraction of a Right may be  exercised)  at any
time after the  Distribution  Date and prior to the  earliest of the  Expiration
Date,  the Exchange  Date or the  Redemption  Date, by  surrendering  the Rights
Certificate,  with the form of election to purchase on the reverse  side thereof
duly executed,  to the Rights Agent at the principal  corporate  trust office of
the Rights  Agent,  together  with  payment of the  Purchase  Price for each one
one-hundredth of a share of Preferred Stock (or other securities,  cash or other
property  or  assets,  as the case may be, as  provided  herein) as to which the
Rights are exercised.

            (c) Upon receipt of a Rights  Certificate  representing  exercisable
Rights,  with the form of election to purchase  duly  executed,  accompanied  by
payment of the Purchase Price for each one one-hundredth of a share of Preferred
Stock (or other  securities,  cash or other property or assets,  as the case may
be, as provided  herein) to be purchased and an amount in cash,  certified  bank
check or bank draft payable to the order of the Company equal to any  applicable
transfer tax required to be paid by the surrendering  holder pursuant to Section
9(d),  the Rights  Agent shall,  subject to the  provisions  of this  Agreement,
thereupon  promptly (i)(A) requisition from any transfer agent for the Preferred
Stock (or make  available,  if the Rights  Agent is the  transfer  agent for the
Preferred Stock)  certificates for the total number of one  one-hundredths  of a
share of Preferred  Stock to be purchased  (and the Company  hereby  irrevocably
authorizes its transfer agent to comply with all such  requests),  or (B) if the
Company  shall have  elected to deposit the total  number of shares of Preferred
Stock issuable upon exercise of the Rights with a depositary agent,  requisition
from the depositary agent depositary  receipts  representing  such number of one
one-hundredths  of a share of Preferred  Stock as are to be purchased  (in which
case  certificates for the Preferred Stock represented by such receipts shall be
deposited by the transfer agent with the depositary agent) and the Company shall
direct the depositary  agent to comply with such request;  (ii) after receipt of
such certificates or depositary  receipts,  cause the same to be delivered to or
upon the order of the registered holder of such Rights  Certificate,  registered
in such  name or  names  as may be  designated  by such  holder;  and  (iii)  if
appropriate,  requisition from the Company the amount of cash to be paid in lieu
of issuance of  fractional  shares in accordance  with Section 14 and,  promptly
after  receipt  thereof,  cause the same to be delivered to or upon the order of
the registered holder of such Rights Certificate.  In the event that the Company
is obligated to issue other securities (including shares of Common Stock) of the
Company,  pay cash and/or  distribute other property pursuant to this Agreement,
the Company will make all arrangements  necessary so that such other securities,
cash and/or other property are available for  distribution  by the Rights Agent,
if and when appropriate.

                                      -12-
<PAGE>

            (d) In case the registered  holder of any Rights  Certificate  shall
exercise less than all the Rights evidenced  thereby,  a new Rights  Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the  Rights  Agent and  delivered  to, or upon the order of,  the  registered
holder of such Rights Certificate or to his duly authorized assigns,  subject to
the provisions of Sections 6 and 14.

            (e) Notwithstanding  anything in this Agreement to the contrary, any
Rights that are or were formerly beneficially owned on or after the Distribution
Date by (i) an  Acquiring  Person or any  Associate or Affiliate of an Acquiring
Person;  (ii) a direct or indirect  transferee of an Acquiring  Person (or of an
Associate  or  Affiliate  of such  Acquiring  Person)  who  becomes,  or becomes
entitled to be, a transferee after the Acquiring Person becomes such; or (iii) a
direct or indirect  transferee  of an  Acquiring  Person (or of an  Associate or
Affiliate of such Acquiring  Person) who becomes,  or becomes  entitled to be, a
transferee prior to or concurrently  with the Acquiring Person becoming such and
receives  such  Rights  pursuant  to either  (A) a direct or  indirect  transfer
(whether  or not for  consideration)  from  the  Acquiring  Person  (or  from an
Associate or Affiliate of such Acquiring  Person) to holders of equity interests
in such Acquiring  Person (or to holders of equity interests in any Associate or
Affiliate  of such  Acquiring  Person) or to any Person with whom the  Acquiring
Person  (or an  Associate  or  Affiliate  of  such  Acquiring  Person)  has  any
continuing  agreement,  arrangement or  understanding  regarding the transferred
Rights,  and (B) a direct or indirect  transfer which a majority of the Board of
Directors  of  the  Company  determines  is  part  of  a  plan,  arrangement  or
understanding  which has as a primary  purpose or effect the  avoidance  of this
Section 7(e),  shall,  from and after the first occurrence of a Triggering Event
and without any  further  action,  be null and void and no holder of such Rights
shall have any rights  whatsoever with respect to such Rights whether under this
Agreement or otherwise;  provided,  however,  that,  in the case of  transferees
described  in clause  (ii) or clause  (iii) of this  Section  7(e),  any  Rights
beneficially  owned by such transferee shall be null and void only if and to the
extent such Rights were formerly  beneficially owned by a Person who was, at the
time such  Person  beneficially  owned  such  Rights,  or who later  became,  an
Acquiring  Person or an Affiliate or Associate  of such  Acquiring  Person.  The
Company shall use all  reasonable  efforts to ensure that the provisions of this
Section 7(e) and of Section  4(b) are complied  with but shall have no liability
to any holder of a Rights  Certificate or to any other Person as a result of the
Company's failure to make, or any delay in making (including any such failure or
delay by the Board of Directors of the Company), any determinations with respect
to an Acquiring Person or its Affiliates,  Associates or transferees  under this
Section 7(e) or any other provision of this Agreement.

            (f)  Notwithstanding  anything in this  Agreement  to the  contrary,
neither the Rights Agent nor the Company  shall be  obligated  to undertake  any
action with respect to the registered  holder of a Rights  Certificate  upon the
occurrence of any purported  exercise as set forth in this Section 7 unless such
registered holder shall have (i) completed and signed the certificate  contained
in the form of election to purchase  set forth on the reverse side of the Rights
Certificate  surrendered  for such exercise,  and (ii) provided such  additional
evidence  of the  identity  of the  Beneficial  Owner  (or  former  or  proposed
Beneficial  Owner)  thereof or the  Affiliates or Associates of such  Beneficial
Owner (or former or proposed  Beneficial  Owner) as the Company shall reasonably
request.

                                      -13-
<PAGE>

            Section 8. Cancellation and Destruction of Rights Certificates.  All
Rights Certificates surrendered for the purpose of exercise, transfer, division,
combination  or exchange  shall,  if surrendered to the Company or to any of its
agents,  be delivered to the Rights Agent for  cancellation or in canceled form,
or, if surrendered  to the Rights Agent,  shall be canceled by it, and no Rights
Certificates  shall be issued in lieu therefor except as expressly  permitted by
the provisions of this Agreement.  The Company shall deliver to the Rights Agent
for  cancellation  and  retirement,  and the  Rights  Agent  shall so cancel and
retire,  any other  Rights  Certificate  purchased  or  acquired  by the Company
otherwise  than upon the exercise  thereof.  The Rights Agent shall  deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company,  destroy such canceled Rights Certificates,  and in such case shall
deliver a certificate of destruction thereof to the Company.

            Section 9.  Reservation and Availability of Preferred Stock.

            (a) The  Company  covenants  and  agrees  that it will  cause  to be
reserved  and kept  available  at all times out of its  authorized  and unissued
shares of Preferred Stock or its authorized and issued shares of Preferred Stock
held in its treasury (and,  following the occurrence of a Triggering  Event or a
Business Combination,  out of its authorized and unissued shares of Common Stock
and/or other  securities  or out of its  authorized  and issued shares of Common
Stock and/or other securities held in its treasury) free from preemptive  rights
or any right of first refusal,  a sufficient number of shares of Preferred Stock
(and, following the occurrence of a Triggering Event or a Business  Combination,
shares of Common Stock and/or other  securities)  to permit the exercise in full
of all Rights from time to time outstanding.

            (b)  The  Company  further  covenants  and  agrees,  so  long as the
Preferred  Stock (and,  following  the  occurrence  of a  Triggering  Event or a
Business  Combination,  shares of Common Stock and/or other securities) issuable
upon the  exercise  of  Rights  may be  listed  on any  United  States  national
securities  exchange or quoted on any  automated  quotation  system,  to use its
reasonable best efforts to cause, from and after the time that the Rights become
exercisable,  all such shares and/or other securities reserved for such issuance
to be listed on such exchange or quoted on such automated  quotation system upon
official notice of issuance upon such exercise.

            (c) The Company  further  covenants and agrees that it will take all
such action as may be  necessary  to ensure that all shares of  Preferred  Stock
(and, following the occurrence of a Triggering Event or a Business  Combination,
shares of Common Stock and/or other  securities)  delivered upon the exercise of
Rights shall, at the time of delivery of the certificates for such shares and/or
such other securities  (subject to payment of the Purchase  Price),  be duly and
validly authorized and issued, fully paid, nonassessable,  freely tradeable, not
subject to liens or encumbrances, and free of preemptive rights, rights of first
refusal or any other  restrictions  or  limitations on the transfer or ownership
thereof, of any kind or nature whatsoever.

            (d) The Company  further  covenants and agrees that it will pay when
due and payable any and all federal and state  transfer  taxes and charges which
may be payable in respect of the  original  issuance  or  delivery of the Rights
Certificates  or of any  certificates  for shares of Preferred  Stock (or Common
Stock and/or other securities,  as the case may be) upon the exercise of Rights.
The Company  shall not,  however,  be required to (i) pay any transfer tax which
may be payable in respect of any  transfer  involved in the issuance or delivery
of any Rights

                                      -14-
<PAGE>

Certificates  or the  issuance  or delivery  of any  certificates  for shares of
Preferred Stock (or Common Stock and/or other  securities as the case may be) to
a Person other than, or in a name other than that of, the  registered  holder of
the Rights  Certificate  evidencing  Rights  surrendered  for exercise;  or (ii)
transfer or deliver any Rights  Certificate or issue or deliver any certificates
for shares of Preferred  Stock (or Common Stock and/or other  securities  as the
case may be) upon the  exercise of any Rights until any such tax shall have been
paid (any such tax being payable by the holder of such Rights Certificate at the
time  of  surrender)  or  until  it  has  been   established  to  the  Company's
satisfaction that no such tax is due.

            (e) The Company shall use its reasonable best efforts (i) as soon as
practicable  following the Stock Acquisition Date (provided the consideration to
be delivered by the Company upon  exercise of the Rights has been  determined in
accordance with Section 11(a)(iii)),  or as soon as is otherwise required by law
following  the  Distribution  Date,  as the case may be, to  prepare  and file a
registration  statement on an  appropriate  form under the  Securities  Act with
respect to the securities purchasable upon exercise of the Rights; (ii) to cause
such  registration  statement to become  effective as soon as practicable  after
such filing; and (iii) to cause such registration  statement to remain effective
(with a prospectus at all times meeting the  requirements of the Securities Act)
until the earlier of (A) the date as of which  Rights are no longer  exercisable
for such  securities or (B) the Expiration  Date. The Company shall also use its
reasonable  best efforts to take such action as may be necessary or  appropriate
under,  or to ensure  compliance  with, the securities or "blue sky" laws of the
various  states in connection  with the exercise of the Rights.  The Company may
temporarily  suspend,  for a period of time not to exceed 90 days after the date
set forth in clause (i) of this Section 9 (e), the  exercisability of the Rights
in order to prepare and file such registration statement and permit it to become
effective.   Upon  any  such  suspension,   the  Company  shall  make  a  public
announcement  stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer  in  effect.  Notwithstanding  any  provision  of this  Agreement  to the
contrary,  the Rights shall not be  exercisable in any  jurisdiction  unless the
requisite  qualification in such jurisdiction shall have been obtained and until
a registration statement has been declared effective under the Securities Act.

            Section 10.  Preferred  Stock Record Date. Each Person in whose name
any  certificate  for shares of  Preferred  Stock (or Common  Stock and/or other
securities,  as the case may be) is issued upon the exercise of Rights shall for
all  purposes  be deemed to have  become the  holder of record of the  Preferred
Stock (or Common Stock and/or other securities,  as the case may be) represented
thereby on, and such certificate  shall be dated, the date upon which the Rights
Certificate  evidencing  such  Rights was duly  surrendered  and  payment of the
Purchase Price (and any applicable transfer taxes) was made; provided,  however,
that if the  date  of such  surrender  and  payment  is a date  upon  which  the
Preferred  Stock (or Common Stock and/or other  securities,  as the case may be)
transfer  books of the Company are closed,  such Person  shall be deemed to have
become the record  holder of such  shares (or  Common  Stock  and/or  such other
securities,  as the case may be) on, and such  certificate  shall be dated,  the
next  succeeding  Business  Day on which the  Preferred  Stock (or Common  Stock
and/or other  securities,  as the case may be) transfer books of the Company are
open.

                                      -15-
<PAGE>

            Section  11.  Adjustments  to  Purchase  Price,  Number of Shares or
Number of Rights.  The Purchase Price,  the number and kind of securities,  cash
and other  property  obtainable  upon  exercise  of each Right and the number of
Rights  outstanding shall be subject to adjustment from time to time as provided
in this Section 11.

            (a) (i) In the event the  Company  shall at any time on or after the
date of  this  Agreement  (A)  pay a  dividend  or  make a  distribution  on the
outstanding  shares of Preferred Stock payable in shares of Preferred Stock, (B)
subdivide (by a stock split or otherwise) the outstanding Preferred Stock into a
larger number of shares, (C) combine (by a reverse stock split or otherwise) the
outstanding  Preferred  Stock into a smaller number of shares,  or (D) issue any
securities in a  reclassification  of the Preferred  Stock  (including  any such
reclassification  in  connection  with a  consolidation  or  merger in which the
Company is the  surviving  corporation),  except as  otherwise  provided in this
Section  11(a),  then in each such event the Purchase  Price and the  Redemption
Price set forth in  Section  23, as each is in effect at the time of the  record
date  for  such  dividend  or  distribution,  or of the  effective  date of such
subdivision, combination or reclassification,  and the number and kind of shares
of  capital  stock  or  interests  therein  issuable  on  such  date,  shall  be
proportionately  adjusted so that the holder of any Right  exercised  after such
time shall be  entitled to receive  the  aggregate  number and kind of shares of
capital  stock or  interests  therein  which,  if such Right had been  exercised
immediately  prior to such date and at a time when the Preferred  Stock transfer
books of the company were open,  such holder would have owned upon such exercise
and  been  entitled  to  receive  by  virtue  of  such  dividend,   subdivision,
combination  or  reclassification.  If an event  occurs  which would  require an
adjustment  under  both  this  Section  11(a)(i)  and  Section  11(a)(ii),   the
adjustment  provided for in this Section  11(a)(i)  shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section 11(a)(ii).

                  (ii) Upon the first occurrence of a Triggering  Event,  proper
provision  shall be made so that  each  holder of a Right,  except as  otherwise
provided in this Agreement,  shall thereafter have the right to receive, and the
Company shall issue,  upon exercise thereof at a price equal to the then-current
Purchase  Price  multiplied  by the number of one  one-hundredths  of a share of
Preferred  Stock for which a Right is then  exercisable  in accordance  with the
terms of this Agreement,  in lieu of the number of one one-hundredths of a share
of Preferred Stock or other securities receivable upon exercise of a Right prior
to the occurrence of the Triggering Event, such number of shares of Common Stock
of the  Company  as shall  equal the  result  obtained  by (x)  multiplying  the
then-current  Purchase  Price  by the  number  of  one-hundredths  of a share of
Preferred  Stock or other  securities  for  which a Right  was then  exercisable
(without giving effect to such  Triggering  Event) and (y) dividing that product
by 50% of the Current  Market Price per share of Common Stock on the date of the
occurrence of the  Triggering  Event (such number of shares being referred to as
the "Adjustment  Shares");  provided,  however, that if the transaction or event
that would  otherwise  give rise to the foregoing  adjustment is also subject to
the provisions of Section 13, then only the provisions of Section 13 shall apply
and no  adjustment  shall be made pursuant to this Section  11(a)(ii).  Upon the
occurrence of such Triggering  Event,  the Purchase Price required to be paid in
order to exercise a Right shall be  unchanged,  and the Purchase  Price shall be
appropriately  adjusted  to  reflect,  and shall  thereafter  mean,  the  amount
required to be paid per share of Common Stock upon exercise of a Right.

                                      -16-
<PAGE>

                  (iii) In lieu of issuing  shares of Common Stock in accordance
with Section 11(a)(ii), the Company may, if a majority of the Board of Directors
of the Company  determines  that such action is necessary or appropriate and not
contrary  to the  interests  of holders of Rights,  elect to,  and,  if that the
number  of  shares  of  Common  Stock  which  are  authorized  by the  Company's
certificate  of  incorporation,  but which are not  outstanding  or reserved for
issuance for purposes other than upon exercise of the Rights, are not sufficient
to  permit  the  exercise  in full of the  Rights  in  accordance  with  Section
11(a)(ii),  the  Company  shall  take all such  action  as may be  necessary  to
authorize,  issue or pay, upon the exercise of Rights, cash (including by way of
a reduction of the Purchase Price), debt securities,  property,  assets or other
equity securities of the Company (including, without limitation, shares or units
of shares of  preferred  stock)  which the Board of Directors of the Company has
determined (which  determination shall be final,  binding and conclusive for all
purposes)  to have  essentially  the same value or economic  rights as shares of
Common  Stock  (such  equity  securities  referred  to herein as  "Common  Stock
Equivalents),  or any  combination of the foregoing,  having an aggregate  value
equal to the value of the  Adjustment  Shares  which  otherwise  would have been
issuable  pursuant  to  Section  11(a)(ii),   which  aggregate  value  shall  be
determined by a majority of the Board of Directors (which determination shall be
final,  binding and conclusive for all purposes).  If a majority of the Board of
Directors  determines  to issue or deliver  any equity  securities  (other  than
Common Stock or Common Stock Equivalents), debt securities and/or other property
or assets  pursuant to this  Section  11(a)(iii),  the value of such  securities
and/or  property  or assets  shall be  determined  by a majority of the Board of
Directors  of the  Company  based  upon the  advice of a  nationally  recognized
investment  banking firm selected by a majority of the Board of Directors of the
Company  (which  determination  shall be final,  binding and  conclusive for all
purposes).  If the  Company is required to make  adequate  provision  to deliver
value pursuant to the first sentence of this Section  11(a)(iii) and the Company
shall not have made such adequate  provision to deliver value within ninety (90)
days  following the first  occurrence of a Triggering  Event (the  "Substitution
Period"),  then  notwithstanding  any  provision  of Section  11(a)(ii)  or this
Section  11(a)(iii) to the contrary,  the Company shall be obligated to deliver,
upon the surrender for exercise of a Right and without  requiring payment of the
Purchase  Price,  shares of Common Stock (to the extent  available) and then, if
necessary,  cash,  which shares and/or cash have an aggregate value equal to the
excess of the value of the Adjustment  Shares over the Purchase  Price.  If both
Common Stock and cash are to be delivered  pursuant to the  preceding  sentence,
amounts of both Common Stock and cash shall be delivered  upon surrender of each
Right in a ratio of Common  Stock to cash that bears the same ratio as the total
value of all  Common  Stock to be  delivered  (as  determined  pursuant  to this
Section  11(a)(iii))  bears to the  total  value  of all  cash to be  delivered;
provided,  however,  that the Company may adjust such ratio to avoid issuing any
fractional shares of Common Stock so long as the method of adjustment is applied
consistently  to each holder of Rights  entitled to receive  value with  respect
thereto  pursuant  to this  Section  11(a)(iii).  To the extent that the Company
determines  that some action is to be taken  pursuant to the first  and/or third
sentences of this Section 11(a)(iii), the Company may suspend the exercisability
of the  Rights  but in no  event to a time  later  than  the  expiration  of the
Substitution  Period.  In the event of any such  suspension,  the Company  shall
issue a public  announcement  stating that the  exercisability of the Rights has
been temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iii),  the
value of each  Adjustment  Share shall be the Current  Market Price per share of
the  Common  Stock on the Stock  Acquisition  Date and the per share or

                                      -17-
<PAGE>

per unit  value of any  Common  Stock  Equivalent  shall be  deemed to equal the
Current Market Price per share of the Common Stock on such date.

                  (iv) A majority of the Board of  Directors of the Company may,
at its option, at any time and from time to time after the first occurrence of a
Triggering  Event,  cause  the  Company  to  exchange,  for  all or  part of the
then-outstanding  and  exercisable  Rights (which shall not include  Rights that
have become void pursuant to the provisions of Section  7(e)),  shares of Common
Stock or Common Stock  Equivalents  at an exchange  ratio of one share of Common
Stock per Right,  appropriately  adjusted  to  reflect  any stock  split,  stock
dividend or similar transaction occurring after the date of this Agreement (such
exchange  ratio being  hereinafter  referred to as the  "Exchange  Ratio").  Any
partial  exchange  shall be  effected on a pro rata basis based on the number of
Rights (other than Rights which have become void  pursuant to the  provisions of
Section 7(e)) held by each holder of Rights.  Notwithstanding the foregoing, the
Board of Directors  shall not be  empowered to effect such  exchange at any time
after any Person (other than an Exempt Person), together with all Affiliates and
Associates of such Person,  becomes the  Beneficial  Owner of 50% or more of the
Outstanding Common Stock.

            Immediately  upon the action of a majority of the Board of Directors
of the Company  ordering  the  exchange of any Rights  pursuant to this  Section
11(a)(iv)  and without any further  action and without any notice,  the right to
exercise such Rights shall  terminate and the only right  thereafter of a holder
of such Rights  shall be to receive that number of shares of Common Stock and/or
Common Stock  Equivalents equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio.  The Company shall promptly give public notice
of any such exchange and, in addition,  the Company shall promptly mail a notice
of any such  exchange to all of the holders of such  Rights in  accordance  with
Section 25; provided,  however, that the failure to give, any delay in giving or
any defect in, such notice shall not affect the validity of such exchange.  Each
such  notice of  exchange  will  state the method by which the  exchange  of the
Common Stock or Common Stock Equivalents for Rights will be effected and, in the
event of any partial exchange, the number of Rights which will be exchanged.  In
the event that the number of shares of Common Stock which is authorized  but not
outstanding  or reserved for issuance for a purpose  other than  exercise of the
Rights is not  sufficient  to permit any exchange of Rights as  contemplated  in
accordance  with this Section  11(a)(iv),  the Board of Directors of the Company
shall take all such action  within its power as may be  necessary  to  authorize
additional shares of Common Stock for issuance upon exchange of the Rights.  The
Company  shall not be required to issue  fractions  of shares of Common Stock or
Common Stock Equivalents or to distribute certificates which evidence fractional
shares of Common Stock or Common Stock  Equivalents.  In lieu of such fractional
shares of Common Stock or Common Stock Equivalents, the Company shall pay to the
registered  holders  of the  Rights  Certificates  with  regard  to  which  such
fractional shares of Common Stock or Common Stock Equivalents would otherwise be
issuable an amount in cash equal to the product  derived by multiplying  (x) the
subject  fraction,  by (y) the last sale price of the Company's  Common Stock on
the fifth Trading Day following the public  announcement  of the exchange by the
Company,  or, in case no such sale takes  place on such day,  the average of the
closing bid and asked  prices on such day, in either case on a when issued basis
(taking into

                                      -18-
<PAGE>

account the  exchange),  as reported in the principal  consolidated
transaction  reporting  system with respect to securities  listed or admitted to
trading  on the NYSE  (or,  if the  Company's  Common  Stock is not so listed or
traded,  then as  determined  in the manner  provided  under the  definition  of
"Current  Market Price,"  adjusted to take into account the  exchange).  For the
purposes of this Section 11(a)(iv),  the value of any Common Stock Equivalent on
any date  shall be the same as the  value of the  Common  Stock,  as  determined
pursuant to the previous sentence, on such date.

            (b) If the  Company  shall at any time on or after  the date of this
Agreement  fix a record date for the issuance of rights,  options or warrants to
holders of  Preferred  Stock  entitling  them (for a period  expiring  within 45
calendar  days after such record  date) to subscribe  for or purchase  Preferred
Stock or Equivalent  Shares (or securities  convertible into or exchangeable for
Preferred Stock or Equivalent Shares) at a price per share of Preferred Stock or
Equivalent  Shares (or, in the case of a convertible or  exchangeable  security,
having a conversion or exchange price per share of Preferred Stock or Equivalent
Shares) less than the Current Market Price per share of Preferred  Stock on such
record date,  the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction,  the numerator of which shall be the number of shares
of Preferred  Stock and  Equivalent  Shares (if any)  outstanding on such record
date, plus the number of shares of Preferred Stock or Equivalent  Shares, as the
case may be, which the aggregate exercise,  conversion and/or exchange price for
the total number of shares of Preferred Stock or Equivalent  Shares, as the case
may be, which are obtainable upon exercise,  conversion  and/or exchange of such
rights,  options,  warrants or  convertible  or  exchangeable  securities  would
purchase at such Current Market Price, and the denominator of which shall be the
number of shares of Preferred Stock and Equivalent  Shares (if any)  outstanding
on such record date, plus the number of additional  shares of Preferred Stock or
Equivalent  Shares,  as the case may be,  which may be obtained  upon  exercise,
conversion and/or exchange of such rights,  options,  warrants or convertible or
exchangeable  securities.  In  case  such  subscription  price  may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration  shall be as determined in good faith by a majority of the
Board of Directors of the Company,  whose  determination shall be described in a
statement filed with the Rights Agent and shall be final, binding and conclusive
for all purposes. Preferred Stock and Equivalent Shares owned by or held for the
account of the  Company or any  Subsidiary  of the  Company  shall not be deemed
outstanding for the purpose of any such  computation.  Such adjustment  shall be
made  successively  whenever such a record date is fixed;  and in the event that
such rights,  options or warrants are not issued following such adjustment,  the
Purchase Price shall be readjusted to be the Purchase Price that would have been
in effect if such record date had not been fixed.

            (c) In case the  Company  shall at any time  after  the date of this
Agreement  fix a record  date for the  making of a  distribution  to  holders of
Preferred  Stock  (including  any such  distribution  made in connection  with a
reclassification  of the Preferred Stock or a  consolidation  or merger in which
the Company is the surviving  corporation)  of securities  (other than Preferred
Stock and rights,  options,  warrants or convertible or exchangeable  securities
referred to in Section 11(b)), cash (other than a regular periodic cash dividend
at an annual  rate not in excess of: (x) 125% of the annual  rate of the regular
cash  dividend  paid on the  Preferred  Stock during the  immediately  preceding
fiscal  year  (or,  if the  Preferred  Stock  was not  outstanding  during  such
preceding fiscal year, then 125% of the annual rate of the regular cash dividend
paid on the Common Stock  during such year),  or (y) in the event that a regular
cash dividend was not paid on the Preferred  Stock (or Common Stock) during such
preceding  fiscal year, 5% of the Current Market Value of the Preferred Stock on
the date such regular cash dividend was first declared),  property, evidences of
indebtedness,  or assets,  the Purchase  Price to be in effect after such record

                                      -19-
<PAGE>

date shall be determined by multiplying the Purchase Price in effect immediately
prior to such  record date by a fraction,  the  numerator  of which shall be the
Current Market Price per share of Preferred  Stock on such record date, less the
fair  market  value (as  determined  in good faith by a majority of the Board of
Directors of the Company,  whose determination shall be described in a statement
filed with the Rights Agent and shall be final,  binding and  conclusive for all
purposes)  of the  portion of such  securities,  cash,  property,  evidences  of
indebtedness or assets to be so distributed in respect of one share of Preferred
Stock, and the denominator of which shall be such Current Market Price per share
of  Preferred  Stock  on  such  record  date.  Such  adjustments  shall  be made
successively  whenever  such a record date is fixed;  and in the event that such
distribution is not made following such adjustment,  the Purchase Price shall be
readjusted  to be the  Purchase  Price  that  would  have been in effect if such
record date had not been fixed.

            (d) Except as provided  below,  no adjustment in the Purchase  Price
shall be required unless such  adjustment  would require an increase or decrease
of at least 1% in the Purchase Price;  provided,  however,  that any adjustments
which by  reason of this  Section  11(d) are not  required  to be made  shall be
carried  forward  and taken  into  account  in any  subsequent  adjustment.  All
calculations  under this  Section 11 shall be made to the nearest  cent,  to the
nearest one hundred-thousandth of a share of Common Stock, or to the nearest one
hundred-thousandths  of a share of Preferred  Stock.  Notwithstanding  the first
sentence of this Section 11(d), any adjustment required by this Section 11 shall
be made no later  than  the  earlier  of (i)  three  years  from the date of the
transaction which requires such adjustment and (ii) the Expiration Date.

            (e) If, as a result of an adjustment  made pursuant to Section 11(a)
or Section  13(a),  the holder of any Right  thereafter  exercised  shall become
entitled to receive any securities of the Company other than shares of Preferred
Stock,  thereafter the Purchase Price and the number of such other securities so
receivable  upon exercise of any Right shall be subject to adjustment  from time
to time in a manner  and on terms as nearly  equivalent  as  practicable  to the
provisions  with  respect to the shares of  Preferred  Stock  contained  in this
Section  11 and the  provisions  of  Sections  7, 9, 10,  12, 13, 14 and 24 with
respect to the shares of  Preferred  Stock shall apply on like terms to any such
other securities.

            (f) All Rights  originally  issued by the Company  subsequent to any
adjustment  made to the Purchase  Price  hereunder  shall  evidence the right to
purchase,  at the  adjusted  Purchase  Price,  the number of shares of Preferred
Stock or other securities,  cash or other property purchasable from time to time
hereunder  upon  exercise of the Rights,  all subject to further  adjustment  as
provided in this Agreement.

            (g) Unless the Company shall have exercised its election as provided
in Section 11(h),  upon each adjustment of the Purchase Price as a result of any
calculation  made  pursuant to Sections  11(a)(i),  11(b) and 11(c),  each Right
outstanding  immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase,  at the adjusted  Purchase Price, that number of
one  one-hundredths of a share of Preferred Stock (calculated to the nearest one
hundred-thousandths  of a share of Preferred  Stock) obtained by (i) multiplying
the number of one  one-hundredths  of a share of  Preferred  Stock  covered by a
Right  immediately  prior to  adjustment  pursuant to this Section  11(g) by the
Purchase Price in effect  immediately

                                      -20-
<PAGE>

prior to such  adjustment of the Purchase Price and (ii) dividing the product so
obtained by the Purchase Price in effect  immediately  after such  adjustment of
the Purchase Price.

            (h) The Company may elect, on or after the date of any adjustment of
the Purchase Price or any adjustment to the number of shares of Preferred  Stock
for which a Right may be exercised,  to adjust the number of Rights,  in lieu of
an adjustment in the number of one  one-hundredths of a share of Preferred Stock
purchasable upon the exercise of a Right.  Each of the Rights  outstanding after
such  adjustment of the number of Rights shall be exercisable  for the number of
one  one-hundredths  of a share  of  Preferred  Stock  for  which  a  Right  was
exercisable  immediately prior to such adjustment.  Each Right outstanding prior
to such  adjustment  of the number of Rights  shall become that number of Rights
(calculated  to the nearest  one  hundred-thousandth)  obtained by dividing  the
Purchase Price in effect  immediately  prior to such  adjustment by the Purchase
Price in effect  immediately  after such  adjustment.  The Company  shall make a
public  announcement of its election to adjust the number of Rights,  indicating
the record date for the adjustment, and, if known at the time, the amount of the
adjustment  to be made.  This record date may be the date on which the  Purchase
Price is adjusted or any day thereafter,  but, if the Rights  Certificates  have
been  issued,  shall  be  at  least  10  days  after  the  date  of  the  public
announcement.  If Rights  Certificates have been issued, upon each adjustment of
the number of Rights  pursuant  to this  Section  11(h) the  Company  shall,  as
promptly as practicable,  cause to be distributed to holders of record of Rights
Certificates on such record date a new Rights Certificate evidencing, subject to
Section 14, the  additional  Rights to which such holders shall be entitled as a
result of such adjustment,  or, at the option of the Company,  shall cause to be
distributed to such holders of record,  in substitution  and replacement for the
Rights  Certificates  held by such holders prior to the date of  adjustment  and
upon  surrender  thereof (if required by the Company),  new Rights  Certificates
evidencing  all the Rights to which such  holders  shall be entitled  after such
adjustment.  Rights Certificates to be so distributed shall be issued,  executed
and countersigned in the manner provided for in this Agreement (and may bear, at
the option of the Company,  the adjusted Purchase Price) and shall be registered
in the names of the holders of record of Rights  Certificates on the record date
specified in the public announcement.

            (i)  Irrespective  of any adjustment or change in the Purchase Price
or the number or kind of shares  issuable  upon the exercise of the Rights,  the
Rights  Certificates  theretofore and thereafter  issued may continue to express
the Purchase Price per one  one-hundredth  of a share of Preferred Stock and the
number of shares of Preferred  Stock which were  expressed in the initial Rights
Certificates issued hereunder.

            (j) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of one  one-hundredth  of a
share of Preferred Stock issuable upon exercise of the Rights, the Company shall
take any corporate action which may, in the opinion of its counsel, be necessary
in  order  that the  Company  may  validly  and  legally  issue  fully  paid and
nonassessable one one-hundredth  shares of such Preferred Stock at such adjusted
Purchase Price.

            (k) In any case in which  this  Section  11  shall  require  that an
adjustment  be made  effective  as of a record date for a specified  event,  the
Company may elect to defer until the  occurrence  of such event the  issuance to
the holder of any Right exercised after such record date

                                      -21-
<PAGE>

the shares of  Preferred  Stock and other  securities,  cash or  property of the
Company,  if any,  issuable  upon such  exercise  over and  above the  shares of
Preferred Stock and other securities,  cash or property of the Company,  if any,
issuable upon such  exercise on the basis of the Purchase  Price in effect prior
to such adjustment;  provided,  however,  that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's right
to receive such additional shares (fractional or otherwise) or other securities,
cash or property upon the occurrence of the event requiring such adjustment.

            (l) Anything in this Section 11 to the contrary notwithstanding, the
Company  shall be entitled to make such  reductions  in the Purchase  Price,  in
addition to those adjustments  expressly  required by this Section 11, as and to
the extent that the Board of  Directors  of the  Company in its sole  discretion
shall  determine to be advisable in order that any combination or subdivision of
the Preferred  Stock,  issuance  wholly for cash of any Preferred  Stock at less
than the Current Market Price per share of Preferred Stock,  issuance wholly for
cash of Preferred Stock or securities  which by their terms are convertible into
or exchangeable or exercisable for Preferred Stock,  stock dividends or issuance
of rights, options or warrants referred to in this Section 11, hereafter made by
the  Company  to holders of its  Preferred  Stock,  shall not be taxable to such
stockholders.

            (m) The Company  covenants and agrees that it shall not, at any time
after the Distribution  Date, (i) consolidate  with, (ii) merge with or into, or
(iii) directly or indirectly sell, lease or otherwise transfer or dispose of (in
one transaction or a series of related transactions) property, assets or earning
power aggregating more than 50% of the property,  assets or earning power of the
Company and its Subsidiaries taken as a whole, to any other Person if (A) at the
time of or immediately after such consolidation,  merger, sale, lease,  transfer
or disposition there are any rights,  warrants,  securities or other instruments
outstanding  or  agreements  in effect  which  would  substantially  diminish or
otherwise  eliminate  the  benefits  intended to be afforded by the Rights;  (B)
prior to,  simultaneously with or immediately after such consolidation,  merger,
sale, lease, transfer or disposition the stockholders (or equity holders) of the
Person who constitutes, or would constitute, the Principal Party for purposes of
Section 13(a) hereof shall have  received a  distribution  of Rights  previously
owned by such Person or any of its Affiliates or Associates;  or (C) the form or
nature of  organization  of the  Principal  Party  would  preclude  or limit the
exercisability  of the  Rights.  The  Company  shall  not  consummate  any  such
consolidation, merger, sale, lease, transfer or disposition unless prior thereto
the Company and such other  Person  shall have  executed  and  delivered  to the
Rights Agent a supplemental  agreement  evidencing  compliance with this Section
11(m).

            (n)  The  Company   covenants  and  agrees  that,  after  the  Stock
Acquisition Date, it will not, except as permitted by Section  11(a)(iv),  26 or
29(b),  take (or permit any  Subsidiary  to take) any action if at the time such
action is taken it is reasonably  foreseeable that such action will, directly or
indirectly, diminish or otherwise eliminate the benefits intended to be afforded
by the Rights.

            (o) Anything in this Agreement to the contrary  notwithstanding,  if
the Company shall at any time prior to the Distribution  Date (i) pay a dividend
or make a  distribution  on the  outstanding  shares of Common Stock  payable in
shares of Common  Stock,  (ii)  subdivide  the  outstanding  Common Stock into a
larger  number of shares,  (iii) combine (by a

                                      -22-
<PAGE>

reverse stock split or otherwise)  the  outstanding  Common Stock into a smaller
number of shares,  or (iv) issue any  securities  in a  reclassification  of the
Common  Stock  (including  any  such   reclassification  in  connection  with  a
consolidation or merger in which the Company is the surviving corporation), then
the  number  of Rights  associated  with  each  share of  Common  Stock or (in a
reclassification)  each  security  then  outstanding,  or  issued  or  delivered
thereafter but prior to the Distribution Date, and the Purchase Price under, and
the number of one  one-hundredths  of a share of  Preferred  Stock  issuable  in
respect of, the Rights,  shall be  proportionately  adjusted,  so that following
such  event  one  Right  (with  the  Purchase   Price  and  the  number  of  one
one-hundredths   of  a  share  of  Preferred  Stock   proportionately   adjusted
thereunder)  shall  thereafter be associated  with each share of Common Stock or
(in a reclassification)  each security then outstanding,  or issued or delivered
thereafter  but prior to the  Distribution  Date.  For  example,  if the Company
effects a two-for-one  stock split of the Common Stock at a time when each Right
(if  it  becomes   exercisable)   would  entitle  the  holder  to  purchase  one
one-hundredth  of a share of Preferred  Stock for a Purchase Price of $"Z", then
following  such stock split each previous  Right would be split into two current
Rights and thereafter each such current Right, upon becoming exercisable,  would
(subject to further adjustment) entitle the holder to purchase one one-hundredth
of a share of Preferred Stock at a Purchase Price of 1/2 x $"Z".

            Section 12. Certification of Adjustments.  Whenever an adjustment is
made as provided in Section 11 or 13, the Company  shall (a) promptly  prepare a
certificate  setting forth such  adjustment  and a brief  statement of the facts
accounting for such adjustment, (b) promptly file with the Rights Agent and with
each transfer agent for the Preferred Stock a copy of such certificate,  and (c)
mail or cause the Rights Agent to mail a brief summary thereof to each holder of
a Rights  Certificate (or, if no Rights  Certificates  have been issued, to each
holder of a certificate  representing shares of Common Stock) in accordance with
Section 25.  Notwithstanding the foregoing sentence,  the failure of the Company
to give such notice  shall not affect the  validity of or the force or effect of
or the  requirement for such  adjustment.  Any adjustment to be made pursuant to
Section 11 or 13 shall be  effective  as of the date of the event giving rise to
such adjustment.

            Section  13.  Consolidation,  Merger  or  Sale  or  Transfer  of
Property, Assets or Earning Power.

            (a) A "Business  Combination"  shall be deemed to occur in the event
that, on or following a Triggering  Event,  (i) the Company  shall,  directly or
indirectly,  consolidate  with, or merge with and into,  any other Person (other
than a Subsidiary  of the Company in a  transaction  that  complies with Section
11(m) and  Section  11(n)) in a  transaction  in which  the  Company  is not the
continuing,  resulting or surviving corporation of such merger or consolidation;
(ii) any Person (other than a Subsidiary  of the Company in a  transaction  that
complies with Section 11(m) and Section  11(n)) shall,  directly or  indirectly,
consolidate  with the Company,  or shall merge with and into the  Company,  in a
transaction  in which the  Company is the  continuing,  resulting  or  surviving
corporation of such merger or consolidation  and, in connection with such merger
or consolidation,  all or part of the Common Stock shall be changed  (including,
without  limitation,  any  conversion  into or exchange  for  securities  of the
Company or of any other Person,  cash or

                                      -23-
<PAGE>

any other property);  (iii) the Company shall, directly or indirectly,  effect a
share  exchange  in which  all or part of the  Common  Stock  shall  be  changed
(including,  without limitation,  any conversion into or exchange for securities
of any other Person,  cash or any other  property);  or (iv) the Company  shall,
directly or indirectly,  sell,  lease,  exchange,  mortgage,  pledge (other than
pledges  in the  ordinary  course  of the  Company's  financing  activities)  or
otherwise  transfer  or  dispose  of (or one or more of its  Subsidiaries  shall
directly or  indirectly  sell,  lease,  exchange,  mortgage,  pledge (other than
pledges  in the  ordinary  course  of the  Company's  financing  activities)  or
otherwise  transfer or dispose  of), in one  transaction  or a series of related
transactions, property, assets or earning power aggregating more than 50% of the
property,  assets or earning power of the Company and its Subsidiaries (taken as
a whole) to any other Person (other than the Company or any of its  Subsidiaries
in one or more  transactions each and all of which comply with Section 11(m) and
Section 11(n)).

            In the event of a Business  Combination,  proper  provision shall be
made so that each  holder  of a Right  (except  as  otherwise  provided  in this
Agreement) shall thereafter have the right to receive, upon the exercise thereof
at a price equal to the Purchase Price immediately prior to the first occurrence
of a Triggering Event multiplied by the number of one  one-hundredths of a share
of Preferred  Stock for which a Right was exercisable  immediately  prior to the
first  occurrence of a Triggering Event (without giving effect to the Triggering
Event) in accordance with the terms of this Agreement,  such number of shares of
Common Stock of the Principal  Party as shall be equal to the result obtained by
(x) multiplying the Purchase Price  immediately prior to the first occurrence of
a Triggering Event by the number of one  one-hundredths  of a share of Preferred
Stock  for  which  a  Right  was  exercisable  immediately  prior  to the  first
occurrence  of a  Triggering  Event  (without  giving  effect to the  Triggering
Event),  and (y) dividing  that  product by 50% of the Current  Market Price per
share of the  Common  Stock of such  Principal  Party  immediately  prior to the
consummation  of such  Business  Combination.  All shares of Common Stock of any
Person for which any Right may be  exercised  after  consummation  of a Business
Combination  as provided in this Section 13(a) shall,  when issued upon exercise
thereof in accordance  with this Agreement,  be duly and validly  authorized and
issued,  fully paid,  nonassessable,  freely tradeable,  not subject to liens or
encumbrances,  and free of  preemptive  rights,  rights of first  refusal or any
other  restrictions  or limitations on the transfer or ownership  thereof of any
kind or nature whatsoever.

            (b)  After  consummation  of  any  Business  Combination,   (i)  the
Principal  Party  shall be  liable  for,  and  shall  assume,  by virtue of such
Business  Combination  and without the  necessity  of any further  act,  all the
obligations and duties of the Company pursuant to this Agreement,  (ii) the term
"Company" as used in this Agreement shall  thereafter be deemed to refer to such
Principal Party, and (iii) such Principal Party shall take all steps (including,
but not  limited to, the  reservation  of a  sufficient  number of shares of its
Common Stock in  accordance  with Section 9) in  connection  with such  Business
Combination  as is necessary  to ensure that the  provisions  of this  Agreement
shall thereafter be applicable, as nearly equivalent as practicable, in relation
to the shares of its Common Stock  thereafter  deliverable  upon the exercise of
the Rights.

            (c) The Company shall not consummate any Business Combination unless
prior  thereto  (i) the  Principal  Party  shall  have a  sufficient  number  of
authorized shares of its Common Stock which have not been issued or reserved for
issuance (other than shares reserved for issuance  pursuant to this Agreement to
the  holders  of  Rights)  to  permit  the  exercise  in full of the  Rights  in
accordance with this Section 13; (ii) the Company and such Principal Party shall
have  executed  and  delivered  to the  Rights  Agent a  supplemental  agreement
providing for the fulfillment of the Principal Party's obligations and the terms
as set forth in paragraphs (a) and (b)

                                      -24-
<PAGE>
of this Section 13 and further  providing  that,  as soon as  practicable  on or
after the date of such Business  Combination,  the Principal  Party,  at its own
expense,  shall (A) prepare and file, if necessary,  a registration statement on
an appropriate  form under the Securities Act with respect to the Rights and the
securities  purchasable upon exercise of the Rights; (B) use its reasonable best
efforts to cause such  registration  statement  to become  effective  as soon as
practicable  after such filing and remain  effective  (with a prospectus  at all
times meeting the requirements of the Securities Act) until the Expiration Date;
(C) deliver to holders of the Rights  historical  financial  statements  for the
Principal Party and each of its Affiliates which comply in all respects with the
requirements  for  registration  on Form 10 (or any  successor  form)  under the
Exchange  Act;  (D) use its  reasonable  best efforts to qualify or register the
Rights and the  securities  purchasable  upon  exercise of the Rights  under the
state securities or "blue sky" laws of such jurisdictions as may be necessary or
appropriate;  (E) use its  reasonable  best  efforts  to list the Rights and the
securities  purchasable  upon exercise of the Rights on a United States national
securities  exchange;  and (F) obtain  waivers of any rights of first refusal or
preemptive  rights in respect of the Common Stock of the Principal Party subject
to purchase  upon  exercise  of  outstanding  Rights;  (iii) the Company and the
Principal  Party  shall  have  furnished  to the  Rights  Agent  an  opinion  of
independent  counsel stating that such supplemental  agreement is a legal, valid
and binding agreement of the Principal Party  enforceable  against the Principal
Party in accordance with its terms; and (iv) the Company and the Principal Party
shall have filed with the Rights Agent a certificate of a nationally  recognized
firm of  independent  accountants  setting  forth the number of shares of Common
Stock of such  issuer  which may be  purchased  upon the  exercise of each Right
after the consummation of such Business Combination.

            (d) The  provisions  of this  Section  13 shall  similarly  apply to
successive Business  Combinations.  In the event a Business Combination shall be
consummated at any time after the occurrence of a Triggering  Event,  the Rights
which have not theretofore  been exercised  shall  thereafter be exercisable for
the  consideration  and in the manner  described in Section  13(a).  Following a
Business Combination, the provisions of Section 11(a)(ii) shall be of no effect.

            (e)  Notwithstanding  any other  provision of this  Agreement to the
contrary, no adjustment to the number of shares of Preferred Stock (or fractions
of a share) or other  securities,  cash or other  property  for which a Right is
exercisable or the number of Rights outstanding or associated with each share of
Common Stock or any similar or other adjustment shall be made or be effective if
such  adjustment  would have the effect of reducing or limiting the benefits the
holders of the Rights would have had absent such adjustment,  including, without
limitation,  the  benefits  under  Sections 11 and 13,  unless the terms of this
Agreement are amended so as to preserve such benefits.

            (f) The  Company  covenants  and agrees that it shall not effect any
Business  Combination  if at the time of, or  immediately  after  such  Business
Combination,  there  are any  rights,  options,  warrants  or other  instruments
outstanding which would diminish or otherwise eliminate the benefits intended to
be afforded by the Rights.

            (g) Without limiting the generality of this Section 13, in the event
the nature of the  organization  of any Principal  Party shall preclude or limit
the  acquisition  of Common Stock of such  Principal  Party upon exercise of the
Rights as required by Section  13(a) as a result of a Business  Combination,  it
shall be a condition to such  Business  Combination  that such

                                      -25-
<PAGE>

Principal  Party  shall  take  such  steps  (including,  but not  limited  to, a
reorganization)  as may be necessary to ensure that the benefits  intended to be
derived under this Section 13 upon the exercise of the Rights are assured to the
holders thereof.

            (h) In addition  to, and without  limiting,  any other  provision of
this  Section  13,  in case  the  Principal  Party  which  is to be a party to a
transaction  referred  to in  this  Section  13  has  provision  in  any  of its
authorized securities or in its certificate of incorporation or by-laws or other
instrument  governing  its  corporate  affairs (or  equivalent  documents  for a
non-corporate Person), which provision would have the effect of (i) causing such
Principal  Party to issue  (other  than to  holders of Rights  pursuant  to this
Section 13), in connection  with, or as a consequence of, the  consummation of a
transaction referred to in this Section 13, Common Stock of such Principal Party
at less than the then Current  Market Price per share or securities  exercisable
for, or convertible into, Common Stock of such Principal Party at less than such
then Current  Market Price,  or (ii) providing for any special  payment,  tax or
similar  provisions in connection  with the issuance of the Common Stock of such
Principal  Party  pursuant to the  provisions  of this Section 13, then, in such
event,  the Company  hereby  agrees with each holder of Rights that it shall not
consummate  any such  transaction  unless  prior  thereto  the  Company and such
Principal  Party  shall  have  executed  and  delivered  to the  Rights  Agent a
supplemental  agreement  providing  that  the  provision  in  question  of  such
Principal  Party  shall  have been  cancelled,  waived or  amended,  or that the
authorized  securities shall be redeemed,  so that the applicable provision will
have no effect in connection  with, or as a consequence of, the  consummation of
the proposed transaction.

            Section 14.  Fractional Rights and Fractional Shares.

            (a) The Company shall not be required to issue fractional  Rights or
to distribute Rights  Certificates which evidence  fractional Rights. In lieu of
such  fractional  Rights,  the Company  may at its option pay to the  registered
holders of the Rights  Certificates with respect to which such fractional Rights
would  otherwise be issuable an amount in cash equal to the same fraction of the
current  market value of a whole Right.  For the purposes of this Section 14(a),
the current  market value of a whole Right shall be the closing price of a Right
for the  Trading  Day  immediately  prior to the date on which  such  fractional
Rights otherwise would have been issuable. The closing price for any Trading Day
shall be the last sale price, regular way, on such day, or, in case no such sale
takes  place on such day,  the  average  of the  closing  bid and asked  prices,
regular  way,  on  such  day,  in  either  case  as  reported  in the  principal
consolidated  transaction  reporting system with respect to securities listed or
admitted  to trading on the NYSE or, if the Rights are not listed or admitted to
trading on the NYSE,  as  reported  in the  principal  consolidated  transaction
reporting  system with  respect to  securities  listed on the  principal  United
States national  securities  exchange on which the Rights are listed or admitted
to trading or, if the Rights are not listed or admitted to trading on any United
States national securities exchange,  the last quoted sale price on such day or,
if not so  quoted,  the  average  of the high bid and low  asked  prices  in the
over-the-counter  market on such day, as reported by Nasdaq or such other system
then in use or, if on such day the Rights are not quoted by any such system, the
average  of the  closing  bid and  asked  prices on such day as  furnished  by a
professional  market maker making a market in the Rights  selected by a majority
of the  Board of  Directors  of the  Company  (which  selection  shall be final,
binding and conclusive for all purposes). If on such day no such market maker is
making a market in the Rights,  the current  market  value of the Rights on such
day shall be determined in good faith by a majority of the Board of Directors of
the Company,  whose

                                      -26-
<PAGE>

determination  shall be described in a statement filed with the Rights Agent and
shall be final, binding and conclusive for all purposes.

            (b) The Company  shall not be required to issue  fractions of shares
of Preferred  Stock (other than  fractions  which are integral  multiples of one
one-hundredth  of a share of Preferred  Stock) upon exercise of the Rights or to
distribute  certificates  which evidence  fractional  shares of Preferred  Stock
(other than fractions  which are integral  multiples of one  one-hundredth  of a
share of Preferred  Stock).  Fractions of shares of Preferred  Stock may, at the
election of the  Company,  be evidenced by  depositary  receipts  pursuant to an
appropriate  agreement  between  the Company  and a  depositary  selected by it,
provided that such agreement  shall provide that the holders of such  depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled as  beneficial  owners of the  Preferred  Stock.  In lieu of fractional
shares of Preferred Stock that are not integral  multiples of one  one-hundredth
of a share of Preferred  Stock, the Company may at its option (i) issue scrip or
warrants  in  registered   form  (either   represented   by  a  certificate   or
uncertificated)  or in bearer form  (represented  by a certificate)  which shall
entitle the holder to receive a full one  one-hundredth  of a share of Preferred
Stock  upon the  surrender  of such  scrip or  warrants  aggregating  a full one
one-hundredth  of a share of  Preferred  Stock,  or (ii)  pay to the  registered
holders  of  Rights  Certificates  at the  time  such  Rights  Certificates  are
exercised  as  provided  in this  Agreement  an amount in cash equal to the same
fraction of the current market value of a share of Preferred Stock. For purposes
of this Section 14(b),  the current  market value of a share of Preferred  Stock
shall be the closing price of a share of Preferred Stock (as determined pursuant
to the second sentence of the definition of "Current Market Price" in Section 1)
for the Trading Day immediately prior to the date of such exercise.

            (c) The Company  shall not be required to issue  fractions of shares
of Common Stock or Common Stock Equivalents or to distribute  certificates which
evidence fractional shares of Common Stock or Common Stock Equivalents.  In lieu
of such  fractional  shares of Common  Stock or Common  Stock  Equivalents,  the
Company  shall pay to the  registered  holders of the Rights  Certificates  with
regard  to  which  such  fractional  shares  of  Common  Stock or  Common  Stock
Equivalents  would  otherwise be issuable an amount in cash equal to the product
derived by multiplying (x) the subject fraction,  by (y) Current Market Price of
the Company's Common Stock.

            (d) The holder of a Right by his acceptance thereof expressly waives
any right to  receive  any  fractional  Rights  or any  fractional  shares  upon
exercise of a Right (except as otherwise provided in this Agreement).

            Section 15.  Rights of Action.  Except as  otherwise  provided,  all
rights of action in  respect  of this  Agreement  are  vested in the  respective
registered  holders of the Rights  Certificates  (and, prior to the Distribution
Date, any  registered  holders of associated  Common Stock);  and any registered
holder of any Rights  Certificate (or, prior to the Distribution Date, any share
of associated  Common Stock),  without the consent of the Rights Agent or of the
holder of any other  Right,  may,  on his own  behalf  and for his own  benefit,
enforce,  and may institute and maintain any suit, action or proceeding  against
the Company or any Principal  Party to enforce,  or otherwise act in respect of,
his rights  pursuant to this  Agreement.  Without  limiting the foregoing or any
remedies  available to the holders of Rights,  it is  specifically  acknowledged
that the

                                      -27-
<PAGE>

holders  of Rights  would not have an  adequate  remedy at law for any breach of
this  Agreement  and will be  entitled,  without  posting any bond,  to specific
performance of the obligations  under, and injunctive  relief against any actual
or  threatened  violation  of the  obligations  of any Person  subject  to, this
Agreement.

            Section 16.  Agreement  of Rights  Holders  Concerning  Transfer and
Ownership of Rights.  Every holder of a Right by accepting the same consents and
agrees with the Company  and the Rights  Agent and with every other  holder of a
Right that:

            (a)   prior  to  the   Distribution   Date,  the  Rights  will  be
transferable only in connection with the transfer of Common Stock;

            (b) after the  Distribution  Date, the Rights  Certificates  will be
transferable  on the registry  books of the Rights Agent only if  surrendered at
the  principal  corporate  trust office of the Rights  Agent,  duly  endorsed or
accompanied by a proper instrument of transfer;

            (c) the Company  and the Rights  Agent may deem and treat the Person
in whose name a Rights  Certificate  (or,  prior to the  Distribution  Date, the
associated Common Stock certificate) is registered as the absolute owner thereof
and of the Rights evidenced thereby  (notwithstanding any notations of ownership
or writing on the Rights  Certificate or the associated Common Stock certificate
made by anyone other than the Company,  the transfer  agent for the Common Stock
or the Rights  Agent) for all purposes  whatsoever,  and neither the Company nor
the Rights Agent shall be affected by any notice to the contrary; and

            (d)  notwithstanding  anything in this  Agreement  to the  contrary,
neither the Company nor the Rights Agent shall have any  liability to any holder
of a Right or other  Person as a result of its  inability  to perform any of its
obligations  under this  Agreement  by reason of any  preliminary  or  permanent
injunction  or other  order,  decree  or ruling  issued by a court of  competent
jurisdiction  or by a  governmental,  regulatory  or  administrative  agency  or
commission,  or any statute,  rule, regulation or executive order promulgated or
enacted by any  governmental  authority,  prohibiting  or otherwise  restraining
performance  of such  obligation;  provided,  however,  the Company must use its
reasonable  best  efforts  to have any such  order,  decree or ruling  lifted or
otherwise overturned as soon as possible.

            Section 17. Rights Holder Not Deemed a  Stockholder.  No holder,  as
such,  of any  Rights  Certificate  shall  be  entitled  to vote  or to  receive
dividends  or  distributions  or shall be deemed for any  purpose  the holder of
Preferred Stock or any other securities, cash or other property which may at any
time be issuable on the exercise of the Rights  represented  thereby,  nor shall
anything  contained in this Agreement or in any Rights  Certificate be construed
to confer upon the holder of any Rights Certificate,  as such, any of the rights
of a stockholder of the Company, including, without limitation, any right (i) to
vote for the election of directors or upon any matter  submitted to stockholders
at any  meeting  thereof,  (ii) to give or  withhold  consent  to any  corporate
action,  (iii)  to  receive  notice  of  meetings  or  other  actions  affecting
stockholders  (except as provided  in Section  24),  (iv) to receive  dividends,
distributions  or  subscription  rights,  or (v) to  institute,  as a holder  of
Preferred  Stock  or  other  securities  issuable  on  exercise  of  the  Rights
represented by any Rights  Certificate,  any derivative  action on behalf of the
Company,  or

                                      -28-
<PAGE>

otherwise,  until and only to the extent that the Right or Rights  evidenced  by
such  Rights  Certificate  shall  have been  exercised  in  accordance  with the
provisions of this Agreement.

            Section 18.  Concerning the Rights Agent.  The Company agrees to pay
to the Rights Agent  reasonable  compensation  for all  services  rendered by it
hereunder and, from time to time, on demand of the Rights Agent,  its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this  Agreement and the exercise and  performance of its duties
hereunder.  The Company  also agrees to  indemnify  the Rights Agent for, and to
hold it harmless against,  any loss, liability or expense incurred without gross
negligence,  bad faith,  willful  misconduct or breach of this  Agreement on the
part of the Rights  Agent for  anything  done or omitted by the Rights  Agent in
connection with the acceptance and  administration of this Agreement,  including
the costs and  expenses  of  defending  against  any claim of  liability  in the
premises. This indemnification shall survive the termination of this Agreement.

            The Rights Agent shall be protected and shall incur no liability for
or in respect of any action taken,  suffered or omitted by it in connection with
its  administration of this Agreement in reliance upon any Rights Certificate or
certificate for Preferred  Stock or Common Stock or for other  securities of the
Company,  instrument of assignment or transfer, power of attorney,  endorsement,
affidavit, letter, notice, direction, consent,  certificate,  statement or other
paper or  document  reasonably  believed  by it to be genuine  and to be signed,
executed and, when necessary,  verified or acknowledged, by the proper Person or
Persons, or otherwise upon the advice of counsel as set forth in Section 20.

            Section  19.  Merger  or  Consolidation  or Change of Name of Rights
Agent.  Any  corporation  or other  entity  into which the  Rights  Agent or any
successor  Rights Agent may be merged or with which it may be  consolidated,  or
any corporation or other entity  resulting from any merger or  consolidation  to
which the Rights Agent or any  successor  Rights Agent shall be a party,  or any
corporation or other entity  succeeding to the corporate trust or stock transfer
business  of the  Rights  Agent  or any  successor  Rights  Agent,  shall be the
successor  to the Rights  Agent under this  Agreement  without the  execution or
filing of any  document  or any  further  act on the part of any of the  parties
hereto,  provided  that such  corporation  or other entity would be eligible for
appointment  as a successor  Rights Agent under  Section 21. In case at the time
such  successor  Rights  Agent  shall  succeed  to the  agency  created  by this
Agreement any of the Rights  Certificates  shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor  Rights Agent and deliver such Rights  Certificate so countersigned;
and in case at that  time any of the  Rights  Certificates  shall  not have been
countersigned,   any  successor   Rights  Agent  may  countersign   such  Rights
Certificate either in the name of the predecessor Rights Agent or in the name of
the successor Rights Agent; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.

            In case at any time the name of the  Rights  Agent  shall be changed
and at such time any of the Rights  Certificates  shall have been  countersigned
but not  delivered,  the Rights Agent may adopt the  countersignature  under its
prior name and deliver Rights Certificates so countersigned; and in case at that
time any of the  Rights  Certificates  shall  not have been  countersigned,  the
Rights Agent may countersign such Rights  Certificates  either in its prior name

                                      -29-
<PAGE>

or in its changed  name;  and in all such cases such Rights  Certificates  shall
have the full force provided in the Rights Certificates and in this Agreement.

            Section 20. Duties of Rights Agent.  The Rights Agent undertakes and
agrees to perform the duties and obligations  imposed by this Agreement upon the
following terms and  conditions,  by all of which the Company and the holders of
Rights Certificates, by their acceptance thereof, shall be bound:

            (a) The Rights  Agent may  consult  with legal  counsel  (who may be
legal  counsel for the  Company),  and the opinion of such counsel shall be full
and complete  authorization  and protection to the Rights Agent as to any action
taken or  omitted to be taken by it in good  faith and in  accordance  with such
opinion.

            (b) Whenever in the  performance  of its duties under this Agreement
the Rights Agent shall deem it  necessary  or desirable  that any fact or matter
(including,  without  limitation,  the identity of any  Acquiring  Person or any
Affiliate or Associate of an Acquiring  Person or the  determination  of Current
Market  Price)  be  proved  or  established  by the  Company  prior to taking or
suffering any action  hereunder,  such fact or matter  (unless other evidence in
respect thereof be  specifically  prescribed in this Agreement) may be deemed to
be conclusively  proved and established by a certificate  signed by the Chairman
of the Board, the President,  the Chief Executive  Officer,  any Vice President,
the Treasurer or the Secretary of the Company and delivered to the Rights Agent;
and such  certificate  shall be full  authorization  to the Rights Agent for any
action  taken or omitted by it in good faith  under this  Agreement  in reliance
upon such certificate.

            (c) The Rights  Agent shall be liable  hereunder  only for the gross
negligence,  bad faith,  willful misconduct or breach of this Agreement by it or
its attorneys or agents.

            (d) The Rights  Agent shall not be liable for or by reason of any of
the statements of fact or recitals  contained in this Agreement or in the Rights
Certificates (except its countersignature  thereof) or be required to verify the
same, but all such  statements and recitals are and shall be deemed to have been
made by the Company only.

            (e) The  Rights  Agent  shall  not be under  any  responsibility  in
respect of the validity of this  Agreement or the execution and delivery of this
Agreement (except the due execution and delivery of this Agreement by the Rights
Agent) or in respect of the  validity  or  execution  of any Rights  Certificate
(except  its  countersignature  thereof);  nor shall it be  responsible  for any
breach by the Company of any covenant or condition  contained in this  Agreement
or in any Rights Certificate;  nor shall it be responsible for any change in the
transferability  or  exercisability of the Rights or any change or adjustment in
the terms of the  Rights  (including  the  manner,  method  or  amount  thereof)
provided for in Section 3, 11, 13 or 23 or any other provision of this Agreement
or the ascertaining of the existence of facts that would require any such change
or adjustment (except with respect to the exercise of Rights evidenced by Rights
Certificates  after actual notice of any change or adjustment is required);  nor
shall it by any act hereunder be deemed to make any  representation  or warranty
as to the authorization or reservation of any shares of Preferred Stock,  Common
Stock or other  securities to be issued pursuant to this Agreement or any Rights
Certificate  or as to whether any shares of  Preferred

                                      -30-
<PAGE>

Stock, Common Stock or other securities will, when issued, be validly authorized
and issued, fully paid and nonassessable.

            (f) The Company  agrees that it will perform,  execute,  acknowledge
and deliver or cause to be performed,  executed,  acknowledged and delivered all
such further and other acts,  instruments  and  assurances as may  reasonably be
required by the Rights Agent for the carrying out or  performance  by the Rights
Agent of its duties and obligations under this Agreement.

            (g) The Rights  Agent is hereby  authorized  and  directed to accept
instructions  with respect to the  performance of its duties  hereunder from the
Chairman of the Board,  the Chief  Executive  Officer,  the President,  any Vice
President,  the Secretary or the Treasurer of the Company,  and to apply to such
officers for advice or instructions in connection with its duties,  and it shall
not be liable for any action taken or omitted to be taken by it in good faith in
accordance  with  instructions  of any such  officer  or for any delay in acting
while  waiting for such  instructions.  When  applying  to any such  officer for
instructions,  the Rights Agent may set forth in writing (i) any proposed action
or omission of the Rights Agent with respect to its duties or obligations  under
this  Agreement  and (ii) the date on or after which the Rights  Agent  proposes
such  action  will be taken or  omitted.  Such date shall not be less than three
Business Days after any such officer  receives such application for instructions
from the Rights Agent. Unless the Rights Agent has received written instructions
from the Company  (including  any such  officer)  with respect to such  proposed
action or omission prior to such date (or, if longer,  in the case of a proposed
action to be taken, prior to the Rights Agent actually taking such action),  the
Rights Agent shall not be liable for the actions or omissions  set forth in such
application,  provided that such action or omission does not violate any express
provision of this Agreement.

            (h) The  Rights  Agent and any  stockholder,  director,  officer  or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the  Company  may be  interested,  or  contract  with or lend money to the
Company or otherwise act as fully and freely as though the Rights Agent were not
serving as such under this  Agreement.  Nothing in this Agreement shall preclude
the Rights  Agent from acting in any other  capacity  for the Company or for any
other Person.

            (i) The Rights  Agent may execute and  exercise any of the rights or
powers hereby vested in it or perform any duty hereunder  either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable  for any act,  default,  neglect or  misconduct  of such attorney or
agent, provided that the Rights Agent exercised reasonable care in the selection
and continued employment of such attorney or agent.

            (j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise  incur any financial  liability in the
performance  of any of its duties  hereunder  or in the  exercise  of its rights
hereunder if there shall be reasonable  grounds for believing  that repayment of
such funds or adequate  indemnification  against  such risk or  liability is not
reasonably assured to the Rights Agent.

                                      -31-
<PAGE>

            (k) If, with respect to any Rights  Certificate  surrendered  to the
Rights Agent for exercise or transfer,  the certificate  attached to the form of
assignment  or form of election to purchase,  as the case may be, either has not
been  completed  or  indicates  an  affirmative  response  to  clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.

            Section  21.  Change  of  Rights  Agent.  The  Rights  Agent  or any
successor  Rights Agent may resign and be discharged  from its duties under this
Agreement  upon 30 days'  notice in writing  mailed to the  Company  and to each
transfer agent of the Common Stock or Preferred Stock by registered or certified
mail, and to the holders of the Rights  Certificates  by  first-class  mail. The
Company may remove the Rights Agent or any successor  Rights Agent upon 30 days'
notice in writing,  mailed to the Rights Agent or successor Rights Agent, as the
case may be, and to each transfer  agent of the Common Stock or Preferred  Stock
by registered or certified  mail, and to the holders of the Rights  Certificates
by  first-class  mail.  If the Rights  Agent shall resign or be removed or shall
otherwise become  incapable of acting,  the Company shall appoint a successor to
the Rights Agent.  Notwithstanding any other provision of this Agreement,  in no
event shall the  resignation  or removal of a Rights Agent be effective  until a
successor  Rights  Agent  shall  have  been  appointed  and have  accepted  such
appointment.  If the Company shall fail to make such appointment within a period
of 30 days after such  removal or after it has been  notified in writing of such
resignation or incapacity by the resigning or  incapacitated  Rights Agent or by
any holder of a Rights  Certificate  (who shall,  with such  notice,  submit his
Rights  Certificate  for inspection by the Company),  then the incumbent  Rights
Agent or the registered holder of any Rights  Certificate may apply to any court
of  competent  jurisdiction  for the  appointment  of a new  Rights  Agent.  Any
successor  Rights  Agent,  whether  appointed by the Company or by such a court,
shall be (i) a corporation  or other entity  organized and doing  business under
the laws of the United  States or any state of the United States so long as such
Person is authorized to conduct a corporate trust or banking  business under the
laws of such state and is in good standing,  which is authorized under such laws
to exercise  corporate  trust powers or stock transfer  powers and is subject to
supervision or  examination  by federal or state  authority and which has at the
time of its appointment as Rights Agent a combined capital surplus and undivided
profits  aggregating of at least  $100,000,000,  according to its last published
statement of condition or (ii) an Affiliate of a Person described in clause (i).
After  appointment,  the  successor  Rights  Agent shall be vested with the same
powers,  rights,  duties and responsibilities as if it had been originally named
as Rights Agent  without  further act or deed but the  predecessor  Rights Agent
shall  deliver and  transfer to the  successor  Rights Agent any property at the
time held by it  hereunder  and  execute  and  deliver  any  further  assurance,
conveyance, act or deed necessary for such purpose. Not later than the effective
date of any such  appointment,  the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Stock or
Preferred  Stock and mail a notice thereof in writing to the registered  holders
of the Rights Certificates.  Neither the failure to give any notice provided for
in this Section 21, however,  nor any defect therein,  shall affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.

            Section 22. Issuance of New Rights Certificates. Notwithstanding any
of the  provisions  of  this  Agreement  or of the  Rights  Certificates  to the
contrary,  the  Company  may,  at its  option,  issue  new  Rights  Certificates
evidencing new Rights in such form as may be approved

                                      -32-
<PAGE>

by a majority of the Board of Directors of the Company to reflect any adjustment
or change  in the  Purchase  Price per share and the  number or kind or class of
securities,  cash or other property  purchasable  under the Rights  Certificates
made in  accordance  with the  provisions  of this  Agreement.  In addition,  in
connection with the issuance or sale of Common Stock following the  Distribution
Date and prior to the  Redemption  Date,  the Company may with respect to Common
Stock so issued or sold  pursuant  to (i) the  exercise of stock  options,  (ii)
under any employee plan or arrangement,  (iii) upon the exercise,  conversion or
exchange  of  securities  notes or  debentures  issued by the  Company or (iv) a
contractual  obligation  of the  Company,  in each  case  existing  prior to the
Distribution Date, issue Rights Certificates representing the appropriate number
of Rights in connection with such issuance or sale.

            Section 23.  Redemption

            (a) The Board of Directors of the Company may, at its option, at any
time  prior  to the  earlier  of (i) the  Stock  Acquisition  Date  and (ii) the
Expiration Date, redeem all but not less than all of the then-outstanding Rights
at a redemption price of $.01 per Right (the "Redemption  Price")  appropriately
adjusted  to reflect any stock  split,  stock  dividend  or similar  transaction
occurring after the date of this Agreement.  The Company may, at its option, pay
the Redemption Price in cash,  shares  (including  fractional  shares) of Common
Stock  (based on the  Current  Market  Price of the Common  Stock at the time of
redemption) or any other form of consideration  deemed  appropriate by the Board
of Directors.

            (b)  At  the  time  and  date  of  effectiveness  set  forth  in any
resolution of the Board of Directors of the Company  ordering the  redemption of
the Rights (the "Redemption  Date"),  without any further action and without any
further  notice,  the right to exercise the Rights will  terminate  and the only
right  thereafter  of the holders of Rights  shall be to receive the  Redemption
Price; provided,  however, that such resolution of the Board of Directors of the
Company may be revoked, rescinded or otherwise modified at any time prior to the
time and date of effectiveness set forth in such resolution,  in which event the
right to exercise  will not  terminate at the time and date  originally  set for
such  termination  by  the  Board  of  Directors  of the  Company.  As  soon  as
practicable  after the action of the Board of Directors of the Company  ordering
the redemption of the Rights,  the Company shall give notice of such  redemption
to the Rights Agent and to the holders of the then-outstanding Rights by mailing
such notice to all such holders at their last  addresses as they appear upon the
registry  books  of the  Rights  Agent  or,  prior  to the  issuance  of  Rights
Certificates,  on the registry books of the transfer agent for the Common Stock.
Any notice  which is mailed in the manner  provided in this  Agreement  shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption  will state the method by which the payment of the  Redemption  Price
will be made. In any case, failure to give such notice by mail, or any defect in
the notice,  to any particular holder of Rights shall not affect the sufficiency
of the notice to other holders of Rights. In the case of a redemption  permitted
under this  Section 23, the Company  may,  at its option,  discharge  all of its
obligations with respect to the Rights by (i) issuing a press release announcing
the  manner  of  redemption  of the  Rights  and  (ii)  mailing  payment  of the
Redemption Price to the registered holders of the Rights at their last addresses
as they  appear on the  registry  books of the  Rights  Agent  or,  prior to the
issuance of the Rights Certificates, on the registry books of the transfer agent
for the Common Stock, and upon such action, all outstanding Rights  Certificates
shall be null and void without any further  action by the  Company.  Neither the
Company nor any of its Affiliates or

                                      -33-
<PAGE>

Associates  may redeem,  acquire or purchase for value any Rights at any time in
any manner  other than as  specifically  set forth in this  Section 23 and other
than in  connection  with the  purchase  of shares of Common  Stock prior to the
earlier of the Distribution Date and the Expiration Date.

            Section 24.  Notice of Certain  Events.  In case the Company,  on or
after the  Distribution  Date,  shall propose to (a) pay any dividend payable in
stock of any class to the  holders of its  Preferred  Stock or to make any other
distribution  to the  holders  of its  Preferred  Stock  (other  than a  regular
periodic  regular cash  dividend at an annual rate not in excess of: (x) 125% of
the annual rate of the cash  dividend  paid on the  Preferred  Stock  during the
immediately preceding fiscal year, or if the Preferred Stock was not outstanding
during such preceding  fiscal year,  then 125% of the annual rate of the regular
cash  dividend  paid on the Common Stock  during such year,  or (y) in the event
that a regular  cash  dividend  was not paid on the  Preferred  Stock (or Common
Stock) during such preceding  fiscal year, 5% of the Current Market Value of the
Preferred Stock on the date such regular cash dividend was first  declared);  or
(b) offer to the holders of its Preferred  Stock rights,  options or warrants to
subscribe for or to purchase any additional  shares of Preferred Stock or shares
of stock of any class or any other securities,  rights or options; or (c) effect
any  reclassification  of the  Preferred  Stock  (other than a  reclassification
involving  only the  subdivision  of  outstanding  shares of Preferred  Stock, a
change in the par value of such Preferred Stock or a change from par value to no
par value);  or (d) directly or indirectly  effect any  consolidation  or merger
into or  with,  or  effect  any  sale,  lease,  exchange  or other  transfer  or
disposition  (or to permit one or more of its  Subsidiaries  to effect any sale,
lease,  exchange or other  transfer or  disposition),  in one  transaction  or a
series of  related  transactions,  of more than 50% of the  property,  assets or
earning  power of the  Company and its  Subsidiaries  (taken as a whole) to, any
other Person;  or (e) effect the  liquidation,  dissolution or winding up of the
Company,  then,  in each such case,  the Company  shall give to each holder of a
Right,  in accordance with Section 25, a notice of such proposed  action,  which
shall  specify  any  record  date  for  the  purposes  of such  stock  dividend,
distribution   or  rights,   or  the  date  on  which   such   reclassification,
consolidation,   merger,   sale,   lease,   exchange,   transfer,   disposition,
liquidation,  dissolution,  or winding  up is to take place and if such  holders
will or may  participate  therein,  the  date of  participation  therein  by the
holders of Common Stock and/or Preferred Stock, if any such date is to be fixed,
and such  notice  shall be so given in the case of any action  covered by clause
(a) or (b)  above at least 20 days  prior  to the  record  date for  determining
holders of the Preferred  Stock for purposes of such action,  and in the case of
any such other action,  at least 20 days prior to the date of the taking of such
proposed action or the date of participation  therein, if any, by the holders of
Preferred Stock, whichever shall be the earlier.

            In case any Triggering  Event or Business  Combination  shall occur,
then, in any such case, the Company shall as soon as practicable thereafter give
to each holder of a Rights Certificate, in accordance with Section 25, notice of
the occurrence of such  Triggering  Event or Business  Combination,  which shall
specify the Triggering  Event or Business  Combination and include a description
of the  consequences of such event to holders of Rights under Section  11(a)(ii)
or 13.

            The failure to give  notice as  required  by this  Section 24 or any
defect  therein shall not affect the legality or validity of the action taken by
the Company or the vote upon any such action.

                                      -34-
<PAGE>

            Section 25. Notices. Notices or demands authorized by this Agreement
to be  given  or  made  by the  Rights  Agent  or by the  holder  of any  Rights
Certificate to or on the Company shall be sufficiently  given or made if sent by
first-class mail, postage prepaid,  addressed (until another address (or another
person's attention) is filed in writing with the Rights Agent) as follows:

                  ATMI, Inc.
                  7 Commerce Drive
                  Danbury, Connecticut  06810
                  Attention: General Counsel

Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement  to be given or made by the  Company  or by the  holder of any  Rights
Certificate  to or on the Rights  Agent shall be  sufficiently  given or made if
sent by first-class mail, postage prepaid,  addressed (until another address (or
another person's attention) is filed in writing with the Company) as follows:

                  Fleet National Bank
                  c/o EquiServe Limited Partnership
                  150 Royall Street
                  Canton, MA  02021
                  Attention: Client Administration

Notices  or  demands  authorized  by this  Agreement  to be given or made by the
Company or the Rights Agent to or on the holder of any Rights  Certificate shall
be  sufficiently  given or made if sent by first-class  mail,  postage  prepaid,
addressed  to such holder at the address of such holder as shown on the registry
books of the Company (or, if no Rights Certificates have been issued, if sent by
first-class  mail,  postage  prepaid,  addressed to the holder of a  certificate
representing  shares of Common  Stock at the  address of such holder as shown on
the Company's Common Stock registry books).

            Section 26.  Amendments  and  Supplements.  This Agreement may not
be amended or  supplemented  except as permitted in Section  26(a) or 26(b) or
as contemplated by Section 11(a)(iii).

            (a) At any time prior to the Stock  Acquisition  Date, a majority of
the Board of Directors  of the Company  may,  and the Rights Agent shall,  if so
directed,  amend or  supplement  any  provision  of this  Agreement  without the
approval of any holders of Rights.

            (b) From and after the Stock  Acquisition  Date,  a majority  of the
Board of  Directors  of the  Company  may,  and the Rights  Agent  shall,  if so
directed, amend or supplement this Agreement without the approval of any holders
of Rights Certificates (i) to cure any ambiguity,  (ii) to correct or supplement
any provision contained in this Agreement which may be defective or inconsistent
with any other provision of this Agreement, or (iii) to change or supplement the
provisions  hereunder  in any manner  which the  Company may deem  necessary  or
desirable and which shall not  adversely  affect the interests of the holders of
Rights Certificates (other than an Acquiring Person or an Affiliate or Associate
of an Acquiring Person).

                                      -35-
<PAGE>

            (c)  Immediately  upon the  action  of a  majority  of the  Board of
Directors providing for any amendment or supplement pursuant to this Section 26,
and without any further action and without notice,  such amendment or supplement
shall be deemed effective.  Promptly  following the adoption of any amendment or
supplement  pursuant to this Section 26, the Company shall deliver to the Rights
Agent a copy,  certified  by the  Secretary  or any  Assistant  Secretary of the
Company,  of  resolutions of a majority of the Board of Directors of the Company
adopting such  amendment or  supplement.  Upon such  delivery,  the amendment or
supplement  shall be  administered by the Rights Agent as part of this Agreement
in accordance with the terms of this Agreement, as so amended or supplemented.

            Section  27.  Successors.  All the  covenants  and  provisions  of
this  Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the  benefit  of their  respective  successors  and  assigns
hereunder.

            Section 28. Benefits of this Agreement;  Determinations  and Actions
by the Board of Directors.  Nothing in this Agreement shall be construed to give
to any  Person  other than the  Company,  the  Rights  Agent and the  registered
holders  of Rights  any legal or  equitable  right,  remedy or claim  under this
Agreement; and this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Rights.

            The Board of Directors of the Company shall have the exclusive power
and authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board of Directors of the Company or the Company, or
as may be  necessary  or  advisable  in the  administration  of this  Agreement,
including,  without  limitation,  the  right  and  power  to (i)  interpret  the
provisions of this Agreement,  and (ii) make all determinations deemed necessary
or advisable for the administration of this Agreement (including a determination
to redeem or not redeem the Rights,  to exchange or not  exchange the Rights for
Common Stock or other securities of the Company,  or to amend or supplement this
Agreement). All such actions,  calculations,  interpretations and determinations
(including,  for purposes of clause (y) below, all omissions with respect to the
foregoing)  which are done or made by the Board of  Directors  of the Company in
good  faith,  shall (x) be final,  conclusive  and binding on the  Company,  the
Rights  Agent,  the  holders of the Rights  and all other  Persons,  and (y) not
subject the Board of Directors of the Company to any liability to the holders of
the Rights.

            Section 29.  Severability.

            (a)  If  any  term,  provision,  covenant  or  restriction  of  this
Agreement or the  application  thereof to any Person or to any  circumstance  is
held by a court of competent jurisdiction or other authority to be invalid, void
or  unenforceable,  the  remainder  of  the  terms,  provisions,  covenants  and
restrictions  of this Agreement  shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.

            (b) If legal  counsel  to the  Company  delivers  to the  Company  a
written  opinion to the effect  that,  as a result of changes in federal  law or
Delaware law, any term, provision, covenant or restriction of this Agreement may
be invalid, void or unenforceable,  then, notwithstanding any other provision of
this Agreement to the contrary,  the Company and the

                                      -36-
<PAGE>

Rights  Agent may amend this  Agreement  to modify,  revise or delete such term,
provision,  covenant or restriction to the extent  necessary to comply with such
law as so changed.

            Section  30.   Governing   Law.  This   Agreement  and  each  Rights
Certificate  issued  hereunder  shall be deemed to be a contract  made under the
laws of the State of  Delaware  and for all  purposes  shall be  governed by and
construed in  accordance  with the  internal  laws of such State  applicable  to
contracts to be made and performed entirely within such State.

            Section  31.  Counterparts.   This  Agreement  may  be  executed  in
counterparts and each of such  counterparts  shall for all purposes be deemed to
be an original, and both such counterparts shall together constitute but one and
the same instrument.

            Section  32.  Descriptive  Headings.  Descriptive  headings of the
several  Sections of this  Agreement  are  inserted for  convenience  only and
shall  not  control  or  affect  the  meaning  or  construction  of any of the
provisions of this Agreement.

            Section 33.  Grammatical  Construction.  Throughout  this Agreement,
where such  meanings  would be  appropriate,  (a) any pronouns used herein shall
include the corresponding masculine,  feminine or neuter forms (e.g., references
to "he" shall also  include  "she" and "it" and  references  to "who" and "whom"
shall also include  "which"),  (b) the plural form of nouns and  pronouns  shall
include the singular and vice-versa,  (c) reference to a Section means a Section
of this  Agreement,  and (d) the  word  "including"  means  "including,  without
limitation," whether expressly stated or not.

                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      -37-
<PAGE>

            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.

                              ATMI, INC.

Attest:

                                      By:
--------------------------               ---------------------------------------
Secretary                                Name: Daniel P. Sharkey
                                         Title: Vice President, Chief Financial
[Corporate Seal]                            Officer and Treasurer

                                      FLEET NATIONAL BANK

Attest:

                                      By:
--------------------------------         --------------------------------
Name:                                    Name:
Title:                                   Title:
[Corporate Seal]

                                      -38-
<PAGE>

                                    Exhibit A

                       Form of Certificate of Designation

                           Certificate of Designation
                                       of
                                   ATMI, Inc.

      Pursuant  to Section 151 of the  General  Corporation  Law of the State of
Delaware

      We,  Daniel P.  Sharkey,  Vice  President,  Chief  Financial  Officer  and
Treasurer,  and Ward Stevens,  Secretary, of ATMI, Inc., a corporation organized
and existing  under the General  Corporation  Law of the State of Delaware  (the
"Corporation"),  in accordance  with the  provisions of Section 103 thereof,  DO
HEREBY CERTIFY:

      That  pursuant to the authority  conferred  upon the Board of Directors by
the Certificate of Incorporation  of the Corporation,  the Board of Directors on
October 13, 2000, adopted the following  resolution creating a series of 350,000
shares of Preferred Stock designated as Series A Junior Participating  Preferred
Stock:

      RESOLVED, that, pursuant to the authority vested in the Board of Directors
of the  Corporation  in accordance  with the  provisions of its  Certificate  of
Incorporation,  a series of Preferred  Stock of the Corporation be and it hereby
is created,  and that the preferences and relative,  participating,  optional or
other rights and the qualifications,  limitations or restrictions thereof are as
follows:

      SECTION  1.  Designation  and  Amount.  The  designation  of the series of
Preferred  Stock  created  by  this   resolution   shall  be  "Series  A  Junior
Participating Preferred Stock" and the number of shares constituting such series
shall be 350,000.

      SECTION 2. Dividends and Distributions.

            (A) Out of the  surplus or net  profits of the  Corporation  legally
available for the payment of dividends, the holders of shares of Series A Junior
Participating  Preferred  Stock shall be  entitled to receive,  when and as such
dividends may be declared by the Board of Directors, quarterly dividends payable
in cash on the tenth days of March,  June,  September  and December in each year
(each  such date  being  referred  to herein as a  "Quarterly  Dividend  Payment
Date"),  commencing on the first Quarterly Dividend Payment Date after the first
issuance  of a share or  fraction  of a share of  Series A Junior  Participating
Preferred  Stock,  in an amount per share (rounded to the nearest cent) equal to
the  greater  of (a)  $1.00  or (b)  subject  to the  provision  for  adjustment
hereinafter  set forth,  100 times the  aggregate  per share  amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind) of all
non-cash  dividends  or other  distributions  other than a  dividend  payable in
shares of Common  Stock or a  subdivision  of the  outstanding  shares of Common
Stock (by  reclassification  or  otherwise),  declared on the Common Stock,  par
value  $.01 per  share,  of the  Corporation  (the  "Common  Stock")  since  the
immediately  preceding  Quarterly Dividend Payment Date, or, with respect to the
first Quarterly  Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior  Participating  Preferred  Stock.  In the
event the  Corporation  shall at any time after

                                      -39-
<PAGE>

November 9, 2000 (the "Rights  Declaration Date") (i) pay any dividend on Common
Stock payable in shares of Common Stock,  (ii) subdivide the outstanding  Common
Stock,  (iii)  combine the  outstanding  Common  Stock into a smaller  number of
shares or (iv)  issue any  shares by  reclassification  of its  shares of Common
Stock,  then in each such case the amount to which holders of shares of Series A
Junior Participating  Preferred Stock shall have been entitled immediately prior
to such event under clause (b) of the  preceding  sentence  shall be adjusted by
multiplying such amount by a fraction the numerator of which shall be the number
of shares of Common  Stock  outstanding  immediately  after  such  event and the
denominator  of which  shall be the  number of shares of Common  Stock that were
outstanding immediately prior to such event.

            (B) Dividends shall begin to accrue and be cumulative on outstanding
shares of  Series A Junior  Participating  Preferred  Stock  from the  Quarterly
Dividend  Payment Date next preceding the date of issue of such shares of Series
A Junior Participating  Preferred Stock, unless the date of issue of such shares
shall be prior to the record date for the first Quarterly Dividend Payment Date,
in which case  dividends  on such shares  shall begin to accrue from the date on
which shares of Series A Junior Participating  Preferred Stock are first issued,
or unless the date of issue shall be a Quarterly  Dividend Payment Date or shall
be a date after the record date for the next Quarterly Dividend Payment Date and
before such  Quarterly  Dividend  Payment  Date,  in either of which events such
dividends shall begin to accrue and be cumulative  from such Quarterly  Dividend
Payment Date. No interest, or sum of money in lieu of interest, shall be payable
in respect of any dividend payment or payments which may be in arrears.

            (C)   Dividends   payable   upon  the   share  of  Series  A  Junior
Participating  Preferred  Stock  shall  be  cumulative  (whether  or  not in any
dividend  period  or  periods  there  shall be  surplus  or net  profits  of the
Corporation  legally available for the payment of such dividends) so that, if on
any Quarterly  Dividend  Payment Date dividends upon the  outstanding  shares of
Series A Junior  Participating  Preferred  Stock  shall not have been  paid,  or
declared  and a sum  sufficient  for the  payment  thereof  set  apart  for such
payment, the amount of the deficiency shall be fully paid, but without interest,
or  dividends  in  such  amount  declared  on the  shares  of  Series  A  Junior
Participating  Preferred  Stock and a sum sufficient for the payment thereof set
apart for such  payment,  before any dividend  shall be declared or paid upon or
set apart for,  or any other  distribution  shall be made in respect  of, or any
payment  shall be made in respect of, or any payment shall be made on account of
the purchase of, the Common Stock or any series of Preferred  Stock  subordinate
to the Series A Junior Participating Preferred Stock.

      SECTION  3.  Distributions  to  Holders  of Series A Junior  Participating
Preferred  Stock and Common  Stock.  Out of any  surplus  or net  profits of the
Corporation  legally  available for dividends  remaining  after full  cumulative
dividends  upon any series of Preferred  Stock ranking senior to Series A Junior
Participating  Preferred  Stock  shall  have  been  paid for all  past  dividend
periods,  and after or  concurrently  with making  payment of, or declaring  and
setting  apart for payment,  full  dividends  on any series of  Preferred  Stock
ranking  senior  to the  Series  A Junior  Participating  Preferred  Stock  then
outstanding  to the most recent  Quarterly  Dividend  Payment Date and after the
Corporation  shall have complied  with the  provisions in respect of any and all
amounts then or  theretofore  required to be set aside in respect of any sinking
fund or purchase  fund with  respect to any series of  Preferred  Stock  ranking
senior to Series A Junior  Participating  Preferred  Stock then  outstanding and
entitled  to the  benefit  of a sinking  fund or  purchase  fund,  and after the
Corporation  shall have made  provision for compliance in respect of the current

                                      -40-
<PAGE>

sinking fund or purchase period for any series of Preferred Stock ranking senior
to Series A Junior  Participating  Preferred  Stock,  then and not otherwise the
holders of Series A Junior Participating Preferred Stock shall be entitled to or
may receive  dividends and redemption  payments as provided  herein.  Out of any
surplus or net  profits  of the  Corporation  legally  available  for  dividends
remaining  after full  cumulative  dividends  upon the shares of Series A Junior
Participating  Preferred Stock then outstanding shall have been paid through the
preceding  Quarterly Dividend Payment Date, and after the Corporation shall have
complied  with  the  provisions  in  respect  of any  and  all  amounts  then or
theretofore  required  (if any) to be set aside or  applied  in  respect  of any
redemption  payments  in  respect  of shares  of  Series A Junior  Participating
Preferred Stock, then and not otherwise,  the holders of Common Stock and of any
series of Preferred Stock ranking  subordinate to Series A Junior  Participating
Preferred  Stock  shall,  subject to the rights of any other series of Preferred
Stock  then  outstanding,  to  paragraph  (A) of  Section  2  hereof  and to the
provisions  of the  Certificate  of  Incorporation,  be entitled to receive such
dividends as may from time to time be declared by the Board of Directors.

      SECTION 4. Voting.

            (A)  Holders  of shares of Series A Junior  Participating  Preferred
Stock shall be entitled to 100 votes for each share of stock held.  In the event
the Corporation shall at any time after the Rights  Declaration Date (i) pay any
dividend on Common Stock payable in shares of Common Stock,  (ii)  subdivide the
outstanding  Common  Stock,  (iii) combine the  outstanding  Common Stock into a
smaller  number of shares or (iv)  issue any shares by  reclassification  of its
shares of Common Stock,  then in each such case the number of votes per share to
which holders of shares of Series A Junior  Participating  Preferred  Stock were
entitled  immediately  prior to such event shall be adjusted by multiplying such
number of votes by a  fraction  the  numerator  of which  shall be the number of
shares  of  Common  Stock  outstanding  immediately  after  such  event  and the
denominator  of which  shall be the  number of shares of Common  Stock that were
outstanding  immediately prior to such event. Except as provided in this Section
4 and except as may be required by applicable law, holders of shares of Series A
Junior  Participating  Preferred  Stock shall vote with the Common  Stock on all
matters  required to be  submitted  to holders of Common  Stock and shall not be
entitled to vote as a separate class with respect to any matter.

            (B) So long as any shares of Series A Junior Participating Preferred
Stock shall be outstanding,  the Corporation  shall not, without the affirmative
vote or written consent of the holders of a majority of the aggregate  number of
shares of Series A Junior Participating  Preferred Stock at the time outstanding
(or such greater  percentage as may be required under applicable law), acting as
a single class,  alter or change the powers,  preferences or rights given to the
Series  A  Junior   Participating   Preferred   Stock  by  the   Certificate  of
Incorporation so as to affect such powers, preferences or rights adversely.

            (C) If at the time of any  annual  meeting  of  stockholders  of the
Corporation for the election of directors a default in preference dividends,  as
the term "default in preference  dividends" is hereinafter  defined with respect
to the Series A Junior  Participating  Preferred Stock, shall exist, the holders
of the Series A Junior  Participating  Preferred Stock,  voting  separately as a
class with the  holders of any other  series of  Preferred  Stock so entitled to
vote,  shall have the right to elect two members of the Board of Directors;  and
the holders of the Common Stock shall not be entitled to vote in the election of
the  directors  of the  Corporation  to

                                      -41-
<PAGE>

be elected as provided in the foregoing clause. Whenever a default in preference
dividends shall commence to exist, the Corporation,  upon the written request of
the  holders  of 5% or more of the  outstanding  shares  of  Preferred  Stock so
entitled to vote,  shall call a special  meeting of the holders of the Preferred
Stock so entitled to vote, such special meeting to be held within 120 days after
the date on which such  request  shall be received by the  Corporation,  for the
purpose of enabling  such holders to elect  members of the Board of Directors as
provided in the immediately  preceding sentence;  provided,  however,  that such
special  meeting need not be called if an annual meeting of  stockholders of the
Corporation  for the election of directors  shall be scheduled to be held within
such 120 days;  and provided  further that in lieu of any such special  meeting,
the  election  of the  directors  to be elected  thereat  may be effected by the
written  consent of the  holders of a majority  of the  outstanding  shares that
would be entitled to be voted upon at such  special  meeting.  Prior to any such
special meeting or meetings, the number of directors of the Corporation shall be
increased to the extent  necessary to provide as additional  places on the Board
of  Directors  the  directorships  to be filled by the  directors  to be elected
thereat. Any director elected as aforesaid by the holders of shares of Preferred
Stock or of any series thereof shall cease to serve as such director  whenever a
default in preference  dividends  shall cease to exist.  If, prior to the end of
the term of any  director  elected as  aforesaid by the holders of shares of the
Preferred  Stock or of any series  thereof,  or elected by the holders of Common
Stock,  a vacancy in the office of such director shall occur by reason of death,
resignation,  removal or disability,  or for any other cause, such vacancy shall
be filled for the unexpired term in the manner provided in the Bylaws; provided,
however, that if such vacancy shall be filled by election by the stockholders at
a meeting thereof, the right to fill such vacancy shall be vested in the holders
of that class of stock or series  thereof which elected the director the vacancy
in the office of whom is so to be filled,  unless,  in any such case, no default
in  preference  dividends  shall  exist  at the time of such  election.  For the
purposes of this paragraph (C), a "default in preference dividends" with respect
to the Series A Junior  Participating  Preferred  Stock  shall be deemed to have
occurred  whenever  the amount of  dividends in arrears upon the Series A Junior
Participating  Preferred  Stock  shall  be  equivalent  to  six  full  quarterly
dividends or more, and, having so occurred, such default in preference dividends
shall be deemed to exist  thereafter  until,  but only until,  all  dividends in
arrears on all shares of the Series A Junior Participating  Preferred Stock then
outstanding  shall have been paid. The term "dividends in arrears" whenever used
in this  paragraph  (C) with  reference  to the  Series  A Junior  Participating
Preferred  Stock shall be deemed to mean (whether or not in any dividend  period
in  respect of which  such term is used  there  shall  have been  surplus or net
profits of the Corporation  legally available for the payment of dividends) that
amount which shall be equal to cumulative dividends at the rate for the Series A
Junior  Participating  Preferred Stock for all past quarterly  dividend  periods
less the amount of all dividends paid, or deemed paid, for all such periods upon
such Series A Junior  Participating  Preferred  Stock.  Nothing herein contained
shall be deemed to  prevent  an  increase  in the  number  of  directors  of the
Corporation  pursuant  to its  Bylaws  as from  time to time in  effect so as to
provide  as  additional  places on the Board of  Directors  directorships  to be
filled by the  directors  so to be elected by the holders of the Series A Junior
Participating  Preferred  Stock, or to prevent any other change in the number of
the directors of the Corporation.

            (D)  Except as set forth  herein or as  otherwise  required  by law,
holders of Series A Junior  Participating  Preferred Stock shall have no special
voting rights and their consent shall not be required (except to the extent they
are  entitled  to vote with  holders of Common  Stock as set forth  herein)  for
taking any corporate action.

                                      -42-
<PAGE>

      SECTION 5. Reacquired Shares. Any shares of Series A Junior  Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever  shall be  retired  and  cancelled  promptly  after  the  acquisition
thereof.  All such shares shall upon their  cancellation  become  authorized but
unissued  shares of Preferred  Stock and may be reissued as part of a new series
of Preferred  Stock to be created by resolution or  resolutions  of the Board of
Directors.

      SECTION 6. Liquidation Rights.

            (A) Upon any  liquidation  (voluntary of otherwise),  dissolution or
winding up of the Corporation ("Liquidation"), the holders of shares of Series A
Junior  Participating  Preferred  Stock  shall be entitled to receive out of the
assets of the Corporation available for distribution to its stockholders, before
any  payment  or  distribution  shall be made on the  shares  of any  series  of
Preferred Stock subordinate to Series A Junior Participating  Preferred Stock as
to assets in the event of any  Liquidation  ("Junior  Shares")  or on the Common
Stock,  the  amount of  $100.00  per  share,  plus a sum equal to all  dividends
(whether or not earned or  declared) on such shares  accrued and unpaid  thereon
through the date of final distribution (the "Series A Liquidation Preference").

            (B) The  shares of  Series A Junior  Participating  Preferred  Stock
shall  be  subordinate  to any  other  series  of  Preferred  Stock  unless  the
provisions of such other series provide  otherwise,  and shall be preferred over
the Common Stock, as to assets in the event of any Liquidation.  In the event of
any  Liquidation,  the  holders of the  shares of Series A Junior  Participating
Preferred  Stock  shall  be  entitled  to  receive,  out  of the  assets  of the
Corporation  available for  distribution to its  stockholders  (after payment in
full of all amounts  payable in respect of any series of Preferred Stock ranking
senior to Series A Junior  Participating  Preferred Stock), an amount determined
as  provided  in  paragraph  (A) of this  Section 6 for every  share of Series A
Junior Participating  Preferred Stock before any distribution of assets shall be
made to the holders of any Junior  Shares or to the holders of the Common Stock.
If,  in the  event  of any  Liquidation,  the  holders  of the  Series  A Junior
Participating  Preferred Stock shall have received all the amounts to which they
shall be entitled in accordance  with the terms of paragraph (A) of this Section
6, no additional  distributions shall be made to the holders of shares of Series
A Junior  Participating  Preferred Stock unless,  prior thereto,  the holders of
shares of Common  Stock  shall have  received  an amount per share (the  "Common
Adjustment")  equal  to the  quotient  obtained  by  dividing  (i) the  Series A
Liquidation  Preference by (ii) 100 (as  appropriately  adjusted as set forth in
paragraph  (C) of this Section 6 to reflect such events as stock  splits,  stock
dividends and  recapitalizations  with respect to the Common Stock) (such number
in clause (ii) being referred to herein as the "Adjustment  Number").  Following
the  payment  of the full  amount of the  Common  Adjustment  in  respect of all
outstanding  shares of Common  Stock,  holders of Series A Junior  Participating
Preferred  Stock and  holders  of shares of Common  Stock  shall  receive  their
ratable and proportionate share of the remaining assets to be distributed to the
holders of Series A Junior Participating Preferred Stock and Common Stock in the
ratio of the  Adjustment  Number to 1 with respect to such  Preferred  Stock and
Common Stock, on a per share basis, respectively.  If, upon any Liquidation, the
amounts  payable on or with respect to Series A Junior  Participating  Preferred
Stock and any series of Preferred Stock ranking on a parity with Series A Junior
Participating  Preferred  Stock are not paid in full,  the  holders of shares of
such Preferred Stock shall share ratably in any distribution of assets according
to the  respective

                                      -43-
<PAGE>

amounts  which  would be payable in respect of the shares held by them upon such
distribution  if all amounts  payable on or with respect to such Preferred Stock
were paid in full.

            (C) In the event the Corporation  shall at any time after the Rights
Declaration  Date (i) pay any  dividend  on Common  Stock  payable  in shares of
Common Stock,  (ii) subdivide the  outstanding  Common Stock,  (iii) combine the
outstanding  Common  Stock  into a smaller  number  of shares or (iv)  issue any
shares by reclassification of its shares of Common Stock, then in each such case
the  Adjustment  Number  in  effect  immediately  prior to such  event  shall be
adjusted by multiplying  such  Adjustment  Number by a fraction the numerator of
which  shall be the  number of shares of Common  Stock  outstanding  immediately
after such event and the  denominator  of which shall be the number of shares of
Common Stock that were outstanding immediately prior to such event.

            (D) Neither the sale, lease or exchange (for cash,  shares of stock,
securities or other  consideration) of all or substantially all the property and
assets of the  Corporation  nor the merger or  consolidation  of the Corporation
into  or  with  any  other   corporation  or  other  entity  or  the  merger  or
consolidation  of any  other  corporation  or  other  entity  into or  with  the
Corporation shall be deemed to be a Liquidation for the purposes of this Section
6.

      SECTION 7. Consolidation, Merger, etc. In case the Corporation shall enter
into any  consolidation,  merger,  combination or other transaction in which the
shares of Common  Stock shall be  exchanged  for or changed  into other stock or
securities,  cash and/or any other property, then in any such case the shares of
Series  A  Junior  Participating  Preferred  Stock  shall  at the  same  time be
similarly  exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be,  into  which or for which  each  share of  Common  Stock is  changed  or
exchanged.  In the  event the  Corporation  shall at any time  after the  Rights
Declaration  Date (i) pay any  dividend  on Common  Stock  payable  in shares of
Common Stock,  (ii) subdivide the  outstanding  Common Stock,  (iii) combine the
outstanding  Common  Stock  into a smaller  number  of shares or (iv)  issue any
shares by reclassification of its shares of Common Stock, then in each such case
the amount set forth in the  preceding  sentence with respect to the exchange or
change  of  shares of Series A Junior  Participating  Preferred  Stock  shall be
adjusted by  multiplying  such amount by a fraction the numerator of which shall
be the number of shares of Common Stock outstanding immediately after such event
and the  denominator of which shall be the number of shares of Common Stock that
were outstanding immediately prior to such event.

      SECTION 8. Optional Redemption.

            (A) The Corporation shall have the option to redeem the whole or any
part of the  Series  A  Junior  Participating  Preferred  Stock at any time at a
redemption  price equal to, subject to the provision for adjustment  hereinafter
set forth, 100 times the "current per share market price" of the Common Stock on
the date of the  mailing  of the  notice of  redemption,  together  with  unpaid
accumulated  dividends  to  the  date  of  such  redemption.  In the  event  the
Corporation  shall at any time  after the  Rights  Declaration  Date (i) pay any
dividend on Common Stock payable in shares of Common Stock,  (ii)  subdivide the
outstanding  Common  Stock,  (iii) combine the  outstanding  Common Stock into a
smaller  number of shares or (iv)  issue any shares by

                                      -44-
<PAGE>

reclassification  of its  shares  of  Common  Stock,  then in each such case the
amount to which  holders  of shares of Series A Junior  Participating  Preferred
Stock  shall be  otherwise  entitled  immediately  prior to such event under the
immediately preceding sentence shall be adjusted by multiplying such amount by a
fraction  the  numerator  of which shall be the number of shares of Common Stock
outstanding  immediately  after such event and the denominator of which shall be
the number of shares of Common Stock that were outstanding  immediately prior to
such event.  The "current per share market price" on any date shall be deemed to
be the average of the closing  prices per share of such Common  Stock for the 10
consecutive Trading Days (as such term in hereinafter defined) immediately prior
to such date.  The  closing  price for each  Trading  Day shall be the last sale
price,  regular  way,  on such day or, in case no such sale takes  place on such
day, the average of the closing bid and asked  prices,  regular way, on such day
in either case as reported in the principal  consolidated  transaction reporting
system with respect to securities  listed or admitted to trading on the New York
Stock  Exchange  ("NYSE")  or, if the Common  Stock is not listed or admitted to
trading on the NYSE,  as  reported  in the  principal  consolidated  transaction
reporting  system with  respect to  securities  listed on the  principal  United
States  national  securities  exchange  on which the  Common  Stock is listed or
admitted to trading or, if the Common Stock is not listed or admitted to trading
on any United States national securities exchange, the last quoted sale price on
such day or, if not so quoted the  average of the high bid and low asked  prices
in the  over-the-counter  market  on  such  day,  as  reported  by the  National
Association of Securities Dealers, Inc. Automated Quotation System ("Nasdaq") or
such other  system  then in use or, if on any such day the  Common  Stock is not
quoted by any such  system,  the average of the closing bid and asked  prices on
such day as  furnished  by a  professional  market  maker making a market in the
Common  Stock  selected  by the Board of  Directors  of the  Corporation  (which
selection  shall be final,  binding and  conclusive  for all purposes) or, if on
such day no such  market  maker is be making a market in the Common  Stock,  the
fair market value of the Common Stock on such date as  determined  in good faith
by the Board of  Directors  of the  Corporation  (which  determination  shall be
final,  binding and conclusive  for all purposes).  The term "Trading Day" shall
mean a day on which the principal United States national  securities exchange on
which the  Common  Stock is be listed or  admitted  to  trading  is open for the
transaction  of  business  or, if the Common  Stock is not listed or admitted to
trading on any United States national securities exchange, but are traded in the
over-the-counter  market and  reported by Nasdaq,  then any day for which Nasdaq
reports the high bid and low asked prices in the over-the-counter  market, or if
the Common  Stock is not traded in the over-the  counter  market and reported by
Nasdaq,  then any day other than a  Saturday,  Sunday or a day on which  banking
institutions  in the State of New York are  authorized  or  obligated  by law or
executive order to close..

            (B) Notice of any such  redemption  shall be given by mailing to the
holders of the Series A Junior  Participating  Preferred  Stock a notice of such
redemption,  first class postage  prepaid,  not later than the thirtieth day and
not earlier than the sixtieth day before the date fixed for redemption, at their
last address as the same shall appear upon the books of Corporation.  Any notice
which  shall be mailed  in the  manner  herein  provided  shall be  conclusively
presumed  to have been duly  given,  whether or not the  stockholder  shall have
received  such  notice,  and failure  duly to give such  notice by mail,  or any
defect in such notice, to any holder of Series A Junior Participating  Preferred
Stock shall not affect the validity of the  proceedings  for the  redemption  of
such Series A Junior Participating Preferred Stock.

                                      -45-
<PAGE>

            (C) If less than all the  outstanding  shares of the Series A Junior
Participating Preferred Stock are to be redeemed by the Corporation,  the number
of shares to be redeemed  shall be  determined by the Board of Directors and the
shares to be redeemed shall be determined by lot or pro rata or in such fair and
equitable  other  manner  as may be  prescribed  by  resolution  of the Board of
Directors.

            (D) The  notice  of  redemption  to each  holder  of Series A Junior
Participating Preferred Stock shall specify (a) the number of shares of Series A
Junior Participating Preferred Stock of such holder to be redeemed, (b) the date
fixed for redemption,  (c) the redemption  price and (d) the place of payment of
the redemption price.

            (E) If any such notice of  redemption  shall have been duly given or
if the  Corporation  shall have given to the bank or trust  company  hereinafter
referred to irrevocable written authorization  promptly to give or complete such
notice,  and if on or before the  redemption  date  specified  therein the funds
necessary for such redemption  shall have been deposited by the Corporation with
the bank or trust  company  designated  in such  notice,  doing  business in the
United  States of America and having a capital,  surplus and  undivided  profits
aggregating at least $100,000,000  according to its last published  statement of
condition,  in  trust  for  the  benefit  of the  holders  of  Series  A  Junior
Participating Preferred Stock called for redemption,  then, notwithstanding that
any  certificate  for such shares so called for  redemption  shall not have been
surrendered for  cancellation,  from and after the time of such deposit all such
shares called for redemption shall no longer be deemed  outstanding,  all rights
with respect to such shares shall no longer be deemed outstanding and all rights
with  respect to such shares shall  forthwith  cease and  terminate,  except the
right of the holders  thereof to receive from such bank or trust  company at any
time after the time of such deposit the funds so deposited, without interest. In
case less than all the shares  represented by any surrendered  certificate shall
be redeemed,  a new  certificate  shall be issued  representing  the  unredeemed
shares.  Any interest  accrued on such funds so  deposited  shall be paid to the
Corporation  from time to time.  Any funds so deposited and unclaimed at the end
of six years from such redemption date shall be repaid to the Corporation, after
which the  holders of shares of Series A Junior  Participating  Preferred  Stock
called for redemption  shall look only to the Corporation  for payment  thereof;
provided,  however,  that any funds so deposited which shall not be required for
redemption  because of the exercise of any  privilege of  conversion or exchange
subsequent to the date of deposit shall be repaid to the Corporation forthwith.

      SECTION 9.  Ranking.  The Series A Junior  Participating  Preferred  Stock
shall rank junior to all other  series of  Preferred  Stock as to the payment of
dividends and the  distribution  of assets,  unless the terms of any such series
shall provide otherwise.

      SECTION 10. Fractional  Shares.  Series A Junior  Participating  Preferred
Stock may be issued in fractions of a share which shall  entitle the holder,  in
proportion  to such  holder's  fractional  shares,  to exercise  voting  rights,
receive  dividends,  participate in distributions and to have the benefit of all
other rights of holders of Series A Junior Participating Preferred Stock.

                                      -46-
<PAGE>

IN WITNESS  WHEREOF,  we have executed and subscribed  this  Certificate  and do
affirm the  foregoing  as true under the  penalties  of perjury this 13th day of
October, 2000.

                                                _______________________________
                                                Daniel P. Sharkey
                                                Vice President, Chief
                                                Financial Officer and
                                                Treasurer

Attest:

_________________________________
Ward Stevens
Secretary

                                      -47-
<PAGE>

                                    Exhibit B

                           Form of Rights Certificate

Certificate No. R-                                             ________ Rights

NOT  EXERCISABLE  AFTER  OCTOBER 12, 2010 OR EARLIER IF NOTICE OF  REDEMPTION OR
EXCHANGE IS GIVEN.  THE RIGHTS ARE SUBJECT TO  REDEMPTION  OR  EXCHANGE,  AT THE
OPTION OF THE  COMPANY,  ON THE TERMS SET FORTH IN THE  RIGHTS  AGREEMENT.  [THE
RIGHTS  REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY
A PERSON WHO WAS OR BECAME AN  ACQUIRING  PERSON OR AN ASSOCIATE OR AFFILIATE OF
AN  ACQUIRING  PERSON  (AS SUCH  TERMS ARE  DEFINED  IN THE  RIGHTS  AGREEMENT).
ACCORDINGLY,  THIS  RIGHTS  CERTIFICATE  AND THE RIGHTS  REPRESENTED  HEREBY MAY
BECOME  NULL AND VOID IN THE  CIRCUMSTANCES  SPECIFIED  IN  SECTION  7(e) OF THE
RIGHTS AGREEMENT.]

                               Rights Certificate

                                  ATMI, INC.

            This   certifies  that   _________________________,   or  registered
assigns,  is the registered owner of the number of Rights set forth above,  each
of which  entitles  the owner  thereof,  subject  to the terms,  provisions  and
conditions of the Rights Agreement dated as of October 13, 2000 (as amended, the
"Rights Agreement") between ATMI, Inc., a Delaware  corporation (the "Company"),
and Fleet National Bank (the "Rights Agent"),  unless notice of redemption shall
have been previously  given by the Company,  to purchase from the Company at any
time  after  the  Distribution  Date  (as such  term is  defined  in the  Rights
Agreement)  and prior to 5:00 P.M., New York, New York time on October 12, 2010,
at the principal corporate trust office of the Rights Agent, or at the office of
its  successor  as  Rights  Agent,  one   one-hundredth  of  a  fully  paid  and
nonassessable share of the Junior Participating  Preferred Stock, par value $.01
per share,  of the Company (the  "Preferred  Stock"),  at a purchase  price (the
"Purchase Price") of $175.00 per one one-hundredth  share, upon presentation and
surrender of this Rights  Certificate with the Form of Election to Purchase duly
executed.  The Purchase  Price may be paid in cash or by certified bank check or
bank draft payable to the order of the Company.

            As  provided in the Rights  Agreement,  the  Purchase  Price and the
number of shares of Preferred Stock or other securities,  cash or other property
which may be purchased upon the exercise of the Rights  evidenced by this Rights
Certificate  are subject to  modification  and adjustment upon the occurrence of
certain events.

            If the  Rights  evidenced  by this  Rights  Certificate  are or were
formerly  beneficially  owned, on or after the earlier of the Distribution  Date
and the Stock  Acquisition  Date, by (i) an Acquiring Person or any Associate or
Affiliate of an Acquiring Person, or (ii) a direct or indirect  transferee of an
Acquiring Person (or of any Associate or Affiliate of an

                                      -48-
<PAGE>

Acquiring  Person),  such  Rights may become  null and void,  in which event the
holder of any such Right  (including any  subsequent  holder) shall not have any
rights with respect to such Right.

            This Rights  Certificate is subject to all of the terms,  provisions
and conditions of the Rights Agreement,  which terms,  provisions and conditions
are hereby  incorporated herein by reference and made a part hereof and to which
Rights Agreement  reference is hereby made for a full description of the rights,
limitations  of rights,  obligations,  duties and  immunities  hereunder  of the
Rights  Agent,  the  Company  and  the  holders  of  the  Rights   Certificates.
Capitalized  terms used but not  defined  in this  Rights  Certificate  that are
defined in the Rights Agreement shall have the same meanings ascribed to them in
the  Rights  Agreement.  Copies  of the  Rights  Agreement  are on  file  at the
principal executive offices of the Company and the above-mentioned office of the
Rights Agent.

            This Rights Certificate,  with or without other Rights Certificates,
upon surrender at the principal  corporate trust office of the Rights Agent, may
be exchanged for another Rights Certificate or Rights Certificates of like tenor
and date  evidencing  Rights  entitling the holder to purchase a like  aggregate
number of shares of Preferred Stock or other property as the Rights evidenced by
the Rights Certificate or Rights Certificates  surrendered  entitled such holder
to purchase.  If this Rights  Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Rights Certificate or
Rights Certificates for the number of whole Rights not exercised.

            Subject  to the  provisions  of the  Rights  Agreement,  the  Rights
evidenced  by this  Rights  Certificate  (a) may be  redeemed  by the  Board  of
Directors of the Company at its option at a redemption  price of $.01 per Right,
subject to  adjustment,  payable,  at the  election of the  Company,  in cash or
shares (including fractional shares) of Common Stock or such other consideration
as the Board of Directors  may determine at any time prior to the earlier of (i)
12:00 a.m.  (midnight,  New York, New York time) on the Stock  Acquisition Date,
and  (ii)  the  Expiration  Date,  or  (b)  may be  exchanged  after  the  Stock
Acquisition Date by the Board of Directors of the Company at its option in whole
or in part for shares of the Company's Common Stock or other Company securities.

            No fractional  shares of Preferred  Stock (other than fractions that
are integral multiples of one one-hundredth of a share of Preferred Stock, which
may, at the election of the Company,  be evidenced by  depository  receipts) are
required to be issued upon the exercise of any Right or Rights evidenced hereby,
but in lieu thereof the Company may elect to (i) evidence  fractional  shares by
depositary  receipts,  (ii) issue scrip or warrants in  registered  form (either
represented by a certificate or  uncertificated)  or in bearer form (represented
by a  certificate)  which shall  entitle the holder to receive a full share upon
the surrender of such scrip or warrants  aggregating a full share, or (iii) make
a cash payment, as provided in the Rights Agreement.

            No holder of this Rights Certificate,  as such, shall be entitled to
vote or to receive  dividends  on, or shall be deemed for any purpose the holder
of,  Preferred Stock or of any other  securities,  cash or property which may at
any time be issuable on the exercise hereof, nor shall anything contained in the
Rights  Agreement  or this Rights  Certificate  be  construed to confer upon the
holder  hereof,  as such,  any of the rights of a  stockholder  of the  Company,
including,  without limitation,  any right to vote for the election of directors
or upon any matter submitted to

                                      -49-
<PAGE>

stockholders  at any  meeting  thereof,  or to give or  withhold  consent to any
corporate  action,  or to receive notice of meetings or other actions  affecting
stockholders  (except  as  provided  in the  Rights  Agreement),  or to  receive
dividends or  subscription  rights,  or to  institute,  as a holder of Preferred
Stock or other securities  issuable on the exercise of the Rights represented by
this Rights Certificate,  any derivative action, or otherwise, until and only to
the extent the Right or Rights evidenced by this Rights  Certificate  shall have
been exercised as provided in the Rights Agreement.

            This Rights  Certificate  shall not be valid or  obligatory  for any
purpose until it shall have been countersigned by the Rights Agent.

            WITNESS  the  facsimile  signature  of the proper  officers of the
Company and its corporate seal.  Dated as of _______ __, ____.

                             ATMI, INC.

                             By:
                                 ------------------------------------
                                 Daniel P. Sharkey
                                 Chief  Financial  Officer,  Vice President and
                                 Treasurer

Countersigned:

Fleet National Bank

By:   __________________________
Name:
Title:

                 [Form of Reverse Side of Rights Certificate]

                                      -50-
<PAGE>

                               Form of Assignment

               (To be executed by the  registered  holder if such holder desires
             to transfer the Rights Certificate.)

      FOR  VALUE  RECEIVED  the  undersigned  ________________  hereby  sells,
assigns and transfers unto

(Please print name and address of transferee) _________ Rights evidenced by this
Rights  Certificate,  together with all right,  title and interest therein,  and
does hereby irrevocably constitute and appoint  ________________________  with a
power  of  attorney  to  transfer  the  said  Rights  and a  Rights  Certificate
evidencing  such  Rights  on the  books  of  ATMI,  Inc.,  with  full  power  of
substitution.

            A new Rights Certificate  evidencing the remaining balance,  if any,
of such Rights not hereby sold,  assigned and transferred shall be mailed to and
registered in the name of the undersigned  unless such person requests that such
Rights  Certificate be registered in the name of and mailed to (complete only if
a Rights  Certificate  evidencing  any  remaining  balance  of  Rights  is to be
registered in a name other than the name of the undersigned):

Please insert Social Security or
other identifying number of transferee: _________________________

-----------------------------------------------------------------
                      (Please print name and address)

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

                                      -51-
<PAGE>

                                   Certificate

            The undersigned  hereby certifies by checking the appropriate  boxes
that:

            (1) this Rights Certificate or any Rights evidenced hereby __ are __
are not being sold,  assigned and transferred by or on behalf of a Person who is
or was an Acquiring  Person or an Affiliate or Associate of an Acquiring  Person
(as such terms are defined in the Rights Agreement); and

            (2) after due inquiry and to the best knowledge of the  undersigned,
the  undersigned  __ did __did not acquire any of the Rights  evidenced  by this
Rights  Certificate  from any  Person  who is or was an  Acquiring  Person or an
Affiliate or Associate of an Acquiring Person.

Dated:  ____________________________          _________________________________
                                                          Signature

Signature Guaranteed:

Signatures  must  be  guaranteed  by  an  eligible  guarantor  institution  with
membership in a recognized  signature guarantee medallion program as approved by
the Stock Transfer Association.

                                      -52-
<PAGE>

                                     Notice

            The signature on the foregoing Form of Assignment must correspond to
the  name as  written  upon  the  face  of  this  Rights  Certificate  in  every
particular, without alteration or enlargement or any change whatsoever.

            In the  event  the  certification  set  forth  above  in the Form of
Assignment is not completed,  the Company will deem the beneficial  owner of the
Rights  evidenced  by this Right  Certificate  to be an  Acquiring  Person or an
Affiliate or Associate  thereof (as defined in the Rights Agreement) and, in the
case of an assignment or other transfer of this Rights Certificate or any Rights
evidenced hereby,  will affix a legend to that effect on any Rights  Certificate
issued in whole or partial exchange for this Rights Certificate.

                                      -53-
<PAGE>

                          Form of Election to Purchase

                (To be executed if holder desires to exercise
              the Rights represented by this Rights Certificate)

To:   ATMI, Inc.

            The   undersigned    hereby    irrevocably    elects   to   exercise
____________________  Rights  represented by this Rights Certificate to purchase
the  shares  of  Preferred  Stock or other  securities,  cash or other  property
issuable  upon the exercise of such Rights and requests  that  certificates  for
such shares or other securities be issued in the name of, and such cash or other
property be paid to:

Please insert social security
or other identifying number: ________________________

___________________________________________________________________
                       (Please print name and address)

___________________________________________________________________

            A new Rights Certificate  evidencing the remaining balance,  if any,
of such Rights not hereby  exercised  shall be mailed to and  registered  in the
name of the undersigned unless such person requests that such Rights Certificate
be registered in the name of and mailed to (complete only if Rights  Certificate
evidencing  any remaining  balance of Rights is to be registered in a name other
than the name of the undersigned):

Please insert social security
or other identifying number: ________________________

___________________________________________________________________
                       (Please print name and address)

___________________________________________________________________

                                      -54-
<PAGE>

                                   Certificate

            The undersigned  hereby certifies by checking the appropriate  boxes
that:

            (1) the Rights evidenced by this Rights  Certificate __are __are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate  or Associate of an Acquiring  Person (as such terms are defined in
the Rights Agreement); and

            (2) after due inquiry and to the best knowledge of the  undersigned,
the  undersigned  __ did __ did not acquire the Rights  evidenced by this Rights
Certificate from any Person who is or was an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.

Dated:  __________________________          __________________________________
                                                  Signature

Signature Guaranteed:

Signatures  must  be  guaranteed  by  an  eligible  guarantor  institution  with
membership in a recognized  signature guarantee medallion program as approved by
the Stock Transfer Association.

                                      -55-
<PAGE>

                                     Notice

            The  signature on the  foregoing  Form of Election to Purchase  must
correspond  to the name as written upon the face of this Rights  Certificate  in
every particular, without alteration or enlargement or any change whatsoever.

            In the  event  the  certification  set  forth  above  in the Form of
Election to  Purchase is not  completed,  the Company  will deem the  beneficial
owner of the Rights  evidenced  by this Rights  Certificate  to be an  Acquiring
Person or an Affiliate or Associate thereof (as defined in the Rights Agreement)
and, in the case of an assignment or other  transfer of this Rights  Certificate
or any Rights evidenced hereby, will affix a legend to that effect on any Rights
Certificate issued in whole or partial exchange for this Rights Certificate.

                                      -56-
<PAGE>

                                    Exhibit C

                Summary of Rights to Purchase Preferred Stock

            On October 13,  2000,  the Board of  Directors  of ATMI,  Inc.  (the
"Company")  authorized  the issuance of one preferred  share  purchase  right (a
"Right") for each  outstanding  share of common stock,  par value $.01 per share
(the  "Common  Stock"),  of the  Company.  The  distribution  is  payable to the
stockholders of record at the close of business on November 9, 2000 (the "Record
Date"), which is also the payment date, and with respect to all shares of Common
Stock that become outstanding after the Record Date and prior to the earliest of
the  Distribution  Date (as defined  below),  the redemption of the Rights,  the
exchange of the Rights,  or the expiration of the Rights (and, in certain cases,
following the Distribution  Date).  Each Right entitles the registered holder to
purchase from the Company one one-hundredth of a share of a Junior Participating
Preferred  Stock,  par value  $.01 per share,  of the  Company  (the  "Preferred
Stock") at an  exercise  price of $175.00  per one  one-hundredth  of a share of
Preferred Stock (the "Purchase Price"),  subject to adjustment.  The description
and terms of the Rights, and certain defined terms used herein, are set forth in
a Rights Agreement (as amended,  the "Rights Agreement") between the Company and
Fleet  National Bank as Rights Agent (the "Rights  Agent"),  dated as of October
13, 2000.

            Until the earlier to occur of (i) the  expiration  of the  Company's
redemption  rights on the date of public disclosure that a person or group other
than certain  Exempt  Persons (an  "Acquiring  Person"),  together  with persons
affiliated or associated  with such Acquiring  Person (other than those that are
Exempt  Persons),  has  acquired,  or obtained the right to acquire,  beneficial
ownership  of 15% or more (20% or more in the case of  certain  acquisitions  by
institutional investors) of the outstanding Common Stock (the "Stock Acquisition
Date") and (ii) the tenth  business day after the date (the "Tender Offer Date")
of commencement or public  disclosure of an intention to commence a tender offer
or exchange offer by a person other than an Exempt Person if, upon  consummation
of the offer, such person could acquire  beneficial  ownership of 15% or more of
the  outstanding  Common  Stock  (the  earlier of such  dates  being  called the
"Distribution  Date"), the Rights will be evidenced by Common Stock certificates
and not by separate certificates.  The Rights Agreement provides that, until the
Distribution Date (or earlier redemption, exchange or expiration of the Rights),
the Rights will be  transferred  with and only with the Common Stock.  Until the
Distribution Date (or earlier redemption, exchange or expiration of the Rights),
new Common Stock  certificates  issued after November 13, 2000, upon transfer or
new issuance of shares of Common  Stock,  will contain a notation  incorporating
the Rights  Agreement  by  reference.  Until the  Distribution  Date (or earlier
redemption,  exchange or expiration of the Rights) the surrender for transfer of
any certificate for Common Stock will also constitute the transfer of the Rights
associated  with the Common Stock  represented by such  certificate.  As soon as
practicable  following the Distribution Date, separate  certificates  evidencing
the  Rights  ("Right  Certificates")  will be mailed to holders of record of the
Common  Stock as of the close of business  on the  Distribution  Date,  and such
separate Right Certificates alone will evidence the Rights.

            The Rights will first become  exercisable  on the Stock  Acquisition
Date (unless sooner redeemed or exchanged).  The Rights will expire at the close
of business on October 12,

                                      -57-
<PAGE>

2010 (the  "Expiration  Date"),  unless  earlier  redeemed or  exchanged  by the
Company as described below.

            The Purchase  Price  payable,  and the number of shares of Preferred
Stock or other securities, cash or other property issuable, upon exercise of the
Rights are subject to  adjustment  from time to time to prevent  dilution (i) in
the event of a stock dividend or distribution on, or a subdivision,  combination
or  reclassification  of, the Preferred Stock, (ii) upon the grant to holders of
the  Preferred  Stock of certain  rights,  options or warrants to subscribe  for
Preferred Stock or securities  convertible  into or  exchangeable  for Preferred
Stock at less than the current market price of the Preferred Stock or (iii) upon
the  distribution to holders of the Preferred Stock of evidences of indebtedness
or assets  (excluding  regular  periodic  cash  dividends,  subject  to  certain
limitations  set forth in the Rights  Agreement)  or of  subscription  rights or
warrants (other than those referred to above).  In addition,  the Purchase Price
payable, and the number of shares of Preferred Stock purchasable, on exercise of
a Right is  subject  to  adjustment  in the event  that the  Company  should (i)
declare or pay any dividend on the Common Stock  payable in Common Stock or (ii)
effect a subdivision or combination of the Common Stock into a different  number
of shares of Common Stock.

            With certain exceptions, no adjustment in the Purchase Price will be
required until  cumulative  adjustments  require an adjustment of at least 1% in
such  Purchase  Price.  No fractional  shares of Preferred  Stock will be issued
(other than fractions  which are integral  multiples of one  one-hundredth  of a
share of  Preferred  Stock,  which  may,  at the  election  of the  Company,  be
evidenced by depositary  receipts)  and in lieu  thereof,  an adjustment in cash
will be made  based  on the  market  price  of the  Preferred  Stock on the last
trading date prior to the date of exercise.

            In the event  that  there is  public  disclosure  that an  Acquiring
Person has become such,  proper provision would be made so that each holder of a
Right,  other than Rights that are or were  beneficially  owned by the Acquiring
Person and certain  related  persons and  transferees  (which will thereafter be
void),  will  thereafter  have the right to receive upon exercise that number of
shares  of  Common  Stock  (or  other  securities)  having  at the  time of such
transaction  a market  value of two times the  Purchase  Price of the Right.  In
addition,  the Company's  Board of Directors has the option of exchanging all or
part of the Rights  (excluding  void  Rights)  for an equal  number of shares of
Common Stock in the manner described in the Rights Agreement.

            In the event that, at any time following  public  disclosure that an
Acquiring  Person has become such,  the Company is involved in a merger or other
business  combination  transaction  where  the  Company  is  not  the  surviving
corporation  or  where  the  Common  Stock  is  changed  or  exchanged  or  in a
transaction or transactions as a result of which 50% or more of its consolidated
assets or earning power are sold,  proper  provision  would be made so that each
holder of a Right (other than such Acquiring  Person and certain related persons
or transferees)  shall  thereafter have the right to receive,  upon the exercise
thereof at the then current  Purchase Price of the Right,  that number of shares
of common stock of the  acquiring  company or the  Company,  as the case may be,
which at the time of such transaction would have a market value of two times the
Purchase Price of the Right.

                                      -58-
<PAGE>

            At any time prior to public  disclosure that an Acquiring Person has
become  such,  the Board of  Directors  of the  Company may redeem the Rights in
whole, but not in part, at a price of $.01 per Right (the  "Redemption  Price"),
payable in cash,  shares  (including  fractional  shares) of Common Stock or any
other form of consideration deemed appropriate by the Board of Directors.

            At any time prior to the  Distribution  Date, the Board of Directors
of the Company may amend or supplement the Rights Agreement without the approval
of the Rights Agent or any holder of the Rights. From and after the Distribution
Date,  the  Board of  Directors  of the  Company  may  generally  only  amend or
supplement the Rights  Agreement  without such approval only to cure  ambiguity,
correct or  supplement  any  defective  or  inconsistent  provision or change or
supplement the Rights  Agreement in any manner which shall not adversely  affect
the interests of the holders of the Rights (other than an Acquiring Person or an
affiliate or  associate  thereof).  Immediately  upon the action of the Board of
Directors  providing  for  any  amendment  or  supplement,   such  amendment  or
supplement will be deemed effective.

            The Preferred Stock purchasable upon exercise of the Rights will not
be  redeemable.  Each share of  Preferred  Stock will be  entitled  to a minimum
preferential  quarterly dividend payment,  when, as and if declared by the Board
of  Directors  of the  Company,  equal to the greater of $1.00 per share and 100
times the dividend declared per share of Common Stock,  subject to anti-dilution
adjustment. In the event of liquidation, the holders of the Preferred Stock will
be entitled to a preferential  liquidation payment equal to $100 per share, plus
accrued and unpaid dividends, subject to anti-dilution adjustment. Each share of
Preferred  Stock  will  have 100  votes  per  share,  subject  to  anti-dilution
adjustment,  voting  together with the Common Stock. In the event of any merger,
consolidation or other transaction in which the Common Stock is exchanged,  each
share of  Preferred  Stock  will be  entitled  to  receive  100 times the amount
received per Common Stock, subject to anti-dilution adjustment.

            Exempt Persons  include (i) the Company,  (ii) any Subsidiary of the
Company,  (iii) any employee benefit plan of the Company or of any Subsidiary of
the  Company  and (iv) any Person  holding  Common  Stock for any such  employee
benefit plan or for employees of the Company or of any Subsidiary of the Company
pursuant to the terms of any such employee benefit plan.

            The Rights may have certain  anti-takeover  effects.  The Rights may
cause substantial  dilution to a person or group (except as described above with
respect to an Exempt  Person) that  attempts to acquire the Company on terms not
approved by the Board.  The Rights should not interfere with any merger or other
business  combination  approved  by the Board of  Directors  prior to the time a
person or group other than an Exempt Person has acquired beneficial ownership of
15% or more (20% or more in the case of certain  acquisitions  by  institutional
investors) of the Common Stock, because until such time the Rights may generally
be redeemed by the Company at $.01 per Right.

            Until a Right is exercised,  the holder thereof,  as such, will have
no rights as a stockholder of the Company,  including,  without limitation,  the
right to vote or to receive dividends.

                                      -59-
<PAGE>

            A copy of the Rights  Agreement  has been filed with the  Securities
and Exchange  Commission as an Exhibit to the Company's  Current  Report on Form
8-K.  A copy of the  Rights  Agreement  is  available  free of  charge  from the
Company.  This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement,  which is
hereby incorporated herein by reference.

                                      -60-

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