Document:

LOAN AND SECURITY AGREEMENT

      THIS LOAN AND SECURITY AGREEMENT (as it may be amended,  this "Agreement")
is entered  into on April 28,  2000,  by and among  BANC OF  AMERICA  COMMERCIAL
FINANCE  CORPORATION  THROUGH ITS COMMERCIAL FUNDING DIVISION (together with its
successors  and  assigns,  "LENDER"),  having an address  at 1177  Avenue of the
Americas,  36th Floor,  New York,  New York 10036 and WILLCOX & GIBBS,  INC.,  a
Delaware corporation ("WILLCOX"); MACPHERSON MEISTERGRAM, INC., a North Carolina
corporation  ("MACPHERSON");  LEADTEC  SYSTEMS,  INC.,  a  Delaware  corporation
("LEADTEC");  EMTEX LEASING  CORPORATION,  a Georgia corporation  ("EMTEX");  WG
APPAREL, INC., a Delaware corporation ("WG");  CLINTON MACHINERY CORPORATION,  a
Delaware corporation ("CLINTON MACHINERY");  CLINTON MANAGEMENT CORP., a Florida
corporation ("CLINTON MANAGEMENT"); CLINTON LEASING CORP., a Florida corporation
("CLINTON  LEASING");  CLINTON EQUIPMENT CORP., a Florida corporation  ("CLINTON
EQUIPMENT");  J&E SEWING  SUPPLIES,  INC., a New York corporation  ("J&E");  W&G
DAON, INC., a Delaware corporation ("DAON"); and PARADISE COLOR INCORPORATED,  a
Florida  corporation  ("PARADISE;"  Willcox,  Macpherson,  Leadtec,  Emtex,  WG,
Clinton Machinery, Clinton Management,  Clinton Leasing, Clinton Equipment, J&E,
Daon and  Paradise  are  referred to herein  individually  as a  "BORROWER"  and
collectively as "Borrowers"),  whose chief executive  offices are located at the
Addresses set forth in Section 9(j) of Schedule A  ("BORROWERS'  ADDRESS").  The
Schedules  to this  Agreement  are an integral  part of this  Agreement  and are
incorporated herein by reference. Terms used, but not defined elsewhere, in this
Agreement are defined in Schedule B.

                                R E C I T A L S:

      Borrowers  have  requested  that  Lender make  available a revolving  loan
facility to Borrowers,  which shall be used by Borrowers to finance their mutual
and collective  enterprise of  distribution of replacement  parts,  supplies and
ancillary equipment to the apparel and other sewn products industry.

      In order to utilize  the  financial  powers of each  Borrower  in the most
efficient and  economical  manner,  and in order to facilitate  the financing of
each Borrower's  needs,  Lender will make revolving loans to all Borrowers under
the loan  facility on a combined  basis and in  accordance  with the  provisions
hereinafter  set  forth.   Borrowers'   business  is  a  mutual  and  collective
enterprise, and Borrowers believe that the consolidation of all loans under this
Agreement will enhance the aggregate  borrowing powers of each Borrower and ease
the  administration of their loan  relationship  with Lender,  all to the mutual
advantage of Borrowers.  Lender's  willingness to extend credit to Borrowers and
to administer each Borrower's  collateral security therefor, on a combined basis
as more fully set forth in this Agreement, is done solely as an accommodation to
Borrowers  and at Borrowers'  request in  furtherance  of Borrowers'  mutual and
collective enterprise.

      Each Borrower has agreed to guarantee the obligations of each of the other
Borrowers under this Agreement and each of the other Loan Documents.

<PAGE>

      NOW,  THEREFORE,  for Ten Dollars  ($10.00)  and other good and valuable
consideration,  the  receipt  and  sufficiency  of which are hereby  severally
acknowledged, the parties hereto hereby agree as follows:

1.    LOANS AND CREDIT ACCOMMODATIONS.

      1.1  AMOUNT.  Subject  to the  terms  and  conditions  contained  in  this
Agreement  and  satisfaction  of all of the  conditions  precedent  set forth in
Schedule C attached  hereto in form and substance  satisfactory to Lender in its
sole  discretion,  Lender will:

            (a)  REVOLVING  LOANS AND CREDIT  ACCOMMODATIONS.  From time to time
during the Term at any Borrower's request and, provided that no Event of Default
exists,  make  revolving  loans to Borrowers  ("REVOLVING  LOANS"),  and may (as
provided in Section 1.3 hereof) make letters of credit,  bankers acceptances and
other credit accommodations ("CREDIT ACCOMMODATIONS") available to Borrowers, in
each case,  to the extent that there is sufficient  Availability  at the time of
such request to cover, dollar for dollar, the requested Revolving Loan or Credit
Accommodation;  PROVIDED,  that after giving  effect to such  Revolving  Loan or
Credit  Accommodation,  (x) the outstanding balance of all monetary  Obligations
(INCLUDING the principal balance of any Term Loan and, solely for the purpose of
determining  compliance with this provision,  the Credit Accommodation  Balance)
will not  exceed  the  Maximum  Facility  Amount  set forth in  Section  1(a) of
Schedule  A and (y) none of the other  Loan  Limits  set  forth in  Section 1 of
Schedule A will be exceeded.  For this purpose,  "AVAILABILITY"  means:  (i) the
aggregate amount of Eligible  Accounts,  Eligible Extended Accounts and Eligible
Foreign Accounts  multiplied by the applicable  Accounts Advance Rates set forth
in Section  1(b)(i) of Schedule A, but not to exceed the Accounts  Sublimits set
forth in Section 1(c) of Schedule A;

                                      PLUS

                  (ii) the  value of  Eligible  Inventory,  Eligible  In-Transit
            Inventory and Eligible Leased Inventory multiplied by the applicable
            Inventory Advance Rates set forth in Section 1(b)(ii) of Schedule A,
            but not to exceed the  applicable  Inventory  Sublimits set forth in
            Section 1(d) of Schedule A;

                                      PLUS

                  (iii) the face  amount of each  Barudan LC  multiplied  by the
            Barudan LC Advance  Rate set forth in Section  1(b)(iii) of Schedule
            A, but not to exceed, in the aggregate,  the Barudan LC Sublimit set
            forth in Section 1(e) of Schedule A;

                                      PLUS

                  (iv)  at  any  time  the  New LC  Loan  Conditions  have  been
            satisfied, as determined by Lender in its sole discretion,  the face
            amount of the New LC  multiplied  by 90%, but not to exceed,  in the
            aggregate,  $2,000,000 (provided,  that such amount shall be reduced
            to $0 five days prior to the expiration date of the New LC);

<PAGE>

                                      MINUS

                  (v) all  Reserves  which  Lender has  established  pursuant to
            Section 1.2 (including  those to be  established in connection  with
            the requested Revolving Loan or Credit Accommodation);

                                      MINUS

                  (vi)  the   outstanding   balance  of  all  of  the   monetary
            Obligations  (EXCLUDING  the Credit  Accommodation  Balance  and the
            principal balance of the Term Loan); and

                                      PLUS

                  (vii) the  Overadvance  Amount,  if any,  set forth in Section
            1(h) of Schedule A.

            (b) TERM LOAN. On the date of this Agreement, make (i) an advance to
Borrowers  computed with respect to the value of Borrowers'  Eligible  Equipment
(the "EQUIPMENT  ADVANCE") in the principal amount, if any, set forth in Section
2(a)(i) of Schedule A, and (ii) an advance to Borrowers computed with respect to
the value of Borrowers'  Eligible Real Property (the "REAL PROPERTY ADVANCE") in
the principal amount,  if applicable,  set forth in Section 2(a)(ii) of Schedule
A. The Equipment Advance and the Real Property Advance are collectively referred
to as the "TERM LOAN."

      1.2  RESERVES.  Lender may from time to time  establish  and  revise  such
reserves as Lender deems  appropriate in its sole  discretion  exercised in good
faith  ("RESERVES") to reflect (i) events,  conditions,  contingencies  or risks
which adversely  affect or may adversely affect (A) the Collateral or its value,
or the security  interests  and other rights of Lender in the  Collateral or (B)
the assets,  business or prospects of any Borrower or any Obligor, (ii) Lender's
good faith  determination  that any Collateral  report or financial  information
furnished  by or on behalf of any  Borrower  or any  Obligor to Lender is or may
have been incomplete,  inaccurate or misleading in any material  respect,  (iii)
any fact or  circumstance  which Lender  determines in good faith  constitutes a
Default  or Event of  Default or (iv) any other  events or  circumstances  which
Lender  determines in good faith make the establishment or revision of a Reserve
prudent.  Without  limiting the foregoing,  Lender shall (x) in the case of each
Credit  Accommodation  issued for the purchase of Inventory  (a) which meets the
criteria for Eligible  Inventory set forth in clauses (i), (ii),  (iii), (v) and
(vi) of the definition of Eligible Inventory, (b) which is or will be in transit
to one of the  locations  set forth in Section  9(d) of Schedule A, (c) which is
fully insured in a manner  satisfactory  to Lender and (d) with respect to which
Lender is in possession of all bills of lading and all other documentation which
Lender has requested,  all in form and substance  satisfactory  to Lender in its
sole  discretion,  establish a Reserve equal to the cost of such Inventory (plus
all duties,  freight,  taxes,  insurance,  costs and other  charges and expenses
relating to such Credit Accommodation or such Eligible Inventory)  multiplied by
a percentage  equal to 100% minus the Inventory  Advance Rate then applicable to
such Inventory and (y) in the case of any other Credit  Accommodation issued for
any  purpose,  establish  a  Reserve  equal to the full  amount  of such  Credit
Accommodation  plus all costs and other  charges and  expenses  relating to such

<PAGE>

Credit  Accommodation.  In  addition,  (x) Lender  shall  establish  a permanent
Reserve in the amount,  if any, set forth in Section 1(g) of Schedule A, and (y)
if the  outstanding  principal  balance of the Term Loan advance with respect to
Eligible  Equipment  exceeds  the  percentage  set forth in  Section  2(a)(i) of
Schedule  A of the  appraised  value  of such  Eligible  Equipment,  Lender  may
establish  an  additional  Reserve in the amount of such excess  (and,  for this
purpose,  if payments of principal on the Term Loan  advances  against  Eligible
Equipment and Eligible Real Property are not calculated separately,  payments of
principal  of the Term  Loan made by  Borrowers  shall be deemed to apply to the
Term Loan advance with respect to Eligible Equipment and Eligible Real Property,
respectively, in proportion to the original principal amounts of such advances).
Lender may, in its  discretion,  establish and revise Reserves by deducting them
in determining  Availability or by  reclassifying  Eligible  Accounts,  Eligible
Extended Accounts and Eligible Foreign Accounts or Eligible Inventory,  Eligible
In-Transit  Inventory and Eligible Leased  Inventory as ineligible.  In no event
shall the  establishment  of a Reserve  in  respect  of a  particular  actual or
contingent  liability  obligate  Lender to make  advances  hereunder to pay such
liability or otherwise obligate Lender with respect thereto.

      1.3 OTHER PROVISIONS APPLICABLE TO CREDIT  ACCOMMODATIONS.  Lender may, in
its sole  discretion  and on terms and  conditions  acceptable  to Lender,  make
Credit  Accommodations  available to  Borrowers  either by issuing  them,  or by
causing  other  financial  institutions  to issue  them  supported  by  Lender's
guaranty or indemnification;  PROVIDED,  that after giving effect to each Credit
Accommodation,  the  Credit  Accommodation  Balance  will not  exceed the Credit
Accommodation Limit set forth in Section 1(f) of Schedule A. Any amounts paid by
Lender in respect of a Credit  Accommodation will be treated for all purposes as
a Revolving Loan which shall be secured by the Collateral and bear interest, and
be  payable,  in the same manner as a Revolving  Loan.  Borrowers  shall have no
obligation to enter into any Credit Accommodation made available to Borrowers by
Lender,  but in the event Borrowers accept any such Credit  Accommodations  made
available  by Lender,  Borrowers  shall  execute all  documentation  required by
Lender or the issuer of any Credit  Accommodation  in  connection  with any such
Credit  Accommodation.  Borrowers may not procure Credit Accommodations from any
other Person without the prior written consent of Lender.

      1.4  REPAYMENT.  Accrued  interest on all  monetary  Obligations  shall be
payable  on the first day of each  month.  Principal  of the Term Loan  shall be
repaid as set forth in  Section  2(b) of  Schedule  A. If at any time any of the
Loan Limits are exceeded,  Borrowers will immediately pay to Lender such amounts
(or provide cash  collateral to Lender with respect to the Credit  Accommodation
Balance in the manner set forth in Section 7.3), as shall cause  Borrowers to be
in full compliance with all of the Loan Limits.  Notwithstanding  the foregoing,
Lender may, in its sole  discretion,  make or permit  Revolving  Loans, the Term
Loan,  any Credit  Accommodations  or any other  monetary  Obligations  to be in
excess of any of the Loan Limits;  PROVIDED, that Borrowers shall, upon Lender's
demand,  pay to Lender  such  amounts  as shall  cause  Borrowers  to be in full
compliance with all of the Loan Limits. All unpaid monetary Obligations shall be
payable in full on the Maturity Date (as defined in Section 7.1) or, if earlier,
the date of any early termination pursuant to Section 7.2. If any amount payable
under this  Agreement  is due on a day that is not a Business  Day,  such amount
shall be due and payable on the next succeeding Business Day.

<PAGE>

      1.5  MINIMUM  BORROWING.  Subject  to the  terms  and  conditions  of this
Agreement,  Borrowers  intend  to (i)  borrow  sufficient  amounts  to cause the
outstanding  principal  balance  of the Loans to equal or  exceed,  at all times
prior to the  Maturity  Date,  the Minimum Loan Amount set forth in Section 4 of
Schedule A and (ii) maintain  Availability  sufficient to enable Borrowers to do
so.  However,  Lender shall not be obligated to loan  Borrowers the Minimum Loan
Amount other than in  accordance  with all of the terms and  conditions  of this
Agreement;  and at any time the  outstanding  principal  balance of the Loans is
less  than the  Minimum  Loan  Amount,  Borrowers  shall  pay  Lender a  Minimum
Borrowing Fee in accordance with Section 2.2(e).

      1.6  ALL  LOANS  TO  CONSTITUTE  ONE  OBLIGATION.  All  Loans  and  Credit
Accommodations shall constitute one general Obligation of Borrowers and shall be
secured by Lender's Lien upon all of the Collateral; PROVIDED, that Lender shall
be deemed to be a creditor of each  Borrower and the holder of a separate  claim
against each  Borrower to the extent of any  Obligations  jointly and  severally
owed by Borrowers to Lender.

      1.7 BORROWERS'  REPRESENTATIVE.  Each Borrower hereby irrevocably appoints
Willcox,  and  Willcox  agrees to act  under  this  Agreement,  as the agent and
representative  of itself and each other  Borrower for all  purposes  under this
Agreement,   including  receiving  account  statements  and  other  notices  and
communications  to Borrowers (or any of them) from Lender.  Lender may rely, and
shall be fully protected in relying, on any request, reports, information or any
other notice or communication made or given by Willcox, whether in its own name,
on behalf of any Borrower or on behalf of "the Borrowers," and Lender shall have
no obligation to make any inquiry or request any confirmation  from or on behalf
of any other  Borrower  as to the  binding  effect on such  Borrower of any such
request, instruction,  report, information,  notice or communication,  nor shall
the joint and several character of Borrowers'  liability for the Loans and other
Obligations be affected,  provided that the provisions of this Section 1.7 shall
not be  construed  so as to preclude any  Borrower  from  directly  taking other
actions  permitted  to be taken by "a  Borrower"  hereunder.  Lender  intends to
maintain a single Loan Account in the name of "Willcox & Gibbs, Inc." hereunder,
and each Borrower  expressly  agrees to such  arrangement and confirms that such
arrangement  shall  have no effect on the joint and  several  character  of such
Borrower's liability for the Loans and other Obligations.

2.    INTEREST AND FEES.

      2.1  INTEREST.  The  principal  amount of all  Loans  and  other  monetary
Obligations  shall bear interest at the Interest  Rate(s) set forth in Section 3
of  Schedule  A,  except  where  expressly  set  forth to the  contrary  in this
Agreement or another Loan  Document;  PROVIDED,  that after the occurrence of an
Event  of  Default,  the  principal  amount  of all  Loans  and  other  monetary
Obligations  shall, at Lender's option,  bear interest at a rate per annum equal
to two percent  (2%) in excess of the rate  otherwise  applicable  thereto  (the
"DEFAULT  RATE") until paid in full  (notwithstanding  the entry of any judgment
against any  Borrower  or the  exercise of any other right or remedy by Lender),
and all such interest  shall be payable on demand.  Changes in the Interest Rate
shall  be   effective  as  of  the  date  of  any  change  in  the  Prime  Rate.
Notwithstanding  anything  to the  contrary  contained  in this  Agreement,  the
aggregate  of all  amounts  deemed  to be  interest  hereunder  and  charged  or
collected by Lender is not intended to exceed the highest rate permissible under
any  Applicable  Law, but if it should,  such interest  shall  automatically  be

<PAGE>

reduced to the extent  necessary to comply with  Applicable Law, and Lender will
refund to Borrowers any such excess interest received by Lender.

      2.2 FEES. Borrowers shall be jointly and severally liable to pay to Lender
the following fees, which are in addition to all interest and other sums payable
by Borrowers to Lender under this Agreement, and are not refundable:

            (a)  CLOSING  FEE. A closing  fee in the amount set forth in Section
6(a) of Schedule A, which shall be deemed to be fully  earned as of, and payable
on, the Closing Date.

            (b) FACILITY  FEES.  (i) A facility fee for the Initial Term,  which
shall be fully earned as of the Closing Date, and shall be payable in the amount
set forth in Section  6(b)(i) of  Schedule  A on each  anniversary  date of this
Agreement  during the Initial  Term,  and (ii) a facility  fee for each  Renewal
Term,  which shall be fully earned as of the first day of such Renewal Term, and
shall be  payable  in equal  installments  in the  amount  set forth in  Section
6(b)(ii)  of  Schedule  A on the  first  day of such  Renewal  Term  and on each
anniversary thereof during such Renewal Term.

            (c) SERVICING  FEE. A monthly  servicing fee in the amount set forth
in Section 6(c) of Schedule A, in consideration of Lender's  administration  and
other services for each month (or part thereof),  which shall be fully earned as
of, and payable in advance on, the date of this  Agreement  and on the first day
of each month thereafter so long as any of the Obligations are outstanding.

            (d)  UNUSED  LINE  FEE.  An unused  line fee at a rate  equal to the
percentage  per annum set forth in Section  6(d) of  Schedule A of the amount by
which the Maximum  Facility  Amount exceeds the greater of (i) the average daily
outstanding  principal balance of the Loans and the Credit Accommodation Balance
during the  immediately  preceding  month (or part thereof) and (ii) the Minimum
Loan Amount,  which fee shall be payable,  in arrears,  on the first day of each
month so long as any of the  Obligations  are  outstanding  and on the  Maturity
Date.

            (e)  MINIMUM  BORROWING  FEE. A minimum  borrowing  fee equal to the
excess, if any, of (i) interest which would have been payable in respect of each
period set forth in Section  6(e)(i) of Schedule A if, at all times  during such
period,  the principal balance of the Loans was equal to the Minimum Loan Amount
over (ii) the actual interest payable in respect of such period, which fee shall
be fully  earned as of the last day of such  period and  payable on the date set
forth in Section  6(e)(ii) of Schedule A and on the Maturity  Date.  The minimum
borrowing fee shall be calculated by Lender and , in Lender's discretion, may be
charged to the Loan Account as set forth in Section 2.4 hereof.

            (f) CREDIT  ACCOMMODATION  FEES.  All of the fees relating to Credit
Accommodations  set forth in Section  6(g) of  Schedule  A.

      2.3  COMPUTATION  OF INTEREST  AND FEES.  All  interest  and fees shall be
calculated daily on the closing balances in the Loan Account based on the actual
number  of days  elapsed  in a year of 360 days.  For  purposes  of  calculating
interest and fees, if the outstanding  daily principal  balance of the Revolving
Loans is a credit balance, such balance shall be deemed to be zero.

<PAGE>

      2.4 LOAN  ACCOUNT;  MONTHLY  ACCOUNTINGS.  Lender  shall  maintain  a loan
account for Borrowers  reflecting all advances,  charges,  expenses and payments
made pursuant to this Agreement to or by any Borrower (the "LOAN ACCOUNT"),  and
shall provide Borrowers with a monthly accounting reflecting the activity in the
Loan Account.  Each accounting shall be deemed correct,  accurate and binding on
all Borrowers and an account stated (except for reverses and  reapplications  of
payments made and corrections of errors discovered by Lender),  unless Borrowers
notify  Lender in writing to the  contrary  within 60 days after such account is
rendered,  describing the nature of any alleged  errors or admissions.  However,
Lender's  failure to maintain the Loan Account or to provide any such accounting
shall not  affect the  legality  or  binding  nature of any of the  Obligations.
Interest, fees and other monetary Obligations due and owing under this Agreement
(including  fees  and  other  amounts  paid  by  Lender  to  issuers  of  Credit
Accommodations) may, in Lender's discretion, be charged to the Loan Account, and
will  thereafter  be deemed to be Revolving  Loans and will bear interest at the
same rate as other Revolving Loans.

3.    SECURITY INTEREST.

      3.1 To secure the full payment and performance of all of the  Obligations,
each Borrower hereby grants to Lender a continuing  security  interest in all of
such  Borrower's  property  and  interests  in  property,  whether  tangible  or
intangible, now owned or in existence or hereafter acquired or arising, wherever
located, including such Borrower's interest in all of the following,  whether or
not eligible for lending purposes: (i) all Accounts, Chattel Paper, Instruments,
Documents,  Goods (including  Inventory,  Equipment,  farm products and consumer
goods),  Investment Property,  General Intangibles,  Deposit Accounts and money,
(ii) all proceeds and products of all of the  foregoing  (including  proceeds of
any insurance  policies,  proceeds of proceeds and claims  against third parties
for loss or any  destruction of any of the  foregoing),  and (iii) all books and
records relating to any of the foregoing.

4.    ADMINISTRATION.

      4.1 LOCK BOXES AND BLOCKED  ACCOUNTS.  Each Borrower will, at its expense,
establish  (and  revise  from time to time as  Lender  may  require)  collection
procedures acceptable to Lender, in Lender's sole discretion, for the collection
of checks,  wire transfers and other proceeds of Accounts ("ACCOUNT  PROCEEDS"),
which may include (i)  directing  all Account  Debtors to send all such proceeds
directly to a post office box  designated  by Lender  either in the name of such
Borrower (but as to which Lender has exclusive  access) or, at Lender's  option,
in the name of Lender (a "LOCK BOX") or (ii)  depositing  all  Account  Proceeds
received by such Borrower into one or more bank accounts  maintained in Lender's
name (each, a "BLOCKED ACCOUNT"), under an arrangement acceptable to Lender with
a depository  bank  acceptable to Lender,  pursuant to which all funds deposited
into each Blocked  Account are to be transferred  to Lender in such manner,  and
with such  frequency,  as Lender  shall  specify or (iii) a  combination  of the
foregoing.  Each Borrower agrees to execute,  and cause its depository  banks to
execute, such Lock Box and Blocked Account agreements and other documentation as
Lender shall require from time to time in connection with the foregoing.

      4.2  REMITTANCE  OF  PROCEEDS.  Except as  provided  in Section  4.1,  all
proceeds  arising from the sale or other  disposition of any Collateral shall be

<PAGE>

delivered,  in kind,  by each  Borrower to Lender in the original  form in which
received  by such  Borrower  not later  than the  following  Business  Day after
receipt by such Borrower. Until so delivered to Lender, each Borrower shall hold
such proceeds  separate and apart from such Borrower's  other funds and property
in an express  trust for  Lender.  Nothing in this  Section  4.2 shall limit the
restrictions on disposition of Collateral set forth elsewhere in this Agreement.

      4.3 APPLICATION OF PAYMENTS.  Lender may, in its sole  discretion,  apply,
reverse and  re-apply  all cash and  non-cash  proceeds of  Collateral  or other
payments  received  with  respect  to  the  Obligations  to the  payment  of the
Obligations, in such order and manner as Lender shall determine,  whether or not
the Obligations are due, and whether before or after the occurrence of a Default
or an Event of Default. For purposes of determining  Availability,  such amounts
will be credited to the Loan Account and the  Collateral  balances to which they
relate upon Lender's  receipt of advice from Lender's Bank (set forth in Section
11 of  Schedule A) that such items have been  credited  to  Lender's  account at
Lender's Bank (or upon Lender's  deposit thereof at Lender's Bank in the case of
payments received by Lender in kind), in each case, subject to final payment and
collection. However, for purposes of computing interest on the Obligations, such
items  shall be deemed  applied by Lender  three  Business  Days after  Lender's
receipt of advice of deposit thereof in Lender's account at Lender's Bank.

      4.4 NOTIFICATION;  VERIFICATION.  Lender or its designee may, from time to
time,  whether or not a Default or Event of Default exists:  (i) verify directly
with the Account Debtors the validity,  amount and other matters relating to the
Accounts and Chattel Paper, by means of mail, telephone or otherwise,  either in
the name of any  Borrower  or Lender or such other name as Lender may choose and
(ii) notify Account Debtors that Lender has a security  interest in the Accounts
and that payment thereof is to be made directly to Lender. At any time a Default
or Event of  Default  exists,  Lender or its  designee  may,  from time to time,
demand,  collect  or enforce  payment of any  Accounts  and  Chattel  Paper (but
without any duty to do so).

      4.5  POWER  OF  ATTORNEY.   Each  Borrower  hereby  grants  to  Lender  an
irrevocable  power  of  attorney,  coupled  with an  interest,  authorizing  and
permitting Lender (acting through any of its officers,  employees,  attorneys or
agents),  at any time (whether or not a Default or Event of Default has occurred
and is continuing,  except as expressly provided below), at Lender's option, but
without  obligation,  with or without notice to any Borrower,  and at Borrowers'
expense,  to do any  or  all  of the  following,  in  such  Borrower's  name  or
otherwise,  to the fullest  extent  permitted by Applicable  Law: (i) execute on
behalf of such Borrower any documents  that Lender may, in its sole  discretion,
deem advisable in order to perfect and maintain Lender's  security  interests in
the  Collateral,  to exercise a right of such  Borrower  or Lender,  or to fully
consummate  all the  transactions  contemplated  by this Agreement and the other
Loan Documents (including such financing  statements and continuation  financing
statements,   and  amendments   thereto,  as  Lender  shall  deem  necessary  or
appropriate) and to file as a financing  statement any copy of this Agreement or
any financing  statement  signed by such Borrower;  (ii) at any time an Event of
Default  exists,  execute on behalf of such  Borrower any  document  exercising,
transferring or assigning any option to purchase,  sell or otherwise  dispose of
or lease (as lessor or lessee)  any real or personal  property  which is part of
the Collateral or in which Lender has an interest; (iii) at any time an Event of
Default exists,  execute on behalf of such Borrower any invoices relating to any
Accounts,  any  draft  against  any  Account  Debtor,  any  proof  of  claim  in
bankruptcy,  any notice of Lien or claim,  and any assignment or satisfaction of

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mechanic's, materialman's or other Lien; (iv) execute on behalf of such Borrower
any notice to any Account Debtor;  (v) receive and otherwise take control in any
manner of any cash or non-cash items of payment or proceeds of Collateral;  (vi)
endorse  such  Borrower's  name on all  checks  and other  forms of  remittances
received by Lender;  (vii) pay,  contest or settle any Lien, or adverse claim in
or to any of the  Collateral,  or any judgment based thereon,  or otherwise take
any action to terminate or  discharge  the same;  (viii) at any time an Event of
Default exists,  grant extensions of time to pay, compromise claims relating to,
and settle  Accounts,  Chattel Paper and General  Intangibles for less than face
value and execute all releases and other documents in connection therewith; (ix)
pay any sums  required  on  account  of such  Borrower's  taxes or to secure the
release of any Liens  therefor;  (x) pay any  amounts  necessary  to obtain,  or
maintain in effect, any of the insurance  described in Section 5.12; (xi) at any
time an Event of Default  exists  settle and adjust,  and give  releases of, any
insurance  claim  that  relates  to any of the  Collateral  and  obtain  payment
therefor;  (xii)  instruct  any third  party  having  custody  or control of any
Collateral  or books or records  belonging  to, or relating to, such Borrower to
give Lender the same rights of access and other rights with  respect  thereto as
Lender  has under  this  Agreement;  and  (xiii) at any time an Event of Default
exists,  change the address for delivery of such Borrower's mail and receive and
open all mail addressed to such Borrower. Any and all sums paid, and any and all
costs,  expenses,  liabilities,   obligations  and  reasonable  attorneys'  fees
incurred,  by Lender with respect to the foregoing  shall be added to and become
part of the Obligations,  shall be payable on demand, and shall bear interest at
a rate equal to the highest  interest rate applicable to any of the Obligations.
Each Borrower  agrees that Lender's rights under the foregoing power of attorney
or any of Lender's other rights under this Agreement or the other Loan Documents
shall not be  construed to indicate  that Lender is in control of the  business,
management or properties of such Borrower.

      4.6 DISPUTES. Each Borrower shall promptly notify Lender of any dispute or
claim in excess of  $50,000  relating  to any  Accounts  or  Chattel  Paper.  No
Borrower will, without Lender's prior written consent,  compromise or settle any
Account or Chattel  Paper for less than the full  amount  thereof  (except  that
Borrowers  may  compromise  or  settle  for less  than the full  amount  thereof
Accounts which do not constitute  Eligible  Accounts with an aggregate value not
to exceed  $500,000 during the term of this  Agreement),  grant any extension of
time of payment of any Account or Chattel  Paper,  release (in whole or in part)
any  Account  Debtor or other  person  liable for the  payment of any Account or
Chattel Paper or grant any credits, discounts,  allowances,  deductions,  return
authorizations  or the like in excess of $50,000  with respect to any Account or
Chattel  Paper;  except  that for so long as no Event of  Default  exists,  each
Borrower may take any of such actions in the  ordinary  course of its  business,
PROVIDED that such Borrower reports the same to Lender on a weekly basis.

      4.7 INVOICES.  At Lender's request at any time an Event of Default exists,
each Borrower will cause all invoices and  statements  which it sends to Account
Debtors or other third parties to be marked, in a manner satisfactory to Lender,
to reflect Lender's security interest therein.

      4.8 INVENTORY.

            (a)  RETURNS.  Provided  that no Event  of  Default  exists,  if any
Account Debtor  returns any Inventory to any Borrower in the ordinary  course of

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its business,  such Borrower will promptly  determine the reason for such return
and promptly issue a credit  memorandum to the Account Debtor in the appropriate
amount (and if such credit equals or exceeds  $50,000,  Borrower  shall promptly
send a copy to Lender). At any time an Event of Default exists, no Borrower will
accept any return of any Inventory  with a aggregate fair market value in excess
of $50,000 without Lender's prior written consent.

            (b) OTHER  COVENANTS.  No Borrower will (i) without  Lender's  prior
written consent,  store any Inventory with any warehouseman or other third party
other than as set forth in Section 9(d) of Schedule A or as permitted by Section
5.6 hereof,  or (ii) sell any  Inventory  with a fair market  value in excess of
$50,000 on a sale-or-return,  guaranteed sale, consignment,  or other contingent
basis at any time without Lender's prior written  consent.  All of the Inventory
has been produced only in accordance  with the Fair Labor  Standards Act of 1938
and all rules, regulations and orders promulgated thereunder.

      4.9 ACCESS TO COLLATERAL,  BOOKS AND RECORDS.  At reasonable times, and on
one  Business  Day's  notice at any time prior to the  existence of a Default or
Event of  Default,  and at any time and  with or  without  notice  at any time a
Default or an Event of Default exists, Lender or its agents shall have the right
to inspect the  Collateral,  and the right to examine  and copy each  Borrower's
books and records.  Lender shall take reasonable steps to keep  confidential all
information  obtained in any such  inspection or  examination,  but Lender shall
have the right to disclose  any such  information  to its  auditors,  regulatory
agencies,  attorneys  and  participants,  and  pursuant to any subpoena or other
legal process.  Each Borrower agrees to give Lender access to any or all of such
Borrower's   premises  to  enable  Lender  to  conduct  such   inspections   and
examinations.  Such inspections and examinations  shall be at Borrowers' expense
and the charge  therefor shall be $750 per person per day (or such higher amount
as shall  represent  Lender's then current  standard  charge),  plus  reasonable
out-of-pocket  expenses.  In connection with such  examinations and inspections,
Lender  may,  at  Borrowers'  expense  and to the  extent  Lender,  in its  sole
discretion, deems appropriate, use any Borrower's personnel,  computer and other
equipment,  programs,  printed output and computer readable media,  supplies and
premises for the collection, sale or other disposition of Collateral as provided
for  in  this  Agreement.   Each  Borrower  hereby  irrevocably  authorizes  all
accountants  and third parties to disclose and deliver to Lender,  at Borrowers'
expense, all financial information,  books and records, work papers,  management
reports and other  information in their  possession  regarding any Borrower.  No
Borrower will enter into any agreement with any accounting firm,  service bureau
or third party to store such  Borrower's  books or records at any location other
than Borrowers'  Address without first obtaining Lender's written consent (which
consent may be conditioned  upon such accounting  firm,  service bureau or other
Person  agreeing to give Lender the same rights with  respect to access to books
and records and related rights as Lender has under this Agreement).

      4.10 NATURE AND EXTENT OF EACH BORROWER'S LIABILITY.

            (a) JOINT AND SEVERAL LIABILITY.  Each Borrower shall be liable for,
on a joint and several  basis,  and hereby  guarantees the timely payment by all
other  Borrowers  of,  all  Loans  and other  Obligations,  regardless  of which
Borrower  actually  may  have  received  the  proceeds  of the  Loans  or  other
extensions of credit hereunder or the amount of the Loans received or the manner
in which  Lender  accounts  for the Loans or other  extensions  of credit on its
books and  records,  it being  acknowledged  and agreed that the proceeds of the
Loans to any  Borrower  inure to the mutual  benefit of all  Borrowers  and that

<PAGE>

Lender is relying on the joint and several  liability  of Borrowers in extending
the Loans and other  financial  accommodations  hereunder.  Each Borrower hereby
unconditionally and irrevocably agrees that upon default in the payment when due
(whether at stated maturity,  by acceleration or otherwise) of any principal of,
or interest owed on, any of the Loans or other Obligations,  such Borrower shall
forthwith pay the same, without notice or demand.

            (b)  UNCONDITIONAL  NATURE OF LIABILITY.  Each Borrower's  joint and
several  liability  hereunder  with  respect to, and  guaranty of, the Loans and
other  Obligations  shall, to the fullest extent permitted by Applicable Law, be
unconditional  irrespective  of (i) the validity,  enforceability,  avoidance or
subordination  of any of the  Obligations  or of any  promissory  note or  other
document evidencing all or any part of the Obligations,  (ii) the absence of any
attempt to collect any of the Obligations from any other Borrower or any Obligor
or any Collateral or other security therefor, or the absence of any other action
to enforce  the same,  (iii) the  waiver,  consent,  extension,  forbearance  or
granting  of any  indulgence  by Lender  with  respect to any  provision  of any
instrument evidencing or securing the payment of any of the Obligations,  or any
other agreement now or hereafter executed by any other Borrower and delivered to
Lender,  (iv) the failure by Lender to take any steps to perfect or maintain the
perfected  status of its security  interest in or Lien upon,  or to preserve its
rights  to,  any  of the  Collateral  or  other  security  for  the  payment  or
performance of any of the  Obligations or Lender's  release of any Collateral or
of its Liens upon any  Collateral,  (v)  Lender's  election,  in any  proceeding
instituted under the Bankruptcy Code, for the application of Section  1111(b)(2)
of the Bankruptcy  Code,  (vi) any borrowing or grant of a security  interest by
any other Borrower, as debtor-in-possession  under Section 364 of the Bankruptcy
Code, (vii) the release or compromise,  in whole or in part, of the liability of
any Obligor for the payment of any of the  Obligations,  (ix) any  amendment  or
modification  of any of the Loan  Documents or waiver of any Default or Event of
Default thereunder, (x) any increase in the amount of the Obligations beyond any
limits  imposed  herein or in the amount of any interest,  fees or other charges
payable  in  connection  therewith,  or any  decrease  in  the  same,  (xi)  the
disallowance  of all or any portion of Lender's  claims for the repayment of any
of the Obligations under Section 502 of the Bankruptcy Code, or (viii) any other
circumstance that might constitute a legal or equitable  discharge or defense of
any Borrower.  After the occurrence  and during the  continuance of any Event of
Default, Lender may proceed directly and at once, without notice to any Borrower
or any  Obligor,  against any or all Borrower or Obligors to collect and recover
all or any part of the Obligations,  without first proceeding  against any other
Borrower or any  Obligor or against any  Collateral  or other  security  for the
payment or performance of any of the  Obligations,  and each Borrower waives any
provision that might otherwise  require Lender under Applicable Law to pursue or
exhaust its remedies against any Collateral, Borrower or Obligor before pursuing
another Borrower or Obligor. Each Borrower consents and agrees that Lender shall
be under no  obligation  to marshall  any assets in favor of any Borrower or any
Obligor or against or in payment of any or all of the Obligations.

            (c) NO  REDUCTION  IN  LIABILITY  FOR  OBLIGATIONS.  No  payment  or
payments  made by a Borrower or an Obligor or received  or  collected  by Lender
from a  Borrower,  Obligor  or any  other  Person  by  virtue  of any  action or
proceeding or any setoff or  appropriation  or  application  at any time or from
time to time in reduction of or in payment of the Obligations shall be deemed to
modify,  reduce, release or otherwise affect the liability of any Borrower under

<PAGE>

this Agreement,  each of whom shall remain jointly and severally  liable for the
payment and performance of the Loans and other Obligations until the Obligations
are paid in full and this Agreement is terminated.

            (d)  CONTRIBUTION.  Each  Borrower is  unconditionally  obligated to
repay the Obligations as a joint and several  obligor under this Agreement.  If,
as of any date,  the aggregate  amount of payments made by a Borrower on account
of the Obligations  and proceeds of such Borrower's  Collateral that are applied
to the Obligations  EXCEEDS the aggregate amount of Loan proceeds  actually used
by such  Borrower in its business  (such excess  amount being  referred to as an
"ACCOMMODATION  PAYMENT"),  then each of the other Borrowers (each such Borrower
being  referred to as a  "CONTRIBUTING  BORROWER")  shall be  obligated  to make
contribution to such Borrower (the "PAYING  BORROWER") in an amount equal to (A)
the product derived by multiplying the sum of each Accommodation Payment of each
Borrower by the Allocable  Percentage of the Borrower from whom  contribution is
sought  LESS  (B) the  amount,  if any,  of the then  outstanding  Accommodation
Payment of such Contributing Borrower (such last mentioned amount which is to be
subtracted from the aforesaid product to be increased by any amounts theretofore
paid by such Contributing Borrower by way of contribution  hereunder,  and to be
decreased by any amounts theretofore  received by such Contributing  Borrower by
way of contribution  hereunder);  PROVIDED, that a Paying Borrower's recovery of
contribution  hereunder from the other Borrowers shall be limited to that amount
paid by the  Paying  Borrower  in  excess  of its  Allocable  Percentage  of all
Accommodation  Payments then outstanding of all Borrowers.  As used herein,  the
term "ALLOCABLE  PERCENTAGE" shall mean, on any date of determination thereof, a
fraction the  denominator of which shall be equal to the number of Borrowers who
are parties to this  Agreement on such date and the  numerator of which shall be
1;  PROVIDED,  that  such  percentages  shall  be  modified  in the  event  that
contribution from a Borrower is not possible by reason of insolvency, bankruptcy
or otherwise by reducing such Borrower's  Allocable  Percentage  equitably or as
may be required under  Applicable Law and by adjusting the Allocable  Percentage
of the other Borrowers  proportionately so that the Allocable Percentages of all
Borrowers at all times equals one hundred percent (100%).

            (e)  SUBORDINATION.  Each Borrower hereby  subordinates  any claims,
including any right of payment, subrogation, contribution and indemnity, that it
may have from or against any other  Borrower or Obligor,  and any  successor  or
assign of any other  Borrower or Obligor,  including  any  trustee,  receiver or
debtor-in-possession, howsoever arising, due or owing or whether heretofore, now
or hereafter existing, to the payment in full of all of the Obligations.

5.    REPRESENTATIONS, WARRANTIES AND COVENANTS.

      To induce Lender to enter into this  Agreement,  each  Borrower  makes the
representations,   warranties   and  covenants   set  forth  below.   Each  such
representation  and warranty  will be deemed remade as of the date on which each
Loan is made and each Credit Accommodation is provided and shall not be affected
by any knowledge of, or any investigation  by, Lender,  and (ii) the accuracy of
each such  representation,  warranty  and  covenant  (subject  to changes in the
nature of a  Borrower's  business  or  operations  that may occur after the date
hereof in the  ordinary  course of business so long as Lender has  consented  to
such  changes  or  such  changes  are not  violative  of any  provision  of this
Agreement)  will  be  a  condition  to  each  Loan  and  Credit   Accommodation.

<PAGE>

Notwithstanding  the foregoing,  representations  and warranties  which by their
terms are applicable only to a specific date shall be deemed made only at and as
of such date.

      5.1 EXISTENCE AND  AUTHORITY.  Each  Borrower is duly  organized,  validly
existing  and in  good  standing  under  the  laws  of the  jurisdiction  of its
incorporation  or  formation.  Each  Borrower is  qualified  and  licensed to do
business  in all  jurisdictions  in which  any  failure  to do so  would  have a
Material  Adverse  Effect.  The  execution,  delivery  and  performance  by each
Borrower of this  Agreement and all of the other Loan  Documents  have been duly
and validly  authorized,  do not violate such Borrower's articles or certificate
of incorporation,  by-laws or other organizational  documents, or any law or any
agreement or  instrument  or any court order which is binding upon such Borrower
or its property,  do not constitute grounds for acceleration of any indebtedness
or  obligation  under any  agreement  or  instrument  which is binding upon such
Borrower or its  property,  and do not require the consent of any Person  (other
than  consents  which have been  previously  obtained  and provided to Lender in
writing).  This  Agreement and such other Loan Documents have been duly executed
and delivered by, and are  enforceable  against,  each  Borrower,  and all other
Obligors  who have signed  them,  in  accordance  with their  respective  terms.
Sections  9(g) and 9(h) of Schedule A set forth the  ownership of each  Borrower
and the names and ownership of each  Borrower's  Subsidiaries  as of the date of
this Agreement.

      5.2 NAME;  TRADE NAMES AND STYLES.  The name of each Borrower set forth in
the heading to this  Agreement is its correct and complete  legal name as of the
date hereof.  Listed in Sections 9(a), 9(b) and 9(c) of Schedule A are all prior
names of each Borrower and all of such Borrower's present and prior trade names.
Each  Borrower  shall give Lender at least  thirty  days' prior  written  notice
before  changing its name or doing business under any other name.  Each Borrower
has  complied  with  all  laws  relating  to the  conduct  of  business  under a
fictitious  business name.  Each Borrower  represents and warrants that (i) each
trade name does not refer to another corporation or other legal entity; (ii) all
Accounts  invoiced  under any such  trade  names are owned  exclusively  by such
Borrower and are subject to the security  interest of Lender and the other terms
of this Agreement and (iii) all schedules of Accounts,  including any sales made
or services  rendered  using any trade name shall show such  Borrower's  name as
assignor or seller.

      5.3 TITLE TO  COLLATERAL;  PERMITTED  LIENS.  Each  Borrower  has good and
marketable  title to the Collateral.  The Collateral now is and will remain free
and clear of any and all Liens and adverse claims,  except for Permitted  Liens.
Lender now has,  and will  continue  to have,  a  first-priority  perfected  and
enforceable  security interest in all of the Collateral,  and each Borrower will
at all times defend Lender and the Collateral against all claims of others. None
of the Collateral  which is Equipment is or will be affixed to any real property
in such a manner, or with such intent, as to become a fixture. Except for leases
or subleases as to which a Borrower has notified Lender in writing,  no Borrower
is a lessee or sublessee  under any real property lease or sublease  pursuant to
which the lessor or  sublessor  may obtain any rights in any of the  Collateral,
and no such lease or sublease now prohibits,  restrains,  impairs or conditions,
or will prohibit, restrain, impair or condition, such Borrower's right to remove
any  Collateral  from the  premises,  and,  with  respect to such real  property
leases,  Borrowers  shall deliver to Lender any  landlord's  waiver  required by
Lender in form and substance  satisfactory  to Lender.  Whenever any  Collateral
with an  aggregate  fair  market  value in excess of  $10,000  is  located  upon
premises in which any third party has an interest (whether as owner,  mortgagee,

<PAGE>

beneficiary  under a deed of trust,  lien or  otherwise),  each Borrower  shall,
whenever  requested  by  Lender,  use its best  efforts to cause each such third
party to  execute  and  deliver  to  Lender,  in form and  substance  reasonably
acceptable to Lender,  such waivers and  subordinations as Lender shall specify,
so as to ensure that Lender's rights in the Collateral are, and will continue to
be,  superior to the rights of any such third party.  Each Borrower will keep in
full force and effect,  and will comply in all  material  respects  with all the
terms of, any lease of real property  where any of the  Collateral now or in the
future may be located.  Notwithstanding  the  foregoing,  Borrowers may maintain
demonstration  Inventory  or  Equipment  with a fair market  value not to exceed
$200,000 at any time at the premises of third parties without  providing  Lender
with any agreement with such third party.

      5.4 ACCOUNTS AND CHATTEL PAPER. As of each date reported by each Borrower,
all  Accounts  which such  Borrower  has  reported  to Lender as being  Eligible
Accounts, Eligible Extended Accounts and Eligible Foreign Accounts comply in all
respects with the criteria for  eligibility  established by Lender and in effect
at such time. Except as disclosed by Borrower in writing to Lender in connection
with the Collateral  reporting  required under this Agreement,  all Accounts and
Chattel Paper are genuine and in all respects what they purport to be, arise out
of a completed, bona fide and unconditional and non-contingent sale and delivery
of goods or rendition  of services by a Borrower in the  ordinary  course of its
business and in accordance with the terms and conditions of all purchase orders,
contracts or other  documents  relating  thereto;  to the best knowledge of such
Borrower,  each Account  Debtor  thereunder  had the capacity to contract at the
time any  contract or other  document  giving rise to such  Accounts and Chattel
Paper were  executed;  and the  transactions  giving rise to such  Accounts  and
Chattel Paper comply with all Applicable Law.

      5.5  INVESTMENT  PROPERTY.  Each  Borrower  will take any and all  actions
required  or  requested  by Lender,  from time to time,  to (i) cause  Lender to
obtain exclusive  control of any Investment  Property in a manner  acceptable to
Lender and (ii) obtain from any issuers of  Investment  Property  and such other
Persons as Lender shall specify, for the benefit of Lender, written confirmation
of Lender's exclusive control over such Investment  Property and take such other
actions as Lender may  request to perfect  Lender's  security  interest  in such
Investment  Property.  For  purposes  of this  Section  5.5,  Lender  shall have
exclusive  control  of  Investment  Property  if (A)  such  Investment  Property
consists of certificated  securities and any Borrower delivers such certificated
securities  to  Lender  (with  appropriate  endorsements  if  such  certificated
securities are in registered  form);  (B) such Investment  Property  consists of
uncertificated   securities   and  either  (x)  any   Borrower   delivers   such
uncertificated  securities to Lender in the manner  required by  Applicable  Law
(including  Article 8 of the UCC) or (y) the issuer thereof agrees,  pursuant to
documentation in form and substance  satisfactory to Lender, that it will comply
with instructions  originated by Lender without further consent by any Borrower;
and (C) such Investment  Property  consists of security  entitlements and either
(x)  Lender  becomes  the  entitlement  holder  thereof  or (y) the  appropriate
securities  intermediary agrees, pursuant to documentation in form and substance
satisfactory to Lender,  that it will comply with entitlement  orders originated
by Lender without further consent by any Borrower.

      5.6 PLACE OF BUSINESS;  LOCATION OF COLLATERAL. Each Borrower's Address is
such  Borrower's  chief  executive  office  and the  location  of its  books and
records. In addition,  except as provided in the immediately following sentence,
each  Borrower  has  places  of  business  and  Collateral  located  only at the

<PAGE>

locations  set forth on Sections 9(d) and 9(e) of Schedule A. Each Borrower will
give  Lender at least  thirty  days' prior  written  notice  before  opening any
additional  place of  business,  changing  its  chief  executive  office  or the
location of its books and records, or moving any of the Collateral to a location
other than such Borrower's Address or one of the locations set forth in Sections
9(d) and 9(e) of Schedule A, and will promptly execute and deliver all financing
statements and other  agreements,  instruments  and documents which Lender shall
require as a result  thereof,  including,  without  limitation,  any landlord or
warehouseman agreements or waivers.

      5.7 FINANCIAL CONDITION,  STATEMENTS AND REPORTS. All financial statements
delivered  to  Lender  by or on behalf of any  Borrower  have been  prepared  in
conformity  with GAAP and completely and fairly reflect the financial  condition
of such Borrower,  at the times and for the periods therein stated.  Between the
last date  covered by any such  financial  statement  provided to Lender and the
date  hereof  (or,  with  respect  to the  remaking  of this  representation  in
connection  with  the  making  of any  Loan  or  the  providing  of  any  Credit
Accommodation,  the  date  such  Loan is made or such  Credit  Accommodation  is
provided),  there has been no material adverse change in the financial condition
or business of such Borrower. Each Borrower is solvent and able to pay its debts
as they come due,  and has  sufficient  capital to carry on its  business as now
conducted  and as proposed to be  conducted.  All  schedules,  reports and other
information and  documentation  delivered by any Borrower to Lender with respect
to the Collateral are, or will be, when delivered, true, correct and complete as
of the date delivered or the date specified therein.

      5.8 TAX RETURNS AND  PAYMENTS;  PENSION  CONTRIBUTIONS.  Each Borrower has
timely filed all tax returns and reports  required by Applicable Law, has timely
paid all applicable taxes, assessments, deposits and contributions owing by such
Borrower and will timely pay all such items in the future as they became due and
payable.  Each Borrower  may,  however,  defer  payment of any contested  taxes;
PROVIDED,  that  such  Borrower  (i) in  good  faith  contests  such  Borrower's
obligation to pay such taxes by appropriate  proceedings promptly and diligently
instituted and conducted;  (ii) notifies  Lender in writing of the  commencement
of, and any material development in, the proceedings; (iii) posts bonds or takes
any other steps  required to keep the contested  taxes from becoming a Lien upon
any  of the  Collateral;  and  (iv)  maintains  adequate  reserves  therefor  in
conformity  with GAAP.  Each  Borrower  is unaware of any claims or  adjustments
proposed  for any of such  Borrower's  prior tax  years  which  could  result in
additional  taxes becoming due and payable by such  Borrower.  Each Borrower has
paid, and shall  continue to pay, all amounts  necessary to fund all present and
future  pension,  profit sharing and deferred  compensation  plans in accordance
with their terms,  and such Borrower has not withdrawn  from  participation  in,
permitted partial or complete termination of, or permitted the occurrence of any
other event with respect to, any such plan which could  result in any  liability
of such  Borrower,  including  any  liability  to the Pension  Benefit  Guaranty
Corporation or any other governmental agency, which could reasonably be expected
to have a Material Adverse Effect.

      5.9  COMPLIANCE  WITH LAWS.  Each  Borrower  has  complied in all material
respects with all provisions of all Applicable Laws and  regulations,  including
those relating to such Borrower's  ownership of real or personal  property,  the
conduct and licensing of such Borrower's  business,  the payment and withholding
of taxes, ERISA and other employee matters, safety and environmental matters.

<PAGE>

      5.10  LITIGATION.  Section  9(f)  of  Schedule  A  discloses  all  claims,
proceedings,  litigation  or  investigations  pending  or (to  the  best of each
Borrower's  knowledge)  threatened  against any  Borrower as of the date hereof.
There is no claim, suit, litigation,  proceeding or investigation pending or (to
the best of each Borrower's knowledge) threatened by or against or affecting any
Borrower in any court or before any  governmental  agency (or any basis therefor
known to any  Borrower)  which could  reasonably  be expected to have a Material
Adverse  Effect,  either  separately  or in the  aggregate.  Each  Borrower will
promptly  inform  Lender in  writing  of any claim,  proceeding,  litigation  or
investigation  in  the  future  threatened  or  instituted  by or  against  such
Borrower.

      5.11 USE OF  PROCEEDS.  All  proceeds of all Loans will be used solely for
lawful business purposes.

      5.12 INSURANCE. Each Borrower will at all times carry property,  liability
and other insurance, with insurers reasonably acceptable to Lender, in such form
and amounts,  and with such  deductibles and other  provisions,  as Lender shall
reasonably require, and such Borrower will provide evidence of such insurance to
Lender,  so that Lender is satisfied  that such  insurance is, at all times,  in
full force and  effect.  Each  property  insurance  policy  shall name Lender as
lender's  loss payee and  mortgagee  and shall  contain a lender's  loss payable
endorsement in form acceptable to Lender,  each liability insurance policy shall
name Lender as an additional insured, and each business  interruption  insurance
policy  shall be  collaterally  assigned  to Lender,  all in form and  substance
satisfactory  to Lender.  All policies of insurance  shall provide that they may
not be cancelled or changed  without at least thirty days' prior written  notice
to Lender, shall contain breach of warranty coverage,  and shall otherwise be in
form and substance  satisfactory to Lender.  Upon receipt of the proceeds of any
such insurance, Lender shall apply such proceeds in reduction of the Obligations
as Lender shall  determine in its sole  discretion.  Each Borrower will promptly
deliver to Lender copies of all reports made to insurance companies.

      5.13  FINANCIAL AND  COLLATERAL  REPORTS.  Each Borrower has kept and will
keep  adequate  records  and  books of  account  with  respect  to its  business
activities  and the  Collateral  in which proper  entries are made in accordance
with  GAAP  reflecting  all its  financial  transactions,  and will  cause to be
prepared and furnished to Lender the following (all to be prepared in accordance
with GAAP,  unless such Borrower's  certified public  accountants  concur in any
change therein and such change is disclosed to Lender):

            (a)  COLLATERAL  REPORTS.  On or before  the  fifteenth  day of each
month, an aging of such Borrower's Accounts, Chattel Paper and notes receivable,
and  weekly  Inventory  reports,  all in  such  form,  and  together  with  such
additional  certificates,  schedules and other  information  with respect to the
Collateral  or the  business of any  Borrower or any  Obligor,  as Lender  shall
request;  PROVIDED,  that any Borrower's failure to execute and deliver the same
shall not affect or limit Lender's security interests and other rights in any of
the Accounts,  nor shall Lender's  failure to advance or lend against a specific
Account affect or limit Lender's security interest and other rights therein.  At
Lender's request,  together with each such schedule, each Borrower shall furnish
Lender  with  copies (or, at  Lender's  request,  originals)  of all  contracts,
orders,  invoices,  and  other  similar  documents,  and all  original  shipping
instructions,  delivery  receipts,  bills  of  lading,  and  other  evidence  of
delivery,  for any  goods  the sale or  disposition  of which  gave rise to such
Accounts, and each Borrower warrants the genuineness of all of the foregoing. In

<PAGE>

addition,   each  Borrower   shall  deliver  to  Lender  the  originals  of  all
Instruments,  Chattel Paper (other than the Emtex Leases),  security agreements,
guaranties and other documents and property evidencing or securing any Accounts,
immediately  upon  receipt  thereof and in the same form as  received,  with all
necessary  endorsements.   Lender  may  destroy  or  otherwise  dispose  of  all
documents,  schedules  and other  papers  delivered  to Lender  pursuant to this
Agreement  (other  than  originals  of  Instruments,   Chattel  Paper,  security
agreements,  guaranties and other documents and property  evidencing or securing
any Accounts) six months after Lender receives them,  unless a Borrower requests
their  return in  writing  in  advance  and  arranges  for their  return to such
Borrower at Borrowers' expense.

            (b)  ANNUAL  STATEMENTS.  Not later  than 90 days after the close of
each fiscal  year of Willcox,  unqualified  (except  for a  qualification  for a
change in  accounting  principles  with which the  accountant  concurs)  audited
financial statements of Willcox and its Subsidiaries as of the end of such year,
on a Consolidated and  consolidating  basis,  certified by a firm of independent
certified  public  accountants  of recognized  standing  selected by Willcox but
reasonably  acceptable to Lender,  together with a copy of any management letter
issued in connection therewith and a letter from such accountants  acknowledging
that Lender is relying on such financial statements;

            (c) INTERIM STATEMENTS. Not later than 30 days after the end of each
month hereafter,  including the last month of Willcox's  fiscal year,  unaudited
interim  financial  statements of Willcox and its  Subsidiaries as of the end of
such month and of the  portion  of  Willcox's  fiscal  year then  elapsed,  on a
Consolidated  and  consolidating  basis,  certified by the  principal  financial
officer of Willcox as prepared in accordance with GAAP and fairly presenting the
Consolidated  financial  position and results of  operations  of Willcox and its
Subsidiaries  for such month and period  subject  only to changes from audit and
year-end adjustments and except that such statements need not contain notes;

            (d)  PROJECTIONS,  ETC.  Such  business  projections,   Availability
projections,  business plans, budgets and cash flow statements for each Borrower
and its Subsidiaries as Lender shall request from time to time;

            (e) SHAREHOLDER  REPORTS,  ETC. Promptly after the sending or filing
thereof,  as the  case  may  be,  copies  of  any  proxy  statements,  financial
statements or reports which any Borrower has made available to its  shareholders
and  copies  of any  regular,  periodic  and  special  reports  or  registration
statements which any Borrower files with the Securities and Exchange  Commission
or any governmental authority which may be substituted therefor, or any national
securities exchange;

            (f) ERISA  REPORTS.  Upon  request by  Lender,  copies of any annual
report to be filed pursuant to the requirements of ERISA in connection with each
plan subject thereto; and

            (g) OTHER  INFORMATION.  Such other data and information  (financial
and otherwise) as Lender,  from time to time, may  reasonably  request,  bearing
upon or related to the Collateral or any Borrower's and any of its  Subsidiary's
financial condition or results of operations.

<PAGE>

      5.14 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against  Lender with respect to any Collateral or in any manner
relating to any Borrower,  each Borrower shall,  without expense to Lender, make
available  such  Borrower  and its  officers,  employees  and  agents,  and such
Borrower's books and records, without charge, to the extent that Lender may deem
them  reasonably  necessary  in order to  prosecute  or defend  any such suit or
proceeding.

      5.15  MAINTENANCE OF  COLLATERAL,  ETC. Each Borrower will maintain all of
its Equipment in good working condition, ordinary wear and tear excepted, and no
Borrower will use the  Collateral for any unlawful  purpose.  Each Borrower will
immediately  advise  Lender in  writing  of any  material  loss or damage to the
Collateral and of any investigation,  action, suit, proceeding or claim relating
to the Collateral  which could reasonably be expected to have a Material Adverse
Effect.

      5.16 NOTIFICATION OF CHANGES. Each Borrower will promptly notify Lender in
writing of any change in its officers or directors,  the opening of any new bank
account or other deposit account, or any material adverse change in the business
or financial affairs of such Borrower or the existence of any circumstance which
would  make any  representation  or  warranty  of such  Borrower  untrue  in any
material  respect  or  constitute  a  material  breach of any  covenant  of such
Borrower.

      5.17 RESERVED.

      5.18 FURTHER ASSURANCES. Each Borrower agrees, at its expense, to take all
actions to perfect and maintain  Lender's  security  interests in the Collateral
and to fully effectuate the  transactions  contemplated by this Agreement or any
of the other Loan  Documents.  Without  limiting the  foregoing,  each  Borrower
agrees to execute or cause to be executed and delivered to Lender all promissory
notes, security agreements,  and other agreements,  instruments and documents as
Lender  may  request  from  time to time and  such  agreements  with  landlords,
mortgagees and processors and other  bailees,  subordination  and  intercreditor
agreements as Lender may request from time to time.

      5.19 NEGATIVE COVENANTS.  Except as set forth in Section 13 of Schedule A,
no  Borrower  will,  without  Lender's  prior  written  consent,  (i)  merge  or
consolidate with another Person, form any new Subsidiary or acquire any interest
in any Person; (ii) acquire any assets except in the ordinary course of business
and as otherwise permitted by this Agreement and the other Loan Documents; (iii)
enter into any transaction outside the ordinary course of business; (iv) sell or
transfer  any  Collateral  or other  assets,  except  that a  Borrower  may sell
finished goods  Inventory in the ordinary course of its business and WG may sell
all of the assets of one of the  divisions  of WG as  required by Item 12(ii) of
Schedule A; (v) make any loans to, or  investments  in, any  Affiliate  or other
Person in the form of money or other  assets;  (vi) incur any debt  outside  the
ordinary  course of business;  (vii)  guaranty or otherwise  become  liable with
respect to the obligations of another party or entity (except to Lender pursuant
to this Agreement);  (viii) pay or declare any dividends or other  distributions
on such  Borrower's  stock,  if  such  Borrower  is a  corporation  (except  for
dividends  payable  solely in capital  stock of Borrower) or with respect to any
equity  interests,  if such Borrower is not a corporation  (except dividends and
distributions  paid and  payable  to another  Borrower);  (ix)  redeem,  retire,

<PAGE>

purchase or otherwise  acquire,  directly or indirectly,  any of such Borrower's
capital stock or other equity interests (except from another Borrower); (x) make
any change in such  Borrower's  capital  structure;  (xi)  dissolve  or elect to
dissolve;  (xii) pay any principal or interest on any  indebtedness  owing to an
Affiliate,  (xiii) enter into any  transaction  with an Affiliate  other than on
arms-length  terms;  or (xiv) agree to do any of the foregoing.  Notwithstanding
the  foregoing,  Borrowers may (i) at any time the Affiliate  Sale  Conditions -
Level 1 are  satisfied,  sell  Inventory to  Affiliates so long as the Affiliate
Sale Balance does not exceed  $4,000,000 and (ii) at any time the Affiliate Sale
Conditions - Level 2 are satisfied,  sell Inventory to Affiliates so long as the
Affiliate Sale Balance does not exceed $5,000,000.

      5.20 BANKRUPTCY PLAN. Borrower shall not amend the Bankruptcy Plan without
the prior written consent of Lender.

      5.21 FINANCIAL COVENANTS.

            (a)  CAPITAL  EXPENDITURES.  Borrowers  will not expend or commit to
expend,  directly or indirectly,  for capital  expenditures  (including  capital
lease  obligations)  an  aggregate  amount in excess of the  amount set forth in
Section 8(a) of Schedule A as the Capital  Expenditure  Limitation in any fiscal
year.

            (b)  CONSOLIDATED  NET  LOSSES.  Borrowers  will  not  permit  their
Consolidated  cumulative net loss (excluding  extraordinary items) to exceed the
amount set forth in Section 8(b) of Schedule A.

            (c)  OTHER  FINANCIAL  COVENANTS.  Borrowers  will  comply  with any
additional financial covenants set forth in Section 8(e) of Schedule A.

6.    RELEASE AND INDEMNITY.

      6.1 RELEASE.  Each Borrower  hereby releases Lender and its Affiliates and
their respective directors,  officers,  employees,  attorneys and agents and any
other  Person  representing  Lender (the  "RELEASED  PARTIES")  from any and all
liability  arising from acts or omissions  under or pursuant to this  Agreement,
whether based on errors of judgment or mistake of law or fact,  except for those
arising from willful  misconduct  or gross  negligence  and those arising from a
breach by Lender of its  obligations  under  this  Agreement  and the other Loan
Documents.  However,  in no  circumstance  will any of the  Released  Parties be
liable for lost profits or other special or consequential  damages. Such release
is made on the date  hereof and remade  upon each  request  for a Loan or Credit
Accommodation by any Borrower. Without limiting the foregoing:

            (a) Lender shall not be liable for (i) any  shortage or  discrepancy
in any  Goods,  the sale or other  disposition  of which gave rise to an Account
(and only to the extent that Lender has  possession of such Goods) or any damage
to or loss or destruction of any Goods; (ii) any error, act, omission,  or delay
of any kind  occurring  in the  settlement,  failure  to settle,  collection  or
failure to collect any  Account;  (iii)  settling  any Account in good faith for
less than the full amount thereof;  or (iv) any of Borrowers'  obligations under
any contract or agreement giving rise to an Account; and

<PAGE>

            (b) In  connection  with  Credit  Accommodations  or any  underlying
transaction,  Lender shall not be responsible for the conformity of any Goods to
the documents  presented,  the validity or genuineness of any documents,  delay,
default  or fraud by any  Borrower,  shippers  and/or  any  other  Person.  Each
Borrower agrees that any action taken by Lender,  if taken in good faith, or any
action taken by an issuer of any Credit  Accommodation,  under or in  connection
with any Credit  Accommodation,  shall be binding on such Borrower and shall not
create any resulting liability to Lender. In furtherance  thereof,  Lender shall
have the full right and  authority  to clear and resolve any  questions  of non-
compliance of documents,  to give any instructions as to acceptance or rejection
of any documents or Goods,  to execute for each  Borrower's  account any and all
applications for steamship or airway guaranties, indemnities or delivery orders,
to grant any  extensions  of the  maturity  of, time of payment  for, or time of
presentation  of, any drafts,  acceptances  or  documents,  and jointly with the
applicable  Borrower,  to  agree  to  any  amendments,   renewals,   extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the Credit Accommodations or applications and other documentation  pertaining
thereto.

      6.2  INDEMNITY.  Each  Borrower  hereby agrees to indemnify and defend the
Released  Parties  and hold them  harmless  from and against any and all claims,
debts, liabilities,  demands, obligations, actions, causes of action, penalties,
costs and expenses  (including  reasonable  attorneys'  fees),  of every nature,
character and description, which the Released Parties may sustain or incur based
upon or arising out of any of the transactions contemplated by this Agreement or
the other Loan Documents or any of the  Obligations,  including any transactions
or  occurrences  relating  to the  issuance  of any  Credit  Accommodation,  the
Collateral  relating thereto,  any drafts thereunder and any errors or omissions
relating  thereto  (including  any loss or claim due to any  action or  inaction
taken by the  issuer of any  Credit  Accommodation)  (and for this  purpose  any
charges to Lender by any issuer of Credit  Accommodations shall be conclusive as
to their  appropriateness and may be charged to the Loan Account),  or any other
matter, cause or thing whatsoever occurred, done, omitted or suffered to be done
by Lender relating to any Borrower or the  Obligations  (except any such amounts
sustained  or  incurred  as  the  result  of the  gross  negligence  or  willful
misconduct  of any  Released  Party).  Notwithstanding  any  provision  in  this
Agreement to the  contrary,  the  indemnity  agreement set forth in this Section
shall survive any termination of this Agreement.

7.    TERM.

      7.1  TERM.  Lender's  obligation  to  make  Loans  and to  provide  Credit
Accommodations  under this Agreement shall commence upon  satisfaction of all of
the  conditions  precedent  set  forth  in  Schedule  C, in form  and  substance
satisfactory to Lender in its sole discretion,  and initially continue in effect
until the  Initial  Maturity  Date set forth in  Section  7 of  Schedule  A (the
"INITIAL TERM");  PROVIDED,  that such date shall automatically be extended (the
Initial  Maturity  Date,  as it may be so  extended,  being  referred  to as the
"MATURITY  DATE") for  successive  additional  terms of three years each (each a
"RENEWAL  TERM"),  unless one party gives written notice to the other,  not less
than sixty days prior to the Maturity Date, that such party elects not to extend
the Maturity  Date.  This  Agreement  and the other Loan  Documents and Lender's
security  interests in and Liens upon the Collateral,  and all  representations,
warranties and covenants of each Borrower  contained  herein and therein,  shall

<PAGE>

remain  in full  force  and  effect  after the  Maturity  Date  until all of the
monetary Obligations are indefeasibly paid in full.

      7.2 EARLY  TERMINATION.  Lender's  obligation to make Loans and to provide
Credit  Accommodations  under  this  Agreement  may be  terminated  prior to the
Maturity Date as follows: (i) by Borrowers,  effective twenty (20) Business Days
after written  notice of termination is given to Lender or (ii) by Lender at any
time  an  Event  of  Default  exists,   upon  notice  to  Borrowers,   effective
immediately;  PROVIDED, that if any Affiliate of any Borrower is also a party to
a  financing  arrangement  with  Lender,  no such  early  termination  shall  be
effective  unless  such  Affiliate   simultaneously   terminates  its  financing
arrangement  with Lender.  If so  terminated  under this Section 7.2,  Borrowers
shall pay to Lender (i) an early  termination fee (the "EARLY  TERMINATION FEE")
in the amount set forth in Section  6(f) of  Schedule A plus (ii) any earned but
unpaid  Facility Fee. Such fee shall be due and payable on the effective date of
termination  and  thereafter  shall bear interest at a rate equal to the highest
rate  applicable  to  any of the  Obligations.  In  addition,  if  Borrowers  so
terminate and repay the Obligations without having provided Lender with at least
twenty (20) Business Days' prior written notice thereof, Borrowers shall jointly
and severally pay to Lender an additional amount equal to 20 days of interest at
the applicable Interest Rate(s),  based on the average outstanding amount of the
Obligations  for  the  six  month  period  immediately  preceding  the  date  of
termination.

      7.3  PAYMENT  OF  OBLIGATIONS.  On the  Maturity  Date  or on any  earlier
effective date of termination,  Borrowers shall be jointly and severally  liable
to pay in  full  all  Obligations,  whether  or not  all  or any  part  of  such
Obligations are otherwise then due and payable.  Without limiting the generality
of the foregoing,  if, on the Maturity Date or on any earlier  effective date of
termination, there are any outstanding Credit Accommodations,  then on such date
Borrowers  shall provide to Lender cash collateral in an amount equal to 110% of
the Credit  Accommodation  Balance to secure all of the  Obligations  (including
estimated   attorneys'  fees  and  other  expenses)   relating  to  said  Credit
Accommodations  or such greater  percentage or amount as Lender reasonably deems
appropriate,  pursuant  to  a  cash  pledge  agreement  in  form  and  substance
satisfactory  to Lender.  Such cash collateral with respect to any single Credit
Accommodation shall be released by Lender upon the indefeasible  payment in full
of all  of the  Obligations  (including  estimated  attorneys'  fees  and  other
expenses) relating to such Credit Accommodation.

      7.4 EFFECT OF TERMINATION. No termination shall affect or impair any right
or remedy of Lender or relieve any Borrower of any of the Obligations  until all
of  the  monetary   Obligations  have  been  indefeasibly  paid  in  full.  Upon
indefeasible  payment and performance in full of all of the monetary Obligations
(and the provision of cash collateral  with respect to any Credit  Accommodation
Balance as required by Section 7.3) and  termination of this  Agreement,  Lender
shall  promptly  deliver  to  Borrowers  termination  statements,  requests  for
reconveyances  and  such  other  documents  as may  be  reasonably  required  to
terminate Lender's security interests in the Collateral.

8.    EVENTS OF DEFAULT AND REMEDIES.

      8.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "EVENT OF DEFAULT" under this  Agreement,  and each Borrower shall

<PAGE>

give  Lender   immediate   written   notice   thereof:   (i)  if  any  warranty,
representation,  statement, report or certificate made or delivered to Lender by
any  Borrower  or any  Borrower's  officers,  employees  or  agents is untrue or
misleading in any material  respect;  (ii) if any Borrower fails to pay when due
any principal or interest on any Loan or any other monetary Obligation; (iii) if
any Borrower breaches any covenant or obligation  contained in this Agreement or
any other Loan Document or fails to perform any other non- monetary  Obligation;
PROVIDED,  THAT any breach of Sections  5.13(b),  5.13(c),  5.13(d),  5.13(e) or
5.13(f) of this Agreement  shall not constitute a Default or an Event of Default
until 10 days after the earlier of such  Borrower's  knowledge of such breach or
notice  by Lender  to  Willcox  of such  breach;  (iv) if any levy,  assessment,
attachment,  seizure,  lien or encumbrance (other than a Permitted Lien) is made
or permitted to exist on all or any part of the  Collateral;  (v) if one or more
judgments aggregating in excess of $100,000, or any injunction or attachment, is
obtained  against any Borrower or any Obligor  which  remains  unstayed for more
than 20 days or is  enforced;  (vi) the  occurrence  of any  default  under  any
financing  agreement,  security  agreement  or other  agreement,  instrument  or
document  (other than the Loan  Documents)  executed  and  delivered  by (A) any
Borrower  with,  or in favor of, any Person other than Lender or an Affiliate of
Lender to the extent  such  financing  agreement,  security  agreement  or other
agreement,  instrument  or document  creates or relates to any debt in excess of
$25,000  if  the  payment  or  maturity  of  such  debt  may be  accelerated  in
consequence  of such  default or demand for  payment of such debt may be made or
such  agreement may be  terminated,  or (B) any Borrower or any Affiliate of any
Borrower  with,  or in favor of,  Lender or any  Affiliate of Lender;  (vii) the
dissolution,  death,  termination  of  existence  in good  standing  (unless all
actions  necessary to cure such  termination  of existence in good standing have
been taken by such Borrower  within 10 days after the earlier of such Borrower's
knowledge  of such  breach or notice by  Lender  to  Borrowers),  insolvency  or
business failure or suspension or cessation of business as usual of any Borrower
or any Obligor (or of any general  partner of any  Borrower or any Obligor if it
is a partnership) or the appointment of a receiver, trustee or custodian for all
or any part of the property of, or an assignment for the benefit of creditors by
any  Borrower or any  Obligor,  or the  commencement  of any  proceeding  by any
Borrower  or any  Obligor  under  any  reorganization,  bankruptcy,  insolvency,
arrangement,  readjustment of debt, dissolution or liquidation law or statute of
any  jurisdiction,  now or in the future in effect,  or if any Borrower makes or
sends a notice of a bulk transfer or calls a meeting of its creditors  generally
for any of the foregoing  purposes;  (viii) the  commencement  of any proceeding
against  any  Borrower  or any  Obligor  under any  reorganization,  bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction,  now or in the future in effect; (ix) the actual or
attempted  revocation  or  termination  of, or limitation or denial of liability
upon, any guaranty of the  Obligations,  or any security  document  securing the
Obligations, by any Obligor; (x) if any Borrower makes any payment on account of
any  indebtedness or obligation  which has been  subordinated to the Obligations
other than as permitted in the  applicable  subordination  agreement,  or if any
Person who has subordinated such  indebtedness or obligations  attempts to limit
or terminate its subordination agreement; (xi) if there is any indictment of any
Borrower or any Obligor under any criminal  statute or  commencement of criminal
or civil proceedings against any Borrower or any Obligor,  pursuant to which the
potential  penalties or remedies sought or available  include  forfeiture of any
property of any Borrower or such  Obligor;  (xii) if any one Person  becomes the
record or beneficial  owner of an aggregate of more than 35% of the  outstanding
shares of stock of any Borrower,  without the prior  written  consent of Lender;
(xiii) if there is any change in the chief  executive  officer,  chief operating

<PAGE>

officer or chief financial officer of Willcox, unless such person is replaced by
an officer  acceptable  to Lender and having  similar  experience  and expertise
within  thirty  (30)  days;  (xiv) any  Borrower  breaches  its  obligations  or
otherwise  defaults under the Bankruptcy  Plan;  (xv) any Borrower  breaches its
duties or obligations  under any  Distribution  Agreement which breach gives the
other  party  to  such  Distribution  Agreement  the  right  to  terminate  such
Distribution  Agreement;  or (xvi) if Lender  determines  in good faith that the
Collateral is  insufficient to fully secure the Obligations or that the prospect
of payment  or  performance  of the  Obligations  is  impaired  in any  material
respect.

      8.2  REMEDIES.  At any time any Event of Default  exists,  Lender,  at its
option,  may cease making Loans or  otherwise  extending  credit to any Borrower
under this Agreement or any other Loan Document and may terminate any obligation
to extend  further  credit  to any  Borrower.  At any time any Event of  Default
exists,  Lender, at its option, and without notice or demand of any kind (all of
which are hereby expressly  waived by each Borrower),  may do any one or more of
the following: (i) cease making Loans or otherwise extending credit to Borrowers
under  this  Agreement  or any  other  Loan  Document  and  terminate  the  Loan
Documents;  (ii) accelerate and declare all or any part of the Obligations to be
immediately  due,  payable  and  performable,  notwithstanding  any  deferred or
installment payments allowed by any instrument  evidencing or relating to any of
the Obligations;  (iii) take possession of any or all of the Collateral wherever
it may be found,  and for that purpose each Borrower hereby  authorizes  Lender,
without judicial process (to the fullest extent permitted by Applicable Law), to
enter onto any of such Borrower's  premises without  interference to search for,
take possession of, keep, store, or remove any of the Collateral, and remain (or
cause a custodian  to remain) on the  premises  in  exclusive  control  thereof,
without  charge for so long as Lender deems it reasonably  necessary in order to
complete  the  enforcement  of its  rights  under  this  Agreement  or any other
agreement;  PROVIDED,  that if  Lender  seeks to take  possession  of any of the
Collateral by court process,  each Borrower  hereby  irrevocably  waives (to the
fullest  extent  permitted by  Applicable  Law):  (A) any bond and any surety or
security relating thereto required by law as an incident to such possession, (B)
any demand for  possession  prior to the  commencement  of any suit or action to
recover possession thereof and (C) any requirement that Lender retain possession
of, and not dispose of, any such Collateral until after trial or final judgment;
(iv) require such Borrower to assemble any or all of the  Collateral and make it
available  to  Lender  at one or more  places  designated  by  Lender  which are
reasonably convenient to Lender and such Borrower,  and to remove the Collateral
to such  locations as Lender may deem  advisable;  (v) complete the  processing,
manufacturing  or repair of any Collateral  prior to a disposition  thereof and,
for such purpose and for the purpose of removal,  Lender shall have the right to
use such  Borrower's  premises,  vehicles  and  other  Equipment  and all  other
property  without charge;  (vi) sell,  lease or otherwise  dispose of any of the
Collateral,  in its  condition at the time Lender  obtains  possession  of it or
after  further  manufacturing,  processing  or repair,  at one or more public or
private sales, in lots or in bulk, for cash,  exchange or other property,  or on
credit (a "SALE"), and to adjourn any such Sale from time to time without notice
other than oral  announcement at the time scheduled for Sale (and, in connection
therewith,  (A)  Lender  shall  have the  right  to  conduct  such  Sale on such
Borrower's  premises without charge,  for such times as Lender deems reasonable,
on Lender's  premises,  or elsewhere,  and the Collateral need not be located at
the place of Sale;  (B) Lender may  directly  or through  any of its  Affiliates
purchase or lease any of the Collateral at any such public  disposition,  and if
permissible under Applicable Law, at any private  disposition;  and (C) any Sale
of Collateral  shall not relieve such Borrower of any liability any Borrower may
have if any Collateral is defective as to title, physical condition or otherwise

<PAGE>

at the time of sale); (vii) demand payment of and collect any Accounts,  Chattel
Paper,  Instruments and General  Intangibles  included in the Collateral and, in
connection therewith,  such Borrower irrevocably authorizes Lender to endorse or
sign such Borrower's name on all  collections,  receipts,  Instruments and other
documents,  to take  possession of and open mail  addressed to such Borrower and
remove  therefrom  payments  made  with  respect  to any item of  Collateral  or
proceeds thereof and, in Lender's sole  discretion,  to grant extensions of time
to pay, compromise claims and settle Accounts,  General Intangibles and the like
for less than face value;  and (viii)  demand and receive  possession  of any of
such  Borrower's  federal and state income tax returns and the books and records
utilized  in the  preparation  thereof or relating  thereto.  In addition to the
rights and remedies set forth above,  Lender shall have all the other rights and
remedies  accorded a secured  party  after  default  under the UCC and under all
other Applicable Law, and under any other Loan Document,  and all of such rights
and remedies are cumulative and  non-exclusive.  Exercise or partial exercise by
Lender of one or more of its rights or remedies  shall not be deemed an election
or bar Lender from subsequent  exercise or partial  exercise of any other rights
or  remedies.  The failure or delay of Lender to exercise any rights or remedies
shall not  operate  as a waiver  thereof,  but all  rights  and  remedies  shall
continue in full force and effect until all of the  Obligations  have been fully
paid and performed.  If notice of any Sale or other disposition of Collateral is
required  by  Applicable  Law,  notice at least ten (10) days  prior to the Sale
designating  the time and place of the Sale in the case of a public  sale or the
time after which any private  sale or other  disposition  is to be made shall be
deemed to be reasonable notice, and each Borrower waives any other notice.

      8.3 APPLICATION OF PROCEEDS.  Subject to any application  required by law,
all  proceeds  realized  as the result of any Sale shall be applied by Lender to
the Obligations in such order as Lender shall determine in its sole  discretion.
Any  surplus  shall be paid to  Borrowers  or  other  Persons  legally  entitled
thereto;  but Borrowers shall remain jointly and severally  liable to Lender for
any deficiency. If Lender, in its sole discretion, directly or indirectly enters
into a deferred  payment or other credit  transaction  with any purchaser at any
Sale,  Lender  shall  have the  option,  exercisable  at any  time,  in its sole
discretion,  of either reducing the  Obligations by the principal  amount of the
purchase  price or deferring the reduction of the  Obligations  until the actual
receipt by Lender of the cash therefor.

9.    GENERAL PROVISIONS.

      9.1  NOTICES.  All  notices to be given under this  Agreement  shall be in
writing and shall be given  either  personally,  by reputable  private  delivery
service, by regular first-class mail or certified mail return receipt requested,
addressed to Lender or Borrowers at their  respective  address set forth in this
Agreement,  or by  facsimile  to the  facsimile  number shown in Section 9(i) of
Schedule  A,  or at  any  other  address  (or  to any  other  facsimile  number)
designated  in writing by one party to the other party in the manner  prescribed
in this  Section  9.1.  All  notices  shall be deemed to have  been  given  when
received or when delivery is refused by the intended recipient.

      9.2 SEVERABILITY.  If any provision of this Agreement,  or the application
thereof to any party or circumstance, is held to be void or unenforceable by any
court of competent  jurisdiction,  such defect shall not affect the remainder of
this Agreement, which shall continue in full force and effect.

<PAGE>

      9.3 INTEGRATION. This Agreement and the other Loan Documents represent the
final,  entire and complete agreement between Borrowers and Lender and supersede
all prior and contemporaneous negotiations, oral representations and agreements,
all of which are merged and integrated  into this  Agreement.  THERE ARE NO ORAL
UNDERSTANDINGS,  REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES WHICH ARE NOT
SET FORTH IN THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.

      9.4  WAIVERS.  The  failure of Lender at any time or times to require  any
Borrower to strictly  comply with any of the provisions of this Agreement or any
other Loan  Documents  shall not waive or diminish  any right of Lender later to
demand and receive strict compliance therewith.  Any waiver of any default shall
not waive or affect any other default, whether prior or subsequent,  and whether
or not  similar.  None of the  provisions  of this  Agreement  or any other Loan
Document  shall be deemed to have been waived by any act or  knowledge of Lender
or its agents or employees,  but only by a specific  written waiver signed by an
authorized  officer of Lender and delivered to Borrower.  Each  Borrower  waives
demand, protest, notice of protest and notice of default or dishonor,  notice of
payment and nonpayment, release, compromise, settlement, extension or renewal of
any commercial paper, Instrument, Account, General Intangible, Document, Chattel
Paper,  Investment Property or guaranty at any time held by Lender on which such
Borrower  is or may in any way be  liable,  and  notice of any  action  taken by
Lender,  unless expressly  required by this Agreement,  and notice of acceptance
hereof.

      9.5  AMENDMENT.  The terms and  provisions  of this  Agreement  may not be
amended  or  modified  except  in a writing  executed  by  Borrowers  and a duly
authorized officer of Lender.

      9.6  TIME  OF  ESSENCE.  Time  is of the  essence  in the  performance  by
Borrowers of each and every  obligation  under this Agreement and the other Loan
Documents.

      9.7  ATTORNEYS  FEES AND COSTS.  Borrowers  shall be jointly and severally
liable to reimburse  Lender for all reasonable  attorneys' and paralegals'  fees
(including the allocated cost of in-house  attorneys and paralegals  employed by
Lender) and all filing, recording,  search, title insurance,  appraisal,  audit,
and other costs incurred by Lender, pursuant to, in connection with, or relating
to this  Agreement,  including all reasonable  attorneys'  fees and costs Lender
incurs to prepare and negotiate this Agreement and the other Loan Documents;  to
obtain  legal  advice in  connection  with  this  Agreement  and the other  Loan
Documents or any Borrower or any Obligor;  to administer  this Agreement and the
other Loan Documents  (including the cost of periodic financing  statement,  tax
lien and other searches  conducted by Lender);  to enforce,  or seek to enforce,
any of its rights;  prosecute  actions  against,  or defend  actions by, Account
Debtors;  to  commence,  intervene  in, or defend any action or  proceeding;  to
initiate any complaint to be relieved of the automatic  stay in  bankruptcy;  to
file or prosecute any probate claim,  bankruptcy  claim,  third-party  claim, or
other claim; to examine,  audit,  copy, and inspect any of the Collateral or any
of any Borrower's books and records;  to protect,  obtain  possession of, lease,
dispose of, or otherwise enforce Lender's security interests in, the Collateral;
and to otherwise represent Lender in any litigation relating to any Borrower. If
either Lender or any Borrower files any lawsuit against the other  predicated on
a  breach  of this  Agreement,  the  prevailing  party in such  action  shall be
entitled  to  recover  its  reasonable  costs  and  attorneys'  fees,  including
reasonable  attorneys' fees and costs incurred in the enforcement of,  execution
upon or defense of any order, decree, award or judgment. All attorneys' fees and
costs to which Lender may be entitled pursuant to this Section shall immediately

<PAGE>

become part of the Obligations,  shall be due on demand, and shall bear interest
at a  rate  equal  to  the  highest  interest  rate  applicable  to  any  of the
Obligations.

      9.8 BENEFIT OF AGREEMENT;  ASSIGNABILITY. The provisions of this Agreement
shall be binding upon and inure to the benefit of the respective  successors and
assigns of each  Borrower and Lender;  PROVIDED,  that no Borrower may assign or
transfer  any of its  rights  under this  Agreement  without  the prior  written
consent of Lender, and any prohibited assignment shall be void. Unless otherwise
agreed to by Lender in  writing,  no consent by Lender to any  assignment  shall
release any Borrower from its liability for any of the Obligations. Lender shall
have the right to assign all or any of its rights and obligations under the Loan
Documents,  and to sell participating  interests  therein,  to one or more other
Persons,  and each Borrower  agrees to execute all  agreements,  instruments and
documents  requested  by Lender in  connection  with  each such  assignment  and
participation   (provided  that  such   documents  do  not  contain   provisions
inconsistent with those contained in this Agreement).

      9.9 HEADINGS;  CONSTRUCTION.  Section and subsection  headings are used in
this Agreement only for convenience.  Each Borrower and Lender  acknowledge that
the headings may not describe  completely  the subject  matter of the applicable
Sections or  subsections,  and the  headings  shall not be used in any manner to
construe,  limit,  define or interpret any term or provision of this  Agreement.
This Agreement has been fully reviewed and negotiated between the parties and no
uncertainty  or ambiguity in any term or  provision of this  Agreement  shall be
construed strictly against Lender or Borrowers under any rule of construction or
otherwise.

      9.10  GOVERNING  LAW;  CONSENT  TO FORUM,  ETC.  THIS  AGREEMENT  HAS BEEN
NEGOTIATED,  EXECUTED AND  DELIVERED,  AND SHALL BE DEEMED TO HAVE BEEN MADE, IN
NEW YORK,  NEW YORK,  AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE  WITH
THE LAWS OF SUCH STATE.  EACH BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE
AND FEDERAL  COURTS IN NEW YORK OR THE STATE IN WHICH ANY OF THE  COLLATERAL  IS
LOCATED SHALL HAVE  NON-EXCLUSIVE  JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS
OR DISPUTES BETWEEN SUCH BORROWER AND LENDER  PERTAINING TO THIS AGREEMENT,  ANY
OTHER LOAN  DOCUMENTS OR ANY MATTER  ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR THE OTHER LOAN  DOCUMENTS.  EACH BORROWER  EXPRESSLY  SUBMITS AND CONSENTS IN
ADVANCE TO SUCH  JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,
AND  WAIVES  ANY  OBJECTION  WHICH  SUCH  BORROWER  MAY HAVE  BASED UPON LACK OF
PERSONAL  JURISDICTION,  IMPROPER VENUE OR FORUM NON  CONVENIENS.  EACH BORROWER
ALSO AGREES THAT ANY CLAIM OR DISPUTE  BROUGHT BY SUCH BORROWER  AGAINST  LENDER
PURSUANT TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY MATTER ARISING OUT OF
THIS  AGREEMENT OR ANY OTHER LOAN DOCUMENT  SHALL BE BROUGHT  EXCLUSIVELY IN THE
STATE AND  FEDERAL  COURTS  OF NEW YORK  COUNTY.  EACH  BORROWER  HEREBY  WAIVES
PERSONAL SERVICE OF THE SUMMONS,  COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES  THAT  SERVICE OF SUCH  SUMMONS,  COMPLAINT  AND OTHER
PROCESS  MAY BE MADE IN THE MANNER AND SHALL  BE DEEMED RECEIVED AS SET FORTH IN

<PAGE>

SECTION  9.1 FOR  NOTICES,  TO THE  EXTENT  PERMITTED  BY LAW.  NOTHING  IN THIS
AGREEMENT  SHALL BE DEEMED  OR  OPERATE  TO AFFECT  THE RIGHT OF LENDER TO SERVE
LEGAL  PROCESS  IN ANY  OTHER  MANNER  PERMITTED  BY  LAW,  OR TO  PRECLUDE  THE
ENFORCEMENT  BY LENDER OF ANY  JUDGMENT  OR ORDER  OBTAINED IN SUCH FORUM OR THE
TAKING OF ANY ACTION  UNDER  THIS  AGREEMENT  TO  ENFORCE  THE SAME IN ANY OTHER
APPROPRIATE FORUM OR JURISDICTION.

      9.11  WAIVER OF JURY TRIAL,  ETC.  EACH  BORROWER  WAIVES (I) THE RIGHT TO
TRIAL BY JURY (WHICH  LENDER ALSO  WAIVES) IN ANY ACTION,  SUIT,  PROCEEDING  OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS,
THE OBLIGATIONS OR THE COLLATERAL OR ANY CONDUCT, ACTS OR OMISSIONS OF LENDER OR
ANY  BORROWER  OR  ANY  OF  THEIR  RESPECTIVE  DIRECTORS,  OFFICERS,  EMPLOYEES,
ATTORNEYS OR AGENTS OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR ANY BORROWER,
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE; (II) THE RIGHT TO INTERPOSE ANY
CLAIMS,  DEDUCTIONS,  SETOFFS  OR  COUNTERCLAIMS  OF ANY KIND IN ANY  ACTION  OR
PROCEEDING INSTITUTED BY LENDER WITH RESPECT TO THE LOAN DOCUMENTS OR ANY MATTER
RELATING  THERETO,  EXCEPT FOR COMPULSORY  COUNTERCLAIMS;  (III) NOTICE PRIOR TO
LENDER'S TAKING  POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY
WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF
LENDER'S  REMEDIES  AND (IV) THE  BENEFIT  OF ALL  VALUATION,  APPRAISEMENT  AND
EXEMPTION  LAWS.  EACH BORROWER  ACKNOWLEDGES  THAT THE FOREGOING  WAIVERS ARE A
MATERIAL  INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS
RELYING UPON THE FOREGOING  WAIVERS IN ITS FUTURE  DEALINGS WITH SUCH  BORROWER.
EACH BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS
WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND  VOLUNTARILY  WAIVED ITS JURY TRIAL
RIGHTS FOLLOWING  CONSULTATION  WITH LEGAL COUNSEL.  IN THE EVENT OF LITIGATION,
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

     IN WITNESS WHEREOF,  EACH BORROWER AND LENDER HAVE SIGNED THIS AGREEMENT ON
THE DATE SET FORTH IN THE HEADING.

                                   BORROWERS:

                                   WILLCOX & GIBBS, INC.
                                   WG APPAREL, INC.
ATTEST:                            PARADISE COLOR INC.

______________________________     By:______________________________
MARY-ANNE KIERAN, Secretary           JOHN K. ZIEGLER, JR.,
                                      Chief Financial Officer

[CORPORATE SEALS]

                                   MACPHERSON MEISTERGRAM, INC.
                                   LEADTEC SYSTEMS, INC.
                                   EMTEX LEASING, INC.
                                   CLINTON MACHINERY CORPORATION
                                   CLINTON MANAGEMENT CORPORATION
                                   CLINTON LEASING CORPORATION
ATTEST:                            CLINTON EQUIPMENT CORP.

______________________________     By:______________________________
MARY-ANNE KIERAN, Secretary           JOHN K. ZIEGLER, JR.,
                                      Chief Financial Officer

[CORPORATE SEALS]

[Signatures continued on the following page]

<PAGE>

                                   J&E SEWING SUPPLIES, INC.
                                   W&G DAON, INC.

                                   By:______________________________
                                      JOHN K. ZIEGLER, JR.,
                                      Vice President and Secretary

[CORPORATE SEALS]

                                   Accepted in New York, New York:

                                   LENDER:

                                   BANC OF AMERICA COMMERCIAL
                                   FINANCE CORPORATION THROUGH ITS
                                   COMMERCIAL FUNDING DIVISION

                                   By:______________________________
                                      Its Authorized Signatory

<PAGE>

                                   SCHEDULE A
                          DESCRIPTION OF CERTAIN TERMS

            This Schedule is an integral part of the Loan and Security Agreement
dated  April  ___,  2000,  by  and  among  WILLCOX  &  GIBBS,  INC.,  MACPHERSON
MEISTERGRAM, INC., LEADTEC SYSTEMS, INC., EMTEX LEASING CORPORATION, WG APPAREL,
INC., CLINTON MACHINERY  CORPORATION,  CLINTON MANAGEMENT CORP., CLINTON LEASING
CORP.,  CLINTON EQUIPMENT CORP., J&E SEWING SUPPLIES,  INC., W&G DAON, INC., and
PARADISE COLOR INCORPORATED.  and BANC OF AMERICA COMMERCIAL FINANCE CORPORATION
THROUGH ITS COMMERCIAL FUNDING DIVISION (the "AGREEMENT").

1. Loan Limits for Revolving Loans:

      (a) Maximum Facility Amount:           An amount equal to (i)  $26,000,000
                                             during the period  from the Closing
                                             Date through October 28, 2000, (ii)
                                             $23,000,000  during the period from
                                             October 29, 2000, through April 28,
                                             2000    and    (iii)    $20,000,000
                                             commencing  on April 29, 2000,  and
                                             at all times thereafter

      (b) Advance Rates:

            (i) Accounts Advance Rate:

                  (A) Eligible Accounts      85%; PROVIDED, that if the Dilution
                      and Eligible Extended  Percentage  with  respect  to  such
                      Accounts:              Accounts exceeds 5.0%, such advance
                                             rate will be  reduced by the number
                                             of  full  or   partial   percentage
                                             points of such excess

                  (B) Eligible Foreign       85% of the  coinsurance  amount (as
                      Accounts:              set  forth  in  Borrower's  foreign
                                             credit     insurance     policies),
                                             PROVIDED,   that  if  the  Dilution
                                             Percentage  with  respect  to  such
                                             Accounts exceeds 5.0%, such advance
                                             rate will be  reduced by the number
                                             of  full  or   partial   percentage
                                             points of such excess

            (ii) Inventory Advance Rates:

                  (A) Eligible Inventory:    The  lesser of (i) 50% of the value
                                             of Eligible Inventory valued at the
                                             lower of cost or market or (ii) 80%
                                             of the value of Eligible  Inventory
                                             valued at the appraised net orderly
                                             liquidation  value (as  defined  in
                                             the    most    recent     inventory
                                             appraisal)
<PAGE>

                  (B) Eligible In-Transit    The  lesser of (i) 50% of the value
                      Inventory:             of  Eligible  In-Transit  Inventory
                                             valued  at the  lower  of  cost  or
                                             market  or (ii) 80% of the value of
                                             Eligible   In-  Transit   Inventory
                                             valued at the appraised net orderly
                                             liquidation  value (as  defined  in
                                             the    most    recent     inventory
                                             appraisal)

                  (C) Eligible Leased        The  lesser  of (i)  85% of the net
                      Inventory:             orderly   liquidation   value   (as
                                             determined   by  the  most   recent
                                             inventory   appraisal   of  similar
                                             Inventory)   of   Eligible   Leased
                                             Inventory   or  (ii)   85%  of  the
                                             aggregate  amount  of the  Accounts
                                             generated   from  or   related   to
                                             Eligible  Leased   Inventory  (less
                                             maximum existing or asserted taxes,
                                             discounts,  credits and  allowances
                                             to  the  extent  included  in  such
                                             amount)    multiplied    by    85%,
                                             PROVIDED,   that  if  the  Dilution
                                             Percentage  exceeds 3.0%, such rate
                                             will be  reduced  by the  number of
                                             full or partial  percentage  points
                                             of such excess

                  (iii) Barudan LC Advance   90%  of the  face  amount  of  each
                        Rate:                Barudan    LC;    PROVIDED,    that
                                             Borrowers shall procure and deliver
                                             to   Lender   on  or   before   the
                                             twentieth   day  of   each   fiscal
                                             quarter  a  certificate  signed  by
                                             Barudan stating that Barudan has no
                                             offset   claims  with   respect  to
                                             Barudan LC # 1 or, if Barudan  does
                                             have an offset claim, the amount of
                                             such  offset  claim.  To the extent
                                             Barudan   makes  any  offset  claim
                                             against  Barudan  LC # 1,  Lender's
                                             Advance   Rate  with   respect   to
                                             Barudan  LC # 1 shall  be  equal to
                                             90%  multiplied  by the  sum of the
                                             face  amount of Barudan LC # 1 less
                                             any offset  claimed by Barudan.  In
                                             the event  that  Borrowers  fail to
                                             deliver  to  Lender  the   required
                                             quarterly  certificate from Barudan
                                             as   required   herein,    Lender's
                                             Advance   Rate  with   respect   to
                                             Barudan  LC # 1 shall  be  equal to
                                             45%  multiplied  by the face amount
                                             of  Barudan  LC # 1 until such time
                                             as  the  required   certificate  is
                                             delivered to Lender.
<PAGE>

      (c) Accounts Sublimits:

            (i) Eligible Accounts:           Not Applicable

            (ii) Eligible Extended Accounts: An amount  equal to (i)  $1,600,000
                                             during the period  from the Closing
                                             Date through  October 28, 2000, and
                                             (ii)   $1,200,000   at  all   times
                                             thereafter

            (iii) Eligible Foreign Accounts: $3,000,000

      (d) Inventory Sublimits:

            (i) Overall sublimit on          $10,000,000
                advances against Eligible
                Inventory

            (ii) Sublimit on advances        $600,000
                 against Eligible
                 In-Transit Inventory

            (iii) Sublimit on advances       $2,000,000
                  against Eligible
                  Leased Inventory

      (e) Barudan LC Sublimit:               An amount  equal to (i)  $1,200,000
                                             during the period  from the Closing
                                             Date through  July 30,  2000,  (ii)
                                             $500,000 from July 31, 2000 through
                                             January 30,  2001,  and (iii) $0 at
                                             all times after January 30, 2001.

      (f) Credit Accommodation Limit:        $4,000,000

      (g) Permanent Reserve Amount:          Not Applicable

      (h) Overadvance Amount:                Not Applicable

2. Loan Limits for Term Loan

      (a) Principal Amount:

            (i) Equipment Advance            Not Applicable

            (ii) Real Property Advance       Not Applicable

<PAGE>

      (b) Repayment Schedule:

            (i) Equipment Advance:           Not Applicable

            (ii) Real Property Advance:      Not Applicable

3. Interest Rates:

      (a) Revolving Loans:                   0.75%  per  annum in  excess of the
                                             Prime Rate

      (b) Term Loan:                         Not Applicable

4. Minimum Loan Amount:                      $17,000,000;   PROVIDED,  that  the
                                             Minimum   Loan   Amount   shall  be
                                             reduced to $15,000,000 at such time
                                             (and at all  times  thereafter)  as
                                             the  Maximum   Facility  Amount  is
                                             reduced to  $23,000,000  or less as
                                             set forth herein

5. Maximum Days:                             90 days

   Maximum days after original INVOICE
   DATE for Eligible Accounts:

6. Fees:

      (a) Closing Fee:                       $125,000 ($62,500 of which was paid
                                             upon issuance and acceptance of the
                                             commitment  letter  and  $62,500 of
                                             which  is due  and  payable  on the
                                             Closing Date)

      (b) Facility Fee:

            (i) First Year of the Initial    $115,000   (.50%  of  the   Maximum
                Term:                        Facility  Amount  in  effect on the
                                             date such  Facility  Fee is due and
                                             payable)

            (ii) Second Year of the Initial  $100,000   (.50%  of  the   Maximum
                 Term:                       Facility  Amount  in  effect on the
                                             date such  Facility  Fee is due and
                                             payable)

            (iii) Renewal Term(s):           $100,000  per  year  (.50%  of  the
                                             Maximum  Facility  Amount in effect
                                             on the date  such  Facility  Fee is
                                             due and payable)

      (c) Servicing Fee:                     $2,000 per month

      (d) Unused Line Fee:                   0.25% per annum

<PAGE>

      (e) Minimum Borrowing Fee:

            (i) Applicable period:           Each one year  period from the date
                                             of the Agreement

            (ii) Date payable:               Each anniversary of the date of the
                                             Agreement

      (f) Early Termination Fee:             3.0% of the Maximum Facility Amount
                                             if terminated during the first year
                                             of the  Initial  Term,  2.0% of the
                                             Maximum    Facility    Amount    if
                                             terminated  during the second  year
                                             of the Initial  Term,  and 0.50% of
                                             the  Maximum   Facility  Amount  if
                                             terminated  thereafter and prior to
                                             the    Initial    Maturity    Date;
                                             PROVIDED,  that if after expiration
                                             of a period of 18  months  from the
                                             date   of   the    Agreement    the
                                             Obligations are repaid in full from
                                             financing  received  from  Bank  of
                                             America,  N.A.,  or its  Affiliates
                                             then no Early Termination Fee shall
                                             be due.

      (g) Fees for letters of credit         1.0% per  annum of the face  amount
          and other Credit Accommodations    of each open Credit  Accommodation,
          (or guaranties thereof by Lender): plus all costs and fees  charged by
                                             the issuer

7. Initial Maturity Date:                    April 28, 2003

8. Financial Covenants:

      (a) Capital Expenditure Limitation:    $1,000,000 during the first year of
                                             the Initial Term and $750,000  each
                                             year thereafter

      (b) Maximum Consolidated Cumulative    $750,000 on a  cumulative  pre- tax
          Net Loss:                          basis  (and  before   extraordinary
                                             items),    measured   monthly   and
                                             commencing  on the first day of the
                                             month following the Closing Date

      (c) Limitation on Purchase             $500,000
          Money Security Interests:

      (d) Limitation on Equipment Leases:    $500,000

      (e) Additional Financial Covenants:    None

<PAGE>

9. Borrower Information:

      (a) Prior Names of Borrowers:          Willcox
                                             - WG, Inc.

                                             Macpherson
                                             - Geoffrey Macpherson Inc.
                                             - Geoffrey Macpherson, Inc.

                                             Leadtec
                                             - W&G Leadtec of Delaware, Inc.

                                             Emtex
                                             - Embroidery Leasing Corporation

      (b) Prior Trade Names of Borrowers:    None

      (c) Existing Trade Names of            Willcox
          Borrowers:                         - WG Apparel

                                             WG
                                             - Sunbrand
                                             - Unity Sewing  Supply
                                             - Leadtec
                                             - Clinton 21.com
                                             - Macpherson
                                             - WG Original Quality Parts
                                             - E.C. Mitchell

                                             Daon
                                             - Sunbrand

                                             Clinton Machinery
                                             - Clinton Machinery & Supply
                                             - Clinton 21.com

                                             Clinton Management
                                             - Clinton Machinery & Supply
                                             - Clinton 21.com

                                             Clinton Leasing
                                             - Clinton Machinery & Supply
                                             - Clinton 21.com

                                             Macpherson
                                             - Macpherson Meistergram
                                             - The Embroidery Store
<PAGE>

                                             Emtex
                                             - ELC

                                             Leadtec
                                             - Leadtec
                                             - Satelite Plus

      (d) Inventory Locations:               900 Milik Street
                                             Carteret, New Jersey 07008

                                             220 South Cotton Street
                                             Andulusia, Alabama 36420

                                             9728 Alburtis Avenue
                                             Sante Fe Springs, California 90670

                                             6800 Owensmouth Avenue
                                             Suite 320
                                             Canoga Park, California 91303

                                             824 East 8th Street
                                             Los Angeles CA, 90021

                                             5800 Miami Lakes Dr.
                                             Miami Lakes FL, 33014

                                             450 NW 27th Street
                                             Miami, Florida 33127

                                             555 NW 24th Street
                                             Miami, Florida 33127

                                             3900 Green Industrial Way
                                             Atlanta, Georgia 30341

                                             1 West Street
                                             Fall River, Massachusetts 02720

                                             88-90 Boston St.
                                             Middleton MA, 01949

                                             496 Gallimore Dairy Road
                                             Greensboro, North Carolina 27409

                                             7965 National Service Road
                                             Greensboro, North Carolina 27419

<PAGE>

                                             4740-M Dwight Evans Road
                                             Charlotte, North Carolina 28217

                                             6427 Eastland Road
                                             Brook Park, Ohio 44142

                                             5350 Transportation Blvd., Suite 14
                                             (c\o Caravan Packaging)
                                             Garfield Heights OH, 44125

                                             6427 Eastland Rd. (c\o Fleming-
                                             Shaw Transfer & Storage, Inc.)
                                             Brook Park OH, 44142

                                             830 Fesslers Parkway
                                             Suite 120
                                             Nashville, Tennessee 37224

                                             5354 El Paso Drive
                                             El Paso, Texas 79905

      (e) Other Locations:                   None

      (f) Litigation:                        Phillip Lary Armfield v.
                                             Sunbrand, a Division of
                                             WG Apparel, Inc.
                                             Civil Action No. 1:98 cvs 00559
                                             M.D. of North Carolina
                                             Age discrimination case

                                             Lynda M. Gaines v. Sunbrand, a
                                             Division of WG Apparel, Inc.
                                             Civil Action No. 198 cv 2935
                                             N.D. of Georgia Atlanta Division
                                             Sexual harassment case

                                             Montalvo / Unity Sewing Supply Inc.
                                             Ref No. E99B4382-00se/0340985308
                                             California Department of Fair
                                             Employment & Housing
                                             Potential employment discrimination
                                             suit in which a complaint has been
                                             filed

<PAGE>

                                             Advance Machining Inc. vs.
                                             Willcox & Gibbs, Inc.
                                             Civil Action No. 98 CVH 04-3133
                                             (Ohio)
                                             DJ-056709-99 (New Jersey)
                                             Ohio Court of Common Pleas
                                             Superior Court of New Jersey
                                             Judgment has been issued for
                                             $196,990.06 against Willcox &
                                             Gibbs, Inc. in the Common
                                             Pleas Court of Franklin
                                             County, Ohio and a Judgment
                                             has been recorded for $61,419.86
                                             in New Jersey

                                             M&R Printing vs. Willcox &
                                             Gibbs, Inc.
                                             No. 13-118-00980-98
                                             Arbitration before the
                                             American Arbitration
                                             Association in New York
                                             Dispute concerns whether M&R's
                                             products were defective under
                                             its warranties sufficient to
                                             justify W&G to withhold
                                             payment of $122,000

                                             Willcox & Gibbs, Inc.
                                             Small claims action against
                                             Willcox & Gibbs, Inc. on
                                             Series B Notes

                                             Speedway Printing  Inc. d/b/a
                                             Gabol Printing vs. Clinton
                                             Leasing Corp., The Manifest
                                             Group, Ideal Equipment Co. Ltd.
                                             Case No. 96S11101 (Division 13)
                                             17th Judicial Circuit
                                             (Brower County)
                                             Contract breach, fraudulent conduct

      (g) Ownership of Borrowers:            Willcox is a publicly owned
                                             corporation For all other Borrowers
                                             see clause (h) below

      (h) Subsidiaries (and ownership
          thereof):

Willcox - 100% of WG

                                      WG     -  100% of Macpherson
                                             -  100% of Leadtec
                                             -  100% of Emtex
                                             -  100% of Daon
                                             -  100% of J&E
                                             -  100% of Clinton Machinery
                                             -  100% of Clinton Management

<PAGE>

                                             -  100% of Clinton Leasing
                                             -  100% of Clinton Equipment
                                             -  100% of Paradise
                                             -  100% of Willcox & Gibbs, Ltd.
                                             -  100% of Sunbrand S.A. de C.V.
                                             -  100% of Sunbrand Caribe S.A.
                                             -  100% of Sunbrand de
                                                Columbia E.U.
                                             -  100% of Sunbrand Honduras, S.A.
                                             -  90% of Unity de Colombia
                                             -  50% of Clinton de Mexico

                                             Willcox & Gibbs, Ltd.
                                             -  100% of Eildon Electronics Ltd.
                                             -  100% of MEC
                                                (Sewing Machines) Ltd.
                                             -  50% of Hopkins-Willcox Ltd.

                                             Macpherson
                                             - 50% of Veristitch, Inc.

            (i) Facsimile Numbers:

                  Borrower:                  732-541-6249

                  Lender:                    212 597-1675

      (j) Chief Executive Office of          900 Milik Street
          each Borrower:                     Carteret, New Jersey 07008

10. Description of Real Property:            88-90 Boston Street

                                             Middletown, Massachusetts

11. Lender's Bank:                           Bank One, N.A.
                                             One First National Plaza
                                             Chicago, Illinois

12. Other Covenants:                    (i)  Borrowers   agree  that  Lender  or
                                             independent  appraisers  acceptable
                                             to Lender may (at Lender's  option)
                                             conduct  appraisals  of  Borrowers'
                                             Inventory once every six (6) months
                                             and that Borrower  shall pay all of
                                             the costs and expenses arising from
                                             such appraisals.

<PAGE>

                                        (ii) On or  before  45  days  after  the
                                             Closing   Date,   WG   shall   have
                                             consummated  the sale of all assets
                                             of one of the  divisions of WG to a
                                             Person  acceptable  to Lender for a
                                             sale  price  of not  less  than the
                                             aggregate     amount    of    Loans
                                             outstanding   on  such   date  with
                                             respect  to the  assets  being sold
                                             and   on   terms   and   conditions
                                             acceptable to Lender,  and WG shall
                                             have  delivered  or  caused  to  be
                                             delivered  to Lender a (i) a Letter
                                             of  Credit  in form  and  substance
                                             satisfactory   to   Lender   naming
                                             Lender as  beneficiary  in the face
                                             amount  of the  purchase  price and
                                             (ii) an  assignment  of WG's rights
                                             and  sums  due   under   such  sale
                                             agreement and an  acknowledgment of
                                             such assignment from the purchaser,
                                             each   in   form   and    substance
                                             satisfactory to Lender.

                                        (iii)Prior to any permitted  sale of any
                                             Emtex Leases as provided for in the
                                             Agreement,  Borrowers  shall at all
                                             times  maintain the Emtex Leases in
                                             such manner and at such location as
                                             Lender  may  approve  in  its  sole
                                             discretion, and upon the occurrence
                                             of an  Event  of  Default,  at  the
                                             request  of Lender,  shall  deliver
                                             the  originals of such Emtex Leases
                                             to  Lender   pursuant  to  Lender's
                                             written instructions.

                                        (iv) On or  before  60  days  after  the
                                             Closing Date,  each Borrower  shall
                                             have   established  a  new  blocked
                                             account or lockbox arrangement with
                                             a bank  acceptable to Lender and on
                                             terms acceptable to Lender,  in its
                                             sole discretion.

                                        (v)  On or  before  10  days  after  the
                                             Closing Date,  Borrowers shall have
                                             deposited  all of the Emtex  Leases
                                             in a safety deposit box established
                                             by Lender.
<PAGE>

13. Exceptions to Negative Covenants:        Notwithstanding   anything  to  the
                                             contrary    in    the    Agreement,
                                             Borrowers  may (i) lease  Inventory
                                             which is or is to be the subject of
                                             an Eligible Emtex Lease,  (ii) sell
                                             the Emtex Leases  provided that all
                                             of the Emtex Lease Sale  Conditions
                                             have been  satisfied  and (iii) for
                                             so  long  as no  Event  of  Default
                                             exists and after giving  Lender not
                                             less  than  ten  (10)  days   prior
                                             written   notice,   (A)   sell   or
                                             otherwise  dispose of  obsolete  or
                                             slow moving  Inventory of Borrowers
                                             with an aggregate fair market value
                                             not to exceed $100,000 and (B) sell
                                             or   otherwise   dispose  of  other
                                             obsolete or slow  moving  Inventory
                                             of such Borrower, provided that the
                                             sale  price is not less than 80% of
                                             the net orderly  liquidation  value
                                             of such Collateral and other assets
                                             and the proceeds from such sale are
                                             promptly  remitted  to  Lender  for
                                             application       against       the
                                             Obligations.

      IN WITNESS  WHEREOF,  each Borrower and Lender have signed this Schedule A
on the date set forth in the heading of the Agreement.

                                   BORROWERS:

                                   WILLCOX & GIBBS, INC.
                                   WG APPAREL, INC.
ATTEST:                            PARADISE COLOR INC.

______________________________     By:______________________________
MARY-ANNE KIERAN, Secretary          JOHN K. ZIEGLER, JR.,
                                     Chief Financial Officer

[CORPORATE SEALS]

                  [Signatures continued on the following page]

<PAGE>

                                   MACPHERSON MEISTERGRAM, INC.
                                   LEADTEC SYSTEMS, INC.
                                   EMTEX LEASING, INC.
                                   CLINTON MACHINERY CORPORATION
                                   CLINTON MANAGEMENT CORPORATION
                                   CLINTON LEASING CORPORATION
ATTEST:                            CLINTON EQUIPMENT CORP.

______________________________     By:______________________________
MARY-ANNE KIERAN, Secretary        JOHN K. ZIEGLER, JR.,
                                   Chief Financial Officer

[CORPORATE SEALS]

                                   J&E SEWING SUPPLIES, INC.
                                   W&G DAON, INC.

                                   By:______________________________
                                      JOHN K. ZIEGLER, JR.,
                                      Vice President and Secretary

[CORPORATE SEALS]

                                   Accepted in New York, New York:

                                   LENDER:

                                   BANC OF AMERICA COMMERCIAL
                                   ITS COMMERCIAL FUNDING DIVISION

                                   By:______________________________
                                      Its Authorized Signatory

<PAGE>

                                   SCHEDULE B
                                   DEFINITIONS

      This Schedule is an integral part of the Loan and Security Agreement dated
April ___,  2000, by and among WILLCOX & GIBBS,  INC.,  MACPHERSON  MEISTERGRAM,
INC.,  LEADTEC  SYSTEMS,  INC.,  EMTEX LEASING  CORPORATION,  WG APPAREL,  INC.,
CLINTON MACHINERY CORPORATION,  CLINTON MANAGEMENT CORP., CLINTON LEASING CORP.,
CLINTON EQUIPMENT CORP., J&E SEWING SUPPLIES, INC., W&G DAON, INC., and PARADISE
COLOR INCORPORATED and BANC OF AMERICA COMMERCIAL  FINANCE  CORPORATION  THROUGH
ITS COMMERCIAL FUNDING DIVISION (the "AGREEMENT").

As used in the Agreement, the following terms have the following meanings:

      "ACCOUNT"  means any right to payment  for Goods sold (but not  leased) or
for services  rendered which is not evidenced by an Instrument or Chattel Paper,
whether or not it has been earned by performance.

      "ACCOUNT DEBTOR" means the obligor on an Account or Chattel Paper.

      "ACCOUNT PROCEEDS" has the meaning set forth in Section 4.1.

      "AFFILIATE"  means,  with  respect to any  Person,  a  relative,  partner,
shareholder, member, manager, director, officer, or employee of such Person, any
parent or subsidiary of such Person, or any Person controlling, controlled by or
under common control with such Person or any other Person  affiliated,  directly
or  indirectly,  by  virtue  of  family  membership,  ownership,  management  or
otherwise.

      "AFFILIATE  SALE  BALANCE"  means  the  intercompany  balance  as shown on
Borrowers'  books  with  respect  to sales of  Inventory  at any time  made from
Borrowers to any  Affiliates  of Borrowers  (and which shall include the Current
Affiliate Sales Balance).

      "AFFILIATE SALE CONDITIONS - LEVEL 1" means the following conditions,  the
satisfaction of each in a manner satisfactory to Lender is a condition precedent
to any sale of  Inventory by Borrowers  to any  Affiliate of  Borrowers:  (i) no
Default  or Event of Default  exists or would  exist as a result of such sale of
Inventory to such Borrowers'  Affiliates,  (ii)  Borrowers'  Availability at the
time of such sale of Inventory to Borrowers'  Affiliates is not and after giving
effect thereto would not be less than zero,  (iii) not more than an amount equal
to the Permitted  Past Due Sale Balance of the Current  Affiliate  Sales Balance
shall be more than 120 days past the original invoice date (as at any time shown
on Borrowers books).

      "AFFILIATE SALE CONDITIONS - LEVEL 2" means the following conditions,  the
satisfaction of each in a manner satisfactory to Lender is a condition precedent
to any sale of  Inventory by Borrowers  to any  Affiliate of  Borrowers:  (i) no
Default  or Event of Default  exists or would  exist as a result of such sale of
Inventory to such Borrowers'  Affiliates,  (ii)  Borrowers'  Availability at the
time of such sale of Inventory to Borrowers'  Affiliates is not and after giving
effect thereto would not be less than $1,000,000,  (iii) Borrowers shall have no
past due taxes or  accounts  payable  more than 60 days past due,  (iv) not more
than an amount  equal to the  Permitted  Past Due Sale  Balance  of the  Current

<PAGE>

Affiliate  Sales Balance  shall be more than 120 days past the original  invoice
date (as at any time shown on Borrowers books).

      "AGREEMENT" and "THIS  AGREEMENT" mean the Loan and Security  Agreement of
which this Schedule B is a part and the Schedules thereto.

      "APPLICABLE LAW" means all laws,  rules and regulations  applicable to the
Person, conduct,  transaction,  covenant or Loan Document in question, including
all  applicable  common law and  equitable  principles;  all  provisions  of all
applicable  state,   federal  and  foreign   constitutions,   statutes,   rules,
regulations and orders of governmental bodies; and orders, judgments and decrees
of all courts and arbitrators.

      "AVAILABILITY" has the meaning set forth in Section 1.1(a).

      "BANKRUPTCY  CODE" means the United States  Bankruptcy Code (11 U.S.C. 101
et seq.).

      "BANKRUPTCY PLAN" shall mean the Joint Plan of Reorganization of Willcox &
Gibbs, Inc. and certain  Subsidiaries  dated as of February 24, 2000,  including
any exhibits or schedules  annexed thereto and all amendments and  modifications
thereto,  which was confirmed by an order of the United States  Bankruptcy Court
for the District of Delaware on April 3, 2000.

      "BARUDAN" means Barudan America, Inc..

      "BARUDAN LC" means those certain  irrevocable letters of credit each dated
January  20,  2000,  in the  face  amount  of  $500,000  ("BARUDAN  LC # 1") and
$711,834.60,  respectively,  each issued by National City Bank, Cleveland, Ohio,
at the request of Barudan as support for the payment of the Barudan Notes.

      "BARUDAN NOTES" means,  collectively,  (i) that certain  Promissory  Notes
dated January 20, 2000,  executed by Barudan in favor of Willcox in the original
principal  amount of $711,834.60  and (ii) that certain  Promissory  Notes dated
January  20,  2000,  executed  by Barudan  in favor of  Willcox in the  original
principal amount of $500,000.00.

      "BLOCKED ACCOUNT" has the meaning set forth in Section 4.1.

      "BORROWER" has the meaning set forth in the heading to the Agreement.

      "BORROWER'S  ADDRESS"  means the  address for  Borrowers  set forth in the
heading to the Agreement.

      "BUSINESS  DAY" means a day other  than a Saturday  or Sunday or any other
day on which Lender or banks in New York are authorized to close.

      "CHATTEL PAPER" has the meaning set forth in the UCC.

      "CLOSING DATE" means the date on which all of the conditions  precedent in
Schedule  C are  satisfied  or waived by Lender and the  initial  Loans are made
under the Agreement.

<PAGE>

      "COLLATERAL" means all property and interests in property in or upon which
a security  interest or other Lien is granted  pursuant to this Agreement or the
other Loan Documents.

      "CONSOLIDATED" means consolidation in accordance with GAAP of the accounts
or other items as to which such term applies.

      "CREDIT ACCOMMODATION" has the meaning set forth in Section 1.1(a).

      "CREDIT ACCOMMODATION  BALANCE" means the sum of (i) the aggregate undrawn
face amount of all outstanding Credit Accommodations and (ii) all interest, fees
and costs due or, in  Lender's  reasonable  estimation,  likely to become due in
connection therewith.

      "CURRENT AFFILIATE SALES BALANCE" means an amount equal to $3,000,000.

      "DEFAULT"  means any event which with notice or passage of time,  or both,
would constitute an Event of Default.

      "DEFAULT RATE" has the meaning set forth in Section 2.1.

      "DEPOSIT ACCOUNT" has the meaning set forth in the UCC.

      "DILUTION  PERCENTAGE" means the gross amount of all returns,  allowances,
discounts,  credits,  write- offs and similar items relating to each  Borrower's
Accounts computed as a percentage of such Borrower's gross sales,  calculated on
either a ninety  (90) day  rolling  average  or twelve  (12)  consecutive  month
period, whichever yields the highest dilution percentage.

      "DISTRIBUTION   AGREEMENTS"   means   collectively,   (i)   that   certain
Distributorship  Agreement  between  Willcox and Barudan dated January 20, 2000,
(ii) that certain  Distributorship  Agreement  between  Willcox and Barudan Co.,
Ltd.  dated  January 19,  2000,  (iii) that  certain  Distributorship  Agreement
between  Willcox and Pegasus Sewing Machine Mfg. Co. Ltd. dated January 1, 1995,
and (iv) that certain  Distributorship  Agreement between Willcox and G.M. Pfaff
AG dated February 15, 2000

      "DOCUMENT" has the meaning set forth in the UCC.

      "DOMESTIC   SUBSIDIARY"  means  a  Subsidiary  of  any  Borrower  that  is
incorporated  under the laws of a state of the United  States or the District of
Columbia.

      "EARLY TERMINATION FEE" has the meaning set forth in Section 7.2.

      "ELIGIBLE ACCOUNT" means, at any time of determination,  an Account of any
Borrower  which  satisfies  the  general  criteria  set forth below and which is
otherwise acceptable to Lender acting in good faith (PROVIDED,  that Lender may,
in its sole discretion  exercised in good faith, change the general criteria for
acceptability of Eligible Accounts upon at least fifteen (15) days' prior notice
to Borrowers).  An Account shall be deemed to meet the current general  criteria
if (i) neither the Account  Debtor nor any of its  Affiliates  is an  Affiliate,
creditor or supplier of any  Borrower;  (ii) it does not remain unpaid more than
the number of days after the original  INVOICE DATE set forth in Section 5(a) of
Schedule A; (iii) not more than 50% of all of the Accounts owing to any Borrower

<PAGE>

by such  Account  Debtor  or its  Affiliates  are more  than  120 days  past the
original  invoice  date;  (iv) all Accounts  owing by the Account  Debtor or its
Affiliates do not represent more than (A) 10% of all otherwise Eligible Accounts
during the period from the Closing Date through October 28, 2000 (PROVIDED, that
Accounts  which are  deemed  to be  ineligible  solely by reason of this  clause
(iv)(A)  shall be  considered  Eligible  Accounts  to the  extent of the  amount
thereof which does not exceed 10% of all otherwise Eligible Accounts) or (B) 15%
of all  otherwise  Eligible  Accounts  at  all  times  after  October  28,  2000
(PROVIDED,  that Accounts which are deemed to be ineligible  solely by reason of
this clause (iv)(B) shall be considered  Eligible  Accounts to the extent of the
amount  thereof which does not exceed 15% of all otherwise  Eligible  Accounts);
(v) no covenant,  representation  or warranty  contained in this  Agreement with
respect  to such  Account  (including  any of the  representations  set forth in
Section  5.4) has been  breached;  (vi) the Account is not subject to any contra
relationship, counterclaim, dispute, set-off, asserted taxes, discounts, credits
or allowances (PROVIDED,  that Accounts which are deemed to be ineligible solely
by reason of this  clause  (vi) shall be  considered  Eligible  Accounts  to the
extent of the amount thereof which is not affected by such contra relationships,
counterclaims,   disputes,  set-offs,  asserted  taxes,  discounts,  credits  or
allowances);  (vii) the Account  Debtor's  chief  executive  office or principal
place of business  is not located  outside  the United  States or  Provinces  of
Canada which have adopted the Personal  Property  Security Act or a similar act;
(viii) it is absolutely  owing to a Borrower and does not arise from a sale on a
bill-and-hold, guarantied sale, sale-or-return,  sale-on-approval,  consignment,
retainage  or any  other  repurchase  or return  basis or  consist  of  progress
billings; (ix) to the extent deemed necessary by Lender, in its sole discretion,
Lender shall have verified the Account in a manner  satisfactory to Lender;  (x)
the Account Debtor is not the United States of America or any state or political
subdivision (or any department,  agency or instrumentality  thereof), unless the
applicable  Borrower has complied with the  Assignment of Claims Act of 1940 (31
U.S.C. 203 et seq.) or other  applicable  similar state or local law in a manner
satisfactory  to  Lender;  (xi) it is at all  times  subject  to  Lender's  duly
perfected,  first priority  security interest and to no other Lien that is not a
Permitted  Lien,  and the goods giving rise to such Account (A) were not, at the
time of sale,  subject  to any Lien  except  Permitted  Liens  and (B) have been
delivered to and accepted by the Account Debtor,  or the services giving rise to
such  Account  have been  performed  by a Borrower  and  accepted by the Account
Debtor;  (xii) the Account is not evidenced by Chattel Paper or an Instrument of
any kind and has not been reduced to judgment; (xiii) the Account Debtor's total
indebtedness  to any  Borrower  does not exceed  the amount of any credit  limit
established by Borrowers or Lender and the Account Debtor is otherwise deemed to
be  creditworthy  by Lender  (PROVIDED,  that  Accounts  which are  deemed to be
ineligible  solely by reason of this clause (xiii) shall be considered  Eligible
Accounts to the extent the amount of such  Accounts does not exceed the lower of
such credit  limits);  (xiv) there are no facts or  circumstances  existing,  or
which could  reasonably  be  anticipated  to occur,  which  might  result in any
material adverse change in the Account Debtor's financial condition or impair or
delay the collectibility of all or any portion of such Account;  (xv) Lender has
been  furnished  with all  documents  and other  information  pertaining to such
Account which Lender has requested,  or which a Borrower is obligated to deliver
to  Lender,  pursuant  to this  Agreement;  (xvi)  a  Borrower  has not  made an
agreement with the Account  Debtor to extend the time of payment  thereof beyond
the time  periods  set forth in clause (ii)  above;  (xvii) the  Account  Debtor
thereunder  had the  capacity  to  contract  at the time any  contract  or other
document  giving rise to such Account were executed;  and (xviii) a Borrower has

<PAGE>

not posted a surety or other bond in respect of the  contract  under  which such
Account arose.

      "ELIGIBLE EQUIPMENT" means, at any time of determination,  Equipment owned
by a Borrower  which Lender,  in its sole  discretion,  deems to be eligible for
borrowing purposes.

      "ELIGIBLE  EXTENDED  ACCOUNT"  means an  Account of any  Borrower  that is
unpaid more than 90 days after the  original  invoice date but not more than 120
days after the original  invoice date and which would  otherwise  constitute  an
Eligible  Account or an Eligible  Foreign  Account  except for the fact that the
Account is unpaid more than 90 days after the original invoice date.

      "ELIGIBLE  FOREIGN  ACCOUNT"  means any Account of any Borrower owed by an
Account Debtor having its chief executive  office or principal place of business
located  outside  of the  United  States  or  Canada,  and (i) for which (A) the
Account is fully backed by a letter of credit, guaranty or acceptance acceptable
to Lender in its sole  discretion,  and if  backed by a letter of  credit,  such
letter of credit has been issued or confirmed by a bank  satisfactory to Lender,
is sufficient to cover such Account,  and if required by Lender, the original of
such letter of credit has been  delivered  to Lender or  Lender's  agent and the
issuer  thereof  notified of the  assignment  of the  proceeds of such letter of
credit to Lender or (B) such Account is subject to credit  insurance  payable to
Lender  issued by an insurer and on terms and in an amount  acceptable to Lender
and (ii) which Account would otherwise constitute an Eligible Account except for
the fact that the Account  Debtor has its chief  executive  office or  principal
place of business located outside of the United States or Canada.

      "ELIGIBLE IN-TRANSIT INVENTORY" means Inventory of any Borrower in transit
between  locations of Borrowers  located in the United  States,  and which would
otherwise  constitute Eligible Inventory except for the fact that such Inventory
is not situated at an Inventory Location listed in Section 9(d) of Schedule A.

      "ELIGIBLE INVENTORY" means, at any time of determination, Inventory of any
Borrower  (other than  packaging  materials  and supplies)  which  satisfies the
general  criteria  set forth below and which is otherwise  acceptable  to Lender
acting  in good  faith  (PROVIDED,  that  Lender  may,  in its  sole  discretion
exercised  in good  faith,  change the general  criteria  for  acceptability  of
Eligible  Inventory  upon at least  fifteen (15) days' prior  written  notice to
Borrowers).  Inventory shall be deemed to meet the current  general  criteria if
(i) it consists of raw materials or finished goods;  (ii) it is in good, new (or
refurbished)  and saleable  condition;  (iii) it is not  slow-moving,  obsolete,
unmerchantable  or returned or  repossessed  (unless such Borrower has disclosed
such  returns  or  repossessions  to  Lender in  writing  and such  returned  or
repossessed Inventory is in refurbished condition acceptable to Lender); (iv) it
is not in the  possession  of a processor,  consignee  or bailee,  or located on
premises leased or subleased to a Borrower, or on premises subject to a mortgage
in favor of a Person other than Lender, unless such processor, consignee, bailee
or mortgagee or the lessor or  sublessor of such  premises,  as the case may be,
has executed  and  delivered  all  documentation  which Lender shall  require to
evidence  the  subordination  or  other  limitation  or  extinguishment  of such
Person's rights with respect to such Inventory and Lender's right to gain access
thereto (PROVIDED,  that the provisions of this clause (iv) shall not apply with
respect to leased or subleased locations or premises of a Borrower if Lender, in
its sole and  absolute  discretion,  elects to waive the  requirement  that such
lessor or sublessor  deliver to Lender a  subordination  or other  limitation or
extinguishment  of such  lessor's or  sublessor's  rights  with  respect to such

<PAGE>

Inventory and Lender's right to gain access thereto); (v) it meets all standards
imposed  by any  governmental  agency  or  authority;  (vi) it  conforms  in all
respects  to any  covenants,  warranties  and  representations  set forth in the
Agreement;  (vii) it is at all times subject to Lender's duly  perfected,  first
priority  security interest and no other Lien except a Permitted Lien; (viii) it
is not leased to any Person;  and (ix) it is situated at an  Inventory  Location
listed in Section 9(d) of Schedule A or other  location of which Lender has been
notified as required by Section 5.6.

      "ELIGIBLE  LEASED  INVENTORY"  means Inventory of any Borrower that (i) is
leased to any  Person  and with  respect  to which (A) the lease  payments  with
respect to such Inventory are not more than three (3) payments past due pursuant
to the underlying lease  arrangement  between such Borrower and such Person (the
"Lease  Agreement"),  (B) such Borrower has provided  Lender with the underlying
lease  agreement  not less than ten (10) days prior to the  commencement  of the
lease relating to such Inventory, and such lease is an Emtex Lease or Lender has
reviewed and found  acceptable,  in its sole  discretion,  such underlying lease
agreement,  (C) such  Borrower  has  directed the lessee in writing to remit all
payments  under the lease directly to Lender or the Lock Box, (D) the underlying
lease  agreement  has not been sold,  otherwise  disposed  of or  encumbered  by
Borrower  and (E) the  original of the  underlying  lease has been  delivered to
Lender  or to a third  party  acceptable  to  Lender  pursuant  to  arrangements
acceptable  to Lender in its sole  discretion;  and (ii) which  would  otherwise
constitute  Eligible Inventory except for the fact that such Inventory is leased
and located at the location of the lessee.

      "ELIGIBLE  REAL  PROPERTY"  means,  at any  time  of  determination,  Real
Property owned by a Borrower which Lender,  in its sole discretion,  deems to be
eligible for borrowing purposes.

      "EMTEX  LEASE"  means a lease of  Inventory  by Emtex under the terms of a
lease agreement in the form of Exhibit A attached hereto,  or such other form as
Lender may approve in its sole and absolute discretion.

      "EMTEX  LEASE  SALE  CONDITIONS"  means  the  following  conditions,   the
satisfaction of each in a manner satisfactory to Lender is a condition precedent
to any sale of any Emtex Lease:  (i) no Event of Default exists,  (ii) Borrowers
shall have  provided  Lender a list of all Emtex Leases being sold not less than
ten (10) days prior to such sale, (iii) the underlying  purchase  agreement with
respect to such sale shall be in the form of Exhibit B attached hereto,  or such
other form as Lender may approve in its sole and absolute  discretion,  (iv) the
sale price of such  Emtex  Lease  shall not be less than the  product of (A) the
Inventory  Advance  Rate for  Eligible  Leased  Inventory  set forth in  Section
1(b)(ii) of Schedule A multiplied by (B) the Eligible  Leased  Inventory with is
the subject of such sale and (iv) Borrowers shall have directed the purchaser of
such Emtex Leases in writing to make all payments owing to Borrowers as a result
of such sale directly to Lender or the Lock Box.

      "EQUIPMENT"  means all Goods which are used or bought for use primarily in
business  (including farming or a profession) or by a Person who is a non-profit
organization or governmental  subdivision or agency and which are not Inventory,
farm products or consumer goods, including all machinery,  molds, machine tools,

<PAGE>

motors,  furniture,  equipment,  furnishings,  fixtures,  trade fixtures,  motor
vehicles,  tools,  parts,  dies  and  jigs,  and all  attachments,  accessories,
accessions, replacements,  substitutions, additions or improvements to, or spare
parts for, any of the foregoing.

      "EQUIPMENT ADVANCE" has the meaning set forth in Section 1.1(b).

      "ERISA" means the Employee  Retirement Income Security Act of 1974 and all
rules, regulations and orders promulgated thereunder.

      "EVENT OF DEFAULT" has the meaning set forth in Section 8.1.

      "FOREIGN  SUBSIDIARY"  means  a  Subsidiary  of any  Borrower  that is not
incorporated  under the laws of a state of the United  States or the District of
Columbia.

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

      "GENERAL  INTANGIBLES"  has the meaning set forth in the UCC, and includes
all books and  records  pertaining  to the  Collateral  and other  business  and
financial  records  in  the  possession  of a  Borrower  or  any  other  Person,
inventions,   designs,  drawings,  blueprints,   patents,  patent  applications,
trademarks,  trademark  applications  (other than  "intent to use"  applications
until a verified  statement of use is filed with  respect to such  applications)
and the goodwill of the business symbolized  thereby,  names, trade names, trade
secrets, goodwill, copyrights,  registrations,  licenses,  franchises,  customer
lists,  security  and other  deposits,  causes of action and other rights in all
litigation  presently  or hereafter  pending for any cause or claim  (whether in
contract,  tort  or  otherwise),  and all  judgments  now or  hereafter  arising
therefrom,  rights to purchase or sell real or  personal  property,  rights as a
licensor  or  licensee  of any  kind,  royalties,  telephone  numbers,  internet
addresses, proprietary information,  purchase orders, and all insurance policies
and claims  (including  life  insurance,  key man insurance,  credit  insurance,
liability  insurance,  property insurance and other insurance),  tax refunds and
claims,  letters  of  credit,  banker's  acceptances  and  guaranties,  computer
programs,  discs,  tapes and tape files in the  possession  of a Borrower or any
other Person, claims under guaranties, security interests or other security held
by or granted to such  Borrower,  all  rights to  indemnification  and all other
intangible property of every kind and nature.

      "GOODS"  means all  things  which  are  movable  at the time the  security
interest   attaches  or  which  are  fixtures  (other  than  money,   Documents,
Instruments,  Investment Property, Accounts, Chattel Paper, General Intangibles,
or minerals or the like  (including oil and gas) before  extraction),  including
standing  timber which is to be cut and removed  under a conveyance  or contract
for sale, the unborn young of animals, and growing crops.

      "GOVERNMENTAL  AUTHORITY" means any federal, state,  municipal,  national,
foreign or other governmental  department,  commission,  board,  bureau,  court,
agency or  instrumentality  or  political  subdivision  thereof or any entity or
officer   exercising   executive,    legislative,    judicial,   regulatory   or
administrative  functions of or  pertaining to any  government or any court,  in
each case whether  associated with a state of the United States, the District of
Columbia or a foreign entity or government.

<PAGE>

      "INITIAL TERM" has the meaning set forth in Section 7.1.

      "INSTRUMENT" has the meaning set forth in the UCC.

      "INVENTORY"  means all Goods held for sale or lease or  furnished or to be
furnished  under  contracts of service,  including  all raw  materials,  work in
process,  finished goods,  goods in transit and materials and supplies which are
or  might be used or  consumed  in a  business  or used in  connection  with the
manufacture, packing, shipping, advertising, selling or finishing of such Goods,
and all  products  of the  foregoing,  and  shall  include  interests  in  Goods
represented by Accounts,  returned, reclaimed or repossessed goods and rights as
an unpaid vendor.

      "INVESTMENT  PROPERTY"  means all of any  Borrower's  securities,  whether
certificated or uncertificated,  securities  entitlements,  securities accounts,
commodity contracts and commodity accounts.

      "LENDER" has the meaning set forth in the heading to the Agreement.

      "LIEN" means any interest in property securing an obligation owed to, or a
claim by, a Person other than the owner of the  property,  whether such interest
is based on common law,  statute or contract,  including rights of sellers under
conditional  sales  contracts or title  retention  agreements and  reservations,
exceptions,  encroachments,  easements,  rights-of-way,  covenants,  conditions,
restrictions,  leases and other  title  exceptions  and  encumbrances  affecting
property. For the purpose of this Agreement, each Borrower shall be deemed to be
the  owner  of any  property  which  it  has  acquired  or  holds  subject  to a
conditional sale agreement or other  arrangement  pursuant to which title to the
property  has been  retained  by or vested in some  other  Person  for  security
purposes.

      "LOAN ACCOUNT" has the meaning set forth in Section 2.4.

      "LOAN DOCUMENTS" means the Agreement and all notes,  guaranties,  security
agreements,  certificates,  landlord's agreements,  Lock Box and Blocked Account
agreements and all other agreements,  documents and instruments now or hereafter
executed or delivered by any Borrower or any Obligor in  connection  with, or to
evidence the transactions contemplated by, this Agreement.

      "LOAN LIMITS" means,  collectively,  the Availability limits and all other
limits  on the  amount  of Loans  and  Credit  Accommodations  set  forth in the
Agreement."Loans" means, collectively, the Revolving Loans and any Term Loan.

      "LOCK BOX" has the meaning set forth in Section 4.1.

      "MATURITY DATE" has the meaning set forth in Section 7.1.

      "MATERIAL  ADVERSE  EFFECT"  means the  effect  of any event or  condition
which, alone or when taken together with other events or conditions occurring or
existing  concurrently  therewith,  (i) has a material  adverse  effect upon the
business, operations, properties or condition (financial or otherwise) of any of
Willcox,  Macpherson,  Leadtec,  Emtex,  WG or  Clinton  Management  or  of  the
Borrowers and their Subsidiaries taken as a whole; (ii) has or may be reasonably

<PAGE>

expected to have any material  adverse  effect  whatsoever  upon the validity or
enforceability  of the Agreement or any of the other Loan  Documents;  (iii) has
any material  adverse effect upon the value of the whole or any material part of
the  Collateral,  the Liens of Lender  with  respect to such  Collateral  or the
priority of any such  Liens;  (iv)  materially  impairs the ability of any other
Obligor to perform its obligations  under the Agreement or any of the other Loan
Documents,  including  repayment  of any of the  Obligations  when  due;  or (v)
materially  impairs the ability of Lender to enforce or collect the  Obligations
or realize upon any of the Collateral in accordance  with the Loan Documents and
Applicable Law.

      "NEW LC" means  the  Standby  Letter of Credit to be issued in  connection
with the sale of a division  of WG as set forth in Item 14 of Schedule C to this
Agreement.

      "NEW LC LOAN CONDITIONS" means the following conditions,  the satisfaction
of each of which is a condition  precedent  to Lender's  obligation  to make any
Loan against the New LC: (i) no Default or Event of Default exists, (ii) the New
LC shall be in an amount and in form and substance  satisfactory  to Lender,  in
its  sole  discretion,  (iii)  the New LC  shall  be  issued  naming  Lender  as
beneficiary  or all payments due to WG under the New LC shall be payable  solely
and directly to Lender.

      "OBLIGATIONS"  means  all  present  and  future  Loans,  advances,  debts,
liabilities,  obligations, guaranties, covenants, duties and indebtedness at any
time owing by any Borrower to Lender,  whether evidenced by or arising under the
Agreement  or any other Loan  Document,  whether  arising  from an  extension of
credit,  opening  of  a  Credit  Accommodation,   guaranty,  indemnification  or
otherwise (including all fees and other amounts which may be owing to issuers of
Credit Accommodations and all taxes, duties, freight, insurance, costs and other
expenses,  costs or amounts payable in connection with Credit  Accommodations or
the underlying goods),  whether direct or indirect  (including those acquired by
assignment and any participation by Lender in any Borrower's  indebtedness owing
to others),  whether  absolute or contingent,  whether due or to become due, and
whether  arising  before or after the  commencement  of a  proceeding  under the
Bankruptcy  Code  or any  similar  statute,  including  all  interest,  charges,
expenses,  fees,  reasonable  attorney's fees,  expert witness fees, audit fees,
letter of credit fees, loan fees, Early Termination Fees, Minimum Borrowing Fees
and any other sums  chargeable to any Borrower  under the Agreement or under any
other Loan Document.

      "OBLIGOR" means any guarantor,  endorser, acceptor, surety or other person
liable  on,  or with  respect  to,  the  Obligations  or who is the owner of any
property which is security for the Obligations, other than a Borrower.

      "PERMITTED LIENS" means: (i) purchase money security interests in specific
items of Equipment  in an aggregate  amount not to exceed the limit set forth in
Section  8(c) of Schedule A; (ii) leases of specific  items of  Equipment  in an
aggregate  amount not to exceed the limit set forth in Section  8(d) of Schedule
A; (iii) Liens for taxes not yet due and payable or that are being  contested in
good faith by any Borrower  through  appropriate  proceedings and for which such
Borrower has  implemented  appropriate  reserves in accordance  with GAAP;  (iv)
additional Liens which are fully subordinate to the security interests of Lender
and are  consented  to in  writing  by  Lender;  (v)  security  interests  being
terminated  concurrently  with the  execution of this  Agreement;  (vi) Liens of
materialmen,  mechanics, warehousemen or carriers arising in the ordinary course

<PAGE>

of business  and  securing  obligations  which are not  delinquent;  (vii) Liens
incurred  in  connection  with the  extension,  renewal  or  refinancing  of the
indebtedness secured by Liens of the type described in clause (i) or (ii) above;
PROVIDED,  that any  extension,  renewal or  replacement  Lien is limited to the
property  encumbered  by the  existing  Lien  and the  principal  amount  of the
indebtedness  being extended,  renewed or refinanced  does not increase;  (viii)
Liens in favor of  customs  and  revenue  authorities  which  secure  payment of
customs  duties in  connection  with the  importation  of goods;  (ix)  security
deposits posted in connection  with real property leases or subleases;  (x) cash
pledges or deposits to secure (A) obligations under workmens's compensation laws
or similar  legislation or (B) public or statutory  obligations of any Borrower;
(xi) zoning restrictions,  easements, licenses, covenants, reservations, utility
company rights, restrictions on the use of real property or minor irregularities
of title incident thereto which do not in the aggregate  materially detract from
the value of the property or assets of any Borrower and its Subsidiaries,  taken
as a whole, or which could not reasonably be expected to have a Material Adverse
Effect;  and (xii) cash pledges or cash  collateral to secure  letters of credit
currently  outstanding with The CIT Group/Business  Credit,  Inc. ("CIT"), in an
amount not to exceed 105% of the face amount of the letters of credit  currently
outstanding  and which cash shall be released by CIT on the conditions set forth
in the cash  collateral and release  agreement  between certain of the Borrowers
and CIT dated on or about the date hereof, a copy of which has been delivered to
Lender.  Lender  will have the right to require,  as a condition  to its consent
under  clause  (iv)  above,  that the  holder  of the  additional  Lien  sign an
intercreditor  agreement in form and substance  satisfactory  to Lender,  in its
sole  discretion,  acknowledging  that the Lien is  subordinate  to the security
interests  of  Lender,  and  agreeing  not to take any  action  to  enforce  its
subordinate  Lien so long as any Obligations  remain  outstanding,  and that all
Borrowers  agree  that any  uncured  default  in any  obligation  secured by the
subordinate Lien shall also constitute an Event of Default under this Agreement.

      "PERMITTED  PAST DUE  SALE  BALANCE"  shall  mean an  amount  equal to (i)
$2,600,000 from the Closing Date through the date forty- five (45) days from the
Closing Date and (ii) $2,100,000 at all times thereafter.

      "PERSON" means any individual,  sole  proprietorship,  partnership,  joint
venture,   limited  liability  company,  trust,   unincorporated   organization,
association,  corporation,  government  or  any  agency  or  political  division
thereof, or any other entity.

      "PRIME  RATE"  means,  at any given time,  the prime rate as quoted in THE
WALL STREET JOURNAL (EASTERN EDITION) as the base rate on corporate loans posted
as of such time by at least 75% of the nation's 30 largest  banks (which rate is
not necessarily the lowest rate offered by such banks).

      "REAL  PROPERTY"  means  the real  property  described  in  Section  10 of
Schedule A.

      "REAL PROPERTY ADVANCE" has the meaning set forth in Section 1.1(b).

      "RELEASED PARTIES" has the meaning set forth in Section 6.1.

      "RENEWAL TERM" has the meaning set forth in Section 7.1.

      "RESERVES" has the meaning set forth in Section 1.2.

<PAGE>

      "REVOLVING LOANS" has the meaning set forth in Section 1.1(a).

      "SALE" has the meaning set forth in Section 8.2.

      "SUBSIDIARY" means any corporation or other entity of which a Person owns,
directly or indirectly, through one or more intermediaries, more than 50% of the
capital stock or other equity interest at the time of determination.

      "TERM"  means the  period  commencing  on the date of this  Agreement  and
ending on the Maturity Date.

      "TERM LOAN" has the meaning set forth in Section 1.1(b).

      "UCC" means, at any given time, the Uniform Commercial Code as adopted and
in effect at such time in the State of New York.

      All accounting terms used in the Agreement,  unless  otherwise  indicated,
shall have the meanings  given to such terms in accordance  with GAAP. All other
terms contained in the Agreement,  unless  otherwise  indicated,  shall have the
meanings provided by the UCC, to the extent such terms are defined therein.  The
term "including," whenever used in the Agreement, shall mean "including, but not
limited to." The singular  form of any term shall  include the plural form,  and
vice versa,  when the context so requires.  References to Sections,  subsections
and  Schedules  are to  Sections  and  subsections  of,  and  Schedules  to, the
Agreement.   All  references  to  agreements  and  statutes  shall  include  all
amendments, modifications, extensions, replacements and restatements thereto and
successor statutes in the case of statutes.

      IN WITNESS  WHEREOF,  each Borrower and Lender have signed this Schedule B
on the date set forth in the heading to the Agreement.

                                   BORROWERS:

                                   WILLCOX & GIBBS, INC.
                                   WG APPAREL, INC.
ATTEST:                            PARADISE COLOR INC.

______________________________     By:______________________________
MARY-ANNE KIERAN, Secretary           JOHN K. ZIEGLER, JR.,
                                      Chief Financial Officer

[CORPORATE SEALS]

                  [Signatures continued on the following page]

<PAGE>

                                   MACPHERSON MEISTERGRAM, INC.
                                   LEADTEC SYSTEMS, INC.
                                   EMTEX LEASING, INC.
                                   CLINTON MACHINERY CORPORATION
                                   CLINTON MANAGEMENT CORPORATION
                                   CLINTON LEASING CORPORATION
ATTEST:                            CLINTON EQUIPMENT CORP.

______________________________     By:______________________________
MARY-ANNE KIERAN, Secretary          JOHN K. ZIEGLER, JR.,
                                     Chief Financial Officer

[CORPORATE SEALS]

                                   J&E SEWING SUPPLIES, INC.
                                   W&G DAON, INC.

                                   By:______________________________
                                      JOHN K. ZIEGLER, JR.,
                                      Vice President and Secretary

[CORPORATE SEALS]

                                   Accepted in New York, New York:

                                   LENDER:

                                   BANC OF AMERICA COMMERCIAL
                                   ITS COMMERCIAL FUNDING DIVISION

                                   By:______________________________
                                      Its Authorized Signatory

<PAGE>

                                   SCHEDULE C
                              CONDITIONS PRECEDENT

      This Schedule is an integral part of the Loan and Security Agreement dated
April ___,  2000, by and among WILLCOX & GIBBS,  INC.,  MACPHERSON  MEISTERGRAM,
INC.,  LEADTEC  SYSTEMS,  INC.,  EMTEX LEASING  CORPORATION,  WG APPAREL,  INC.,
CLINTON MACHINERY CORPORATION,  CLINTON MANAGEMENT CORP., CLINTON LEASING CORP.,
CLINTON EQUIPMENT CORP., J&E SEWING SUPPLIES, INC., W&G DAON, INC., and PARADISE
COLOR INCORPORATED and BANC OF AMERICA COMMERCIAL  FINANCE  CORPORATION  THROUGH
ITS COMMERCIAL FUNDING DIVISION (the "AGREEMENT").

      Lender's obligation to make any Loans or Credit  Accommodations  under the
Loan Agreement is subject to the satisfaction of all of the conditions precedent
set forth on this Schedule C, all in form and substance  satisfactory  to Lender
in its sole discretion.

      o     No Event of Default  exists at the time,  or would  result  from the
            funding, of any Loan or other extension of credit.

      o     Each of the  Loan  Documents  shall  have  been  duly  executed  and
            delivered  to Lender by each of the  signatories  thereto,  and each
            Borrower shall be in compliance with all of the terms thereof.

      o     Lender  shall  have  received  copies  of  all  filing  receipts  or
            acknowledgments issued by any Governmental Authority to evidence any
            filing or  recordation  necessary  to perfect the Liens of Lender in
            the  Collateral  and evidence that such Liens  constitute  valid and
            perfected  security interests and Liens, and that there are no other
            Liens upon any Collateral except for Permitted Liens.

      o     Lender shall have received  resolutions of the board of directors of
            each Borrower  authorizing  the  transactions  set forth in the Loan
            Agreement,  copies  of each  Borrower's  bylaws  and all  amendments
            thereto,  and  copies of the  articles  of  incorporation  and other
            organizational  documents  of  each  Borrower,  and  all  amendments
            thereto,  certified by the  Secretary of State or other  appropriate
            officials  of  the   jurisdiction  of  each  Borrower's   states  of
            organization.

      o     Lender  shall have  received  good  standing  certificates  for each
            Borrower,  issued  by the  Secretary  of State or other  appropriate
            official of such Borrower's  jurisdiction  of organization  and each
            jurisdiction   where  the  conduct  of  such   Borrower's   business
            activities or ownership of its property necessitates qualification.

      o     Lender shall have received and found  acceptable in all respects any
            and  all  modifications,  amendments  or  changes  to  the  form  of
            Bankruptcy  Plan delivered to Lender and attached  hereto as Exhibit
            C,  and  the  Bankruptcy   Plan  shall  have  been  confirmed  by  a
            confirmation  order issued by the  Bankruptcy  Court and a period of
            not less than eleven (11) days shall have expired since the issuance

<PAGE>

            of such confirmation  order without any objections or appeals having
            been filed with respect thereto.

      o     Lender  shall have  received a first  priority  Mortgage  or Deed to
            Secure Debt with  respect to  Borrowers'  Real  Property  located at
            88-90 Boston Street, Middletown, Massachusetts.

      o     Lender  shall  have  received  the Note  Pledge  Agreements  for the
            Barudan Notes held by Borrowers.

      o     Lender shall have received the original stock  certificates  for all
            Domestic  Subsidiaries and Foreign Subsidiaries (with respect to the
            Foreign  Subsidiaries,  limited to 65%) and Stock Pledge  Agreements
            for  all  Foreign   Subsidiaries   (with   respect  to  the  Foreign
            Subsidiaries, limited to 65%).

      o     Lender shall have determined that immediately  after Lender has made
            the  initial  Loans  and  Credit  Accommodations  to be  made on the
            Closing Date and Borrowers  have paid (or made provision for payment
            of) all closing costs incurred in connection with the Agreement, and
            after  giving  effect  to the  other  transactions  to  occur on the
            Closing Date (i) Borrowers have no  post-petition  accounts  payable
            more than sixty (60) days past due, (ii) Borrowers' have no past due
            taxes and (iii) Borrowers' Availability is not less than $2,800,000.
            For purposes hereof, the term  "Availability"  shall include lockbox
            cash receipts, less any outstanding checks and/or book overdrafts.

      o     Borrowers'  shall  have a  Consolidated  Tangible  Net  Worth on the
            Closing Date of not less than $3,500,000.  For purposes hereof,  the
            term "Consolidated Tangible Net Worth" means Borrowers' Consolidated
            total  shareholder's  equity  (including  capital stock,  additional
            paid-in  capital and retained  earnings,  after  deducting  treasury
            stock) which would appear as such on a Consolidated balance sheet of
            Borrowers   prepared  in  accordance  with  GAAP,   after  deducting
            therefrom the amount of all intangible items reflected therein,  all
            in accordance with GAAP.

      o     Lender shall have received and found acceptable the Barudan LCs, and
            all  payments  due to  Borrowers  under  such  Barudan  LCs shall be
            payable  solely and  directly to Lender or such Baradan LCs shall be
            transferred and assigned to Lender.

      o     Lender  shall have  received and found  acceptable  (i) the Sale and
            Purchase  agreement  of a division  of WG, (ii)  resolutions  of the
            board of directors  of WG approving  such sale and (iii) the form of
            letter of credit  naming Lender as  beneficiary  to be issued by the
            purchaser  in the face  amount of not less than the net value of the
            Collateral being sold.

      o     To the extent requested by Lender, Lender shall have received a Debt
            Subordination  Agreement  with respect to any debt of Borrowers  not
            specifically permitted under the Agreement.

<PAGE>

      o     Lender shall have received and found acceptable  certified copies of
            Borrowers' foreign accounts  receivable credit insurance policies in
            an amount not less than  $3,000,000,  and Lender shall have received
            of an assignment of such insurance policies.

      o     Lender shall have received the original life insurance  policy in an
            amount not less than $2,000,000 on the life of John Ziegler, Sr. and
            an assignment of such insurance policy to Lender.

      o     Lender shall have reviewed and found acceptable  copies of all Emtex
            Leases from  Borrowers  and the  originals of the  underlying  Emtex
            Leases  shall  have been  delivered  to  Lender or to a third  party
            acceptable to Lender pursuant to  arrangements  acceptable to Lender
            in its sole discretion.

      o     Lender  shall have  received  Landlord  waivers with respect to each
            Borrower's  leased premises from each Borrower's  landlords,  to the
            extent required by Lender.

      o     Lender shall have received a favorable,  written  opinions of Hughes
            Hubbard & Reed, LLP,  Emtex's local Georgia counsel and Macpherson's
            local North Carolina counsel.

      o     Lender  shall have  received  certified  copies of the  property and
            casualty insurance policies,  insurance  certificates regarding such
            insurance with respect to the Collateral, together with loss payable
            endorsements  on  Lender's  standard  form of  lender's  loss  payee
            endorsement  naming  Lender as loss payee with  respect to each such
            policy and certified copies of each Borrower's  liability  insurance
            policies,   including  product  liability  policies,  together  with
            endorsements naming Lender as an additional insured, all as required
            by the Loan Documents.

      o     Lender shall have received the duly executed agreements establishing
            the Lockbox  Account  with a  financial  institution  acceptable  to
            Lender for the collection or servicing of the Accounts.

      o     Lender shall have received assurances  satisfactory to it that there
            are no threats of strikes or work  stoppages  by any  employees,  or
            organization of employees,  of any Borrower which Lender  reasonably
            determines may have a Material Adverse Effect.

      o     Lender shall have  determined that none of the Loan Documents or any
            of the transactions contemplated thereby violate any Applicable Law,
            court order or agreement binding upon any Borrower.

                  [Remainder of page intentionally left blank]

<PAGE>

      IN WITNESS  WHEREOF,  each Borrower and Lender have signed this Schedule C
on the date set forth in the heading to the Agreement.

                                   BORROWERS:

                                   WILLCOX & GIBBS, INC.
                                   WG APPAREL, INC.
ATTEST:                            PARADISE COLOR INC.

______________________________     By:______________________________
MARY-ANNE KIERAN, Secretary           JOHN K. ZIEGLER, JR.,
                                      Chief Financial Officer

[CORPORATE SEALS]

                                   MACPHERSON MEISTERGRAM, INC.
                                   LEADTEC SYSTEMS, INC.
                                   EMTEX LEASING, INC.
                                   CLINTON MACHINERY CORPORATION
                                   CLINTON MANAGEMENT CORPORATION
                                   CLINTON LEASING CORPORATION
ATTEST:                            CLINTON EQUIPMENT CORP.

______________________________     By:______________________________
MARY-ANNE KIERAN, Secretary           JOHN K. ZIEGLER, JR.,
                                      Chief Financial Officer

[CORPORATE SEALS]

                                   J&E SEWING SUPPLIES, INC.
                                   W&G DAON, INC.

                                   By:______________________________
                                      John K. Ziegler, Jr.,
                                      Vice President and Secretary

[CORPORATE SEALS]

[Signatures continued on the following page]

<PAGE>

Accepted in New York, New York:

                                   LENDER:

                                   BANC OF AMERICA COMMERCIAL
                                   ITS COMMERCIAL FUNDING DIVISION

                                   By:______________________________
                                      Its Authorized Signatory

<PAGE>

                                    EXHIBIT A

                        SEE ATTACHED FORM OF EMTEX LEASE

<PAGE>

                                    EXHIBIT B

              SEE ATTACHED FORM OF EMTEX LEASE PURCHASE AGREEMENTS

                [SEE ATTACHED CIT AND TEXTRON PROGRAM AGREEMENTS]

<PAGE>

                                    EXHIBIT C

                      SEE ATTACHED FORM OF BANKRUPTCY PLAN==============================================================================

                              WARRANT AGREEMENT

                           Dated as of May 1, 2000,

                                   between

                            WILLCOX & GIBBS, INC.

                                     and

                            WILLCOX & GIBBS, INC.,
                               as Warrant Agent

==============================================================================

<PAGE>

                              TABLE OF CONTENTS

                                                                          PAGE

ARTICLE I      DEFINITIONS..............................................     1

      SECTION 1.01.  Definitions........................................     1

ARTICLE II     ISSUANCE, EXECUTION AND TRANSFER OF WARRANT
               CERTIFICATES.............................................     5

      SECTION 2.01.  Form of Warrant Certificates.......................     5
      SECTION 2.02.  Execution of Warrant Certificates..................     5
      SECTION 2.03.  Issuance, Delivery and Registration of
                     Warrant Certificates...............................     5
      SECTION 2.04.  Transfer and Exchange of Warrant Certificates......     6

ARTICLE III    WARRANT PRICE, EXPIRATION DATE AND EXERCISE OF
               WARRANTS.................................................     6

      SECTION 3.01.  Warrant Price; Expiration Date.....................     6
      SECTION 3.02.  Exercise of Warrants...............................     6
      SECTION 3.03.  No Fractional Shares to Be Issued..................     8
      SECTION 3.04.  Acquisition of Warrants by the Company;
                     Cancellation of Warrants...........................     8
      SECTION 3.05.  Certain Additional Terms of Exercise...............     9

ARTICLE IV     ADJUSTMENT OF WARRANT PRICE, TRIGGER PRICES,
               SHARES OF COMMON STOCK PURCHASABLE AND NUMBER OF
               WARRANTS.................................................     9

      SECTION 4.01.  Adjustment of Warrant Price and Trigger
                     Prices.............................................     9
      SECTION 4.02.  Adjustment of Shares of Common Stock
                     Purchasable Upon Exercise of Warrants..............    13
      SECTION 4.03.  Election to Adjust Warrants instead of
                     Shares Per Warrant.................................    13
      SECTION 4.04.  No Fractional Warrants to Be Issued................    14
      SECTION 4.05.  Rights Upon Consolidation, Merger, Sale,
                     Transfer or Reclassification.......................    15
      SECTION 4.06.  Covenant to Reserve Shares for Issuance on
                     Exercise...........................................    16
      SECTION 4.07.  Compliance with Governmental Requirements;
                     Suspension of Exercise of Warrants.................    17
      SECTION 4.08.  Payment of Taxes on Stock Certificates
                     Issued upon Exercise...............................    17
      SECTION 4.09.  Warrant Agent Not Responsible for
                     Adjustments or Validity of Stock...................    17

<PAGE>

                              TABLE OF CONTENTS
                                 (Continued)

                                                                          PAGE

      SECTION 4.10.  Statements on Warrants.............................    18
      SECTION 4.11.  Issuance of Class A Common Stock in Lieu of
                     Class B Common Stock...............................    18

ARTICLE V      OTHER PROVISIONS RELATING TO RIGHTS OF HOLDERS OF
               WARRANTS.................................................    18

      SECTION 5.01.  No Rights as Stockholders..........................    18
      SECTION 5.02.  Mutilated or Missing Warrant Certificates..........    18
      SECTION 5.03.  Delivery of Prospectuses...........................    19

ARTICLE VI     CONCERNING THE WARRANT AGENT.............................    19

      SECTION 6.01.  Payment of Certain Taxes...........................    19
      SECTION 6.02.  Change of Warrant Agent............................    19
      SECTION 6.03.  Compensation; Further Assurances...................    21
      SECTION 6.04.  Reliance on Counsel................................    21
      SECTION 6.05.  Proof of Actions Taken.............................    21
      SECTION 6.06.  Correctness of Statements..........................    21
      SECTION 6.07.  Validity of Agreement..............................    21
      SECTION 6.08.  Use of Agents......................................    22
      SECTION 6.09.  Liability of Warrant Agent.........................    22
      SECTION 6.10.  Legal Proceedings..................................    22
      SECTION 6.11.  Other Transactions in Securities of the
                     Company............................................    22
      SECTION 6.12.  Actions as Agent...................................    22
      SECTION 6.13.  Appointment and Acceptance of Agency...............    23

ARTICLE VII    MISCELLANEOUS PROVISIONS.................................    23

      SECTION 7.01.  Supplements and Amendments.........................    23
      SECTION 7.02.  Successors and Assigns.............................    23
      SECTION 7.03.  Notices............................................    23
      SECTION 7.04.  Applicable Law.....................................    24
      SECTION 7.05.  Benefits of this Agreement.........................    24
      SECTION 7.06.  Registered Warrantholders..........................    24
      SECTION 7.07.  Inspection of Agreement............................    25
      SECTION 7.08.  Headings...........................................    25
      SECTION 7.09.  Counterparts.......................................    25

Signatures and Seals ...................................................    26
Exhibit A - Form of Warrant Certificate ................................   A-1

<PAGE>

                              WARRANT AGREEMENT

            THIS AGREEMENT (this "AGREEMENT"), dated as of May 1, 2000, is made
by and between WILLCOX & GIBBS, INC., a Delaware corporation (the "COMPANY"),
and the Warrant Agent, as defined herein.

                                 WITNESSETH:

            WHEREAS, on February 24, 2000, the Company and certain of its
subsidiaries filed a Joint Plan of Reorganization (as it may be further amended
or modified, the "PLAN") under Chapter 11 of the United States Bankruptcy Code
with the United States Bankruptcy Court for the District of Delaware (the
"BANKRUPTCY COURT");

            WHEREAS, pursuant to Section IV.D.1, of the Plan, which was
confirmed by an order of the Bankruptcy Court dated April 3, 2000, the Company
proposes to issue and deliver to the Holders of Allowed Interests in Class 7 (as
defined in the Plan) its warrant certificates evidencing warrants to acquire up
to an aggregate of 1,170,253 shares, subject to adjustment, of Class B Common
Stock of the Company;

            WHEREAS, the Company wishes the Warrant Agent to act on behalf of
the Company, and the Warrant Agent is willing to act in connection with the
issuance, exchange, transfer, substitution and exercise of Warrants; and

            WHEREAS, the Company desires to enter into this Agreement to set
forth the terms and conditions of the Warrants and the rights of the holders
thereof.

            NOW THEREFORE in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:

                                  ARTICLE I

                                 DEFINITIONS

            SECTION 1.01. DEFINITIONS. As used in this Agreement, the following
terms shall have the following meanings:

            AFFILIATE: of any Person, any Person directly or indirectly
controlling or controlled by, or under direct or indirect common control with,
such Person. For purposes of this definition, "control" when used with respect
to any Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

            BANKRUPTCY COURT: the United States Bankruptcy Court for the
District of Delaware.

<PAGE>

            BOARD OF DIRECTORS: the Board of Directors of the Company.

            BUSINESS DAY: any day of the week other than a Saturday, Sunday or a
day which shall be in New York, New York or in the city in which the principal
office of the Warrant Agent is located a day on which banking institutions are
authorized or required by law to close.

            CHANGE OF CONTROL: the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act); (ii) the adoption of a plan relating to the liquidation, dissolution or
winding-up of the Company; (iii) the consummation of any transaction (including,
without limitation, any merger or consolidation) the result of which is that any
"person" (as defined above) becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, or more than 50% of the Common Stock of the
Company entitled to elect a majority of the directors of the Company (measured
by voting power rather than number of shares); (iv) the first day on which a
majority of the members of the Board of Directors of the Company are not
Continuing Directors; or (v) the Company consolidates with, or merges with or
into, any Person, or any Person consolidates with, or merges with or into, the
Company, in any such event pursuant to a transaction in which any of the
outstanding Common Stock entitled to elect a majority of the directors of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where the Common Stock of the Company entitled
to elect a majority of the directors of the Company outstanding immediately
prior to such transaction is converted into or exchanged for common stock of the
surviving or transferee Person constituting a majority of the voting power of
the outstanding shares of stock of such surviving or transferee Person
(immediately after giving effect to such issuance) entitled to elect a majority
of the directors of the Company.

            CLASS A COMMON STOCK: the Class A Common Stock, $.001 par value per
share, of the Company.

            CLASS B COMMON STOCK: the Class B Common Stock, $.001 par value per
share, of the Company.

            CLOSING PRICE: on any day, means (a) if Class A Common Stock is
listed or admitted for trading on a national securities exchange, the reported
last sales price regular way or, if no such reported sale occurs on such day,
the average of the closing bid and asked prices regular way on such day, in each
case on the principal national securities exchange on which Class A Common Stock
is listed or admitted to trading, or (b) if Class A Common Stock is not listed
or admitted to trading on any national securities exchange, the average of the
closing bid and asked prices in the over-the-counter market on such day as
reported by the National Association of Securities Dealers Automatic Quotation

<PAGE>

System (NASDAQ) or any comparable system or, if not so reported, as reported by
any New York Stock Exchange member firm selected by the Company for such
purpose.

            COMMON STOCK:  Class A Common Stock, Class B Common Stock, and
all other stock of any class or classes (however designated) of the Company,
the holders of which have the right, without limitation as to amount, either
to all or to a share of the balance of current dividends and liquidating
dividends after the payment of dividends and distributions on any shares
entitled to preference.

            COMPANY: Willcox & Gibbs, Inc., a Delaware corporation.

            CONTINUING DIRECTORS: as of any date of determination, any member of
the Board of Directors of the Company who (i) was named as a member of such
Board of Directors pursuant to the Plan or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.

            EFFECTIVE DATE: the meaning set forth in the Plan.

            EXCHANGE ACT: the Securities Exchange Act of 1934, as amended.

            EXPIRATION DATE: In the case of the Series A Warrants, the next
Business Day after the fifth anniversary of the Effective Date; in case of the
Series B Warrants, the next Business Day after the sixth anniversary of the
Effective Date; and in the case of the Series C Warrants, the next Business Day
after the seventh anniversary of the Effective Date.

            HOLDER OF ALLOWED INTERESTS IN CLASS 7: the meaning set forth in the
Plan.

            OFFICERS' CERTIFICATE: the meaning specified in Section 4.01(e).

            PERSON: any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

            PLAN: The Joint Plan of Reorganization of the Company and certain of
its subsidiaries, dated as of February 24, 2000, as it may be further amended or
modified.

            SECURITIES ACT: The Securities Act of 1933, as amended.

            SERIES A WARRANTS: the Class B Common Stock Purchase Warrants of the
Company issued pursuant to this Agreement and the Plan, and all warrants issued
in substitution therefor, consisting initially of Class B Common Stock Purchase
Warrants to purchase up to an aggregate of 363,081 shares of Class B Common
Stock, exercisable in accordance with this Agreement on or before the Expiration
Date applicable to such Warrants.

            SERIES B WARRANTS: the Class B Common Stock Purchase Warrants of the
Company issued pursuant to this Agreement and the Plan, and all warrants issued

<PAGE>

in substitution therefor, consisting initially of Class B Common Stock Purchase
Warrants to purchase up to an aggregate of 389,446 shares of Class B Common
Stock, exercisable in accordance with this Agreement on or before the Expiration
Date applicable to such Warrants.

            SERIES C WARRANTS: the Class B Common Stock Purchase Warrants of the
Company issued pursuant to this Agreement and the Plan, and all warrants issued
in substitution therefor, consisting initially of Class B Common Stock Purchase
Warrants to purchase up to an aggregate of 417,726 shares of Class B Common
Stock, exercisable in accordance with this Agreement on or before the Expiration
Date applicable to such Warrants.

            SUBSIDIARY: a corporation, association or other business entity in
which the Company or one or more Subsidiaries owns sufficient voting securities
to enable it or them (as a group) ordinarily, in the absence of contingencies,
to elect a majority of the directors (or persons performing similar functions)
of such business entity.

            TRADING DAY: (a) if Class A Common Stock is listed or admitted for
trading on a national securities exchange, a day on which such securities
exchange shall be open for business, or (b) if Class A Common Stock is not
listed or admitted to trading on any national securities exchange, a day with
respect to which quotations shall be reported (in the over-the-counter market as
reported by the National Association of Securities Dealers Automatic Quotation
System (NASDAQ) or any comparable system or, if not so reported, as reported by
any New York Stock Exchange member firm selected by the Company for such
purpose).

            TRIGGER PRICES: the amounts of $4.00 referred to in Section 3.05(a),
$5.00 referred to in Section 3.05(b) and $6.00 referred to in Section 3.05(c).

            WARRANT AGENT: means the Company or its successors appointed
pursuant to Section 6.02.

            WARRANT AGENT'S OFFICE: means, for so long as the Company shall be
the Warrant Agent, the principal business address of the Company as specified in
Section 7.03, and thereafter, the office or agency maintained by the Warrant
Agent in the Borough of Manhattan, New York, New York or the principal office of
the Warrant Agent.

            WARRANT CERTIFICATES: the meaning specified in Section 2.01.

            WARRANT PRICE: the meaning specified in Section 3.01.

            WARRANT REGISTER: the meaning specified in Section 2.03.

            WARRANTS: the Series A Warrants, Series B Warrants, Series C
Warrants and all warrants issued in substitution therefor.

<PAGE>

                                  ARTICLE II

           ISSUANCE, EXECUTION AND TRANSFER OF WARRANT CERTIFICATES

            SECTION 2.01. FORM OF WARRANT CERTIFICATES. The Warrants shall be
evidenced by certificates in temporary or definitive fully registered form (the
"WARRANT CERTIFICATES") substantially in the form of Exhibit A hereto, and
designated as Series A Warrants, Series B Warrants or Series C Warrants, as the
case may be, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon 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 securities exchange, or to conform to usage, or as
may, consistently herewith, be determined by the officers of the Company
executing such Warrant Certificates as evidenced by their execution of the
Warrant Certificates. Each Warrant shall evidence the right, subject to the
provisions of this Agreement and of the Warrant Certificate, to purchase one
share of Class B Common Stock, subject to adjustment pursuant to the provisions
of Article IV.

            SECTION 2.02. EXECUTION OF WARRANT CERTIFICATES. Each Warrant
Certificate, whenever issued, shall be dated as of the date of countersignature
thereof by the Warrant Agent either upon initial issuance or upon exchange,
substitution or transfer, shall be signed manually by, or bear the facsimile
signature of, the Chairman of the Board, the Chief Executive Officer, the
President or a Vice President of the Company, shall have the Company's seal or a
facsimile thereof affixed or imprinted thereon and shall be attested by the
manual or facsimile signature of the Secretary or an Assistant Secretary of the
Company. In case any officer of the Company whose manual or facsimile signature
has been placed upon any Warrant Certificate shall have ceased to be such before
such Warrant Certificate is issued, it may be issued with the same effect as if
such officer had not ceased to be such at the date of issuance. Warrant
Certificates shall be countersigned manually by the Warrant Agent and shall not
be valid for any purpose unless so countersigned. Warrant Certificates may be
countersigned by the Warrant Agent, with the same effect, notwithstanding that
any persons whose manual or facsimile signatures appear thereon as proper
officers of the Company shall have ceased to be such officers at the time of
such countersignature, issuance or delivery. Any Warrant Certificate may be
signed on behalf of the Company by any person who, at the actual date of the
execution of such Warrant Certificate, shall be a proper officer of the Company
to sign such Warrant Certificate, although at the date of the execution of this
Agreement any such person was not such an officer.

            SECTION 2.03. ISSUANCE, DELIVERY AND REGISTRATION OF WARRANT
CERTIFICATES. The Warrant Agent shall, and the Company shall cause the Warrant
Agent to, countersign, issue and deliver to each Holder of Allowed Interests in
Class 7, on or promptly after the Effective Date, a Warrant Certificate
representing each of the Series A Warrants, the Series B Warrants and the Series
C Warrants that such Holder is entitled to receive pursuant to the Plan, and
shall countersign and deliver Warrant Certificates upon exchange, transfer or
substitution for one or more previously countersigned Warrant Certificates as
hereinafter provided. The Warrant Agent shall maintain books (the "WARRANT
REGISTER") for the registration of transfer and registration of Warrant
Certificates (including, without limitation, registration of the Warrant
Certificates described above) after the Effective Date.

<PAGE>

            SECTION 2.04. TRANSFER AND EXCHANGE OF WARRANT CERTIFICATES. The
Warrant Agent, from time to time, shall register the transfer in whole or in
part of any outstanding Warrant Certificates in the Warrant Register upon
surrender at the Warrant Agent's Office of Warrant Certificates accompanied by a
written instrument or instruments of transfer, in form satisfactory to the
Company and the Warrant Agent, duly executed by the registered warrantholder or
his attorney duly authorized in writing. Upon any such registration of transfer,
a new Warrant Certificate shall be countersigned by the Warrant Agent and issued
to the transferee and the surrendered Warrant Certificate shall promptly be
canceled by the Warrant Agent. Warrant Certificates may be exchanged at the
option of the holder thereof, upon surrender, properly endorsed at the Warrant
Agent's Office, with written instructions, for other Warrant Certificates
countersigned by the Warrant Agent representing in the aggregate a like number
of Warrants. The Company or the Warrant Agent may require the payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any such exchange or transfer.

                                 ARTICLE III

           WARRANT PRICE, EXPIRATION DATE AND EXERCISE OF WARRANTS

            SECTION 3.01. WARRANT PRICE; EXPIRATION DATE. Each Warrant
Certificate shall entitle the registered holder thereof, subject to the
provisions thereof and of this Agreement, to purchase from the Company at any
time commencing at the opening of business on the next Business Day after the
earlier of the second anniversary of Effective Date and the occurrence of a
Change of Control and before 5:00 p.m., New York time, on the applicable
Expiration Date, one share of Class B Common Stock for each of the Series A
Warrants, Series B Warrants or Series C Warrants, respectively, specified
therein, at the price per share of $.01 (which price per share shall appear on
the face of such Warrant Certificate), subject to adjustment as provided in
Article IV hereof, payable in full at the time of purchase. Each Warrant not
exercised during the applicable period set forth above shall become void, and
all rights thereunder and all rights in respect thereof under this Agreement
shall cease at the end of such period. The term "WARRANT PRICE" as used herein
refers to the foregoing price per share in effect at any time with respect to a
Warrant.

            SECTION 3.02. EXERCISE OF WARRANTS. (a) Subject to the provisions of
the Warrant Certificate and this Agreement, commencing at the opening of
business on the next Business Day after the earlier of the second anniversary of
the Effective Date and the occurrence of a Change of Control, Warrants may be
exercised by surrendering the Warrant Certificate evidencing such Warrants at
the Warrant Agent's Office with the Election to Exercise form set forth on the
reverse of the Warrant Certificate duly completed and executed by the registered
holder thereof or his attorney duly authorized in writing, and by paying in full
to the Warrant Agent for the account of the Company (i) in cash, (ii) by
certified or official bank check or (iii) by any combination of the foregoing,
the Warrant Price for each share of Class B Common Stock as to which Warrants
are exercised and any applicable taxes, other than taxes that the Company is
required to pay hereunder. A registered warrantholder may exercise the full
number of Warrants represented by a Warrant Certificate or any number of whole
Warrants thereof. If the Warrant Price is less than $.01 at the time of

<PAGE>

exercise, the amount due from an exercising warrantholder shall be determined by
multiplying the total number of Warrants exercised by such warrantholder by the
Warrant Price, and any remaining fraction of $.01 shall be rounded up to the
next full $.01.

            (b) Subject to the provisions of subsection (e) below and Section
4.08 hereof, as soon as practicable after the exercise of any Warrants and
payment by the registered warrantholder of the full Warrant Price for the shares
as to which such Warrants are then being exercised, the Warrant Agent shall
promptly requisition from the transfer agent of the Class B Common Stock and
deliver to or upon the order of such registered warrantholder a certificate or
certificates for the number of full shares of Class B Common Stock to which such
warrantholder is entitled, registered in such name or names as may be directed
by him (if other than to such registered holders, to the extent such transfer is
not validly restricted), together with cash or scrip, as provided in Section
3.03 hereof, in respect of any fractional shares, and, if the number of Warrants
represented by a Warrant Certificate shall not have been exercised in full, a
new Warrant Certificate, countersigned by the Warrant Agent, for the balance of
the number of whole Series A Warrants, Series B Warrants, or Series C Warrants,
as the case may be, together with cash or scrip, as provided in Section 4.04
hereof, in respect of the balance of any fractional Warrants, represented by the
surrendered Warrant Certificate; PROVIDED, HOWEVER, that the Company shall not
be required to pay any tax or taxes that may be payable in respect of any
transfer in connection with the issue of any Warrant Certificate in a name other
than that of the registered holder of the Warrant Certificate surrendered upon
the exercise of a Warrant.

            (c) A Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of the surrender for exercise of the
Warrant Certificate. Each person in whose name any such certificate for shares
of Common Stock is issued shall for all purposes be deemed to have become the
holder of record of such shares at the close of business on the date on which
the Warrant Certificate was duly surrendered to the Warrant Agent and payment of
the Warrant Price and any applicable taxes was made to the Warrant Agent for the
account of the Company, irrespective of the date of delivery of such
certificate, except that, if the date of such surrender and payment is a date
when the stock transfer books of the Company are closed, such person shall be
deemed to have become the holder of such shares at the close of business on the
next succeeding date on which the stock transfer books are open (whether before
or after the applicable Expiration Date).

            (d) The Warrant Agent shall promptly notify the Company in writing
of any exercise of any Warrant and of the number of shares delivered upon the
exercise of such Warrant, shall pay to the Company within 72 hours after receipt
by wire transfer or certified or official bank check payable to the order of the
Company the amount of money received by it upon the exercise of Warrants (less
any amount paid by the Warrant Agent in respect of a fractional share upon such
exercise in accordance with Section 3.03 hereof). The Warrant Agent shall hold
any proceeds collected and not yet paid to the Company in a federally insured
escrow account. A detailed accounting statement setting forth the number of
Warrants exercised, the amount of funds received upon such exercise and all
expenses incurred by the Warrant Agent shall be transmitted to the Company on
payment to the Company of the funds so received upon exercise. The Warrant Agent
shall render to the Company a complete accounting setting forth the number of
Warrants exercised, the identity of the persons exercising such Warrants, the

<PAGE>

number of shares issued, the amounts distributed to the Company and all other
expenses incurred by the Warrant Agent as of each Expiration Date.

            (e) The Warrant Agent may deem and treat the person named as the
registered holder on the face of any Warrant as the true and lawful owner
thereof for all purposes. If the Warrant Agent is instructed to deliver shares
upon the exercise of Warrants or to deliver a Warrant Certificate representing
unexercised Warrants, in any case registered in a name or names other than the
name or names in which such exercised Warrant was registered, the Warrant Agent
may require such documents, and such evidence of payment of applicable transfer
taxes, as it may deem necessary to enable it to carry out the instructions of
the bearer.

            SECTION 3.03. NO FRACTIONAL SHARES TO BE ISSUED. Notwithstanding
anything to the contrary contained in this Agreement, if the number of shares of
Class B Common Stock purchasable on the exercise of each Warrant is adjusted
pursuant to the provisions of Section 4.02 hereof, the Company shall not be
required to issue any fraction of a share of Class B Common Stock or to
distribute stock certificates that evidence fractional shares of Class B Common
Stock or to issue a Warrant Certificate representing a fractional Warrant upon
exercise of any Warrants. If Warrant Certificates evidencing more than one
Warrant shall be surrendered for exercise at one time by the same holder, the
number of full shares which shall be issuable upon exercise thereof shall be
computed on the basis of the aggregate number of Warrants so surrendered. If any
fraction of a share of Class B Common Stock would, except for the provisions of
this Section 3.03, be issuable on the exercise of any Warrant or Warrants, the
Company shall, at its option upon notice to the Warrant Agent given within two
(2) Business Days of exercise of any such Warrant or Warrants, either (a)
purchase such fraction for an amount in cash equal to the then-current market
value of such fraction computed in accordance with Section 4.01(d) hereof
(assuming, for the purpose of such computation, that the date of surrender of
such Warrants to the Warrant Agent shall be the applicable record date referred
to in Section 4.01(d)) or (b) issue scrip of the Company in lieu thereof,
rounded up to the nearest one-hundredth of a share. Such scrip shall be
non-dividend bearing and non-voting, shall be exchangeable in combination with
other similar scrip for the number of full shares of Class B Common Stock
represented thereby, shall be issued in such denominations (not less than
one-hundredth of a share) and in such form, shall expire after such reasonable
time (which shall not be less than six years from the date of issue) and may
contain such provisions for sale for the account of the holders of such scrip of
shares of Class B Common Stock for which such scrip is exchangeable or the
payment to such holders of the market value of such shares, and be subject to
such other terms and provisions, if any, as the Board of Directors may from time
to time determine. Fractional Warrants shall be treated pursuant to Section
4.04. The warrantholders, by their acceptance of the Warrant Certificates,
expressly waive their right to receive any fraction of a share of Class B Common
Stock or a stock certificate representing a fraction of a share of Class B
Common Stock or Warrant Certificate representing a fractional Warrant upon
exercise of any Warrant.

            SECTION 3.04. ACQUISITION OF WARRANTS BY THE COMPANY; CANCELLATION
OF WARRANTS. The Company shall have the right, except as limited by law or other
agreement, to purchase or otherwise acquire Warrants at such times, in such
manner and for such consideration as it may deem appropriate. The Warrant Agent

<PAGE>

shall cancel any Warrant Certificate delivered to it for exercise or redemption,
in whole or in part, or delivered to it for transfer, exchange, or substitution,
and no Warrant Certificates shall be issued in lieu thereof unless such
exercise, redemption, transfer, exchange or substitution is expressly permitted
by the provisions of this Agreement. On request of the Company, the Warrant
Agent shall destroy canceled Warrant Certificates held by it and shall deliver
its certificates of destruction to the Company. If the Company shall acquire any
of the Warrants, such acquisition shall not operate as a redemption or
termination of the right represented by such Warrants unless and until the
Warrant Certificates evidencing such Warrants are surrendered to the Warrant
Agent for cancellation.

            SECTION 3.05. CERTAIN ADDITIONAL TERMS OF EXERCISE. (a) In the case
of the Series A Warrants, no such Warrant may be exercised unless (i) the
average Closing Price per share of the Class A Common Stock over any period of
20 consecutive Trading Days preceding the date of exercise exceeded $4.00 or
(ii) there has been a Change of Control at any time prior to the date of
exercise.

            (b) In the case of the Series B Warrants, no such Warrant may be
exercised unless (i) the average Closing Price per share of the Class A Common
Stock over any period of 20 consecutive Trading Days preceding the date of
exercise exceeded $5.00 or (ii) there has been a Change of Control at any time
prior to the date of exercise.

            (c) In the case of the Series C Warrants, no such Warrant may be
exercised unless (i) the average Closing Price per share of the Class A Common
Stock over any period of 20 consecutive Trading Days preceding the date of
exercise exceeded $6.00 or (ii) there has been a Change of Control at any time
prior to the date of exercise.

            (d) The Board of Directors of the Company may authorize any Series
of Warrants to become exercisable notwithstanding the failure to satisfy the
requirements in this Section 3.05, but shall have no obligation to do so.

                                  ARTICLE IV

        ADJUSTMENT OF WARRANT PRICE, TRIGGER PRICES, SHARES OF COMMON
                   STOCK PURCHASABLE AND NUMBER OF WARRANTS

            SECTION 4.01. ADJUSTMENT OF WARRANT PRICE AND TRIGGER PRICES. The
Warrant Price specified in Section 3.01 and Trigger Prices specified in Section
3.05 shall be subject to adjustment from time to time as follows:

            (a) If the Company after the date hereof shall (i) pay a dividend or
make a distribution to all holders of Common Stock or any class thereof in
shares of Common Stock or any class thereof, (ii) subdivide the outstanding
shares of Common Stock or any class thereof, or (iii) combine the outstanding
shares of Common Stock or any class thereof into a smaller number of shares,
then in any such case the Warrant Price and Trigger Prices in effect immediately
prior thereto shall each be adjusted to a price obtained by multiplying such
Warrant Price and Trigger Prices by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding prior to such action and the
denominator shall be the number of shares of Common Stock outstanding after

<PAGE>

giving effect to such action. An adjustment made pursuant to clause (i) of this
subsection (a) shall become effective retroactively immediately after the record
date for such dividend or distribution, and an adjustment made pursuant to
clause (ii) or (iii) of this subsection (a) shall become effective immediately
after the effective date of such subdivision or combination.

            (b) In case the Company after the date hereof shall issue rights or
warrants to all holders of Common Stock or any class thereof entitling them (for
a period expiring within 45 days after the record date mentioned below) to
subscribe for or purchase shares of such Common Stock or any class thereof at a
price per share less than the then-current market price per share (as determined
pursuant to subsection (d) below) on the record date (or, if applicable, the
ex-distribution date) mentioned below, the Warrant Price and Trigger Prices in
effect immediately prior thereto shall each be adjusted to a price obtained by
multiplying such Warrant Price and Trigger Prices by a fraction of which (i) the
numerator shall be the number of shares of Common Stock outstanding on the date
of issuance of such rights or warrants plus the number of shares of Common Stock
of the class subject to such rights or warrants which the aggregate offering
price of the total number of shares so to be offered would purchase at the
current market price of the Common Stock subject to such rights or warrants, and
(ii) the denominator shall be the number of shares of Common Stock outstanding
on the date of issuance of such rights or warrants plus the number of additional
shares of Common Stock, or the applicable class thereof, to be offered for
subscription or purchase; PROVIDED, HOWEVER, that no adjustment shall be made in
the Warrant Price if the Company issues or distributes to each holder of
Warrants the rights or warrants which each holder of Warrants would have been
entitled to receive had such Warrants been exercised prior to the record date
mentioned below. Any such adjustments shall be made whenever such rights or
warrants are issued and shall become effective retroactively immediately after
the record date for the determination of stockholders entitled to receive such
rights or warrants.

            (c) In case the Company after the date hereof shall distribute to
all holders of Common Stock or any class thereof evidences of its indebtedness
or assets (excluding any cash dividend or distribution) or rights to subscribe
(excluding those referred to in subsection (b) above) or shares of capital stock
of any class other than the Common Stock, in each such case the Warrant Price
and Trigger Prices in effect immediately prior thereto shall each be adjusted to
a price obtained by multiplying such Warrant Price and Trigger Prices by a
fraction of which (i) the numerator shall be the sum of the amount, for each
class of Common Stock then outstanding, of the then-current market price per
share (determined as provided in subsection (d) below) of the Common Stock of
such class, multiplied by the number of outstanding shares of such class, in
each case on the record date (or, if applicable, the ex-distribution date)
mentioned below less the then-current fair market value (as determined by the
Board of Directors in its reasonable judgment whose determination shall be
conclusive, and described in a statement filed with the Warrant Agent) of the
assets or evidences of indebtedness so distributed or of such subscription
rights or of such shares of capital stock of any class other than Common Stock,
and (ii) the denominator shall be the sum of the amount, for each class of
Common Stock then outstanding, of the then-current market price per share of the
Common Stock of such class, multiplied by the number of outstanding shares of
such class, in each case on the record date (or, if applicable, the
ex-distribution date) mentioned below; PROVIDED, HOWEVER, that no adjustment
shall be made in the Warrant Price (1) if the Company issues or distributes to

<PAGE>

each holder of Warrants the subscription rights referred to above in this
subsection (c) that each holder of Warrants would have been entitled to receive
had the Warrants been exercised prior to the record date mentioned below, or (2)
if the Company grants to each holder of Warrants the right to receive, upon the
exercise thereof at any time after the distribution of the evidences of
indebtedness or assets or shares of capital stock of any class other than the
Common Stock referred to above in this subsection (c), the evidences of
indebtedness or assets or shares of capital stock of any class other than the
Common Stock that such holder would have been entitled to receive had the
Warrants been exercised prior to the record date mentioned below. The Company
shall provide the Warrant Agent, upon receipt of a written request therefor,
with any indenture or other instrument defining the rights of the holders of any
indebtedness, assets, subscription rights or capital stock referred to in this
Section 4.01(c). Any such adjustment shall be made whenever any such
distribution is made and shall become effective retroactively immediately after
the record date for the determination of stockholders entitled to receive such
distribution.

            (d) For the purpose of any computation under subsection (b) or (c)
above, the current market price per share of any class of Common Stock on any
date shall be deemed to be the average Closing Price per share for the ten
consecutive Trading Days preceding the applicable record date (or, if earlier,
the date on which such class of Common Stock commences trading on an
ex-distribution basis).

            (e) In any case in which this Section 4.01 shall require that an
adjustment be made retroactively immediately following a record date, the
Company may elect to defer (but only until five Business Days following the
filing by the Company with the Warrant Agent of a certificate signed by the
Chairman of the Board, Chief Executive Officer, the President or any Vice
President of the Company (an "OFFICERS' CERTIFICATE") or a certificate of a firm
of independent public accountants as required in subsection (g) of this Section
4.01) issuing to the holder of any Warrant exercised after such record date the
shares of Common Stock and any other capital stock of the Company issuable upon
such exercise in excess of the shares of Common Stock and any other capital
stock of the Company issuable upon such exercise prior to such adjustment.

            (f) No adjustment shall be required unless such adjustment would
require an increase or decrease of at least one hundredth of one cent in the
Warrant Price or Trigger Prices then subject to adjustment; PROVIDED, HOWEVER,
that any adjustments that are not made by reason of this subsection (f) shall be
carried forward and taken into account in any subsequent adjustment. In case the
Company shall at any time issue Common Stock or any class thereof by way of
dividend on any stock of the Company or subdivide or combine the outstanding
shares of Common Stock or any class thereof, said amount of one hundredth of one
cent specified in the preceding sentence (as theretofore increased or decreased,
if said amount shall have been adjusted in accordance with the provisions of
this paragraph (f)) shall forthwith be proportionately increased in the case of
such a combination or decreased in the case of such a subdivision or stock
dividend so as appropriately to reflect the same. All calculations under this
Section 4.01 shall be made to the nearest one hundredth of one cent.

            (g) Whenever an adjustment in the Warrant Price or Trigger Prices is
made as required or permitted by the provisions of this Section 4.01, the

<PAGE>

Company shall promptly file with the Warrant Agent (i) an Officers' Certificate
in the case of an adjustment pursuant to subsection (a) or (i) of this Section
4.01, or (ii) a certificate of a firm of independent public accountants in the
case of any other adjustment pursuant to this Section 4.01, in each case (A)
setting forth the adjusted Warrant Price and Trigger Prices as provided in this
Section 4.01 and setting forth a brief statement of the facts requiring such
adjustment and the computation thereof, and (B) setting forth the number of
shares of Common Stock (or portions thereof) purchasable upon exercise of a
Warrant after such adjustment in the Warrant Price in accordance with Section
4.02 hereof or the number of Warrants outstanding in accordance with Section
4.03 hereof after such adjustment in the Warrant Price and the record date
therefor, which Officers' Certificate or certificate of a firm of independent
public accountants, as the case may be, shall be conclusive evidence of the
correctness of any such adjustment, and promptly after such filing shall mail or
cause to be mailed a notice of such adjustment to each warrantholder at his last
address as the same appears on the Warrant Register. The Warrant Agent shall be
under no duty or responsibility with respect to any such certificate except to
exhibit the same to any holder of Warrants desiring inspection thereof.

            (h) In case:

            (1) the Company shall declare a dividend (or any other distribution)
     on shares of Common Stock or any class thereof payable from sources other
     than its retained earnings (as such term is used in generally accepted
     accounting principles); or

            (2) the Company shall authorize the granting to the holders of
     shares of Common Stock or any class thereof of rights to subscribe for or
     purchase any shares of capital stock of any class or of any other right; or

            (3) of any reclassification of shares of Common Stock or any class
     thereof (other than a subdivision or combination of outstanding shares of
     Common Stock or any class thereof), or of any consolidation or merger to
     which the Company is a party and for which approval of any stockholders of
     the Company is required, or of the sale or transfer of all or substantially
     all of the assets of the Company; or

            (4) of the voluntary or involuntary dissolution, liquidation or
     winding up of the Company;

then the Company shall cause to be filed with the Warrant Agent, and shall cause
to be mailed to the holders of the Warrants, at their last addresses as they
shall appear upon the Warrant Register, at least 10 days prior to the applicable
record date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution or rights,
or, if a record is not to be taken, the date as of which the holders of Common
Stock (or any class thereof) of record to be entitled to such dividend,
distribution or rights are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and, if applicable,
the date as of which it is expected that holders of Common Stock (or any class
thereof) of record shall be entitled to exchange their shares of Common Stock
for securities or other property (including cash) deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,

<PAGE>

liquidation or winding up. Failure to give any such notice, or any defect
therein, shall not affect the validity of the proceedings referred to in clauses
(1), (2), (3) and (4) above.

            (i) Anything in this Section 4.01 to the contrary notwithstanding,
the Company shall be entitled, but not required, to make such reductions in the
Warrant Price or the Trigger Prices, in addition to those required by this
Section 4.01, as it in its discretion shall determine to be advisable,
including, without limitation, in order that any dividend in or distribution of
shares of Common Stock (or any class thereof) or shares of capital stock of any
class other than Common Stock, subdivision, reclassification or combination of
shares of Common Stock, issuance of rights or warrants, or any other transaction
having a similar effect, shall not be treated as a distribution of property by
the Company to its stockholders under Section 305 of the Internal Revenue Code
of 1986, as amended or any successor provision and shall not be taxable to them.

            (j) Anything to the contrary herein notwithstanding, no adjustment
to the Warrant Price, the Trigger Prices or the number of shares of Common Stock
purchasable upon exercise of a Warrant (or the number of Warrants) shall be made
as a result of, or in connection with, the issuance of (i) options or rights to
purchase Common Stock issued to employees of the Company or its Subsidiaries
pursuant to a stock option or other similar plan adopted by the Board of
Directors, or the modification, renewal or extension of any such plan if
approved by the Board of Directors, (ii) shares of Common Stock or other
securities issued by the Company pursuant to and in accordance with the Plan, or
(iii) upon conversion of shares of any class of Common Stock into shares of any
other class of Common Stock pursuant to and in accordance with the provisions of
the Certificate of Incorporation of the Company as in effect from time to time.

            SECTION 4.02. ADJUSTMENT OF SHARES OF COMMON STOCK PURCHASABLE UPON
EXERCISE OF WARRANTS. Unless the Company shall have exercised its election as
provided in Section 4.03 hereof, upon each adjustment of the Warrant Price
pursuant to Section 4.01 hereof the number of shares of Common Stock purchasable
upon exercise of a Warrant outstanding prior to the effectiveness of such
adjustment shall be adjusted to the number of shares of Common Stock, calculated
to the nearest one-hundredth of a share, obtained by (i) multiplying the number
of shares of Common Stock purchasable immediately prior to such adjustment upon
the exercise of a Warrant by the Warrant Price in effect prior to such
adjustment, and (ii) dividing the product so obtained by the Warrant Price in
effect after such adjustment of the Warrant Price.

            SECTION 4.03. ELECTION TO ADJUST WARRANTS INSTEAD OF SHARES PER
WARRANT. The Company may elect on or after the date of any adjustment of the
Warrant Price pursuant to Section 4.01 hereof to adjust the number of Warrants
outstanding in substitution for any adjustment in the number of shares of Common
Stock purchasable upon the exercise of a Warrant as provided in Section 4.02
hereof. Each of the Warrants outstanding after such adjustment of the number of
Warrants shall be exercisable for one share of Common Stock. Each Warrant held
of record prior to such adjustment of the number of Warrants shall become that
number of Warrants (calculated to the nearest hundredth) obtained by (i)
multiplying the number of Warrants held of record prior to adjustment of the
number of Warrants by the Warrant Price in effect prior to adjustment of the

<PAGE>

Warrant Price, and (ii) dividing the product so obtained by the Warrant Price in
effect after adjustment of the Warrant Price. The Company shall make a public
announcement of its election to adjust the number of Warrants, 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 Warrant
Price is adjusted or any day thereafter, but shall not be less than 10 or more
than 30 days later than the date of public announcement. Upon each adjustment of
the number of Warrants pursuant to this Section 4.03, the Company shall cause
the Warrant Agent, as promptly as practicable, to distribute to holders of
record of the Warrant Certificates on such record date either (i) Warrant
Certificates evidencing any additional Warrants to which such holders shall be
entitled as a result of such adjustment, or (ii) in substitution and replacement
for the Warrant Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Warrant
Certificates evidencing all the Warrants to which such holders shall be entitled
after such adjustment. Warrant Certificates to be so distributed shall be
issued, executed and countersigned in the manner specified in this Agreement
(but may bear, at the option of the Company, the adjusted Warrant Price), shall
represent the same class of Warrants as was represented by the Warrant
Certificate so surrendered and shall be registered in the names of the holders
of record of the Warrant Certificates on the record date specified in the public
announcement.

            For the purposes of this Section 4.03, "public announcement" shall
mean publication at least once in a newspaper printed in the English language
and customarily published at least once a day for at least five days in each
calendar week and of general circulation in the Borough of Manhattan, New York,
New York.

            SECTION 4.04. NO FRACTIONAL WARRANTS TO BE ISSUED. Notwithstanding
anything to the contrary contained in this Agreement, the Company shall not be
required to issue fractions of Warrants on any distribution of Warrants to
warrantholders pursuant to Section 4.03 hereof or otherwise or to distribute
Warrant Certificates that evidence fractional Warrants. If any fraction of a
Warrant would, except for the provisions of this Section 4.04, be issuable upon
an adjustment of the Warrant Price and distribution of Warrants pursuant to
Section 4.03 hereof or otherwise, the Company shall, at its option, either (a)
purchase such fraction for an amount in cash equal to the then-current market
value of such fraction computed in accordance with Section 4.01(d) hereof (with
respect to the current market price of the Warrant rather than the per share
current market price of the Common Stock and assuming, for the purpose of such
computation, that the effective date of such adjustment of the Warrant Price, or
such other relevant date, shall be the applicable record date referred to in
Section 4.01(d)) or (b) issue scrip of the Company in lieu thereof, rounded up
to the nearest one-hundredth of a Warrant. Such scrip shall be exchangeable in
combination with other similar scrip for the number of full Warrants represented
thereby, shall be issued in such denominations (not less than one-hundredth of a
Warrant) and in such form, shall expire after such reasonable time (which shall
not be less than six years from the date of issue or the applicable Expiration
Date, if earlier) and may contain such provisions for sale for the account of
the holders of such scrip of the Warrants for which such scrip is exchangeable
or the payment to such holders of the market value of such Warrants, and be
subject to such other terms and provisions, if any, as the Board of Directors
may from time to time determine. The warrantholders, by their acceptance of the
Warrant Certificates, expressly waive their right to receive any fraction of a

<PAGE>

Warrant or a Warrant Certificate representing a fraction of a Warrant upon the
adjustment thereof in accordance with this Article IV or otherwise.

            SECTION 4.05. RIGHTS UPON CONSOLIDATION, MERGER, SALE, TRANSFER OR
RECLASSIFICATION. (a) In case of any consolidation with or merger of the Company
into another corporation (other than a merger or consolidation in which the
Company is the continuing corporation), or in case of any lease, sale or
conveyance to another corporation of the property of the Company as an entirety
or substantially as an entirety, such successor, leasing or purchasing
corporation, as the case may be, shall execute with the Warrant Agent a
supplemental agreement (1) providing that the holder of each Warrant then
outstanding shall have the right thereafter (until the applicable Expiration
Date) to receive, upon exercise thereof, in lieu of each share of Common Stock
deliverable upon such exercise immediately prior to such event, only the kind
and amount of shares and/or other securities and/or property and/or cash
receivable upon such consolidation, merger, lease, sale or conveyance by a
holder of one share of such Common Stock, and (2) setting forth the Warrant
Price for the shares and/or other securities and/or property and/or cash so
issuable, which shall be an amount equal to the Warrant Price per share of
Common Stock immediately prior to such event.

            (b) In case of any liquidation, dissolution or winding up of the
affairs of the Company, the Company shall make prompt, proportionate, equitable,
lawful and adequate provision as part of the terms of such dissolution,
liquidation or winding up such that the holder of a Warrant may thereafter
receive, on exercise of such Warrant, in lieu of each share of Common Stock of
the Company which such holder would have been entitled to receive upon exercise
of such Warrant, the same kind and amount of any stock, securities or assets as
may be issuable, distributable or payable on any such dissolution, liquidation
or winding up with respect to each share of Common Stock of the Company;
PROVIDED, HOWEVER, that in the event of any such dissolution, liquidation or
winding up, the right to exercise the Warrants shall terminate on a date fixed
by the Company, such date to be not earlier than the 90th day next succeeding
the date on which notice of such termination of the right to exercise the
Warrants has been given by mail to the holders thereof in accordance with
Section 4.01(h).

            (c) In case of any reclassification or change of the shares of
Common Stock issuable upon exercise of the Warrants (other than a change in par
value, or from no par value to a par value or as a result of a subdivision or
combination) or in case of any consolidation or merger of another corporation
into the Company in which the Company is the continuing corporation and in which
the holders of the shares of Common Stock thereafter receive shares and/or other
securities and/or property and/or cash for such shares of Common Stock
(including for this purpose shares reflecting a change in par value or from no
par value to a par value or as a result of a subdivision or combination of the
shares of Common Stock), the Company shall execute with the Warrant Agent a
supplemental agreement (1) providing that the holder of each Warrant then
outstanding shall have the right thereafter (until the expiration of the
exercise right of the warrant) to receive, upon exercise thereof, in lieu of
each share of Common Stock deliverable upon such exercise immediately prior to
such event, only the kind and amount of shares and/or other securities and/or
property and/or cash receivable upon such reclassification, change,
consolidation or merger by a holder of one share of such Common Stock, and (2)
setting forth the Warrant Price for the shares and/or other securities and/or

<PAGE>

property and/or cash so issuable, which shall be an amount equal to the Warrant
Price per share of Common Stock immediately prior to such event. If, as a result
of this subsection (c), the holder of any Warrant thereafter surrendered for
exercise shall become entitled to receive shares of two or more classes of
capital stock of the Company, the Board of Directors (whose determination shall
be conclusive and shall be described in a statement filed with the Warrant
Agent) shall determine the allocation of the Warrant Price between or among
shares of such classes of capital stock.

            (d) Any supplemental agreement entered into pursuant to this Section
4.05 shall (1) where appropriate, state the Warrant Price in terms of one full
share of Common Stock of the Company or one full share of the common stock of
any successor, leasing or purchasing corporation and (2) provide for adjustments
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article IV.

            (e) The above provisions of this Section 4.05 shall similarly apply
to successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, leases, sales or conveyances.

            (f) Notice of the execution of any such supplemental agreement shall
be mailed by the Company to registered holders of Warrants as soon as
practicable after the execution of such supplemental agreement.

            (g) In the event that at any time as a result of the provisions of
this Section 4.05, the holder of any Warrant thereafter surrendered for exercise
shall become entitled to receive any shares or other securities other than
shares of Common Stock, thereafter the price or prices of such other shares or
other securities so receivable upon exercise of any Warrant 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 Common Stock contained in Article
IV hereof, and the provisions of Article III hereof with respect to the Common
Stock shall apply on like terms to any such other shares or other securities.

            SECTION 4.06. COVENANT TO RESERVE SHARES FOR ISSUANCE ON Exercise.
The Company covenants that it will at all times reserve and keep available out
of its authorized Common Stock, solely for the purpose of issue upon exercise of
Warrants and exchange of scrip as herein provided, the full number of shares of
Common Stock, if any, then issuable if all outstanding Warrants then exercisable
were to be exercised. The Company covenants that all shares of Common Stock
which shall be so issuable shall be duly and validly issued and fully paid and
non-assessable.

            The Company hereby authorizes and directs its current and future
transfer agents for the Common Stock and for any shares of the Company's capital
stock issuable upon the exercise of any of the Warrants at all times to reserve
such number of authorized shares as shall be requisite for such purpose. The
Warrant Agent is hereby authorized to requisition from time to time from any
such transfer agents stock certificates required to honor outstanding Warrants
upon exercise thereof in accordance with the terms of this Agreement, and the
Company hereby authorizes and directs such transfer agents to comply with all
such requests of the Warrant Agent. The Company will supply such transfer agents
with duly executed stock certificates for such purposes and will provide or

<PAGE>

otherwise make available any cash or scrip which may be payable as provided in
this Article IV. Promptly after each Expiration Date, the Warrant Agent shall
certify to the Company the aggregate number of expired Warrants then
outstanding, and thereafter no shares shall be reserved in respect of such
expired Warrants.

            SECTION 4.07. COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS; SUSPENSION
OF EXERCISE OF WARRANTS. The Company covenants that if any shares of Common
Stock required to be reserved for purposes of exercise of Warrants or exchange
of scrip require, under any Federal or state law or rule or regulation of any
national securities exchange, registration with or approval of any governmental
authority, or listing on any national securities exchange before such shares may
be issued upon exercise, the Company will in good faith and as expeditiously as
possible endeavor to cause such shares to be duly registered, approved or listed
on the relevant national securities exchange, as the case may be; PROVIDED,
HOWEVER, that in no event shall such shares of Common Stock be issued, and the
Company is hereby authorized to suspend the exercise of all Warrants, for the
period during which such registration, approval or listing is required but not
in effect.

            SECTION 4.08. PAYMENT OF TAXES ON STOCK CERTIFICATES ISSUED UPON
EXERCISE. The initial issuance of certificates of Common Stock upon the exercise
of Warrants shall be made without charge to the exercising warrantholders for
any transfer, stamp or similar tax in respect of the issuance of such stock
certificates, and such stock certificates shall be issued in the respective
names of, or in such names as may be directed by, the registered holders of the
Warrants exercised; PROVIDED, HOWEVER, that the Company shall not be required to
pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of any such stock certificate, any Warrant Certificates or
other securities in a name other than that of the registered holder of the
Warrant Certificate surrendered upon exercise of the Warrant, and the Company
shall not be required to issue or deliver such certificates or other securities
unless and until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.

            SECTION 4.09. WARRANT AGENT NOT RESPONSIBLE FOR ADJUSTMENTS OR
VALIDITY OF STOCK. The Warrant Agent shall not at any time be under any duty or
responsibility to any warrantholder to determine whether any facts exist that
may require an adjustment of the Warrant Price, or with respect to the nature or
extent of any such adjustment when made, or with respect to the method employed,
or herein or in any supplemental agreement provided to be employed, in making
the same. The Warrant Agent shall not be accountable with respect to the
validity or value (or the kind or amount) of any shares of Common Stock or of
any securities or property or scrip which may at any time be issued or delivered
upon the exercise of any Warrant or upon any adjustment pursuant to Article IV,
and it makes no representation with respect thereto. The Warrant Agent shall not
be responsible for any failure of the Company to make any cash payment or to
issue, transfer or deliver any shares of Common Stock or stock certificates or
other securities or property upon the surrender of any Warrant for the purpose
of exercise or upon any adjustment pursuant to Article IV, or to comply with any
of the covenants of the Company contained in this Article IV.

<PAGE>

            SECTION 4.10. STATEMENTS ON WARRANTS. The form of Warrant
Certificate need not be changed because of any adjustment made pursuant to this
Article IV, and Warrant Certificates issued after such adjustment may state the
same Warrant Price and the same number of shares of Common Stock as are stated
in the Warrant Certificates initially issued pursuant to this Agreement. The
Company, however, may at any time in its sole discretion (which shall be
conclusive) make any change in the form of Warrant Certificate that it may deem
appropriate and that does not affect the substance thereof; and any Warrant
Certificate thereafter issued or countersigned, whether in exchange or
substitution for an outstanding Warrant Certificate or otherwise, may be in the
form as so changed.

            SECTION 4.11. ISSUANCE OF CLASS A COMMON STOCK IN LIEU OF CLASS B
COMMON STOCK. Effective at such time as Section (A) of Article FIFTH of the
Certificate of Incorporation of the Company shall cease to be applicable as
provided therein, if Class B Common Stock is then issuable upon exercise of a
Warrant an equal number of shares of Class A Common Stock shall thereafter be
issuable upon exercise of such Warrant in lieu of the Class B Common Stock, but
otherwise on the same terms and conditions as provided pursuant to this Warrant
Agreement.

                                  ARTICLE V

          OTHER PROVISIONS RELATING TO RIGHTS OF HOLDERS OF WARRANTS

            SECTION 5.01. NO RIGHTS AS STOCKHOLDERS. Nothing contained in this
Agreement or in any Warrant Certificate shall be construed as conferring on the
holder of any Warrant or his transferee any rights whatsoever as a stockholder
of the Company, either at law or equity including but not limited to, the right
to vote at, or to receive notice of, any meeting of stockholders of the Company;
nor shall the consent of any such holder be required with respect to any action
or proceeding of the Company; nor shall any such holder, by reason of the
ownership or possession of a Warrant or the Warrant Certificate representing the
same, either at, before or after exercising such Warrant, have any right to
receive any cash dividends, stock dividends, allotments or rights, or other
distributions (except as specifically provided herein), paid, allotted or
distributed or distributable to the stockholders of the Company prior to the
date of the exercise of such Warrant, nor shall such holder have any right not
expressly conferred by this Agreement or the Warrant Certificate that he holds.

            SECTION 5.02. MUTILATED OR MISSING WARRANT CERTIFICATES. If any
Warrant Certificate is lost, stolen, mutilated or destroyed, the Company may in
its discretion issue and the Warrant Agent may countersign, in exchange and
substitution for and upon cancellation of the mutilated Warrant Certificate, or
in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, upon receipt of a proper affidavit or other evidence satisfactory to
the Company and the Warrant Agent (and surrender of any mutilated Warrant
Certificate) and bond of indemnity in form and amount and with corporate surety
satisfactory to the Company and the Warrant Agent in each instance protecting
the Company and the Warrant Agent, a new Warrant Certificate of like tenor and
representing an equivalent number of Warrants as the Warrant Certificate so
lost, stolen, mutilated or destroyed. Any such new Warrant Certificate shall
constitute an original contractual obligation of the Company, whether or not the
allegedly lost, stolen, mutilated or destroyed Warrant Certificate shall be at
any time enforceable by anyone. An applicant for such a substitute Warrant

<PAGE>

Certificate shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company or the Warrant Agent may prescribe.
All Warrant Certificates shall be held and owned upon the express condition that
the foregoing provisions are exclusive, with respect to the replacement of lost,
stolen, mutilated or destroyed Warrant Certificates, and shall preclude any and
all other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement of negotiable
instruments or other securities without their surrender.

            SECTION 5.03. DELIVERY OF PROSPECTUSES. If, and to the extent that,
the Company may be required by the Securities Act, or any other applicable
Federal or state law, to furnish a prospectus to warrantholders upon their
exercise of Warrants, the Company shall cause to be kept at the Warrant Agent's
Office sufficient quantities of such prospectuses for delivery to warrantholders
upon their exercise of Warrants, and the Warrant Agent hereby agrees to deliver
such prospectuses to such warrantholders together with the shares of Common
Stock or other securities receivable by such warrantholders upon their exercise
of Warrants.

                                  ARTICLE VI

                         CONCERNING THE WARRANT AGENT

            SECTION 6.01. PAYMENT OF CERTAIN TAXES. The Company will from time
to time promptly pay all transfer, stamp or similar taxes that may be imposed
upon the Company in respect of the initial issuance or delivery of shares of
Common Stock upon the exercise of Warrants, but the Company shall not be
obligated to pay any transfer taxes in respect of any transfer of the Warrants
or such shares effected by any holder thereof.

            SECTION 6.02. CHANGE OF WARRANT AGENT. (a) The Warrant Agent, or any
successor to it hereafter appointed, may resign its duties and be discharged
from all further duties and liabilities hereunder (except liabilities arising as
a result of the Warrant Agent's own gross negligence or willful misconduct)
after giving 60 days' notice in writing to the Company, except that such shorter
notice may be given as the Company shall, in writing, accept as sufficient. At
least 15 days prior to the date such resignation is to become effective, the
Warrant Agent shall cause a copy of such notice of resignation to be mailed to
the registered holder of each Warrant Certificate. If the office of the Warrant
Agent becomes vacant by resignation or incapacity to act or otherwise, the
Company shall appoint in writing a successor warrant agent in place of the
Warrant Agent. If the Company shall fail to make such appointment within a
period of 60 days after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated warrant agent or by any holder of
Warrants (who shall, with such notice, submit a copy of his Warrant Certificate
for inspection by the Company), then the holder of any Warrants may apply to any
court of competent jurisdiction for the appointment of a successor warrant
agent.

            (b) The Warrant Agent may be removed by the Company at any time upon
30 days' written notice to the Warrant Agent; PROVIDED, HOWEVER, that the
Company shall not remove the Warrant Agent until a successor warrant agent
meeting the qualifications hereof shall have been appointed.

<PAGE>

            (c) If the holders of the majority of the Warrants deliver a notice
to the Company at any time the Company is the Warrant Agent requesting the
replacement of the Warrant Agent, the Company shall promptly appoint as Warrant
Agent a Person who meets the qualifications set forth in clause (d) below and
who is reasonably acceptable to such holders of the majority of the Warrants and
shall promptly upon such appointment resign.

            (d) Any successor warrant agent, whether appointed by the Company or
by a court, shall be a corporation organized, in good standing and doing
business under the laws of the United States of America or any state thereof or
the District of Columbia, and authorized under such laws to exercise corporate
trust powers and subject to supervision or examination by Federal or state
authority and having a combined capital and surplus of not less than
$10,000,000. The combined capital and surplus of any such successor warrant
agent shall be deemed to be the combined capital and surplus as set forth in the
most recent report of its condition published prior to its appointment, provided
that such reports are published at least annually pursuant to law or to the
requirements of a Federal or state supervising or examining authority. After
appointment, any successor warrant agent shall be vested with all the authority,
powers, rights, immunities, duties and obligations of its predecessor warrant
agent with like effect as if originally named as warrant agent hereunder,
without any further assurance, conveyance, act or deed; but if for any reason it
becomes necessary or appropriate, the predecessor warrant agent shall execute
and deliver, at the expense of the Company, an instrument transferring to such
successor warrant agent all the authority, powers and rights of such predecessor
warrant agent hereunder; and upon request of any successor warrant agent, the
Company shall make, execute, acknowledge and deliver any and all instruments in
writing to more fully and effectually vest in and conform to such successor
warrant agent all such authority, powers, rights, immunities, duties and
obligations. Upon assumption by a successor warrant agent of the duties and
responsibilities hereunder, the predecessor warrant agent shall deliver and
transfer, at the expense of the Company, to the successor warrant agent any
property at the time held by it hereunder. As soon as practicable after such
appointment, the Company shall give notice thereof to the predecessor warrant
agent, the registered holders of the Warrants and each transfer agent for the
shares of its Common Stock. Failure to give such notice, or any defect therein,
shall not affect the validity of the appointment of the successor warrant agent.

            (e) Any corporation into which the Warrant Agent may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Warrant Agent shall be a party, shall be the
successor warrant agent under this Agreement without any further act, provided
that such corporation is eligible for appointment as a successor to the Warrant
Agent. Any such successor warrant agent shall promptly cause notice of its
succession as Warrant Agent to be mailed to the Company and to the registered
holder of each Warrant Certificate. In case at the time such successor warrant
agent shall succeed to the agency created by this Agreement, any of the Warrant
Certificates shall have been countersigned but not delivered, any such successor
warrant agent may adopt the countersignature of the original warrant agent and
deliver such Warrant Certificates so countersigned, and in case at that time any
of the Warrant Certificates shall not have been countersigned, any successor to
the warrant agent may countersign such Warrant Certificates either in the name
of the predecessor warrant agent or in the name of the successor warrant agent;
and in all such cases Warrant Certificates shall have the full force provided in
the Warrant Certificates and in this Agreement.

<PAGE>

            (f) In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrant Certificates shall have been
countersigned but not delivered, the Warrant Agent may adopt the
countersignatures under its prior name and deliver such Warrant Certificates so
countersigned; and in case at that time any of the Warrant Certificates shall
not have been counter-signed, the Warrant Agent may countersign such Warrant
Certificates either in its prior name or in its changed name; and in all such
cases such Warrant Certificates shall have the full force provided in the
Warrant Certificates and in this Agreement.

            SECTION 6.03. COMPENSATION; FURTHER ASSURANCES. The Company agrees
(i) that it will pay the Warrant Agent reasonable compensation for its services
as Warrant Agent hereunder and, except as otherwise expressly provided, will pay
or reimburse the Warrant Agent upon demand for all reasonable expenses,
disbursements and advances incurred or made by the Warrant Agent in accordance
with any of the provisions of this Agreement (including the reasonable
compensation, expenses and disbursements of its agents and counsel) except any
such expense, disbursement or advance as may arise from its or any of their
gross negligence, willful misconduct or bad faith; and (ii) 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 Warrant Agent for the carrying
out or performing of the provisions of this Agreement.

            SECTION 6.04. RELIANCE ON COUNSEL. The Warrant Agent may consult
with legal counsel (who may be legal counsel for the Company), and the written
opinion of such counsel or any advice of legal counsel subsequently confirmed by
a written opinion of such counsel shall be full and complete authorization and
protection to the Warrant Agent as to any action taken or omitted by it in good
faith and in accordance with such written opinion or advice.

            SECTION 6.05. PROOF OF ACTIONS TAKEN. Whenever in the performance of
its duties under this Agreement the Warrant Agent shall deem it necessary or
desirable that any matter be proved or established by the Company prior to
taking or suffering or omitting any action hereunder, such matter (unless other
evidence in respect thereof be herein specifically prescribed) may, in the
absence of bad faith on the part of the Warrant Agent, be deemed to be
conclusively proved and established by an Officers' Certificate delivered to the
Warrant Agent; and such Officers' Certificate shall, in the absence of bad faith
on the part of the Warrant Agent be full authority to the Warrant Agent for any
action taken, suffered or omitted in good faith by it under the provisions of
this Agreement in reliance upon such certificate; but in its discretion the
Warrant Agent may in lieu thereof accept other evidence of such fact or matter
or may require such further or additional evidence as to it may seem reasonable.

            SECTION 6.06. CORRECTNESS OF STATEMENTS. The Warrant 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 Warrant Certificates (except its
counter-signature thereof) or be required to verify the same, and all such
statements and recitals are and shall be deemed to have been made by the Company
only.

            SECTION 6.07. VALIDITY OF AGREEMENT. The Warrant Agent shall not be
under any responsibility in respect of the validity of this Agreement or the

<PAGE>

execution and delivery hereof or in respect of the validity or execution of any
Warrant Certificates (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 Warrant Certificate; 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 Common Stock to be issued pursuant
to this Agreement or any Warrants or as to whether any shares of Common Stock
will, when issued, be validly issued and fully paid and nonassessable.

            SECTION 6.08. USE OF AGENTS. The Warrant 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 Warrant
Agent shall not be responsible for the misconduct or negligence of any agent or
attorney, provided due care had been exercised in the appointment and continued
employment thereof.

            SECTION 6.09. LIABILITY OF WARRANT AGENT. The Warrant Agent shall
incur no liability or responsibility to the Company or to any holder of Warrants
for any action taken in reliance on any notice, resolution, waiver, consent,
order, certificate, or other paper, document or instrument believed by it to be
genuine and to have been signed, sent or presented by the proper party or
parties. The Company agrees to indemnify the Warrant Agent and hold it harmless
against any and all liabilities, including judgments, costs and reasonable
counsel fees, for anything done or omitted in good faith by the Warrant Agent in
the execution of this Warrant Agreement, except as a result of the Warrant
Agent's gross negligence or willful misconduct or bad faith.

            SECTION 6.10. LEGAL PROCEEDINGS. The Warrant Agent shall be under no
obligation to institute any action, suit or legal proceeding or to take any
other action likely to involve expense unless the Company or one or more holders
of Warrants shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as the
Warrant Agent may consider proper, whether with or without any such security or
indemnity.

            SECTION 6.11. OTHER TRANSACTIONS IN SECURITIES OF THE COMPANY. The
Warrant Agent in its individual or any other capacity may become the owner of
the Warrants or other securities of the Company, or become peculiarly 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 it were
not Warrant Agent under this Warrant Agreement. Nothing herein shall preclude
the Warrant Agent from acting in any other capacity for the Company or for any
other legal entity.

            SECTION 6.12. ACTIONS AS AGENT. The Warrant Agent shall act
hereunder solely as agent and not in a ministerial capacity, and its duties
shall be determined solely by the provisions hereof. The Warrant Agent shall not
be liable for anything which it may do or refrain from doing in good faith in
connection with this Agreement except for its own gross negligence or willful
misconduct or bad faith.

<PAGE>

            SECTION 6.13. APPOINTMENT AND ACCEPTANCE OF AGENCY. The Company
hereby appoints the Warrant Agent to act as agent for the Company in accordance
with the instructions set forth in this Agreement, and the Warrant Agent hereby
accepts the agency established by this Agreement and agrees to perform the same
upon the terms and conditions herein set forth.

                                 ARTICLE VII

                           MISCELLANEOUS PROVISIONS

            SECTION 7.01. SUPPLEMENTS AND AMENDMENTS. (a) Notwithstanding the
provisions of subsection (b) below, the Warrant Agent may, without the consent
or concurrence of the registered holders of the Warrants, enter into one or more
supplemental agreements or amendments with the Company for the purpose of
evidencing the rights of warrantholders upon consolidation, merger, sale,
transfer, reclassification, liquidation or dissolution pursuant to Section 4.05
hereof, making any changes or corrections in this Agreement that are required to
cure any ambiguity, to correct or supplement any provision contained herein that
may be defective or inconsistent with any other provision herein or any clerical
omission or mistake or manifest error herein contained, or making such other
provisions in regard to matters or questions arising under this Agreement as
shall not adversely affect the interests of the holders of the Warrants or be
inconsistent with this Agreement or any supplemental agreement or amendment.

            (b) With the consent of the registered holders of at least a
majority in number of the Warrants at the time outstanding, the Company and the
Warrant Agent may at any time and from time to time by supplemental agreement or
amendment add any provisions to or change in any manner or eliminate any of the
provisions of this Agreement or of any supplemental agreement or modify in any
manner the rights and obligations of the warrantholders and of the Company;
PROVIDED, HOWEVER, that no such supplemental agreement or amendment shall,
without the consent of the registered holder of each outstanding Warrant
affected thereby,

            (1) alter the provisions of this Agreement so as to affect adversely
     the terms upon which the Warrants are exercisable; or

            (2) reduce the number of Warrants outstanding the consent of whose
     holders is required for any such supplemental agreement or amendment.

            (c) Any provision contained herein to the contrary notwithstanding,
the Company will not enter into a supplemental agreement relating to, or an
amendment of, this Agreement unless such supplement or amendment shall have been
approved by a majority of the members of the Board of Directors of the Company.

            SECTION 7.02. SUCCESSORS AND ASSIGNS. All the covenants and
provisions of this Agreement by or for the benefit of the Company or the Warrant
Agent shall bind and inure to the benefit of their respective successors and
assigns hereunder.

            SECTION 7.03. NOTICES. Any notice or demand authorized by this
Agreement to be given or made by the Warrant Agent or by the holder of any
Warrant to or on the Company shall be sufficiently given or made if sent by mail

<PAGE>

first-class, postage prepaid or by facsimile, addressed (until another address
is filed in writing by the Company with the Warrant Agent), as follows:

                  Willcox & Gibbs, Inc.
                  900 Milik Street
                  Carteret, New Jersey  07008
                  Attention:  Chief Financial Officer
                  Facsimile No.: (732) 541-6249

            Any notice or demand authorized by this Agreement to be given or
made by the holder of any Warrant or by the Company to or on the Warrant Agent
shall be sufficiently given or made if sent by mail first-class, postage prepaid
or by facsimile, addressed (until another address is filed in writing by the
Warrant Agent with the Company), as follows:

                  Willcox & Gibbs, Inc., as Warrant Agent
                  900 Milik Street
                  Carteret, New Jersey  07008
                  Attention:  Corporate Secretary
                  Facsimile No.: (732) 541-6249

            Any notice of demand authorized by this Agreement to be given or
made to the holder of any Warrants shall be sufficiently given or made if sent
by first-class mail, postage prepaid to the last address of such holder as it
shall appear on the Warrant Register.

            SECTION 7.04. APPLICABLE LAW. THE VALIDITY, INTERPRETATION AND
PERFORMANCE OF THIS AGREEMENT AND OF THE WARRANT CERTIFICATES SHALL BE GOVERNED
BY THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE IN AND TO BE
PERFORMED IN SUCH STATE.

            SECTION 7.05. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
expressed and nothing that may be implied from any of the provisions hereof is
intended, or shall be construed, to confer upon, or give to, any Person other
than the parties hereto and the holders of the Warrants any right, remedy or
claim under or by reason of this Agreement or of any covenant, condition,
stipulation, promise or agreement hereof, and all covenants, conditions,
stipulations promises and agreements in this Agreement contained shall be for
the sole and exclusive benefit of the parties hereto and their successors and of
the holders of the Warrants.

            SECTION 7.06. REGISTERED WARRANTHOLDERS. Prior to due presentment
for registration of transfer, the Company and the Warrant Agent may deem and
treat the Person in whose name any Warrants are registered in the Warrant
Register as the absolute owner thereof for all purposes whatever
(notwithstanding any notation of ownership or other writing thereon made by
anyone other than the Company or the Warrant Agent) and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary or be bound to
recognize any equitable or other claim to or interest in any Warrants on the
part of any other Person and shall not be liable for any registration of
transfer of Warrants that are registered or to be registered in the name of a
fiduciary or the nominee of a fiduciary unless made with actual knowledge that a

<PAGE>

fiduciary or nominee is committing a breach of trust in requesting such
registration of transfer or with such knowledge of such facts that its
participation therein amounts to bad faith. The terms "warrantholder" and holder
of any "Warrants" and all other similar terms used herein shall mean such person
in whose name Warrants are registered in the Warrant Register.

            SECTION 7.07. INSPECTION OF AGREEMENT. A copy of this Agreement
shall be available at all reasonable times for inspection by any registered
warrantholder at the principal office of the Warrant Agent. The Warrant Agent
may require any such holder to submit his Warrant Certificate for inspection by
it before allowing such holder to inspect a copy of this Agreement.

            SECTION 7.08. HEADINGS. The Article and Section headings herein are
for convenience only and are not a part of this Agreement and shall not affect
the interpretation thereof.

            SECTION 7.09. COUNTERPARTS. The Agreement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original.

                        [Remainder of this page blank.]

<PAGE>

            IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto under their respective seals as of the day and year first above
written.

                                          WILLCOX & GIBBS, INC.

[CORPORATE SEAL]
                                          By:___________________________________
                                             Name:
                                             Title
Attest:  ____________________________
       Name:
       Title

                                          WILLCOX & GIBBS, INC.,
                                               AS WARRANT AGENT

[CORPORATE SEAL]
                                          By:  _________________________________
                                              Name:
                                              Title
Attest:  ____________________________
       Name:
       Title

<PAGE>

                                                                     EXHIBIT A
                        [Form of Warrant Certificate]

No. W[A][B][C]                __________ Series [A] [B] [C] Warrants

                         VOID AFTER __________, ____

                    WARRANTS TO PURCHASE CLASS B COMMON STOCK

                           OF WILLCOX & GIBBS, INC.

WILLCOX & GIBBS, INC., a Delaware corporation (hereinafter called the
("COMPANY"), for value received, hereby certifies that

or registered assigns, is the owner of the number of Series [A] [B] [C] Warrants
set forth above, each of which represents the right, at any time commencing on
the first Business Day (as defined in the Warrant Agreement referred to below)
after the earlier of May 1, 2002, and the occurrence of a Change of Control (as
defined in the Warrant Agreement) and before 5:00 p.m., New York time, on May 1,
[200_] (subject to Sections 3.01 and 3.05 of the Warrant Agreement), on which
date such Warrants expire, initially to purchase, subject to the terms hereof
and of the Warrant Agreement, one share of Class B Common Stock, $.001 par value
per share, of the Company (hereinafter called the "CLASS B COMMON STOCK") at the
price of $.01 per share (the "WARRANT PRICE"), subject to the terms and
conditions hereof and of the Warrant Agreement, each such purchase to be made,
and to be deemed effective for the purpose of determining the date of exercise,
only upon surrender hereof to the Company at the Warrant Agent Office (which
shall initially be the principal office of the Company), with the form of
Election to Exercise on the reverse hereof duly completed and signed, and upon
payment in full to the Company, acting as the Warrant Agent for the account of
the Company of the Warrant Price (i) in cash, (ii) by certified or official bank
check or (iii) by any combination of the foregoing, all as provided in the
Warrant Agreement and upon compliance with and subject to the conditions set
forth herein and in the Warrant Agreement.

            The Warrant Price and, at the Company's option, either (1) the
number of shares of Class B Common Stock purchasable on the exercise of each
Warrant or (2) the number of Warrants outstanding are subject to adjustment in
certain events as provided in the Warrant Agreement. In the event the Company
elects to adjust the number of Warrants outstanding rather than the number of
shares of Class B Common Stock purchasable on the exercise of each Warrant, the
Company shall cause the Warrant Agent to distribute to registered holders of
Warrant Certificates either Warrant Certificates representing any additional
Warrants issuable pursuant to the adjustment or substitute Warrant Certificates
to replace all outstanding Warrant Certificates in accordance with the
provisions of the Warrant Agreement. The Company shall not be required to issue
fractions of Warrants or Warrant Certificates evidencing fractional Warrants
upon any such adjustment or otherwise, but the Company shall make adjustment in
cash or scrip for any fraction of a Warrant which the registered holder of

<PAGE>

Warrants would have been entitled to receive upon such adjustment or otherwise
on the basis of the then-current market value of such fraction of a Warrant
(computed as provided in the Warrant Agreement).

            This Warrant Certificate is issued under and in accordance with the
Joint Plan of Reorganization filed by the Company and certain of its
subsidiaries in the United States Bankruptcy Court for the District of Delaware
(as it may be further amended or modified, the "PLAN") and confirmed by an order
of such court dated April 3, 2000, and the Warrant Agreement dated as of May 1,
2000 (herein called the "WARRANT AGREEMENT"), between the Company and the
Warrant Agent, and is subject to the terms and provisions of the Plan and the
Warrant Agreement, which terms and provisions are hereby incorporated by
reference herein and made a part hereof. Every holder of this Warrant
Certificate consents to all of the terms contained in the Plan and in the
Warrant Agreement by acceptance hereof. Copies of the Plan and the Warrant
Agreement are available for inspection by the registered holder hereof at the
principal office of the Warrant Agent.

            The Company shall not be required upon the exercise of the Warrants
represented hereby to issue fractions of shares of Class B Common Stock, to
distribute stock certificates that evidence fractional shares of Class B Common
Stock or to issue Warrant Certificates representing fractional Warrants, but
shall make adjustment in cash or scrip for any fraction of a share which the
same registered holder of Warrants exercised in the same transaction would have
been entitled to purchase on the basis of the then-current market value of any
such fraction of a share (computed as provided in the Warrant Agreement). If the
Warrants represented hereby shall be exercised in part, the registered holder
hereof shall be entitled to receive, upon surrender hereof, another Warrant
Certificate for the balance of the number of whole Warrants not exercised as
provided in the Warrant Agreement.

            This Warrant Certificate may be exchanged either separately or in
combination with other Warrant Certificates at the Warrant Agent's Office (as
defined in the Warrant Agreement) for new Warrant Certificates representing the
same aggregate number of Warrants of the same Series evidenced by the Warrant
Certificate or Warrant Certificates exchanged, upon surrender of this Warrant
Certificate of the same Series and upon compliance with and subject to the
conditions set forth herein and in the Warrant Agreement.

            This Warrant Certificate is transferable at the Warrant Agent's
Office by the registered holder hereof in person or by his attorney duly
authorized in writing, upon surrender of this Warrant Certificate and upon
compliance with and subject to the conditions set forth herein and in the
Warrant Agreement. Upon any such transfer, a new Warrant Certificate or new
Warrant Certificates of different denominations, representing in the aggregate a
like number of Warrants of the same Series, will be issued to the transferee.
Every holder of Warrants, by accepting this Warrant Certificate, consents and
agrees with the Company, the Warrant Agent and with every subsequent holder of
this Warrant Certificate that until due presentation for the registration of
transfer of this Warrant Certificate on the Warrant Register maintained by the
Warrant Agent, the Company and the Warrant Agent may deem and treat the person
in whose name this Warrant Certificate is registered as the absolute and lawful
owner for all purposes whatsoever and neither the Company nor the Warrant Agent
shall be affected by any notice to the contrary.

<PAGE>

            The Company is authorized by the Warrant Agreement to suspend the
exercise of all Warrants for any period during which any shares of Class B
Common Stock reserved for exercise of Warrants require, under any Federal or
state law or rule or regulation of any national securities exchange,
registration with or approval of any governmental authority or listing on any
national securities exchange and such registration, approval or listing is not
in effect.

            Nothing contained in the Warrant Agreement or in this Warrant
Certificate shall be construed as conferring on the holder of any Warrants or
his transferee any rights whatsoever as a stockholder of the Company.

            This Warrant Certificate shall not be valid unless countersigned
manually by the Warrant Agent.

            The Warrant Agreement and each Warrant Certificate, including this
Warrant Certificate, shall be deemed a contract made under the laws of the State
of New York and for all purposes shall be construed in accordance with the laws
of the State of New York.

<PAGE>

            IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed under its corporate seal.

Dated:  __________________, ____

                                          WILLCOX & GIBBS, INC.

[CORPORATE SEAL]

                                          By: _____________________________
                                              Name:
                                              Title:

Attest:

By: ____________________________
    Name:
    Title

COUNTERSIGNED:

                                          WILLCOX & GIBBS, INC.,
                                               AS WARRANT AGENT

                                          By: _____________________________
                                              Name:
                                              Title

<PAGE>

                             ELECTION TO EXERCISE
                  (To be executed upon exercise of Warrant)

To WILLCOX & GIBBS, INC.:

            The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to purchase
thereunder, _______ shares of Class B Common Stock, as provided for therein, and
tenders herewith payment of the purchase price in full in the form of cash or a
certified or official bank check in the amount of $_______.

            Please issue a certificate or certificates for such shares of Class
B Common Stock in the name of, and pay any cash for any fractional share to:

PLEASE INSERT SOCIAL SECURITY OR         Name  _______________________________
OTHER IDENTIFYING NUMBER OF ASSIGNEE           (Please Print Name and Address)

__________________________________       Address ___________________________

__________________________________       Signature ___________________________

                        NOTE:   The above signature
                                should correspond
                                exactly with the name
                                on the face of this
                                Warrant Certificate or
                                with the name of
                                assignee appearing in
                                the assignment form
                                below.

AND, if said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder less any fraction of a share paid in cash.

Dated: _______________

<PAGE>

                                  ASSIGNMENT

            (To be executed only upon assignment of Warrant Certificate)

            For value received, ______________________________ hereby sells,
assigns and transfers unto ______________________________ the within Warrant
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint __________________________ attorney,
to transfer said Warrant Certificate on the books of the within-named Company,
with full power of substitution in the premises.

Dated: _______________, ____

                                          NOTE:   The above signature should
                                                  correspond exactly with the
                                                  name on the face of this
                                                  Warrant Certificate.

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