Document:

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                                                                  Exhibit 10.13
                    AMENDED AND RESTATED REVOLVING LOAN NOTE

$12,000,000                                                   November 17, 1999

                  SPINCYCLE, INC., a Delaware corporation ("Borrower"), for
value received, hereby promises to pay to the order of LaSalle Bank National
Association (the "Bank"), on September 30, 2001, the principal sum of Twelve
Million and No/100 Dollars ($12,000,000), or such lesser amount of all of the
then outstanding advances made by the Bank to Borrower pursuant to Section 2.1
of the "Loan Agreement" (as hereinafter defined), together with interest on any
and all principal amounts remaining unpaid hereunder from time to time from the
date hereof until paid, at the rate(s) set forth in Section 2.14 of the Loan
Agreement, payable on each "Interest Payment Date" (as such term is defined in
the Loan Agreement).

                  Upon the occurrence of any Event of Default (hereinafter
defined), the outstanding principal balance of this Note shall bear interest
payable on demand, at the "Default Rate" (as such term is defined in the Loan
Agreement).

                  All payments of principal and interest on this Note shall be
payable in lawful money of the United States of America. In no event shall the
interest payable exceed the highest rate permitted by law. Principal and
interest shall be paid to Bank at its office at LaSalle Bank National
Association, 135 South LaSalle Street, Chicago, Illinois 60603, or at such other
place as the holder of this Note may designate in writing to Borrower. All
payments hereunder shall be applied as provided in the Loan Agreement. In
determining Borrower's liability to the Bank hereunder, the books and records of
the Bank shall be controlling absent arithmetic or manifest error.

                  This Note evidences certain indebtedness incurred under the
Amended and Restated Loan and Security Agreement, dated as of the date hereof,
between Borrower and Bank (as heretofore or hereafter amended, the "Loan
Agreement"), to which reference is hereby made for a statement of the terms and
conditions under which the due date of this Note or any payment thereon may be
accelerated or is automatically accelerated, or under which this Note may be
prepaid or is required to be prepaid. All capitalized terms used herein shall,
unless otherwise defined herein, have the meanings set forth in the Loan
Agreement. The holder of this Note is entitled to all of the benefits provided
in said Loan Agreement and the Loan Documents referred to therein. Borrower
agrees to pay all costs of collection and all reasonable attorneys' fees paid or
incurred in enforcing any of the Bank's rights hereunder promptly on demand of
the Bank and as more fully set forth in the Loan Agreement.

                  This Note may be prepaid in whole or in part in accordance
with the terms of the Loan Agreement.
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                  Except as set forth in the Loan Agreement, the Borrower,
endorsers and all other parties to this Note waive presentment, demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this Note and the Loan
Agreement. In any action on this Note, the Bank or its assignee need not file
the original of this Note, but need only file a photocopy of this Note certified
by the Bank or such assignee to be a true and correct copy of this Note.

                  This is the Revolving Loan Note referred to in the Loan
Agreement. This Note is secured by, among other things, a security interest in
the Collateral granted to the Bank pursuant to the Loan Agreement and the other
Loan Documents.

                  No delay on the part of the Bank in exercising any right under
this Note, any security agreement, guaranty or other undertaking affecting this
Note, shall operate as a waiver of such right or any other right under this
Note, nor shall any omission in exercising any right on the part of the Bank
under this Note operate as a waiver of any other rights.

                  The occurrence of an Event of Default under the Loan Agreement
(as such term is defined therein) shall constitute an Event of Default
hereunder. Upon the occurrence of an Event of Default, the outstanding
indebtedness evidenced by this Note, together with all accrued interest, shall
be due and payable in accordance with the terms of the Loan Agreement, without
notice to or demand upon the Borrower except as otherwise provided in the Loan
Agreement, and the Bank may exercise all of its rights and remedies reserved to
it under the Loan Agreement or applicable law.

                  If any provision of this Note or the application thereof to
any party of circumstance is held invalid or unenforceable, the remainder of
this Note and the application of such provision to other parties or
circumstances will not be affected thereby and the provisions of this Note shall
be severable in any such instance.

                  BORROWER HEREBY WAIVES ANY RIGHT BORROWER MAY NOW OR HEREAFTER
HAVE TO SUBMIT ANY CLAIM, ISSUE OR DEFENSE ARISING HEREUNDER OR UNDER THE OTHER
LOAN DOCUMENTS TO A TRIAL BY JURY.

                  This Note shall be an amendment and restatement of and
substitution and replacement for those certain Revolving Notes dated August 29,
1998 in the respective original principal amounts of $25,000,000 and $15,000,000
made by Borrower and payable to the order of Bank, as assignee of Heller
Financial, Inc. and Finova Capital Corporation (the "Prior Lenders"),
respectively, and all amendments, extensions, substitutions, replacements and
renewals thereto (the "Original Notes"). The indebtedness evidenced by the
Original Notes is continuing indebtedness and nothing contained herein shall be
deemed to constitute payment, settlement or a novation of the Original Notes, or
the indebtedness evidenced thereby, or release or otherwise adversely affect any
lien or security interest securing such indebtedness.

                  This Note shall be deemed to have been made under and shall be
governed in accordance with the internal laws and not the conflict of law rules
of the State of Illinois.

                                      -2-
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                  IN WITNESS WHEREOF, Borrower has caused this Note to be
executed by its duly authorized officer as of the date first above written.

                                             SPINCYCLE, INC.

                                             By: /s/ Tim Yost
                                                -------------------------------
                                             Title: Vice President
                                                   ----------------------------

                                      -3-<PAGE>   1

                                                                 Exhibit 10.14

                           LOAN AND SECURITY AGREEMENT

                          Dated as of November 17, 1999

                                     between

                                SPINCYCLE, INC.,
                                   as Borrower

                                       and

                          ALLIANCE LAUNDRY SYSTEMS LLC,
                                    as Lender
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                           LOAN AND SECURITY AGREEMENT

            THIS LOAN AND SECURITY AGREEMENT ("Agreement"), dated as of November
17, 1999, is entered into between "Lender" and "Borrower" (hereinafter
defined).

                                 R E C I T A L S

      A. Borrower desires to borrow from Lender the sum of Three Million Dollars
($3,000,000) to refinance existing debt and pay closing costs.

      B. Lender desires, upon the terms and conditions set forth in this
Agreement, to make the loan requested by Borrower.

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

1.    DEFINITIONS

                  1.1 General Terms. As used in this Agreement, the following
      terms shall have the following definitions:

            "Accounts" shall mean all of Borrower's presently existing and
            hereafter arising accounts, accounts receivable, contract rights,
            instruments, documents, chattel paper, and all other forms of
            obligations owing to Borrower arising out of the sale or lease of
            goods or the rendition of services by Borrower, whether or not
            earned by performance, and any and all credit insurance, guarantees,
            letters of credit and other security therefor, as well as all
            merchandise returned to or reclaimed by Borrower, and all products
            and proceeds of the foregoing.

            "Affiliate" shall mean any Person that directly or indirectly,
            through one or more intermediaries, controls or is controlled by, or
            is under common control with, Borrower.

            "Agreement" shall mean this Loan and Security Agreement, any and all
            exhibits or schedules hereto, any and all concurrent or subsequent
            riders to this Loan and Security Agreement and any extensions,
            supplements, amendments, modifications or restatements to or of this
            Loan and Security Agreement and/or to or of any such rider.

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            "Bank" shall mean LaSalle Bank National Association, a national
            banking association.

            "Bank Financing" shall mean the term loan by Bank to Borrower in the
            maximum principal amount of $12,000,000, to be evidenced by the Bank
            Loan Documents.

            "Bank Loan Documents" shall mean the Loan and Security Agreement
            between Bank and Borrower of even date herewith and all other
            documents which are defined therein as "Loan Documents."

            "Bank Senior Collateral" shall have the meaning provided therefor in
            the Intercreditor Agreement.

            "Borrower" shall mean SpinCycle, Inc.

            "Borrower's Books" shall mean all of Borrower's books and records
            including, but not limited to: minute books; ledgers; records
            indicating, summarizing, or evidencing Borrower's assets,
            liabilities, the Accounts and all information relating thereto;
            records indicating, summarizing, or evidencing Borrower's business
            operations or financial condition; records indicating, summarizing,
            or evidencing Borrower's compliance with or problems or activities
            concerning Environmental Laws; and all computer programs, disc or
            tape files, printouts, runs, and other computer prepared information
            and the equipment containing such information and any software
            necessary to operate the same.

            "Business Day(s)" shall mean any day other than a Saturday, Sunday
            or other day on which banks in Illinois are closed.

            "Capital Expenditures" shall mean, with respect to any period, the
            aggregate of all expenditures (whether paid in cash or accrued as
            liabilities and including expenditures for the portion of
            capitalized lease obligations amortizable in the fiscal period of
            measurement) by Borrower during such period that are required by
            Generally Accepted Accounting Principles to be included in or
            reflected by the property, plant, or equipment or similar fixed
            asset accounts in the balance sheet of Borrower.

            "Closing" shall have the meaning set forth in Section 5.1 hereof.

            "Closing Date" shall mean the date of the Closing.

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            "Code" shall mean the Uniform Commercial Code of the State of
            Illinois as in effect from time to time during the Initial Term and
            any renewal term hereof, and any and all terms used in this
            Agreement which are not otherwise defined herein but are defined in
            the Code shall be construed and defined in accordance with the
            meaning and definition ascribed to such terms under the Code.

            "Collateral" shall mean each and all of the following wherever
            located and whether now existing or owned or hereafter created or
            acquired by Borrower: the Accounts; the General Intangibles; the
            Negotiable Collateral; the Inventory; Borrower's Books; the
            Equipment; any money, deposit accounts or other assets of Borrower
            in which Lender receives a Lien or which hereafter comes into the
            possession, custody or control of Lender or any bailee of Lender;
            and all products and proceeds of every nature of any of the
            foregoing, including, but not limited to, proceeds of insurance
            covering the Collateral and any and all Accounts, General
            Intangibles, Negotiable Collateral, Inventory, contract rights,
            instruments, documents and chattel paper, Equipment, money, deposit
            accounts or other tangible and intangible property of Borrower
            resulting from the sale or other disposition of the Collateral, and
            the proceeds and products thereof.

            "Default Rate" shall have the meaning set forth in Section 2.2(b)
            hereof.

            "EBITDA" shall have the meaning provided therefor in the definition
            of Senior Interest Coverage Ratio set forth in this Section.

            "Environmental Laws" shall mean any applicable laws, statutes,
            rules, regulations, orders, consent decrees, permits or licenses of
            any governmental authority, relating to prevention, remediation,
            reduction or control of pollution, or protection of the environment,
            natural resources and/or human health and safety, including, without
            limitation, such applicable laws, statutes, rules, regulations,
            orders, consent decrees, permits or licenses relating to (a) solid
            waste and/or Hazardous Materials treatment, storage, disposal,
            generation and transactions, (b) air, water, and noise pollution,
            (c) soil, ground, water or groundwater contamination, (d) the
            generation, handling, storage, transportation or Release into the
            environment of Hazardous Materials, and (e) regulation of
            underground and above ground storage tanks.

            "Equipment" shall mean the machinery and equipment of Borrower,
            including, without limitation, laundry equipment, processing
            equipment, data processing and computer equipment with software and
            peripheral equipment, and all engineering, processing and
            manufacturing equipment,

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            office machinery, furniture, materials handling equipment, tools,
            molds, dies, attachments, accessories, automotive equipment,
            trailers, trucks, motor vehicles, leasehold improvements and cranes,
            and other equipment of every kind and nature, and fixtures, all
            whether now owned or hereafter acquired, and wheresoever situated,
            together with all additions and accessions thereto, replacements
            therefor, all parts therefor, and all manuals, drawings,
            instructions, warranties, and rights with respect thereto, and all
            products and proceeds of the foregoing, and condemnation awards and
            insurance proceeds with respect thereto.

            "ERISA" shall mean the Employee Retirement Income Security Act of
            1974, as amended, and all references to sections thereof shall
            include such sections and any predecessor and successor provisions
            thereto.

            "Event of Default" shall mean the occurrence of any one or more of
            the events set forth in Section 12 of this Agreement.

            "Extended Maturity Date" shall mean September 30, 2006.

            "Fiscal Quarter" shall mean the four (4) fiscal quarterly periods of
            Borrower during each Fiscal Year consisting of three (3), three (3),
            four (4), and three (3) Reporting Periods, respectively.

            "Fiscal Year" shall mean with respect to Borrower, the fiscal
            accounting period of Borrower each year consisting of thirteen (13)
            four calendar week accounting periods ending on the last Sunday of
            December of each calendar year.

            "Free Cash Flow" shall mean with respect to Borrower for any period
            of measurement, the sum of EBITDA for such period, less Maintenance
            Capital Expenditures during such period, less income taxes paid
            during such period, less interest expense paid during such period.

            "Funded Debt" shall mean Indebtedness of Borrower incurred under
            this Agreement, the other Loan Documents, and the Bank Loan
            Documents.

            "Funded Debt Interest Expense" shall have the meaning provided
            therefor in the definition of Senior Interest Coverage Ratio set
            forth in this Section.

            "General Intangibles" shall mean all of the Borrower's present and
            future general intangibles, contract rights and other personal
            property rights of Borrower to all choses or things in action, tax
            refund claims, credits, claims, demands, goodwill, licenses,
            franchise agreements, subscription costs,

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<PAGE>   6
            patents, trade names, trademarks, copyrights, rights to royalties,
            blueprints, drawings, customer lists, purchase orders, computer
            programs, computer discs, computer tapes, literature, reports,
            catalogs, methods, sales literature, video tapes, confidential
            information and trade secrets, consulting agreements, employment
            agreements, leasehold interests in real and personal property,
            insurance policies, deposits with insurers relating to workmen's
            compensation liabilities, deposit accounts, tax refunds and
            proprietary rights in any Equipment, other than Equipment, Inventory
            and Accounts, as well as Borrower's Books relating to any of the
            foregoing, and all products and proceeds of the foregoing.

            "Generally Accepted Accounting Principles" shall mean, with respect
            to any date of determination, generally accepted accounting
            principles as used by the Financial Accounting Standards Board
            and/or the American Institute of Certified Public Accountants
            consistently applied and maintained throughout the periods
            indicated.

            "Hazardous Materials" shall mean any flammable or explosive
            materials, petroleum (including crude oil and its fractions),
            radioactive materials, hazardous wastes, toxic substances or related
            hazardous materials, including without limitation polychlorinated
            biphenyls, friable asbestos, and any substances defined as, or
            included in the definition of toxic or hazardous substances, wastes,
            or materials under any federal or applicable state or local laws,
            ordinances, rules or regulations including Environmental Laws.

            "Indebtedness" shall mean, with respect to any Person, (a)
            indebtedness for borrowed money or for the deferred purchase price
            of property or services in respect of which such Person is liable,
            contingently or otherwise, as obligor or otherwise, including
            without limitation accounts payable and accrued indebtedness owed by
            such Person or any commitment by which such Person assures a
            creditor against loss, including contingent reimbursement
            obligations with respect to letters of credit, (b) indebtedness
            guaranteed in any manner by such Person, including guarantees in the
            form of an agreement to repurchase or reimburse, (c) obligations
            under leases which shall have been or should be, in accordance with
            Generally Accepted Accounting Principles, recorded as capital
            leases, in respect of which obligations such Person is liable,
            contingently or otherwise, as obligor, guarantor or otherwise, or in
            respect of which obligations such Person assures a creditor against
            loss, and (d) any unfunded obligation of such Person to any Benefit
            Plan or Multiemployer Plan.

            "Indemnified Persons" shall have the meaning set forth in Section 18
            hereof.

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            "Insolvency Proceeding" shall mean, with respect to any Person, any
            proceeding commenced by or against such Person, under any provision
            of the United States Bankruptcy Code, as amended, or under any other
            bankruptcy, reorganization or insolvency law, or any assignment for
            the benefit of creditors, formal or informal moratorium, or
            compositions or extensions with some or all creditors of such
            Person.

            "Intercreditor Agreement" shall mean the Intercreditor Agreement of
            even date herewith between Bank and Lender.

            "Inventory" shall mean all present and future inventory in which
            Borrower has any interest, including, but not limited to, goods held
            by Borrower for sale or lease or to be finished under a contract of
            service and all of Borrower's present and future raw materials, work
            in process, finished goods, supplies and packing and shipping
            materials, wherever located, and any documents of title representing
            any of the above.

            "IRC" shall mean the Internal Revenue Code of 1986, as amended, and
            all references to sections thereof shall include such sections and
            any predecessor and successor provisions thereto.

            "Lender" shall mean Alliance Laundry Systems LLC, a Delaware limited
            liability company.

            "Lien" shall mean any mortgage, deed of trust, pledge, fixed or
            floating charge, lien, security interest, or encumbrance or security
            arrangement of any nature whatsoever, whether arising by written or
            oral agreement or by operation of law, including without limitation
            any conditional sale or title retention arrangement and any
            assignment, deposit arrangement or lease intended as or having the
            effect of, security.

            "Loan" shall have the meaning set forth in Section 2.1 hereof.

            "Loan Documents" shall mean all agreements, instruments and
            documents, including without limitation security agreements, loan
            agreements (including without limitation this Agreement), notes,
            guarantees, mortgages, deeds of trust, subordination agreements,
            intercreditor agreements, pledges, affidavits, certificates, powers
            of attorney, consents, assignments, landlord and mortgagee waivers,
            opinions, collateral assignments, reimbursement agreements,
            contracts, notices, leases, financing statements, and all
            amendments, supplements, restatements and renewals thereof, and all
            other written matter, whether heretofore, now or hereafter executed
            by or on

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            behalf of Borrower, or any other Person in connection with the
            Obligations or the transactions contemplated hereby (including
            without limitation any guaranty of the Obligations), and delivered
            to Lender, together with all agreements, instruments and documents
            referred to therein or contemplated thereby, whether heretofore, now
            or hereafter executed by or on behalf of Borrower or any such other
            Persons and delivered to Lender, and all amendments, supplements,
            restatements and renewals thereof, but not including any proposal
            letter, commitment letter or other comparable documents delivered by
            Lender prior to the date hereof and not expressly incorporated
            herein and made a part hereof.

            "Losses" shall have the meaning set forth in Section 18.1 hereof.

            "Maintenance Capital Expenditures" shall have the meaning set forth
            in Section 8.20 hereof.

            "Maturity Date" shall mean September 30, 2001.

            "Negotiable Collateral" shall mean a letter of credit, advice of
            credit, instrument, money, negotiable document, warehouse receipt,
            bill of lading, certificated security, certificate of title,
            certificate of deposit, chattel paper, or similar property, and the
            proceeds thereof.

            "Net Worth" means the total of Borrower's stated capital, paid in
            surplus and retained earnings, less treasury stock, all as
            determined in accordance with Generally Accepted Accounting
            Principles.

            "Note" shall have the meaning set forth in Section 2.1 hereof.

            "Obligations" shall mean all loans, advances, overdrafts, debts,
            liabilities, obligations, covenants, lease payments, guarantees and
            duties owing by Borrower to Lender of any kind or description
            (whether advanced pursuant to or evidenced by this Agreement, by the
            Note, by any other Loan Document or other agreement, instrument or
            document or otherwise), whether direct or indirect, absolute or
            contingent, due or to become due, now existing or hereafter arising,
            and including without limitation any debt, liability or obligation
            owing from Borrower to another Person which Lender may have obtained
            by assignment of which notice is provided to Borrower (or otherwise
            as a result of a payment made by Lender on behalf of Borrower as
            permitted under this Agreement or any other Loan Documents) and
            further including without limitation all interest, all Out-of-Pocket
            Fees and Costs which Borrower is required to pay or reimburse by
            this Agreement or any other Loan Document, by law or otherwise.

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            "Out-of-Pocket Fees and Costs" shall have the meaning set forth in
            Section 2.3(b) hereof.

            "Permanent Term" shall have the meaning set forth in Section 3.1
            hereof.

            "Permitted Liens" shall have the meaning set forth in Section 8.1
            hereof.

            "Person" shall mean any individual, sole proprietorship,
            partnership, joint venture, trust, unincorporated organization,
            association, corporation, limited liability corporation,
            institution, entity or governmental entity.

            "Potential Default" shall mean any event which through the passage
            of time, service of notice or both, would mature into an Event of
            Default.

            "Pro Formas" shall have the meaning set forth in Section 7.11
            hereof.

            "Rate" shall have the meaning set forth in Section 2.14(a) hereof.

            "Reference Rate" shall mean the variable per annum rate of interest
            announced from time to time by Bank at its corporate headquarters in
            Chicago, Illinois, as its prime or equivalent rate. The "Reference
            Rate" is one of Bank's index rates and merely serves as a basis
            under which effective rates of interest are calculated for loans
            making reference thereto and may not be the lowest or best rate at
            which Bank calculates interest or extends credit.

            "Release" shall mean any actual or threatened past, present or
            future releasing, spilling, leaking, pumping, pouring, emitting,
            emptying, discharging, seeping, injecting, escaping, leaching,
            dumping or disposing, whether intentional or not.

            "Reporting Period" shall mean each of Borrower's thirteen (13)
            annual four week fiscal reporting periods.

            "Restriction Agreement" shall have the meaning set forth in Section
            8.8 hereof.

            "Senior Discount Notes" shall mean Borrower's $144,990,000 principal
            amount of 12-3/4% Series B Senior Discount Notes due 2005, issued
            pursuant to an Indenture dated as of April 29, 1998 between Borrower
            and Norwest Bank Minnesota, N.A., as Trustee (the "Note Indenture").

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            "Senior Interest Coverage Ratio" shall mean with respect to Borrower
            for any period of measurement (a) the total of (i) Borrower's net
            income after income taxes (exclusive of any gain or loss in such
            period from an asset disposition other than Inventory in the
            ordinary course of business and excluding other extraordinary gains
            and losses) for such period, plus (ii) Borrower's amortization,
            depreciation and other non-cash charges (excluding Accounts
            reserves, Inventory reserves and other reserves incurred in the
            ordinary course of business) for such period ("EBITDA"), divided by
            (b) interest expense paid or accrued on Funded Debt for such period
            ("Funded Debt Interest Expense").

            "Subordinated Indebtedness" shall mean Borrower's Indebtedness, if
            any, to any Person, the repayment of which has been subordinated to
            the repayment of the Obligations on terms and by written agreement
            in form and substance acceptable to Lender.

            "Subsidiary" shall mean any corporation of which more than fifty
            percent (50%) of the outstanding capital stock having ordinary
            voting power to elect a majority of the board of directors of such
            corporation (irrespective of whether at the time stock of any other
            class or classes of such corporation shall have or might have voting
            power by reason of the happening of any contingency) is at the time,
            directly or indirectly, owned by Borrower, or any partnership,
            limited liability company or joint venture of which more than fifty
            percent (50%) of the outstanding equity interests are at the time,
            directly or indirectly, owned by Borrower.

            "Tangible Net Worth" means the sum of the Net Worth of Borrower,
            plus the outstanding principal balance of the Senior Discount Notes,
            less all of the following: (i) all prepaid expenses and deposits,
            (ii) the book value of all such assets which would be treated as an
            intangible under Generally Accepted Accounting Principles, including
            without limitation, goodwill, trademarks, tradenames, copyrights,
            patents, licenses, deferred charges, unamortized debt discount and
            expenses and covenants not to compete, and (iii) accounts, notes and
            other receivables due from Affiliates and/or employees of Borrower.

            "Term" shall mean the term of this Agreement, commencing on the
            Closing Date and ending on the Maturity Date, unless extended.

            "Uncured Default" shall mean an Event of Default which shall be
            continuing.

                                       10
<PAGE>   11
                  1.2 Accounting Terms. Any accounting terms used in this
      Agreement which are not specifically defined herein shall have the
      meanings customarily given them in accordance with Generally Accepted
      Accounting Principles. In the event that changes in Generally Accepted
      Accounting Principles shall be mandated by the Financial Accounting
      Standards Board and/or the American Institute of Certified Public
      Accountants or any similar accounting body of comparable standing, or
      shall be recommended by Borrower's certified public accountants, to the
      extent that such changes would modify such accounting terms or the
      interpretation or computation thereof as contemplated by this Agreement at
      the time of execution hereof, then in such event such changes shall be
      followed in defining such accounting terms only after the Borrower and
      Lender shall have agreed to amend this Agreement to reflect the original
      intent of such terms in light of such changes, and such terms shall
      continue to be applied and interpreted without such change until such
      agreement.

                  1.3 Certain Matters of Construction. The terms "herein",
      "hereof" and "hereunder" and other words of similar import refer to this
      Agreement as a whole and not to any particular section, paragraph or
      subdivision. Any pronoun used shall be deemed to cover all genders. The
      section titles, table of contents and list of exhibits appear as a matter
      of convenience only and shall not affect the interpretation of this
      Agreement. All references to statutes and related regulations shall
      include any amendments of same and any successor statutes and regulations.
      All references to any instruments or agreements, including, without
      limitation, references to any of the Loan Documents shall include any and
      all modifications or amendments thereto and any and all extensions or
      renewals thereof. The Recitals to this Agreement are incorporated into
      this Agreement in their entirety and deemed to be a part hereof.

2.    LOAN; FEES; TERMS OF PAYMENT

                  2.1 Term Loan. Subject to the terms and provisions of this
      Agreement including without limitation, that no Event of Default or
      Potential Default has occurred and all other conditions precedent to
      lending under Section 5 hereof have been satisfied, Lender agrees to make
      a term loan (the "Loan") to Borrower on the Closing Date in the amount of
      Three Million Dollars ($3,000,000).

                  The Loan shall be evidenced by, and repayable in accordance
      with, the Note, which shall be substantially in the form of Exhibit A to
      this Agreement ("Note").

                                       11
<PAGE>   12
                  2.2   Interest.

                        (a) Rate. All Obligations owed by Borrower to Lender
            shall bear interest on the unpaid principal balance thereof, at a
            rate per annum (computed on the basis of the actual number of days
            elapsed over a 360 day year) equal to the Reference Rate, plus one
            percent (1.00%) (the "Rate"). Interest owed on the Obligations shall
            be payable monthly in arrears on the first Business Day of each
            month.

                        In addition to calculations of the Rate as provided
            above, in the event that the Reference Rate announced is, from time
            to time hereafter, changed, adjustment in the Rate shall be made on
            the effective date of such change in the Reference Rate. Lender
            shall use reasonable efforts to notify Borrower of each change in
            the Reference Rate as soon as practicable, but Borrower's obligation
            to pay all interest at the Rate and Default Rate as provided in this
            Agreement shall not be affected by, nor shall Lender have any
            liability for, any failure to so notify Borrower.

                        (b) Default Rate. Notwithstanding the foregoing, the
            Obligations shall bear interest, from and after written notice by
            Lender to Borrower of the occurrence of an Event of Default and for
            so long as such Event of Default has not been cured or waived as set
            forth in this Agreement, and without constituting a waiver of any
            such Event of Default, on the balances owing from time to time, at a
            rate per annum equal to two percentage (2.00%) points above the Rate
            (the "Default Rate"), payable on demand.

                        (c) Maximum Interest. It is the intention of Lender and
            Borrower to comply with the laws of the State of Illinois, and
            notwithstanding any provision to the contrary contained herein or in
            the other Loan Documents, Borrower shall not be required to pay, and
            Lender shall not be permitted to collect, any amount in excess of
            the maximum amount of interest permitted by applicable law ("Excess
            Interest"). If any Excess Interest is provided for or determined to
            have been provided for by a court of competent jurisdiction in this
            Agreement or in any of the other Loan Documents, then in such event
            (i) the provisions of this Section 2.14(d) shall govern and control;
            (ii) Borrower shall not be obligated to pay any Excess Interest;
            (iii) any Excess Interest that Lender may have received hereunder
            shall be, at Lender's option, (A) applied as a credit against either
            the outstanding principal balance of the Loan or accrued and unpaid
            interest hereon, (B) refunded to the payor thereof, or (C) any
            combination of the foregoing; (iv) the interest rate provided for
            herein shall be automatically reduced to the maximum rate allowed
            under

                                       12
<PAGE>   13
            applicable law, and this Agreement and the other Loan Documents
            shall be deemed to have been, and shall be, reformed and modified to
            reflect such reduction; and (v) Borrower shall not have any action
            against Lender for any damages arising out of the payment or
            collection of any Excess Interest. Notwithstanding the foregoing, if
            any interest payment or other charge or fee payable hereunder or
            under any of the other Loan Documents exceeds the maximum amount
            then permitted by applicable law, then to the extent permitted by
            law, Borrower shall be obligated to pay the maximum amount then
            permitted by applicable law and Borrower shall continue to pay the
            maximum amount from time to time permitted by applicable law until
            all such interest payments and other charges and fees otherwise due
            hereunder or under any of the other Loan Documents (in the absence
            of such restraint imposed by applicable law) have been paid in full.

                  2.3 Fees. In consideration of Lender's making of the Loan
      hereunder, Borrower shall pay to Lender the following fees and charges:

                        (a)   Closing Fee.  A one-time closing fee equal to
            $30,000.00, payable at the Closing.

                        (b) Out-of-Pocket Fees, Costs and Expenses. All
            reasonable out-of-pocket fees, costs and expenses ("Out-of-Pocket
            Fees and Costs"), incurred by Lender in connection with the
            documentation, negotiation and closing of this Agreement and the
            other Loan Documents and the ongoing administration of the Loan and
            any and all reasonable costs of enforcement of this Agreement or the
            other Loan Documents or collection of the Obligations, including,
            without limitation, the reasonable fees, costs and expenses of
            attorneys and paralegals in connection with all of the foregoing,
            all of which shall be part of the Obligations, payable on demand.
            Prior to an Event of Default, Lender shall provide Borrower with
            copies of invoices of charges and expenses setting forth all
            Out-of-Pocket Fees and Costs. There shall be included as
            Out-of-Pocket Fees and Costs, but without limitation of the
            foregoing sentence, certain specific categories of Out-of-Pocket
            Fees and Costs related to Collateral as follows: (i) any reasonable
            costs or expenses incurred by Lender concerning any property of
            Borrower relating to Environmental Laws, including without
            limitation, for consultants or engineers; (ii) any out-of-pocket
            fees, costs and expenses for audits or examinations by Lender or its
            agents or representatives, of Borrower or the Collateral; and (iii)
            any reasonable appraisal and evaluation fees and expenses, including
            for appraisers retained by Lender in Lender's discretion to appraise
            Equipment, Inventory or any other Collateral or property of Borrower
            which are undertaken pursuant to and as limited by Section 6.2(c).

                                       13
<PAGE>   14
                  2.4 Lender Rights to Collect Directly. Lender or Lender's
      designee may, after the occurrence of an Event of Default which has been
      declared by Lender by notice to Borrower, (i) notify customers or account
      debtors of Borrower that the Accounts have been assigned to Lender and
      that Lender has a Lien thereon, and (ii) collect the Accounts directly,
      and charge the reasonable collection costs and expenses to Borrower's
      account.

                  2.5 Disputes, Returns and Allowances. Returns and allowances,
      if any, as between Borrower and its customers, will be on the same basis
      and in accordance with the usual customary practices of Borrower, as they
      exist at this time. After the occurrence of an Event of Default which has
      not been cured or waived as set forth in this Agreement, no discount,
      credit or allowance shall be granted by Borrower to any account debtor
      without Lender's consent, and no return of merchandise shall be accepted
      by Borrower outside the ordinary course of its business without Lender's
      consent. Lender may, in its discretion, after the occurrence of an Event
      of Default which has not been cured or waived as set forth in this
      Agreement, settle or adjust disputes and claims directly with account
      debtors for amounts and upon terms which Lender considers advisable, and
      in such cases, Lender will credit Borrower's account with only the net
      amounts received by Lender in payment of such disputed Accounts, after
      deducting all Out-of-Pocket Fees and Costs incurred or expended in
      connection therewith.

                  2.6 Lender Statements. Lender may render from time to time,
      statements of the Obligations owing by Borrower to Lender, including
      statements of all principal, interest, and Out-of-Pocket Fees and Costs
      owing, and such statements shall be presumed to be correct and accurate
      and constitute an account stated between Borrower and Lender unless,
      within sixty (60) days after receipt thereof by Borrower, Borrower shall
      deliver to Lender, in accordance with Section 16 of this Agreement, at
      Lender's place of business indicated in Section 16 hereof, written
      objection thereto specifying the error or errors, if any, contained in any
      such statement.

                  2.7 Payments.

                        (a) Borrower shall make each payment in respect of the
            Loan and any other payments due under this Agreement not later than
            12:00 p.m. Chicago time on the day when due, in United States
            dollars, to Lender at its office in Ripon, Wisconsin in immediately
            available funds.

                        (b) Borrower shall, at the time of making such payment
            under this Agreement or the Note, specify to Lender the amounts
            payable by Borrower hereunder to which such payment is to be applied
            (and in the

                                       14
<PAGE>   15
            event that it fails to so specify, or if an Event of Default has
            occurred and has not been cured or waived as set forth in this
            Agreement, Lender shall distribute such payment in such manner as
            Lender may determine to be appropriate).

                  2.8 All Collateral Secures Borrower's Obligations. The Loan
      made by Lender to Borrower under this Agreement shall be secured not only
      by Lender's Lien on the Collateral, but also by any Lien heretofore, now
      or at any time or times hereafter granted by Borrower to Lender under any
      of the Loan Documents.

3.    TERM OF THIS AGREEMENT; PREPAYMENTS

                  3.1 Term. This Agreement shall have a term (the "Initial
      Term") commencing on the Closing Date and maturing on the Maturity Date.
      Provided that no Event of Default exists at the expiration of the Initial
      Term, an additional term (the "Permanent Term") shall commence on that
      date and expire on the Extended Maturity Date.

                  3.2 Prepayment. Borrower may voluntarily prepay the
      Obligations in whole or in part, at any time, without premium or penalty
      of any kind.

                  3.3 Effect of Termination. The indemnifications set forth in
      Section 18 and elsewhere in this Agreement shall survive the termination
      of this Agreement.

4.    CREATION OF LIEN AND COLLATERAL

                  4.1 Security Interest. Borrower hereby grants to Lender, a
      continuing Lien and security interest in all presently existing and
      hereafter arising Collateral which Borrower now or hereafter owns or has
      an interest in, wherever located, to secure prompt repayment of any and
      all Obligations owed and to be owed by Borrower to Lender and to secure
      prompt performance by Borrower of each and all of its covenants and
      obligations under this Agreement and the other Loan Documents. Lender's
      Lien and security interest in the Collateral shall attach to all
      Collateral without further act on the part of Lender or Borrower. In the
      event that any Collateral, including proceeds, is evidenced by or consists
      of Negotiable Collateral, Borrower shall, immediately upon receipt
      thereof, endorse and assign such Negotiable Collateral over to Lender (or
      in blank if requested by Lender) and deliver actual physical possession of
      the Negotiable Collateral to Lender.

                                       15
<PAGE>   16
                  4.2 Preservation of Collateral and Perfection of Security
      Interests. Borrower shall execute and deliver to Lender, concurrently with
      Borrower's execution of this Agreement, and at any time or times hereafter
      immediately at the request of Lender, all financing statements, amendments
      or continuations of financing statements, fixture filings, security
      agreements, chattel mortgages, assignments, endorsements of certificates
      of title, affidavits, reports, notices, schedules of accounts, letters of
      authority and all other documents that Lender may reasonably request, in
      form satisfactory to Lender, that are required to perfect and maintain
      perfected Lender's Liens in the Collateral and to fully consummate all of
      the transactions contemplated under this Agreement. Borrower hereby
      irrevocably makes, constitutes and appoints Lender (and any of Lender's
      officers, employees or agents designated by Lender), with full power of
      substitution by Lender, as Borrower's true and lawful attorney with power
      to sign the name of Borrower on any of the above-described documents or on
      any other similar documents which need to be executed, recorded and/or
      filed to perfect or continue perfected Lender's Lien in the Collateral
      upon the failure of Borrower to do so after a request by Lender. For
      purposes hereof, photocopies of this Agreement or any other Loan Document
      constituting a security agreement may be filed by Lender as a financing
      statement.

                  4.3 Inspection, Appointment as Attorney-in-Fact. Lender
      (through any of its officers, employees or agents) shall have the right,
      at any time or times during Borrower's usual business hours, or during the
      usual business hours of any third party having control over the records of
      Borrower, to inspect and verify Borrower's Books and the Collateral in
      order to verify the amount or condition of, or any other matter relating
      to, the Collateral and Borrower's financial condition; provided that,
      unless an Event of Default has occurred or Lender in good faith believes
      that Borrower has breached a representation, warranty or covenant
      hereunder, Lender shall give Borrower two (2) Business Days' notice of
      Lender's inspections. In addition, Borrower hereby appoints Lender (and
      any of Lender's officers, employees or agents designated by Lender), with
      full power of substitution by Lender, as Borrower's attorney-in-fact, with
      power: to endorse Borrower's name on any checks, notes, acceptances, money
      orders, drafts or other forms of payment or security that may come into
      Lender's possession; to sign Borrower's name on any invoice or bill of
      lading relating to any Accounts, on drafts against account debtors, on
      schedules and assignments of Accounts, on verifications of Accounts and on
      notices to account debtors; after an occurrence of an Event of Default, to
      notify the post office authorities to change the address for delivery of
      Borrower's mail to an address designated by Lender, to receive and open
      all mail addressed to Borrower, and to retain all mail relating to the
      Collateral and forward all other mail to Borrower; to send, whether in
      writing or by telephone, request for verifications of Accounts and request
      for verifications of trade and other Indebtedness of Borrower; and after
      the occurrence of an Event of Default, to do

                                       16
<PAGE>   17
      all things necessary to carry out this Agreement. Borrower ratifies and
      approves all acts of the attorney acting in accordance with this Section
      4.3 (other than those acts which constitute gross negligence or willful
      misconduct) and neither Lender nor any other Person acting as Borrower's
      attorney hereunder will be liable for any acts or omissions or for any
      error of judgment or mistake of fact or law made in good faith except as
      result of gross negligence or willful misconduct. The appointment of
      Lender as Borrower's attorney, and each and every one of Lender's rights
      and powers as set forth in this Section 4.3, being coupled with an
      interest, are irrevocable so long as any Accounts in which Lender has a
      Lien remain unpaid and until all of the Obligations have been fully repaid
      and this Agreement shall have expired or been terminated.

5.    CONDITIONS PRECEDENT

                  5.1 Closing: Conditions to Closing. The Loan shall be made on
      the Closing Date hereunder at the offices of Bank's counsel, or at such
      other place as may be designated by Lender ("Closing"). In addition to
      those conditions set forth in Section 2 of this Agreement, prior to or
      contemporaneously with the making of the Loan hereunder at Closing, Lender
      shall be satisfied that all of the following conditions precedent shall
      have been satisfied in a manner satisfactory to Lender:

                        (a) Satisfactory Due Diligence. Lender shall have
            completed and shall be satisfied with the results of (i) due
            diligence by Lender and its counsel with respect to Borrower; (ii)
            Lender's examination of Borrower, including a review of prior years'
            "management letters" by Borrower's independent certified public
            accountants, to the extent such management letters exist; (iii) the
            results of investigations, including any consultants' reports,
            concerning Environmental Laws; (iv) all appraisals reasonably
            required by Lender; and (v) any governmental approvals, waivers or
            consents.

                        (b) No Adverse Change. There shall have been, as
            determined by Lender in its reasonable discretion (i) no material
            adverse change since August 8, 1999 in the operations (financial or
            otherwise) of Borrower, and (ii) no material litigation or claims
            with respect to this Agreement or otherwise which could have a
            material adverse effect on the condition, financial or otherwise,
            business, property or assets of Borrower or the results of the
            operation of Borrower, the Collateral, Lender's Liens or ability to
            enforce its rights and remedies hereunder or the ability of Borrower
            to pay or perform the Obligations.

                                       17
<PAGE>   18
                        (c) Senior Loan. Lender shall have received evidence
            reasonably satisfactory to it that Lender has a first priority
            perfected Lien on the Collateral (other than the Bank Senior
            Collateral) and a second priority perfected Lien on the Bank Senior
            Collateral, and all financing statements and other documents Lender
            deems reasonably necessary to perfect such Lien shall have been
            filed and recorded.

                        (d) Required Documents. Lender shall have received all
            of the following documents, each in form and substance reasonably
            satisfactory to Lender and its counsel, duly executed and dated the
            Closing Date (or such other date prior thereto as shall be
            reasonably satisfactory to Lender), where required:

                              (i) Agreement. Multiple copies of this Agreement
                  as requested by Lender.

                              (ii) Note. The Note.

                              (iii) Intercreditor Agreement.  The Intercreditor
                  Agreement.

                              (iv) Assignments of Leases. Assignments to Lender,
                  for collateral purposes, of all leases of Borrower for any of
                  Borrower's places of business or leased locations where
                  Collateral is located, other than locations where the Bank
                  Senior Collateral is located.

                              (v) Landlord and Mortgagee Waivers. Landlord,
                  mortgagee and bailee waivers for any of Borrower's places of
                  business, equipment locations or Inventory storage or
                  processing locations, including without limitation, all leased
                  locations or where any Collateral is located or where payroll
                  and Accounts are processed, except for such premises which are
                  owned by Borrower and subject only to the Lien of Lender,
                  together with any necessary landlord consents to any subleases
                  or lease assignments to Borrower.

                              (vi) Certificate for Certified Resolutions,
                  Incumbency By-Laws. A secretary's certificate for the Borrower
                  with respect to resolutions of the directors of Borrower
                  authorizing this Agreement and all related transactions and
                  the incumbency of Borrower's officers.

                                       18
<PAGE>   19
                              (vii) Legal Opinion. A legal opinion of Pedersen &
                  Houpt, counsel for Borrower, in form and substance reasonably
                  acceptable to Lender.

                              (viii) Organizational Documents. A copy of the
                  by-laws and the Certificate of Incorporation of the Borrower,
                  as amended to and including the Closing Date, certified by the
                  Secretary of State of the State of incorporation of Borrower.

                              (ix) Insurance. A certified list with copies of
                  insurance policies of Borrower; certificates of liability and
                  other third party insurance of Borrower, each showing Lender
                  as certificate holder and additional insured; certificates of
                  property and boiler and machinery insurance, each showing
                  Lender as certificate holder and lender loss payee, with a
                  form of lender's loss payable clause in form and in accordance
                  with the requirements of Section 9.2 of this Agreement to
                  Lender attached to each such certificate; a certificate of
                  business interruption insurance of Borrower, showing Lender as
                  certificate holder, lender's loss payee, and assignee of such
                  policy, with lender's loss payable clause and the collateral
                  assignment of such insurance policy, in form and substance
                  satisfactory to Lender.

                              (x) Good Standing Certificates. Good standing
                  certificates and qualifications to do business for Borrower in
                  the State of its incorporation and in each other State in
                  which the failure of Borrower to be qualified to transact
                  business as a corporation would have a material adverse impact
                  on Borrower.

                              (xi) Officer's Certificate. A certificate executed
                  by the President of Borrower in his capacity as such officer,
                  stating that (a) no Event of Default or Potential Default has
                  occurred and is continuing, (b) no material adverse change in
                  the condition or operations, financial or otherwise, or in the
                  business prospects of such Borrower's business, has occurred
                  since August 8, 1999, and (c) no litigation, investigation or
                  proceeding, or injunction, writ or restraining order of the
                  type described in Section 7.8 or Section 9.3 hereof is pending
                  or threatened.

                              (xii) Releases. Evidence of releases of any other
                  Liens on the Collateral other than Permitted Liens.

                                       19
<PAGE>   20
                              (xiii) Completion of Transactions. Satisfactory
                  evidence of completion of the Bank Financing.

                              (xiv) [Intentionally not used.]

                              (xv) Payoff Letters and Releases. Payoff letters,
                  releases and UCC-3 termination statements, executed by any
                  secured party designated by Lender, in a form appropriate for
                  recording and filing, as to any Lien recorded against the
                  Collateral and which is not permitted hereunder.

                              (xvi) Pro Formas.  The Pro Formas.

                              (xvii) Other. Such other documents as Lender shall
                  reasonably request.

                        (e) Out-of-Pocket Fees and Costs. Lender shall have
            received reimbursement for all Out-of-Pocket Fees and Costs which
            then have been paid or incurred by Lender.

                        (f) Warranties and Representations. All of the
            warranties and representations contained in this Agreement or any
            other Loan Document shall be true and correct in all material
            respects on and as of the Closing Date of the Loan as if made on
            such date.

                        (g) No Default. As determined by Lender in its
            reasonable discretion, no Potential Default shall have occurred and
            be continuing or will result from the funding of the Loan, and no
            Event of Default shall have occurred which has not been cured or
            waived as set forth in this Agreement or will result from the
            funding of the Loan.

                        (h) Other Requirements and Other Documents. Lender shall
            have received, in form and substance reasonably satisfactory to
            Lender, all certificates, orders, authorizations, consents,
            affidavits, schedules, instruments, security agreements, financing
            statements, and other documents which are provided for hereunder, or
            which Lender may at any time reasonably request.

                                       20
<PAGE>   21
6.    WARRANTIES, REPRESENTATIONS, AND COVENANTS -- COLLATERAL

Borrower warrants, represents, covenants and agrees that:

                  6.1 Collateral Warranties Generally. Borrower has and will
      continue to have good and marketable title to the portion of the
      Collateral owned by it; the Collateral is free and clear of all Liens,
      except (i) as may be consented to in writing by Lender, (ii) as held by
      Lender, or (iii) Permitted Liens.

                  6.2 Account Warranties and Covenants. The Accounts are and
      will, at all times pertinent hereto, be bona fide existing obligations
      created by the sale and delivery of merchandise or the rendition of
      services to account debtors in the ordinary course of business, free of
      Liens (except those described in Section 6.1), and are unconditionally
      owed to Borrower without defenses, disputes, offsets or counterclaims
      which have been asserted, rights of return or cancellation, except for any
      such defenses, offsets or counterclaims which may arise in the ordinary
      course of Borrower's business.

                  6.3   Inventory and Equipment Warranties and Covenants.

                        (a) Borrower shall keep the Inventory and Equipment only
            at the locations specified in Schedule 6.3 hereto or at (i)
            locations consented to by Lender upon 30 days' prior written notice
            to Lender, or (ii) new store locations permitted by Section 8.20 of
            this Agreement, and in the case of (i) and (ii) above, execution by
            Borrower or any other Persons of such financing statements,
            landlord, mortgagee, bailee, warehouseman or other agreements
            requested by Lender in its reasonable discretion.

                        (b) All Inventory is now and at all times hereafter
            shall be of good and merchantable quality, free from defects that
            make the Inventory unsalable in the ordinary course of Borrower's
            business (as determined by Lender in its reasonable discretion).

                        (c) Borrower shall keep and maintain the Equipment in
            good operating condition and repair (normal wear and tear excepted)
            in a manner consistent with that maintained by prudent business
            people in similar circumstances and, subject to the terms of this
            Agreement, make necessary or appropriate replacements thereto.
            Borrower shall not permit any items of Equipment to become a fixture
            to real estate or an accession to other property and the Equipment
            is now and shall at all times remain and be personal property to the
            extent that under applicable law, such Equipment would be deemed to
            be fixtures and/or otherwise part of the real

                                       21
<PAGE>   22
            property, except where Lender first receives a landlord's waiver
            satisfactory to it, establishing the priority of Lender's Lien in
            such Equipment. Borrower shall promptly deliver to Lender any and
            all evidence of ownership, if any, of any of the Equipment
            including, without limitation, certificates of title and
            applications for title. Borrower shall maintain accurate, itemized
            records describing the kind, type, quality, quantity and value of
            the Equipment and shall furnish Lender with a current schedule
            containing the foregoing information when requested, and Borrower
            shall not sell, lease, or otherwise dispose of or transfer any of
            the Equipment or any part thereof, except as otherwise permitted
            under the terms of this Agreement. Borrower shall, as and when
            requested by Lender, procure and supply to Lender, at Borrower's
            expense, annual appraisals of the Equipment Collateral by appraisers
            and in form reasonably satisfactory to Lender; provided, however,
            that upon or after the occurrence of an Event of Default, Borrower's
            obligations for such appraisals shall not be limited to annual
            appraisals and Lender may request or procure additional appraisals
            at Borrower's expense.

                        (d) The Inventory and Equipment is not now and shall not
            at any time or times hereafter be stored with a bailee, warehouseman
            or similar party without Lender's prior written consent, and, in
            such event, Borrower will upon Lender's request, concurrent
            therewith, cause any such bailee, warehouseman or similar party to
            issue and deliver to Lender, in a form acceptable to Lender,
            warehouse receipts in Lender's name evidencing the storage of the
            Inventory or Equipment.

                        (e) Borrower shall keep correct and accurate records
            itemizing and describing the kind, type, quality and quantity of the
            Inventory, and its costs therefor, all of which records shall be
            available at all times after demand to any of Lender's officers,
            agents, and employees for inspection and copying.

                        (f) Lender shall have the right at all times during
            Borrower's usual business hours, to inspect and examine the
            Inventory and Equipment and to check and test the same as to
            quality, quantity, value, and condition; provided that prior to an
            Event of Default, Lender shall provide Borrower two (2) Business
            Days' prior notice of any such inspection, and Lender shall use its
            good faith efforts to minimize interference with Borrower's business
            in conducting such inspections.

                                       22
<PAGE>   23
7.    GENERAL CONTINUING WARRANTIES AND REPRESENTATIONS

Borrower warrants, represents, covenants and agrees that:

                  7.1 Office. The chief executive office or principal place of
      business of Borrower is at the address indicated in Section 16 hereof, and
      Borrower covenants and agrees that it will not, during the term of this
      Agreement, without at least thirty (30) days prior written notification to
      Lender and the delivery to Lender, if requested, of an executed landlord's
      or mortgagee's waiver and Code financing statements in form acceptable to
      Lender, relocate either such chief executive office or principal place of
      business.

                  7.2 Existence. Borrower is and shall at all times hereafter be
      a corporation, duly organized and existing under the laws of the state of
      its organization and qualified and licensed to do business, and is good
      standing, in any state in which it conducts its business or in which the
      failure to qualify would have a material adverse effect on the condition,
      financial or otherwise, business, property or results of operations of
      Borrower, which states include, as of the date hereof and as of the
      Closing Date, the states listed on Schedule 7.2.

                  7.3 Authority. Borrower has the right and power and is duly
      authorized to enter into this Agreement and the other Loan Documents.

                  7.4 Validity. This Agreement and all of the other Loan
      Documents are the legal, valid and binding obligations of Borrower,
      enforceable in accordance with their respective terms, except as limited
      by applicable bankruptcy, reorganization, insolvency or similar laws
      affecting the enforcement of creditor's rights generally.

                  7.5 No Breach. The execution by Borrower of this Agreement and
      the other Loan Documents shall not constitute a breach of any provision
      contained in Borrower's Certificate of Incorporation or by-laws, nor does
      it constitute an event of default under any material agreement to which
      Borrower is now or hereafter becomes a party, nor does it violate any
      order, decree or judgment of any court or governmental commission or
      agency.

                  7.6 Solvency. On the Closing Date both prior to and after the
      transactions contemplated in connection with the Closing and the Bank
      Financing, and at all times thereafter, Borrower's assets (determined at
      present fair saleable value) are and shall be greater than Borrower's
      liabilities (taking into account all liabilities of Borrower, whether
      fixed or contingent, direct or indirect, disputed or undisputed and
      whether or not required to be reflected on a balance sheet prepared in
      accordance with Generally Accepted Accounting Principles other than

                                       23
<PAGE>   24
      Borrower's liabilities under the Senior Discount Notes); Borrower is and
      shall at all times hereafter be able to pay its debts as they mature, and
      Borrower does not and will not have an unreasonably small amount of
      capital. Borrower has and at all times hereafter will have sufficient
      capital to carry on its business and transactions as now conducted and as
      planned to be conducted in the future.

                  7.7 Compliance With Laws. Borrower is in compliance in all
      material respects with all applicable laws, rules and regulations of any
      governmental authority, including but not limited to the Securities Act of
      1933, the Securities Exchange Act of 1934, the Fair Labor Standards Act,
      Environmental Laws, laws relating to income, unemployment, payroll or
      social security taxes and Benefit Plans (as defined in Section 7.15
      hereof) as required by ERISA, except for those laws, rules and regulations
      the violation of which would not have a material adverse effect on the
      condition, financial or otherwise, business, property or results of
      operations of Borrower.

                  7.8 Actions or Proceedings. Except as disclosed on Schedule
      7.8, there are no actions or proceedings pending by or against Borrower
      before any court, administrative agency or other governmental entity and
      Borrower has no knowledge of any pending, threatened or imminent
      litigation, governmental investigations or claims, complaints, actions or
      prosecutions involving Borrower, or any breaches by Borrower or any other
      Person of any agreement to which Borrower is a party, except for actions,
      proceedings, litigation, investigations, claims, complaints, actions,
      prosecutions and breaches that involve claims that do not exceed $100,000
      individually or $200,000 in the aggregate.

                  7.9 Trademarks, Licenses, etc. Borrower owns or possesses
      rights to use all licenses, patents, patent applications, copyrights,
      service marks, trademarks and trade names required to continue to conduct
      its business as heretofore or presently conducted. All such licenses,
      patents, patent applications, copyright registrations, service marks,
      trademarks and trade names are listed on Schedule 7.9. No such license or
      trademark has been declared invalid, been limited by order of any
      governmental authority or by agreement, or is the subject of any
      infringement, interference or similar proceeding or challenge, except for
      those licenses or trademarks which if challenged, limited or rendered
      invalid, would not have a material adverse effect on the condition,
      financial or otherwise, business, property or results of operations of
      Borrower, the Collateral, Lender's Liens or Lender's ability to enforce
      its rights and remedies hereunder.

                  7.10 Financial Statements. All financial statements relating
      to Borrower which have been or may hereafter be delivered by Borrower to
      Lender fairly present the financial condition of Borrower for the periods
      related thereto and have been prepared in accordance with Generally
      Accepted Accounting Principles,

                                       24
<PAGE>   25
      subject to year-end adjustments and the absence of footnotes with respect
      to interim financial statements, and there has been no material adverse
      change in the financial condition of Borrower since the submission of such
      financial information to Lender.

                  7.11 Pro Formas. Borrower has furnished to Lender, (i) profit
      and loss statements and cash flow projections for each Reporting Period
      after the Closing through December 21, 2003, and (ii) balance sheets,
      profit and loss statements and cash flow projections reflected annually
      for the next five (5) Fiscal Years, including the Fiscal Year 1999, all
      certified by the Chief Executive Officer or a Vice President of Borrower
      and (except as stated above), based on Generally Accepted Accounting
      Principles, and on financial data as of the Closing Date, and which are
      attached hereto as Schedule 7.11 (the "Pro Formas"). The Pro Formas are
      complete and accurate, and fairly present Borrower's assets, liabilities
      and financial condition, on the bases described above, as of the Closing
      Date, but taking into account the transactions contemplated by this
      Agreement and those contemplated as of the Closing Date under the other
      Loan Documents. There are no omissions from the Pro Formas or other facts
      and circumstances not reflected in the Pro Formas which are or may be
      material.

                  7.12 Conduct of Business. Except as contemplated hereby, since
      August 8, 1999, Borrower has not (i) incurred any debts, obligations, or
      liabilities (absolute, accrued, or contingent and whether due or to become
      due) except current liabilities incurred in the ordinary course of
      business, none of which (individually or in the aggregate) materially and
      adversely affects the business or properties of Borrower, except as set
      forth in Schedule 7.12; (ii) paid any obligation or liability other than
      current liabilities in the ordinary course of business, or discharged or
      satisfied any Liens or encumbrances other than those securing current
      liabilities, in each case in the ordinary course of business or as
      required by the terms of this Agreement; (iii) declared or made any
      payment to or distribution to its stockholders as such, or purchased or
      redeemed any of its shares of capital stock, or obligated itself to do so;
      (iv) mortgaged, pledged, or subjected to any Lien any of its assets,
      tangible or intangible (other than Permitted Liens); (v) sold, transferred
      or leased any of its assets except in the usual and ordinary course of
      business; (vi) suffered any physical damage, destruction or loss (whether
      or not covered by insurance) materially and adversely affecting its
      properties or business; (vii) except as set forth in Schedule 7.12,
      entered into any transaction other than in the usual and ordinary course
      of business and other than as contemplated hereby; (viii) encountered any
      strikes or work stoppages or labor union organizing activities; (ix)
      issued or sold any shares of capital stock or other securities or granted
      any options or similar rights with respect thereto other than pursuant to
      Borrower's existing stock option plans, as such plans may be amended with
      the approval of Borrower's stockholders; or (x) agreed to do any of the
      foregoing other than pursuant hereto.

                                       25
<PAGE>   26
      To Borrower's knowledge after due inquiry, there has been no material
      adverse change in the business, financial condition, operations or results
      of operations of Borrower since August 8, 1999.

                  7.13 Environmental Laws. Except as disclosed on Schedule 7.13:
      (i) Borrower and all properties owned or operated by Borrower comply with
      all Environmental Laws; (ii) Borrower is not subject to any actual or
      threatened judicial or administrative proceeding, investigation or inquiry
      into the possibility of violation of any Environmental Laws; (iii) neither
      the Borrower nor its properties is the subject of actual or, to the best
      of Borrower's knowledge after due inquiry, threatened governmental
      authority investigation or inquiry evaluating whether any remedial action
      is needed to respond to a Release of any Hazardous Material or other
      substance into the environment, and Borrower does not have knowledge or
      notice of the presence on or under any property owned or operated by it,
      or of the Release of, any Hazardous Material; (iv) there is no claim
      pending or, to the best of Borrower's knowledge after due inquiry,
      threatened against Borrower relating to damage, contribution, cost
      recovery compensation, loss, or injury resulting from the Release of, or
      exposure to, any Hazardous Material other than as listed on Schedule 7.13,
      which Hazardous Material is stored in or under Borrower's properties in
      the ordinary course of business in accordance with Environmental Laws; and
      (v) Borrower has not filed, nor was required to file, any notice under any
      law, regulation or rule indicating past or present generation,
      transportation, treatment, storage or disposal of a Hazardous Material or
      reporting a Release of a Hazardous Material into the environment and has
      not engaged in such activity other than in accordance with Environmental
      Laws where failure to file such notice or report will not have a material
      adverse effect on Borrower. Borrower does not have any known contingent
      liability in connection with any Release of any Hazardous Material into
      the environment; and Borrower has not received notice, nor has reason to
      expect notice, of any potential liability under any Environmental Law.

                  7.14 Permits and Licenses. Borrower has not been in breach or
      default under, and is current and in good standing with respect to, all
      governmental approvals, permits, certificates, licenses, inspections,
      consents and franchises necessary to continue to conduct its business and
      to own or lease and operate its respective properties as heretofore
      conducted, owned, leased or operated, including, without limitation, any
      and all governmental approvals, permits, certificates, licenses,
      inspections, consents and franchises related to Environmental Laws.

                  7.15 ERISA. Neither Borrower nor any ERISA Affiliate (defined
      below) of Borrower, nor any Benefit Plan (defined below) is in violation
      in any material respect of any of the provisions of ERISA or any of the
      qualification requirements of Section 401(a) of the IRC; no Prohibited
      Transaction (defined

                                       26
<PAGE>   27
      below) or Reportable Event (defined below) has occurred with respect to
      any Benefit Plan, nor has any Benefit Plan been the subject of a waiver of
      the minimum funding standard under Section 412 of the IRC; nor has any
      Benefit Plan experienced an accumulated funding deficiency under Section
      412 of the IRC; nor has any Lien been imposed upon Borrower or any ERISA
      Affiliate of Borrower under Section 412(n) of the IRC; nor has any Benefit
      Plan been amended in such a way that the security requirements of Section
      401(a)(29) of the IRC apply; no notice of intent to terminate a Benefit
      Plan has been distributed to affected parties or filed with the Pension
      Benefit Guaranty Corporation, or any successor agency (the "PBGC"), under
      Section 4041 of ERISA, nor has any Benefit Plan been terminated under
      Section 4041(e) of ERISA; the PBGC has not instituted proceedings to
      terminate, or appoint a trustee to administer, a Benefit Plan and no event
      has occurred or condition exists which might constitute grounds under
      Section 4042 of ERISA for the termination of, or the appointment of a
      trustee to administer, any Benefit Plan; neither Borrower nor any ERISA
      Affiliate of Borrower would be liable for any amount pursuant to Sections
      4062, 4063 or 4064 of ERISA if all Benefit Plans terminated as of the most
      recent valuation dates of such Benefit Plans; neither Borrower nor any
      ERISA Affiliate of Borrower maintains any employee welfare benefit plan,
      as defined in Section 3(l) of ERISA, which provides any benefits to an
      employee or the employee's dependents with respect to claims incurred
      after the employee separates from service other than is required by
      applicable law; and neither Borrower nor any ERISA Affiliate of Borrower
      has incurred or expects to incur any withdrawal liability to any
      Multiemployer Plan (defined below), or contributes to a Multiemployer
      Plan. As used herein, (a) "Benefit Plan" shall mean an employee benefit
      plan of Borrower or an ERISA Affiliate, as defined in Section 3(3) of
      ERISA; (b) "ERISA Affiliate" shall mean any Person which, together with
      Borrower, would be treated as a single employer under Section 4001(a)(14)
      of ERISA or IRC Section 414(b), (c), (m), (n) or (o), as applicable; (c)
      "Multiemployer Plan" shall mean a plan described in Section 4001(a)(3) of
      ERISA which covers employees of Borrower or any ERISA Affiliate; (d)
      "Prohibited Transaction" shall mean any transaction described in Section
      406 of ERISA which is not exempt by reason of Section 408 of ERISA, and
      any transaction described in Section 4975(c) of the IRC which is not
      exempt by reason of Sections 4975(c)(2) or (d) of the IRC, and which could
      result in any excise tax, fine, penalty or other liability being imposed
      on Borrower; and (e) "Reportable Event" shall mean a reportable event
      described in Section 4043 of ERISA or the regulations thereunder, for
      which the thirty (30) day notice requirement has not been waived.

                  7.16 Customer and Trade Relations. There exists no actual or
      to the best of Borrower's knowledge after diligent inquiry, threatened
      termination, cancellation or limitation of, or any modification or change
      in, the business relationship between Borrower and any customer or any
      group of customers whose

                                       27
<PAGE>   28
      purchases individually or in the aggregate are material to the business of
      Borrower, or with any material supplier, and there exists no present
      condition or state of facts or circumstances which would materially
      adversely affect Borrower or prevent Borrower from conducting such
      business after the consummation of the transactions contemplated by this
      Agreement in substantially the same manner in which it has heretofore been
      conducted by Borrower.

                  7.17 Other Names. The businesses conducted by Borrower have
      not been conducted under any corporate, trade or fictitious name other
      than those names listed on Schedule 7.17 hereto.

                  7.18 Tax Obligations. Borrower has filed complete and correct
      federal, state and local tax reports and returns required to be filed by
      them, prepared in accordance with any applicable laws or regulations, and
      except for extensions duly obtained, have either duly paid all taxes,
      duties and charges owed by it, or made adequate provision for the payment
      thereof. There are no material unresolved questions or claims concerning
      any tax liability of Borrower. None of the transactions contemplated
      hereby or under any agreements referred to hereunder will result in any
      material tax liability for Borrower or result in any other material
      adverse tax consequence for Borrower.

                  7.19 Employee Controversies. There are no strikes, work
      stoppages or controversies pending or, to the best of Borrower's knowledge
      after diligent inquiry and investigation, threatened, between Borrower and
      any of its employees, other than employee grievances arising in the
      ordinary course of business which are not, in the aggregate, material to
      the financial condition, results of operations or business of Borrower.

                  7.20 Investment Company Act. Borrower is not an "investment
      company" nor a company "controlled" by an investment company within the
      meaning of the Investment Company Act of 1940, as amended.

                  7.21 Full Disclosure. This Agreement, the financial statements
      delivered in connection herewith, and the representations and warranties
      of Borrower herein and in any other document delivered or to be delivered
      by or on behalf of Borrower in connection therewith, do not and will not
      contain any untrue statement of a material fact or omit a material fact
      necessary to make the statements contained therein or herein, in light of
      the circumstances under which they were made, not misleading. There is no
      material fact which Borrower has not disclosed to Lender in writing which
      materially and adversely affects or, so far as Borrower can foresee, would
      materially and adversely affect the assets, business, prospects, profits,
      or condition (financial or otherwise) of Borrower, the rights of Lender or
      the ability of Borrower to perform this Agreement.

                                       28
<PAGE>   29
                  7.22 Year 2000 Compliance. The Borrower and its Affiliates
      have reviewed the areas within their business and operations which could
      be adversely affected by, and have developed or are developing a program
      to address on a timely basis, the "Year 2000 Problem" (that is, the risk
      that computer applications used by the Borrower and its Affiliates may be
      unable to recognize and perform properly date-sensitive functions
      involving certain dates prior to and any date after December 31, 1999),
      and have made related appropriate inquiry of material suppliers and
      vendors. Based on such review and program, the Borrower believes that the
      "Year 2000 Problem" will not have a material adverse effect on the
      Borrower, its financial condition, business and operations, and its
      ability to pay and perform the Obligations. From time to time, at the
      request of Lender, the Borrower and its Affiliates shall provide to Lender
      such updated information or documentation as is reasonably requested
      regarding the status of its efforts to address the "Year 2000 Problem".

8.    NEGATIVE COVENANTS

The Borrower will not, without Lender's prior written consent:

                  8.1 Sale, Transfer or Encumbrance of Assets. Sell, lease,
      pledge, encumber, grant or permit a Lien on (other than Permitted Liens),
      or otherwise dispose of or transfer, whether by sale or otherwise, any of
      its assets, except for (a) sales of Inventory in the ordinary course of
      business, (b) sales of items of Equipment which are obsolete, worn-out or
      otherwise not useable in Borrower's businesses up to an aggregate of
      $100,000 in sales proceeds in any Fiscal Year so long as (i) no Event of
      Default has occurred and which has not been cured or waived as set forth
      in this Agreement, or Potential Default exists, (ii) the proceeds thereof
      are applied to the principal balance of the Obligations, (iii) Lender has
      prior written notice thereof, (iv) such sales are on price and other
      terms, and Borrower proposes to apply the proceeds of each such sale to
      the Obligations in a manner, reasonably acceptable to Lender, and (v) the
      transfer of assets in each such sale will not result in any impairment in
      use or value of the Collateral remaining after each such sale, or (c) the
      closure of Borrower's locations listed on Schedule 8.1 hereto or such
      other locations consented to by Lender in writing, which consent shall not
      be unreasonably withheld, provided that the Equipment located at any
      closed facility is transferred to locations of Borrower listed on Schedule
      6.3 hereto or locations permitted by Section 6.3(a) of this Agreement. The
      parties agree that, with respect to those locations which constitute the
      Alliance Senior Collateral, as defined in the Intercreditor Agreement, it
      shall be reasonable for Lender to condition its consent to the closure of
      any location pursuant to the preceding clause (c) upon either (A) a
      proportional reduction (based upon the percentage which the closed
      location constituted of the total number of locations comprising Alliance

                                       29
<PAGE>   30
      Senior Collateral, as defined in the Intercreditor Agreement) of the then
      outstanding principal balance of the Loan or (B) the grant of a senior
      security interest in the Collateral located at a substitute location
      acceptable to Lender, with the effect that such substitute location
      becomes Alliance Senior Collateral, within the meaning of the
      Intercreditor Agreement. For purposes of this Agreement, "Permitted Liens"
      shall mean any or all of the following: (i) Liens to Lender, (ii) Liens
      securing the payment of taxes or other governmental charges not yet due
      and payable, (iii) Liens securing claims or demands of materialmen,
      mechanics, carriers, warehousemen, landlords and other like Persons
      imposed without action of such parties, provided that the payment thereof
      is not yet required; (iv) Liens incurred or deposits made in the ordinary
      course of Borrower's business in connection with worker's compensation,
      unemployment insurance, social security and other like laws, (v)
      easements, rights of way, restrictions and other similar encumbrances
      incurred in the ordinary course of business that, in the aggregate, are
      not substantial in amount and that do not in any case materially detract
      from the value of the property subject thereto or materially interfere
      with the ordinary conduct of Borrower's business, (vi) Liens in connection
      with purchase money security interests for the purchase of Equipment up to
      an aggregate sum not to exceed One Hundred Thousand Dollars ($100,000) for
      any purchase and One Hundred Thousand Dollars ($100,000) in the aggregate
      for purchases during any Fiscal Year, provided the documents relating to
      any such purchases must be in form and substance reasonably satisfactory
      to Lender, (vii) Liens listed on Schedule 8.1, and (viii) Liens in favor
      of Bank.

                  8.2 Name or Identity Change. Change Borrower's name, business
      structure, or identity, or add any new fictitious name.

                  8.3 Guaranties. Guarantee or otherwise become in any way
      liable with respect to the obligations of any third party except by
      endorsement of instruments or items of payments for deposit to the general
      account of Borrower or which are transmitted or turned over to Lender.

                  8.4 Change in Business. Enter into any business not related to
      Borrower's present business or make any change in Borrower's financial
      structure or in any of its business objectives, purposes, or operations
      which would adversely affect the ability of Borrower to repay the
      Obligations, the value of the Collateral or Lender's rights and remedies
      hereunder, or create any Subsidiary or change the form of Borrower's
      business entity from a corporation.

                  8.5 Loans and Investments. Except as set forth on Schedule
      8.5, make any advance, loan, investment or material acquisition of assets
      other than (i) advances made to employees in the ordinary course of
      business for travel and business related expenses so long as the amount of
      such advances do not exceed

                                       30
<PAGE>   31
      Fifty Thousand Dollars ($50,000) in the aggregate outstanding at any time;
      (ii) investments in short-term direct obligations of the United States
      government; (iii) investments in negotiable certificates of deposit issued
      by a bank having capital and surplus of not less than $100,000,000,
      payable to the order of Borrower or to bearer, and (iv) investments in
      commercial paper rated A-1 or P-1; provided, that with respect to clauses
      (ii), (iii) and (iv), Borrower shall assign all such investments to Lender
      in form acceptable to Lender.

                  8.6 Indebtedness. Incur or make any commitments or agreements
      to incur or suffer to exist any Indebtedness, other than (i) unsecured
      trade debt and accrued expenses arising in the ordinary course of
      Borrower's business, (ii) Indebtedness incurred with respect to
      Maintenance Capital Expenditures in accordance with Section 8.20 hereof up
      to the aggregate sum of $500,000 in any Fiscal Year, (iii) Indebtedness
      incurred in connection with Liens arising under Section 8.1(v) of this
      Agreement, (iv) Indebtedness incurred in connection with the Bank
      Financing, or (v) obligations under the Note Indenture.

                  8.7 Prepayments. Prepay any existing Indebtedness owing to any
      Person, except that (i) Borrower may prepay trade creditors in the
      ordinary course of business, and (ii) Borrower may prepay Lender as
      provided in this Agreement.

                  8.8 Affiliate Transactions. Transfer any cash or property to
      any direct or indirect owner of or beneficial owner of any interest in
      Borrower or other Affiliate or enter into any transaction, including
      without limitation the purchase, lease, sale or exchange of property or
      the rendering of any service to or by any direct or indirect owner of or
      beneficial owner of any interest in Borrower or other Affiliate; provided
      that Borrower may (i) sell Inventory to Affiliates, for cash for fair
      value in the ordinary course of business pursuant to terms that are no
      less favorable to Borrower than the terms upon which such transactions
      would have been made had such transfers or transactions been made at arm's
      length to or with a Person that is not an Affiliate, and notice thereof
      has been given to Lender, (ii) pay compensation for services to employees
      who are direct or indirect owners of or beneficial owners of any interest
      in Borrower in the ordinary course of Borrower's business, (iii) pay
      Pedersen & Houpt for legal services performed for Borrower, and (iv)
      repurchase common stock of Borrower pursuant to that certain Stock
      Transfer Restriction Agreement between Borrower and certain of its
      shareholders ("Restriction Agreement") as permitted by Section 8.12
      hereof.

                  8.9 Consolidations, Mergers. Merge or consolidate with any
      other Person, or enter into any joint venture or become a partner in any
      partnership.

                                       31
<PAGE>   32
                  8.10 Liquidations. Adopt or undertake a plan of liquidation or
      dissolution.

                  8.11 Suspension of Business. Suspend or terminate the
      transaction of its business or abandon the Collateral.

                  8.12 Redemptions and Distributions. Except for the purchase or
      redemption of capital stock of officers of Borrower who terminate their
      employment with Borrower or whose employment is terminated by Borrower and
      repurchases by Borrower of capital stock of Borrower pursuant to the
      Restriction Agreement, up to the aggregate sum of $50,000 in any Fiscal
      Year, purchase, redeem, retire or otherwise acquire any shares of its
      capital stock or declare or pay, directly or indirectly, any cash or other
      property, dividends or distributions to its shareholders.

                  8.13 Unpermitted Uses of Loans. Use any part of the proceeds
      of the Loan for any purpose which constitutes a violation of, or is
      inconsistent with, any applicable regulations of the Board of Governors of
      the Federal Reserve System, including without limitation, the purchase or
      carrying of (or refinancing of indebtedness originally incurred to
      purchase or carry) margin securities.

                  8.14 ERISA. Adopt or agree to contribute to any tax qualified
      Benefit Plan, except for a 401(k) Plan or as previously approved by Lender
      in writing.

                  8.15 Consignment. Sell any goods on consignment, bill and
      hold, or similar terms, except as permitted in writing by Lender.

                  8.16 Bank Accounts. Unless Borrower first notifies Lender and
      obtains any necessary blocked account agreements from such financial
      institution, establish any depository, operating or other account at any
      financial institution other than those accounts listed on Schedule 8.16
      hereof.

                  8.17 Compensation. Unless approved by Borrower's board of
      directors, pay total compensation, including salaries, withdrawals, fees,
      bonuses, commissions, drawing accounts, and other payments, whether
      directly or indirectly, in money or otherwise, to the officers of Borrower
      in any fiscal year, in amounts in excess of one hundred twenty percent
      (120%) of the total compensation for the immediately preceding fiscal
      year, paid or accrued by Borrower or its Affiliates to or for the benefit
      of such Persons (individually).

                                       32
<PAGE>   33
                  8.18 Lease Modifications. Modify or amend the material terms
      of or terminate any lease of real property, except for the termination of
      the leases for the stores listed on Schedule 8.1 hereto.

                  8.19 New Leases. Enter into any lease of real property without
      obtaining an executed landlord's waiver and such lease contains a consent
      to assignment thereof to Lender, both in form attached hereto as Exhibit
      C.

                  8.20 Capital Expenditures. Make any Capital Expenditures
      except for (i) Capital Expenditures to maintain or upgrade existing
      business locations of Borrower, up to the aggregate sum of $1,000,000 in
      any Fiscal Year ("Maintenance Capital Expenditures"), (ii) Capital
      Expenditures either to maintain or upgrade existing business locations or
      for the construction and equipping of new business locations, up to the
      aggregate sum of seventy-five percent (75%) of Free Cash Flow in any
      Fiscal Year, and (iii) Capital Expenditures either to maintain or upgrade
      existing business locations or for the construction of new business
      locations, up to the aggregate sum of ninety percent (90%) of any Excess
      Issuance Proceeds, provided such sums are actually spent on Capital
      Expenditures within twelve (12) months of their receipt by Borrower.

9.    AFFIRMATIVE COVENANTS - GENERAL

So long as any Obligations are outstanding, Borrower covenants and agrees that:

                  9.1 Taxes. All assessments and taxes, whether real, personal
      or otherwise, due or payable by, or imposed, levied or assessed against,
      Borrower or any of its property have been paid, and shall hereafter be
      paid in full, before delinquency, except those assessments and taxes the
      validity of which is being contested in good faith by appropriate
      proceedings, do not impair the priority of Lender's Liens on the
      Collateral and as to which Borrower shall have set aside adequate reserves
      (as determined by Lender in its reasonable discretion). Borrower will make
      timely payment or deposit of all FICA payments and withholding taxes
      required of it by applicable laws, and will, upon request, furnish Lender
      with proof reasonably satisfactory to it that Borrower has made such
      payments or deposits.

                  9.2 Insurance. Borrower, at its expense, shall keep and
      maintain the Collateral insured under "all risk" or equivalent types of
      policies against loss or damage by fire, theft, explosion, sprinklers and
      all other hazards and risks ordinarily insured against by other owners who
      use such properties in similar business for the full insurable value
      thereof as necessary to prevent application of any co-insurance
      provisions. Borrower shall also keep and maintain business interruption
      insurance and public liability and property damage insurance relating to
      Borrower's ownership and use of the Inventory, Equipment and its other
      assets.

                                       33
<PAGE>   34
      All such policies of insurance shall be in such form, with such companies,
      and in such amounts as may be reasonably satisfactory to Lender. Borrower
      shall deliver to Lender certified copies of such policies of insurance and
      evidence of the payments of all premiums therefor. All such policies of
      insurance (except those of public liability and those insuring
      improvements to real estate leased by Borrower (the "Real Property
      Improvement Insurance") shall contain an endorsement in a form reasonably
      satisfactory to Lender showing Lender as the lender loss payee on all
      Collateral with a waiver of warranties, and absent the occurrence of a
      Potential Default or an Event of Default, all proceeds payable thereunder
      in excess of the aggregate sum of One Hundred Thousand Dollars ($100,000)
      shall be payable to Lender and, upon receipt by Lender, shall be applied
      on account of the Obligations owing to Lender. Absent the occurrence of a
      Potential Default or Event of Default, Borrower may retain proceeds up to
      the aggregate sum of One Hundred Thousand Dollars ($100,000) to be used by
      Borrower for the repair or replacement of any damaged or destroyed
      Collateral. Upon the occurrence of a Potential Default or Event of
      Default, all insurance proceeds (other than the Real Property Improvement
      Insurance proceeds) shall be paid to Lender. To secure the payment of the
      Obligations, Borrower grants Lender a Lien in and to all such policies of
      insurance (except those of public liability and the Real Property
      Improvement Insurance) and the proceeds thereof, and except as provided
      above, Borrower shall direct all insurers under such policies of insurance
      to pay all proceeds thereof directly to Lender as its interest may appear.
      After the occurrence of a Potential Default or Event of Default, Borrower
      hereby irrevocably appoints Lender (and any of Lender's officers,
      employees or agents designated by Lender) as Borrower's attorney-in-fact
      for the purpose of making, settling and adjusting claims under such
      policies of insurance, endorsing the name of Borrower on any check, draft,
      instrument or other item of payment for the proceeds of such policies of
      insurance and for making all determinations and decisions with respect to
      such policies of insurance. Prior to an Event of Default or Potential
      Default, Borrower shall not make, settle or adjust claims in excess of One
      Hundred Thousand Dollars ($100,000) under such policies of insurance
      without prior consultation with and written consent of Lender. Borrower
      will not cancel any of such policies without Lender's prior written
      consent. Borrower shall obtain by endorsement upon the policy or policies
      of insurance issued to Borrower as required above, or by independent
      instruments furnished to Lender, an agreement from each insurer that it
      will give Lender at least thirty (30) days' written notice before any such
      policy or policies of insurance shall be materially altered or canceled,
      and that no act or default of Borrower, or any other Person, shall affect
      the right of Lender to recover under such policy or policies of insurance
      required above or to pay any premium in whole or in part relating thereto.
      Lender, without waiving or releasing any Obligations or any Event of
      Default may, but shall have no obligation to, obtain and maintain such
      policies of insurance that Borrower is required to carry hereunder and pay
      such premiums and take any other action with respect to such

                                       34
<PAGE>   35
      policies which Lender deems advisable. All sums disbursed by Lender in
      accordance with this Section 9.2, as well as reasonable attorneys' fees,
      court costs, expenses and other charges relating thereof, shall constitute
      Out-of-Pocket Fees and Costs and shall be payable on demand.

                  9.3 Litigation. Borrower shall immediately notify Lender in
      writing of any suit in law or equity or administrative proceeding
      involving money or property, and seeking damages in excess of $100,000
      individually or $200,000 in the aggregate.

                  9.4 Books and Records. Borrower at all times hereafter shall
      keep proper books of record and account in which full and true entries
      will be made of all dealings or transactions with respect to or in
      relation to the business and affairs of Borrower, and shall maintain a
      standard and modern system of accounting, in accordance with Generally
      Accepted Accounting Practices with ledger and account cards and/or
      computer tapes, discs, printouts, and records pertaining to the Collateral
      which contain information as may from time to time be reasonably requested
      by Lender. Borrower agrees to permit Lender and any of its employees,
      officers or agents, at all times during Borrower's usual business hours,
      or the usual business hours of third Persons having control thereof, to
      have access to and examine all of Borrower's Books relating to the
      Collateral, the Obligations, Borrower's financial condition and the
      results of Borrower's operations, and, in connection therewith, permit
      Lender or any of its agents, employees or officers to copy and make
      extracts therefrom; provided that prior to an Event of Default, Lender
      shall provide Borrower two (2) Business Days' prior notice of such
      examinations and Lender shall use its good faith efforts to minimize
      interference with Borrower's business.

                  9.5 Compliance with Laws. Borrower shall comply in all
      material respects with all Federal, State, local and foreign laws, rules
      and regulations, including, but not limited to the Securities Act of 1933,
      the Securities Exchange Act of 1934, the Fair Labor Standards Act,
      Environmental Laws, laws relating to income, unemployment, payroll or
      social security taxes and pension funds and retirement benefit programs as
      required by ERISA.

                  9.6 Expense Reimbursements. Borrower shall within five (5)
      Business Days of demand by Lender, reimburse Lender for all sums expended
      by Lender which constitute Out-of-Pocket Fees and Costs if Borrower fails
      to pay same. Absent the occurrence of an Event of Default, Lender shall
      provide Borrower with copies of invoices for such Out-of-Pocket Fees and
      Costs. All of such amounts expended for Out-of-Pocket Fees and Costs shall
      be part of the Obligations subject to interest at the Rate or Default
      Rate, as applicable.

                                       35
<PAGE>   36
                  9.7 ERISA Reportable Events. Borrower shall furnish to Lender:
      (a) as soon as possible, but in no event later than thirty (30) days after
      it knows or has reason to know that any Reportable Event with respect to
      any Benefit Plan has occurred, a statement of the Chief Executive Officer
      of Borrower setting forth the details concerning such Reportable Event and
      the action which it proposes to take with respect thereto, together with a
      copy of the notice of such Reportable Event given to the PBGC, if a copy
      of such notice is available to Borrower; (b) upon request by Lender,
      promptly after the filing thereof with the United States Internal Revenue
      Service or the PBGC, copies of each annual report with respect to each
      Benefit Plan; (c) promptly after receipt thereof, a copy of any notice of
      any potential material liability, adverse determination letter, ruling or
      opinion it may receive from the PBGC or the Internal Revenue Service with
      respect to any Benefit Plan; (d) when the same is made available to
      participants in a Benefit Plan, all notices of a significant reduction in
      the rate of benefit accrual or plan termination to the participants by the
      administrator of such Benefit Plan; and (e) promptly after receipt
      thereof, any notice from any Multiemployer Plan to which it or any of its
      ERISA Affiliates contributes which quantifies any actual or potential
      withdrawal liability which will or may be imposed upon the withdrawal of
      Borrower or any ERISA Affiliate of Borrower from such Multiemployer Plan.

                  9.8 Intellectual Property. Upon Borrower's acquisition of any
      patents, trademarks, licenses or other intellectual property rights,
      Borrower shall notify Lender of same in writing and take all steps that
      Lender reasonably deems necessary to create a first priority lien and
      security interest in such assets in favor of Lender.

10.   AFFIRMATIVE COVENANTS - REPORTING

Borrower shall furnish or cause to be furnished to Lender the following:

                        10.1 (a) Periodic Financial Statements. As soon as
            practicable and in any event within thirty (30) days following the
            end of each Reporting Period (i) a statement of income and a
            statement of cash flow of Borrower for each such Reporting Period
            and for the period from the beginning of the then current fiscal
            year of Borrower to the end of such Reporting Period, (ii) a balance
            sheet of Borrower as of the end of such Reporting Period, and (iii)
            with respect to such statement of income and balance sheet, in
            comparative form, figures for the corresponding Reporting Periods in
            the preceding Fiscal Year of Borrower, all in reasonable detail and
            certified by the Chief Executive Officer of Borrower as fairly
            presenting the financial condition of Borrower in accordance with
            Generally Accepted Accounting Principles, subject to changes
            resulting from normal year-end adjustments and the absence of
            footnotes.

                                       36
<PAGE>   37
                        (b) Yearly Financial Statements. As soon as practicable
            and in any event within ninety (90) days after the end of each
            Fiscal Year of Borrower, a statement of income of Borrower for such
            Fiscal Year, and a balance sheet of Borrower as of the end of such
            Fiscal Year, and a statement of cash flow of Borrower for such
            Fiscal Year, all setting forth in comparative form, corresponding
            figures for the period covered by the preceding annual audit and as
            of the end of the preceding Fiscal Year of Borrower, all in
            reasonable detail and in scope in accordance with audits performed
            for Borrower in prior years and examined and certified by
            independent certified public accountants of recognized national
            standing selected by Borrower and reasonably satisfactory to Lender,
            whose opinion shall be unqualified and shall be in scope in
            accordance with audits performed for Borrower in prior years, in
            form and substance satisfactory to Lender.

                        (c) Projections. As soon as practicable and in any event
            not later than thirty (30) days prior to the beginning of each
            Fiscal Year of Borrower hereafter, preliminary drafts of projected
            balance sheets, statements of income and cash flow for Borrower, for
            each month during such Fiscal Year, which shall include the
            assumptions used therein, together with final versions of same
            within sixty (60) days after the beginning of each Fiscal Year
            containing appropriate supporting details as requested by Lender,
            along with consolidated calculations with respect to compliance with
            covenants in the same manner as required in connection with the
            delivery of financial statements under (a) and (b) above.

                        (d) Management Letters, Tax Distributions. As soon as
            practicable and in any event within ten (10) days of delivery to
            Borrower a copy of any letter issued by Borrower's independent
            public accountants or other management consultants, if any are
            issued, with respect to Borrower's financial or accounting systems
            or controls, including all so-called "management letters".

                        (e) Yearly Reports. In conjunction with the delivery of
            the annual presentation of projections or budgets referred to in
            subsection (c) above, a letter signed by the Chief Executive Officer
            of Borrower, describing, comparing and analyzing, in reasonable
            detail, all changes and developments between the anticipated
            financial results included in such projections or budgets for the
            prior Fiscal Year and the historical financial statements of
            Borrower for such prior Fiscal Year.

                                       37
<PAGE>   38
                        (f) SEC Reports. Within five (5) days after the same are
            sent, copies of all financial statements and reports that Borrower
            sends to the Securities and Exchange Commission or any holders of
            other Indebtedness.

                        (g) Other Information. With reasonable promptness, such
            other business or financial data, reports, appraisals and
            projections as Lender may reasonably request.

                  All financial statements delivered to Lender pursuant to the
      requirements of this subsection (except where otherwise expressly
      indicated) shall be prepared in accordance with Generally Accepted
      Accounting Principles as provided in this Agreement. Together with each
      delivery of financial statements required by subsections (a) and (b)
      above, Borrower shall deliver to Lender an officer's certificate in the
      form of Exhibit B hereto stating that (i) there exists no Event of Default
      or Potential Default, or if an Event of Default or Potential Default
      exists, specifying the nature thereof, the period of existence thereof and
      what action Borrower proposes to take with respect thereto, (ii) no
      material adverse change in the condition, financial or otherwise,
      business, property, including without limitation, with respect to
      Environmental Laws, or results of operations of Borrower has occurred
      since the previous certificate was sent to Lender by Borrower or, if any
      such change has occurred, specifying the nature thereof and what action
      Borrower has taken or proposes to take with respect thereto, (iii) all
      insurance premiums then due have been paid before delinquent, (iv) all
      taxes then due have been paid or, for those taxes which have not been paid
      before delinquent, a statement of the taxes not paid and a description of
      Borrower's rationale therefor, (v) except as previously reported to
      Lender, no litigation, investigation or proceeding, or injunction, writ or
      restraining order involving claims in excess of $100,000 individually or
      $200,000 in the aggregate is pending or to the best of Borrower's
      knowledge after diligent inquiry, threatened, and (vi) stating whether or
      not Borrower is in compliance with the representations, warranties and
      covenants in this Agreement, including a calculation of financial
      covenants in the schedule attached to such officer's certificate in form
      satisfactory to Lender. Lender shall exercise reasonable efforts to keep
      such information, and all information acquired as a result of any
      inspection conducted in accordance with this Agreement, confidential,
      provided that Lender may communicate such information (A) to any other
      Person in accordance with the customary practices of commercial lenders
      relating to routine trade inquiries, (B) to any regulatory authority, or
      pursuant to any order, judgement or decree of any court having
      jurisdiction over Lender, or (C) to any other Person in connection with
      the exercise of Lender's rights hereunder.

                                       38
<PAGE>   39
                  10.2 Accounting Information. Borrower authorizes Lender to
      discuss the financial condition of Borrower with Borrower's independent
      public accountants and agrees that such discussion or communication shall
      be without liability to either Lender or Borrower's independent public
      accountants. Prior to the occurrence of a Potential Default or Event of
      Default, Lender shall use its best efforts to notify Borrower of Lender's
      discussions with Borrower's accountants. Borrower shall deliver a letter
      addressed to such accountants authorizing them to comply with the
      provisions of this subsection, and authorizing Lender to rely on financial
      statements of Borrower issued by such accountants, which letter shall be
      acknowledged and consented to in writing by such accountants, and be in
      form and substance satisfactory to Lender.

                  10.3 Other Information and Changes. Borrower shall promptly
      supply Lender with such other information concerning its affairs as Lender
      may request from time to time hereafter, and shall promptly notify Lender
      of any material adverse change in Borrower's financial condition and of
      any condition or event which constitutes a breach of or an Event of
      Default under this Agreement.

11.   AFFIRMATIVE COVENANTS - FINANCIAL

                  11.1 Tangible Net Worth. Borrower shall maintain its Tangible
      Net Worth in an amount of not less than the amount set forth opposite each
      period set forth below, measured quarterly, as of the last day of each
      Fiscal Quarter.

                           MINIMUM TANGIBLE NET WORTH

<TABLE>
<CAPTION>
      ----------------------------------------------------------------
                  Period                       Minimum Level

      ----------------------------------------------------------------
<S>                                           <C>
      Closing Date to and including             $90,000,000
      December 26, 1999
      ----------------------------------------------------------------
      December 27, 1999 to and                  $85,000,000
      including June 11, 2000
      ----------------------------------------------------------------
      June 12, 2000 and thereafter              $80,000,000
      ----------------------------------------------------------------
</TABLE>

                  11.2 Senior Interest Coverage Ratio. Borrower shall maintain a
      Senior Interest Coverage Ratio, calculated and tested as of the last day
      of each respective Fiscal Quarter, cumulatively for the rolling thirteen
      (13) Reporting Periods ending on the last day of each such Fiscal Quarter
      of not less 3.00 : 1.00; provided that for purposes of determining the
      ratio described above for the Fiscal Quarters ending December 26, 1999,
      March 19, 2000, and June 11, 2000, EBITDA and Funded Debt Interest Expense
      shall be deemed to equal EBITDA and Funded Debt Interest Expense for such
      Fiscal Quarter (and, in the case of the later two such

                                       39
<PAGE>   40
      determinations, each previous Fiscal Quarter commencing with the Closing),
      multiplied by 13/3rds, 13/3rds, and 13/3rds respectively.

                  11.3 Minimum Net Book Value of Laundry Equipment. Borrower
      shall own at all times, laundry Equipment having a net book value of not
      less than $30,000,000.

12.   EVENTS OF DEFAULT

Any one or more of the following shall constitute an Event of Default by
Borrower under this Agreement:

                  12.1 Payment. If Borrower fails to pay, when due and payable
      or when declared due and payable, all or any portion of the Obligations
      representing principal or interest owing to Lender, or Borrower fails to
      pay, when due and payable or when declared due and payable, any other
      Obligations and such failure is not cured within five (5) days of such
      breach.

                  12.2 Breach of Covenants. If Borrower fails or neglects to
      perform, keep or observe any term, provision, condition, covenant, or
      agreement contained in this Agreement, any other Loan Document, or any
      other present or future agreement between Borrower and Lender and/or
      evidencing and/or securing the Obligations, except the failure to comply
      with Sections 8.2, 8.18, 9.1, 9.3, 9.4, 9.5, 9.7 and 9.8 of this Agreement
      shall not be an Event of Default unless such failure continues for a
      period of thirty (30) days following notice by Lender to Borrower.

                  12.3 Breach of Representation. If any representation,
      warranty, statement, report, or certificate made or delivered by Borrower,
      or any of its officers, employees or agents on behalf of Borrower, to
      Lender is false in any material respect when made or deemed to be made.

                  12.4 Material Adverse Change. If in Lender's reasonable
      discretion (i) there is a material impairment of the prospect of repayment
      of all or any portion of the Obligations, (ii) there is any impairment of
      the priority of Lender's Liens on all or a portion of the Collateral
      (including without limitation a Lien, levy or assessment in any amount of
      the type referred to in Section 12.9 hereof), or (iii) a material adverse
      change has occurred in the condition (financial or otherwise), business,
      property or results of operations of Borrower.

                  12.5 Attachment or Levy. If all or any of Borrower's assets in
      excess of Fifty Thousand Dollars ($50,000) in the aggregate are attached,
      seized, subjected to a writ or distress warrant, or are levied upon, or
      come into the

                                       40
<PAGE>   41
      possession of any trustee, receiver, controller, custodian or assignee for
      the benefit of creditors (or any other Person with similar powers or
      duties) unless, with respect to any such assets, such attachment, seizure,
      writ, warrant or levy shall be dismissed, released or stayed within thirty
      (30) days of issuance thereof.

                  12.6  Voluntary Insolvency.  If an Insolvency Proceeding is
      commenced by Borrower.

                  12.7 Involuntary Insolvency. If an Insolvency Proceeding is
      commenced against Borrower except that if Borrower is contesting such
      Insolvency Proceeding in good faith, such Insolvency Proceeding shall not
      constitute an Event of Default unless such Insolvency Proceeding is not
      dismissed within sixty (60) days of the commencement of such Insolvency
      Proceedings.

                  12.8 Injunction. If Borrower is enjoined, restrained or in any
      way prevented by court order from continuing to conduct all or any
      material part of its business affairs and such order continues for more
      than thirty (30) days.

                  12.9 Governmental Lien. Except as permitted by Section 9.1, if
      a notice of Lien, levy or assessment in excess of Ten Thousand Dollars
      ($10,000) in the aggregate, is filed of record with respect to any or all
      of Borrower's assets by the United States Government, or any department,
      agency or instrumentality thereof, or by any state, county, municipal or
      other governmental agency, or if any taxes or debts owing at any time
      hereafter to any one or more of such entities in excess of Ten Thousand
      Dollars ($10,000) in the aggregate, becomes a Lien, whether choate or
      otherwise, upon any or all of Borrower's assets and the same is not paid
      on or before the due date thereof.

                  12.10 Judgment. If a judgment or other claim in excess of
      Fifty Thousand Dollars ($50,000) individually, or One Hundred Thousand
      Dollars ($100,000) in the aggregate, becomes a Lien upon any or all of
      Borrower's assets, or any individual judgment or other claim in excess of
      One Hundred Thousand Dollars ($100,000) is entered against Borrower and is
      not stayed, vacated or discharged within thirty (30) days of the entry
      thereof.

                  12.11 Other Indebtedness. If there is a default in any
      agreement with respect to Indebtedness in excess of One Hundred Thousand
      Dollars ($100,000) to which Borrower is a party with another Person
      resulting in a right by such Person to accelerate the maturity of
      Borrower's Indebtedness or to exercise any other right or remedy.

                  12.12 Prepayment. If Borrower makes any prepayment on account
      of Indebtedness for borrowed money, except for prepayments to Lender.

                                       41
<PAGE>   42
                  12.13 ERISA Reportable Event. If (a) any Reportable Event
      which Lender determines constitutes grounds for the termination of any
      Benefit Plan by the PBGC or for the appointment by the appropriate United
      States District Court of a trustee to administer any such Plan, shall have
      occurred and be continuing thirty (30) days after written notice of such
      determination shall have been given to Borrower by Lender, or any such
      Benefit Plan shall be terminated within the meaning of Title IV of ERISA,
      or a trustee shall be appointed by the appropriate United States District
      Court to administer any such Plan, or the PBGC shall institute proceedings
      to terminate any Benefit Plan; and (b) in case of any event described
      above in this Section 12.13, the aggregate amount of Borrower's liability
      under Sections 4062, 4063 or 4064 of ERISA shall exceed one percent
      (1.00%) of its Net Worth, or (c) there shall be a withdrawal from any
      Multiemployer Plan as a result of which the aggregate amount of Borrower's
      liability in relation thereto shall exceed one percent (1%) of its Net
      Worth.

                  12.14 Change of Control. If any "person" or "group" (as such
      terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act
      of 1934, as amended (the "Exchange Act")), shall become, or obtain rights
      (whether by means of warrants, options or otherwise) to become the
      "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the
      Exchange Act, directly or indirectly, of more than 30% of the outstanding
      common stock of Borrower or the occurrence of a Change of Control (as
      defined in the Note Indenture).

                  12.15 Default Under the Bank Financing. If an Event of Default
      or (as defined therein) occurs under the Bank Loan Agreement.

                  Notwithstanding anything contained in this Section 12 or
      contained in any other provision of this Agreement or the other Loan
      Documents to the contrary, in the event of the institution of Insolvency
      Proceedings against Borrower, Lender shall not be obligated to make
      advances to Borrower during the sixty (60) day grace period under Section
      12.7

13.   RIGHTS AND REMEDIES

                  13.1 Rights and Remedies Generally. Upon the occurrence of an
      Event of Default by Borrower under this Agreement and notice thereof by
      Lender to Borrower, except as hereinafter provided, Lender may, at its
      sole election, without notice of its election and without demand, do any
      one or more of the following, all of which are authorized by Borrower:

                        (a) Declare all Obligations, whether evidenced by this
            Agreement, by the Note, or otherwise, immediately due and payable;

                                       42
<PAGE>   43
            provided, that all Obligations shall be immediately due and payable
            without notice or demand upon an Event of Default under Section 12.6
            or 12.7;

                        (b) Without notice to or demand upon Borrower, make such
            payments and do such acts as Lender considers necessary or
            reasonable to protect its Lien in the Collateral. Borrower agrees to
            assemble the Collateral if Lender so requires, and to make the
            Collateral available to Lender at such location as Lender may
            designate. Borrower authorizes Lender to enter the premises where
            the Collateral is located subject to the terms of the related real
            estate leases, take and maintain possession of the Collateral, or
            any part of it, and to pay, purchase, contest or compromise any Lien
            which in the opinion of Lender appears to be prior or superior to
            its Lien (exclusive of the Lien of Bank on the Bank Senior
            Collateral) and to pay all expenses incurred in connection
            therewith;

                        (c) Ship, reclaim, recover, store, finish, maintain,
            repair, prepare for sale, advertise for sale and sell (in the manner
            provided for herein) the Collateral;

                        (d) Sell some or all of the Collateral at either public
            or private sales, or both, by way of one or more contracts or
            transactions, for cash or on terms, in such manner and at such
            places (including Borrower's premises subject to the terms of the
            related real estate leases) as is commercially reasonable in the
            opinion of Lender. It is not necessary that the Collateral be
            present at any such sale.

                  Lender is hereby granted a license or other right to use,
      without charge, Borrower's labels, patents, copyrights, rights of use of
      any name, logo, trade secrets, trade names, trademarks, customer lists and
      advertising matter, or any property of a similar nature, as it pertains to
      the Collateral, in completing production of, advertising for sale and
      selling any Collateral and Borrower's rights under all licenses and all
      franchise agreements shall inure to Lender's benefit.

                  13.2 Notice of Disposition. Lender shall give notice of the
      disposition of the Collateral as follows:

                        (a) Lender shall give Borrower and each holder of a Lien
            in the Collateral who has filed with Lender a written request for
            notice, a notice in writing of the time and place of public sale,
            or, if the sale is a private sale or some other disposition other
            than a public sale is to be made of the Collateral, the time on or
            after which the private sale or other disposition is to be made;

                                       43
<PAGE>   44
                        (b) The notice to Borrower shall be personally delivered
            or mailed, postage prepaid, as provided in Section 16, at least ten
            (10) calendar days before the date fixed for the sale, or at least
            ten (10) calendar days before the date on or after which the private
            sale or other disposition is to be made, unless the Collateral is
            perishable or threatens to decline speedily in value. Notice to
            Persons other than Borrower claiming an interest in the Collateral
            shall be sent to such addresses as they have furnished to Lender;
            and

                        (c) If the sale is to be a public sale, Lender shall
            also give notice of the time and place by publishing a notice one
            time at least ten (10) calendar days before the date of the sale in
            a newspaper of general circulation in the county in which the sale
            is to be held. Lender may bid in any way permitted by applicable law
            and purchase at any public sale.

                  13.3 Expenses of Enforcement. Borrower shall pay all
      Out-of-Pocket Fees and Costs incurred in connection with Lender's
      enforcement and exercise of any of its rights and remedies as herein
      provided, whether or not suit is commenced by Lender. Any deficiency which
      exists after disposition of the Collateral as provided above will be paid
      immediately by Borrower. Any excess will be returned, without interest to
      Borrower or such other Person as may be entitled thereto by Lender.

                  13.4 Rights Cumulative. Lender's rights and remedies under
      this Agreement, all other Loan Documents and all other agreements with
      Borrower shall be cumulative. Lender shall have all other rights and
      remedies not inconsistent herewith as provided under the Code, by law, or
      in equity. No exercise by Lender of one right or remedy shall be deemed an
      election, and no waiver by Lender of any default on Borrower's part shall
      be deemed a continuing waiver. No delay by Lender shall constitute a
      waiver, election or acquiescence by it.

14.   TAXES AND EXPENSES REGARDING THE COLLATERAL

                  14.1 If Borrower fails to pay promptly when due to any other
      Person, monies which Borrower is required to pay by reason of any
      provision in this Agreement in accordance with the provisions of this
      Agreement (including without limitation for any tax, expense or with
      respect to any Lien), or to promptly contest same by proper proceedings
      diligently pursued and establish adequate reserves therefor as required by
      the terms of this Agreement, Lender may, but need not, pay the same after
      any notice required hereunder and charge Borrower's account therefor, and
      Borrower shall promptly reimburse Lender. All such sums shall become
      additional Obligations owing to Lender, shall bear interest at the
      applicable interest rate hereunder and shall be secured by the Collateral.
      Any

                                       44
<PAGE>   45
      payments made by Lender shall not constitute: (i) an agreement by Lender
      to make similar payments in the future, or (ii) a waiver by Lender of any
      Event of Default under this Agreement. In connection with any payment made
      by Lender pursuant to this Section 14.1, Lender need not inquire as to, or
      contest the validity of, any such expense, tax or Lien and the receipt of
      the usual official notice for the payment thereof shall be conclusive
      evidence that the same was validly due and owing, and the receipt of any
      other notice with respect to all other such monies due hereunder shall be
      prima facia evidence that the same was validly due and owing.

15.   CERTAIN WAIVERS

                  15.1 Application of Payments. Except as expressly provided in
      this Agreement, Borrower waives the right to direct the application of any
      and all payments at any time or times hereafter received by Lender on
      account of any Obligations owed by Borrower, including without limitation
      amounts received which are the proceeds of any insurance policy, and
      Borrower agrees that Lender shall have the continuing exclusive right to
      apply and reapply such payments in any manner as Lender may deem
      advisable, notwithstanding any entry by Lender upon its books.

                  15.2 Demand, etc. Except as specifically provided herein,
      Borrower waives demand, protest, notice of protest, notice of default or
      dishonor, notice of payment and nonpayment, notice of any default, notice
      of nonpayment at maturity, notice of intent to accelerate, and notice of
      acceleration, notice prior to Lender's taking possession or control of any
      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,
      including the issuance of an immediate writ of possession, the release,
      compromise, settlement, extension or renewal of any or all commercial
      paper, accounts, documents, instruments, chattel paper, and guarantees at
      any time held by Lender on which Borrower may in any way be liable, the
      benefit of all valuation, appraisement and exemption laws, and any right
      to require a marshalling of assets by Lender or to require that Lender
      first resort to some or any portion of any Collateral before sale,
      foreclosure or realization on any other portion thereof.

                  15.3 Risk of Loss Regarding Collateral. Beyond the safe
      custody of the Collateral in its possession, Lender shall not in any way
      or manner be liable or responsible for: (a) the Collateral in its
      possession (or in the possession or control of any agent or bailee); (b)
      any loss or damage thereto occurring or arising in any manner or fashion
      from any cause, including without limitation, lost profits, incidental or
      consequential damages; or (c) any diminution in the value thereof. Except
      where occasioned by gross negligence or willful misconduct of Lender, all
      risk of loss, damage or destruction of the Collateral shall be borne by
      Borrower.

                                       45
<PAGE>   46
                  15.4 Confidentiality. Borrower authorizes its accounting firm
      and/or service bureau to provide Lender with such information requested by
      Lender pursuant to or in accordance with Section 10.2 of this Agreement,
      and authorizes Lender to contact directly any such accounting firm and/or
      service bureau in order to obtain such information. Prior to the
      occurrence of a Potential Default or Event of Default, Lender shall notify
      Borrower prior to contacting such accounting firm or service bureau, but
      in no event shall Lender be liable to Borrower for failure to provide such
      notice.

16.   NOTICES

Except as otherwise expressly provided herein, any notice required or desired to
be served, given or delivered hereunder shall be in the form and manner
specified below, and shall be addressed to the party to be notified as follows:

      If to Lender at:       Alliance Laundry Systems LLC
                             Shepard Street
                             P.O. Box 990
                             Ripon, Wisconsin 54971-0990
                             Attn: Bruce Rounds
                             Facsimile No. 920/748-1629

      With a copy to:        Gammage & Burnham, PLC
                             Two North Central Avenue
                             Eighteenth Floor
                             Phoenix, Arizona 85004
                             Attn: Kevin R. Merritt, Esq.
                             Facsimile No. 602/256-4475

      If to Borrower at:     SpinCycle, Inc.
                             15990 N. Greenway/Hayden Loop, Suite 400
                             Scottsdale, AZ 85260
                             Attn: Peter Ax
                             Facsimile No. 602/707-9967

      With copies to:        Pedersen & Houpt
                             161 N. Clark Street, Suite 3100
                             Chicago, Illinois 60601
                             Attn: Amy Yates, Esq.
                             Facsimile No. 312/641-6895

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<PAGE>   47
      or to such other address as each party designates to the other by notice
      in the manner herein prescribed. Notice shall be deemed given hereunder if
      (i) delivered personally or otherwise actually received, (ii) sent by
      overnight delivery service, (iii) mailed by first-class United States
      mail, postage prepaid, registered or certified, with return receipt
      requested, or (iv) sent via telecopy machine with a duplicate signed copy
      sent on the same day as provided in clause (ii) above. Notice mailed as
      provided in clause (iii) above shall be effective upon the expiration of
      three (3) Business Days after its deposit in the United States mail, and
      notice telecopied as provided in clause (iv) above shall be effective upon
      receipt of such telecopy if the duplicate signed copy is sent under clause
      (ii) above. Notice given in any other manner described in this section
      shall be effective upon receipt by the addressee thereof; provided,
      however, that if any notice is tendered to an addressee and delivery
      thereof is refused by such addressee, such notice shall be effective upon
      such tender unless expressly set forth in such notice.

17.   CHOICE OF LAW AND VENUE

This Agreement shall be deemed to have been made in the State of Illinois and
the validity of this Agreement, its construction, interpretation and
enforcement, and the rights of parties hereunder and concerning the Collateral,
shall be determined under, governed by and construed in accordance with the laws
of the State of Illinois. The parties agree that at Lender's election, all
actions or proceedings arising in connection with this Agreement shall be tried
and litigated only in the state and federal courts located in the County of
Cook, State of Illinois. Borrower waives any right it may have to assert the
doctrine of forum non conveniens or to object to such venue and hereby consents
to any court ordered relief. Borrower consents that all service of process upon
it be made by registered mail or messenger directed to it at the address set
forth in Section 16 above and that service so made shall be deemed to be
completed upon the earlier of actual receipt or three (3) Business Days after
the same shall have been posted to Borrower's address. Nothing contained in this
Section 17 shall affect the right of Lender to serve legal process in any other
manner permitted by law or affect the right of Lender to bring any action or
proceeding against Borrower or its property in the courts of any other
jurisdiction.

18.   INDEMNITY

Borrower hereby shall indemnify, hold harmless and defend Lender and its
directors, officers, agents, counsel and employees ("Indemnified Persons") from
and against all losses, claims, damages, costs, expenses and liabilities
("Losses"), whether such Losses arise or notice thereof is received by Lender
during the Initial Term or any renewal term or after termination of this
Agreement, incurred by any of them arising principally out of or relating to
this Agreement or under any other transaction contemplated hereby except for any
such Losses caused by the gross negligence or willful misconduct of such
Indemnified Persons, and shall reimburse Lender and each other Indemnified
Person for

                                       47
<PAGE>   48
any reasonable expenses including in connection with the investigation of,
preparation for or defense of any actual or threatened claim, action or
proceeding arising therefrom (including any such costs of responding to
discovery requests or subpoenas), regardless of whether any Indemnified Person
is a party thereto. Each Indemnified Person may select its own counsel with
respect to any Losses, in addition to Borrower's counsel, and shall be
indemnified therefor hereunder.

19.   GENERAL PROVISIONS

                  19.1 Acceptance. This Agreement shall be binding and deemed
      effective when executed by Borrower and accepted and executed by Lender.

                  19.2 Binding Agreement. This Agreement shall bind and inure to
      the benefit of the respective successors and assigns of each of the
      parties, provided, however, that Borrower may not assign this Agreement or
      any rights hereunder without Lender's prior written consent and any
      prohibited assignment shall be absolutely void. No consent to an
      assignment by Lender shall release Borrower from its Obligations to
      Lender. Lender may not assign this Agreement and its rights and duties
      hereunder, without Borrower's written consent, such consent not to be
      unreasonably withheld, conditioned or delayed, and Borrower shall execute
      and deliver such documents in connection with such assignment as Lender or
      such assignee may reasonably request. Lender may not transfer, negotiate
      or grant participations in all or any part of, or any interest in its
      rights and benefits hereunder without Borrower's written consent, such
      consent not to be unreasonably withheld, conditioned or delayed. In
      connection therewith, Lender may disclose all documents and information
      which Lender now or hereafter may have relating to Borrower or Borrower's
      business, but shall use all reasonable efforts to ensure that the
      recipient of such information maintains the confidentiality of such
      information as required by the terms of this Agreement.

                  19.3 Section Headings. Section headings and section numbers
      have been set forth herein for convenience only. Unless the contrary is
      compelled by the context, everything contained in each paragraph applies
      equally to this entire Agreement.

                  19.4 Construction. Neither this Agreement nor any uncertainty
      or ambiguity herein shall be construed or resolved against Lender or
      Borrower, whether under any rule of construction or otherwise. On the
      contrary, this Agreement has been reviewed by all parties and shall be
      construed and interpreted according to the ordinary meaning of the words
      used so as to fairly accomplish the purposes and intentions of the parties
      hereto.

                                       48
<PAGE>   49
                  19.5 Severability. Each provision of this Agreement shall be
      severable from every other provision of this Agreement for the purpose of
      determining the legal enforceability of any specific provision.

                  19.6 Entire Agreement. This Agreement cannot be changed or
      terminated orally. All prior agreements, understandings, representations,
      warranties, and negotiations, if any, are merged into this Agreement. This
      Agreement may be amended only by a written agreement signed by duly
      authorized officers of Borrower and Lender.

                  19.7 No Fiduciary Relationship or Joint Venture. No provision
      herein or in any of the other Loan Documents and no course of dealing
      between the parties hereto shall be deemed to create any fiduciary
      relationship between Lender and Borrower nor to create any partnership or
      joint venture between Lender and Borrower.

                  19.8 Publicity. Subject to the other confidentiality
      provisions of this Agreement, Borrower hereby consents to the issuance or
      dissemination by Lender to the public of information describing the credit
      accommodations entered into pursuant to this Agreement (as it may be
      amended, modified and supplemented from time to time) including without
      limitation the name and address of Borrower, a general description of
      Borrower's business and the use of Borrower's name and logo in connection
      therewith.

                  19.9 Counterparts. This Agreement may be executed in two (2)
      or more counterparts, each of which shall be deemed an original but all of
      which shall together constitute one and the same instrument.

                  19.10 Conflict. In the event of a conflict between the terms
      of this Agreement and the terms of any other Loan Documents, the terms of
      this Agreement shall be controlling.

                  19.11 WAIVER OF JURY TRIAL

                  LENDER AND BORROWER ACKNOWLEDGE THAT THE RIGHT TO A TRIAL BY
      JURY IS A CONSTITUTIONAL RIGHT, BUT THAT THE RIGHT MAY BE WAIVED. BORROWER
      AND LENDER EACH KNOWINGLY, VOLUNTARILY, IRREVOCABLY AND WITHOUT COERCION,
      WAIVE ALL RIGHTS TO TRIAL BY JURY OF ALL DISPUTES BETWEEN THEM. NEITHER
      LENDER NOR BORROWER SHALL BE DEEMED TO HAVE GIVEN UP THIS WAIVER OF JURY
      TRIAL UNLESS THE PARTY CLAIMING THAT THIS WAIVER HAS BEEN RELINQUISHED

                                       49
<PAGE>   50
      HAS A WRITTEN INSTRUMENT SIGNED BY THE OTHER PARTY STATING THAT THIS
      WAIVER HAS BEEN GIVEN UP.

            IN WITNESS WHEREOF, Borrower has executed and delivered this
Agreement.

                                 SPINCYCLE, INC.

                                         /s/ Tim Yost
                                    By: ______________________________________
                                       Tim Yost
                                       Vice President
                                    Address: 15590 N. Greenway/Hayden
                                             Loop, Suite 400
                                    Attn:    Peter Ax
                                    Facsimile:  602/707-9967
                          17th
            ACCEPTED this ____ day of November, 1999 at Lender's place of
business in the City of Ripon, State of Wisconsin.

                                    ALLIANCE LAUNDRY SYSTEMS LLC

                                      /s/ Bruce P. Rounds
                                    _________________________________________
                                    By:  Bruce P. Rounds
                                    Title:  Vice President Chief Financial
                                            Officer
                                    Address: Shepard Street
                                             P.O. Box 990
                                             Ripon, Wisconsin 54971-0990
                                    Attn:    Bruce Rounds
                                    Facsimile:  920/748-1629

                                       50
<PAGE>   51
                             SCHEDULES AND EXHIBITS

EXHIBITS

Exhibit A   Form of Note
Exhibit B   Form of Compliance Certificate
Exhibit C   Form of Landlord's Waiver and Lease Assignment Provision

SCHEDULES

Schedule 6.3  -  Location of Inventory
Schedule 7.2  -  States Where Borrower is Qualified
Schedule 7.8  -  Litigation
Schedule 7.9  -  Intellectual Property
Schedule 7.11 -  Pro Formas
Schedule 7.12 -  Conduct of Business
Schedule 7.13 -  Environmental Compliance
Schedule 7.17 -  Fictitious Names
Schedule 8.1  -  Permitted Liens, Facilities to be Closed
Schedule 8.16 -  Bank Accounts

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