Document:

<PAGE>

                                                                     EXHIBIT 4.8

                                CREDIT AGREEMENT

                            Dated as of June 27, 2002

                                      among

                                    PCA LLC,
                                  as Borrower,

                             PCA INTERNATIONAL, INC.
                                       and
                      CERTAIN SUBSIDIARIES OF THE BORROWER
                         FROM TIME TO TIME PARTY HERETO
                                 as Guarantors,

                          THE SEVERAL LENDERS FROM TIME
                              TO TIME PARTY HERETO

                                       AND

                             BANK OF AMERICA, N.A.,
                                    as Agent

                         BANC OF AMERICA SECURITIES LLC,
                        as Lead Arranger and Book Manager

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
SECTION 1 DEFINITIONS.............................................................................................1
<S>      <C>                                                                                                     <C>
         1.1  Definitions.........................................................................................1
         1.2  Computation of Time Periods........................................................................28
         1.3  Accounting Terms...................................................................................28
SECTION 2 CREDIT FACILITIES......................................................................................29
         2.1  Revolving Loans....................................................................................29
         2.2  Letter of Credit Subfacility.......................................................................30
         2.3  Swingline Loan Subfacility.........................................................................36
SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES.........................................................37
         3.1  Default Rate.......................................................................................37
         3.2  Extension and Conversion...........................................................................38
         3.3  Prepayments........................................................................................38
         3.4  Termination and Reduction of Commitments...........................................................41
         3.5  Fees...............................................................................................41
         3.6  Capital Adequacy...................................................................................42
         3.7  Inability To Determine Interest Rate...............................................................43
         3.8  Illegality.........................................................................................43
         3.9  Requirements of Law................................................................................44
         3.10  Taxes.............................................................................................45
         3.11  Indemnity.........................................................................................47
         3.12  Pro Rata Treatment................................................................................48
         3.13  Sharing of Payments...............................................................................49
         3.14  Payments, Computations, Etc.......................................................................50
         3.15  Evidence of Debt..................................................................................51
         3.16  Replacement of Lenders............................................................................52
SECTION 4 GUARANTY...............................................................................................52
         4.1  The Guarantee......................................................................................52
         4.2  Obligations Unconditional..........................................................................53
         4.3  Reinstatement......................................................................................54
         4.4  Certain Additional Waivers.........................................................................54
         4.5  Remedies...........................................................................................54
         4.6  Rights of Contribution.............................................................................55
         4.7  Continuing Guarantee...............................................................................56
SECTION 5 CONDITIONS.............................................................................................56
         5.1  Conditions to Closing..............................................................................56
         5.2  Conditions to All Extensions of Credit.............................................................60
SECTION 6 REPRESENTATIONS AND WARRANTIES.........................................................................61
         6.1  Financial Condition................................................................................61
         6.2  No Changes or Restricted Payments..................................................................61
         6.3  Organization; Existence; Compliance with Law.......................................................61
         6.4  Power; Authorization; Enforceable Obligations......................................................62
         6.5  No Legal Bar.......................................................................................62
</TABLE>

                                       i

<PAGE>

<TABLE>
<S>      <C>                                                                                                    <C>
         6.6  No Material Litigation.............................................................................63
         6.7  No Default.........................................................................................63
         6.8  Ownership of Property; Liens.......................................................................63
         6.9  Intellectual Property..............................................................................63
         6.10  Disclosure........................................................................................63
         6.11  No Burdensome Restrictions........................................................................64
         6.12  Taxes.............................................................................................64
         6.13  ERISA.............................................................................................64
         6.14  Governmental Regulations, Etc.....................................................................65
         6.15  Subsidiaries......................................................................................66
         6.16  Purpose of Extensions of Credit...................................................................66
         6.17  Environmental Matters.............................................................................67
         6.18  Solvency..........................................................................................68
         6.19  Labor Matters.....................................................................................68
         6.20  Location of Collateral............................................................................68
SECTION 7 AFFIRMATIVE COVENANTS..................................................................................68
         7.1  Financial Statements...............................................................................68
         7.2  Certificates; Other Information....................................................................69
         7.3  Notices............................................................................................71
         7.4  Compliance with Law................................................................................72
         7.5  Payment of Obligations.............................................................................72
         7.6  Conduct of Business and Maintenance of Existence...................................................72
         7.7  Maintenance of Property; Insurance.................................................................72
         7.8  Inspection of Property; Books and Records; Discussions.............................................73
         7.9  Environmental Laws.................................................................................73
         7.10  Financial Covenants...............................................................................74
         7.11  Additional Guaranties and Stock Pledges...........................................................76
         7.12  Ownership of Subsidiaries.........................................................................76
         7.13  Use of Proceeds...................................................................................76
         7.14  Collateral........................................................................................77
SECTION 8 NEGATIVE COVENANTS.....................................................................................77
         8.1  Indebtedness.......................................................................................77
         8.2  Liens..............................................................................................78
         8.3  Nature of Business.................................................................................78
         8.4  Consolidation, Merger, Asset Dispositions, etc.....................................................79
         8.5  Investments........................................................................................79
         8.6  Transactions with Affiliates.......................................................................79
         8.7  Ownership of Capital Stock.........................................................................80
         8.8  Fiscal Year; Other Changes.........................................................................80
         8.9  Prepayments of Indebtedness, etc...................................................................80
         8.10  Restricted Payments...............................................................................81
         8.11  Sale Leasebacks...................................................................................82
         8.12  No Further Negative Pledges.......................................................................82
         8.13  License Agreements................................................................................82
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>      <C>                                                                                                    <C>
         8.14  Operating Lease Obligations.......................................................................83
         8.15  Limitation on Restricted Actions..................................................................83
         8.16  Limitation on the Parent..........................................................................83
SECTION 9 EVENTS OF DEFAULT......................................................................................84
         9.1  Events of Default..................................................................................84
         9.2  Acceleration; Remedies.............................................................................87
SECTION 10 AGENCY PROVISIONS.....................................................................................88
         10.1  Appointment and Authorization of Agent............................................................88
         10.2  Delegation of Duties..............................................................................88
         10.3  Liability of Agent................................................................................89
         10.4  Reliance by Agent.................................................................................89
         10.5  Notice of Default.................................................................................90
         10.6  Credit Decision; Disclosure of Information by Agent...............................................90
         10.7  Indemnification of Agent..........................................................................91
         10.8  Agent in its Individual Capacity..................................................................91
         10.9  Successor Agent...................................................................................92
SECTION 11 MISCELLANEOUS.........................................................................................92
         11.1  Notices...........................................................................................92
         11.2  Right of Set-Off..................................................................................94
         11.3  Benefit of Agreement..............................................................................94
         11.4  No Waiver; Remedies Cumulative....................................................................97
         11.5  Payment of Expenses, etc..........................................................................98
         11.6  Amendments, Waivers and Consents..................................................................99
         11.7  Counterparts.....................................................................................100
         11.8  Headings.........................................................................................100
         11.9  Survival.........................................................................................100
         11.10  Governing Law; Submission to Jurisdiction; Venue................................................101
         11.11  Severability....................................................................................101
         11.12  Entirety........................................................................................101
         11.13  Binding Effect; Termination.....................................................................102
         11.14  Confidentiality.................................................................................102
         11.15  Source of Funds.................................................................................103
         11.16  Conflict........................................................................................103
</TABLE>

                                      iii

<PAGE>

                                    EXHIBITS

Exhibit 2.1(b)(i)          Form of Notice of Borrowing
Exhibit 2.1(e)             Form of Revolving Note
Exhibit 2.3(b)             Form of Swingline Loan Request
Exhibit 2.3(d)             Form of Swingline Note
Exhibit 3.2                Form of Notice of Extension/Conversion
Exhibit 7.2(b)             Form of Officer's Compliance Certificate
Exhibit 7.11               Form of Joinder Agreement
Exhibit 11.3(b)            Form of Assignment and Assumption

                                    SCHEDULES

Schedule 1.1               Existing Liens
Schedule 2.1(a)            Schedule of Lenders and Commitments
Schedule 2.2(b)            Closing Date Letters of Credit
Schedule 5.1(j)            List of Real Property Collateral
Schedule 6.2               Restricted Payments
Schedule 6.9               Intellectual Property
Schedule 6.15              Subsidiaries
Schedule 6.20(a)           Collateral Locations
Schedule 6.20(b)           Chief Executive Office/Principal Place of Business
Schedule 7.7               Insurance
Schedule 8.1               Existing Indebtedness
Schedule 8.5               Existing Investments

                                       iv

<PAGE>

                                CREDIT AGREEMENT

         THIS CREDIT AGREEMENT dated as of June 27, 2002 (the "Credit
Agreement"), is by and among PCA LLC, a Delaware limited liability company (the
"Borrower"), PCA INTERNATIONAL, INC., a North Carolina corporation (the
"Parent"), the subsidiaries of the Borrower identified on the signature pages
hereto and such other subsidiaries as may from time to time become Guarantors
hereunder in accordance with the provisions hereof (collectively with the
Parent, the "Guarantors"), the lenders named herein and such other lenders as
may become a party hereto (the "Lenders"), and BANK OF AMERICA, N.A., as Agent
(in such capacity, the "Agent").

                               W I T N E S S E T H

         WHEREAS, the Borrower has requested that the Lenders provide a
$50,000,000 credit facility for the purposes hereinafter set forth; and

         WHEREAS, the Lenders have agreed to make the requested credit facility
available to the Borrower on the terms and conditions hereinafter set forth;

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

                                    SECTION 1
                                   DEFINITIONS

         1.1      Definitions.

                  As used in this Credit Agreement, the following terms shall
have the meanings specified below unless the context otherwise requires. Defined
terms herein shall include in the singular number the plural and in the plural
the singular:

                  "Additional Credit Party" means each Person that becomes a
         Guarantor after the Closing Date by execution of a Joinder Agreement.

                  "Administrative Questionnaire" means an Administrative
         Questionnaire in a form supplied by the Agent.

                  "Affiliate" means, with respect to a specified Person, another
         Person that (i) directly, or indirectly through one or more
         intermediaries, Controls or is Controlled by or is under common Control
         with the Person specified or (ii) directly or indirectly owning or
         holding seven and one-half percent (7.5%) or more of the Capital Stock
         in such specified Person. "Control" means the possession, directly or
         indirectly, of the power to direct or cause the

<PAGE>

         direction of the management or policies of a Person, whether through
         the ability to exercise voting power, by contract or otherwise.
         "Controlling" and "Controlled" have meanings correlative thereto.

                  "Agent" has the meaning given to such term in the heading
         hereof, together with any successors or assigns.

                  "Agent-Related Persons" means the Agent (including any
         successor administrative agent), together with its Affiliates
         (including, in the case of Bank of America in its capacity as the
         Agent, Banc of America Securities LLC), and the officers, directors,
         employees, agents and attorneys-in-fact of such Persons and Affiliates.

                  "Agent's Fee Letter" means that certain letter agreement,
         dated June 13, 2002, between the Agent, Banc of America Securities LLC,
         the Borrower and the Parent, as amended, modified, supplemented or
         replaced from time to time.

                  "Agent's Fees" shall have the meaning assigned to such term in
         Section 3.5(c).

                  "Applicable Percentage" means for purposes of calculating the
         applicable interest rate for any day for any Base Rate Loan or any
         Eurodollar Loan, the applicable rate of the Letter of Credit Fee for
         any day or the applicable rate of the Commitment Fee, the appropriate
         applicable percentage in the following table corresponding to the
         Consolidated Total Leverage Ratio then in effect as of the most recent
         Rate Determination Date:

<TABLE>
<CAPTION>
                                           Applicable
                                           Percentage        Applicable
                  Consolidated                for           Percentage for     Applicable     Applicable
  Pricing        Total Leverage            Eurodollar        Letter of      Percentage for   Percentage for
   Level             Ratio                  Loans            Credit Fee     Base Rate Loans  Commitment Fee
------------ -------------------------- ---------------- ----------------- ---------------- -----------------
<S>          <C>                        <C>               <C>                <C>              <C>
     I       (less than)4.0 to 1.0        3.00%            3.00%             2.00%             0.50%
------------ -------------------------- ---------------- ----------------- ---------------- ------------------
    II       (greater than or equal to)   3.25%            3.25%             2.25%             0.50%
             4.0 to 1.0 but(less than)
             4.5 to 1.0
------------ -------------------------- ---------------- ----------------- ----------------  ------------------
    III      (greater than or equal to)   3.50%            3.50%             2.50%             0.75%
             4.5 to 1.0 but(less than)
             5.0 to 1.0
------------ -------------------------- ---------------- ----------------- ----------------  ------------------
             (greater than or equal to)   3.75%            3.75%             2.75%             0.75%
    IV       5.0 to 1.0
------------ -------------------------- ---------------- ----------------- ----------------  ------------------
</TABLE>

         The Applicable Percentage shall be determined and adjusted quarterly on
         the date (each a "Rate Determination Date") three (3) Business Days
         after the date by which the annual and quarterly compliance
         certificates and related financial statements and information are
         required in accordance with the provisions of Sections 7.1(a) and (b)
         and Section 7.2(b), as appropriate; provided that:

                           (i) on the Closing Date, the Applicable Percentages
                  shall be based on Pricing Level III, and the Applicable
                  Percentages shall not be more favorable to the Borrower than
                  Pricing Level III until the Rate Determination Date with
                  respect to the fiscal quarter ending on or about January 31,
                  2003, and

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                           (ii) in the event an annual or quarterly compliance
                  certificate and related financial statements and information
                  are not delivered timely to the Agent by the date required by
                  Sections 7.1(a) and (b) and Section 7.2(b), as appropriate,
                  the Applicable Percentages shall be based on Pricing Level IV
                  until such time as an appropriate compliance certificate and
                  related financial statements and information are delivered,
                  whereupon the Applicable Percentage shall be adjusted based on
                  the information contained in such compliance certificate and
                  related financial statements and information.

         Each Applicable Percentage shall be effective from a Rate Determination
         Date until the next such Rate Determination Date. The Agent shall
         determine the appropriate Applicable Percentages in the pricing matrix
         promptly upon receipt of the quarterly or annual compliance certificate
         and related financial information and shall promptly notify the
         Borrower and the Lenders of any change thereof. Adjustments in the
         Applicable Percentages shall be effective as to existing Extensions of
         Credit as well as new Extensions of Credit made thereafter.

                  "Approved Fund" means any Fund that is administered or managed
         by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an
         Affiliate of an entity that administers or manages a Lender.

                  "Asset Disposition" means any disposition (including pursuant
         to a sale and leaseback transaction) of any or all of the Property
         (including without limitation the Capital Stock of a Subsidiary) of the
         Parent or any Subsidiary of the Parent whether by sale, lease,
         licensing, transfer or otherwise, but other than pursuant to any
         casualty, theft, loss, physical destruction, taking, condemnation or
         similar event; provided, however, that the term "Asset Disposition"
         shall be deemed to (i) include any "Asset Sale" (or any comparable
         term) under, and as defined in the Indenture, the Subordinated Note
         Agreement or the Parent Subordinated Note Agreement, (ii) exclude any
         Equity Transaction.

                  "Assignment and Assumption" means an assignment and assumption
         entered into by a Lender and an Eligible Assignee (with the consent of
         any party whose consent is required by Section 11.3), and accepted by
         the Agent, in substantially the form of Exhibit 11.3(b) or any other
         form approved by the Agent.

                  "Bank of America" means Bank of America, N.A. and its
         successors.

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

                  "Bankruptcy Event" means, with respect to any Person, the
         occurrence of any of the following with respect to such Person: (i) a
         court or governmental agency having jurisdiction in the premises shall
         enter a decree or order for relief in respect of such Person in an

                                       -3-

<PAGE>

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

                  "Base Rate" means, for any day, a fluctuating rate per annum
         equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and
         (b) the Prime Rate.

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

                  "Borrower" means the Person identified as such in the heading
         hereof, together with any successors and permitted assigns.

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

                  "Capital Lease" means, as applied to any Person, any lease of
         any Property (whether real, personal or mixed) by that Person as lessee
         which, in accordance with GAAP, is or should be accounted for as a
         capital lease on the balance sheet of that Person.

                  "Capital Lease Obligation" means the capital lease obligations
         (including without limitation the payment of rent or other amounts)
         relating to a Capital Lease determined in accordance with GAAP.

                  "Capital Stock" means (i) in the case of a corporation,
         capital stock, (ii) in the case of an association or business entity,
         any and all shares, interests, participations, rights or other
         equivalents (however designated) of capital stock, (iii) in the case of
         a

                                       -4-

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         partnership, partnership interests (whether general or limited), (iv)
         in the case of a limited liability company, membership interests and
         (v) any other interest or participation that confers on a Person the
         right to receive a share of the profits and losses of, or distributions
         of assets of, the issuing Person.

                  "Cash Equivalents" means (a) securities issued or directly and
         fully guaranteed or insured by the United States of America or any
         agency or instrumentality thereof (provided that the full faith and
         credit of the United States of America is pledged in support thereof)
         having maturities of not more than twelve months from the date of
         acquisition, (b) Dollar denominated time deposits and certificates of
         deposit of (i) any Lender, or (ii) any domestic commercial bank of
         recognized standing (y) having capital and surplus in excess of
         $500,000,000 and (z) whose short-term commercial paper rating from S&P
         is at least A-2 or the equivalent thereof or from Moody's is at least
         P-2 or the equivalent thereof (any such bank being an "Approved Bank"),
         in each case with maturities of not more than 270 days from the date of
         acquisition, (c) commercial paper and variable or fixed rate notes
         issued by any Approved Bank (or by the parent company thereof) and
         maturing within six months of the date of acquisition, (d) repurchase
         agreements entered into by a Person with a bank or trust company
         (including any of the Lenders) or recognized securities dealer having
         capital and surplus in excess of $500,000,000 for direct obligations
         issued by or fully guaranteed by the United States of America in which
         such Person shall have a perfected first priority security interest
         (subject to no other Liens) and having, on the date of purchase
         thereof, a fair market value of at least 100% of the amount of the
         repurchase obligations, (e) obligations of any State of the United
         States or any political subdivision thereof, the interest with respect
         to which is exempt from federal income taxation under Section 103 of
         the Code, having a long term rating of at least AA- or Aa-3 by S&P or
         Moody's, respectively, and maturing within three years from the date of
         acquisition thereof, (f) Investments in municipal auction preferred
         stock (i) rated AAA (or the equivalent thereof) or better by S&P or Aaa
         (or the equivalent thereof) or better by Moody's and (ii) with
         dividends that reset at least once every 365 days and (g) Investments,
         classified in accordance with GAAP as current assets, in money market
         investment programs registered under the Investment Company Act of
         1940, as amended, which are administered by reputable financial
         institutions having capital of at least $100,000,000 and the portfolios
         of which are limited to Investments of the character described in the
         foregoing subdivisions (a), (b), (c), (e) and (f).

                  "Certificate of Preferences" means the Articles of Amendment
         of the Parent filed May 3, 1999 governing the Series A Convertible
         Preferred.

                  "Change of Control" means any of the following events: (a)
         prior to a Qualifying IPO, Jupiter shall fail to beneficially own,
         directly or indirectly, at least 51% of the outstanding Voting Stock of
         the Parent, (b) after a Qualifying IPO, (1) Jupiter shall beneficially
         own, directly or indirectly, less than 30% of the outstanding Voting
         Stock of the Parent and (2) a person or any group, and any affiliate of
         any such person other than Jupiter shall beneficially own, directly or
         indirectly, an amount of the outstanding Voting Stock of the Parent
         entitled to 30% or more of the voting power of all the outstanding
         Voting Stock

                                       -5-

<PAGE>

         of the Parent, (c) during any period of up to 24 consecutive months,
         commencing after the Closing Date, individuals who at the beginning of
         such 24 month period were directors of the Parent (together with any
         new director whose election by the Parent's Board of Directors or whose
         nomination for election by the Parent's shareholders was approved by a
         vote of at least a majority of the directors then still in office who
         either were directors at the beginning of such period or whose election
         or nomination for election was previously so approved) cease for any
         reason to constitute a majority of the directors of the Parent then in
         office, (d) the Parent shall fail own 100% of the Capital Stock of the
         Borrower or (e) the occurrence of a "Change of Control" under and as
         defined in the Indenture, the Subordinated Note Agreement or the Parent
         Subordinated Note Agreement. As used herein, "beneficial ownership",
         shall have the meaning provided in Rule 13d-3 of the Securities and
         Exchange Commission under the Securities Exchange Act of 1934, and the
         term "beneficially own" shall have a correlative meaning.

                  "Closing Date" means the date hereof.

                  "Closing Date Letters of Credit" means those letters of credit
         identified on Schedule 2.2(b).

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

                  "Collateral" means all collateral referred to in and covered
         by the Collateral Documents.

                  "Collateral Documents" means the Security Agreement, the
         Pledge Agreement, the Mortgages and such other documents executed and
         delivered in connection with the attachment and perfection of the
         Agent's security interests in the assets of the Credit Parties,
         including without limitation, the Mortgage Policies, UCC financing
         statements and patent and trademark filings.

                  "Commitment" means the Revolving Commitment, the LOC
         Commitment and the Swingline Commitment.

                  "Commitment Fee" shall have the meaning given such term in
         Section 3.5(a).

                  "Commitment Period" means the period from and including the
         Closing Date to but not including the earlier of (i) the Termination
         Date, or (ii) the date on which the Revolving Commitments terminate in
         accordance with the provisions of this Credit Agreement.

                                       -6-

<PAGE>

                  "Consolidated Capital Expenditures" means for any period for
         the Parent and its Subsidiaries on a consolidated basis, all capital
         expenditures for such period, as determined in accordance with GAAP.

                  "Consolidated Cash Taxes" means for any period, the aggregate
         of all federal, state or other domestic or foreign taxes with respect
         to the Parent and its Subsidiaries on a consolidated basis, for such
         period, as determined in accordance with GAAP, to the extent the same
         are paid in cash during such period minus the amount of any cash
         refunded during such period to the Parent or any of its Subsidiaries
         with respect to such taxes.

                  "Consolidated EBITDA" means for any period for the Parent and
         its Subsidiaries on a consolidated basis, the sum of (i) Consolidated
         Net Income for such period plus (ii), without duplication, an amount
         which, in the determination of Consolidated Net Income for such period
         has been deducted for (A) Consolidated Interest Expense, (B) total
         federal, state, local or value-added taxes, domestic and foreign income
         taxes or other taxes, (C) depreciation and amortization, (D)
         Non-Recurring Expenses to the extent accrued during the period in
         question, (E) Consolidated Non-Cash Charges and (F) the amount of cash
         bonuses paid to management in an amount not to exceed $1,000,000 during
         such period plus (iii) the amount of cash reimbursement payments
         received from Wal*Mart Stores, Inc. during such period to offset
         photography studio closure costs during such period (to the extent not
         included in the calculation of Consolidated Net Income), minus (or
         plus) (iv) unrealized gains (or losses) recognized in such period
         pursuant to Statement of Financial Accounting Standards No. 133,
         "Accounting for Derivative Instruments and Hedging Activities", (or any
         successor or substitute provision) during such period, in each case on
         a consolidated basis determined in accordance with GAAP. Except as
         expressly provided otherwise, the applicable period shall be for the
         four consecutive quarters ending as of the date of determination.

                  "Consolidated Fixed Charge Coverage Ratio" means, as of the
         end of each fiscal quarter of the Parent for the twelve month period
         ending on such date, the ratio (i) Consolidated EBITDA for such period
         minus Consolidated Maintenance Capital Expenditures for such period
         minus Consolidated Cash Taxes for such period to (ii) Consolidated
         Fixed Charges for such period.

                  "Consolidated Fixed Charges" means for any period for the
         Parent and its Subsidiaries on a consolidated basis, the sum of (i) the
         cash portion of Consolidated Interest Expense paid (net of cash
         interest income) during such period plus (ii) scheduled maturities of
         Consolidated Funded Debt paid during such period to the extent paid
         during such period (but specifically excluding any voluntary or
         mandatory prepayments of such Consolidated Funded Debt), in each case
         as determined in accordance with GAAP. Except as expressly provided
         otherwise, the applicable period shall be for the four consecutive
         quarters ending as of the date of determination. For purposes of
         calculating Consolidated Fixed Charges for any period, any amortization
         or like payment due and

                                       -7-

<PAGE>

         owing by a member of the Consolidated Group during such period on any
         Indebtedness permitted by Section 8.1(i) shall not be considered a
         scheduled maturity of Consolidated Funded Debt.

                  "Consolidated Funded Debt" means Funded Debt of the Parent and
         its Subsidiaries determined on a consolidated basis in accordance with
         GAAP.

                  "Consolidated Group" means the Parent and its Subsidiaries.

                  "Consolidated Interest Coverage Ratio" means, as of the end of
         each fiscal quarter of the Parent for the twelve month period ending on
         such date, the ratio of Consolidated EBITDA for such period to the cash
         portion of Consolidated Interest Expense (net of cash interest income
         in an amount not to exceed $1,000,000) for such period.

                  "Consolidated Interest Expense" means for any period for the
         Parent and its Subsidiaries on a consolidated basis, all interest
         expense, including the amortization of debt discount and premium and
         the interest component under Capital Leases and the implied interest
         component under Synthetic Leases, in each case on a consolidated basis
         determined in accordance with GAAP. Except as expressly provided
         otherwise, the applicable period shall be for the four consecutive
         quarters ending as of the date of determination.

                  "Consolidated Maintenance Capital Expenditures" means, for
         purposes of calculating the Consolidated Fixed Charge Coverage Ratio,
         the greater of (i) $4,000,000 or (ii) the sum of $2,000 multiplied by
         the number of permanent photography studios under operation by the
         Parent and its Subsidiaries as of the last day of the period for which
         the Consolidated Fixed Charge Coverage Ratio is being calculated.

                  "Consolidated Net Income" means for any period, the net income
         of the Parent and its Subsidiaries on a consolidated basis determined
         in accordance with GAAP, but excluding any extraordinary gains or
         losses and any taxes on such excluded gains and any tax deductions or
         credits on account of any such excluded gains and any tax deductions or
         credits on account of any such excluded losses.

                  "Consolidated Net Worth" means, as of any date with respect to
         the Parent and its Subsidiaries on a consolidated basis, the aggregate
         of (i) shareholder's equity or net worth plus (ii) the Series A
         Convertible Preferred, as determined in accordance with GAAP but
         excluding (a) gains or losses from the cumulative effect of any change
         in accounting principles (subject to the terms of Section 1.3) and (b)
         unrealized gains and losses recognized in such period pursuant to
         Statement of Financial Accounting Standards No. 133, "Accounting for
         Derivative Instruments and Hedging Activities" (or any successor or
         substitute provision).

                                       -8-

<PAGE>

                  "Consolidated Non-Cash Charges" means for any period for the
         Parent and its Subsidiaries on a consolidated basis, determined in
         accordance with GAAP, all non-cash charges for such period (excluding
         any non-cash charges that require an accrual or reserve for cash
         charges for any future period prior to the Termination Date).

                  "Consolidated Senior Secured Leverage Ratio" means, as of the
         last day of any fiscal quarter, the ratio of (i) the outstanding Loans
         (net of cash of the Consolidated Group in an amount not to exceed
         $5,000,000) on such date to (ii) Consolidated EBITDA for the period of
         four consecutive fiscal quarters ending as of such day.

                  "Consolidated Total Leverage Ratio" means, as of the last day
         of any fiscal quarter, the ratio of (i) Consolidated Funded Debt (net
         of cash of the Consolidated Group in an amount not to exceed
         $5,000,000) on such date to (ii) Consolidated EBITDA for the period of
         four consecutive fiscal quarters ending as of such day.

                  "Contractual Obligation" means, as to any Person, any
         provision of any security issued by such Person or of any material
         agreement, instrument or undertaking to which such Person is a party or
         by which it or any of its property is bound.

                  "Credit Documents" means a collective reference to this Credit
         Agreement, the Notes, the LOC Documents, the Collateral Documents, the
         Jupiter Negative Pledge Agreement, each Joinder Agreement, the Agent's
         Fee Letter, and all other related agreements and documents issued or
         delivered hereunder or thereunder or pursuant hereto or thereto.

                  "Credit Parties" means a collective reference to the Borrower
         and the Guarantors, and "Credit Party" means any one of them.

                  "Credit Party Obligations" means, without duplication, (i) all
         of the obligations of the Credit Parties to the Lenders (including the
         Issuing Lender and the Swingline Lender) and the Agent, whenever
         arising, under this Credit Agreement, the Notes, the Collateral
         Documents or any of the other Credit Documents (including, but not
         limited to, any interest accruing after the occurrence of a Bankruptcy
         Event with respect to any Credit Party, regardless of whether such
         interest is an allowed claim under the Bankruptcy Code) and (ii) all
         liabilities and obligations, whenever arising, owing from any Credit
         Party to any Lender, or any Affiliate of a Lender, arising under any
         Hedging Agreement relating to the Loans.

                  "Debt Issuance" means the issuance of any Indebtedness for
         borrowed money by a Credit Party or any of its Subsidiaries, other than
         Indebtedness permitted by Section 8.1.

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

                                       -9-

<PAGE>

                  "Defaulting Lender" means, at any time, any Lender that, at
         such time, (i) has failed to make an Extension of Credit required
         pursuant to the terms of this Credit Agreement, (ii) has failed to pay
         to the Agent or any Lender an amount owed by such Lender pursuant to
         the terms of the Credit Agreement or any other of the Credit Documents,
         or (iii) has been deemed insolvent or has become subject to a
         bankruptcy or insolvency proceeding or to a receiver, trustee or
         similar proceeding.

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

                  "Domestic Subsidiary" means any Subsidiary which is
         incorporated or organized under the laws of any State or territory of
         the United States or the District of Columbia.

                  "Eligible Assignee" means (a) a Lender; (b) an Affiliate of a
         Lender; (c) an Approved Fund; and (d) any other Person (other than a
         natural person) approved by (i) the Agent, (ii) in the case of any
         assignment of a Revolving Commitment, the Issuing Lender, and (iii)
         unless a Default or an Event of Default has occurred and is continuing,
         the Borrower (each such approval not to be unreasonably withheld or
         delayed, it being understood that disapproval of a proposed assignee by
         the Borrower because an assignment to such assignee may require the
         Credit Parties to incur increased costs or pay additional amounts under
         this Credit Agreement shall be deemed to be a reasonable exercise of
         the Borrower's rights hereunder); provided that notwithstanding the
         foregoing, "Eligible Assignee" shall not include the Borrower or any of
         the Borrower's Affiliates or Subsidiaries.

                  "Environmental Laws" means any and all lawful and applicable
         Federal, state, local and foreign statutes, laws, regulations,
         ordinances, rules, judgments, orders, decrees, permits, concessions,
         grants, franchises, licenses, agreements or other governmental
         restrictions relating to the environment or to emissions, discharges,
         releases or threatened releases of pollutants, contaminants, chemicals,
         or industrial, toxic or hazardous substances or wastes into the
         environment including, without limitation, ambient air, surface water,
         ground water, or land, or otherwise relating to the manufacture,
         processing, distribution, use, treatment, storage, disposal, transport,
         or handling of pollutants, contaminants, chemicals, or industrial,
         toxic or hazardous substances or wastes.

                  "Equity Transaction" means, with respect to the Parent and its
         Subsidiaries, any issuance of shares of its Capital Stock; provided
         that any Equity Transaction shall not include any such issuance (A) by
         a member of the Consolidated Group to a Credit Party, (B) to an
         employee, officer or director or former employee, officer or director
         pursuant to a stock incentive plan, stock option plan or other
         equity-based compensation plan or arrangement except to the extent that
         the aggregate annual amount of such issuances under this subsection (B)
         exceeds $1,000,000, (C) by the Parent to Jupiter, (D) by the Parent to
         shareholders of the Parent pursuant to a shareholder's rights offering
         so long as Jupiter purchases at least 50% of the Capital Stock issued
         pursuant to such shareholder's

                                       -10-

<PAGE>

         rights offering or (E) by the Parent to the seller of a business
         acquired in a Permitted Acquisition.

                  "ERISA" means the Employee Retirement Income Security Act of
         1974, as amended, and any successor statute thereto, as interpreted by
         the rules and regulations thereunder, all as the same may be in effect
         from time to time. References to sections of ERISA shall be construed
         also to refer to any successor sections.

                  "ERISA Affiliate" means an entity which is under common
         control with any Credit Party within the meaning of Section 4001(a)(14)
         of ERISA, or is a member of a group which includes the Parent or the
         Borrower and which is treated as a single employer under Sections
         414(b) or (c) of the Code.

                  "ERISA Event" means (i) with respect to any Plan, the
         occurrence of a Reportable Event or the substantial cessation of
         operations (within the meaning of Section 4062(e) of ERISA); (ii) the
         withdrawal by the Parent, any Subsidiary of the Parent or any ERISA
         Affiliate from a Multiple Employer Plan during a plan year in which it
         was a substantial employer (as such term is defined in Section
         4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan;
         (iii) the distribution of a notice of intent to terminate or the actual
         termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA;
         (iv) the institution of proceedings to terminate or the actual
         termination of a Plan by the PBGC under Section 4042 of ERISA; (v) any
         event or condition which could reasonably be expected to constitute
         grounds under Section 4042 of ERISA for the termination of, or the
         appointment of a trustee to administer, any Plan; (vi) the complete or
         partial withdrawal of the Parent, any Subsidiary of the Parent or any
         ERISA Affiliate from a Multiemployer Plan; (vii) the conditions for
         imposition of a lien under Section 302(f) of ERISA exist with respect
         to any Plan; or (vii) the adoption of an amendment to any Plan
         requiring the provision of security to such Plan pursuant to Section
         307 of ERISA.

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

                  "Eurodollar Rate" means for any Interest Period with respect
         to any Eurodollar Loan, a rate per annum determined by the Agent
         (absent manifest error) to be equal to the quotient obtained by
         dividing (a) the Interbank Offered Rate by (b) 1 minus the Eurodollar
         Reserve Percentage.

                  "Eurodollar Reserve Percentage" means, for any day during any
         Interest Period, the reserve percentage (expressed as a decimal,
         rounded upward to the nearest 1/100th of 1%) in effect on such day,
         whether or not applicable to any Lender, under regulations issued from
         time to time by the Board of Governors of the Federal Reserve System
         for determining the maximum reserve requirement (including any
         emergency, supplemental or other marginal reserve requirement) with
         respect to Eurocurrency funding (currently referred to as "Eurocurrency
         liabilities"). The Eurodollar Rate for each outstanding

                                       -11-

<PAGE>

         Eurodollar Rate Loan shall be adjusted automatically as of the
         effective date of any change in the Eurodollar Reserve Percentage.

                  "Event of Default" means such term as defined in Section 9.1.

                  "Excluded Property" means, with respect to any Credit Party
         (i) any leased real or personal Property of such Credit Party, (ii) any
         owned real or personal Property of such Credit Party which is located
         outside of the United States, (iii) any owned real Property of such
         Credit Party which has a net book value of less than $50,000, provided
         that the aggregate net book value of all real Property of the members
         of the Consolidated Group excluded pursuant to this clause (iii) shall
         not exceed $200,000 and (iv) any Property of such Credit Party which,
         subject to the terms of Section 8.12 and Section 8.15, is subject to a
         Lien of the type described in clause (vii) of the definition of
         Permitted Liens pursuant to documents which prohibit such Credit Party
         from granting any other Liens in such Property.

                  "Existing Indebtedness" means all Indebtedness evidenced by
         and outstanding under (i) that certain Credit Agreement among the
         Parent, certain subsidiaries of the Parent, the guarantors party
         thereto, the lenders party thereto and Bank of America, N.A., as agent
         dated as of August 25, 1998, as amended or modified from time to time
         and (ii) that certain Bridge Loan Agreement dated as of August 25, 1998
         among the Parent, the guarantors listed on the signature pages thereof,
         the lenders named therein, Banc of America Securities LLC (formerly
         NationsBanc Montgomery Securities LLC), as arranger, and Banc of
         America Bridge LLC (formerly NationsBridge, L.L.C.), as administrative
         agent, as amended and modified from time to time.

                  "Extension of Credit" means, as to any Lender, the making of,
         extension or conversion of, or participation in, a Loan by such Lender
         or the issuance or extension of, or participation in, a Letter of
         Credit.

                  "Fees" means all fees payable pursuant to Section 3.5.

                  "Federal Funds Rate" means, for any day, the rate per annum
         (rounded upwards to the nearest 1/100 of 1%) equal to the weighted
         average of the rates on overnight Federal funds transactions with
         members of the Federal Reserve System arranged by Federal funds brokers
         on such day, as published by the Federal Reserve Bank on the Business
         Day next succeeding such day; provided that (a) if such day is not a
         Business Day, the Federal Funds Rate for such day shall be such rate on
         such transactions on the next preceding Business Day as so published on
         the next succeeding Business Day, and (b) if no such rate is so
         published on such next succeeding Business Day, the Federal Funds Rate
         for such day shall be the average rate charged to Bank of America on
         such day on such transactions as determined by the Agent.

                  "Foreign Subsidiary" means a Subsidiary which is not a
         Domestic Subsidiary.

                                       -12-

<PAGE>

                  "Fund" means any Person (other than a natural person) that is
         (or will be) engaged in making, purchasing, holding or otherwise
         investing in commercial loans and similar extensions of credit in the
         ordinary course of its business.

                  "Funded Debt" means, with respect to any Person, without
         duplication, (i) all Indebtedness of such Person for borrowed money,
         (ii) all obligations of such Person evidenced by bonds, debentures,
         notes or similar instruments, or upon which interest payments are
         customarily made, (iii) all obligations of such Person under
         conditional sale or other title retention agreements relating to
         Property purchased by such Person (other than customary reservations or
         retentions of title under agreements with suppliers entered into in the
         ordinary course of business), (iv) all purchase money Indebtedness of
         such Person, including without limitation the principal portion of all
         obligations of such Person under Capital Leases, (v) all Guaranty
         Obligations of such Person with respect to Funded Debt of another
         Person, (vi) all Funded Debt of another Person secured by a Lien on any
         Property of such Person, whether or not such Funded Debt has been
         assumed, provided that for purposes hereof the amount of such Funded
         Debt shall be limited to the greater of (A) the amount of such Funded
         Debt as to which there is recourse to such Person and (B) the fair
         market value of the property which is subject to the Lien, (vii) all
         obligations of such Person (including, but not limited to, the amount
         of any upfront payment or rebate payment made to such Person pursuant
         to the terms of a supply contract or other contract) issued or assumed
         as the deferred purchase price of Property or services purchased by
         such Person (other than trade debt incurred in the ordinary course of
         business and due within twelve months of the incurrence thereof),
         (viii) all drafts drawn under standby letters of credit issued or
         bankers' acceptances facilities created for the account of such Person
         (to the extent unreimbursed within 1 Business Day, including with the
         proceeds of a Revolving Loan), (ix) the principal balance outstanding
         under any Synthetic Lease, (x) all obligations of such Person to
         repurchase any securities issued by such Person at any time on or prior
         to the Termination Date which repurchase obligations are related to the
         issuance thereof, including, without limitation, obligations commonly
         known as residual equity appreciation potential shares and (xi) the
         aggregate amount of uncollected accounts receivable of such Person
         subject at such time to a sale of receivables (or similar transaction)
         to the extent such transaction is effected with recourse to such Person
         (whether or not such transaction would be reflected on the balance
         sheet of such Person in accordance with GAAP). The Funded Debt of any
         Person shall include the Funded Debt of any partnership or joint
         venture in which such Person is a general partner or joint venturer,
         but only to the extent to which there is recourse to such Person for
         the payment of such Funded Debt. The Series A Convertible Preferred
         shall not be considered Funded Debt for purposes of this Credit
         Agreement.

                  "GAAP" means generally accepted accounting principles in the
         United States applied on a consistent basis and subject to the terms of
         Section 1.3 hereof.

                                       -13-

<PAGE>

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

                  "Guarantor" means the Parent, each of the Domestic
         Subsidiaries of the Borrower and each Additional Credit Party which may
         hereafter execute a Joinder Agreement, together with their successors
         and permitted assigns.

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

                  "Hedging Agreements" means any interest rate protection
         agreement or foreign currency exchange agreement. For purposes of
         Section 4, the term "Hedging Agreements" shall only refer to those
         Hedging Agreements between a Credit Party and any Lender, or any
         Affiliate of a Lender, that relate to the Loans.

                  "Indebtedness" of any Person means (i) all obligations of such
         Person for borrowed money, (ii) all obligations of such Person
         evidenced by bonds, debentures, notes or similar instruments, or upon
         which interest payments are customarily made, (iii) all obligations of
         such Person under conditional sale or other title retention agreements
         relating to Property purchased by such Person (other than customary
         reservations or retentions of title under agreements with suppliers
         entered into in the ordinary course of business), (iv) all obligations
         of such Person issued or assumed as the deferred purchase price of
         Property or services purchased by such Person (other than trade debt
         incurred in the ordinary course of business and due within twelve
         months of the incurrence thereof) which would appear as liabilities on
         a balance sheet of such Person, (v) all obligations of such Person
         under take-or-pay or similar arrangements or under commodities
         agreements, (vi) all Indebtedness of others secured by (or for which
         the holder of such Indebtedness has an existing right, contingent or
         otherwise, to be secured by) any Lien on, or payable out of the
         proceeds of production from, Property owned or acquired by such Person,
         whether or not the obligations secured thereby have been assumed,
         provided that for purposes hereof the amount of such

                                       -14-

<PAGE>

         Indebtedness shall be limited to the greater of (A) the amount of such
         Indebtedness as to which there is recourse to such Person and (B) the
         fair market value of the property which is subject to the Lien, (vii)
         all Guaranty Obligations of such Person, (viii) the principal portion
         of all obligations of such Person under Capital Leases, (ix) all
         obligations of such Person in respect of interest rate protection
         agreements, foreign currency exchange agreements, commodity purchase or
         option agreements or other interest or exchange rate or commodity price
         hedging agreements (including, but not limited to, the Hedging
         Agreements), (x) the maximum amount of all standby letters of credit
         issued or bankers' acceptances facilities created for the account of
         such Person and, without duplication, all drafts drawn thereunder (to
         the extent unreimbursed), (xi) all preferred Capital Stock issued by
         such Person and required by the terms thereof to be redeemed, or for
         which mandatory sinking fund payments are due, at any time prior to the
         Termination Date, (xii) the principal balance outstanding under any
         Synthetic Lease, (xiii) all obligations of such Person to repurchase
         any securities issued by such Person at any time on or prior to the
         Termination Date which repurchase obligations are related to the
         issuance thereof, including, without limitation, obligations commonly
         known as residual equity appreciation potential shares and (xiv) the
         aggregate amount of uncollected accounts receivable of such Person
         subject at such time to a sale of receivables (or similar transaction)
         to the extent such transaction is effected with recourse to such Person
         (whether or not such transaction would be reflected on the balance
         sheet of such Person in accordance with GAAP). The Indebtedness of any
         Person shall include the Indebtedness of any partnership or joint
         venture in which such Person is a general partner or a joint venturer,
         but only to the extent to which there is recourse to such Person for
         payment of such Indebtedness.

                  "Indenture" means that certain Indenture dated as of the
         Closing Date among the Borrower, PCA Finance Corp., the guarantors
         named therein and The Bank of New York, as trustee, as amended or
         modified from time to time.

                  "Interbank Offered Rate" means for any Interest Period with
         respect to any Eurodollar Loan: (a) the rate per annum equal to the
         rate determined by the Agent to be the offered rate that appears on the
         page of the Telerate screen (or any successor thereto) that displays an
         average British Bankers Association LIBOR Rate for deposits in Dollars
         (for delivery on the first day of such Interest Period) with a term
         equivalent to such Interest Period, determined as of approximately
         11:00 A.M. (London time) two Business Days prior to the first day of
         such Interest Period, or (b) if the rate referenced in the preceding
         clause (a) does not appear on such page or service or such page or
         service shall cease to be available, the rate per annum equal to the
         rate determined by the Agent to be the offered rate on such other page
         or other service that displays an average British Bankers Association
         LIBOR Rate for deposits in Dollars (for delivery on the first day of
         such Interest Period) with a term equivalent to such Interest Period,
         determined as of approximately 11:00 A.M. (London time) two Business
         Days prior to the first day of such Interest Period, or (c) if the
         rates referenced in the preceding clauses (a) and (b) are not
         available, the rate per annum determined by the Agent as the rate of
         interest (rounded upward to the nearest 1/100th of 1%) at which
         deposits in Dollars for delivery on the first

                                       -15-

<PAGE>

         day of such Interest Period in same day funds in the approximate amount
         of the Eurodollar Loan being made, continued or converted by Bank of
         America and with a term equivalent to such Interest Period would be
         offered by Bank of America's London Branch to major banks in the
         offshore Dollar market at their request at approximately 11:00 A.M.
         (London time) two Business Days prior to the first day of such Interest
         Period.

                  "Interest Payment Date" means (i) as to any Base Rate Loan,
         the last day of each calendar quarter and the Termination Date and (ii)
         as to any Eurodollar Loan, the last day of each Interest Period for
         such Loan, any date of repayment of principal of such Loan and the
         Termination Date, and in addition where the applicable Interest Period
         is more than 3 months, then also on the date 3 months from the
         beginning of the Interest Period, and each 3 months thereafter. If an
         Interest Payment Date falls on a date which is not a Business Day, such
         Interest Payment Date shall be deemed to be the next succeeding
         Business Day, except that in the case of Eurodollar Loans where the
         next succeeding Business Day falls in the next succeeding calendar
         month, then on the next preceding Business Day.

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

                  "Investment" means (i) the acquisition (whether for cash,
         property, services, assumption of Indebtedness, securities or
         otherwise) of assets (other than equipment, inventory, supplies or
         other assets in the ordinary course of business and other than any
         acquisition of assets constituting a Consolidated Capital Expenditure),
         Capital Stock, bonds, notes, debentures, partnership, joint venture or
         other ownership interests or other securities of any Person, (ii) any
         deposit with, or advance, loan or other extension of credit to, any
         Person (other than deposits made in connection with the purchase of
         equipment, inventory, services, leases, supplies or other assets in the
         ordinary course of business) or (iii) any other capital contribution to
         or investment in such Person, including, without limitation, any
         Guaranty Obligation incurred for the benefit of such Person.

                  "Issuing Lender" means Bank of America.

                  "Issuing Lender Fees" has the meaning assigned to such term in
         Section 3.5(b)(ii).

                                       -16-

<PAGE>

                  "Joinder Agreement" means a Joinder Agreement substantially in
         the form of Exhibit 7.11 hereto, executed and delivered by an
         Additional Credit Party in accordance with the provisions of Section
         7.11.

                  "Jupiter" means the collective reference to (i) Jupiter
         Partners II L.P., a Delaware limited partnership, (ii) Jupiter Partners
         II Parallel Fund L.P., a Delaware limited partnership and (iii) such
         other limited partnerships of which Ganymede II LLC is the general
         partner.

                  "Jupiter Negative Pledge Agreement" means that certain letter
         agreement dated the Closing Date among Jupiter, the Parent and the
         Agent.

                  "Lenders" means each of the Persons identified as a "Lender"
         on the signature pages hereto, and their successors and assigns.

                  "Letter of Credit" means any Closing Date Letter of Credit and
         any other letter of credit issued by the Issuing Lender for the account
         of the Borrower in accordance with the terms of Section 2.2.

                  "Letter of Credit Application" means an application and
         agreement for the issuance or amendment of a Letter of Credit in the
         form from time to time in use by the Issuing Lender.

                  "Letter of Credit Fee" has the meaning given such term in
         Section 3.5(b)(i).

                  "Lien" means any mortgage, pledge, hypothecation, assignment,
         deposit arrangement, security interest, encumbrance, lien (statutory or
         otherwise), preference, priority or charge of any kind (including any
         agreement to give any of the foregoing, any conditional sale or other
         title retention agreement, any financing or similar statement or notice
         filed under the Uniform Commercial Code as adopted and in effect in the
         relevant jurisdiction or other similar recording or notice statute, and
         any lease in the nature thereof).

                  "Loan" or "Loans" means the Revolving Loans and the Swingline
         Loans.

                  "LOC Commitment" means the commitment of the Issuing Lender to
         issue, and to honor payment obligations under, Letters of Credit
         hereunder and with respect to each Lender, the commitment of each
         Lender to purchase participation interests in the Letters of Credit up
         to such Lender's Revolving Commitment Percentage of the LOC Committed
         Amount as specified in Schedule 2.1(a), as such amount may be reduced
         from time to time in accordance with the provisions hereof.

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

                                       -17-

<PAGE>

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

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

                  "Margin Stock" has the meaning given such term in 12 CFR Part
         221.2.

                  "Material Adverse Effect" means a material adverse effect on
         (i) the condition (financial or otherwise), operations, business,
         assets, liabilities or prospects of the Parent and its Subsidiaries
         taken as a whole, (ii) the ability of the Credit Parties taken as a
         whole to perform any material obligation under the Credit Documents to
         which it is a party or (iii) the rights and remedies of the Lenders
         under the Credit Documents.

                  "Materials of Environmental Concern" means any gasoline or
         petroleum (including crude oil or any fraction thereof) or petroleum
         products or any hazardous or toxic substances, materials or wastes,
         defined or regulated as such in or under any Environmental Laws,
         including, without limitation, asbestos, polychlorinated biphenyls and
         urea-formaldehyde insulation.

                  "Moody's" means Moody's Investors Service, Inc., or any
         successor or assignee of the business of such company in the business
         of rating securities.

                  "Mortgages" has the meaning given to such term in Section
         5.1(j).

                  "Mortgage Policies" has the meaning given to such term in
         Section 5.1(j).

                  "Multiemployer Plan" means a Plan which is a multiemployer
         plan as defined in Sections 3(37) or 4001(a)(3) of ERISA.

                  "Multiple Employer Plan" means a Plan which the Parent, any
         Subsidiary of the Parent or any ERISA Affiliate and at least one
         employer other than the Parent, any Subsidiary of the Parent or any
         ERISA Affiliate are contributing sponsors.

                  "Net Proceeds" means gross cash proceeds (including any cash
         received by way of deferred payment pursuant to a promissory note,
         receivable or otherwise, but only as and when received) received in
         connection with an Asset Disposition, Debt Issuance or

                                       -18-

<PAGE>

         Equity Transaction, net of (i) reasonable transaction costs, including
         in the case of an Equity Transaction, underwriting discounts and
         commissions and in the case of an Asset Disposition occurring in
         connection with a claim under an insurance policy, costs incurred in
         connection with adjustment and settlement of the claim, (ii) estimated
         taxes payable in connection therewith, (iii) reserves or escrows for
         earn-out or purchase price adjustments or indemnity obligations and
         (iv) in the case of an Asset Disposition, any amounts payable in
         respect of Indebtedness (other than the Loans), including without
         limitation principal, interest, premiums and penalties, which is
         secured by, or otherwise related to, any property or asset which is the
         subject thereof to the extent that such Indebtedness and any payments
         in respect thereof are paid with a portion of the proceeds therefrom;
         it being understood that "Net Proceeds" shall include, without
         limitation, any cash or Cash Equivalents received upon (a) the sale or
         other disposition of any non-cash consideration received by any member
         of the Consolidated Group in any Asset Disposition, Equity Transaction
         or Debt Issuance to the extent such sale or other disposition of such
         non-cash consideration is not otherwise subject to Section 3.3(b) and
         (b) the reversal or cancellation of any of the reserves or escrows
         described in clause (iii) above.

                  "Non-Excluded Taxes" means such term as is defined in Section
         3.10.

                  "Non-Recurring Expenses" means (i) the costs associated with
         the closing of Kmart portrait studios during fiscal year 2001 in an
         amount not to exceed $1,000,000, (ii) executive search fees and
         relocation expenses in an amount not to exceed $1,000,000 in the
         aggregate during the term of the Credit Agreement, (iii) severance fees
         in an amount not to exceed $2,500,000 in the aggregate during the term
         of the Credit Agreement and (iv) one-time cash expenses incurred in
         connection with the closing of this Credit Agreement, the Indenture,
         the Subordinated Note Agreement, the Parent Subordinated Note Agreement
         and Permitted Acquisitions (to the extent such expenses are reasonably
         documented to the satisfaction of the Agent).

                  "Note" or "Notes" means any Revolving Notes and/or the
         Swingline Note, individually or collectively, as appropriate.

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

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

                  "Obligations" means, collectively, the Revolving Loans, the
         Swingline Loans and the LOC Obligations.

                  "Operating Lease" means, as applied to any Person, any lease
         (including, without limitation, leases which may be terminated by the
         lessee at any time) of any Property

                                       -19-

<PAGE>

         (whether real, personal or mixed) which is not a Capital Lease other
         than any such lease in which that Person is the lessor.

                  "Parent" means the Person identified as such in the heading
         hereof, together with any successors and permitted assigns.

                  "Parent Subordinated Note Agreement" means that certain
         Purchase Agreement dated as of the Closing Date among the Parent, GS
         Mezzanine Partners II, L.P. and GS Mezzanine Partners II Offshore,
         L.P., as amended or modified from time to time in accordance with the
         terms thereof and hereof.

                  "Parent Subordinated Notes" means the notes issued by the
         Parent pursuant to the Parent Subordinated Note Agreement evidencing
         Indebtedness of the Parent in an aggregate principal amount not to
         exceed $30,000,000 plus pay-in-kind interest.

                  "Participation Interest" means the purchase by a Lender of a
         participation (a) in Letters of Credit and LOC Obligations as provided
         in Section 2.2, (b) in Swingline Loans as provided in Section 2.3 and
         (c) in Loans as provided in Section 3.13.

                  "PBGC" means the Pension Benefit Guaranty Corporation
         established pursuant to Subtitle A of Title IV of ERISA and any
         successor thereof.

                  "Permitted Acquisition" means an acquisition by any Credit
         Party (other than the Parent) for consideration no greater than the
         fair market value of the Capital Stock or Property acquired; provided
         that (i) the Property acquired (or the Property of the Person acquired)
         in such acquisition is used or useful in the same or a substantially
         similar line of business as the Borrower and its Subsidiaries are
         engaged in as of the Closing Date (and reasonable extensions thereof),
         (ii) the Agent shall have received all items in respect of the Capital
         Stock or Property acquired in such acquisition required to be delivered
         by the terms of Section 7.11 and/or Section 7.14, (iii) in the case of
         the acquisition of the Capital Stock of another Person, the board of
         directors (or other comparable governing body) of such other Person
         shall have duly approved such acquisition, (iv) at least 3 days prior
         to the date of closing of such acquisition, the Borrower shall have
         delivered to the Agent a certificate demonstrating that, upon giving
         effect to such acquisition on a Pro Forma Basis, the Credit Parties
         shall be in compliance with all of the covenants set forth in Section
         7.10, (v) the representations and warranties made by the Credit Parties
         in any Credit Document shall be true and correct in all material
         respects at and as if made as of the date of such acquisition except to
         the extent such representations and warranties expressly relate to an
         earlier date, (vi) the aggregate consideration (including cash and
         non-cash consideration, any assumption of liabilities and earn-out
         obligations) for all acquisitions occurring during any fiscal year
         shall not exceed $4,000,000 (plus a carry-over amount equal to the
         portion of such annual amount, if any, that is not used to consummate
         Permitted Acquisitions during a prior fiscal year), (vii) the aggregate
         consideration (including cash and non-cash consideration, any
         assumption of liabilities and earn-out obligations) for all
         acquisitions occurring subsequent

                                       -20-

<PAGE>

         to the Closing Date shall not exceed $20,000,000 and (viii) immediately
         prior to and after giving effect to such acquisition, no Default or
         Event of Default shall exist.

                  "Permitted Investments" means Investments which are either (i)
         cash and Cash Equivalents; (ii) accounts receivable created, acquired
         or made in the ordinary course of business and payable or dischargeable
         in accordance with customary trade terms; (iii) Investments consisting
         of Capital Stock, obligations, securities or other property received in
         settlement of accounts receivable (created in the ordinary course of
         business) from bankrupt or insolvent obligors; (iv) Investments
         existing as of the Closing Date and set forth in Schedule 8.5; (v)
         Guaranty Obligations permitted by Section 8.1; (vi) loans to employees,
         directors or officers in connection with the award of convertible bonds
         or Capital Stock under a stock incentive plan, stock option plan or
         other equity-based compensation plan or arrangement in the aggregate
         not to exceed $500,000 (calculated on the exercise price for any such
         shares) in the aggregate at any time outstanding; (vii) other advances
         or loans to employees, directors, officers or agents in the ordinary
         course of business not to exceed $750,000 in the aggregate at any time
         outstanding; (viii) advances or loans to customers or suppliers that do
         not exceed $1,000,000 in the aggregate at any one time outstanding;
         (ix) Investments in any Credit Party (other than the Parent); (x)
         loans, advances and investments in Foreign Subsidiaries in an amount
         not to exceed $20,000,000 in the aggregate at any time outstanding;
         (xi) Permitted Acquisitions, (xii) to the extent constituting
         Investments, transactions permitted by Sections 8.4 and 8.10 and (xiii)
         other loans, advances and investments of a nature not contemplated in
         the foregoing subsections in an amount not to exceed $2,000,000 in the
         aggregate at any time outstanding.

                  "Permitted Liens" means:

                                    (i) Liens in favor of the Agent to secure
                  the Credit Party Obligations;

                                    (ii) Liens (other than Liens created or
                  imposed under ERISA) for taxes, assessments or governmental
                  charges or levies not yet due or Liens for taxes being
                  contested in good faith by appropriate proceedings for which
                  adequate reserves determined in accordance with GAAP have been
                  established (and as to which the Property subject to any such
                  Lien is not yet subject to any foreclosure proceeding, sale or
                  loss on account thereof);

                                    (iii) statutory Liens of landlords and Liens
                  of carriers, warehousemen, mechanics, materialmen and
                  suppliers and other Liens imposed by law or pursuant to
                  customary reservations or retentions of title arising in the
                  ordinary course of business, provided that such Liens secure
                  only amounts not yet due and payable or, if due and payable,
                  are unfiled and no other action has been taken to enforce the
                  same or are being contested in good faith by appropriate
                  proceedings for which adequate reserves determined in
                  accordance with GAAP have been established (and as to which
                  the Property subject to any such Lien is not yet subject to
                  any foreclosure proceeding, sale or loss on account thereof);

                                       -21-

<PAGE>

                  (iv) Liens (other than Liens created or imposed under ERISA)
         incurred or deposits made by members of the Consolidated Group in the
         ordinary course of business in connection with workers' compensation,
         unemployment insurance and other types of social security, or to secure
         the performance of tenders, statutory obligations, bids, leases,
         government contracts, performance and return-of-money bonds and other
         similar obligations (exclusive of obligations for the payment of
         borrowed money);

                  (v) Liens in connection with attachments or judgments
         (including judgment or appeal bonds) provided that the judgments
         secured shall, within 30 days after the entry thereof, have been
         discharged or execution thereof stayed pending appeal, or shall have
         been discharged within 30 days after the expiration of any such stay;

                  (vi) easements, rights-of-way, restrictions (including zoning
         restrictions), minor defects or irregularities in title and other
         similar charges or encumbrances not, in any material respect, impairing
         the use of the encumbered Property for its intended purposes;

                  (vii) Liens securing purchase money Indebtedness (including
         Capital Leases) to the extent permitted under Section 8.1(d), provided
         that any such Lien attaches only to the Property financed and such Lien
         attaches thereto concurrently with or within 90 days after the
         acquisition thereof;

                  (viii) leases or subleases granted to others not interfering
         in any material respect with the business of any member of the
         Consolidated Group;

                  (ix) any interest of title of a lessor under, and Liens
         arising from UCC financing statements (or equivalent filings,
         registrations or agreements in foreign jurisdictions) relating to,
         leases permitted by this Credit Agreement;

                  (x) Liens in favor of customs and revenue authorities arising
         as a matter of law to secure payment of customs duties in connection
         with the importation of goods;

                  (xi) Liens deemed to exist in connection with Investments in
         repurchase agreements permitted under Section 8.5;

                  (xii) normal and customary rights of setoff upon deposits of
         cash in favor of banks or other depository institutions;

                  (xiii) Liens of sellers of goods to the Borrower and any of
         its Subsidiaries arising under Article 2 of the Uniform Commercial Code
         or similar

                                       -22-

<PAGE>

                  provisions of applicable law in the ordinary course of
                  business, covering only the goods sold and securing only the
                  unpaid purchase price for such goods and related expenses; and

                           (xiv) Liens existing as of the Closing Date and set
                  forth on Schedule 1.1; provided that (a) no such Lien shall at
                  any time be extended to or cover any Property other than the
                  Property subject thereto on the Closing Date and (b) the
                  principal amount of the Indebtedness secured by such Liens
                  shall not be extended, renewed, refunded or refinanced.

                  "Person" means any natural person, corporation, limited
         liability company, trust, joint venture, association, company,
         partnership, Governmental Authority or other entity.

                  "Plan" means any employee benefit plan (as defined in Section
         3(3) of ERISA) which is covered by ERISA and with respect to which the
         Parent, any Subsidiary of the Parent or any ERISA Affiliate is (or, if
         such plan were terminated at such time, would under Section 4069 of
         ERISA be deemed to be) an "employer" within the meaning of Section 3(5)
         of ERISA.

                  "Pledge Agreement" means the Pledge Agreement dated as of the
         date hereof entered into by the Credit Parties in favor of the Agent
         for the benefit of the Lenders (and Affiliates of Lenders as to certain
         obligations under Hedging Agreements related to the Loans), as amended,
         modified, restated or supplemented from time to time.

                  "Prime Rate" means, for any day, the per annum rate of
         interest in effect for such day as publicly announced from time to time
         by Bank of America as its "prime rate." Such rate is a rate set by Bank
         of America based upon various factors including Bank of America's costs
         and desired return, general economic conditions and other factors, and
         is used as a reference point for pricing some loans, which may be
         priced at, above, or below such announced rate. Any change in such rate
         announced by Bank of America shall take effect at the opening of
         business on the day specified in the public announcement of such
         change.

                  "Pro Forma Basis" means, for purposes of calculating
         (utilizing the principles set forth in the second paragraph of Section
         1.3) compliance with each of the financial covenants set forth in
         Section 7.10 in respect of a proposed event, that such event shall be
         deemed to have occurred as of the first day of the twelve-month period
         ending as of the last day of the most recent fiscal quarter for which
         the Lenders have received the financial information required by Section
         7.1(a) or 7.1(b)(ii), as applicable.

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

                                       -23-

<PAGE>

                  "Qualifying IPO" means an underwritten primary public offering
         (other than a public offering pursuant to a registration statement on
         Form S-8) of the common Capital Stock of the Parent (i) pursuant to an
         effective registration statement filed with the Securities and Exchange
         Commission in accordance with the Securities Act (whether alone or in
         connection with a secondary public offering) and (ii) resulting in
         proceeds to the Parent of at least $25 million; provided, that, all of
         such proceeds (except to the extent applied to prepay the Senior Notes,
         the Subordinated Notes and the Parent Subordinated Notes to the extent
         permitted hereunder) are contributed in cash to the Borrower.

                  "Register" has the meaning given such term in Section 11.3(c).

                  "Regulation T, U, or X" means Regulation T, U or X,
         respectively, of the Board of Governors of the Federal Reserve System
         as from time to time in effect and any successor to all or a portion
         thereof.

                  "Release" means any spilling, leaking, pumping, pouring,
         emitting, emptying, discharging, injecting, escaping, leaching, dumping
         or disposing into the environment (including the abandonment or
         discarding of barrels, containers and other closed receptacles
         containing any Materials of Environmental Concern).

                  "Reportable Event" means any of the events set forth in
         Section 4043(c) of ERISA, other than those events as to which the
         notice requirement has been waived by regulation.

                  "Required Lenders" means, at any time, Lenders (and, if there
         is more than one Lender at such time, at least two Lenders) having more
         than fifty percent (50%) of the Commitments, or if the Commitments have
         been terminated, Lenders having more than fifty percent (50%) of the
         aggregate principal amount of the Obligations outstanding (taking into
         account in each case Participation Interests or obligation to
         participate therein); provided that the Commitments of, and outstanding
         principal amount of Obligations (taking into account Participation
         Interests therein) owing to, a Defaulting Lender shall be excluded for
         purposes hereof in making a determination of Required Lenders.

                  "Requirement of Law" means, as to any Person, the certificate
         of incorporation and by-laws or other organizational or governing
         documents of such Person, and any law, treaty, rule or regulation or
         determination of an arbitrator or a court or other Governmental
         Authority, in each case applicable to or binding upon such Person or
         any of its material property.

                  "Responsible Officer" means the Chief Executive Officer and/or
         the President, the Chief Financial Officer, the Chief Operating Officer
         and the Controller.

                  "Restricted Payment" means (i) any dividend or other
         distribution, direct or indirect, on account of any shares of any class
         of Capital Stock of any member of the Consolidated

                                       -24-

<PAGE>

         Group now or hereafter outstanding, (ii) any redemption, retirement,
         sinking fund or similar payment, purchase or other acquisition for
         value, direct or indirect, of any shares of any class of Capital Stock
         of any member of the Consolidated Group now or hereafter outstanding,
         and (iii) any payment made to retire, or to obtain the surrender of,
         any outstanding warrants, options or other rights to acquire shares of
         any class of Capital Stock of any member of the Consolidated Group now
         or hereafter outstanding.

                  "Revolving Commitment" means, with respect to each Lender, the
         commitment of such Lender to make Revolving Loans in an aggregate
         principal amount at any time outstanding of up to such Lender's
         Revolving Commitment Percentage of the Revolving Committed Amount as
         specified in Schedule 2.1(a), as such amount may be reduced from time
         to time in accordance with the provisions hereof.

                  "Revolving Commitment Percentage" means, for each Lender, a
         fraction (expressed as a decimal) the numerator of which is the
         Revolving Commitment of such Lender at such time and the denominator of
         which is the Revolving Committed Amount at such time. The initial
         Revolving Commitment Percentages are set out on Schedule 2.1(a).

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

                  "Revolving Loans" has the meaning assigned to such term in
         Section 2.1(a).

                  "Revolving Note" or "Revolving Notes" means the promissory
         notes of the Borrower in favor of each of the Lenders evidencing the
         Revolving Loans in substantially the form attached as Exhibit 2.1(e),
         individually or collectively, as appropriate, as such promissory notes
         may be amended, modified, supplemented, extended, renewed or replaced
         from time to time.

                  "S&P" means Standard & Poor's Ratings Group, a division of
         McGraw Hill, Inc., or any successor or assignee of the business of such
         division in the business of rating securities.

                  "Security Agreement" means the Security Agreement dated as of
         the date hereof entered into by the Credit Parties in favor of the
         Agent for the benefit of the Lenders (and Affiliates of Lenders as to
         certain obligations under Hedging Agreements related to the Loans), as
         amended, modified, restated or supplemented from time to time.

                  "Senior Notes" means the Indebtedness evidenced by the
         Indenture in an aggregate principal amount not to exceed $165,000,000.

                                       -25-

<PAGE>

                  "Series A Convertible Preferred" means the Parent's Series A
         Convertible Preferred Stock, par value of $10 per share issued pursuant
         to the Certificate of Preferences.

                  "Single Employer Plan" means any Plan which is covered by
         Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple
         Employer Plan.

                  "Solvent" or "Solvency" means, with respect to any Person as
         of a particular date, that on such date (i) such Person is able to
         realize upon its assets and pay its debts and other liabilities,
         contingent obligations and other commitments as they mature in the
         normal course of business, (ii) such Person does not intend to, and
         does not believe that it will, incur debts or liabilities beyond such
         Person's ability to pay as such debts and liabilities mature in their
         ordinary course, (iii) such Person is not engaged in a business or a
         transaction, and is not about to engage in a business or a transaction,
         for which such Person's Property would constitute unreasonably small
         capital after giving due consideration to the prevailing practice in
         the industry in which such Person is engaged or is to engage, (iv) the
         fair value of the Property of such Person is greater than the total
         amount of liabilities, including, without limitation, contingent
         liabilities, of such Person and (v) the present fair saleable value of
         the assets of such Person is not less than the amount that will be
         required to pay the probable liability of such Person on its debts as
         they become absolute and matured. In computing the amount of contingent
         liabilities at any time, it is intended that such liabilities will be
         computed at the amount which, in light of all the facts and
         circumstances existing at such time, represents the amount that can
         reasonably be expected to become an actual or matured liability.

                  "Subordinated Note Agreement" means that certain Purchase
         Agreement dated as of the Closing Date among the Borrower, the
         guarantors named therein, GS Mezzanine Partners II, L.P. and GS
         Mezzanine Partners II Offshore, L.P., as amended or modified from time
         to time in accordance with the terms thereof and hereof.

                  "Subordinated Notes" means the notes issued by the Borrower
         pursuant to the Subordinated Note Agreement evidencing Indebtedness of
         the Borrower in an aggregate principal amount not to exceed
         $10,000,000.

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

                                       -26-

<PAGE>

                  "Swingline Commitment" means the commitment of the Swingline
         Lender to make Swingline Loans in an aggregate principal amount at any
         time outstanding of up to the Swingline Committed Amount.

                  "Swingline Committed Amount" shall have the meaning assigned
         to such term in Section 2.3(a).

                  "Swingline Lender" means Bank of America.

                  "Swingline Loan" shall have the meaning assigned to such term
         in Section 2.3(a).

                  "Swingline Note" means the promissory note of the Borrower in
         favor of the Swingline Lender in the original principal amount of
         $5,000,000, as such promissory note may be amended, modified, restated
         or replaced from time to time.

                  "Synthetic Lease" means any synthetic lease, tax retention
         operating lease, off-balance sheet loan or similar off-balance sheet
         financing product where such transaction is considered borrowed money
         indebtedness for tax purposes but is classified as an Operating Lease.

                  "Termination Date" means June 27, 2007.

                  "U.S. Wal*Mart License Agreement" means the agreement, dated
         April 4, 2002, between Wal*Mart Stores, Inc. and American Studios,
         Inc., as the same may be amended, modified, supplemented or replaced
         from time to time and any other agreements entered into from time to
         time between the Parent (or its Subsidiaries) and Wal*Mart Stores, Inc.
         granting the Parent or its Subsidiaries the right to operate retail
         portrait photography studios in Wal*Mart stores in the United States.

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

                  "Warrant Agreement" means that certain Warrant Agreement dated
         as of the Closing Date by and among the Parent, G.S. Mezzanine Partners
         II, L.P. and G.S. Mezzanine Partners II Offshore, L.P.

                  "Wholly Owned Subsidiary" of any Person means any Subsidiary
         100% of whose Voting Stock or other equity interests is at the time
         owned by such Person directly or indirectly through other Wholly Owned
         Subsidiaries.

                                       -27-

<PAGE>

         1.2      Computation of Time Periods.

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

         1.3      Accounting Terms.

         Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP. All calculations made for
the purposes of determining compliance with this Credit Agreement shall (except
as otherwise expressly provided herein) be made by application of GAAP (i)
consistent with the most recent annual or quarterly financial statements
delivered pursuant to Section 7.1 hereof and (ii) subject to any changes in
accounting principles since the delivery of such financial statements which have
been promulgated by the Financial Accounting Standards Board or any Governmental
Authority, but have not yet become generally accepted accounting principles (or,
prior to the delivery of the first financial statements pursuant to Section 7.1
hereof, consistent with the annual audited financial statements referenced in
Section 6.1); provided, however, if (a) the Borrower shall object to determining
such compliance on such basis at the time of delivery of such financial
statements due to any change in GAAP, the rules promulgated with respect thereto
or other changes in accounting principles described above or (b) the Agent or
the Required Lenders shall so object in writing within 30 days after delivery of
such financial statements, then such calculations shall be made on a basis
consistent with the most recent financial statements delivered by the Borrower
to the Lenders as to which no such objection shall have been made.

         Notwithstanding the above, the parties hereto acknowledge and agree
that, for purposes of all calculations made under the financial covenants set
forth in Section 7.10, financial statement items (whether positive or negative)
attributable to the assets acquired in any Permitted Acquisition and any
Indebtedness incurred by the Borrower or any of its Subsidiaries in order to
consummate such Permitted Acquisition shall be included to the extent relating
to any period applicable in such calculations occurring on or after the date of
such Permitted Acquisition on a Pro Forma Basis (and, if any Indebtedness
incurred by the Borrower or any of its Subsidiaries in order to consummate such
Permitted Acquisition has a floating or formula rate, then the implied rate of
interest for such Indebtedness for the applicable period shall be determined by
utilizing the rate which is or would be in effect with respect to such
Indebtedness as at the relevant date of determination). Furthermore, the parties
hereto agree that, for purposes of all calculations made under the financial
covenants set forth in Section 7.10 after any Asset Disposition, such
calculations shall be conducted in a manner similar to any calculation related
to a Permitted Acquisition in similar circumstances except that the applicable
financial statement items and Indebtedness attributable to the Person or
Property related to the applicable Asset Disposition shall be excluded (rather
than included) from such calculation on a Pro Forma Basis.

                                       -28-

<PAGE>

                                    SECTION 2
                                CREDIT FACILITIES

         2.1      Revolving Loans.

         (a) Revolving Commitment. During the Commitment Period, subject to the
terms and conditions hereof, each Lender severally agrees to make revolving
credit loans (the "Revolving Loans") to the Borrower from time to time in the
amount of such Lender's Revolving Commitment Percentage of such Revolving Loans
for the purposes hereinafter set forth; provided that (i) with regard to the
Lenders collectively, the aggregate principal amount of the Revolving Loans,
Swingline Loans and the LOC Obligations outstanding at any time shall not exceed
FIFTY MILLION DOLLARS ($50,000,000) (as such aggregate maximum amount may be
reduced from time to time as provided in Section 3.4, the "Revolving Committed
Amount"), (ii) with regard to each Lender individually, such Lender's
outstanding Revolving Loans shall not exceed such Lender's Revolving Commitment
Percentage of the Revolving Committed Amount and (iii) during the period from
and including (A) December 15, 2002 through and including January 15, 2003, and,
as more specifically provided in Section 3.3(b)(i) hereof, with regard to the
Lenders collectively, the aggregate principal amount of Revolving
Loans and Swingline Loans outstanding shall not exceed $20,000,000 during such
period, (B) December 15, 2003 through and including January 15, 2004, and, as
more specifically provided in Section 3.3(b)(i) hereof, with regard to the
Lenders collectively, the aggregate principal amount of Revolving Loans and
Swingline Loans outstanding shall not exceed $15,000,000 during such period and
(C) December 15 of 2004, 2005 and 2006, respectively through and including
January 15 of 2005, 2006 and 2007, respectively, and, as more specifically
provided in Section 3.3(b)(i) hereof, with regard to the Lenders collectively,
the aggregate principal amount of Revolving Loans and Swingline Loans
outstanding shall not exceed $10,000,000 during such period. Revolving Loans may
consist of Base Rate Loans or Eurodollar Loans, or a combination thereof, as the
Borrower may request, and may be repaid and reborrowed in accordance with the
provisions hereof.

         (b)      Revolving Loan Borrowings.

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

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<PAGE>

         notice shall be deemed to be a request for a Base Rate Loan hereunder.
         The Agent shall give notice to each Lender promptly upon receipt of
         each Notice of Borrowing pursuant to this Section 2.1(b)(i), of the
         contents thereof and each such Lender's share of any borrowing to be
         made pursuant thereto.

                  (ii) Minimum Amounts. Each Revolving Loan shall be in a
         minimum aggregate principal amount of $1,000,000, in the case of
         Eurodollar Loans, or $500,000 (or the remaining Revolving Committed
         Amount, if less), in the case of Base Rate Loans, and integral
         multiples of $100,000 in excess thereof.

                  (iii) Advances. Each Lender will make its Revolving Commitment
         Percentage of each Revolving Loan borrowing available to the Agent for
         the account of the Borrower as specified in Section 3.14(a), or in such
         other manner as the Agent may specify in writing, by 1:00 P.M.
         (Charlotte, North Carolina time) on the date specified in the
         applicable Notice of Borrowing (or the date on which a borrowing is
         deemed requested pursuant to Section 2.2(e) hereof) in Dollars and in
         funds immediately available to the Agent. Such borrowing will then be
         made available to the Borrower by the Agent by crediting the account of
         the Borrower on the books of the Agent with the aggregate of the
         amounts made available to the Agent by the Lenders and in like funds as
         received by the Agent.

         (c) Repayment. The principal amount of all Revolving Loans shall be due
and payable in full on the Termination Date.

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

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

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

         Interest on Revolving Loans shall be payable in arrears on each
         applicable Interest Payment Date (or at such other times as may be
         specified herein).

         (e) Revolving Notes. The Revolving Loans shall be evidenced by a duly
executed Revolving Note in favor of each Lender.

         2.2 Letter of Credit Subfacility.

         (a) Issuance. During the Commitment Period, in reliance upon the
agreements of the Lenders set forth herein and subject to the terms and
conditions hereof and of the LOC Documents, if any, and such other terms and
conditions which the Issuing Lender may

                                       -30-

<PAGE>

reasonably require, the Issuing Lender shall issue, and the Lenders shall
participate in, such Letters of Credit as the Borrower may request (or have
requested in the case of Closing Date Letters of Credit) for its own account or
for the account of another Credit Party as provided herein, in a form acceptable
to the Issuing Lender, for the purposes hereinafter set forth; provided that (i)
the aggregate amount of LOC Obligations shall not exceed TWENTY-FIVE MILLION
DOLLARS ($25,000,000) (the "LOC Committed Amount") and (ii) with regard to the
Lenders collectively, the aggregate principal amount of Revolving Loans,
Swingline Loans and the LOC Obligations outstanding at any time shall not exceed
the Revolving Committed Amount. Letters of Credit issued hereunder shall not
have an original expiry date more than one year from the date of issuance or
extension, nor an expiry date, whether as originally issued or by extension,
extending beyond the Termination Date. Each Letter of Credit shall comply with
the related LOC Documents. The issuance date of each Letter of Credit shall be a
Business Day.

         (b) Notice and Reports. Except for Closing Date Letters of Credit
described on Schedule 2.2(b), the request for the issuance of a Letter of Credit
shall be submitted by the Borrower to the Issuing Lender (with a copy to the
Agent) at least three (3) Business Days prior to the requested date of issuance
(or such shorter period as may be agreed by the Issuing Lender) in the form of a
Letter of Credit Application, appropriately completed and signed. The Issuing
Lender will provide to the Agent at least monthly, and more frequently upon
request, a detailed summary report on its Letters of Credit and the activity
thereon, in form and substance acceptable to the Agent.

         (c) Participation. Each Lender, upon issuance of a Letter of Credit
(or, as of the Closing Date, in the case of the Closing Date Letters of Credit),
shall be deemed to have purchased without recourse a participation from the
applicable Issuing Lender in such Letter of Credit and the obligations arising
thereunder, in each case in an amount equal to its pro rata share of the
obligations under such Letter of Credit (based on the respective Revolving
Commitment Percentages of the Lenders) and shall absolutely, unconditionally and
irrevocably assume, as primary obligor and not as surety, and be obligated to
pay to the Issuing Lender therefor and discharge when due, its pro rata share of
the obligations arising under such Letter of Credit. Without limiting the scope
and nature of each Lender's participation in any Letter of Credit, to the extent
that the Issuing Lender has not been reimbursed as required hereunder or under
any such Letter of Credit, each such Lender shall pay to the Issuing Lender its
pro rata share of such unreimbursed drawing in same day funds on the day of
notification by the Issuing Lender of an unreimbursed drawing pursuant to the
provisions of subsection (d) hereof. The obligation of each Lender to so
reimburse the Issuing Lender shall be absolute and unconditional and shall not
be affected by the occurrence of a Default, an Event of Default or any other
occurrence or event. Any such reimbursement shall not relieve or otherwise
impair the obligation of the Borrower to reimburse the Issuing Lender under any
Letter of Credit, together with interest as hereinafter provided. As of the
Closing Date, each Closing Date Letter of Credit shall be deemed for all
purposes of the Credit Agreement and the other Credit Documents to be a Letter
of Credit.

         (d) Reimbursement. In the event of any drawing under any Letter of
Credit, the Issuing Lender will promptly notify the Borrower and the Agent.
Unless the Borrower shall immediately

                                       -31-

<PAGE>

notify the Issuing Lender that the Borrower intends to otherwise reimburse the
Issuing Lender for such drawing, the Borrower shall be deemed to have requested
that the Lenders make a Revolving Loan in the amount of the drawing as provided
in subsection (e) hereof on the related Letter of Credit, the proceeds of which
will be used to satisfy the related reimbursement obligations. The Borrower
promises to reimburse the Issuing Lender on the day of drawing under any Letter
of Credit (either with the proceeds of a Revolving Loan obtained hereunder or
otherwise) in same day funds. If the Borrower shall fail to reimburse the
Issuing Lender as provided hereinabove, the unreimbursed amount of such drawing
shall bear interest at a per annum rate equal to the Base Rate plus the sum of
(i) the Applicable Percentage and (ii) two percent (2%). The Borrower's
reimbursement obligations hereunder shall be absolute and unconditional under
all circumstances irrespective of any rights of setoff, counterclaim or defense
to payment the Borrower may claim or have against the Issuing Lender, the Agent,
the Lenders, the beneficiary of the Letter of Credit drawn upon or any other
Person, including without limitation any defense based on any failure of the
Borrower or any other Credit Party to receive consideration or the legality,
validity, regularity or unenforceability of the Letter of Credit. The Agent will
promptly notify the other Lenders of the amount of any unreimbursed drawing and
each Lender shall promptly pay to the Agent for the account of the Issuing
Lender in Dollars and in immediately available funds, the amount of such
Lender's pro rata share of such unreimbursed drawing. Such payment shall be made
on the day such notice is received by such Lender from the Agent if such notice
is received at or before 2:00 P.M. (Charlotte, North Carolina time) otherwise
such payment shall be made at or before 12:00 Noon (Charlotte, North Carolina
time) on the Business Day next succeeding the day such notice is received. If
such Lender does not pay such amount to the Issuing Lender in full upon such
request, such Lender shall, on demand, pay to the Agent for the account of the
Issuing Lender interest on the unpaid amount during the period from the date of
such drawing until such Lender pays such amount to the Issuing Lender in full at
a rate per annum equal to, if paid within three (3) Business Days of the date
that such Lender is required to make payments of such amount pursuant to the
preceding sentence, the Federal Funds Rate and thereafter at a rate equal to the
Base Rate. Each Lender's obligation to make such payment to the Issuing Lender,
and the right of the Issuing Lender to receive the same, shall be absolute and
unconditional, shall not be affected by any circumstance whatsoever and without
regard to the termination of this Credit Agreement or the Commitments hereunder,
the existence of a Default or Event of Default or the acceleration of the
obligations of the Borrower hereunder and shall be made without any offset,
abatement, withholding or reduction whatsoever. Simultaneously with the making
of each such payment by a Lender to the Issuing Lender, such Lender shall,
automatically and without any further action on the part of the Issuing Lender
or such Lender, acquire a participation in an amount equal to such payment
(excluding the portion of such payment constituting interest owing to the
Issuing Lender) in the related unreimbursed drawing portion of the LOC
Obligation and in the interest thereon and in the related LOC Documents, and
shall have a claim against the Borrower with respect thereto.

         (e) Repayment with Revolving Loans. On any day on which the Borrower
shall have requested, or been deemed to have requested, a Revolving Loan to
reimburse a drawing under a Letter of Credit, the Agent shall give notice to the
Lenders that a Revolving Loan has been requested or deemed requested by the
Borrower to be made in connection with a drawing under a Letter of Credit, in
which case a Revolving Loan comprised of Base Rate Loans (or Eurodollar

                                       -32-

<PAGE>

Loans to the extent the Borrower has complied with the procedures of Section
2.1(b)(i) with respect thereto) shall be immediately made to the Borrower by all
Lenders (notwithstanding any termination of the Commitments pursuant to Section
9.2) pro rata based on the respective Revolving Loan Commitment Percentages of
the Lenders (determined before giving effect to any termination of the
Commitments pursuant to Section 9.2) and the proceeds thereof shall be paid
directly to the Issuing Lender for application to the respective LOC
Obligations. Each such Lender hereby irrevocably agrees to make its pro rata
share of each such Revolving Loan immediately upon any such request or deemed
request in the amount, in the manner and on the date specified in the preceding
sentence notwithstanding (i) the amount of such borrowing may not comply with
the minimum amount for advances of Revolving Loans otherwise required hereunder,
(ii) whether any conditions specified in Section 5.2 are then satisfied, (iii)
whether a Default or an Event of Default then exists, (iv) failure for any such
request or deemed request for Revolving Loan to be made by the time otherwise
required hereunder, (v) whether the date of such borrowing is a date on which
Revolving Loans are otherwise permitted to be made hereunder or (vi) any
termination of the Commitments relating thereto immediately prior to or
contemporaneously with such borrowing. In the event that any Revolving Loan
cannot for any reason be made on the date otherwise required above (including,
without limitation, as a result of the commencement of a proceeding under the
Bankruptcy Code with respect to the Borrower or any Credit Party), then each
such Lender hereby agrees that it shall forthwith purchase (as of the date such
borrowing would otherwise have occurred, but adjusted for any payments received
from the Borrower on or after such date and prior to such purchase) from the
Issuing Lender such participation in the outstanding LOC Obligations as shall be
necessary to cause each such Lender to share in such LOC Obligations ratably
(based upon the respective Revolving Commitment Percentages of the Lenders
(determined before giving effect to any termination of the Commitments pursuant
to Section 9.2)), provided that in the event such payment is not made on the day
of drawing, such Lender shall pay in addition to the Issuing Lender interest on
the amount of its unfunded Participation Interest at a rate equal to, if paid
within three (3) Business Days of the date of drawing, the Federal Funds Rate,
and thereafter at the Base Rate.

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

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

         (h) Applicability of ISP98 and UCP. Unless otherwise expressly agreed
by the Issuing Bank and the Borrower when a Letter of Credit is issued, (i) the
rules of the "International Standby Practices 1998" published by the Institute
of International Banking Law & Practice (or

                                       -33-

<PAGE>

such later version thereof as may be in effect at the time of issuance) shall
apply to each standby Letter of Credit, and (ii) the rules of the Uniform
Customs and Practice for Documentary Credits, as most recently published by the
International Chamber of Commerce (the "ICC") at the time of issuance (including
the ICC decision published by the Commission on Banking Technique and Practice
on April 6, 1998 regarding the European single currency (euro)) shall apply to
each commercial Letter of Credit.

         (i)      Indemnification; Nature of Issuing Lender's Duties.

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

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

                  (iii) In furtherance and extension of, and not in limitation
         of, the specific provisions hereinabove set forth, any action taken or
         omitted by the Issuing Lender, under or in connection with any Letter
         of Credit or the related certificates, if taken or omitted in good
         faith and without gross negligence or willful misconduct, shall not put
         such Issuing Lender under any resulting liability to the Borrower or
         any other Credit Party. It is the intention of the parties that this
         Credit Agreement shall be construed and applied to protect and
         indemnify the Issuing Lender against any and

                                       -34-

<PAGE>

         all risks involved in the issuance of the Letters of Credit, all of
         which risks are hereby assumed by the Borrower (on behalf of itself and
         each of the other Credit Parties), including, without limitation, any
         and all Government Acts. The Issuing Lender shall not, in any way, be
         liable for any failure by the Issuing Lender or anyone else to pay any
         drawing under any Letter of Credit as a result of any Government Acts
         or any other cause beyond the control of the Issuing Lender.

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

                  (v) Notwithstanding anything to the contrary contained in this
         subsection (i), the Borrower shall have no obligation to indemnify the
         Issuing Lender in respect of any liability incurred by the Issuing
         Lender (A) arising solely out of the gross negligence or willful
         misconduct of the Issuing Lender, as determined by a court of competent
         jurisdiction, or (B) caused by the Issuing Lender's failure to pay
         under any Letter of Credit after presentation to it of a request
         strictly complying with the terms and conditions of such Letter of
         Credit, as determined by a court of competent jurisdiction, unless such
         payment is prohibited by any law, regulation, court order or decree.

         (j) Limitation on Obligations of Issuing Lender. Notwithstanding
anything contained herein to the contrary, the Issuing Lender shall not be under
any obligation to issue, renew or extend any Letter of Credit if (i) any order,
judgment or decree of any Governmental Authority or arbitrator shall by its
terms purport to enjoin or restrain the Issuing Lender from issuing a Letter of
Credit, or any applicable law, rule or regulation or any request or directive
(whether or not having the force of law) from any Governmental Authority with
jurisdiction over the Issuing Lender shall prohibit, or request that the Issuing
Lender refrain from, the issuance of letters of credit generally or any such
Letter of Credit in particular, or shall impose upon the Issuing Lender with
respect to any such Letter of Credit any restriction, reserve or capital
requirement (for which the Issuing Lender is not otherwise compensated
hereunder) not in effect on the Closing Date, or shall impose upon the Issuing
Lender any unreimbursed loss, costs or expense which was not applicable on the
Closing Date and which the Issuing Lender should deem material to it in good
faith, or (ii) the issuance, renewal or extension would violate or otherwise
contravene its internal policy.

         (k) Conflict with LOC Documents. In the event of any conflict between
this Credit Agreement and any LOC Document (including any Letter of Credit
Application), this Credit Agreement shall control.

                                       -35-

<PAGE>

         2.3      Swingline Loan Subfacility.

         (a) Swingline Commitment. Subject to the terms and conditions hereof,
the Swingline Lender, in its individual capacity, agrees to make certain
revolving credit loans to the Borrower (each a "Swingline Loan" and,
collectively, the "Swingline Loans") from time to time from the Closing Date
until the Termination Date for the purposes hereinafter set forth; provided,
however, (i) the aggregate amount of Swingline Loans outstanding at any time
shall not exceed FIVE MILLION DOLLARS ($5,000,000) (the "Swingline Committed
Amount"), and (ii) with regard to the Lenders collectively, the aggregate
principal amount of Revolving Loans, Swingline Loans and the LOC Obligations
outstanding at any time shall not exceed the Revolving Committed Amount.
Swingline Loans hereunder shall be made in accordance with the provisions of
this Section 2.3, and may be repaid and reborrowed in accordance with the
provisions hereof.

         (b)      Swingline Loan Advances.

                  (i) Notices; Disbursement. Whenever the Borrower desires a
         Swingline Loan advance hereunder it shall give written notice (or
         telephone notice promptly confirmed in writing) to the Swingline Lender
         not later than 2:00 P.M. (Charlotte, North Carolina time) on the
         Business Day of the requested Swingline Loan advance substantially in
         the form of Exhibit 2.3(b) attached hereto. Each such notice shall be
         irrevocable and shall specify (A) that a Swingline Loan advance is
         requested, (B) the date of the requested Swingline Loan advance (which
         shall be a Business Day) and (C) the principal amount of the Swingline
         Loan advance requested. Each Swingline Loan shall have such maturity
         date as the Swingline Lender and the Borrower shall agree upon receipt
         by the Swingline Lender of any such notice from the Borrower. The
         Swingline Lender shall initiate the transfer of funds representing the
         Swingline Loan advance to the Borrower by 3:30 P.M. (Charlotte, North
         Carolina time) on the Business Day of the requested borrowing. Each
         Swingline Loan advance shall be in a minimum principal amount of
         $100,000 and in integral multiples of $50,000 in excess thereof (or the
         remaining amount of the Swingline Committed Amount, if less).

                  (ii) Repayment of Swingline Loans. The principal amount of all
         Swingline Loans shall be due and payable on the Termination Date. The
         Swingline Lender may, at any time, in its sole discretion, by written
         notice to the Borrower and the Lenders, demand repayment of its
         Swingline Loans by way of a Revolving Loan advance, in which case the
         Borrower shall be deemed to have requested a Revolving Loan advance
         comprised solely of Base Rate Loans in the amount of such Swingline
         Loans; provided, however, that any such demand shall be deemed to have
         been given one Business Day prior to the Termination Date and on the
         date of the occurrence of any Event of Default described in Section 9.1
         and upon acceleration of the Obligations and the exercise of remedies
         in accordance with the provisions of Section 9.2. Each Lender hereby
         irrevocably agrees to make its pro rata share of each such Revolving
         Loan in the amount, in the manner and on the date specified in the
         preceding sentence notwithstanding (I) the

                                       -36-

<PAGE>

         amount of such borrowing may not comply with the minimum amount for
         advances of Revolving Loans otherwise required hereunder, (II) whether
         any conditions specified in Section 5.2 are then satisfied, (III)
         whether a Default or an Event of Default then exists, (IV) failure of
         any such request or deemed request for Revolving Loan to be made by the
         time otherwise required hereunder, (V) whether the date of such
         borrowing is a date on which Revolving Loans are otherwise permitted to
         be made hereunder or (VI) any termination of the Commitments relating
         thereto immediately prior to or contemporaneously with such borrowing.
         In the event that any Revolving Loan cannot for any reason be made on
         the date otherwise required above (including, without limitation, as a
         result of the commencement of a proceeding under the Bankruptcy Code
         with respect to the Borrower or any other Credit Party), then each
         Lender hereby agrees that it shall forthwith purchase (as of the date
         such borrowing would otherwise have occurred, but adjusted for any
         payments received from the Borrower on or after such date and prior to
         such purchase) from the Swingline Lender such participations in the
         outstanding Swingline Loans as shall be necessary to cause each such
         Lender to share in such Swingline Loans ratably based upon its
         Revolving Commitment Percentage of the Revolving Committed Amount
         (determined before giving effect to any termination of the Commitments
         pursuant to Section 3.4), provided that (A) all interest payable on the
         Swingline Loans shall be for the account of the Swingline Lender until
         the date as of which the respective participation is purchased and (B)
         at the time any purchase of participations pursuant to this sentence is
         actually made, the purchasing Lender shall be required to pay to the
         Swingline Lender, to the extent not paid to the Swingline Lender by the
         Borrower in accordance with the terms of subsection (c) below, interest
         on the principal amount of participation purchased for each day from
         and including the day upon which such borrowing would otherwise have
         occurred to but excluding the date of payment for such participation,
         at the rate equal to the Federal Funds Rate.

         (a) Interest on Swingline Loans. Subject to the provisions of Section
3.1, each Swingline Loan shall bear interest at a per annum rate equal to the
Base Rate plus the Applicable Margin. Interest on Swingline Loans shall be
payable in arrears on the dates agreed upon by the Borrower and the Swingline
Lender (or at such other times as may be specified herein).

         (b) Swingline Note. The Swingline Loans shall be evidenced by a duly
executed promissory note of the Borrower to the Swingline Lender in
substantially the form of Exhibit 2.3(d).

                                    SECTION 1
                 OTHER PROVISIONS RELATING TO CREDIT FACILITIES

         3.1      Default Rate.

         Upon the occurrence, and during the continuance, of an Event of
Default, the principal of and, to the extent permitted by law, interest on the
Loans and any other amounts due and owing

                                       -37-

<PAGE>

hereunder or under the other Credit Documents shall bear interest, payable on
demand, at a per annum rate 2% greater than the rate which would otherwise be
applicable (or if no rate is applicable, whether in respect of interest, fees or
other amounts, then 2% greater than the Base Rate plus the Applicable
Percentage).

         3.2      Extension and Conversion.

         Subject to the terms of Section 5.2, the Borrower shall have the
option, on any Business Day, to extend existing Revolving Loans into a
subsequent permissible Interest Period or to convert Revolving Loans into
Revolving Loans of another interest rate type; provided, however, that (i)
except as provided in Section 3.8, Eurodollar Loans may be extended, and
Eurodollar Loans may be converted into Base Rate Loans only on the last day of
the Interest Period applicable thereto, (ii) Eurodollar Loans may be extended,
and Base Rate Loans may be converted into Eurodollar Loans, only if the
conditions precedent set forth in Section 5.2 are satisfied on the date of
extension or conversion, (iii) Revolving Loans extended as, or converted into,
Eurodollar Loans shall be subject to the terms of the definition of "Interest
Period" set forth in Section 1.1 and shall be in a minimum aggregate principal
amount of $1,000,000 and integral multiples of $100,000 in excess thereof, and
(iv) any request for extension or conversion of a Eurodollar Loan which shall
fail to specify an Interest Period shall be deemed to be a request for an
Interest Period of one month. Each such extension or conversion shall be
effected by the Borrower by giving a Notice of Extension/Conversion (or
telephone notice promptly confirmed in writing) to the Agent prior to 11:00 A.M.
(Charlotte, North Carolina time) on the Business Day of, in the case of the
conversion of a Eurodollar Loan into a Base Rate Loan, and on the third Business
Day prior to, in the case of the extension of a Eurodollar Loan as, or
conversion of a Base Rate Loan into, a Eurodollar Loan, the date of the proposed
extension or conversion, specifying the date of the proposed extension or
conversion, the Revolving Loans to be so extended or converted, the types of
Loans into which such Revolving Loans are to be converted and, if appropriate,
the applicable Interest Periods with respect thereto. Each request for extension
or conversion shall be irrevocable and shall constitute a representation and
warranty by the Borrower of the matters specified in subsections (a) through (d)
of Section 5.2. In the event the Borrower fails to request extension or
conversion of any Eurodollar Loan in accordance with this Section, or any such
conversion or extension is not permitted or required by this Section, then such
Eurodollar Loan shall be automatically converted into a Base Rate Loan at the
end of the Interest Period applicable thereto. The Agent shall give each Lender
notice as promptly as practicable of any such proposed extension or conversion
affecting any Revolving Loan. The Borrower will be limited to a maximum number
of six (6) Eurodollar Loans outstanding at any time. For purposes hereof,
Eurodollar Loans with separate or different Interest Periods will be considered
as separate Eurodollar Loans even if their Interest Periods expire on the same
date.

         3.3      Prepayments.

         (a) Voluntary Prepayments. The Loans may be repaid in whole or in part
without premium or penalty; provided that (i) Eurodollar Loans may be prepaid
only upon three (3) Business Days' prior written notice to the Agent and must be
accompanied by payment of any

                                       -38-

<PAGE>

amounts owing under Section 3.11, (ii) with respect to Revolving Loans, partial
prepayments shall be minimum principal amounts of $1,000,000 and in integral
multiples of $250,000 in excess thereof or the remaining amount thereof if less
and (iii) with respect to Swingline Loans, partial prepayments shall be minimum
principal amounts of $100,000 and in integral multiples of $50,000 in excess
thereof or the remaining amount thereof if less. Within the parameters of the
applications set forth above, prepayments shall be applied first to Base Rate
Loans and then Eurodollar Loans in direct order of Interest Period maturities.
All prepayments under this Section 3.3(a) shall be subject to Section 3.11, but
otherwise without premium or penalty, and, in the case of Eurodollars Loans, be
accompanied by interest on the principal amount prepaid through the date of
prepayment.

         (b) Mandatory Prepayments. The Borrower will make the following
prepayments (in accordance with and to be applied as set forth in paragraph (c)
below).

                  (i) Commitment Limitations. If at any time, (A) the sum of the
         aggregate principal amount of outstanding Revolving Loans plus LOC
         Obligations outstanding plus Swingline Loans outstanding shall exceed
         the Revolving Committed Amount, (B) the aggregate amount of LOC
         Obligations outstanding shall exceed the LOC Committed Amount or (C)
         the aggregate principal amount of outstanding Swingline Loans shall
         exceed the Swingline Committed Amount, the Borrower shall immediately
         make payment on the Loans and/or to a cash collateral account in
         respect of the LOC Obligations, in an amount sufficient to eliminate
         such excess. In addition, the Borrower agrees to prepay any Revolving
         Loans and Swingline Loans outstanding such that (x) no more than
         $20,000,000 in Revolving Loans and Swingline Loans shall be outstanding
         during the period from December 15, 2002 through and including January
         15, 2003, (y) no more than $15,000,000 in Revolving Loans and Swingline
         Loans shall be outstanding during the period from December 15, 2003
         through and including January 15, 2004 and (z) no more than $10,000,000
         in Revolving Loans and Swingline Loans shall be outstanding during the
         period from December 15 of 2004, 2005 and 2006, respectively, through
         and including January 15 of 2005, 2006 and 2007, respectively.

                  (ii) Asset Dispositions. The Borrower will make prepayment on
         the Loans in an amount equal to one hundred percent (100%) of the Net
         Proceeds received from any Asset Disposition (other than any Asset
         Disposition permitted by Sections 8.4(c)(i) through (c)(v) inclusive,
         and, to the extent a mandatory prepayment is not required thereunder,
         Section 8.4(c)(vi)).

                  (iii) Equity Transactions. The Borrower will make prepayment
         on the Loans in an amount equal to one hundred percent (100%) of the
         Net Proceeds received from any Equity Transaction (it being agreed that
         any such payments required in connection with the issuance of Capital
         Stock under stock incentive, stock option or other similar plans shall
         be made quarterly within sixty days following the end of each quarter).
         Notwithstanding the foregoing terms of this Section 3.3(b)(iii), (a)
         the Net Proceeds from a Qualifying IPO shall not be required to be used
         to prepay the Loans, provided, that, no

                                       -39-

<PAGE>

         Default or Event of Default shall exist and be continuing at the time
         of such Qualifying IPO, (b) the Net Proceeds from any Equity
         Transaction that generates gross cash proceeds of at least $25,000,000
         may be used first by the Borrower to prepay up to 35% of the principal
         of the Senior Notes to the extent permitted by Section 8.9, (c) the Net
         Proceeds from any Equity Transaction occurring prior to April 1, 2004
         that generates gross cash proceeds of at least $25,000,000 may be used
         first by the Borrower to prepay up to 35% of the principal of the
         Subordinated Notes and 35% of the principal and 100% of the capitalized
         interest of the Parent Subordinated Notes, in each case to the extent
         permitted by Section 8.9, (d) the Net Proceeds from any Equity
         Transaction occurring on or after April 1, 2004 that generates gross
         cash proceeds of at least $25,000,000 may be used first by the Borrower
         to prepay up to 100% of the principal of the Subordinated Notes and
         100% of the principal and 100% of the capitalized interest of the
         Parent Subordinated Notes, in each case to the extent permitted by
         Section 8.9 and (e) provided, that, no Default or Event of Default
         shall exist and be continuing, the Borrower shall not be required to
         prepay the Loans if the Net Proceeds from the applicable Equity
         Transaction are less than $250,000 and the Net Proceeds from all Equity
         Transactions excluded pursuant to this clause (e) do not exceed
         $1,250,000 in the aggregate.

                  (iv) Debt  Issuances.  The  Borrower  shall make a prepayment
         on the Loans in an aggregate amount equal to one hundred percent (100%)
         of the Net Proceeds of any Debt Issuance to the Lenders.

         (c) Application of Prepayments. All amounts required to be paid
pursuant to Section 3.3(b)(i) shall be applied first to Revolving Loans, second
to Swingline Loans and third to a cash collateral account in respect of LOC
Obligations (except to the extent otherwise required by Section 3.3(b)(i)). All
amounts required to be prepaid pursuant to Section 3.3(b)(ii), (iii) and (iv)
above shall be paid promptly (and in any event, within five Business Days) upon
receipt of the Net Proceeds to be prepaid. All amounts required to be prepaid
pursuant to Section 3.3(b)(ii), (iii) and (iv) above shall be applied as
follows: first to the Revolving Loans (with a corresponding permanent reduction
in the Revolving Committed Amount to the extent required by Section 3.4(b)),
second to the Swingline Loans (with a corresponding permanent reduction in the
Revolving Committed Amount to the extent required by Section 3.4(b)) and third
to a cash collateral account to secure LOC Obligations. Within the parameters of
the application set forth above, prepayments shall be applied first to Base Rate
Loans and then to Eurodollar Loans in direct order of Interest Period
maturities. All prepayments hereunder shall be subject to Section 3.11.

         (d) Prepayment Account. If the Borrower is required to make a mandatory
prepayment of Eurodollar Loans under Section 3.3(b), the Borrower shall have the
right, in lieu of making such prepayment in full, to deposit an amount equal to
such mandatory prepayment with the Agent in a cash collateral account maintained
(pursuant to documentation reasonably satisfactory to the Agent) by and in the
sole dominion and control of the Agent. Any amounts so deposited shall be held
by the Agent as collateral for the prepayment of such Eurodollar Loans and shall
be applied to the prepayment of the applicable Eurodollar Loans at the end of
the

                                       -40-

<PAGE>

current Interest Periods applicable thereto. At the request of the Borrower,
amounts so deposited shall be invested by the Agent in Cash Equivalents maturing
prior to the date or dates on which it is anticipated that such amounts will be
applied to prepay such Eurodollar Loans; any interest earned on such Cash
Equivalents will be for the account of the Borrower and the Borrower will
deposit with the Agent the amount of any loss on any such Cash Equivalents to
the extent necessary in order that the amount of the prepayment to be made with
the deposited amounts may not be reduced.

         3.4      Termination and Reduction of Commitments

         (a) Voluntary Reductions.

                  (i) The Revolving Committed Amount may be terminated or
         permanently reduced in whole or in part upon three (3) Business Days'
         prior written notice to the Agent, provided that (A) after giving
         effect to any voluntary reduction the aggregate amount of Revolving
         Loans, Swingline Loans and the LOC Obligations outstanding shall not
         exceed the Revolving Committed Amount, as reduced, and (B) partial
         reductions shall be in a minimum principal amount of $1,000,000, and in
         integral multiples of $500,000 in excess thereof.

                  (ii) The LOC Committed Amount may be terminated or permanently
         reduced in whole or in part upon three (3) Business Days' prior written
         notice to the Agent, provided that (A) after giving effect to any
         voluntary reduction the aggregate amount of the LOC Obligations
         outstanding shall not exceed the LOC Committed Amount, as reduced, and
         (B) partial reductions shall be in a minimum principal amount of
         $1,000,000, and in integral multiples of $500,000 in excess thereof.

                  (iii) The Swingline Committed Amount may be terminated or
         permanently reduced in whole or in part upon three (3) Business Days'
         prior written notice to the Agent, provided that (A) after giving
         effect to any voluntary reduction the aggregate amount of Swingline
         Loans outstanding shall not exceed the Swingline Committed Amount, as
         reduced, and (B) partial reductions shall be in a minimum principal
         amount of $1,000,000, and in integral multiples of $500,000 in excess
         thereof.

         (b) Mandatory Reduction. On any date that the Loans are required to be
prepaid pursuant to Sections 3.3(b)(ii), (iii) or (iv), the Revolving Committed
Amount automatically shall be permanently reduced by the amount of such required
prepayment and/or reduction; provided, however, the Revolving Committed Amount
shall not be required to be reduced below $25,000,000. The Revolving Commitments
hereunder shall terminate on the Termination Date.

         3.5      Fees.

         (a) Commitment Fee. In consideration of the Revolving Commitments
hereunder, the Borrower agrees to pay to the Agent for the ratable benefit of
the Lenders a commitment fee (the

                                       -41-

<PAGE>

"Commitment Fee") at a per annum rate equal to the Applicable Percentage in
effect from time to time on the average daily unused amount of the Revolving
Committed Amount for the applicable period. The Commitment Fee shall be payable
quarterly in arrears on the 15th day following the last day of each calendar
quarter for the immediately preceding quarter (or portion thereof) beginning
with the first such date to occur after the Closing Date and on the Termination
Date. For purposes of computation of the Commitment Fee, (i) the Swingline Loans
shall not be counted toward or considered usage under the Revolving Committed
Amount and (ii) the LOC Obligations shall be counted toward and considered usage
under the Revolving Committed Amount.

         (b) Letter of Credit Fees.

                  (i) Letter of Credit Fee. In consideration of the LOC
         Commitment hereunder, the Borrower agrees to pay to the Agent for the
         ratable benefit of the Lenders a fee (the "Letter of Credit Fee") on
         the average daily maximum amount available to be drawn under Letters of
         Credit computed at a per annum rate from the date of issuance to the
         date of expiration equal to the Applicable Percentage then in effect.
         The Letter of Credit Fee shall be payable quarterly in arrears on the
         15th day following the last day of each calendar quarter for the
         immediately preceding quarter (or portion thereof) beginning with the
         first such date to occur after the Closing Date and on the applicable
         date of expiration of each Letter of Credit.

                  (ii) Issuing Lender Fee. In addition to the Letter of Credit
         Fee, the Borrower agrees to pay to the Issuing Lender for its own
         account without sharing by the other Lenders upon the issuance of any
         Letter of Credit hereunder a fee equal to one-eighth of one percent
         (0.125%) of the face amount of such Letter of Credit and customary
         charges of the Issuing Lender with respect to the issuance, amendment,
         transfer, administration, cancellation and conversion of, and drawings
         under, such Letters of Credit (collectively, the "Issuing Lender
         Fees").

         (c) Administrative  Fees. The Borrower agrees to pay to the Agent,
for its own account, an annual administrative fee and such other fees, if any,
referred to in the Agent's Fee Letter (collectively, the "Agent Fees").

         3.6      Capital Adequacy.

         If any Lender has determined, after the date hereof, that the adoption
or the becoming effective of, or any change in, or any change by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof in the interpretation or administration
of, any applicable law, rule or regulation regarding capital adequacy, or
compliance by such Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on such Lender's capital or assets as a consequence of its commitments or
obligations hereunder to a level below that which such Lender could have

                                       -42-

<PAGE>

achieved but for such adoption, effectiveness, change or compliance (taking into
consideration such Lender's policies with respect to capital adequacy), then,
upon notice from such Lender to the Borrower, the Borrower shall be obligated to
pay within thirty days of demand therefor to such Lender such additional amount
or amounts as will compensate such Lender for such reduction. The Lender shall
provide the Borrower notice of any such claim within ninety days of the
occurrence of any event constituting the basis for such claim. Each
determination by any such Lender of amounts owing under this Section shall,
absent manifest error, be conclusive and binding on the parties hereto.

         3.7      Inability To Determine Interest Rate.

         If prior to the first day of any Interest Period, the Agent shall have
determined (which determination shall be conclusive and binding upon the
Borrower) that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
for such Interest Period, the Agent shall give telecopy or telephonic notice
thereof to the Borrower and the Lenders as soon as practicable thereafter. If
such notice is given (a) any Eurodollar Loans requested to be made on the first
day of such Interest Period shall be made as Base Rate Loans and (b) any Loans
that were to have been converted on the first day of such Interest Period to or
continued as Eurodollar Loans shall be converted to or continued as Base Rate
Loans. Until such notice has been withdrawn by the Agent (which notice shall be
withdrawn whenever such circumstances no longer exist), no further Eurodollar
Loans shall be made or continued as such, nor shall the Borrower have the right
to convert Base Rate Loans to Eurodollar Loans.

         3.8      Illegality.

         Notwithstanding any other provision herein, if the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
occurring after the Closing Date shall make it unlawful for any Lender to make
or maintain Eurodollar Loans as contemplated by this Credit Agreement, (a) such
Lender shall promptly give written notice of such circumstances to the Borrower
and the Agent (which notice shall be withdrawn whenever such circumstances no
longer exist), (b) the commitment of such Lender hereunder to make Eurodollar
Loans, continue Eurodollar Loans as such and convert a Base Rate Loan to
Eurodollar Loans shall forthwith be canceled and, until such time as it shall no
longer be unlawful for such Lender to make or maintain Eurodollar Loans, such
Lender shall then have a commitment only to make a Base Rate Loan when a
Eurodollar Loan is requested and (c) such Lender's Loans then outstanding as
Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on
the respective last days of the then current Interest Periods with respect to
such Loans or within such earlier period as required by law. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day of the
then current Interest Period with respect thereto, the Borrower shall pay to
such Lender such amounts, if any, as may be required pursuant to Section 3.11.

                                       -43-

<PAGE>

         3.9      Requirements of Law.

         If, after the date hereof, the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof applicable to
any Lender, or compliance by any Lender with any request or directive (whether
or not having the force of law) from any central bank or other Governmental
Authority, in each case made subsequent to the Closing Date (or, if later, the
date on which such Lender becomes a Lender):

                  (a) shall subject such Lender to any tax of any kind
         whatsoever with respect to any Letter of Credit, any Eurodollar Loans
         made by it or its obligation to make Eurodollar Loans, or change the
         basis of taxation of payments to such Lender in respect thereof (except
         for (i) Non-Excluded Taxes covered by Section 3.10 (including
         Non-Excluded Taxes imposed solely by reason of any failure of such
         Lender to comply with its obligations under Section 3.10(b)) and (ii)
         changes in taxes measured by or imposed upon the overall net income, or
         franchise tax (imposed in lieu of such net income tax), of such Lender
         or its applicable lending office, branch, or any affiliate thereof));

                  (b) shall impose, modify or hold applicable any reserve,
         special deposit, compulsory loan or similar requirement against assets
         held by, deposits or other liabilities in or for the account of,
         advances, loans or other extensions of credit by, or any other
         acquisition of funds by, any office of such Lender which is not
         otherwise included in the determination of the Eurodollar Rate
         hereunder; or

                  (c) shall impose on such Lender any other condition (excluding
         any tax of any kind whatsoever);

and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, upon notice to the Borrower from such Lender,
through the Agent, in accordance herewith, the Borrower shall be obligated to
pay within 30 days of demand therefor to such Lender, any additional amounts
necessary to compensate such Lender for such increased cost or reduced amount
receivable, provided that, in any such case, the Borrower may elect to convert
the Eurodollar Loans made by such Lender hereunder to Base Rate Loans by giving
the Agent at least one Business Day's notice of such election, in which case the
Borrower shall promptly pay to such Lender, upon demand, without duplication,
such amounts, if any, as may be required pursuant to Section 3.11. The Lender
shall provide the Borrower notice of any such claim within ninety (90) days of
the occurrence of any event constituting the basis for such claim. If any Lender
becomes entitled to claim any additional amounts pursuant to this
subsection, it shall provide prompt notice thereof to the Borrower, through the
Agent, certifying (x) that one of the events described in this paragraph has
occurred and describing in reasonable detail the nature of such event, (y) as to
the increased cost or reduced amount resulting from such event and (z) as to the
additional amount demanded by such Lender and a reasonably detailed explanation
of the calculation thereof. Such a certificate as to any additional amounts
payable pursuant to this

                                       -44-

<PAGE>

subsection submitted by such Lender, through the Agent, to the Borrower shall be
conclusive and binding on the parties hereto in the absence of manifest error.
This covenant shall survive the termination of this Credit Agreement and the
payment of the Loans and all other amounts payable hereunder.

         3.10     Taxes.

         (a) Except as provided below in this subsection, all payments made by
the Borrower under this Credit Agreement and any Notes shall be made free and
clear of, and without deduction or withholding for or on account of, any present
or future income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any court, or governmental body, agency or other
official, excluding taxes measured by or imposed upon the overall net income of
any Lender or its applicable lending office, or any branch or affiliate thereof,
and all franchise taxes, branch taxes, taxes on doing business or taxes on the
overall capital or net worth of any Lender or its applicable lending office, or
any branch or affiliate thereof imposed: (i) by the jurisdiction under the laws
of which such Lender, applicable lending office, branch or affiliate is
organized or is located, or in which its principal executive office is located,
or any nation within which such jurisdiction is located or any political
subdivision thereof; or (ii) by reason of any connection between the
jurisdiction imposing such tax and such Lender, applicable lending office,
branch or affiliate other than a connection arising solely from such Lender
having executed, delivered or performed its obligations, or received payment
under or enforced, this Credit Agreement or any Notes. If any such non-excluded
taxes, levies, imposts, duties, charges, fees, deductions or withholdings
("Non-Excluded Taxes") are required to be withheld from any amounts payable to
the Agent or any Lender hereunder or under any Notes, (A) the amounts so payable
to the Agent or such Lender shall be increased to the extent necessary to yield
to the Agent or such Lender (after payment of all Non-Excluded Taxes) interest
or any such other amounts payable hereunder at the rates or in the amounts
specified in this Credit Agreement and any Notes, provided, however, that the
Borrower shall be entitled to deduct and withhold any Non-Excluded Taxes and
shall not be required to increase any such amounts payable to any Lender that is
not organized under the laws of the United States of America or a state thereof
if such Lender fails to comply with the requirements of paragraph (b) of this
subsection whenever any Non-Excluded Taxes are payable by the Borrower, and (B)
as promptly as possible thereafter the Borrower shall send to the Agent for its
own account or for the account of such Lender, as the case may be, a certified
copy of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Agent the required
receipts or other required documentary evidence, the Borrower shall indemnify
the Agent and the Lenders for any incremental taxes, interest or penalties that
may become payable by the Agent or any Lender as a result of any such failure.
The agreements in this subsection shall survive the termination of this Credit
Agreement and the payment of the Loans and all other amounts payable hereunder.

         (b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:

                                       -45-

<PAGE>

                  (X)(i) on or before the date of any payment by the Borrower
         under this Credit Agreement or Notes to such Lender, deliver to the
         Borrower and the Agent (A) two (2) duly completed copies of United
         States Internal Revenue Service Form W-8BEN or Form W-8ECI, or
         successor applicable form, as the case may be, certifying that it is
         entitled to receive payments under this Credit Agreement and any Notes
         without deduction or withholding of any United States federal income
         taxes and (B) an Internal Revenue Service Form W-8BEN or Form W-8ECI,
         or successor applicable form, as the case may be, certifying that it is
         entitled to an exemption from United States backup withholding tax;

                  (ii) deliver to the Borrower and the Agent two (2) further
         copies of any such form or certification on or before the date that any
         such form or certification expires or becomes obsolete and after the
         occurrence of any event requiring a change in the most recent form
         previously delivered by it to the Borrower; and

                  (iii) obtain such extensions of time for filing and complete
         such forms or certifications as may reasonably be requested by the
         Borrower or the Agent; or

                  (Y) in the case of any such Lender that is not a "bank" within
         the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (i)
         represent to the Borrower (for the benefit of the Borrower and the
         Agent) that it is not a bank within the meaning of Section 881(c)(3)(A)
         of the Internal Revenue Code, (ii) agree to furnish to the Borrower on
         or before the date of any payment by the Borrower, with a copy to the
         Agent two (2) accurate and complete original signed copies of Internal
         Revenue Service Form W-8BEN, or successor applicable form certifying to
         such Lender's legal entitlement at the date of such certificate to an
         exemption from U.S. withholding tax under the provisions of Section
         871(h) or 881(c) of the Internal Revenue Code with respect to payments
         of "portfolio interest" to be made under this Credit Agreement and any
         Notes (and to deliver to the Borrower and the Agent two (2) further
         copies of such form on or before the date it expires or becomes
         obsolete and after the occurrence of any event requiring a change in
         the most recently provided form and, if necessary, obtain any
         extensions of time reasonably requested by the Borrower or the Agent
         for filing and completing such forms), and (iii) agree, to the extent
         legally entitled to do so, upon reasonable request by the Borrower, to
         provide to the Borrower (for the benefit of the Borrower and the Agent)
         such other forms as may be reasonably required in order to establish
         the legal entitlement of such Lender to an exemption from withholding
         with respect to payments under this Credit Agreement and any Notes;

unless in any such case any change in treaty, law or regulation has occurred
after the date such Person becomes a Lender hereunder which renders all such
forms inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advises the
Borrower and the Agent. Each Person that shall become a Lender or a Participant
pursuant to subsection 11.3 shall, upon the effectiveness of the related
transfer, be required to provide all of the forms, certifications and statements
required pursuant to this

                                       -46-

<PAGE>

subsection, provided that in the case of a Participant the obligations of such
Participant pursuant to this subsection (b) shall be determined as if the
Participant were a Lender except that such Participant shall furnish all such
required forms, certifications and statements to the Lender from which the
related participation shall have been purchased.

         3.11     Indemnity.

         Upon demand of any Lender (with a copy to the Agent) from time to time,
the Borrower shall promptly compensate such Lender for and hold such Lender
harmless from any loss, cost or expense incurred by it as a result of:

                  (a) any continuation, conversion, payment or prepayment of any
         Loan other than a Base Rate Loan on a day other than the last day of
         the Interest Period for such Loan (whether voluntary, mandatory,
         automatic, or for any other reason, including, without limitation, (i)
         in connection with any assignment by Bank of America pursuant to
         Section 11.3(b) as part of the primary syndication of the Loans during
         the 180-day period immediately following the Closing Date (it being
         understood and agreed by the Agent, however, that the Agent shall use
         commercially reasonable efforts to minimize the incurrence of costs by
         the Borrower pursuant to this clause (i)) and (ii) the acceleration of
         the Loans pursuant to Section 9.2);

                  (b) any failure by the Borrower (for a reason other than the
         failure of such Lender to make a Loan) to prepay, borrow, continue or
         convert any Loan other than a Base Rate Loan on the date or in the
         amount notified by the Borrower; or

                  (c)  any assignment of a Eurodollar  Loan on a day other than
         the last day of the Interest Period therefor as a result of a request
         by the Borrower pursuant to Section 3.16;

including any loss or expense arising from the liquidation or reemployment of
funds obtained by it to maintain such Loan or from fees payable to terminate the
deposits from which such funds were obtained (but excluding any loss of
anticipated profits). The Borrower shall also pay any reasonable and customary
administrative fees charged by such Lender in connection with the foregoing.

For purposes of calculating amounts payable by the Borrower to the Lenders under
this Section 3.11, each Lender shall be deemed to have funded each Eurodollar
Loan made by it at the Interbank Offered Rate for such Loan by a matching
deposit or other borrowing in the applicable offshore Dollar interbank market
for a comparable amount and for a comparable period, whether or not such
Eurodollar Loan was in fact so funded. The covenants of the Borrower set forth
in this Section 3.11 shall survive the repayment of the Loans, LOC Obligations
and other obligations under the Credit Documents and the termination of the
Commitments hereunder.

                                       -47-

<PAGE>

         3.12     Pro Rata Treatment.

         Except to the extent otherwise provided herein:

         (a) Loans. Each Loan, each payment or prepayment of principal of any
Loan or reimbursement obligations arising from drawings under Letters of Credit,
each payment of interest on the Loans or reimbursement obligations arising from
drawings under Letters of Credit, each payment of Commitment Fees, each payment
of the Letter of Credit Fee, each reduction of the Revolving Committed Amount
and each conversion or extension of any Loan, shall be allocated pro rata among
the Lenders in accordance with the respective principal amounts of their
outstanding Loans and Participation Interests.

         (b) Advances.

                  (i) No Lender shall be responsible for the failure or delay by
         any other Lender in its obligation to make its ratable share of a
         borrowing hereunder; provided, however, that the failure of any Lender
         to fulfill its obligations hereunder shall not relieve any other Lender
         of its obligations hereunder.

                  (ii) Unless the Borrower or any Lender has notified the Agent
         prior to the date any payment is required to be made by it to the Agent
         hereunder, that the Borrower or such Lender, as the case may be, will
         not make such payment, the Agent may assume that the Borrower or such
         Lender, as the case may be, has timely made such payment and may (but
         shall not be so required to), in reliance thereon, make available a
         corresponding amount to the Person entitled thereto. If and to the
         extent that such payment was not in fact made to the Agent in
         immediately available funds, then:

                           (A) if the Borrower failed to make such payment, each
                  Lender shall forthwith on demand repay to the Agent the
                  portion of such assumed payment that was made available to
                  such Lender in immediately available funds, together with
                  interest thereon in respect of each day from and including the
                  date such amount was made available by the Agent to such
                  Lender to the date such amount is repaid to the Agent in
                  immediately available funds, at the Federal Funds Rate from
                  time to time in effect; and

                           (B) if any Lender failed to make such payment, such
                  Lender shall forthwith on demand pay to the Agent the amount
                  thereof in immediately available funds, together with interest
                  thereon for the period from the date such amount was made
                  available by the Agent to the Borrower to the date such amount
                  is recovered by the Agent (the "Compensation Period") at a
                  rate per annum equal to the Federal Funds Rate from time to
                  time in effect. If such Lender does not pay such amount
                  forthwith upon the Agent's demand therefor, the Agent may make
                  a demand therefor upon the Borrower, and the Borrower shall
                  pay (within 1 Business Day after demand) such amount to the
                  Agent, together with interest

                                       -48-

<PAGE>

                  thereon for the Compensation Period at a rate per annum equal
                  to the rate of interest applicable to the applicable Extension
                  of Credit.

         Nothing herein shall be deemed to relieve any Lender from its
         obligation to fulfill its Commitment or to prejudice any rights that
         the Agent or the Borrower may have against any Lender as a result of
         any default by such Lender hereunder. A notice of the Agent to any
         Lender with respect to any amount owing under this subsection (ii)
         shall be conclusive, absent manifest error.

         3.13     Sharing of Payments.

         The Lenders agree among themselves that, in the event that any Lender
shall obtain payment in respect of any Loan, LOC Obligations or any other
obligation owing to such Lender under this Credit Agreement through the exercise
of a right of setoff, banker's lien or counterclaim, or pursuant to a secured
claim under Section 506 of Title 11 of the United States Code or other security
or interest arising from, or in lieu of, such secured claim, received by such
Lender under any applicable bankruptcy, insolvency or other similar law or
otherwise, or by any other means, in excess of its pro rata share of such
payment as provided for in this Credit Agreement, such Lender shall promptly
purchase from the other Lenders a participation in such Loans, LOC Obligations
and other obligations in such amounts, and make such other adjustments from time
to time, as shall be equitable to the end that all Lenders share such payment in
accordance with their respective ratable shares as provided for in this Credit
Agreement. The Lenders further agree among themselves that if payment to a
Lender obtained by such Lender through the exercise of a right of setoff,
banker's lien, counterclaim or other event as aforesaid shall be rescinded or
must otherwise be restored, each Lender which shall have shared the benefit of
such payment shall, by repurchase of a participation theretofore sold, return
its share of that benefit (together with its share of any accrued interest
payable with respect thereto) to each Lender whose payment shall have been
rescinded or otherwise restored. The Borrower agrees that any Lender so
purchasing such a participation may, to the fullest extent permitted by law,
exercise all rights of payment, including setoff, banker's lien or counterclaim,
with respect to such participation as fully as if such Lender were a holder of
such Loan, LOC Obligations or other obligation in the amount of such
participation. Except as otherwise expressly provided in this Credit Agreement,
if any Lender or the Agent shall fail to remit to the Agent or any other Lender
an amount payable by such Lender or the Agent to the Agent or such other Lender
pursuant to this Credit Agreement on the date when such amount is due, such
payments shall be made together with interest thereon for each date from the
date such amount is due until the date such amount is paid to the Agent or such
other Lender at a rate per annum equal to the Federal Funds Rate. If under any
applicable bankruptcy, insolvency or other similar law, any Lender receives a
secured claim in lieu of a setoff to which this Section 3.13 applies, such
Lender shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders under this
Section 3.13 to share in the benefits of any recovery on such secured claim.

                                       -49-

<PAGE>

         3.14     Payments, Computations, Etc.

         (a) Except as otherwise specifically provided herein, all payments
hereunder shall be made to the Agent in Dollars in immediately available funds,
without condition or deduction for any counterclaim, defense, recoupment or
setoff, at the Agent's office specified in Section 11.1 not later than 2:00 P.M.
(Charlotte, North Carolina time) on the date when due. Payments received after
such time shall be deemed to have been received on the next succeeding Business
Day. The Agent may (but shall not be obligated to) debit the amount of any such
payment which is not made by such time to any ordinary deposit account of the
Borrower maintained with the Agent (with notice to the Borrower). The Borrower
shall, at the time it makes any payment under this Credit Agreement, specify to
the Agent the Loans, LOC Obligations, Fees, interest or other amounts payable by
the Borrower hereunder to which such payment is to be applied (and in the event
that it fails so to specify, or if such application would be inconsistent with
the terms hereof, the Agent shall distribute such payment to the Lenders in such
manner as the Agent may determine to be appropriate in respect of obligations
owing by the Borrower hereunder, subject to the terms of Section 3.12(a)). The
Agent will distribute such payments to such Lenders, if any such payment is
received prior to 2:00 P.M. (Charlotte, North Carolina time) on a Business Day
in like funds as received prior to the end of such Business Day and otherwise
the Agent will distribute such payment to such Lenders on the next succeeding
Business Day. Whenever any payment hereunder shall be stated to be due on a day
which is not a Business Day, the due date thereof shall be extended to the next
succeeding Business Day (subject to accrual of interest and Fees for the period
of such extension), except that in the case of Eurodollar Loans, if the
extension would cause the payment to be made in the next following calendar
month, then such payment shall instead be made on the next preceding Business
Day. Except as expressly provided otherwise herein, all computations of interest
and fees shall be made on the basis of actual number of days elapsed over a year
of 360 days, except with respect to computation of interest on Base Rate Loans
which (unless the Base Rate is determined by reference to the Federal Funds
Rate) shall be calculated based on a year of 365 or 366 days, as appropriate.
Interest shall accrue from and include the date of borrowing, but exclude the
date of payment.

         (b) Allocation of Payments After Acceleration. Notwithstanding any
other provisions of this Credit Agreement or any other Credit Document to the
contrary, after the acceleration of the Credit Party Obligations pursuant to
Section 9.2, all amounts collected or received by the Agent or any Lender on
account of the Credit Party Obligations or any other amounts outstanding under
any of the Credit Documents or in respect of the Collateral shall be paid over
or delivered as follows:

                  FIRST, to the payment of all reasonable out-of-pocket costs
         and expenses (including without limitation reasonable attorneys' fees)
         of the Agent in connection with enforcing the rights of the Lenders
         under the Credit Documents and any protective advances made by the
         Agent with respect to the Collateral under or pursuant to the terms of
         the Collateral Documents;

                  SECOND, to payment of any fees owed to the Agent;

                                       -50-

<PAGE>

                  THIRD, to the payment of all reasonable out-of-pocket costs
         and expenses (including without limitation, reasonable attorneys' fees)
         of each of the Lenders in connection with enforcing its rights under
         the Credit Documents or otherwise with respect to the Credit Party
         Obligations owing to such Lender;

                  FOURTH, to the payment of all accrued interest and fees on or
         in respect of the Credit Party Obligations;

                  FIFTH, to the payment of the outstanding principal amount of
         the Credit Party Obligations (including the payment or cash
         collateralization of the outstanding LOC Obligations);

                  SIXTH, to all other Credit Party Obligations and other
         obligations which shall have become due and payable under the Credit
         Documents or otherwise and not repaid pursuant to clauses "FIRST"
         through "FIFTH" above; and

                  SEVENTH, to the payment of the surplus, if any, to whoever may
         be lawfully entitled to receive such surplus.

In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; and (ii) each of the Lenders shall receive an amount equal
to its pro rata share (based on the proportion that the then outstanding
Obligations owed to such Lender bears to the aggregate then outstanding
Obligations) of amounts available to be applied pursuant to clauses "THIRD",
"FOURTH", "FIFTH" and "SIXTH" above; and (iii) to the extent that any amounts
available for distribution pursuant to clause "FIFTH" above are attributable to
the issued but undrawn amount of outstanding Letters of Credit, such amounts
shall be held by the Agent in a cash collateral account and applied (A) first,
to reimburse the Issuing Lender for any drawings under such Letters of Credit
and (B) then, following the expiration of all Letters of Credit, to all other
obligations of the types described in clauses "FIFTH" and "SIXTH" above in the
manner provided in this Section 3.14(b).

         3.15     Evidence of Debt.

         (a) Each Lender shall maintain an account or accounts evidencing each
Loan made by such Lender to the Borrower from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Credit Agreement. Each Lender will make reasonable efforts to
maintain the accuracy of its account or accounts and to promptly update its
account or accounts from time to time, as necessary.

         (b) The Agent shall maintain the Register pursuant to Section 11.3(c)
hereof, and a subaccount for each Lender, in which Register and subaccounts
(taken together) shall be recorded (i) the amount, type and Interest Period of
each such Loan hereunder, (ii) the amount of any principal or interest due and
payable or to become due and payable to each Lender hereunder and (iii) the
amount of any sum received by the Agent hereunder from or for the account of the

                                       -51-

<PAGE>

Borrower and each Lender's share thereof. The Agent will make reasonable efforts
to maintain the accuracy of the Register and subaccounts referred to in the
preceding sentence and to promptly update such Register and subaccounts from
time to time, as necessary.

         (c) The entries made in the accounts, Register and subaccounts
maintained pursuant to subsection (b) of this Section 3.15 (and, if consistent
with the entries of the Agent, subsection (a)) shall be prima facie evidence of
the existence and amounts of the obligations of the Borrower therein recorded;
provided, however, that the failure of any Lender or the Agent to maintain any
such account, such Register or such subaccount, as applicable, or any error
therein, shall not in any manner affect the obligation of the Borrower to repay
the Loans made by such Lender in accordance with the terms hereof.

         3.16     Replacement of Lenders.

         In the event any Lender delivers to the Borrower any notice in
accordance with Section 3.6, 3.8, 3.9 or 3.10 or the Agent notifies the Borrower
that a Lender has not made its ratable share of a Loan borrowing available in
accordance with Section 3.12(b), then the Borrower shall have the right, if no
Default or Event of Default then exists, to replace such Lender (the "Replaced
Lender") with one or more additional banks or financial institutions
(collectively, the "Replacement Lender"), provided, that (a) at the time of any
replacement pursuant to this Section 3.16, the Replacement Lender shall enter
into one or more Assignment and Assumption agreements pursuant to, and in
accordance with the terms of, Section 11.3(b) (and with all processing and
recordation fees payable pursuant to said Section 11.3(b) to be paid by the
Replacement Lender or, at its option, the Borrower) pursuant to which the
Replacement Lender shall acquire all of the rights and obligations of the
Replaced Lender hereunder and, in connection therewith, shall pay to the
Replaced Lender in respect thereof an amount equal to the sum of (i) the
principal of, and all accrued interest on, all outstanding Loans of the Replaced
Lender, and (ii) all accrued, but theretofore unpaid, fees owing to the Replaced
Lender pursuant to Section 3.5, and (b) all other obligations of the Borrower
owing to the Replaced Lender (including all other obligations, if any, owing
pursuant to Sections 3.6, 3.8, 3.9 and 3.10) shall be paid in full to such
Replaced Lender concurrently with such replacement.

                                    SECTION 2
                                    GUARANTY

         4.1      The Guarantee.

         Each of the Guarantors hereby jointly and severally guarantees to each
Lender, to each Affiliate of a Lender that enters into a Hedging Agreement and
to the Agent as hereinafter provided, the prompt payment of the Credit Party
Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration, a mandatory cash collateralization or otherwise)
strictly in accordance with the terms thereof. The Guarantors hereby further
agree that if any of the Credit

                                       -52-

<PAGE>

Party Obligations are not paid in full when due (whether at stated maturity, as
a mandatory prepayment, by acceleration, as mandatory cash collateralization or
otherwise), the Guarantors will, jointly and severally, promptly pay the same,
without any demand or notice whatsoever, and that in the case of any extension
of time of payment or renewal of any of the Credit Party Obligations, the same
will be promptly paid in full when due (whether at extended maturity, as a
mandatory prepayment, by acceleration or otherwise) in accordance with the terms
of such extension or renewal. Each Guarantor agrees that this is a continuing
guarantee of payment and not of collection.

         Notwithstanding any provision to the contrary contained herein or in
any other of the Credit Documents or Hedging Agreements, the obligations of each
Guarantor hereunder shall be limited to an aggregate amount equal to the largest
amount that would not render its obligations hereunder subject to avoidance
under Section 548 of the Bankruptcy Code or any comparable provisions of any
applicable state law.

         4.2      Obligations Unconditional.

         The obligations of the Guarantors under Section 4.1 hereof are joint
and several, absolute, irrevocable and unconditional, irrespective of the value,
genuineness, validity, regularity or enforceability of any of the Credit
Documents or Hedging Agreements, or any other agreement or instrument referred
to therein, or any substitution, release or exchange of any other guarantee of
or security for any of the Credit Party Obligations, and, to the fullest extent
permitted by applicable law, irrespective of any other circumstance whatsoever
which might otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor, it being the intent of this Section 4.2 that the
obligations of the Guarantors hereunder shall be absolute, irrevocable and
unconditional under any and all circumstances. Each Guarantor agrees that such
Guarantor shall have no right of subrogation, indemnity, reimbursement or
contribution against the Borrower or any other Guarantor of the Credit Party
Obligations for amounts paid under this Guaranty until such time as the Lenders
(and any Affiliates of Lenders entering into Hedging Agreements) have been paid
in full and all Commitments under the Credit Agreement have been terminated.
Without limiting the generality of the foregoing, it is agreed that, to the
fullest extent permitted by law, the occurrence of any one or more of the
following shall not alter or impair the liability of any Guarantor hereunder
which shall remain absolute, irrevocable and unconditional as described above:

                  (i) at any time or from time to time, without notice to any
         Guarantor, the time for any performance of or compliance with any of
         the Credit Party Obligations shall be extended, or such performance or
         compliance shall be waived;

                  (ii) any of the acts mentioned in any of the provisions of any
         of the Credit Documents, any Hedging Agreement or any other agreement
         or instrument referred to in the Credit Documents or Hedging Agreements
         shall be done or omitted;

                  (iii) the maturity of any of the Credit Party Obligations
         shall be accelerated, or any of the Credit Party Obligations shall be
         modified, supplemented or amended in any respect,

                                       -53-

<PAGE>

         or any right under any of the Credit Documents, any Hedging Agreement
         or any other agreement or instrument referred to in the Credit
         Documents or Hedging Agreements shall be waived or any other guarantee
         of any of the Credit Party Obligations or any security therefor shall
         be released or exchanged in whole or in part or otherwise dealt with;

                  (iv) any Lien granted to, or in favor of, the Agent or any
         Lender or Lenders as security for any of the Credit Party Obligations
         shall fail to attach or be perfected; or

                  (v) any of the Credit Party Obligations shall be determined to
         be void or voidable (including, without limitation, for the benefit of
         any creditor of any Guarantor) or shall be subordinated to the claims
         of any Person (including, without limitation, any creditor of any
         Guarantor).

With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Agent or any Lender exhaust any right,
power or remedy or proceed against any Person under any of the Credit Documents,
any Hedging Agreement or any other agreement or instrument referred to in the
Credit Documents or Hedging Agreements, or against any other Person under any
other guarantee of, or security for, any of the Credit Party Obligations.

         4.3      Reinstatement.

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

         4.4      Certain Additional Waivers.

         Each Guarantor further agrees that such Guarantor shall have no right
of recourse to security for the Credit Party Obligations, except through the
exercise of the rights of subrogation pursuant to Section 4.2.

         4.5      Remedies.

         The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Agent and the Lenders, on the
other hand, the Credit Party Obligations may be declared to be forthwith due and
payable as provided in Section 9.2 hereof (and shall be

                                       -54-

<PAGE>

deemed to have become automatically due and payable in the circumstances
provided in said Section 9.2) for purposes of Section 4.1 hereof notwithstanding
any stay, injunction or other prohibition preventing such declaration (or
preventing the Credit Party Obligations from becoming automatically due and
payable) as against any other Person and that, in the event of such declaration
(or the Credit Party Obligations being deemed to have become automatically due
and payable), the Credit Party Obligations (whether or not due and payable by
any other Person) shall forthwith become due and payable by the Guarantors for
purposes of said Section 4.1.

         4.6      Rights of Contribution.

         The Guarantors hereby agree as among themselves that, if any Guarantor
shall make an Excess Payment (as defined below), such Guarantor shall have a
right of contribution from each other Guarantor in an amount equal to such other
Guarantor's Contribution Share (as defined below) of such Excess Payment. The
payment obligations of any Guarantor under this Section 4.6 shall be subordinate
and subject in right of payment to the prior payment in full to the Agent and
the Lenders of the Guaranteed Obligations (as defined below), and none of the
Guarantors shall exercise any right or remedy under this Section 4.6 against any
other Guarantor until payment and satisfaction in full of all of such Guaranteed
Obligations. For purposes of this Section 4.6, (a) "Guaranteed Obligations"
shall mean any obligations arising under the other provisions of this Section 4;
(b) "Excess Payment" shall mean the amount paid by any Guarantor in excess of
its Pro Rata Share of any Guaranteed Obligations; (c) "Pro Rata Share" shall
mean, for any Guarantor in respect of any payment of Guaranteed Obligations, the
ratio (expressed as a percentage) as of the date of such payment of Guaranteed
Obligations of (i) the amount by which the aggregate present fair salable value
of all of its assets and properties exceeds the amount of all debts and
liabilities of such Guarantor (including contingent, subordinated, unmatured,
and unliquidated liabilities, but excluding the obligations of such Guarantor
hereunder) to (ii) the amount by which the aggregate present fair salable value
of all assets and other properties of the Borrower and all of the Guarantors
exceeds the amount of all of the debts and liabilities (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding the
obligations of the Borrower and the Guarantors hereunder) of the Borrower and
all of the Guarantors; provided, however, that, for purposes of calculating the
Pro Rata Shares of the Guarantors in respect of any payment of Guaranteed
Obligations, any Guarantor that became a Guarantor subsequent to the date of any
such payment shall be deemed to have been a Guarantor on the date of such
payment and the financial information for such Guarantor as of the date such
Guarantor became a Guarantor shall be utilized for such Guarantor in connection
with such payment; and (d) "Contribution Share" shall mean, for any Guarantor in
respect of any Excess Payment made by any other Guarantor, the ratio (expressed
as a percentage) as of the date of such Excess Payment of (i) the amount by
which the aggregate present fair salable value of all of its assets and
properties exceeds the amount of all debts and liabilities of such Guarantor
(including contingent, subordinated, unmatured, and unliquidated liabilities,
but excluding the obligations of such Guarantor hereunder) to (ii) the amount by
which the aggregate present fair salable value of all assets and other
properties of the Borrower and all of the Guarantors other than the maker of
such Excess Payment exceeds the amount of all of the debts and liabilities
(including contingent, subordinated, unmatured, and unliquidated liabilities,
but excluding the obligations of the Borrower and the Guarantors hereunder) of
the Borrower and all of

                                       -55-

<PAGE>

the Guarantors other than the maker of such Excess Payment; provided, however,
that, for purposes of calculating the Contribution Shares of the Guarantors in
respect of any Excess Payment, any Guarantor that became a Guarantor subsequent
to the date of any such Excess Payment shall be deemed to have been a Guarantor
on the date of such Excess Payment and the financial information for such
Guarantor as of the date such Guarantor became a Guarantor shall be utilized for
such Guarantor in connection with such Excess Payment. This Section 4.6 shall
not be deemed to affect any right of subrogation, indemnity, reimbursement or
contribution that any Guarantor may have under applicable law against the
Borrower in respect of any payment of Guaranteed Obligations. Notwithstanding
the foregoing, all rights of contribution against any Guarantor shall terminate
from and after such time, if ever, that such Guarantor shall be relieved of its
obligations pursuant to Section 8.4.

         4.7      Continuing Guarantee.

         The guarantee in this Section 4 is a continuing guarantee, and shall
apply to all Credit Party Obligations whenever arising.

                                    SECTION 3
                                   CONDITIONS

         5.1      Conditions to Closing.

         This Credit Agreement shall become effective, and the initial
Extensions of Credit shall be made, upon the satisfaction of the following
conditions precedent (in form and substance reasonably acceptable to the
Lenders):

                  (a) Execution of Credit Agreement and Credit Documents.
Receipt by the Agent of (i) multiple counterparts of this Credit Agreement, (ii)
the Notes and (iii) the Collateral Documents, in each case executed by a duly
authorized officer of each party thereto and in each case conforming to the
requirements of this Credit Agreement.

                  (b) Financial Information. Receipt by the Agent of (i) the
consolidated and consolidating financial statements of the Parent and its
Subsidiaries, including balance sheets and income and cash flow statements for
each of the fiscal years ending January 30, 2000, January 28, 2001 and February
3, 2002, in each case audited by nationally recognized independent public
accountants and containing an unqualified opinion of such firm that such
statements present fairly the consolidated and consolidating financial position
of the Parent and its Subsidiaries and are prepared in conformity with GAAP,
(ii) a satisfactory pro forma consolidated balance sheet and income statement of
the Parent and its Subsidiaries as of the last day of the fiscal month ended May
5, 2002 giving effect to the transactions contemplated hereby, and (iii) such
other information relating to the Parent or the Borrower as the Agent may
reasonably require in connection with the structuring and syndication of credit
facilities of the type described herein.

                                       -56-

<PAGE>

         (c) Material Adverse Effect. No material adverse change shall have
occurred since February 3, 2002 in the business, assets, liabilities (actual or
contingent), operations, condition (financial or otherwise), management or
prospects of the Parent and its Subsidiaries taken as a whole.

         (d) Repayment of Indebtedness. Receipt by the Agent of evidence that
simultaneously with the making of the initial Loans, all Existing Indebtedness
shall have been paid in full.

         (e) Absence of Legal Proceedings. The absence of any action, suit,
investigation or proceeding pending or, to the best knowledge of the Credit
Parties, threatened in any court or before any arbitrator or governmental
instrumentality which could reasonably be expected to have a Material Adverse
Effect on the Parent and its Subsidiaries taken as a whole.

         (f) Legal Opinions. Receipt of opinions of counsel for the Credit
Parties relating to the Credit Documents and the transactions contemplated
herein, in form and substance satisfactory to the Agent.

         (g) Corporate Documents. Receipt of the following (or their equivalent)
for each of the Credit Parties:

                  (i) Articles of Incorporation. Copies of the articles of
         incorporation or the equivalent charter documents certified to be true
         and complete as of a recent date by the appropriate governmental
         authority of the state of its incorporation or organization.

                  (ii) Resolutions. Copies of resolutions of the board of
         directors, board of managers or general partner, as applicable,
         approving and adopting the respective Credit Documents, the
         transactions contemplated therein and authorizing execution and
         delivery thereof, certified by a secretary or assistant secretary as of
         the Closing Date to be true and correct and in force and effect as of
         such date.

                  (iii) Bylaws. Copies of the bylaws or operating agreement or
         partnership agreement certified by a secretary or assistant secretary
         as of the Closing Date to be true and correct and in full force and
         effect as of such date.

                  (iv) Good Standing. Copies, where applicable, of certificates
         of good standing, existence or its equivalent certified as of a recent
         date by the appropriate governmental authorities of the state of
         incorporation or organization.

                  (v) Incumbency. An incumbency certificate for each of the
         Credit Parties certified by a secretary or assistant secretary to be
         true and correct as of the Closing Date.

                                       -57-

<PAGE>

         (h) KeyMan Life Insurance. Evidence of key man life insurance for Barry
Feld, Eric Jeltrup and Donald Norsworthy in an aggregate amount of at least
$5,000,000 naming the Borrower as beneficiary, which key man life insurance
shall be pledged to the Agent to secure the Obligations.

                  (i) Personal Property Collateral. The Agent shall have
received:

                  (i) searches of Uniform Commercial Code ("UCC") filings or its
         equivalent in the office of the Secretary of State or its equivalent in
         the jurisdiction of organization and the chief executive office of each
         Credit Party and each jurisdiction where any Collateral is located in
         the United States of America, copies of the financing statements on
         file in such jurisdictions and evidence that no Liens exist other than
         Permitted Liens;

                  (ii) appropriate UCC financing statements to be filed in the
         office of the Secretary of State or its equivalent in the jurisdiction
         of organization of each Credit Party;

                  (iii) searches of ownership of intellectual property in the
         appropriate U.S. governmental offices and such
         patent/trademark/copyright filings as requested by the Agent in order
         to perfect the Agent's security interest in such intellectual property;
         and

                  (iv) all certificates evidencing the Capital Stock pledged to
         the Agent pursuant to the Pledge Agreement, together with duly executed
         in blank undated transfer powers attached thereto.

                   (j) Real Property Collateral. The Agent shall have received:

                   (i) fully executed and notarized mortgages, deeds of trust or
         deeds to secure debt (each a "Mortgage" and collectively the
         "Mortgages") encumbering the fee interest of the Credit Parties in each
         real property asset owned by a Credit Party set forth on Schedule
         5.1(j) (each a "Mortgaged Property" and collectively the "Mortgaged
         Properties"), together with such UCC-1 financing statements as the
         Agent shall deem appropriate with respect to each such Mortgaged
         Property;

                   (ii) ALTA or other appropriate form mortgagee title insurance
         policies (the "Mortgage Policies") issued by title insurers reasonably
         satisfactory to the Agent (the "Title Insurance Company"), in an amount
         satisfactory to the Agent with respect to each Mortgaged Property and
         otherwise in form and substance satisfactory to the Agent; and

                                       -58-

<PAGE>

                  (iii) certification from a registered engineer or land
         surveyor in a form satisfactory to the Agent or other evidence
         acceptable to the Agent that none of the improvements on the real
         property encumbered by the Mortgages are located within any area
         designated by the Director of the Federal Emergency Management Agency
         as a "special flood hazard" area or if any improvements on such
         properties are located within a "special flood hazard" area, evidence
         of a flood insurance policy from a company and in an amount
         satisfactory to the Agent for the applicable portion of the premises,
         naming the Agent, for the benefit of the Lenders, as mortgagee.

         (k) Priority of Liens. The Agent shall have received satisfactory
evidence that (i) upon filing of appropriate UCC financing statements and
patent/trademark/copyright filings, the Agent, on behalf of the Lenders, will
hold a perfected, first priority Lien on all Collateral, to the extent the
perfection of such Collateral is accomplished by filing a UCC-1 financing
statement or an appropriate notice with the U.S. Copyright Office or U.S. Patent
and Trademark Office and (ii) none of the Collateral is subject to any other
Liens other than Permitted Liens.

         (l) Evidence of Insurance. Receipt by the Agent of copies of insurance
policies or certificates of insurance of the Credit Parties evidencing liability
and casualty insurance meeting the requirements set forth in the Credit
Documents, including, but not limited to, naming the Agent as sole loss payee on
behalf of the Lenders.

         (m) Senior Notes. (i) The Borrower shall have entered into the
Indenture, which such Indenture shall be in form and substance reasonably
satisfactory to the Lenders, (ii) the Agent shall have received a copy,
certified by an officer of the Borrower as true and complete as of the Closing
Date, of the Indenture and (iii) the Borrower shall have received gross proceeds
pursuant to the terms of the Indenture in an aggregate principal amount of $165
million.

         (n) Subordinated Notes. (i) The Borrower shall have entered into the
Subordinated Note Agreement, which such Subordinated Note Agreement (including,
without limitation, the subordination provisions) shall be in form and substance
reasonably satisfactory to the Lenders, (ii) the Agent shall have received a
copy, certified by an officer of the Borrower as true and complete as of the
Closing Date, of the Subordinated Note Agreement and (iii) the Borrower shall
have received gross proceeds pursuant to the terms of the Subordinated Note
Agreement in an aggregate principal amount of $10 million.

         (o) Parent Subordinated Notes. (i) The Parent shall have entered into
the Parent Subordinated Note Agreement, which such Parent Subordinated Note
Agreement (including, without limitation, the subordination provisions) shall be
in form and substance reasonably satisfactory to the Lenders, (ii) the Agent
shall have received a copy, certified by an officer of the Borrower as true and
complete as of the Closing Date, of the Parent Subordinated Note Agreement and
(iii) the Parent shall have received gross proceeds pursuant

                                       -59-

<PAGE>

to the terms of the Parent Subordinated Note Agreement in an aggregate principal
amount of $30 million (and such amount shall have been made available to the
Borrower).

                  (p) Consents. All governmental, shareholder and material third
party consents and approvals necessary or desirable in connection with the
transactions contemplated hereby shall have been obtained.

                  (q) Officer's Certificates. The Agent shall have received a
certificate or certificates executed by an officer of the Borrower as of the
Closing Date stating that (A) each member of the Consolidated Group is in
compliance with all existing material financial obligations, (B) all
governmental, shareholder and third party consents and approvals, if any, with
respect to the Credit Documents and the transactions contemplated thereby have
been obtained, (C) no action, suit, investigation or proceeding is pending or,
to the best knowledge of the Credit Parties, threatened in any court or before
any arbitrator or governmental instrumentality which could reasonably be
expected to have a Material Adverse Effect and (D) immediately after giving
effect to this Credit Agreement, the other Credit Documents and all the
transactions contemplated therein to occur on such date, (1) each of the Credit
Parties is Solvent, (2) no Default or Event of Default exists, (3) all
representations and warranties contained herein and in the other Credit
Documents are true and correct in all material respects, and (4) the Credit
Parties are in compliance with each of the financial covenants set forth in
Section 7.10.

                  (r) Fees. Receipt of all fees, if any, owing pursuant to the
Agent's Fee Letter and Section 3.5 or otherwise.

                  (s) Additional Matters. All other documents and legal matters
in connection with the transactions contemplated by this Credit Agreement shall
be reasonably satisfactory in form and substance to the Agent.

         5.2      Conditions to All Extensions of Credit.

         The obligation of each Lender to make any Extension of Credit hereunder
(including the initial Extension of Credit to be made hereunder) is subject to
the satisfaction of the following conditions precedent on the date of making
such Extension of Credit:

                  (a) Representations and Warranties. The representations and
warranties made by the Credit Parties herein or in any other Credit Documents or
which are contained in any certificate furnished at any time under or in
connection herewith shall be true and correct in all material respects on and as
of the date of such Extension of Credit as if made on and as of such date
(except for those which expressly relate to an earlier date).

                  (b) No Default or Event of Default. No Default or Event of
Default shall have occurred and be continuing on such date or after giving
effect to the Extension of Credit to be made on such date unless such Default or
Event of Default shall have been waived in accordance with this Credit
Agreement.

                                       -60-

<PAGE>

                  (c) Additional Conditions to Revolving Loans. If a Revolving
Loan is made pursuant to Section 2.1, all conditions set forth therein shall
have been satisfied.

                  (d) Additional Conditions to Letters of Credit. If a Letter of
Credit is issued pursuant to Section 2.2, all conditions set forth therein shall
have been satisfied.

                  (e) Additional Conditions to Swingline Loans. If a Swingline
Loan is made pursuant to Section 2.3, all conditions set forth therein shall
have been satisfied.

         Each request for Extension of Credit (including extensions and
conversions) and each acceptance by the Borrower of an Extension of Credit
(including extensions and conversions) shall be deemed to constitute a
representation and warranty by the Borrower as of the date of such Extension of
Credit that the applicable conditions in paragraphs (a), (b), (c), (d) and (e)
of this subsection have been satisfied.

                                    SECTION 4
                         REPRESENTATIONS AND WARRANTIES

         To induce the Lenders to enter into this Credit Agreement and to make
Extensions of Credit herein provided for, each Credit Party hereby represents
and warrants to the Agent and to each Lender that:

         6.1      Financial Condition.

         The financial statements delivered to the Lenders pursuant to Section
5.1(b) and Section 7.1(a) and (b), have been prepared in accordance with GAAP,
are complete and correct in all material respects and present fairly the
financial condition and results from operations of the entities and for the
periods specified, subject in the case of interim company-prepared statements to
normal year-end adjustments and the absence of notes required by GAAP.

         6.2      No Changes or Restricted Payments.

         Since February 3, 2002, (a) there has been no circumstance, development
or event relating to or affecting the members of the Consolidated Group which
has had or would be reasonably expected to have a Material Adverse Effect, and
(b) except as set forth on Schedule 6.2 or as permitted herein, no Restricted
Payments have been made or declared or are contemplated by any members of the
Consolidated Group.

         6.3      Organization; Existence; Compliance with Law.

         Each of the members of the Consolidated Group (a) is a corporation,
limited liability company or limited partnership duly organized, validly
existing in good standing under the laws of

                                       -61-

<PAGE>

the jurisdiction of its incorporation or organization, (b) has the corporate or
other necessary power and authority, and the legal right to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
entity and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification, other than in such jurisdictions where the failure
to be so qualified and in good standing would not, in the aggregate, have a
Material Adverse Effect, and (d) is in compliance with all Requirements of Law,
except to the extent that the failure to comply therewith would not, in the
aggregate, be reasonably expected to have a Material Adverse Effect.

         6.4      Power; Authorization; Enforceable Obligations.

         Each of the Credit Parties has the corporate or other necessary power
and authority, and the legal right, to make, deliver and perform the Credit
Documents to which it is a party and has taken all necessary corporate action to
authorize the execution, delivery and performance by it of the Credit Documents
to which it is a party. No consent or authorization of, filing with, notice to
or other act by or in respect of, any Governmental Authority or any other Person
is required in connection with the borrowings hereunder or with the execution,
delivery or performance of any Credit Documents by the Credit Parties (other
than those which have been obtained, such filings as are required by the
Securities and Exchange Commission and to fulfill other reporting requirements
with Governmental Authorities) or with the validity or enforceability of any
Credit Document against the Credit Parties (except such filings as are necessary
in connection with the perfection of the Liens created by such Credit
Documents). Each Credit Document to which the Credit Parties are a party
constitutes a legal, valid and binding obligation of such Credit Parties
enforceable against such Credit Parties in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).

         6.5      No Legal Bar.

         The execution, delivery and performance of the Credit Documents, the
borrowings hereunder and the use of the Extensions of Credit will not violate
any Requirement of Law, which violation has or would reasonably be expected to
have a Material Adverse Effect, or any Contractual Obligation of any member of
the Consolidated Group (except those as to which waivers or consents have been
obtained or which would not have a Material Adverse Effect), and will not result
in, or require, the creation or imposition of any Lien on any of their
respective properties or revenues pursuant to any Requirement of Law or
Contractual Obligation other than the Liens arising under or contemplated in
connection with the Credit Documents. No member of the Consolidated Group is in
default under or with respect to any of its Contractual Obligations in any
respect which has or would reasonably be expected to have a Material Adverse
Effect.

                                       -62-

<PAGE>

         6.6      No Material Litigation.

         No claim, litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the best knowledge of the
Credit Parties, threatened by or against, any members of the Consolidated Group
or against any of their respective properties or revenues which (a) relate to
the Credit Documents or any of the transactions contemplated hereby or thereby
or (b) could reasonably be expected to have a Material Adverse Effect.

         6.7      No Default.

         No member of the Consolidated Group is in default in any respect under
any contract, lease, loan agreement, indenture, mortgage, security agreement or
other agreement or obligation to which it is a party or by which any of its
properties is bound which default could have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.

         6.8      Ownership of Property; Liens.

         Each of the members of the Consolidated Group has good record and
marketable title in fee simple to, or a valid leasehold interest in, all its
material real property, and good title to, or a valid leasehold interest in, all
its other material property, and none of such property is subject to any Lien,
except for Permitted Liens.

         6.9      Intellectual Property.

         Each of the members of the Consolidated Group owns, or has the legal
right to use, all United States trademarks, tradenames, copyrights, technology,
know-how and processes, if any, necessary for each of them to conduct its
business as currently conducted (the "Intellectual Property") except for those
the failure to own or have such legal right to use would not be reasonably
expected to have a Material Adverse Effect. Set forth on Schedule 6.9 is a list
of all patents (issued or pending), registrations or applications for
registrations of trademarks and material unregistered trademarks, tradenames and
copyrights owned by each Credit Party or that any Credit Party has the right to
use as of the Closing Date. No claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual Property or
the validity or effectiveness of any such Intellectual Property, nor does any
Credit Party know of any such claim, and the use of such Intellectual Property
by the members of the Consolidated Group does not, to their knowledge, infringe
on the rights of any Person, except for such claims and infringements that in
the aggregate, would not be reasonably expected to have a Material Adverse
Effect.

         6.10     Disclosure.

         Neither this Credit Agreement nor any financial statements delivered to
the Lenders nor any other document, certificate or statement furnished to the
Lenders by or on behalf of any member of the Consolidated Group in connection
with the transactions contemplated hereby contains any

                                       -63-

<PAGE>

untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained therein or herein not materially
misleading in light of the circumstances under which such statements were made.

         6.11     No Burdensome Restrictions.

         No Requirement of Law applicable to, or Contractual Obligation of, the
members of the Consolidated Group has or would be reasonably expected to have a
Material Adverse Effect.

         6.12     Taxes.

         Each of the members of the Consolidated Group has filed or caused to be
filed all United States federal income tax returns and all other material tax
returns which, to the best knowledge of the Credit Parties, are required to be
filed and has paid (a) all taxes shown to be due and payable on said returns or
(b) all taxes shown to be due and payable on any assessments of which it has
received notice made against it or any of its property and all other taxes, fees
or other charges imposed on it or any of its property by any Governmental
Authority (other than any (i) taxes, fees or other charges with respect to which
the failure to pay, in the aggregate, would not have a Material Adverse Effect
or (ii) taxes, fees or other charges the amount or validity of which are
currently being contested and with respect to which reserves in conformity with
GAAP have been provided on the books of such Person), and no tax Lien has been
filed, and, to the best knowledge of the Credit Parties, no claim is being
asserted, with respect to any such tax, fee or other charge.

         6.13     ERISA

         Except as would not reasonably be expected to have a Material Adverse
Effect:

         (a) During the five-year period prior to the date on which this
representation is made or deemed made: (i) no ERISA Event has occurred, and, to
the best knowledge of the Credit Parties, no event or condition has occurred or
exists as a result of which any ERISA Event could reasonably be expected to
occur, with respect to any Plan; (ii) no "accumulated funding deficiency," as
such term is defined in Section 302 of ERISA and Section 412 of the Code,
whether or not waived, has occurred with respect to any Plan; (iii) each Plan
has been maintained, operated, and funded in compliance with its own terms and
in material compliance with the provisions of ERISA, the Code, and any other
applicable federal or state laws; and (iv) no lien in favor of the PBGC or a
Plan has arisen or is reasonably likely to arise on account of any Plan.

         (b) The actuarial present value of all "benefit liabilities" (as
defined in Section 4001(a)(16) of ERISA), whether or not vested, under each
Single Employer Plan, as of the last annual valuation date prior to the date on
which this representation is made or deemed made (determined, in each case, in
accordance with Financial Accounting Standards Board Statement 87, utilizing the
actuarial assumptions used in such Plan's most recent actuarial valuation
report), did not exceed as of such valuation date the fair market value of the
assets of such Plan.

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<PAGE>

         (c) No member of the Consolidated Group nor any ERISA Affiliate has
incurred, or, to the best knowledge of the Credit Parties, could be reasonably
expected to incur, any withdrawal liability under ERISA to any Multiemployer
Plan or Multiple Employer Plan. No member of the Consolidated Group nor any
ERISA Affiliate would become subject to any withdrawal liability under ERISA if
any member of the Consolidated Group or any ERISA Affiliate were to withdraw
completely from all Multiemployer Plans and Multiple Employer Plans as of the
valuation date most closely preceding the date on which this representation is
made or deemed made. No member of the Consolidated Group nor any ERISA Affiliate
has received any notification that any Multiemployer Plan is in reorganization
(within the meaning of Section 4241 of ERISA), is insolvent (within the meaning
of Section 4245 of ERISA), or has been terminated (within the meaning of Title
IV of ERISA), and no Multiemployer Plan is, to the best knowledge of the Credit
Parties, reasonably expected to be in reorganization, insolvent, or terminated.

         (d) No prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) or breach of fiduciary responsibility has
occurred with respect to a Plan which has subjected or may subject any member of
the Consolidated Group or any ERISA Affiliate to any liability under Sections
406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any
agreement or other instrument pursuant to which any member of the Consolidated
Group or any ERISA Affiliate has agreed or is required to indemnify any person
against any such liability.

         (e) No member of the Consolidated Group nor any ERISA Affiliates has
any material liability with respect to "expected post-retirement benefit
obligations" within the meaning of the Financial Accounting Standards Board
Statement 106. Each Plan which is a welfare plan (as defined in Section 3(1) of
ERISA) to which Sections 601-609 of ERISA and Section 4980B of the Code apply
has been administered in compliance in all material respects of such sections.

         6.14     Governmental Regulations, Etc.

         (a) No part of the proceeds of the Loans will be used, directly or
indirectly, for the purpose of purchasing or carrying any Margin Stock, or for
the purpose of purchasing or carrying or trading in any securities. If requested
by any Lender or the Agent, the Borrower will furnish to the Agent and each
Lender additional statements to the foregoing effect in conformity with the
requirements of FR Form U-1 referred to in said Regulation U. No Indebtedness
being reduced or retired out of the proceeds of the Loans was or will be
incurred for the purpose of purchasing or carrying any Margin Stock within the
meaning of Regulation U or any "margin security" within the meaning of
Regulation T. Margin Stock does not constitute more than 25% of the value of the
consolidated assets of the Parent and its Subsidiaries. None of the transactions
contemplated by this Credit Agreement (including, without limitation, the direct
or indirect use of the proceeds of the Loans) will violate or result in a
violation of the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, or regulations issued pursuant thereto, or Regulation
T, U or X.

         (b) None of the members of the Consolidated Group is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act or the Investment Company

                                       -65-

<PAGE>

Act of 1940, each as amended. In addition, none of the members of the
Consolidated Group is (i) an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended, and is not
controlled by such a company, or (ii) a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company" or of
a "subsidiary" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.

         (c) Each of the members of the Consolidated Group has obtained all
material licenses, permits, franchises, other governmental authorizations and
third party approvals necessary to the ownership of its respective Property and
to the conduct of its business.

         (d) None of the members of the Consolidated Group is in violation of
any applicable statute, regulation or ordinance of the United States of America,
or of any state, city, town, municipality, county or any other jurisdiction, or
of any agency thereof (including without limitation, environmental laws and
regulations), which violation could reasonably be expected to have a Material
Adverse Effect.

         (e) Each of the members of the Consolidated Group is current with all
reports and documents, if any, required to be filed with any state or federal
securities commission or similar agency and is in full compliance with all
applicable rules and regulations of such commissions except to the extent that a
failure to do so could not reasonably be expected to have a Material Adverse
Effect.

         6.15     Subsidiaries.

         Set forth on Schedule 6.15 are all the Subsidiaries of the Parent, the
jurisdiction of their incorporation, the number of shares of each class of
Capital Stock outstanding, the number and percentage of outstanding shares of
each class owned (directly or indirectly) by a member of the Consolidated Group;
and the number and effect, if exercised of all outstanding options, warrants,
rights of conversion or purchase and all other similar rights with respect
thereto. Schedule 6.15 may be updated from time to time by the Borrower by
giving written notice thereof to the Agent.

         6.16     Purpose of Extensions of Credit.

         The Loans will be used (a) to refinance Existing Indebtedness of the
Parent, (b) to provide working capital, (c) to pay fees and expenses related to
the Credit Agreement, the Senior Notes, the Subordinated Notes and the Parent
Subordinated Notes, (d) for Consolidated Capital Expenditures and (e) for lawful
corporate purposes. The Letters of Credit shall be used only for or in
connection with worker's compensation, business licenses and the importing of
equipment and obligations not otherwise aforementioned relating to transactions
entered into by the applicable account party in the ordinary course of business
or for lawful business purposes.

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<PAGE>

         6.17     Environmental Matters.

         Except as would not reasonably be expected to have a Material Adverse
Effect:

         (a) Each of the facilities and properties owned, leased or operated by
the members of the Consolidated Group (the "Properties") and all operations at
the Properties are in compliance with all applicable Environmental Laws, and
there is no violation of any Environmental Law with respect to the Properties or
the businesses operated by the members of the Consolidated Group (the
"Businesses"), and there are no conditions relating to the Businesses or
Properties that could reasonably be expected to result in any liability under
any applicable Environmental Laws.

         (b) None of the Properties contains, or has previously contained, any
Materials of Environmental Concern at, on or under the Properties in amounts or
concentrations that constitute or constituted a violation of, or could give rise
to liability under, Environmental Laws.

         (c) None of the members of the Consolidated Group has received any
written or verbal notice of, or inquiry from any Governmental Authority
regarding, any violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Properties or the Businesses, nor
does any member of the Consolidated Group have knowledge or reason to believe
that any such notice will be received or is being threatened.

         (d) Materials of Environmental Concern have not been transported or
disposed of from the Properties, or generated, treated, stored or disposed of
at, on or under any of the Properties or any other location, in each case by or
on behalf of any members of the Consolidated Group in violation of, or in a
manner that would be reasonably likely to give rise to liability under, any
applicable Environmental Law.

         (e) No judicial proceeding or governmental or administrative action is
pending or, to the best knowledge of any Credit Party, threatened, under any
Environmental Law to which any member of the Consolidated Group is or will be
named as a party, nor are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with respect to
any member of the Consolidated Group, the Properties or the Businesses.

         (f) There has been no release or, threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related to
the operations (including, without limitation, disposal) of any member of the
Consolidated Group in connection with the Properties or otherwise in connection
with the Businesses, in violation of or in amounts or in a manner that could
give rise to liability under Environmental Laws.

                                       -67-

<PAGE>

         6.18     Solvency.

         Each member of the Consolidated Group is and, after consummation of the
transactions contemplated by this Credit Agreement, will be Solvent.

         6.19     Labor Matters.

         There are no collective bargaining agreements or Multiemployer Plans
covering the employees of the Parent or any of its Subsidiaries as of the
Closing Date and none of the Consolidated Group has suffered any strikes,
walkouts, work stoppages or other material labor difficulty within the last five
years.

         6.20     Location of Collateral.

         Set forth on Schedule 6.20(a) is a list of all states where any
tangible personal property of a Credit Party is located as of the Closing Date.
Set forth on Schedule 6.20(b) is the chief executive office and principal place
of business of each Credit Party as of the Closing Date.

                                    SECTION 7
                              AFFIRMATIVE COVENANTS

         Each of the Credit Parties covenants and agrees that on the Closing
Date, and so long as this Credit Agreement is in effect and until the
Commitments have been terminated, no Obligations remain outstanding and all
amounts owing hereunder or in connection herewith have been paid in full, each
of the members of the Consolidated Group party hereto shall, and shall cause
each of its Subsidiaries to:

         7.1      Financial Statements.

         Furnish, or cause to be furnished, to the Agent and to each of the
Lenders:

         (a) Audited Financial Statements. As soon as available, but in any
event within 90 days after the end of each fiscal year, an audited consolidated
balance sheet of the Parent and its Subsidiaries as of the end of the fiscal
year and the related consolidated statements of income, retained earnings,
shareholders' equity and cash flows for the year, audited by Deloitte & Touche
or other firm of independent certified public accountants of nationally
recognized standing reasonably acceptable to the Agent, setting forth in each
case in comparative form the figures for the previous year, reported without a
"going concern" or like qualification or exception, or qualification indicating
that the scope of the audit was inadequate to permit such independent certified
public accountants to certify such financial statements without such
qualification or any other material qualification or exception.

         (b) Company-Prepared Financial Statements. As soon as available, but in
any event

                                       -68-

<PAGE>

                           (i) within 30 days after the end of each month, a
                  company-prepared unaudited consolidated balance sheet of the
                  Parent and its Subsidiaries as of the end of such month and
                  related company-prepared consolidated statements of income for
                  such monthly period and for the fiscal year to date;

                           (ii) within 45 days after the end of each of the
                  first three fiscal quarters, the company-prepared unaudited
                  consolidated balance sheet of the Parent and its Subsidiaries
                  as of the end of such quarter and related company-prepared
                  consolidated statements of income, retained earnings,
                  shareholders' equity and cash flows for such quarterly period
                  and for the fiscal year to date or, in lieu thereof, the
                  Parent's report on Form 10Q filed with the Securities and
                  Exchange Commission for such period;

                           (iii) within 60 days following the end of each fiscal
                  year, an annual business plan and budget for the members of
                  the Consolidated Group, containing, among other things, pro
                  forma financial statements for the then current fiscal year,

         in each case setting forth in comparative form the consolidated figures
         for the corresponding period or periods of the preceding fiscal year or
         the portion of the fiscal year ending with such period, as applicable,
         in each case subject to normal recurring year-end audit adjustments and
         the absence of notes required by GAAP.

All such financial statements shall be complete and correct in all material
respects (subject, in the case of interim statements, to normal recurring
year-end audit adjustments) and shall be prepared in reasonable detail and, in
the case of the annual and quarterly financial statements provided in accordance
with subsections (a) and (b) above, in accordance with GAAP and further
accompanied by a description of, and an estimation of the effect on the
financial statements on account of, any change in the application of accounting
principles as provided in Section 1.3.

         7.2      Certificates; Other Information.

         Furnish, or cause to be furnished, to the Agent and to each of the
Lenders:

         (a) Accountant's Certificate and Reports. Concurrently with the
delivery of the financial statements referred to in subsection 7.1(a) above, a
certificate of the independent certified public accountants reporting on such
financial statements stating that in making the examination necessary therefor
no knowledge was obtained of any Default or Event of Default, except as
specified in such certificate.

         (b) Officer's Certificate. Concurrently with the delivery of the
financial statements referred to in Sections 7.1(a) and 7.1(b)(ii) above, a
certificate of a Responsible Officer (i) demonstrating compliance with the
financial covenants in Section 7.10 by calculation thereof as of the end of each
such fiscal period and (ii) stating that, to the best of such Responsible
Officer's knowledge and belief, (A) the financial statements fairly present in
all material respects the

                                       -69-

<PAGE>

financial condition of the parties covered by such financial statements, (B)
during such period the members of the Consolidated Group have observed or
performed in all material respects the covenants and other agreements hereunder
and under the other Credit Documents relating to them, and satisfied in all
material respects the conditions, contained in this Credit Agreement to be
observed, performed or satisfied by them and (C) in each case such Responsible
Officer has obtained no knowledge of any Default or Event of Default except as
specified in such certificate. A form of Officer's Certificate is attached as
Exhibit 7.2(b).

         (c) Accountants' Reports. Promptly upon receipt, a copy of any final
(as distinguished from a preliminary or discussion draft) "management letter" or
other similar report submitted by independent accountants or financial
consultants to any member of the Consolidated Group in connection with any
annual, interim or special audit.

         (d) Public Information. Within ten days after the same are sent, copies
of all reports (other than those otherwise provided pursuant to subsection 7.1)
and other financial information which any member of the Consolidated Group sends
to its public stockholders, and within ten days after the same are filed, copies
of all financial statements and non-confidential reports (other than those
otherwise provided pursuant to Section 7.1) which any member of the Consolidated
Group may make to, or file with, the Securities and Exchange Commission or any
successor or analogous Governmental Authority.

         (e) Studio Closings. Concurrently with the delivery of the financial
statements referred to in Sections 7.1(a) and 7.1(b)(ii), a report containing
information as to the number of photography studios closed by the Parent or any
of its Subsidiaries during the applicable fiscal quarter period and the number
of studios remaining open at the end of such fiscal quarter.

         (f) Additional Intellectual Property. Concurrently with the delivery of
the financial statements referred to in Sections 7.1(a) and 7.1(b)(ii), a report
setting forth (i) a list of registration numbers for all patents, trademarks,
service marks, tradenames and copyrights awarded to the Parent or any
Consolidated Party since the last day of the immediately preceding fiscal
quarter and (ii) a list of all patent applications, trademark applications,
service mark applications, trade name applications and copyright applications
submitted by any Credit Party since the last day of the immediately preceding
fiscal quarter and the status of each such application, all in such form as
shall be reasonably satisfactory to the Agent.

         (g) Other Information. Promptly, such additional financial and other
information as the Agent, at the request of any Lender, may from time to time
reasonably request.

                                       -70-

<PAGE>

         7.3      Notices.

         Give notice to the Agent (which shall promptly transmit such notice to
each Lender) of:

         (a) Defaults. Immediately (and in any event within five (5) Business
Days) after a Responsible Officer of any Credit Party knows of, the occurrence
of any Default or Event of Default.

         (b) Contractual Obligations. Promptly, the occurrence of any default or
event of default under any Contractual Obligation of any member of the
Consolidated Group which would reasonably be expected to have a Material Adverse
Effect.

         (c) Legal Proceedings. Promptly, the initiation of any litigation, or
any investigation or proceeding (including without limitation, any environmental
proceeding) known to any Responsible Officer of a member of the Consolidated
Group, or any material development in respect thereof, against any member of the
Consolidated Group which would in the opinion of management of the Borrower
reasonably be expected to have a Material Adverse Effect (and in any event,
where compensation, reimbursement, damages or relief is sought in excess of
$2,000,000 in any instance and such liability is not covered by insurance).

         (d) ERISA. Promptly, after any Responsible Officer of the Borrower
knows of (i) any event or condition, including, but not limited to, any
Reportable Event, that constitutes, or might reasonably lead to, an ERISA Event;
(ii) with respect to any Multiemployer Plan, the receipt of notice as prescribed
in ERISA or otherwise of any withdrawal liability assessed against any of their
ERISA Affiliates, or of a determination that any Multiemployer Plan is in
reorganization or insolvent (both within the meaning of Title IV of ERISA);
(iii) the failure to make full payment on or before the due date (including
extensions) thereof of all amounts which the members of the Consolidated Group
or any ERISA Affiliate are required to contribute to each Plan pursuant to its
terms and as required to meet the minimum funding standard set forth in ERISA
and the Code with respect; or (iv) any change in the funding status of any Plan
that reasonably could be expected to have a Material Adverse Effect; together
with a description of any such event or condition or a copy of any such notice
and a statement by the chief financial officer of the Borrower briefly setting
forth the details regarding such event, condition, or notice, and the action, if
any, which has been or is being taken or is proposed to be taken by the Credit
Parties with respect thereto. Promptly upon request, the members of the
Consolidated Group shall furnish the Agent and the Lenders with such additional
information concerning any Plan as may be reasonably requested, including, but
not limited to, copies of each annual report/return (Form 5500 series), as well
as all schedules and attachments thereto required to be filed with the
Department of Labor and/or the Internal Revenue Service pursuant to ERISA and
the Code, respectively, for each "plan year" (within the meaning of Section
3(39) of ERISA).

         (e) Other. Promptly, any other development or event which a Responsible
Officer determines could reasonably be expected to have a Material Adverse
Effect.

                                       -71-

<PAGE>

Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the relevant Credit Parties propose to take with respect
thereto.

         7.4      Compliance with Law.

         Comply with all laws, rules, regulations and orders, and all applicable
restrictions imposed by all Governmental Authorities, applicable to it and its
Property if noncompliance with any such law, rule, regulation, order or
restriction could have a Material Adverse Effect.

         7.5      Payment of Obligations.

         Pay, discharge or otherwise satisfy at or before maturity or before
they become delinquent, as the case may be, in accordance with prudent business
practice (subject, where applicable, to specified grace periods) all material
obligations of each member of the Consolidated Group of whatever nature
(including without limitation all taxes, assessments and governmental charges or
levies imposed on it, or upon its income or profits and all lawful claims which,
if unpaid, might give rise to a Lien upon any of its properties) and any
additional costs that are imposed as a result of any failure to so pay,
discharge or otherwise satisfy such obligations; provided, however, that no
member of the Consolidated Group shall be required to pay any such tax or other
obligation which is being contested in good faith by appropriate proceedings and
as to which adequate reserves therefor have been established in accordance with
GAAP, unless the failure to make any such payment (i) could give rise to an
immediate right to foreclose on a Lien securing such amounts or (ii) could have
a Material Adverse Effect.

         7.6      Conduct of Business and Maintenance of Existence.

         (a) Continue to engage in business of the same general type as now
conducted by it on the date hereof (and reasonable extensions thereof), (b)
preserve, renew and keep in full force and effect its existence (except as a
result of any dissolution permitted by Section 8.4(a) or any merger or
consolidation permitted by Section 8.4(b)) and take all reasonable action to
maintain all material rights, privileges, licenses and franchises necessary or
desirable in the normal conduct of its business, and (c) comply with all
Contractual Obligations and Requirements of Law applicable to it except to the
extent that failure to comply therewith would not, in the aggregate, have a
Material Adverse Effect.

         7.7      Maintenance of Property; Insurance.

         Keep all material property useful and necessary in its business in
reasonably good working order and condition (ordinary wear and tear excepted);
maintain with financially sound and reputable insurance companies casualty,
liability and such other insurance (which may include plans of self-insurance)
with such coverage and deductibles, and in such amounts as may be consistent
with prudent business practice and in any event consistent with normal industry
practice; maintain at all times an aggregate of at least $5,000,000 in key man
like insurance

                                       -72-

<PAGE>

insuring Barry Feld, Eric Jeltrup and Donald Norsworthy; and furnish to the
Agent, upon written request, full information as to the insurance carried. The
Agent shall be named as loss payee or mortgagee, as its interest may appear,
and/or as additional insured with respect to any such insurance providing
coverage in respect of any Collateral, and each provider of any such insurance
shall agree, by endorsement upon the policy or policies issued by it or by
independent instruments furnished to the Agent, that it will give the Agent
thirty (30) days prior written notice before any such policy or policies shall
be altered or canceled, and that no act or default of the Parent or any of its
Subsidiaries or any other Person shall affect the rights of the Agent or the
Lenders under such policy or policies. The present insurance coverage of the
Parent and its Subsidiaries is outlined as to carrier, policy number, expiration
date, type and amount on Schedule 7.7, as Schedule 7.7 may be amended from time
to time by written notice to the Agent.

         7.8      Inspection of Property; Books and Records; Discussions.

         (a) Keep proper books of records and account in which full, true and
correct entries in conformity with GAAP and all Requirements of Law shall be
made of all dealings and transactions in relation to its businesses and
activities; and permit, during regular business hours and upon reasonable notice
by the Agent or any Lender, the Agent or such Lender to visit and inspect any of
its properties and examine and make abstracts (including photocopies) from any
of its books and records (other than materials protected by the attorney-client
privilege and materials which the Credit Parties may not disclose without
violation of a confidentiality obligation binding upon them) at any reasonable
time, and to discuss the business, operations, properties and financial and
other condition of the members of the Consolidated Group with officers and
employees of the members of the Consolidated Group and with their independent
certified public accountants; provided, however, that unless an Event of Default
shall be in existence, the Agent shall not exercise its rights under this
sentence more often than two times per calendar year. The cost of the inspection
by the Agent referred to in the preceding sentence shall be for the account of
the Lenders unless an Event of Default has occurred and is continuing, in which
case the cost of such inspection shall be for the account of the Credit Parties,
and the cost of the inspection by any Lender referred to in the preceding
sentence shall be for the account of such Lender.

         (b) In addition to the foregoing subsection (a), permit the Agent to
have agents or representatives to conduct a "field audit" of its inventory and
accounts, including inspection of the inventory and account records and a right
to examine and make abstracts (including photocopies) from its books and records
relating to its inventory and accounts once in each fiscal year, and more
frequently after the occurrence and during the continuance of an Event of
Default. In the absence of an Event of Default, the Borrower shall only be
required to reimburse the Agent in an amount not to exceed $10,000 with respect
to each "field audit".

         7.9      Environmental Laws.

         (a) Comply in all material respects with, and take reasonable actions
to ensure compliance in all material respects by all tenants and subtenants, if
any, with, all applicable

                                       -73-

<PAGE>

Environmental Laws and obtain and comply in all material respects with and
maintain, and take reasonable actions to ensure that all tenants and subtenants
obtain and comply in all material respects with and maintain, any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws except to the extent that failure to do so would
not reasonably be expected to have a Material Adverse Effect;

         (b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws except to the extent that the same are being contested in good faith by
appropriate proceedings and the failure to do so or the pendency of such
proceedings would not reasonably be expected to have a Material Adverse Effect;
and

         (c) Defend, indemnify and hold harmless the Agent and the Lenders, and
their respective employees, agents, officers and directors, from and against any
and all claims, demands, penalties, fines, liabilities, settlements, damages,
costs and expenses of whatever kind or nature known or unknown, contingent or
otherwise, arising out of, or in any way relating to the violation of,
noncompliance with or liability under, any Environmental Law applicable to the
operations of the members of the Consolidated Group or the Properties, or any
orders, requirements or demands of Governmental Authorities related thereto,
including, without limitation, reasonable attorney's and consultant's fees,
investigation and laboratory fees, response costs, court costs and litigation
expenses, except to the extent that any of the foregoing arise out of the gross
negligence or willful misconduct of the party seeking indemnification therefor.
The agreements in this paragraph shall survive repayment of the Loans and all
other amounts payable hereunder, and termination of the Commitments.

         7.10     Financial Covenants.

         (a) Consolidated Total Leverage Ratio. There shall be maintained, as of
the end of each fiscal quarter set forth below, a Consolidated Total Leverage
Ratio of no greater than:

<TABLE>
<CAPTION>

                                       January 31         April 30           July 31              October 31
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                  <S>                 <C>             <C>               <C>                 <C>
                        2002               N/A              N/A            5.75 to 1.00          5.75 to 1.00
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                        2003          5.50 to 1.00      5.50 to 1.00       5.50 to 1.00          5.50 to 1.00
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                        2004          5.25 to 1.00      5.25 to 1.00       5.25 to 1.00          5.25 to 1.00
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                        2005          5.00 to 1.00      5.00 to 1.00       5.00 to 1.00          5.00 to 1.00
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                        2006          4.75 to 1.00      4.75 to 1.00       4.75 to 1.00          4.75 to 1.00
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                     thereafter       4.50 to 1.00      4.50 to 1.00       4.50 to 1.00          4.50 to 1.00
                  ------------------ ---------------- ----------------- ------------------- ------------------------
</TABLE>

         (b) Consolidated Senior Secured Leverage Ratio. There shall be
maintained, as of the end of each fiscal quarter, a Consolidated Senior Secured
Leverage Ratio of no greater than 1.25 to 1.00.

                                       -74-

<PAGE>

         (c) Consolidated Fixed Charge Coverage Ratio. There shall be
maintained, as of the end of each fiscal quarter set forth below, a Consolidated
Fixed Charge Coverage Ratio of at least:

<TABLE>
<CAPTION>

                  ------------------ ---------------- ----------------- ------------------- ------------------------
                                       January 31         April 30           July 31              October 31
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                  <S>                 <C>             <C>               <C>                 <C>
                        2002               N/A              N/A            1.20 to 1.00          1.20 to 1.00
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                        2003          1.20 to 1.00      1.20 to 1.00       1.20 to 1.00          1.20 to 1.00
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                        2004          1.20 to 1.00      1.20 to 1.00       1.20 to 1.00          1.20 to 1.00
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                        2005          1.25 to 1.00      1.25 to 1.00       1.25 to 1.00          1.25 to 1.00
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                     thereafter       1.50 to 1.00      1.50 to 1.00       1.50 to 1.00          1.50 to 1.00
                  ------------------ ---------------- ----------------- ------------------- ------------------------
</TABLE>

         (d) Consolidated Interest Coverage Ratio. There shall be maintained, as
of the end of each fiscal quarter set forth below, a Consolidated Interest
Coverage Ratio of at least:

<TABLE>
<CAPTION>

                  ------------------ ---------------- ----------------- ------------------- ------------------------
                                       January 31         April 30           July 31              October 31
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                  <S>                 <C>             <C>               <C>                 <C>
                        2002               N/A              N/A            1.40 to 1.00          1.40 to 1.00
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                        2003          1.50 to 1.00      1.50 to 1.00       1.50 to 1.00          1.50 to 1.00
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                        2004          1.75 to 1.00      1.75 to 1.00       1.75 to 1.00          1.75 to 1.00
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                        2005          2.00 to 1.00      2.00 to 1.00       2.00 to 1.00          2.00 to 1.00
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                     thereafter       2.50 to 1.00      2.50 to 1.00       2.50 to 1.00          2.50 to 1.00
                  ------------------ ---------------- ----------------- ------------------- ------------------------
</TABLE>

         (e) Consolidated EBITDA. Consolidated EBITDA as of the last day of each
fiscal quarter set forth below for the twelve month period ending on such date
shall be greater than or equal to:

<TABLE>
<CAPTION>

                  ------------------ ---------------- ----------------- ------------------- ------------------------
                                       January 31         April 30           July 31              October 31
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                  <S>                 <C>             <C>               <C>                 <C>
                        2002               N/A              N/A            $37,000,000            $38,000,000
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                        2003           $40,000,000      $40,000,000        $42,000,000            $43,000,000
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                        2004           $45,000,000      $45,000,000        $47,000,000            $48,000,000
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                        2005           $51,000,000      $51,000,000        $53,000,000            $54,000,000
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                        2006           $56,000,000      $57,000,000        $59,000,000            $61,000,000
                  ------------------ ---------------- ----------------- ------------------- ------------------------
                     thereafter        $65,000,000
                  ------------------ ---------------- ----------------- ------------------- ------------------------
</TABLE>

         (f) Consolidated Net Worth. At all times Consolidated Net Worth shall
be no less than negative Two Hundred Twenty Seven Million Twenty Seven Thousand
Dollars ($227,027,000).

                                       -75-

<PAGE>

         (g) Capital Expenditures. The aggregate amount of Consolidated Capital
Expenditures for the Consolidated Group will not exceed an amount equal to (i)
$20,000,000 for fiscal year 2002, (ii) $25,000,000 for fiscal year 2003 and
(iii) $27,000,000 for each fiscal year thereafter plus (iv) in each case, 50% of
Consolidated EBITDA in excess of $50,000,000 for the fiscal year most recently
ended. In the event the Consolidated Group incurs less than (x) $20,000,000 on
Consolidated Capital Expenditures in fiscal year 2002, (y) $25,000,000 on
Consolidated Capital Expenditures for fiscal year 2003 and (z) $27,000,000 on
Consolidated Capital Expenditures for each fiscal year thereafter, such
shortfall may be carried over and used in the next fiscal year (one year carry
over); provided, however, the Consolidated Group must use the amount of
Consolidated Capital Expenditures permitted in any given fiscal year before
utilizing the amount carried over from the preceding year.

         (h) Fiscal Quarter Computations. For purposes of this Section 7.10,
each reference to January 31, April 30, July 31 and October 31 shall refer to
the fiscal quarter of the Parent ending on or about such dates. Calculations
with respect to Asset Dispositions and Permitted Acquisitions shall be subject
to Section 1.3.

         7.11     Additional Guaranties and Stock Pledges.

         At any time any Person becomes a Domestic Subsidiary, the Borrower will
promptly notify the Agent thereof and within 30 days of such event, (a) cause
such Domestic Subsidiary to become a Guarantor hereunder by (i) execution of a
Joinder Agreement, (ii) delivery of supporting resolutions, incumbency
certificates, corporation formation and organizational documentation and
opinions of counsel as the Agent may reasonably request, and (iii) delivery of
security agreements, mortgages and other related documents (in a form acceptable
to the Agent) necessary to perfect a lien on or security interest in the assets
of such Domestic Subsidiary in accordance with the Credit Documents and (b)
cause the 100% of the Capital Stock of such Domestic Subsidiary and of 100% of
the Capital Stock of each of its Domestic Subsidiaries and 65% of the Capital
Stock of each of its direct Foreign Subsidiaries having assets with a book value
of $1,000,000 or more, together in each case with appropriate pledge agreements,
undated transfer powers executed in blank and such opinions of counsel as the
Agent may reasonably request.

         7.12     Ownership of Subsidiaries.

         Except to the extent otherwise permitted in Section 8.7 and except as
set forth on Schedule 6.15, the Borrower shall, directly or indirectly, own at
all times 100% of the Voting Stock of each of its Subsidiaries except to the
extent necessary to qualify directors where required by applicable law or to
satisfy other requirements of applicable law with respect to the ownership of
Capital Stock of Foreign Subsidiaries.

         7.13     Use of Proceeds.

         Extensions of Credit will be used solely for the purposes provided in
Section 6.16.

                                       -76-

<PAGE>

         7.14     Collateral.

         If, subsequent to the Closing Date, a Credit Party shall (a) acquire or
lease any real property other than Excluded Property or (b) acquire any
intellectual property, securities instruments, chattel paper or other personal
property other than Excluded Property required to be delivered to the Agent as
Collateral hereunder or under any of the Collateral Documents, the Borrower
shall immediately notify the Agent of same except for intellectual property, for
which the Borrower is only required to give the notice described in Section
7.2(f). Each Credit Party shall take such action as requested by the Agent and
at its own expense, to ensure that the Agent has a first priority perfected Lien
in all Property (other than Excluded Property), subject only to Permitted Liens.
The Credit Parties shall use commercially reasonable efforts to obtain a
landlord waiver (in form and substance reasonably satisfactory to the Agent)
with respect to (i) each leased real property location of a Credit Party that
contains assets valued at $200,000 or more and (ii) those certain leased real
property locations of the Credit Parties which contain aggregate assets valued
at $1,000,000 or more in the aggregate.

                                    SECTION 8
                               NEGATIVE COVENANTS

         Each of the Credit Parties covenants and agrees that on the Closing
Date, and so long as this Credit Agreement is in effect and until the
Commitments have been terminated, no Obligations remain outstanding and all
amounts owing hereunder or in connection herewith, have been paid in full, no
member of the Consolidated Group shall:

         8.1      Indebtedness.

         Contract, create, incur, assume or permit to exist any Indebtedness,
except:

         (a) Indebtedness arising or existing under this Credit Agreement and
the other Credit Documents;

         (b) the Senior Notes;

         (c) Indebtedness set forth in Schedule 8.1, and renewals, refinancings
and extensions thereof on terms and conditions no less favorable than for such
existing Indebtedness;

         (d) purchase money Indebtedness (including Capital Lease Obligations)
of the Borrower and its Subsidiaries to finance the purchase or construction of
fixed assets (whether incurred or assumed), provided that (i) such Indebtedness
when incurred shall not exceed the purchase price or cost of construction of
such asset, (ii) no such Indebtedness shall be refinanced for a principal amount
in excess of the principal balance outstanding thereon at the time of such
refinancing, and (iii) the total amount of all such Indebtedness shall not
exceed $7,500,000 at any time outstanding;

                                       -77-

<PAGE>

         (e) Indebtedness and obligations of the Borrower in respect of Hedging
Agreements entered into in the ordinary course of business to manage existing or
anticipated risks and not for speculative purposes;

         (f) (i) unsecured intercompany Indebtedness owing by one Credit Party
(other than the Parent) to another Credit Party, (ii) unsecured intercompany
Indebtedness owing by a Credit Party (other than the Parent) to a Subsidiary of
the Borrower which is not a Credit Party, in each case to the extent permitted
under Section 8.5 hereof and provided that such Indebtedness is expressly
subordinated to the Credit Party Obligations and (iii) unsecured intercompany
Indebtedness owing by a Foreign Subsidiary to a Credit Party provided such
Indebtedness is permitted by Section 8.5;

         (g) other unsecured Indebtedness of the Borrower or any of its
Subsidiaries of up to $15,000,000 in the aggregate at any time outstanding;

         (h) the Subordinated Notes;

         (i) obligations of a Credit Party to repay any purchase price
adjustment, upfront payment or rebate payment received pursuant to a supply
contract or other contract (each such supply contract or other contract to be in
form and substance acceptable to the Agent;

         (j) the Parent Subordinated Notes;

         (k) unsecured intercompany Indebtedness of the Parent to the extent
permitted by Section 8.10; and

         (l) Guaranty Obligations of Indebtedness of the Borrower or any of its
Subsidiaries permitted under this Section 8.1.

         8.2      Liens.

         Contract, create, incur, assume or permit to exist any Lien with
respect to any of their respective property or assets of any kind (whether real
or personal, tangible or intangible), other than any Margin Stock, whether now
owned or hereafter acquired, except for Permitted Liens.

         8.3      Nature of Business.

         Engage in any business other than the business conducted by such member
of the Consolidated Group on the Closing Date and any businesses reasonably
related thereto.

                                       -78-

<PAGE>

         8.4      Consolidation, Merger, Asset Dispositions, etc.

         (a) Dissolve, liquidate or wind up their affairs, except for the
dissolution and liquidation of a wholly-owned Subsidiary of the Borrower where
the parent company Credit Party receives the assets of such Subsidiary;

         (b) Enter into any transaction of merger or consolidation; provided,
however, that, so long as no Default or Event of Default would be directly or
indirectly caused as a result thereof, (i) a member of the Consolidated Group
(other than the Parent) may merge or consolidate with another member of the
Consolidated Group (other than the Parent), provided that (A) if the Borrower is
a party thereto, the Borrower shall be the surviving corporation and (B) if one
of the parties thereto is a Credit Party, such Credit Party shall be the
surviving corporation and (ii) a Credit Party (other than the Parent or the
Borrower) may merge or consolidate with another Person in connection with a
Permitted Acquisition provided that such Credit Party shall be the surviving
corporation; or

         (c) Consummate any Asset Disposition other than (i) the sale of
inventory in the ordinary course of business for reasonable consideration, (ii)
the sale or disposition of machinery and equipment no longer used or useful in
the conduct of such Person's business, (iii) sales or transfers of assets to any
Credit Party (other than the Parent), (iv) sales or transfers of assets having a
book value of less than (x) $250,000 with respect to any transaction, or series
of related transactions, and (y) $1,250,000 in the aggregate for all such
transactions, or series of related transactions, (v) any Asset Disposition that
constitutes a Permitted Investment and (vi) other Asset Dispositions, provided
that (A) after giving effect to such Asset Disposition, the aggregate book value
of assets sold or otherwise disposed of pursuant to this clause (vi) in any
given fiscal year does not exceed $5,000,000 and (B) the proceeds from any such
Asset Disposition are, within 360 days from the date of such Asset Disposition
applied as a mandatory prepayment in accordance with Section 3.3(b)(ii) or
reinvested in an asset similar to the type transferred or disposed of pursuant
to this Section 8.4(c)(vi) or in other assets used or useful in the same or a
similar line of business as the Parent and its Subsidiaries were engaged in on
the Closing Date (or businesses reasonably related thereto). Upon an Asset
Disposition permitted by this Section 8.4(c), the Agent shall (to the extent
applicable) deliver to the Credit Parties, upon the Credit Parties' request and
at the Credit Parties' expense, such documentation as is reasonably necessary to
evidence the release of the Agent's security interest, if any, in such assets,
including, without limitation, amendments or terminations of UCC financing
statements.

         8.5      Investments.

         Make an Investment in, any Person except for Permitted Investments.

         8.6      Transactions with Affiliates.

         Enter into or permit to exist any transaction or series of transactions
with any officer, director, shareholder, Subsidiary or Affiliate other than (i)
transactions permitted by this Credit

                                       -79-

<PAGE>

Agreement, (ii) customary fees and expenses paid to directors, (iii) advances of
working capital to any Credit Party (other than the Parent), (iv) transfers of
cash and assets to any Credit Party (other than the Parent) and (v) where such
transactions are on terms and conditions substantially as favorable as would be
obtainable in a comparable arm's-length transaction with a Person other than an
officer, director, shareholder or Affiliate.

         8.7      Ownership of Capital Stock.

         Issue, sell, transfer, pledge or otherwise dispose of any Capital Stock
in any member of the Consolidated Group, except (i) issuance, sale or transfer
of Capital Stock to a Credit Party by a Subsidiary of such Credit Party, (ii) in
connection with a transaction permitted by Section 8.4, (iii) as needed to
qualify directors under applicable law and (iv) subject to the terms hereof, the
sale or issuance of equity interests in the Parent to any Person.

         8.8      Fiscal Year; Other Changes.

         (i) Change its fiscal year end from the Sunday falling closest to
January 31st of each year, or (ii) amend, modify or change its articles of
incorporation (or corporate charter or other similar organizational document) or
bylaws (or similar document) in any manner that would reasonably be likely to
materially adversely affect the rights of the Lenders. Each Credit Party will
notify the Agent at least 30 days prior to any change in its legal
choice-of-entity or its jurisdiction of organization.

         8.9      Prepayments of Indebtedness, etc.

         (a) After the issuance thereof, amend or modify (or permit the
amendment or modification of), the terms of any other Indebtedness in a manner
materially adverse to the interests of the Lenders (including specifically
shortening any maturity or average life to maturity or requiring any payment
sooner than previously scheduled or increasing the interest rate or fees
applicable thereto or changing any subordination provisions thereof); or

         (b) Make any voluntary or optional prepayment, redemption, defeasance
or acquisition for value of (including without limitation, by way of depositing
money or securities with the trustee with respect thereto before due for the
purpose of paying when due), or refund, refinance or exchange of any Funded
Debt, other than, so long as no Default or Event of Default is in existence or
would be caused as a result thereof, (i) intercompany Indebtedness permitted
hereunder, (ii) regularly scheduled payments of principal and interest on such
Funded Debt, (iii) prepayment of up to 35% of the principal of the Senior Notes
with the Net Proceeds of an Equity Transaction that generates gross cash
proceeds of at least $25,000,000 provided that the Borrower shall notify the
Agent of any such prepayment, (iv) prepayment of up to 35% of the principal of
the Subordinated Notes and 35% of the principal and 100% of the capitalized
interest of the Parent Subordinated Notes with the Net Proceeds of an Equity
Transaction occurring prior to April 1, 2004 that generates gross cash proceeds
of at least $25,000,000 provided that the Borrower shall notify the Agent of any
such prepayment, (v) prepayment of up to 100% of the

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principal of the Subordinated Notes and 100% of the principal and 100% of the
capitalized interest of the Parent Subordinated Notes with the Net Proceeds of
an Equity Transaction occurring on or after April 1, 2004 that generates gross
cash proceeds of at least $25,000,000 provided that the Borrower shall notify
the Agent of any such prepayment and (vi) prepayment of the outstanding
principal amount of the Senior Notes in an amount not to exceed (A) $3,600,000
in any fiscal year and (B) $12,000,000 in the aggregate during the term of this
Credit Agreement.

         (c) Amend, in a manner adverse to the Lenders, the Certificate of
Preferences without the prior written consent of the Required Lenders.

         (d) Make principal or interest payments in respect of the Subordinated
Notes or the Parent Subordinated Notes in violation of the subordination
provisions contained in the Subordinated Note Agreement or the Parent
Subordinated Note Agreement, as applicable.

         (e) Make any cash interest payments in respect of the Parent
Subordinated Notes prior to the Termination Date.

         (f) Amend or modify any subordination provisions of the Subordinated
Note Agreement or the Parent Subordinated Note Agreement.

         (g) Amend, in a manner adverse to the Lenders, the Warrant Agreement
without the prior written consent of the Required Lenders.

         8.10     Restricted Payments.

         Make or permit Restricted Payments other than (i) dividends or
distributions payable in Capital Stock of the applicable Person and dividends or
distributions payable (directly or indirectly through Subsidiaries) to any
Credit Party (other than the Parent), (ii) dividends or distributions made to a
Credit Party in connection with transactions permitted by Section 8.4(a),
Section 8.7(i) or clauses (iv) and (v) of Section 8.9(b), (iii) the repurchase
by the Parent of shares of its Capital Stock owned by employees of the Parent as
part of the severance pay of such employees so long as (a) such repurchases of
Capital Stock shall not exceed $2,500,000 in the aggregate during the term of
this Credit Agreement and (b) no Default or Event of Default exists or would
result therefrom, (iv) the payment of any dividend or distribution or the making
of any loan or advance to Parent to enable Parent to pay its reasonable general
administrative costs and expenses including, without limitation, in respect of
franchise taxes and other fees required to maintain its existence and
administrative, legal and accounting services provided by third parties, in an
aggregate amount not to exceed $250,000 per fiscal year and (v) payments by
members of the Consolidated Group to the Parent pursuant to a tax sharing
agreement under which each such member of the Consolidated Group and the Parent
is allocated its proportionate share of the tax liability of the affiliated
group of corporations that file consolidated federal income tax returns (or that
file state or local income tax returns on a consolidated, combined, unitary or
similar basis), provided that the amount of such payments to the Parent do not
exceed the amount necessary to allow the Parent to make payments with respect to
its allocated share of such tax liability.

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         8.11     Sale Leasebacks.

         Directly or indirectly become or remain liable as lessee or as
guarantor or other surety with respect to any lease, whether an Operating Lease
or a Capital Lease, of any Property (whether real or personal or mixed), whether
now owned or hereafter acquired, (i) which such Person has sold or transferred
or is to sell or transfer to any other Person other than a Credit Party or (ii)
which such Person intends to use for substantially the same purpose as any other
Property which has been sold or is to be sold or transferred by such Person to
any other Person in connection with such lease.

         8.12     No Further Negative Pledges.

         Except with respect to prohibitions against other encumbrances on
specific Property encumbered to secure payment of particular Indebtedness (which
Indebtedness relates solely to such specific Property, and improvements and
accretions thereto, and is otherwise permitted hereby), no member of the
Consolidated Group will enter into, assume or become subject to any agreement
prohibiting or otherwise restricting the creation or assumption of any Lien upon
its properties or assets, whether now owned or hereafter acquired, or requiring
the grant of any security for such obligation if security is given for some
other obligation, except (a) pursuant to this Credit Agreement and the other
Credit Documents, (b) pursuant to the Indenture, (c) pursuant to the
Subordinated Note Agreement, (d) pursuant to the Parent Subordinated Note
Agreement, (e) in connection with any Permitted Lien or any document or
instrument governing any Permitted Lien, provided that any such restriction
contained therein relates only to the asset or assets subject to such Permitted
Lien, (f) pursuant to customary restrictions and conditions contained in any
agreement relating to the sale of any Property permitted under Section 8.4(c),
pending the consummation of such sale and (g) pursuant to any document governing
unsecured Indebtedness permitted by Section 8.1(g), provided that any such
restriction contained therein does not prohibit or otherwise restrict the
creation or assumption of any Lien required by the terms of the Credit
Documents.

         8.13     License Agreements.

         (a) Terminate, cancel or permit to expire the U.S. Wal*Mart License
Agreement; or

         (b) permit the Consolidated Group to close a material number (as
determined by the Required Lenders in their sole discretion or as determined by
the Borrower) of individual permanent photography studios located at Wal*Mart
locations in the United States in any single fiscal year unless, after giving
effect to such closings and any such prior closings or other studio closings,
determined as of the end of the next succeeding fiscal quarter, the Borrower is
able to establish to the satisfaction of the Agent that the Borrower will be in
compliance on a Pro Forma Basis with each of the financial covenants contained
in Section 7.10 hereof.

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         8.14     Operating Lease Obligations.

         Enter into, assume or permit to exist any obligations for the payment
of rent under Operating Leases which in the aggregate for all members of the
Consolidated Group would exceed $2,000,000 in any fiscal year.

         8.15     Limitation on Restricted Actions.

         Directly or indirectly, create or otherwise cause, incur, assume,
suffer or permit to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of any such Person to (a) in the case of
any direct or indirect Subsidiary of the Borrower, to pay dividends or make any
other distribution on any of such Person's Capital Stock, (b) pay any
Indebtedness owed to any Credit Party, (c) make loans or advances to any Credit
Party, (d) sell, lease or transfer any of its Property to any Credit Party or
(e) except in respect of any Subsidiary which is not a Credit Party, (1) pledge
its Property pursuant to the Credit Documents or (2) act as a Credit Party
pursuant to the Credit Documents, except for encumbrances or restrictions
existing under or by reason of (i) applicable law, (ii) this Credit Agreement
and the other Credit Documents, (iii) the Indenture, (iv) the Subordinated Note
Agreement, (v) the Parent Subordinated Note Agreement, (vi) any Permitted Lien
or any document or instrument governing any Permitted Lien, provided that any
such restriction contained therein relates only to the asset or assets subject
to such Permitted Lien, (vii) any agreement of a Foreign Subsidiary governing
Indebtedness permitted by Section 8.1(g) so long as the restrictions contained
therein are not applicable to any Credit Party or the Capital Stock of such
Foreign Subsidiary and (viii) customary non-assignment or net worth provisions
in any contract entered into in the ordinary course of business.

         8.16     Limitation on the Parent.

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<PAGE>

         Permit the Parent to (i) hold any assets other than (A) the Capital
Stock of the Borrower, (B) assets, properties or rights that are not capable of
being sold, assigned, transferred or conveyed to the Borrower without the
consent of any other Person, or if such assignment or attempted assignment would
constitute a breach thereof, or a violation of any applicable federal, state,
local or foreign law, statute, ordinance, rule, regulation, order, judgment or
decree, injunction, award, administrative order or decree, administrative or
judicial decision, or any other executive or legislative proclamation, (C)
agreements relating to the issuance, sale, purchase, repurchase or registration
of securities of the Parent, (D) minute books and other corporate books and
records of the Parent, (E) deposit accounts with depository institutions
organized in the United States of America or any state thereof for sixty (60)
days subsequent to the Closing Date; provided, that, any cash deposited in such
accounts is promptly transferred to a deposit account of the Borrower and (F)
other miscellaneous non-material assets, the transfer of which would require the
consent of a third party, (ii) have any liabilities other than (A) the
liabilities under the Credit Documents, (B) the liabilities arising under the
Parent Subordinated Note Agreement, (C) acting as a guarantor in respect of the
Indebtedness arising under the Indenture, (D) acting as a guarantor in respect
of the Indebtedness arising under the Subordinated Note Agreement, (E) tax
liabilities in the ordinary course of business, (F) loans and advances permitted
under Section 8.10, (G) corporate, administrative and operating expenses in the
ordinary course of business and (H) liabilities under any contracts or
agreements described in clause (i)(B) above or (iii) engage in any activities or
business other than holding the assets and incurring the liabilities described
in this Section 8.16 and activities incidental or related thereto.

                                    SECTION 9
                                EVENTS OF DEFAULT

         9.1      Events of Default.

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

         (a) Payment. Any Credit Party shall

                  (i) default in the payment when due of any principal of any of
         the Loans or of any reimbursement obligations arising from drawings
         under Letters of Credit, or

                  (ii) default, and such defaults shall continue for three (3)
         or more Business Days, in the payment when due of any interest on the
         Loans or on any reimbursement obligations arising from drawings under
         Letters of Credit, or of any Fees or other amounts owing hereunder,
         under any of the other Credit Documents or in connection herewith or
         therewith; or

         (b) Representations. Any representation, warranty or statement made or
deemed to be made herein, in any of the other Credit Documents, or in any
statement or

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<PAGE>

certificate delivered or required to be delivered pursuant hereto or thereto
shall prove untrue in any material respect on the date as of which it was deemed
to have been made; or

         (c) Covenants.

                  (i) Default in the due performance or observance of any term,
         covenant or agreement contained in Section 7.3(a), 7.10, 7.14 or
         Section 8, or

                  (ii) Default in the due performance or observance by it of any
         term, covenant or agreement (other than those referred to in
         subsections (a), (b) or (c)(i) of this Section 9.1) contained in this
         Credit Agreement and such default shall continue unremedied for a
         period of at least 30 days after the earlier of a Responsible Officer
         of a Credit Party having knowledge of such default or notice thereof by
         the Agent; or

         (d) Other Credit Documents. (i) Any Credit Party shall default in the
due performance or observance of any material term, covenant or agreement in any
of the other Credit Documents (subject to applicable grace or cure periods, if
any), or (ii) any Credit Document shall fail to be in full force and effect or
to give the Agent and/or the Lenders any material part of the Liens, rights,
powers and privileges purported to be created thereby or any Credit Party shall
assert the same; or

         (e) Guaranties. Except as to the Credit Party which is dissolved,
merged or consolidated out of existence as the result of or in connection with a
dissolution, merger or consolidation permitted by Section 8.4(a) or Section
8.4(b), the guaranty given by any Guarantor hereunder or any material provision
thereof shall cease to be in full force and effect, or any Guarantor hereunder
or any Person acting by or on behalf of such Guarantor shall deny or disaffirm
such Guarantor's obligations under such guaranty, or any Guarantor shall default
in the due performance or observance of any term, covenant or agreement on its
part to be performed or observed pursuant to any guaranty beyond any applicable
grace period; or

         (f) Bankruptcy, etc. Any Bankruptcy Event shall occur with respect to
any member of the Consolidated Group; or

         (g) Defaults under Other Agreements.

                  (i) There shall occur a default (beyond the applicable grace
         period with respect thereto, if any) under the U.S. Wal*Mart License
         Agreement, which default could reasonably be expected to have a
         Material Adverse Effect; or

                  (ii) With respect to any Indebtedness (other than Indebtedness
         outstanding under this Credit Agreement) in excess of $2,000,000 in the
         aggregate for the Consolidated Group taken as a whole, (A) any member
         of the Consolidated Group shall (1) default in any payment (beyond the
         applicable grace period with respect thereto, if any) with respect to
         any such Indebtedness, or (2) default in the observance or performance
         relating to such Indebtedness or contained in any instrument or
         agreement evidencing,

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<PAGE>

         securing or relating thereto, or any other event or condition shall
         occur or condition exist, the effect of which default or other event or
         condition is (after the giving of notice or lapse of time if required)
         to cause, or permit, the holder or holders of such Indebtedness (or
         trustee or agent on behalf of such holders) to cause any such
         Indebtedness to become due prior to its stated maturity; or (B) any
         such Indebtedness shall be declared due and payable, or required to be
         prepaid other than by a regularly scheduled required prepayment, prior
         to the stated maturity thereof; or

         (h) Judgments. One or more judgments or decrees shall have been entered
against one or more of the members of the Consolidated Group involving a
liability of $2,000,000 or more in the aggregate (to the extent not paid or
fully covered by insurance provided by a carrier who has acknowledged coverage
and has the ability to perform) and any such judgments or decrees shall not have
been vacated, discharged or stayed or bonded pending appeal within 30 days from
the entry thereof; or

         (i) ERISA. Any of the following events or conditions, if such event or
condition could reasonably be expected to have a Material Adverse Effect: (1)
any "accumulated funding deficiency," as such term is defined in Section 302 of
ERISA and Section 412 of the Code, whether or not waived, shall exist with
respect to any Plan, or any lien shall arise on the assets of a member of the
Consolidated Group or any ERISA Affiliate in favor of the PBGC or a Plan; (2) an
ERISA Event shall occur with respect to a Single Employer Plan, which is, in the
reasonable opinion of the Agent, likely to result in the termination of such
Plan for purposes of Title IV of ERISA; (3) an ERISA Event shall occur with
respect to a Multiemployer Plan or Multiple Employer Plan, which is, in the
reasonable opinion of the Agent, likely to result in (i) the termination of such
Plan for purposes of Title IV of ERISA, or (ii) a member of the Consolidated
Group or any ERISA Affiliate incurring any liability in connection with a
withdrawal from, reorganization of (within the meaning of Section 4241 of
ERISA), or insolvency of (within the meaning of Section 4245 of ERISA) such
Plan; or (4) any prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) or breach of fiduciary responsibility shall
occur which may subject a member of the Consolidated Group or any ERISA
Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA
or Section 4975 of the Code, or under any agreement or other instrument pursuant
to which a member of the Consolidated Group or any ERISA Affiliate has agreed or
is required to indemnify any person against any such liability; or

         (j) Change of Control. There shall occur, without the prior written
consent of the Lenders, which consent shall not be unreasonably withheld or
delayed, a Change of Control.

         (k) Indenture. There shall occur an "Event of Default" (as defined in
the Indenture) under the Indenture.

         (l) Subordinated Note Agreement. (i) There shall occur and be
continuing any "Event of Default" (or any comparable term) under, and as defined
in, the Subordinated Note Agreement or (ii) the subordination provisions of the
Subordinated Note Agreement shall, in whole or in part,

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<PAGE>

terminate, cease to be effective or cease to be legally valid, binding and
enforceable against any holder of the Subordinated Notes.

         (m) Parent Subordinated Note Agreement. (i) There shall occur and be
continuing any "Event of Default" (or any comparable term) under, and as defined
in, the Parent Subordinated Note Agreement or (ii) the subordination provisions
of the Parent Subordinated Note Agreement shall, in whole or in part, terminate,
cease to be effective or cease to be legally valid, binding and enforceable
against any holder of the Parent Subordinated Notes.

         9.2      Acceleration; Remedies.

         Upon the occurrence of an Event of Default, and at any time thereafter,
the Agent shall, upon the request and direction of the Required Lenders, by
written notice to the Credit Parties take any of the following actions:

                  (i) Termination of Commitments. Declare the Commitments
         terminated whereupon the Commitments shall be immediately terminated.

                  (ii) Acceleration. Declare the unpaid principal of and any
         accrued interest in respect of all Loans, any reimbursement obligations
         arising from drawings under Letters of Credit and any and all other
         indebtedness or obligations of any and every kind owing by the Credit
         Parties to the Agent and/or any of the Lenders hereunder to be due
         whereupon the same shall be immediately due and payable without
         presentment, demand, protest or other notice of any kind, all of which
         are hereby waived by each of the Credit Parties.

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

                  (iv) Enforcement of Rights. Enforce any and all rights and
         interests created and existing under the Credit Documents and all
         rights of set-off.

Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur, then the Commitments shall automatically terminate and all
Loans, all reimbursement obligations arising from drawings under Letters of
Credit, all accrued interest in respect thereof, all accrued and unpaid Fees and
other indebtedness or obligations owing to the Agent and/or any of the Lenders
hereunder automatically shall immediately become due and payable without
presentment,

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<PAGE>

demand, protest or the giving of any notice or other action by the Agent or the
Lenders, all of which are hereby waived by the Credit Parties.

                                   SECTION 10
                                AGENCY PROVISIONS

         10.1     Appointment and Authorization of Agent.

                  (a) Each Lender hereby irrevocably (subject to Section 10.9)
         appoints, designates and authorizes the Agent to take such action on
         its behalf under the provisions of this Credit Agreement and each other
         Credit Document and to exercise such powers and perform such duties as
         are expressly delegated to it by the terms of this Credit Agreement or
         any other Credit Document, together with such powers as are reasonably
         incidental thereto. Notwithstanding any provision to the contrary
         contained elsewhere herein or in any other Credit Document, the Agent
         shall not have any duties or responsibilities, except those expressly
         set forth herein, nor shall the Agent have or be deemed to have any
         fiduciary relationship with any Lender or participant, and no implied
         covenants, functions, responsibilities, duties, obligations or
         liabilities shall be read into this Credit Agreement or any other
         Credit Document or otherwise exist against the Agent. Without limiting
         the generality of the foregoing sentence, the use of the term "Agent"
         herein and in the other Credit Documents with reference to the Agent is
         not intended to connote any fiduciary or other implied (or express)
         obligations arising under agency doctrine of any applicable law.
         Instead, such term is used merely as a matter of market custom, and is
         intended to create or reflect only an administrative relationship
         between independent contracting parties.

                  (b) The Issuing Lender shall act on behalf of the Lenders with
         respect to any Letters of Credit issued by it and the documents
         associated therewith until such time (and except for so long) as the
         Agent may agree at the request of the Required Lenders to act for the
         Issuing Lender with respect thereto; provided, however, that the
         Issuing Lender shall have all of the benefits and immunities (i)
         provided to the Agent in this Section 10 with respect to any acts taken
         or omissions suffered by the Issuing Lender in connection with Letters
         of Credit issued by it or proposed to be issued by it and the
         application and agreements for letters of credit pertaining to the
         Letters of Credit as fully as if the term "Agent" as used in this
         Section 10 included the Issuing Lender with respect to such acts or
         omissions, and (ii) as additionally provided herein with respect to the
         Issuing Lender.

         10.2     Delegation of Duties.

         The Agent may execute any of its duties under this Credit Agreement or
any other Credit Document by or through agents, employees or attorneys-in-fact
and shall be entitled to advice of counsel and other consultants or experts
concerning all matters pertaining to such duties. The

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<PAGE>

Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects in the absence of gross negligence or willful
misconduct.

         10.3     Liability of Agent.

         No Agent-Related Person shall (a) be liable for any action taken or
omitted to be taken by any of them under or in connection with this Credit
Agreement or any other Credit Document or the transactions contemplated hereby
(except for its own gross negligence or willful misconduct in connection with
its duties expressly set forth herein), or (b) be responsible in any manner to
any Lender or participant for any recital, statement, representation or warranty
made by any Credit Party or any officer thereof, contained herein or in any
other Credit Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Credit Agreement or any other Credit Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Credit Agreement or any other Credit Document, or for any failure of any Credit
Party or any other party to any Credit Document to perform its obligations
hereunder or thereunder. No Agent-Related Person shall be under any obligation
to any Lender or participant to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this Credit
Agreement or any other Credit Document, or to inspect the properties, books or
records of any Credit Party or any Affiliate thereof.

         10.4     Reliance by Agent.

                  (a) The Agent shall be entitled to rely, and shall be fully
         protected in relying, upon any writing, communication, signature,
         resolution, representation, notice, consent, certificate, affidavit,
         letter, telegram, facsimile, telex or telephone message, statement or
         other document or conversation believed by it to be genuine and correct
         and to have been signed, sent or made by the proper Person or Persons,
         and upon advice and statements of legal counsel (including counsel to
         any Credit Party), independent accountants and other experts selected
         by the Agent. The Agent shall be fully justified in failing or refusing
         to take any action under any Credit Document unless it shall first
         receive such advice or concurrence of the Required Lenders as it deems
         appropriate and, if it so requests, it shall first be indemnified to
         its satisfaction by the Lenders against any and all liability and
         expense which may be incurred by it by reason of taking or continuing
         to take any such action. The Agent shall in all cases be fully
         protected in acting, or in refraining from acting, under this Credit
         Agreement or any other Credit Document in accordance with a request or
         consent of the Required Lenders or all the Lenders, if required
         hereunder, and such request and any action taken or failure to act
         pursuant thereto shall be binding upon all the Lenders and
         participants. Where this Credit Agreement expressly permits or
         prohibits an action unless the Required Lenders otherwise determine,
         the Agent shall, and in all other instances, the Agent may, but shall
         not be required to, initiate any solicitation for the consent or a vote
         of the Lenders.

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<PAGE>

                  (b) For purposes of determining compliance with the conditions
         specified in Section 5.1, each Lender that has signed this Credit
         Agreement shall be deemed to have consented to, approved or accepted or
         to be satisfied with, each document or other matter either sent by the
         Agent to such Lender for consent, approval, acceptance or satisfaction,
         or required thereunder to be consented to or approved by or acceptable
         or satisfactory to a Lender.

         10.5     Notice of Default.

         The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default, except with respect to defaults
in the payment of principal, interest and fees required to be paid to the Agent
for the account of the Lenders, unless the Agent shall have received written
notice from a Lender or the Borrower referring to this Credit Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". The Agent will notify the Lenders of its receipt of any
such notice. The Agent shall take such action with respect to such Default or
Event of Default as may be directed by the Required Lenders in accordance with
Section 9.2; provided, however, that unless and until the Agent has received any
such direction, the Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable or in the best interest of the Lenders.

         10.6     Credit Decision; Disclosure of Information by Agent.

         Each Lender acknowledges that no Agent-Related Person has made any
representation or warranty to it, and that no act by the Agent hereinafter
taken, including any consent to and acceptance of any assignment or review of
the affairs of any Credit Party or any Affiliate thereof, shall be deemed to
constitute any representation or warranty by any Agent-Related Person to any
Lender as to any matter, including whether Agent-Related Persons have disclosed
material information in their possession. Each Lender represents to the Agent
that it has, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of the Credit
Parties and their respective Subsidiaries, and all applicable Requirements of
Law relating to the transactions contemplated hereby, and made its own decision
to enter into this Credit Agreement and to extend credit to the Borrower
hereunder. Each Lender also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Credit Agreement and the other Credit Documents, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Borrower and the other Credit Parties. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Agent herein, the Agent shall not have any duty or responsibility
to provide any Lender with any credit or other information concerning the
business, prospects, operations, property, financial and other

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<PAGE>

condition or creditworthiness of any of the Credit Parties or any of their
respective Affiliates which may come into the possession of any Agent-Related
Person.

         10.7     Indemnification of Agent.

         Whether or not the transactions contemplated hereby are consummated,
the Lenders shall indemnify upon demand each Agent-Related Person (to the extent
not reimbursed by or on behalf of any Credit Party and without limiting the
obligation of any Credit Party to do so), pro rata, and hold harmless each
Agent-Related Person from and against any and all claims, damages, losses,
liabilities, costs, and expenses (including, without limitation, reasonable
attorneys' fees) that may be incurred by or asserted or awarded against any
Agent-Related Person, in each case arising out of or in connection with or by
reason of (including, without limitation, in connection with any investigation,
litigation, or proceeding or preparation of defense in connection therewith) the
Credit Documents, any of the transactions contemplated herein or the actual or
proposed use of the proceeds of the Loans, except to the extent such claim,
damage, loss, liability, cost, or expense is found in a final, non-appealable
judgment by a court of competent jurisdiction to have resulted from such
Agent-Related Person's gross negligence or willful misconduct; provided,
however, that no action taken in accordance with the directions of the Required
Lenders shall be deemed to constitute gross negligence or willful misconduct for
purposes of this Section. Without limitation of the foregoing, each Lender shall
reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including reasonable attorneys fees and the allocated
costs of internal counsel) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Credit
Agreement, any other Credit Document, or any document contemplated by or
referred to herein, to the extent that the Agent is not reimbursed for such
expenses by or on behalf of the Borrower. The undertaking in this Section shall
survive termination of the Commitments, the payment of all Obligations hereunder
and the resignation or replacement of the Agent.

         10.8     Agent in its Individual Capacity.

         Bank of America and its Affiliates may make loans to, issue letters of
credit for the account of, accept deposits from, acquire equity interests in and
generally engage in any kind of banking, trust, financial advisory, underwriting
or other business with each of the Credit Parties and their respective
Affiliates as though Bank of America were not the Agent or the Issuing Lender
hereunder and without notice to or consent of the Lenders. The Lenders
acknowledge that, pursuant to such activities, Bank of America or its Affiliates
may receive information regarding any Credit Party or its Affiliates (including
information that may be subject to confidentiality obligations in favor of such
Credit Party or such Affiliate) and acknowledge that the Agent shall be under no
obligation to provide such information to them. With respect to its Loans, Bank
of America shall have the same rights and powers under this Credit Agreement as
any other Lender and may exercise such rights and powers as though it were not
the Agent or the

                                       -91-

<PAGE>

Issuing Lender, and the terms "Lender" and "Lenders" include Bank of America in
its individual capacity.

         10.9     Successor Agent.

         The Agent may resign as Agent upon 30 days' notice to the Lenders and
the Borrower. If the Agent resigns under this Credit Agreement, the Required
Lenders shall appoint from among the Lenders a successor administrative agent
for the Lenders which successor administrative agent shall be consented to by
the Borrower at all times other than during the existence of an Event of Default
(which consent of the Borrower shall not be unreasonably withheld or delayed).
If no successor administrative agent is appointed prior to the effective date of
the resignation of the Agent, the Agent may appoint, after consulting with the
Lenders and the Borrower, a successor administrative agent from among the
Lenders. Upon the acceptance of its appointment as successor administrative
agent hereunder, such successor administrative agent shall succeed to all the
rights, powers and duties of the retiring Agent and the term "Agent" shall mean
such successor administrative agent and the retiring Agent's appointment, powers
and duties as Agent shall be terminated. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Section 10 and Sections 11.4 and 11.9
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Credit Agreement. If no successor administrative
agent has accepted appointment as Agent by the date which is 30 days following a
retiring Agent's notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the
duties of the Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above.

                                   SECTION 11
                                  MISCELLANEOUS

         11.1     Notices.

         Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (i) when
delivered, (ii) when transmitted via telecopy (or other facsimile device) to the
number set out below, (iii) the day following the day on which the same has been
delivered prepaid to a reputable national overnight air courier service, or (iv)
the third Business Day following the day on which the same is sent by certified
or registered mail, postage prepaid, in each case to the respective parties at
the address, in the case of the Borrower, Guarantors and the Agent, set forth
below, and, in the case of the Lenders, set forth on Schedule 2.1(a), or at such
other address as such party may specify by written notice to the other parties
hereto:

                  if to the Borrower or the Guarantors:

                           PCA LLC
                           815 Matthews-Mint Hill Road

                                       -92-

<PAGE>

                           Matthews, North Carolina 28105
                           Attn:  Barry Feld, Chairman and CEO
                           Telephone: (704) 847-8011
                           Telecopy: (704) 847-1548

                  with a copy to:

                           Paul, Weiss, Rifkind,
                           Wharton & Garrison
                           1285 Avenue of the Americas
                           New York, New York   10019
                           Attn:  Richard Borisoff
                           Telephone:  (212)373-3153
                           Telecopy:   (212)757-3990

                  if to the Agent:

                           for requests of Extensions of Credit, payments, etc.

                           Bank of America, N.A.
                           101 N. Tryon Street
                           Independence Center, 15th Floor
                           NC1-001-15-04
                           Charlotte, North Carolina  28255
                           Attn:  Agency Services
                           Telephone:  (704) 386-8388
                           Telecopy:   (704) 386-9923

                           for all other matters:

                           Bank of America, N.A.
                           Agency Management
                           1455 Market Street
                           CA5-701-05-19
                           San Francisco, California  94103
                           Attn:  Agency Management, Angela Lau

                            Telephone: (415) 436-4000
                            Telecopy:  (415) 503-5008

                           with a copy to:

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

                                       -93-

<PAGE>

                            Charlotte, North Carolina 28202-4003
                            Attn:  Rick Hardison
                            Telephone: (704) 386-1185
                            Telecopy:  (704) 388-8268

         11.2     Right of Set-Off.

         In addition to any rights now or hereafter granted under applicable law
or otherwise, and not by way of limitation of any such rights, upon the
occurrence and continuation of an Event of Default, each Lender is authorized at
any time and from time to time, without presentment, demand, protest or other
notice of any kind (all of which rights being hereby expressly waived to the
extent permitted by law), to set-off and to appropriate and apply any and all
deposits (general or special) and any other indebtedness at any time held or
owing by such Lender (including, without limitation branches, agencies or
Affiliates of such Lender wherever located) to or for the credit or the account
of any Credit Party against obligations and liabilities of such Person to such
Lender hereunder, under the Notes, the other Credit Documents or otherwise,
irrespective of whether such Lender shall have made any demand hereunder and
although such obligations, liabilities or claims, or any of them, may be
contingent or unmatured, and any such set-off shall be deemed to have been made
immediately upon the occurrence of an Event of Default even though such charge
is made or entered on the books of such Lender subsequent thereto. Any Person
purchasing a participation in the Loans and Commitments hereunder pursuant to
Section 3.13 or Section 11.3(d) may exercise all rights of set-off with respect
to its participation interest as fully as if such Person were a Lender
hereunder. Following the exercise of its rights under this Section 11.2, such
Lender shall make reasonable efforts to promptly notify the Borrower and/or the
relevant Credit Party.

         11.3     Benefit of Agreement.

                  (a) The provisions of this Credit Agreement shall be binding
         upon and inure to the benefit of the parties hereto and their
         respective successors and assigns permitted hereby, except that none of
         the Credit Parties may assign or otherwise transfer any of its rights
         or obligations hereunder without the prior written consent of each
         Lender and no Lender may assign or otherwise transfer any of its rights
         or obligations hereunder except (i) to an Eligible Assignee in
         accordance with the provisions of Section 11.3(b), (ii) by way of
         participation in accordance with the provisions of Section 11.3(d) or
         (iii) by way of pledge or assignment of a security interest subject to
         the restrictions of Section 11.3(f) (and any other attempted assignment
         or transfer by any party hereto shall be null and void). Nothing in
         this Credit Agreement, expressed or implied, shall be construed to
         confer upon any Person (other than the parties hereto, their respective
         successors and assigns permitted hereby, Participants to the extent
         provided in Section 11.3(d) and, to the extent expressly contemplated
         hereby, the Related Parties of each of the Agent and the Lenders) any
         legal or equitable right, remedy or claim under or by reason of this
         Credit Agreement.

                                       -94-

<PAGE>

                  (b) Any Lender may at any time assign to one or more Eligible
         Assignees all or a portion of its rights and obligations under this
         Credit Agreement (including all or a portion of its Commitment and the
         Loans at the time owing to it); provided that (i) except in the case of
         an assignment of the entire remaining amount of the assigning Lender's
         Commitment and the Loans at the time owing to it or in the case of an
         assignment to a Lender or an Affiliate of a Lender or an Approved Fund
         with respect to a Lender, the aggregate amount of the Commitment (which
         for this purpose includes Loans outstanding thereunder) or, if the
         applicable Commitment is not then in effect, the principal outstanding
         balance of the Loan of the assigning Lender subject to each such
         assignment (determined as of the date the Assignment and Assumption
         with respect to such assignment is delivered to the Agent or, if "Trade
         Date" is specified in the Assignment and Assumption, as of the Trade
         Date) shall not be less than $5,000,000, unless each of the Agent and,
         so long as no Default or Event of Default has occurred and is
         continuing, the Borrower otherwise consent (each such consent not to be
         unreasonably withheld or delayed); (ii) each partial assignment shall
         be made as an assignment of a proportionate part of all the assigning
         Lender's rights and obligations under this Credit Agreement with
         respect to the Loan or the Commitment assigned; (iii) any assignment of
         a Revolving Commitment must be approved by the Agent and the Issuing
         Lender unless the Person that is the proposed assignee is itself a
         Lender with a Revolving Commitment (whether or not the proposed
         assignee would otherwise qualify as an Eligible Assignee); and (iv) the
         parties to each assignment shall execute and deliver to the Agent an
         Assignment and Assumption, together with a processing and recordation
         fee of $3,500, and the Eligible Assignee, if it shall not be a Lender,
         shall deliver to the Agent an Administrative Questionnaire. Subject to
         acceptance and recording thereof by the Agent pursuant to Section
         11.3(c), from and after the effective date specified in each Assignment
         and Assumption, the Eligible Assignee thereunder shall be a party to
         this Credit Agreement and, to the extent of the interest assigned by
         such Assignment and Assumption, have the rights and obligations of a
         Lender under this Credit Agreement, and the assigning Lender thereunder
         shall, to the extent of the interest assigned by such Assignment and
         Assumption, be released from its obligations under this Credit
         Agreement (and, in the case of an Assignment and Assumption covering
         all of the assigning Lender's rights and obligations under this Credit
         Agreement, such Lender shall cease to be a party hereto) but shall
         continue to be entitled to the benefits of Sections 3.6, 3.9, 3.10,
         3.11 and 11.5 with respect to facts and circumstances occurring prior
         to the effective date of such assignment. Any assignment or transfer by
         a Lender of rights or obligations under this Credit Agreement that does
         not comply with this Section 11.3(b) shall be treated for purposes of
         this Credit Agreement as a sale by such Lender of a participation in
         such rights and obligations in accordance with Section 11.3(d).

                  (c) The Agent, acting solely for this purpose as an agent of
         the Borrower, shall maintain at one of its offices in the United States
         a copy of each Assignment and Assumption delivered to it and a register
         for the recordation of the names and addresses of the Lenders, and the
         Commitments of, and principal amounts of the Loans owing to, each
         Lender pursuant to the terms hereof from time to time (the "Register").
         The entries

                                       -95-

<PAGE>

         in the Register shall be conclusive and binding for all purposes absent
         manifest error, and the Borrower, the Agent and the Lenders may treat
         each Person whose name is recorded in the Register pursuant to the
         terms hereof as a Lender hereunder for all purposes of this Credit
         Agreement, notwithstanding notice to the contrary. The Register shall
         be available for inspection by the Borrower and any Lender, at any
         reasonable time and from time to time upon reasonable prior notice.

                  (d) Any Lender may at any time, without the consent of, or
         notice to, the Borrower or the Agent, sell participations to any Person
         (other than a natural person or the Borrower or any of the Borrower's
         Affiliates or Subsidiaries) (each, a "Participant") in all or a portion
         of such Lender's rights and/or obligations under this Credit Agreement
         (including all or a portion of its Commitment and/or the Loans owing to
         it); provided that (i) such Lender's obligations under this Credit
         Agreement shall remain unchanged, (ii) such Lender shall remain solely
         responsible to the other parties hereto for the performance of such
         obligations and (iii) the Borrower, the Agent and the other Lenders
         shall continue to deal solely and directly with such Lender in
         connection with such Lender's rights and obligations under this Credit
         Agreement. Any agreement or instrument pursuant to which a Lender sells
         such a participation shall provide that such Lender shall retain the
         sole right to enforce this Credit Agreement and to approve any
         amendment, modification or waiver of any provision of this Credit
         Agreement; provided that such agreement or instrument may provide that
         such Lender will not, without the consent of the Participant, agree to
         any amendment, modification or waiver that decreases the amount of
         principal of or the rate at which interest is payable on such Loans,
         extends any scheduled principal payment date or date fixed for the
         payment of interest on such Loans, extends its Commitment or releases
         the Borrower or all or substantially all of the Guarantors from its or
         their respective obligations under the Credit Documents. Subject to
         Section 11.3(e), the Borrower agrees that each Participant shall be
         entitled to the benefits of Sections 3.6, 3.9, 3.10 and 3.11 to the
         same extent as if it were a Lender and had acquired its interest by
         assignment pursuant to Section 11.3(b). To the extent permitted by law,
         each Participant also shall be entitled to the benefits of Section 11.2
         as though it were a Lender, provided such Participant agrees to be
         subject to Section 3.13 as though it were a Lender.

                  (e) A Participant shall not be entitled to receive any greater
         payment under Section 3.6, 3.9 or 3.10 than the applicable Lender would
         have been entitled to receive with respect to the participation sold to
         such Participant, unless the sale of the participation to such
         Participant is made with the Borrower's prior written consent. A
         Participant that is not incorporated under the laws of the United
         States of America or a state thereof shall not be entitled to the
         benefits of Section 3.10 unless the Borrower is notified of the
         participation sold to such Participant and such Participant agrees, for
         the benefit of the Borrower, to comply with Section 3.10 as though it
         were a Lender.

                  (f) Any Lender may at any time pledge or assign a security
         interest in all or any portion of its rights under this Credit
         Agreement to secure obligations of such Lender,

                                       -96-

<PAGE>

         including without limitation any pledge or assignment to secure
         obligations to a Federal Reserve Bank; provided that no such pledge or
         assignment shall release such Lender from any of its obligations
         hereunder or substitute any such pledgee or assignee for such Lender as
         a party hereto.

                  (g) If the consent of the Borrower to an assignment or to an
         Eligible Assignee is required hereunder (including a consent to an
         assignment which does not meet the minimum assignment threshold
         specified in clause (i) of the proviso to the first sentence of Section
         11.3(b)), the Borrower shall be deemed to have given its consent five
         (5) Business Days after the date notice thereof has been delivered by
         the assigning Lender (through the Agent) unless such consent is
         expressly refused by the Borrower prior to such fifth Business Day.

                  (h) Notwithstanding anything to the contrary contained herein,
         if at any time Bank of America assigns all of its Commitment and Loans
         pursuant to Section 11.3(b), Bank of America may, (i) upon 30 days'
         notice to the Borrower and the Lenders, resign as Issuing Lender and/or
         (ii) upon five (5) Business Days' notice to the Borrower, terminate its
         Swingline Commitment. In the event of any such resignation as Issuing
         Lender or termination of its Swingline Commitment, the Borrower shall
         be entitled to appoint from among the Lenders a successor Issuing
         Lender or Swingline Lender hereunder; provided, however, that no
         failure by the Borrower to appoint any such successor shall affect the
         resignation of Bank of America as Issuing Lender or the termination of
         its Swingline Commitment, as the case may be. Bank of America shall
         retain all the rights and obligations of the Issuing Lender hereunder
         with respect to all Letters of Credit outstanding as of the effective
         date of its resignation as Issuing Lender and all LOC Obligations with
         respect thereto (including the right to require the Lenders to make
         Revolving Loans or fund their Participation Interests pursuant to
         Section 2.2). If Bank of America terminates its Swingline Commitment,
         it shall retain all the rights of the Swingline Lender provided for
         hereunder with respect to Swingline Loans made by it and outstanding as
         of the effective date of such termination, including the right to
         require the Lenders to make Revolving Loans or fund their Participation
         Interests in outstanding Swingline Loans pursuant to Section 2.3.

         11.4     No Waiver; Remedies Cumulative.

         No failure or delay on the part of the Agent or any Lender in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the Agent or any Lender and any of the
Credit Parties shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or under any other
Credit Document preclude any other or further exercise thereof or the exercise
of any other right, power or privilege hereunder or thereunder. The rights and
remedies provided herein are cumulative and not exclusive of any rights or
remedies which the Agent or any Lender would otherwise have. No notice to or
demand on any Credit Party in any case shall entitle the Borrower or any other
Credit Party to any other or further notice or demand in similar or other
circumstances or constitute a

                                       -97-

<PAGE>

waiver of the rights of the Agent or the Lenders to any other or further action
in any circumstances without notice or demand.

         11.5     Payment of Expenses, etc.

         The Borrower agrees to: (i) pay all reasonable out-of-pocket costs and
expenses (A) of the Agent in connection with the negotiation, preparation,
execution and delivery and administration of this Credit Agreement and the other
Credit Documents and the documents and instruments referred to therein
(including, without limitation, the reasonable fees and expenses of Moore & Van
Allen, PLLC, special counsel to the Agent) and any amendment, waiver or consent
relating hereto and thereto including, but not limited to, any such amendments,
waivers or consents resulting from or related to any work-out, renegotiation or
restructure relating to the performance by the Credit Parties under this Credit
Agreement and (B) of the Agent and the Lenders in connection with enforcement of
the Credit Documents and the documents and instruments referred to therein as a
result of the occurrence of a Default or Event of Default (including, without
limitation, in connection with any such enforcement, the reasonable fees and
disbursements of counsel for the Agent and each of the Lenders); (ii) pay and
hold the Agent harmless from and against all reasonable fees, costs and expenses
(including reasonable fees of employees of the Agent or its Affiliates) of
"field audits" of inventory conducted as provided in Section 7.8(b) at any time
a Default or Event of Default then exists; (iii) pay and hold each of the
Lenders harmless from and against any and all present and future stamp and other
similar taxes with respect to the foregoing matters and save each of the Lenders
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to such
Lender) to pay such taxes; and (iv) indemnify and hold harmless each
Agent-Related Person and each Lender and each of their Affiliates and their
respective officers, directors, employees, agents, and advisors (each, an
"Indemnified Party") from and against any and all claims, damages, losses,
liabilities, costs, and expenses (including, without limitation, reasonable
attorneys' fees) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by
reason of (including, without limitation, in connection with any investigation,
litigation, or proceeding or preparation of defense in connection therewith) the
Credit Documents, any of the transactions contemplated herein or the actual or
proposed use of the proceeds of the Loans, except to the extent such claim,
damage, loss, liability, cost, or expense is found in a final, non-appealable
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct. In the case of an
investigation, litigation or other proceeding to which the indemnity in this
Section 11.5 applies, such indemnity shall be effective whether or not such
investigation, litigation or proceeding is brought by any of the Credit Parties,
their respective directors, shareholders or creditors or an Indemnified Party or
any other Person or any Indemnified Party is otherwise a party thereto and
whether or not the transactions contemplated hereby are consummated. The Credit
Parties agree not to assert any claim against any Agent-Related Party, any
Lender, any of their Affiliates, or any of their respective directors, officers,
employees, attorneys, agents, and advisers, on any theory of liability, for
special, indirect, consequential, or punitive damages arising out of or
otherwise relating to the Credit Documents, any of the transactions contemplated
herein or the actual or proposed use of the proceeds of the Loans.

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<PAGE>

         11.6     Amendments, Waivers and Consents.

         Neither this Credit Agreement nor any other Credit Document nor any of
the terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing entered into by, or approved in writing by, the Required Lenders and the
Borrower, provided that no such amendment, change, waiver, discharge or
termination shall:

                  (a) without the consent of each Lender affected thereby:

                           (i) extend the final maturity of any Loan or of any
                  reimbursement obligation, or any portion thereof, arising from
                  drawings under Letters of Credit,

                           (ii) reduce the rate or extend the time of payment of
                  interest (other than as a result of waiving the applicability
                  of any post-default increase in interest rates) thereon or
                  fees hereunder,

                           (iii) reduce or waive the principal amount of any
                  Loan or of any reimbursement obligation, or any portion
                  thereof, arising from drawings under Letters of Credit,

                           (iv) increase the Commitment of a Lender over the
                  amount thereof in effect (it being understood and agreed that
                  a waiver of any Default or Event of Default or mandatory
                  reduction in the Commitments shall not constitute a change in
                  the terms of any Commitment of any Lender),

                           (v) release all or substantially all of the
                  Collateral securing the Credit Party Obligations hereunder
                  (provided that the Agent may, without consent from any other
                  Lender, release any Collateral that is sold or transferred by
                  a Credit Party in conformance with Section 8.4),

                           (vi) except as the result of or in connection with a
                  dissolution, merger or disposition of a member of the
                  Consolidated Group not prohibited by Section 8.4, release the
                  Borrower or substantially all of the other Credit Parties from
                  its obligations under the Credit Documents,

                           (vii) amend, modify or waive any provision of this
                  Section 11.6 or Section 3.6, 3.10, 3.11, 3.12, 3.13, 9.1(a),
                  11.2, 11.5 or 11.9,

                           (viii) reduce any percentage specified in, or
                  otherwise modify, the definition of Required Lenders, or

                                       -99-

<PAGE>

                           (ix) consent to the assignment or transfer by the
                  Borrower (or another Credit Party) of any of its rights and
                  obligations under (or in respect of) the Credit Documents
                  except as permitted thereby.

                  (b) Without the consent of the Agent, no provision of Section
         10 may be amended.

                  (c) Without the consent of the Issuing Lender, no provision of
         Section 2.2 may be amended.

                  (d) Without the consent of the Swingline Lender, no provision
         of Section 2.3 may be amended.

                  (e) Notwithstanding the fact that the consent of all the
         Lenders is required in certain circumstances as set forth above, (x)
         each Lender is entitled to vote as such Lender sees fit on any
         bankruptcy reorganization plan that affects the Loans and each Lender
         acknowledges that the provisions of Section 1126(c) of the Bankruptcy
         Code supersedes the unanimous consent provisions set forth herein and
         (y) the Required Lenders may consent to allow a Credit Party to use
         cash collateral in the context of a bankruptcy or insolvency
         proceeding.

         11.7     Counterparts.

         This Credit Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart.

         11.8     Headings.

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

         11.9     Survival.

         All indemnities set forth herein, including, without limitation, in
Section 2.2(i), 3.9, 10.8 or 11.5 shall survive the execution and delivery of
this Credit Agreement, the making of the Loans, the issuance of the Letters of
Credit, the repayment of the Loans, LOC Obligations and other obligations under
the Credit Documents and the termination of the Commitments hereunder, and all
representations and warranties made by the Credit Parties herein shall survive
delivery of the Notes and the making of the Loans hereunder.

                                       -100-

<PAGE>

         11.10    Governing Law; Submission to Jurisdiction; Venue.

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

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

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

         11.11    Severability.

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

         11.12    Entirety.

         This Credit Agreement together with the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings,

                                       -101-

<PAGE>

oral or written, if any, including any commitment letters or correspondence
relating to the Credit Documents or the transactions contemplated herein and
therein.

         11.13    Binding Effect; Termination.

         (a) This Credit Agreement shall become effective at such time on or
after the Closing Date when it shall have been executed by the Borrower, the
Guarantors and the Agent, and the Agent shall have received copies hereof
(telefaxed or otherwise) which, when taken together, bear the signatures of each
Lender, and thereafter this Credit Agreement shall be binding upon and inure to
the benefit of the Borrower, the Guarantors, the Agent and each Lender and their
respective successors and assigns.

         (b) The term of this Credit Agreement shall be until no Loans, LOC
Obligations or any other amounts payable hereunder or under any of the other
Credit Documents shall remain outstanding and until all of the Commitments
hereunder shall have expired or been terminated. Upon such payment and
termination, this Credit Agreement shall be automatically terminated and the
Agent and the Lenders shall, upon the request and at the expense of the Credit
Parties, forthwith release all of its Liens and security interests hereunder or
under the Collateral Documents and shall execute and deliver all UCC termination
statements and/or other documents reasonably requested by the Credit Party
evidencing such termination.

         11.14    Confidentiality.

         Each of the Agent and the Lenders agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its Affiliates and to its (and its Affiliates')
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential); (b) to the extent requested
by any regulatory authority; (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process; (d) to any other party
to this Credit Agreement; (e) in connection with the exercise of any remedies
hereunder or any suit, action or proceeding relating to this Credit Agreement or
the enforcement of rights hereunder; (f) subject to an agreement containing
provisions substantially the same as those of this Section 11.14, to (i) any
Eligible Assignee of or Participant in, or any prospective Eligible Assignee of
or Participant in, any of its rights or obligations under this Credit Agreement
or (ii) any direct or indirect contractual counterparty or prospective
counterparty (or such contractual counterparty's or prospective counterparty's
professional advisor) to any credit derivative transaction relating to
Obligations; (g) with the consent of the Borrower; (h) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section 11.14 or (ii) becomes available to the Agent or any Lender on a
nonconfidential basis from a source other than the Consolidated Parties; or (i)
to the National Association of Insurance Commissioners or any other similar
organization or any nationally recognized rating agency that requires access to
information about a Lender's or its Affiliates' investment portfolio in
connection with ratings issued with respect to such Lender or its Affiliates.
For the purposes of

                                       -102-

<PAGE>

this Section, "Information" means all information received from the Credit
Parties relating to the Consolidated Parties or their business, other than any
such information that is available to the Agent or any Lender on a
nonconfidential basis prior to disclosure by the Consolidated Parties. Any
Person required to maintain the confidentiality of Information as provided in
this Section 11.14 shall be considered to have complied with its obligation to
do so if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

         11.15    Source of Funds.

         Each of the Lenders hereby represents and warrants to the Borrower that
at least one of the following statements is an accurate representation as to the
source of funds to be used by such Lender in connection with the financing
hereunder:

         (a) no part of such funds constitutes assets allocated to any separate
account maintained by such Lender in which any employee benefit plan (or its
related trust) has any interest;

         (b) to the extent that any part of such funds constitutes assets
allocated to any separate account maintained by such Lender, such Lender has
disclosed to the Borrower the name of each employee benefit plan whose assets in
such account exceed 10% of the total assets of such account as of the date of
such purchase (and, for purposes of this subsection (b), all employee benefit
plans maintained by the same employer or employee organization are deemed to be
a single plan);

         (c) to the extent that any part of such funds constitutes assets of an
insurance company's general account, such insurance company has complied with
all of the requirements of the regulations issued under Section 401(c)(1)(A) of
ERISA; or

         (d) such funds constitute assets of one or more specific benefit plans
which such Lender has identified in writing to the Borrower.

As used in this Section 11.15, the terms "employee benefit plan" and "separate
account" shall have the respective meanings assigned to such terms in Section 3
of ERISA.

         11.16    Conflict.

         To the extent that there is a conflict or inconsistency between any
provision hereof, on the one hand, and any provision of any Credit Document, on
the other hand, this Credit Agreement shall control.

                           [Signature Page to Follow]

                                       -103-

<PAGE>

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

BORROWER:                  PCA LLC, a
                           Delaware limited liability company

                           By:  /s/ Donald Norsworthy
                                ----------------------------------------
                           Name: Donald Norsworthy
                                 -------------------------------------
                           Title: Chief Financial Officer
                                --------------------------------------

GUARANTORS:                PCA INTERNATIONAL, INC., a
                           North Carolina corporation

                           PCA PHOTO CORPORATION OF
                           CANADA, INC., a North Carolina corporation

                           PHOTO CORPORATION OF AMERICA,
                           a North Carolina corporation

                           PCA NATIONAL LLC,
                           a Delaware limited liability company

                           AMERICAN STUDIOS, INC.,
                           a North Carolina corporation

                           PCA FINANCE CORP.,
                           a Delaware corporation

                           By:   /s/ Donald Norsworthy
                                 ----------------------------------------------
                           Name: Donald Norsworthy
                                  ----------------------------------------------
                           Title: Chief Financial Officer of each of the
                                  above-named Guarantors

                           PCA NATIONAL OF TEXAS L.P.,
                           a Texas limited partnership

                                    By PCA National LLC, a Delaware limited
                                    liability company, its sole general partner

                                    By: /s/ Donald Norsworthy
                                        ----------------------------------------
                                        Name:  Donald Norsworthy
                                        ----------------------------------------
                                        Title: Chief Financial Officer
                                        ----------------------------------------

                                       -104-

<PAGE>

AGENT:                     BANK OF AMERICA, N.A., individually in
                              its capacity as Agent

                           By: /s/ S. Paul Trapani, III
                               -------------------------------------------------
                               Name: S. Paul Trapani, III
                               -------------------------------------------------
                               Title: Managing Director
                               -------------------------------------------------

LENDERS:                   BANK OF AMERICA, N.A.,
                           as a Lender

                           By: /s/ S. Paul Trapani, III
                               -------------------------------------------------
                               Name: S. Paul Trapani, III
                               -------------------------------------------------
                               Title: Managing Director
                               -------------------------------------------------

                                       -105-<PAGE>

                                                                    Exhibit 10.1

PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. SUCH PORTIONS ARE DESIGNATED "[***]."

                             MASTER IN-STORE LICENSE

THIS IN-STORE LICENSE is dated as of the 25/th/ day of June, 2001, by and
between MEIJER STORES LIMITED PARTNERSHIP, a Michigan limited partnership, of
2929 Walker Avenue, N.W., Grand Rapids, Michigan 49544, hereinafter referred to
as "Meijer," and PCA INTERNATIONAL, INC., a North Carolina corporation, of 815
Matthews-Mint Hill Road, Matthews, North Carolina 28105, hereinafter referred to
as "Licensee."

On June 25, 2001 Meijer and Licensee entered into separate license agreements
with respect to Licensed Premises in Meijer Stores #183, 204, and 206 (the
"Original License Agreements"). Meijer and Licensee desire to enter into license
agreements for licensed premises in Meijer Stores #138, 139, 146, and 176.
Meijer and Licensee desire to enter into a Master In-Store License agreement for
all of the premises listed above, Meijer and Licensee agree that simultaneously
with entering into this Master In-Store License agreement the Original License
Agreements shall be terminated.

                                   WITNESSETH:

                              ARTICLE 1. PREMISES

Section 1.1  Entire Premises and Licensed Premises. In consideration of the
mutual covenants and agreements herein contained, Meijer gives and grants to
Licensee the privilege of operating a portrait studio in the Meijer Store(s)
described on Exhibit A attached hereto and incorporated by reference herein.
Each Meijer Store designated on Exhibit A shall hereinafter be referred to as an
"Entire Premises." Licensee's business in each Entire Premises shall be located
in the area designated by Meijer within the Entire Premises and outlined in red
on Exhibit A attached hereto and incorporated by reference herein. Each such
area shall be hereinafter referred to as a "Licensed Premises." Each Licensed
Premises shall consist of approximately the number of square feet designated for
such Licensed Premises on Exhibit A.

                                 ARTICLE 2. TERM

Section 2.1  Term of License. The term of this License shall commence on the
earlier of (i) the Commencement Date listed for each Licensed Premises on
Exhibit B and (ii) the date Licensee opens for business on each Licensed
Premises, and shall terminate on the last day of the third license year, as
defined in Section 2.2 (License Year).

Section 2.2  License Year. The term "license year" shall mean a period of twelve
(12) consecutive months commencing on August 1 and terminating on July 31. The
first license year shall begin on August 1, 2001. Subsequent license years shall
run consecutively, each beginning on the first day of August succeeding the
completion of the previous license year.

Section 2.3  Termination. Either party may terminate this License with respect
to all or any Licensed Premises at any time by no less than ninety (90) days'
prior written notice thereof to the other party. In the event that Meijer
terminates this License without cause prior to the end of the third license
year, Meijer agrees to reimburse Licensee for an amount equal to the unamortized

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reasonable, actual, out-of-pocket costs of the improvements made to the Licensed
Space by Licensee, in accordance with the terms of this License Agreement which
are not removable by Licensee and would have no value to Licensee in the event
of a termination of the License (i.e. walls, carpet, HVAC, electrical),
multiplied by a fraction, the numerator of which equals one thousand ninety five
(1,095) less the number of days remaining before the end of the Third License
Year and the denominator of which equals one thousand ninety five (1,095).
Provided, however, Licensee shall only be entitled to such a reimbursement if
within sixty (60) days after the completion of such improvements, Licensee
provides Meijer with documentation of its reasonable, actual, out-of-pocket
costs for the improvements.

                             ARTICLE 3. LICENSE FEE

Section 3.1  Payment. All fees and other payments required to be made by
Licensee to Meijer pursuant to this License shall be paid and made to Meijer
Stores Limited Partnership, Attention: Cash Office, 2929 Walker Avenue, N.W.,
Grand Rapids, Michigan 49544, until Licensee is otherwise notified in writing by
Meijer at least ten (10) days prior to the payment date on which the change is
to be effective.

Section 3.2  Basic License Fee. Licensee shall pay, as a basic license fee for
each Licensed Premises, the sum set forth on Exhibit C attached hereto and
incorporated by reference herein. These basic license fees shall be paid in
advance on or before the tenth (10/th/) day of each month of the license term,
and Licensee  shall pay the basic license fee pro rata for that part, if any, of
the term preceding the first license year.

Section 3.3  Percentage License Fee. In addition to the basic license fee,
Licensee agrees to pay to Meijer, in the manner and upon the conditions and at
the times hereinafter set forth, and as a percentage license fee, a sum equal to
[***] of gross receipts (defined below) of each Licensed Premises during each
license year (and the portion of the term preceding the first license year)
during the term of this License greater than the Percentage License Fee
Threshold (defined below). For each full license year during the term of this
License, the "Percentage License Fee Threshold" for each License Premises shall
equal the sum specified in Exhibit C. For each license year during the term of
this License less than a full license year (and for the period during the term
of this License preceding the first license year), the Percentage License Fee
Threshold for each Licensed Premises shall equal the product of the Percentage
License Fee Threshold multiplied by a fraction, the numerator of which equals
the aggregate number of days during the term of this License in such time period
and the denominator of which equals three hundred sixty-five (365). Licensee
shall pay Meijer monthly estimates of percentage license fees for each Licensed
Premises by a bank certified check on or before the fifteenth (15/th/) day
following the end of each of Licensee's fiscal months (Licensee's fiscal year is
divided into four quarters comprised of 3 "months" of five, four and four weeks)
during the term of this License. Monthly estimates of Licensee's percentage
license fee shall be determined by multiplying (a) gross receipts of each
Licensed Premises for such month subtracting the product of the Percentage
License Fee Threshold divided by twelve (12) by (b) [***]. On or before the
thirtieth (30) day

-----------------

[***] Redacted pursuant to a request for confidential treatment.

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                                       -2-

<PAGE>

following each license year during the term of this License, Meijer and Licensee
shall reconcile the amount of estimated percentage license fees paid by Licensee
for each Licensed Premises to the amount of percentage license fees actually due
and owing under the terms of this License for each Licensed Premises for the
time period in question. The time period preceding the first license year shall
be reconciled separately (as described above) at the same time the first license
year is reconciled. In the event Licensee is deemed to owe a greater amount than
paid for a Licensed Premises, Licensee shall within thirty (30) days after such
reconciliation pay Meijer the additional fees owning. In the event Licensee is
deemed to have paid too much in estimated percentage license fees for a Licensed
Premises, Licensee shall receive a credit for such overpayment of percentage
license fees against fees next due and owing under the terms of this License or
in the event the term of this License has terminated, Meijer shall, provided
that Licensee is not otherwise in default under the terms of this License,
promptly reimburse Licensee the amount of such overpayment.

The term "gross receipts" as used herein shall mean receipts from gross sales of
all business conducted upon or from each Licensed Premises by Licensee and all
others, and whether such sales be evidenced by check, credit, charge account,
exchange, or otherwise, and shall include, but not be limited to, the amounts
received from the sale of goods, wares, and merchandise and for services
performed on or at each Licensed Premises, together with the amount received or
collected on all orders taken at each Licensed Premises, whether such orders be
filled from that Licensed Premises or elsewhere, all sales to employees of
Licensee, all deposits not refunded to purchasers, receipts for sales through
any vending machine or other coin operated device, sales on layaways, and sales
of gift certificates. Gross receipts shall not include sales or merchandise for
which cash has been refunded, or allowances made on merchandise claimed to be
defective or unsatisfactory, bad check and bad charges, provided they shall have
been included in gross sales; and there shall be deducted from gross sales the
sales price of merchandise returned by customers for exchange, provided that the
sales price of merchandise delivered to the customer in exchange shall be
included in gross sales. Gross receipts shall not include the amount of any
sales, use, or gross receipts tax imposed by any federal, state, municipal, or
governmental authority directly on sales and collected from customers, provided
that the amount thereof is added to the selling price or absorbed therein, and
paid by the Licensee to such governmental authority. No franchise or capital
stock tax and no income or similar tax based upon income or profits as such
shall be deducted from gross receipts in any event whatever. Each charge or sale
upon installment or credit shall be treated as a sale for the full price in the
month during which such charge or sale shall be made, irrespective of the time
when Licensee shall receive payment (whether full or partial) therefor.

Licensee agrees to prepare and keep at each Licensed Premises, adequate records
which shall show inventories and receipts of merchandise at that Licensed
Premises, and daily receipts from all sales and other transactions on or from
that Licensed Premises by Licensee and any other persons conducting any business
upon or from that Licensed Premises. Licensee further agrees to keep at its
office in Matthews, North Carolina the gross income, sales, and occupation tax
returns with respect to Licensee's operation at each Licensed Premises during
the term of this License and all pertinent original sales records which would
normally be examined by an independent accountant pursuant to accepted auditing
standards in performing an audit of Licensee's sales. Upon thirty (30) days
prior written request from Meijer, Licensee shall provide

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                                      -3-

<PAGE>

at Licensee's expense, all of Licensee's records for each Licensed Premises for
examination by Meijer and Meijer's authorized representative.

Licensee agrees to maintain a continuous running cash register record of the
total cumulative gross receipts from all business conducted upon or from each
Licensed Premises by Licensee and all others during the term of this License at
its office in Matthews, North Carolina. Licensee shall keep at each Licensed
Premises all records/reports produced by such cash register. Licensee
acknowledges and agrees that upon thirty (30) days prior written request from
Meijer, Licensee shall provide at Licensee's expense, such cash register and the
records/reports produced by such cash register at each Licensed Premises for
review by Meijer and Meijer's authorized representative.

Licensee shall submit to Meijer on or before the fifteenth (15th) day following
each calendar month during the term hereof (including the fifteenth (15th) day
of the month following the end of the term), a written statement signed by
Licensee, and certified by Licensee to be true and correct showing in reasonably
accurate detail, the amount of gross receipts for each Licensed Premises for the
preceding month. Licensee shall also submit to Meijer on or before the thirtieth
(30th) day following the end of each license year a written statement signed by
Licensee, and certified to be true and correct showing in reasonably accurate
detail satisfactory in scope to Meijer the amount of gross receipts for each
Licensed Premises during the preceding license year, which certification shall
be one which is satisfactory to Meijer in scope and substance. In addition, if
requested by Meijer, Licensee shall, at its sole cost and expense, after each
license year provide the written statement referenced above that is additionally
duly certified by independent certified public accountants of recognized
standing, for up to twenty five percent (25%) of all the Licensed Premises. The
statements referred to herein shall be in such form and style and contain such
details and breakdown as Meijer may reasonably request. All information with
regard to sales shall be treated as confidential and shall not be divulged by
Meijer or Meijer's accountants to anyone without Licensee's prior written
consent.

The acceptance by Meijer of payments of percentage license fees shall be without
prejudice to Meijer's right to an examination of the Licensee's books and
records of its gross receipts and inventories of merchandise. At its option and
expense, Meijer may cause, at any reasonable time, a complete audit to be made
of Licensee's entire business affairs and records relating to any Licensed
Premises for the period covered by any statement issued by the Licensee as above
set forth. If such audit shall disclose a liability for percentage license fees
for a Licensed Premises to the extent of five percent (5%) or more in excess of
the percentage license fees theretofore computed and paid by Licensee for such
period for such Licensed Premises, Licensee shall promptly pay to Meijer the
cost of said audit in addition to the deficiency, which deficiency shall be
payable in any event, and, in addition, Meijer at Meijer's option, may terminate
this License upon ten (10) days' notice to Licensee of Meijer's election to do
so.

                 ARTICLE 4. MAINTENANCE, REPAIRS, AND UTILITIES

Section 4.1   Meijer's Obligations. Meijer shall furnish, without cost to
Licensee at each Licensed Premises, electricity, air conditioning, and heat as a
part of Meijer's heating and cooling of such Entire Premises and not from
separate heating or cooling units. Except as provided in

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                                       -4-

<PAGE>

Section 4.2  (Licensee's Obligations), Meijer shall also (i) make all necessary
repairs to each Entire Premises (excluding each Licensed Premises), including
but not limited to the roof and exterior walls and (ii) maintain the parking lot
adjacent to each Entire Premises. Notwithstanding the foregoing, Meijer assumes
no responsibility or liability for damage or losses due to interruption of any
of the aforesaid services agreed to be furnished by Meijer or for damage to
Licensee's property caused by the breaking, bursting, stoppage, leaking, or
overflowing of any pipes, toilets, or roof or from any failure of or defect in
any electric line, circuit, or facility.

Section 4.2  Licensee's Obligations. Licensee shall maintain and keep each
Licensed Premises clean, shall keep all rubbish in proper containers out of view
of customers and shall dispose of all rubbish as Meijer may direct. All general
maintenance and cleaning (including but not limited to the replacement of light
bulbs) of each Licensed Premises shall be the responsibility of Licensee.
Subject to the provisions of Section 6.1 (Mutual Release), Licensee shall be
responsible for the cost of all repairs made necessary by the negligence or
intentional acts of Licensee and Licensee's agents, employees, and contractors.

Section 4.3  Telephones. Licensee may install and shall maintain at its own
expense such telephone(s) in each Licensed Premises as it may require for
incoming and outgoing calls. In the event Licensee has a Meijer intercom phone,
Licensee shall not use this phone for advertising purposes without the consent
of the Meijer store director with respect to both the timing and content of the
particular advertisement, which consent may be granted or denied in the sole
discretion of the Meijer store director. Licensee shall pay all fees for all
telephone/communications services utilized by Licensee in its operations at each
Licensed Premises.

                                 ARTICLE 5. USE

Section 5.1  Use. Licensee shall use each Licensed Premises for the sole purpose
of operating a portrait studio and selling portrait related products with the
exception of frames, photo albums and film. Notwithstanding the foregoing, the
sale of key chain frames shall be a permitted use. Licensee shall not sell any
other goods or render any other services whatsoever in or from any Licensed
Premises without Meijer's prior written approval. Notwithstanding anything
contained in this License to the contrary, Licensee shall not engage in, or
permit its agents, employees, contractors, subcontractors, or invitees to engage
in, any activity in violation of any policy of insurance which may at any time
be in force with respect to any Licensed Premises, Entire Premises, and/or
Common Facilities.

Section 5.2  Common Facilities. Licensee, its employees and invitees, shall have
the nonexclusive rights to use the driveways, sidewalks, service areas, and
parking facilities appurtenant to each Entire Premises as they may exist from
time to time ("Common Facilities"), and shall have the non-exclusive right of
ingress and egress from and to the Licensed Premises by means of the respective
Entire Premises only during such hours as such Entire Premises is open for
business to the public.

Section 5.3  Business Hours. Licensee agrees to be open each Licensed Premises
for business a minimum of 10:00 a.m. to 7:00 p.m., Monday through Friday.
Licensee understands that each

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<PAGE>

Entire Premises is closed during only the following holiday: Christmas Day.
Licensee agrees to be open during its regular business hours on all other
holidays and other business days (such as the day after Thanksgiving), except
that (i) Licensee may close at 7:00 p.m. on Christmas Eve and New Year's Eve and
all day on Thanksgiving, New Year's Day, July 4th, Memorial Day, and Labor Day;
and (ii) Licensee shall not be required to be open on Sundays.

Section 5.4  Compliance with Laws. Licensee shall, at its expense, comply with
all governmental statutes, laws, rules, orders, regulations, and ordinances
affecting each Licensed Premises or Licensee's use thereof, including, but not
limited to, The Americans With Disabilities Act of 1990 (42 U.S.C. (S)12101 et.
seq) and regulations and guidelines promulgated thereunder, as all of the same
may be amended and supplemented from time to time. Licensee shall, at its
expense, obtain and maintain during the term of this License any necessary
business and/or professional licenses, registrations, and permits required for
the operation of Licensee's business within each Licensed Premises. Breach of
this Section 5.4 (Compliance with Laws) shall give Meijer the right to terminate
this License forthwith upon twenty-four (24) hours' advance notice to Licensee,
Section 2.3 (Termination) herein notwithstanding. Licensee shall, within three
(3) days after receipt of any written correspondence regarding any Licensed
Premises or Licensee's use thereof (including, but not limited to, any written
review or inspection report) from any lawful governmental authority, provide a
copy of such correspondence, including all enclosures and attachments, to
Meijer. Meijer acknowledges and agrees that Meijer is responsible to keep each
Entire Premises, except each Licensed Premises which is Licensee's
responsibility, in compliance with The Americans With Disabilities Act. If
Meijer fails to bring any Entire Premises, excluding each Licensed Premises, in
compliance with The Americans With Disabilities Act for more than ninety (90)
days after Meijer has received written notification of a violation, Licensee may
as its sole remedy terminate this License upon written notice to Meijer.

Section 5.5  Fixtures. Licensee shall, at its own cost and expense, construct,
furnish and install in each Licensed Premises all improvements, trade fixtures,
equipment, and furnishings necessary for its operations, including, without
limitation, paneling, wallpaper, counters, cupboards, partitions, decorating,
special lighting, business shop front, signage, and all plumbing and utility
lines and/or connections. All improvements, trade fixtures, equipment, and
furnishings must be approved by Meijer in advance of the time that such items
are installed. In the event Meijer does not approve of any such item, it shall
not be installed or placed in that Licensed Premises. All movable trade
fixtures, equipment, and all other similar items owned by Licensee and installed
or placed in each Licensed Premises shall remain the property of Licensee, and
Licensee shall have the right to remove said property at any time during the
term of this License; provided that Licensee promptly repairs all damage caused
by such removal.

Section 5.6  Remodeling and Redecorating. Any remodeling or redecorating of any
Licensed Premises shall be at Licensee's expense; provided, however, prior
approval must be given in writing by Meijer. If Meijer does not approve of any
proposed remodeling or redecorating, it shall not be performed. (See Section 9.2
(Right to Relocate)).

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Section 5.7        Work Requirements.

              (a)  All work performed on or at any Licensed Premises, including
          the work described in Sections 5.5 (Fixtures) and 5.6 (Remodeling or
          Redecorating), shall be in accordance with the following requirements.
          Licensee may perform work on or at any Licensed Premises only through
          licensed contractors and subcontractors approved by Meijer in writing.
          Licensee shall in all cases promptly pay all costs and expenses
          associated with work performed on or at any Licensed Premises.
          Licensee shall be solely responsible for and have control over the
          means, methods, techniques, sequences, and procedures and for
          coordinating all portions of such work in any Licensed Premises.
          Licensee shall obtain all required governmental permits and
          authorizations for such work, and Licensee shall cause all work to be
          completed in a good and workmanlike manner, free from defective
          materials and in compliance with all building, zoning, and other laws,
          ordinances, and governmental regulations and requirements.

              (b)  Notwithstanding the foregoing, Licensee may not perform or
          arrange to have performed work on (i) the HVAC system serving any
          Entire Premises, (ii) the fire sprinkler system serving any Entire
          Premises, or (iii) the electrical system between the fuse box and any
          Licensed Premises. In the event that Licensee wishes to perform or
          arrange to have performed work on the above-described areas, Licensee
          shall request in writing that Meijer perform or arrange to have
          performed such work. Licensee shall specify in detail all requested
          work. All such work is subject to Meijer's prior approval, which may
          be withheld in its sole discretion. If Meijer approves such request,
          Meijer shall perform the requested work or arrange to have such work
          performed and Licensee shall reimburse Meijer for all costs and
          expenses incurred by Meijer in performing or arranging to have
          performed such work. If requested by Meijer, Licensee shall deposit
          with Meijer a sum equal to the sum of the costs and expenses Meijer
          would incur in performing or arranging to have performed such work as
          estimated by Meijer in its reasonable discretion.

Section 5.8   Signing and Graphics. All signing identification for each Licensed
Premises and the placement thereof shall be entirely subject to and conditioned
upon Meijer's prior approval. All costs related to signage for each Licensed
Premises shall be paid by Licensee. Licensee shall obtain any necessary permits
from governmental authorities for the erection and maintenance of its signs.

Section 5.9   Advertising. Licensee shall not use or permit the use of the word
"Meijer" or Meijer's logo in the advertisement of its business in any Licensed
Premises, in the telephone book or in any other manner whatsoever, without first
obtaining Meijer's written permission. In the event Meijer does any advertising
for Licensee, Licensee shall pay the cost of such advertising; provided,
however, that the parties shall approve in advance the cost and nature of any
such advertising.

Section 5.10  Liens. Licensee shall keep each Licensed Premises free from any
mechanics' or materialmen's liens or claims thereof for any labor or material
furnished to Licensee in connection with any Licensed Premises, except that
Licensee shall have the right to contest the

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<PAGE>

validity or amount of any such lien, provided that Licensee shall either (i)
first post any bond or make any deposits required by Meijer or the terms of any
trust, deed, mortgage, or similar instrument affecting such Licensed Premises to
assure the discharge of such lien or claim thereof; or (ii) furnish such
security as may be required, to and for the benefit of Meijer, or any title
insurance and trust company designated by Meijer, to permit a report of title to
be issued relating to such Licensed Premises without showing thereon the
existence of such lien.

Section 5.11  "Meijer" Trademark and Other Intellectual Property. Each Licensed
Premises is located in a business location owned or operated by Meijer. Licensee
acknowledges that "Meijer(R)" is a trademark owned exclusively by Meijer, Inc.
Licensee acknowledges and agrees that it has no right to use the "Meijer"
trademark, or any other trademark owned by Meijer, Inc. (collectively, the
"Mark") without the specific written permission of Meijer, Inc. Licensee
acknowledges and agrees that all other intellectual property associated with
each Entire Premises, including without limitation, all patents, design patents,
copyrights, trade dress and trade secrets (collectively, the "Other Intellectual
Property,") are the property of Meijer, Inc., and shall not be used by Licensee.
Nothing in this License or arising out of any dealings of the parties gives
Licensee any right, title, or interest whatsoever in or to the Mark or the Other
Intellectual Property. Licensee further acknowledges the validity of, and the
goodwill associated with, the Mark. Licensee will not, either during or after
the term of this License, contest Meijer, Inc.'s, title or right in and to the
Mark or the Other Intellectual Property. All use by Licensee of the Mark shall
inure to Meijer, Inc.'s exclusive benefit. The quality of the services offered
by Licensee in association with the Mark shall be in accordance with the highest
standards in the industry. Where Licensee is permitted to use the Mark to
advertise Licensee's business pursuant to Section 5.9 (Advertising), the
following notice, or another notice approved by Meijer, Inc., shall appear:

     "Meijer(R)" is a registered trademark and service mark of Meijer, Inc.

If necessary to properly reflect the legal status of the Mark, Meijer, Inc., may
change the wording of this notice by providing written notice to Licensee. Upon
request, Meijer, Inc., shall have the right to approve any and all uses of the
Mark, including advertising copy. Licensee shall use the Mark in the form, if
any, approved by Meijer, Inc., such as stylized lettering or logos. Licensee
shall not attempt to register the Mark or any other trademark that is likely to
be confused with the Mark. Licensee acknowledges that all decisions concerning
the registration and legal protection of the Mark will be made by Meijer, Inc.,
in its sole discretion. Licensee acknowledges that a breach of any of its
covenants, agreements or undertakings related to the Mark or the Other
Intellectual Property will cause immediate, irreparable damage to Meijer, Inc.,
that cannot be readily remedied or ascertained by damages in any action at law.
Accordingly, Licensee acknowledges and agrees that if a breach occurs that is
related to the Mark or the Other Intellectual Property, Meijer, Inc., will be
entitled to equitable remedies, including, without limitation, injunctions and
attorney fees.

                             ARTICLE 6. RESTORATION

Section 6.1   Mutual Release. Meijer hereby releases and discharges Licensee,
its agents and employees, of and from liability to Meijer and to anyone claiming
by, through, or under Meijer

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by subrogation or otherwise on account of any damage to or destruction of any
Entire Premises and any other property of Meijer located in any Entire Premises
caused by or arising out of any fire or other insured peril, however caused.
Licensee hereby releases and discharges Meijer, its parent, subsidiary, and
affiliated entities (including, without limitation, Meijer, Inc., and Meijer
Distribution, Inc., and their respective officers, directors, shareholders,
partners, agents, and employees and any other persons, firms, or corporations
having an interest in any Licensed Premises, of and from liability to Licensee
and to anyone claiming by, through, or under Licensee by subrogation or
otherwise on account of any of the following caused by or arising out of any
fire or other insurable peril, however caused: (i) damage to or destruction of
any property of Licensee, (ii) damage to or destruction of any improvements,
merchandise, inventory, contents, furniture, fixtures, equipment and other
property located in any Licensed Premises, Entire Premises, or Common Facilities
and (iii) loss or damage resulting from the interruption of Licensee's business
operations in any Licensed Premises.

Section 6.2   Restoration. If any Licensed Premises is damaged or destroyed, in
whole or in part, by fire or other peril so as to deprive Licensee of occupancy
or use of the same or if any Entire Premises or Common Facilities are damaged or
destroyed to the extent that they cannot be repaired or are not repaired within
thirty (30) days, Meijer may either (i) terminate this License upon written
notice to Licensee or (ii) proceed with due diligence to so restore and repair
such Licensed Premises, Entire Premises, and/or Common Facilities. The Licensee
shall be solely responsible for replacing, restoring, or repairing the fixtures,
merchandise, and other property of Licensee and any property located in any
Licensed Premises. In the event any such damage or destruction to any Licensed
Premises or any Entire Premises is not repaired within such thirty (30) day
period, Licensee shall have the right to terminate this License by providing
Meijer with ten (10) days' prior written notice of such termination given within
ten (10) days after the expiration of the above-referenced 30-day period. If
such damage renders any Licensed Premises untenantable (which results in the
suspension of operations in the affected Licensed Premises), the basic license
fee payable by Licensee with respect to such Licensed Premises hereunder shall
abate until Licensee is able to fully occupy and use the affected Licensed
Premises. Meijer shall have no duty or obligation to restore any improvements or
fixtures to any Licensed Premises made or installed by or for Licensee.

                            ARTICLE 7. EMINENT DOMAIN

Section 7.1   Total. If any entire Licensed Premises is taken under the power of
eminent domain, this License shall terminate on the date Licensee is deprived of
possession pursuant to such taking.

Section 7.2   Partial. If under the power of eminent domain any part of any
Licensed Premises or any substantial part of any Entire Premises or Common
Facilities are taken by one or more takings, then in any such event Meijer or
Licensee may terminate this License by giving to the other no less than thirty
(30) days' written notice thereof at any time after the date of such taking and
before the expiration of ninety (90) days from the date Licensee or Meijer is
deprived of possession or use of such portion of such Licensed Premises, Entire
Premises, or Common Facilities pursuant to such taking.

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Section 7.3   Restoration. If any part of any Licensed Premises or any
substantial part of any Entire Premises or Common Facilities are taken by any
public authority and neither party elects to terminate this License, Licensee
shall continue in possession of the remainder of the affected Licensed Premises,
and Meijer, at its own cost and expense, shall make all repairs and alterations
to such Entire Premises (including the respective Licensed Premises) and/or
Common Facilities necessary to constitute the remaining premises as a complete
architectural unit.

Section 7.4   License Fee Abatement. In the event of any partial taking of any
Licensed Premises, the basic license fee payable by Licensee hereunder for such
Licensed Premises shall be reduced from and after the date Licensee is deprived
of possession of such portion of such Licensed Premises in proportion to the
square footage of the Licensed Premises so taken.

Section 7.5   Award. The entire compensation awarded in or by reason of any such
taking shall belong to Meijer without any reduction therefrom for any present or
future interest of Licensee, and Licensee hereby assigns to Meijer all of
Licensee's right, title, and interest in and to any and all such compensation.
Licensee shall, however, have the right to claim and recover from the condemning
authority, but not Meijer, such compensation as may be separately recoverable by
Licensee in its own right on account of the cost of moving its business,
equipment, signage, and fixtures, interruption of business and other damages
available under applicable law.

Section 7.6   Settlement. For the purpose of this Article 7 (Eminent Domain), a
taking under the power of eminent domain shall include conveyances or
dedications made in settlement of or in lieu of condemnation proceedings.

                      ARTICLE 8. INDEMNITIES AND INSURANCE

Section 8.1   Licensee's Indemnity. Subject to the provisions of Section 6.1
(Mutual Release), Licensee shall defend, indemnify, and save harmless Meijer,
its parent, subsidiary, and affiliated entities (including, without limitation,
Meijer, Inc., and Meijer Distribution, Inc., and their respective officers,
directors, shareholders, partners, agents, and employees and any other persons,
firms, or corporations having any interest in any Licensed Premises against any
liability or claim thereof (including but not limited to reasonable actual
attorney fees and costs) whether for injury to persons, including death, or
damage to property (i) occurring on or arising out of the use of any Licensed
Premises during the term of this License; (ii) arising out of any default by
Licensee under this License; (iii) arising out of any act or omission to act by
Licensee, its agents, employees, or contractors at any time including, without
limitation, any such act or omission in any Entire Premises or Common
Facilities; or (iv) arising in connection with the operation of the business
conducted from any Licensed Premises. The foregoing indemnity from Licensee
shall include claims alleging or involving joint or comparative negligence, but
shall not extend to liability directly resulting only from the sole negligence
of Meijer, its parent, subsidiary, and affiliated entities and their respective
officers, directors, shareholders, partners, agents, and employees. To the
fullest extent permitted by law, Licensee expressly waives any and all immunity
and/or damage limitation provisions available to Licensee under any workers' or
workmen's compensation acts, disability benefit acts or other employee benefit
acts to the extent such acts would otherwise limit the amount recoverable by
Meijer, its parent, subsidiary, and affiliated entities (including, without
limitation, Meijer, Inc., and Meijer Distribution, Inc., and

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their respective officers, directors, shareholders, partners, agents, and
employees, pursuant to the indemnification provisions contained in this Section
8.1 (Licensee's Indemnity).

Section 8.2   Meijer's Indemnity. Subject to the provisions of Section 6.1
(Mutual Release), Meijer covenants to defend, indemnify, and save harmless
Licensee from and against all claims brought by third parties and all costs
(including, but not limited to, reasonable actual attorney fees), expenses, and
liabilities incurred in connection with such claims, including any action or
proceeding brought thereon, arising solely from and as a direct result of the
negligent or willful act or omission of Meijer or its agents or employees acting
in the scope of their agency or employment and which is related to Meijer's
operations in any Entire Premises.

Section 8.3   Insurance. At all times during the term of this License and at all
times during which Licensee occupies any Licensed Premises, Licensee shall
purchase and maintain the following minimum insurance coverages:

              (a)  Workers' Compensation, disability benefit or similar employee
          benefit act coverage with statutory limits and employer's liability
          with limits not less than Five Hundred Thousand Dollars ($500,000).

              (b)  Commercial General Liability including Coverage A. Bodily
          Injury and Property Damage Liability and Coverage B. Personal and
          Advertising Injury Liability, and contractual liability, in an amount
          not less than One Million Dollars ($1,000,000) per occurrence. Such
          policy shall be an "occurrence" policy, not a "claims-made" policy.
          Such insurance, including any deductible or self-insured retention,
          shall by its terms be primary with respect to any insurance carried by
          Meijer or its parent, subsidiary, or affiliated entities.

              (c)  Commercial Comprehensive Automobile Liability coverage, which
          includes contractual liability coverage and coverage for all owned,
          hired and non-owned vehicles.

              (d)  All-Risk Contents/Personal Property Insurance on
          improvements, merchandise, inventory, contents, furniture, fixtures,
          equipment and other property located in each Licensed Premises,
          protecting Licensee from damage or other loss caused by fire or other
          insurable peril, including, but not limited to, vandalism and
          malicious mischief, perils covered by extended coverage, theft,
          sprinkler leakage (if applicable), water damage (however caused),
          explosion, malfunction or failure of heating and cooling or similar
          apparatus, and other similar risks, in amounts to cover one hundred
          percent (100%) of the replacement cost of such property.

              (e)  Business Interruption Insurance with respect to Licensee's
          business operations in each Licensed Premises in amounts and coverages
          sufficient to insure Licensee against any loss Licensee may suffer as
          a result of Licensee's inability to use any Licensed Premises during
          the term of this License.

By Subsections 8.3(d) and 8.3(e), Meijer and Licensee intend that the risks of
loss or damage as described therein be borne by the responsible insurance
carriers to the extent above provided,

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and Licensee agrees to look solely to, and to seek recovery only from, such
respective insurance carriers in the event of a loss of a type described in such
Subsections to the extent that such coverage is agreed to be provided
thereunder. For this purpose, any applicable deductible amount shall be treated
as though it were recoverable under such policies. With respect to the insurance
policy specified in Subsection 8.3(b), Meijer, Inc., Meijer Distribution, Inc.,
Meijer Stores Limited Partnership, and their parent, subsidiary and affiliated
entities shall be named as additional insureds on ISO form CG 2026 or comparable
form, all at no cost to Meijer. Certificates of Insurance evidencing all
insurance required under Subsections 8.3(a), 8.3(b), 8.3(c), 8.3(d), and 8.3(e),
acceptable to Meijer, including any required additional insured endorsement,
shall be promptly sent to the Meijer Risk Management Department, P.O. Box 3280,
Grand Rapids, Michigan 49501-3280. All insurance policies required under
Subsections 8.3(a), 8.3(b), 8.3(c), 8.3(d), and 8.3(e) shall contain a provision
that the coverages afforded thereunder shall not be modified, cancelled or
allowed to expire until at least ten (10) days' prior written notice has been
given to the Meijer Risk Management Department. All required insurance shall be
underwritten by an insurance carrier acceptable to Meijer and with an AM Best
rating of not less than A-. Upon the request of Meijer, Licensee shall deliver
copies of policies evidencing the insurance coverages required by this License
to the Meijer Risk Management Department. Compliance by Licensee with the
requirements in this Section 8.3 (Insurance) as to carrying insurance and
furnishing proof thereof to Meijer shall not relieve Licensee of its indemnity
obligations under Section 8.1 (Licensee's Indemnity). Indemnity obligations in
this License shall not be negated or reduced by virtue of any insurance
carrier's (i) denial of insurance coverage for the occurrence or event which is
the subject matter of the claim, or (ii) refusal to defend any named insured.
Failure to comply with all insurance requirements shall be deemed a material
breach of this License.

                        ARTICLE 9. TITLE AND POSSESSION

Section 9.1   Quiet Enjoyment. Licensee, upon paying all fees required under
this License and performing the covenants and agreements of this License, shall
quietly have, hold, and enjoy each Licensed Premises and all rights granted
Licensee in this License during the term hereof. This Section 9.1 (Quiet
Enjoyment) is subject to Meijer's rights specified in Section 9.2 (Right to
Relocate).

Section 9.2   Right to Relocate. Meijer reserves the right, to change the size
and/or location of any Licensed Premises within any Entire Premises to a
mutually agreeable size and/or location, and in the event of any such change,
Meijer shall be responsible for Licensee's reasonable, moving expenses and the
reasonable cost of constructing such new Licenses Premises. Licensee shall be
responsible for all other relocation costs, including without limitation the
following: Licensee's lost profits and sales, and lost income to Licensee's
employees or independent contractors. Meijer may not require Licensee to change
the size and/or location of Licensee's operation more than one time during any
two (2) year period, unless the cause for such change is beyond the control of
Meijer, as in the case of fire, riot, acts of God, demand of any governmental
authority, or because of the request of Licensee for such change. In the event
Licensee and Meijer are unable to mutually agree on a size and/or location as
contemplated above, either party may terminate this License with respect to such
Licensed Premises upon thirty (30) days written notice to the other party.

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Section 9.3   Assignment. This License shall not be assigned, transferred,
relinquished, or conveyed by Licensee nor shall Licensee sublet or assign any
Licensed Premises without the prior written consent of Meijer, which consent may
be withheld in Meijer's sole discretion. In case of any assignment permitted
hereunder, Licensee, as well as the assignee, shall be liable for the full
performance of all terms and conditions of this License. Meijer's consent to any
assignment of this License or transfer of any interest in any Licensed Premises
shall not be deemed a consent to any further assignment of this License or
transfer of any interest in any Licensed Premises.

Section 9.4   Subordination. Nothing herein shall empower Licensee to do any act
which can, may, or shall cloud or encumber Meijer's interest. Licensee's rights
are and shall always be subordinate to the lien of any trust, deed, mortgage, or
other encumbrance now or hereafter placed upon any Licensed Premises or any
underlying lease now or hereafter created and to all advances made or hereafter
to be made upon the security thereof, and Licensee shall execute such further
instruments evidencing the subordination of this License to the lien or liens of
any such trust, deed, mortgage, or other encumbrance, or to any such underlying
lease, as shall be requested by Meijer. Licensee hereby irrevocably appoints
Meijer as attorney-in-fact for Licensee with full authority to execute and
deliver in the name of Licensee any such instrument or instruments.

Section 9.5   Surrender of Licensed Premises. Upon the termination of this
License, Licensee shall surrender each affected Licensed Premises to Meijer in a
broom-clean condition. Licensee shall promptly repair, at its sole cost and to
Meijer's reasonable satisfaction, all damage done to such Licensed Premises
during the course of Licensee's possession thereof, other than damage resulting
from normal wear and tear. If this License shall have been terminated by Meijer,
Meijer may at any time thereafter resume possession of any affected Licensed
Premises by any lawful means and remove Licensee or other occupants and their
effects. Upon the termination of this License, Licensee shall have no right,
title, or interest in or to any affected Licensed Premises; rather, any affected
Licensed Premises, including all modifications or improvements thereof, shall be
the sole property of Meijer, without charge, free and clear of any interest
whatsoever of Licensee. On or before the last day of the term, Licensee shall
remove all trade fixtures, machinery, equipment, and other items and/or
improvements as directed by Meijer from each Licensed Premises and promptly
repair any damage occasioned by any such removal. Property not so removed may be
removed by Meijer, its authorized agents, or independent contractors, and
Licensee shall promptly pay all costs of such removal upon receipt of notice
thereof. Upon removal of such property by Meijer, its authorized agents or
independent contractors, Licensee shall be deemed to have abandoned said
property, and title thereto shall immediately vest in Meijer. If any affected
Licensed Premises is not surrendered at such time, the Licensee shall indemnify
Meijer against loss or liability resulting from delay by Licensee in so
surrendering such Licensed Premises including, without limitation, any claims
made by any succeeding licensee founded on such delay. Licensee shall surrender
all keys for any affected Licensed Premises to Meijer at the place then fixed
for payment of license fees. Licensee's obligation to observe or perform the
provisions of this Section 9.5 (Surrender of Licensed Premises) shall survive
the termination of this License. If Licensee retains possession of the Licensed
Premises or any part thereof after the termination of the term by lapse of time
or otherwise, such holding over shall not operate to extend the term or renew
this License, except

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that at the election of Meijer, such holding over shall renew the term for the
period of one (1) month at a rate double the basic monthly license fee in
addition to all other charges due hereunder. Meijer's acceptance of any fees
after holding over shall not renew this License and the provisions of this
License do not waive Meijer's rights of re-entry or any other right hereunder.

Section 9.6   Right of Entry. Meijer, its agents and employees shall have the
right to enter each Licensed Premises at all reasonable times and for such
reasonable time as may be required to inspect the same, to show them to
prospective purchasers or licensees, to make such repairs, alterations,
improvements, or additions as Meijer shall deem necessary or desirable, and to
enforce or carry out any provision of this License. Such activities shall not
constitute an eviction of Licensee in whole or in part and the license fee(s)
reserved shall in no wise abate while such activities take place. Nothing herein
contained, however, shall be deemed or construed to impose upon Meijer any
obligation, responsibility, or liability whatsoever, for the care, maintenance,
or repair of any Licensed Premises or any part thereof, except as otherwise
herein specifically provided.

                            ARTICLE 10. MISCELLANEOUS

Section 10.1  Miscellaneous Covenants of Licensee.  Licensee covenants and
agrees:

              (a)  Licensee shall, during the business hours specified in
          Section 5.3 (Business Hours), maintain adequate personnel for the
          efficient rendering of services to Licensee's customers. Meijer
          understands that Licensee intends, for most times, to have only one
          person staffing each Licensed Premises and that such person will be
          away from the studio for breaks and lunch. Also, Meijer understands
          that customer demand for Licensee's service will sometimes exceed
          Licensee's ability to timely serve all customers.

              (b)  Licensee shall comply in all respects with the lawful
          requirements, orders, statutes, ordinances, rules, directives, and
          regulations of all lawful government authority; with rules,
          regulations, business principles, and practices adopted by Meijer for
          the conduct of each Entire Premises and the Common Facilities; and
          with the established requirement that all employees and persons
          working at the Entire Premises park in the employees' parking area.

              (c)  Licensee shall provide its own security for each Licensed
          Premises, including, but not limited to, the locking of each Licensed
          Premises when Licensee is not open for business. Meijer shall not be
          responsible for any losses which Licensee or its invitees may suffer
          including, but not limited to, thefts, robberies, or other crimes on
          or about each Licensed Premises, unless due to the sole negligence of
          Meijer or its agents or employees.

              (d)  Licensee shall pay, before delinquency, all sales, personal
          property, special assessment, income (including, any privilege or
          excise tax based on gross revenue), and all other taxes levied on
          Licensee's business or personal property. Licensee shall have no
          obligation for any real estate taxes levied on any Licensed Premises,
          except as otherwise specifically provided herein or if such taxes are
          specifically levied in lieu of

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          any tax that Licensee is required to pay pursuant to this License.
          Licensee shall also pay any license or other fee incident to its
          operations at each Licensed Premises.

              (e)  Licensee shall at all times treat its customers in a fair,
          courteous, and respectful manner.

              (f)  Licensee shall establish charges for its goods and/or
          services which are competitive with similar business operations in the
          same marketing area.

              (g)  Licensee shall not permit its employees to smoke in any
          Licensed Premises but only in areas designated by Meijer, if any, in
          each Entire Premises.

              (h)  None of the employees of Licensee shall be considered
          employees of Meijer, and Licensee is solely responsible for the
          supervision, management, payment of all salaries, compensation,
          withholding taxes, unemployment insurance premiums, health and welfare
          benefits or similar charges associated with the employment of
          Licensee's employees.

              (i)  During the term of this License, Licensee may, from time to
          time, become aware of or exposed to confidential information relative
          to Meijer customer counts, marketing plans, financial information, or
          other sensitive data. Licensee agrees, on behalf of itself, its agents
          and employees, that any such information must be treated strictly
          confidential and shall not be disclosed in any fashion to any third
          parties.

              (j)  Licensee shall keep each Licensed Premises illuminated in a
          manner approved by Meijer twenty-four (24) hours per day, seven (7)
          days a week (except for times during which each Entire Premises is
          closed).

Section 10.2  Credit Sales. Licensee may provide credit to its customers through
use of Master Charge, American Express, Visa, and Discover. Licensee shall
comply with all policies and requirements relating to credit sales established
by the agencies extending the credit.

Section 10.3  Satisfaction of Customer Complaints. Meijer has an established
policy which permits customers to freely return merchandise or obtain a full or
partial refund of money paid for services rendered which are, for any reason,
not satisfactory to the customer. This policy is directed at trying to satisfy
all reasonable customer complaints. Licensee covenants and agrees to follow this
refund policy and to adopt other policies established by Meijer to handle
customer complaints on a reasonable basis.

Section 10.4  Force Majeure. The time within which any of the parties hereto
shall be required to perform any act or acts under this License shall be
extended to the extent that the performance of such act or acts shall be delayed
by acts of God, fire, windstorm, flood, explosion, collapse of structures, riot,
war, labor disputes, delays or restrictions by governmental bodies, inability to
obtain or use necessary materials, or any cause beyond the reasonable control of
such party; provided, however, that the party entitled to such extension
hereunder shall give prompt notice to the other party of the occurrence causing
such delay. The provisions of this Section 10.4 (Force

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Majeure) shall not operate to excuse Licensee from prompt payment of any fees or
any other payments required by the terms of this License.

Section 10.5  Acceptance of Licensed Premises.

              (a)  Licensee accepts each Licensed Premises in its "as is"
          condition, with all faults, on the date of commencement of the term.
          Licensee further acknowledges that Meijer has made absolutely no
          warranties or representations regarding the condition of any Licensed
          Premises or its suitability for Licensee's intended use.

              (b)  If Meijer is unable to give possession of any Licensed
          Premises on the Commencement Date specified for such Licensed Premises
          on Exhibit C by reason of the holding over of any Licensee or
          occupant, or because construction, repairs or improvements are not
          completed, the license fee with respect to such Licensed Premises
          shall abate for the period that possession by Licensee is delayed. If
          such delay shall continue for more than forty-five (45) days, the
          Licensee may, within ten (10) days after the expiration of said
          forty-five (45) day period, give Meijer a notice of election to
          terminate this License. Unless possession of such Licensed Premises
          shall sooner be made available to Licensee, this License shall
          terminate on the tenth day after the giving of said notice. Meijer
          shall have no obligation to Licensee for failure to give possession
          except as provided in this Section 10.5 (Acceptance of Licensed
          Premises).

Section 10.6  Accord and Satisfaction. Payments by Licensee hereunder shall be
deemed to be payments for the earliest license fee due and owing under the terms
of this License. No endorsement or statement on any check or any letter
accompanying any check or payment of license fees shall be deemed an accord and
satisfaction, and Meijer may accept such check or payment without prejudice to
Meijer's right to recover the balance of such license fees or pursue any other
remedy in this License provided.

                               ARTICLE 11. DEFAULT

Section 11.1  Default. In the event that (i) Licensee defaults in its obligation
to pay any license fees or any other amounts required under this License and
such default continues uncured for five (5) days after the receipt of written
notice from Meijer of such default, (ii) Licensee defaults in the performance of
any other covenant (i.e., non-monetary covenants) on its part to be performed
under this License and such default continues uncured for ten (10) days after
the receipt of written notice from Meijer of such default, (iii) any Licensed
Premises is not continuously and uninterruptedly, except for breaks and lunch as
stated in Section 10.1(a) above, open for business in accordance with the hours
specified in Section 5.3 (Business Hours), (iv) Licensee shall become bankrupt
or insolvent or file any debtor proceedings or take or have taken against
Licensee in any court pursuant to any statute either of the United States or of
any state a petition in bankruptcy or insolvency or for reorganization or for
the appointment of a receiver or trustee of all or a portion of Licensee's
property or if Licensee makes an assignment for the benefit of creditors or
petitions for or enters into such an arrangement, or (v) Licensee shall abandon
any Licensed Premises, Meijer, in addition to other rights or remedies Meijer
may have, shall have the right to terminate this License with respect to all or
any Licensed Premises and shall have the immediate right of re-entry and may
remove all persons and property from any

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affected Licensed Premises and such property may be removed and stored in a
public warehouse or elsewhere at the cost of and for the account of Licensee,
all without service of notice or resort to legal process and without being
deemed guilty of trespass or becoming liable for any loss or damage which may be
occasioned thereby.

Section 11.2  Remedies Upon Default. Licensee and Meijer shall have, in addition
to any right or rights of termination provided hereunder, the right, upon
material default or material violation of any of the provisions hereof, to seek
specific performance of this License, or to seek any other remedy in law or
equity.

Section 11.3  Legal Expense. In case suit shall be brought for recovery of
possession of the Licensed Premises, for the recovery of any fees or other
amounts due under the provisions of this License, or because of the breach of
any other covenant herein contained on the part of Licensee to be kept or
performed and a breach shall be established, Licensee shall pay to Meijer all
expenses incurred therefor, including reasonable attorney fees. In case suit
shall be brought because of the breach of any covenant herein contained on the
part of Meijer to be kept or performed and a breach shall be established, Meijer
shall pay to Licensee all expenses incurred therefor, including reasonable
attorney fees.

Section 11.4  Remedies Cumulative. All rights and remedies provided for herein
or otherwise existing at law or in equity are cumulative, and the exercise of
one or more rights or remedies by either party shall not preclude or waive its
right to the exercise of any or all of the others.

Section 11.5  Late Payment Fee. In addition to any other rights it may have,
Meijer may charge and Licensee shall pay a late fee on any license fee or other
payment due hereunder if not paid when due. Such late fee shall be one percent
(1%) of the amount past due for any period less than fifteen (15) days. Licensee
shall also pay, on any such payment which is fifteen (15) days or more past due,
interest at a rate equal to the lesser of (a) one and one-half percent (1 1/2%)
per month or part thereof and (b) the highest rate of interest allowed by
applicable law.

                               ARTICLE 12. GENERAL

Section 12.1  Notices. Any notice desired or required to be given to Meijer
under this License, except those insurance notices described below, shall be
sent postage prepaid, registered or certified mail, to the following address:

                        Meijer Stores Limited Partnership
                        Attention: Real Estate Department
                        4411 Plainfield Avenue, N.E.
                        Grand Rapids, Michigan 49525

Any notice or document desired or required to be given to Meijer under this
License concerning matters of insurance, including but not limited to
certificates of insurance and notices of policy modification, cancellation,
termination, or expiration, shall be sent postage prepaid, registered or
certified mail, return receipt requested, to the following address:

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<PAGE>

                        Meijer Risk Management Department
                        P.O. Box 3280
                        Grand Rapids, Michigan 49501-3280

Any notice desired or required to be given to Licensee under this License shall
be sent postage prepaid, registered or certified mail, return receipt requested,
to the following address:

                        PCA International, Inc.
                        815 Matthews-Mint Hill Road
                        Matthews, North Carolina 28105
                        Attention: Barry Feld, CEO

Either party may, by written notice, designate a different address to which
notices may be sent and, by written notice, designate not more than one
additional party to whom copies of all notices must be sent.

Section 12.2  Nonwaiver. The failure of Meijer or Licensee to insist upon the
strict performance of any covenant of this License or to exercise any option or
right herein contained shall not be a waiver or relinquishment for the future of
such covenant, right, or option but the same shall remain in full force and
effect.

Section 12.3  No Offer. The submission of this License for examination does not
constitute an offer to enter into a License, and this License shall become
effective only upon execution and delivery hereof by Meijer and Licensee.

Section 12.4  Captions. The captions and headings herein are for convenience and
reference only and have no legal force or effect.

Section 12.5  Partial Invalidity. Should any section, subsection, or provision
of this License be declared to be invalid or unenforceable by a court of
competent jurisdiction, it shall not affect the validity or enforceability of
the License as a whole or any part thereof, other than the part so declared
invalid/unenforceable. The parties shall renegotiate, if possible, the
invalid/unenforceable section, subsection, or provision in a manner consistent
with the original intent.

Section 12.6 Applicable Law. This License shall be interpreted pursuant to the
laws of the state in which the Entire Premises is located.

Section 12.7  Interpretation. All provisions hereof are to be construed as
covenants and agreements as though the words importing such covenants and
agreements were used in each section hereof. The necessary grammatical changes
required to make the provisions of this License apply in the plural sense where
there is more than one licensor or licensee and to either corporations,
companies, associations, partnerships, or individuals, males or females, shall
in all instances be assumed as though in each case fully expressed.

Section 12.8 Venue of Legal Action. Any legal action between the parties (except
for eviction proceedings) related to this License shall be conducted in courts
seated in Kent County,

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<PAGE>

Michigan. Each party consents to the jurisdiction of such courts, waives any
objection to venue, and waives trial by jury.

Section 12.9  No Partnership. Meijer shall not in any way or for any purpose
become or be deemed to become a partner of or joint venturer with Licensee in
the conduct of its business by virtue of Meijer's execution of this License or
its performance of the terms and provisions hereof.

Section 12.10 Complete Agreement-Amendments. This License contains the entire
agreement between the parties and any or all prior or contemporaneous oral or
written agreements made on behalf of either party shall be of no force and
effect. This License shall be amended only by a written instrument signed by
Meijer and Licensee.

Section 12.11 Exhibits. All exhibits referred to in and attached to this License
are hereby made a part of this License.

Section 12.12 Successors and Third Parties. This License shall be binding upon
and inure to the benefit of each of the parties hereto and their respective
heirs, administrators, personal representatives, successors, and Meijer's
assigns or Licensee's assigns agreed to by Meijer pursuant to Section 9.3
(Assignment) herein. Except for Meijer's parent, subsidiary, and affiliated
entities (including, without limitation, Meijer, Inc., and Meijer Distribution,
Inc., and their respective officers, directors, shareholders, partners, agents,
and employees, Meijer and Licensee acknowledge and warrant and represent to each
other that there are no third party beneficiaries to this License.

Section 12.13 Obligations Survive. All obligations arising prior to the
termination of this License and all provisions of this License allocating
responsibility or liability between the parties, including without limitation
the indemnity provisions contained in Article 8 (Indemnities and Insurance),
shall survive the termination of this License. No obligation which survives the
term of this License shall give Licensee any possessory interest in the Licensed
Premises nor have the effect of extending the term of this License.

               (The remainder of this page is intentionally blank)

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<PAGE>

Section 12.14 Authority. Licensee represents and warrants that Licensee has the
capacity and authority to enter into this License. If Licensee is a corporation,
Licensee represents and warrants it is a duly organized and validly existing
corporation in good standing and that the person executing this License has the
requisite authority to bind the corporation to the terms of this License. If
Licensee is a partnership, Licensee represents and warrants that it is validly
existing and that the person executing this License has the requisite authority
to bind the partnership to the terms of this License.

IN WITNESS WHEREOF, the parties hereto have signed this In-Store License as of
the day and year first above written.

                                         MEIJER STORES LIMITED PARTNERSHIP

                                         By Meijer Group, Inc., General Partner

                                         By    /s/ Mike Kirsth
                                           -------------------------------------
                                            (              )

                                         Its   VP-Real Estate
                                            ------------------------------------

                                         PCA INTERNATIONAL, INC.

                                         By    /s/ Barry J. Feld
                                           -------------------------------------
                                            (              )

                                         Its   CEO
                                            ------------------------------------

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<PAGE>

                                    EXHIBIT A

                [Depiction of Licensed Premises outlined in red]

<TABLE>
<CAPTION>
Meijer                                                                      Licensed Premises
Store #                        Store Address                                 Square Footage
-------                        -------------                                 --------------
<S>         <C>                                                              <C>
138         10301 S.R. 37, Fort Wayne, Indiana 46835-9591                          451

139         6260 W. McGalliard Road, Muncie, Indiana 47304-9413                    457

146         2401 N. Prospect Ave., Champaign, Illinois 61821-1233                  638

176         4200 Conestoga Drive, Springfield, Illinois 62707-7962                 351

183         815 S. Randall Road, Elgin, Illinois 60120-3003                        457

204         10509 Heartland Blvd., Camby, Indiana 46113-9123                       443

206         400 S. Randall Road, Algonquin, Illinois 60102                         457
</TABLE>

         [Depiction of each Licensed Premises outlined in red following]

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<PAGE>

                                    EXHIBIT B
                                    ---------

                       Meijer                Commencement
                       Stores #                  Date
                       --------                  ----
                       138                 August 9, 2001

                       139                 August 3, 2001

                       146                August 12, 2001

                       176                August 18, 2001

                       183                  July 1, 2001

                       204                  July 1, 2001

                       206                  July 1, 2001

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<PAGE>

                                    EXHIBIT C

           Meijer      Annual License      Monthly      Percentage License
           Store #          Fee          Installment       Fee Threshold
           -------          ---          -----------       -------------
            138            [***]            [***]              [***]

            139            [***]            [***]              [***]

            146            [***]            [***]              [***]

            176            [***]            [***]              [***]

            183            [***]            [***]              [***]

            204            [***]            [***]              [***]

            206            [***]            [***]              [***]

-----------------

[***] Redacted pursuant to a request for confidential treatment.

PCA International Master License
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                                      -23-

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