Document:

<PAGE>

                                                                    Exhibit 4.12
--------------------------------------------------------------------------------

                          RADNOR HOLDINGS CORPORATION
                                   as Issuer,

                             WINCUP HOLDINGS, INC.
                          RADNOR CHEMICAL CORPORATION
                             RADNOR DELAWARE, INC.
                            RADNOR MANAGEMENT, INC.
                              STYROCHEM U.S., LTD.
                               WINCUP TEXAS, LTD.
                              STYROCHEM GP, L.L.C.
                              STYROCHEM LP, L.L.C.
                               WINCUP GP, L.L.C.
                               WINCUP LP, L.L.C.
                        RADNOR MANAGEMENT DELAWARE, INC.
                            STYROCHEM DELAWARE, INC.
                                      and
                          WINCUP EUROPE DELAWARE, INC

                                 as Guarantors

                                      and

                           FIRST UNION NATIONAL BANK
                                   as Trustee

                               ________________

                          THIRD SUPPLEMENTAL INDENTURE

                           Dated as of March 23, 1999

    (Supplementing a Trust Indenture dated as of October 15, 1997 as amended
 by a First Supplemental Indenture dated as of February 9, 1998, as amended by
         a Second Supplemental Indenture dated as of January 21, 1999)

                               ________________

                                  $60,000,000

                       10% Series B Senior Notes due 2003

--------------------------------------------------------------------------------
<PAGE>

     THIS THIRD SUPPLEMENTAL INDENTURE, dated as of the 23rd day of March, 1999
(this "Third Supplemental Indenture"), is among RADNOR HOLDINGS CORPORATION, a
Delaware corporation (the "Company"), WINCUP HOLDINGS, INC., a Delaware
corporation, RADNOR CHEMICAL CORPORATION (formerly known as SP Acquisition Co.),
a Delaware corporation, RADNOR DELAWARE, INC., a Delaware corporation, RADNOR
MANAGEMENT, INC., a Delaware corporation, STYROCHEM U.S., LTD. (formerly known
as StyroChem International, Inc. and StyroChem U.S., Inc.), a Texas limited
partnership, WINCUP TEXAS, LTD., a Texas limited partnership, STYROCHEM GP,
L.L.C., a Delaware limited liability company, STYROCHEM LP, L.L.C., a Delaware
limited liability company, WINCUP GP, L.L.C., a Delaware limited liability
company and WINCUP LP, L.L.C., a Delaware limited liability company,
(collectively, the "Guarantors"), RADNOR MANAGEMENT DELAWARE, INC., a Delaware
corporation, STYROCHEM DELAWARE, INC., a Delaware corporation and WINCUP EUROPE
DELAWARE, INC., a Delaware corporation, (collectively, the "New Guarantors") and
FIRST UNION NATIONAL BANK, as trustee (the "Trustee").

                                   RECITALS:

     The Company, the Guarantors and the Trustee are parties to a certain
Indenture dated October 15, 1997, as amended by a First Supplemental Indenture
dated as of February 9, 1998, as amended by a Second Supplemental Indenture
dated as of January 21, 1999 (as amended, the "Indenture") relating to the
creation by the Company of an issue of $60,000,000 of its 10% Series B Senior
Notes, due 2003 (the "Securities");

     Each Guarantor has issued a guarantee of the Securities (collectively, the
"Guarantees") pursuant to which the Guarantors have guaranteed, in accordance
with Article Thirteen of the Indenture, all Indenture Obligations (as such term
is defined in the Indenture); and

     The Company, the Guarantors, the New Guarantors and the Trustee now desire
to enter into this Third Supplemental Indenture pursuant to Section 901(vi) of
the Indenture, without the consent of the Holders, in order to add the New
Guarantors as Guarantors and Restricted Subsidiaries under the Indenture;

     Capitalized terms used herein without definition shall have the meanings
given such terms in the Indenture.

         NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH:

     For and in consideration of the premises and for other good and valuable
consideration, it is covenanted and agreed, for the benefit of each other and
for the equal and proportionate benefit of the Holders of the Securities issued
under the Indenture, as follows:

                                       2
<PAGE>

                                  ARTICLE ONE

                  JOINDER AND GUARANTEE OF THE NEW GUARANTORS

     Section 101. The New Guarantors hereby absolutely, unconditionally and
irrevocably guarantee, on a joint and several basis with the Guarantors, to the
Trustee and the Holders, as if each New Guarantor was the principal debtor, the
punctual payment and performance when due of all Indenture Obligations (which
for purposes of this Guarantee shall also be deemed to include all commissions,
fees, charges, costs and expenses (including reasonable legal fees and
disbursements of one counsel) arising out of or incurred by the Trustee or the
Holders in connection with the enforcement of this Guarantee).  This Guarantee
shall rank pari passu with any Senior Indebtedness of the New Guarantors and
shall be subject in all respects to, and governed by all of the terms and
provisions applicable to Guarantees in, the Indenture, including without
limitation Article Thirteen thereof.

     Section 102.  As of the date hereof, all references to the "Guarantors" in
the Indenture shall be deemed to refer collectively to: (i) the Guarantors in
existence on the date hereof and (ii) the New Guarantors.

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

                                           RADNOR HOLDINGS CORPORATION

Attest: /s/ Caroline J. Williamson         By: /s/ Michael T. Kennedy
        -----------------------------          ----------------------------
        Caroline J. Williamson                 Michael T. Kennedy
        Secretary                              President

                                           WINCUP HOLDINGS, INC.

Attest: /s/ Caroline J. Williamson         By: /s/ Michael T. Kennedy
        -----------------------------          ----------------------------
        Caroline J. Williamson                 Michael T. Kennedy
        Secretary                              President

                                           RADNOR CHEMICAL CORPORATION

Attest: /s/ Caroline J. Williamson         By: /s/ Michael T. Kennedy
        -----------------------------          ----------------------------
        Caroline J. Williamson                 Michael T. Kennedy
        Secretary                              President

                                       3
<PAGE>

                                           RADNOR DELAWARE, INC.

Attest: /s/ Caroline J. Williamson         By: /s/ Michael T. Kennedy
        -----------------------------          ----------------------------
        Caroline J. Williamson                 Michael T. Kennedy
        Secretary                              President

     RADNOR MANAGEMENT, INC.

Attest: /s/ Caroline J. Williamson         By: /s/ Michael T. Kennedy
        -----------------------------          ----------------------------
        Caroline J. Williamson                 Michael T. Kennedy
        Secretary                              President

                                           STYROCHEM U.S., LTD.
                                           By:  StyroChem GP, L.L.C.,
                                                its general partner,
                                           By:  Radnor Chemical Corporation,
                                                its sole member

Attest: /s/ Caroline J. Williamson         By: /s/ Michael T. Kennedy
        -----------------------------          ----------------------------
        Caroline J. Williamson                 Michael T. Kennedy
        Secretary                              President

                                           WINCUP TEXAS, LTD.
                                           By:  WinCup GP, L.L.C.,
                                                its general partner,
                                           By:  WinCup Holdings, Inc.,
                                                its sole member

Attest: /s/ Caroline J. Williamson         By: /s/ Michael T. Kennedy
        -----------------------------          ----------------------------
        Caroline J. Williamson                 Michael T. Kennedy
        Secretary                              President

                                       4
<PAGE>

                                           STYROCHEM GP, L.L.C.
                                           By: Radnor Chemical Corporation,
                                           its sole member

Attest: /s/ Caroline J. Williamson         By: /s/ Michael T. Kennedy
        -----------------------------          ----------------------------
        Caroline J. Williamson                 Michael T. Kennedy
        Secretary                              President

                                           STYROCHEM LP, L.L.C.
                                           By: Radnor Chemical Corporation,
                                           its sole member

Attest: /s/ Caroline J. Williamson         By: /s/ Michael T. Kennedy
        -----------------------------          ----------------------------
        Caroline J. Williamson                 Michael T. Kennedy
        Secretary                              President

                                           WINCUP GP, L.L.C.
                                           By: WinCup Holdings, Inc.,
                                           its sole member

Attest: /s/ Caroline J. Williamson         By: /s/ Michael T. Kennedy
        -----------------------------          ----------------------------
        Caroline J. Williamson                 Michael T. Kennedy
        Secretary                              President

                                           WINCUP LP, L.L.C.
                                           By: WinCup Holdings, Inc.,
                                           its sole member

Attest: /s/ Caroline J. Williamson         By: /s/ Michael T. Kennedy
        -----------------------------          ----------------------------
        Caroline J. Williamson                 Michael T. Kennedy
        Secretary                              President

                                           RADNOR MANAGEMENT DELAWARE, INC.

Attest: /s/ Caroline J. Williamson         By: /s/ Michael T. Kennedy
        -----------------------------          ----------------------------
        Caroline J. Williamson                 Michael T. Kennedy
        Secretary                              President

                                       5
<PAGE>

                                           STYROCHEM DELAWARE, INC.

Attest: /s/ Caroline J. Williamson         By: /s/ Michael T. Kennedy
        -----------------------------          ----------------------------
        Caroline J. Williamson                 Michael T. Kennedy
        Secretary                              President

                                           WINCUP EUROPE DELAWARE, INC.

Attest: /s/ Caroline J. Williamson         By: /s/ Michael T. Kennedy
        -----------------------------          ----------------------------
        Caroline J. Williamson                 Michael T. Kennedy
        Secretary                              President

     FIRST UNION NATIONAL BANK,
     as Trustee

Attest: /s/ Ralph E. Jones                 By: /s/ Alan G. Finn
        -----------------------------          ----------------------------
        Name: Ralph E. Jones                   Alan G. Finn
        Title: Corporate Trust Officer         Assistant Vice President

                                       6<PAGE>

                                                                   EXHIBIT 10.19

                                                                  EXECUTION COPY

                  THIRD AMENDED AND RESTATED REVOLVING CREDIT

                                      AND

                               SECURITY AGREEMENT

                             BANK OF AMERICA, N.A.
                                   (AS AGENT)

                                      WITH

                             WINCUP HOLDINGS, INC.
                          RADNOR CHEMICAL CORPORATION
                              STYROCHEM U.S., LTD.
                          RADNOR HOLDINGS CORPORATION
                             RADNOR DELAWARE, INC.
                            STYROCHEM DELAWARE, INC.
                               WINCUP TEXAS, LTD.
                              (AS U.S. BORROWERS)

                                      AND

                    STYROCHEM EUROPE (THE NETHERLANDS) B.V.
                              STYROCHEM FINLAND OY
                             THERMISOL DENMARK A/S
                              THERMISOL SWEDEN AB
                              THERMISOL FINLAND OY
                            (AS EUROPEAN BORROWERS)

                                      AND

                                  THE LENDERS

                               December 29, 1999
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                            Page
<S>                                                                         <C>
I.     DEFINITIONS.........................................................   2
       1.1.  Accounting Terms..............................................   2
       1.2.  General Terms.................................................   2
       1.3.  Uniform Commercial Code Terms.................................  21
       1.4.  Certain Matters of Construction...............................  21

II.    ADVANCES, PAYMENTS..................................................  21
       2.1.  U.S. Revolving Advances.......................................  21
       2.1A. European Revolving Advances...................................  22
       2.2.  Procedure for Borrowing.......................................  23
       2.3.  Disbursement of Advance Proceeds..............................  25
       2.4.  Optional Currencies...........................................  25
       2.5.  Maximum Advances..............................................  27
       2.6.  Repayment of Advances.........................................  27
       2.7.  Currency......................................................  27
       2.8.  Statement of Account..........................................  28
       2.9.  Letters of Credit.............................................  28
      2.10.  Issuance of Letters of Credit.................................  29
      2.11.  Requirements For Issuance of Letters of Credit................  29
      2.12.  Additional Payments...........................................  31
      2.13.  Manner of Borrowing and Payment...............................  31
      2.14.  Swingline Loans...............................................  34
      2.15.  Utilization of Advances in Optional Currencies................  36

III   INTEREST AND FEES....................................................  36
       3.1.  Interest......................................................  36
       3.2.  Letter of Credit Fees.........................................  36
       3.3.  Fees..........................................................  37
       3.4.  Collateral Monitoring Fee.....................................  38
       3.5.  Computation of Interest and Fees..............................  38
       3.6.  Maximum Charges...............................................  38
       3.7.  Increased Costs...............................................  38
       3.8.  Basis For Determining Interest Rate Inadequate or Unfair......  39
       3.9.  Capital Adequacy..............................................  40

IV.    COLLATERAL; GENERAL TERMS...........................................  40
       4.1.  Acknowledgement and Grant of Security Interests...............  40
       4.2.  Perfection of Security Interest...............................  41
       4.3.  Disposition of Collateral.....................................  42
       4.4.  Preservation of Collateral....................................  42
       4.5.  Ownership of Collateral.......................................  42
       4.6.  Defense of Agent's and Lender's Interests.....................  43
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                         <C>
       4.7.  Books and Records.............................................  43
       4.8.  Financial Disclosure..........................................  43
       4.9.  Compliance with Laws..........................................  44
       4.10. Inspection of Premises........................................  44
       4.11. Insurance.....................................................  44
       4.12. Failure to Pay Insurance......................................  45
       4.13. Payment of Taxes..............................................  45
       4.14. Payment of Leasehold Obligations..............................  46
       4.15. Receivables...................................................  46
       4.16. Inventory.....................................................  48
       4.17. Intentionally Omitted.........................................  48
       4.18. Exculpation of Liability......................................  49
       4.19. Environmental Matters.........................................  49
       4.20. Financing Statements..........................................  50
       4.21. ThermiSol Sweden..............................................  50

V.    REPRESENTATIONS AND WARRANTIES.......................................  51
       5.1.  Authority.....................................................  51
       5.2.  Formation and Qualification...................................  51
       5.3.  Survival of Representations and Warranties....................  51
       5.4.  Tax Returns...................................................  51
       5.5.  Financial Statements..........................................  52
       5.6.  Corporate Name................................................  52
       5.7.  O.S.H.A. and Environmental Compliance.........................  53
       5.8.  Solvency: No Litigation, Violation, Indebtedness or Default...  53
       5.9.  Patents, Trademarks, Copyrights and Licenses..................  55
       5.10. Licenses and Permits..........................................  55
       5.11. Default of Indebtedness.......................................  55
       5.12. No Default....................................................  55
       5.13. No Burdensome Restrictions....................................  55
       5.14. No Labor Disputes.............................................  55
       5.15. Margin Regulations............................................  56
       5.16. Investment Company Act........................................  56
       5.17. Disclosure....................................................  56
       5.18. Intentionally Omitted.........................................  56
       5.19. Swaps.........................................................  56
       5.20. Conflicting Agreements........................................  56
       5.21. Application of Certain Laws and Regulations...................  56
       5.22. Business and Property of Borrowers............................  57
       5.23. Acquisition...................................................  57
       5.24. Year 2000 Matters.............................................  57
VI.    AFFIRMATIVE COVENANTS...............................................  57
       6.1.  Payment of Fees...............................................  57
       6.2.  Conduct of Business and Maintenance of Existence and Assets...  57
       6.3.  Violations....................................................  58
       6.4.  Government Receivables........................................  58
</TABLE>

                                      ii
<PAGE>

<TABLE>
<S>                                                                         <C>
       6.5.  Net Worth.....................................................  58
       6.6.  Current Ratio.................................................  58
       6.7.  Fixed Charge Coverage.........................................  58
       6.8.  Interest Coverage.............................................  59
       6.9.  Net Income....................................................  59
       6.10. Funded Indebtedness to EBITDA Ratio...........................  59
       6.11. Execution of Supplemental Instruments.........................  59
       6.12. Payment of Indebtedness.......................................  59
       6.13. Standards of Financial Statements.............................  59
       6.14. Exercise of Rights............................................  60
       6.15. Landlord Waivers; Bailee Letters..............................  60

VII.   NEGATIVE COVENANTS..................................................  60
       7.1.  Merger, Consolidation, Acquisition and Sale of Assets.........  60
       7.2.  Creation of Liens.............................................  61
       7.3.  Guarantees....................................................  61
       7.4.  Investments...................................................  61
       7.5.  Loans.........................................................  61
       7.6.  Capital Expenditures..........................................  62
       7.7.  Dividends: Distributions......................................  62
       7.8.  Indebtedness..................................................  63
       7.9.  Nature of Business............................................  63
       7.10. Transactions with Affiliates..................................  63
       7.11. Leases........................................................  63
       7.12. Subsidiaries..................................................  64
       7.13. Fiscal Year and Accounting Changes............................  64
       7.14. Pledge of Credit..............................................  64
       7.15. Amendment of Certificate of Incorporation, Etc................  64
       7.16. Compliance with ERISA.........................................  64
       7.17. Senior Notes..................................................  65
       7.18. Second Senior Notes...........................................  65
       7.19. Prepayment of Indebtedness....................................  65

VIII.  CONDITIONS PRECEDENT................................................  65
       8.1.  Conditions to Initial Advances................................  65
       8.2.  Conditions to Each Advance....................................  69

IX.    INFORMATION.........................................................  70
       9.1.  Disclosure of Material Matters................................  70
       9.2.  Schedules.....................................................  70
       9.3.  Intentionally Omitted.........................................  70
       9.4.  Litigation....................................................  70
       9.5.  Material Occurrences..........................................  70
       9.6.  Government Receivables........................................  71
       9.7.  Annual Financial Statements...................................  71
       9.8.  Quarterly Financial Statements................................  71
       9.9.  Monthly Financial Statements..................................  72
</TABLE>

                                      iii
<PAGE>

<TABLE>
<S>                                                                         <C>
       9.10. Other Reports.................................................  72
       9.11. Additional Information........................................  72
       9.12. Projected Operating Budget....................................  73
       9.13. Intentionally Omitted.........................................  73
       9.14. Notice of Suits, Adverse Events...............................  73
       9.15. ERISA Notices and Requests....................................  73
       9.16. Additional Documents..........................................  74

XI.    LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT..........................  77
       11.1. Rights and Remedies...........................................  77
       11.2. Agent's Discretion............................................  78
       11.3. Setoff........................................................  78
       11.4. Rights and Remedies not Exclusive.............................  78
       11.5. Actions in Concert............................................  78

XII.   WAIVERS AND JUDICIAL PROCEEDINGS....................................  78
       12.1. Waiver of Notice..............................................  78
       12.2. Delay.........................................................  79
       12.3. Jury Waiver...................................................  79

XIII.  EFFECTIVE DATE AND TERMINATION......................................  79
       13.1. Term..........................................................  79
       13.2. Termination...................................................  79

XIV.   REGARDING AGENT.....................................................  80
       14.1. Appointment...................................................  80
       14.2. Nature of Duties..............................................  80
       14.3. Lack of Reliance on Agent and Resignation.....................  81
       14.4. Certain Rights of Agent.......................................  81
       14.5. Reliance......................................................  82
       14.6. Notice of Default.............................................  82
       14.7. Indemnification...............................................  82
       14.8. Agent in its Individual Capacity..............................  82
       14.9. Delivery of Documents.........................................  83
       14.10.Borrowers' Undertaking to Agent...............................  83

XV.    MISCELLANEOUS.......................................................  83
       15.1. Governing Law.................................................  83
       15.2. Entire Understanding..........................................  84
       15.3. Successors and Assigns; Participations; New Lenders...........  85
       15.4. Application of Payments.......................................  86
       15.5. Indemnity.....................................................  86
       15.6. Notice........................................................  87
       15.7. Survival......................................................  88
       15.8. Severability..................................................  88
       15.9. Expenses......................................................  88
       15.10.Injunctive Relief.............................................  89
</TABLE>

                                      iv
<PAGE>

<TABLE>
<S>                                                                         <C>
      15.11. Consequential Damages.........................................  89
      15.12. Captions......................................................  89
      15.13. Counterparts:  Telecopied Signatures..........................  89
      15.14. Construction..................................................  89
      15.15. Currency Indemnity............................................  89

XVI.  BORROWING AGENCY.....................................................  90
      16.1. Borrowing Agency Provisions....................................  90
      16.2. Waiver of Subrogation..........................................  91

XVII. GUARANTY.............................................................  91
      17.1. Cross-Guaranty.................................................  91
      17.2. Contribution with Respect to Guaranty Obligations..............  92
      17.3. Obligations Absolute...........................................  93
      17.4. Waiver.........................................................  94
      17.5. Recovery.......................................................  94
      17.6. Liability Cumulative...........................................  95
</TABLE>

                                       v
<PAGE>

                             EXHIBITS AND SCHEDULES

EXHIBITS
Exhibit 2.1         - Form of Amended and Restated U.S. Revolving Credit Note
Exhibit 2.1A        - Form of European Revolving Note
Exhibit 2.2(a)      - Form of Notice of Borrowing
Exhibit 2.9         - Form of Letter of Credit and Security Agreement
Exhibit 2.14(b)(i)  - Form of Swingline Request
Exhibit 2.14(d)     - Form of Swingline Note
Exhibit 5.5(b)      - Financial Projections
Exhibit 7.12-A      - Form of Joinder Agreement
Exhibit 7.12-B      - Form of Guaranty (Corporate)
Exhibit 8.1(j)      - Form of Officers' Certificate
Exhibit 15.3        - Form of Commitment Transfer Supplement

SCHEDULES
Schedule 1.2        - Permitted Encumbrances
Schedule 4.5        - Locations of Equipment and Inventory
Schedule 4.15(c)    - Location of Borrowers' Executive Offices
Schedule 4.20       - Financing Statements
Schedule 5.2(a)     - Formation and Qualification
Schedule 5.2(b)     - Subsidiaries
Schedule 5.4        - Federal Tax Identification Numbers
Schedule 5.6        - Corporate Names
Schedule 5.7        - Environmental Releases, Spills, etc.
Schedule 5.8 (b)    - Pending Litigation
Schedule 5.8(d)     - Multiemployer Plans
Schedule 5.9        - Licenses, Trademarks, Patents, Copyrights, Source Code
                      Escrow Agreements
Schedule 5.10       - Licenses and Permits
Schedule 5.14       - Labor Disputes
Schedule 7.3        - Guarantees

                                      vi
<PAGE>

                                                                  EXECUTION COPY

                  THIRD AMENDED AND RESTATED REVOLVING CREDIT
                                      AND
                              SECURITY AGREEMENT

     Third Amended and Restated Revolving Credit and Security Agreement dated as
of December 29, 1999 between WINCUP HOLDINGS, INC. ("WinCup"), RADNOR CHEMICAL
CORPORATION ("Radnor Chemical"), STYROCHEM U.S., LTD. ("StyroChem"), RADNOR
HOLDINGS CORPORATION ("Radnor"), RADNOR DELAWARE, INC. ("Radnor Delaware"),
STYROCHEM DELAWARE, INC. ("StyroChem Delaware") and WINCUP TEXAS, LTD. ("WinCup
Texas") (WinCup, Radnor Chemical, StyroChem, Radnor, Radnor Delaware, StyroChem
Delaware and WinCup Texas each, a "U.S. Borrower" and jointly and severally, the
"U.S. Borrowers") and STYROCHEM EUROPE (THE NETHERLANDS) B.V. ("StyroChem
Europe"), STYROCHEM FINLAND OY ("StyroChem Finland"), THERMISOL DENMARK A/S
("ThermiSol Denmark"), THERMISOL SWEDEN AB ("ThermiSol Sweden") and THERMISOL
FINLAND OY ("ThermiSol Finland") (StyroChem Europe, StyroChem Finland, ThermiSol
Denmark, ThermiSol Sweden and ThermiSol Finland each, a "European Borrower" and
jointly and severally, the "European Borrowers"; the European Borrowers,
together with the U.S. Borrowers each, a "Borrower" and collectively, the
"Borrowers"), BANK OF AMERICA, N.A., a national banking association ("Bank of
America") and each of the other financial institutions which are and such
financial institutions which become a party hereto pursuant to Section 15.3
(Bank of America and such other financial institutions, collectively, the
"Lenders" and individually a "Lender") and Bank of America, as administrative
and collateral agent for the Lenders (Bank of America, in such capacity, the
"Agent").

                                  BACKGROUND
                                  ----------

     WinCup, Radnor Chemical (formerly known as SP Acquisition Co.), StyroChem
(formerly known as StyroChem International, Inc.), Radnor, Radnor Delaware,
StyroChem Delaware and WinCup Texas entered into a Second Amended and Restated
Revolving Credit and Security Agreement dated as of October 15, 1997 (as same
may have been amended, modified or supplemented, the "Existing Loan Agreement")
and the European Borrowers, the Prior U.K. Agent (as defined herein) and Bank of
America were parties to a Supplement Revolving Multicurrency Credit Agreement
dated as of December 12, 1997 (the "Supplement").  GMAC Commercial Credit LLC
(formerly BNY Factoring LLC, formerly BNY Financial Corporation) (the "Prior
Agent") and GMAC Commercial Credit Development Limited (formerly BNY Financial
Limited) (the "Prior U.K. Agent") resigned as Agent under the Existing Loan
Agreement and the Supplement and has assigned all of its rights, obligations and
interests as Agent and as a Lender under the Existing Loan Agreement and the
Supplement, respectively to Bank of America pursuant to an Assignment Agreement
dated as of the date hereof.  By execution of this Agreement, WinCup, Radnor
Chemical, StyroChem, Radnor, Radnor Delaware, StyroChem Delaware, WinCup Texas,
Agent and Lenders wish to amend and restate the Existing Loan Agreement on the
terms and conditions hereinafter set forth and the European Borrowers agree to
the extension of the loans hereunder to the European Borrowers on the terms and
conditions hereinafter set forth.
<PAGE>

     IN CONSIDERATION of the mutual covenants and undertakings herein contained,
the U.S. Borrowers, the European Borrowers, Agent and Lenders hereby agree as
follows:

I.   DEFINITIONS.
     -----------

     1.1. Accounting Terms.
          ----------------

     As used in this Agreement or any certificate, report, note or other
document made or delivered pursuant to this Agreement, accounting terms not
defined in Section 1.2 or elsewhere in this Agreement and accounting terms
partly defined in Section 1.2 to the extent not defined, shall have the
respective meanings given to them under GAAP; provided, however, whenever such
                                              --------  -------
accounting terms are used for the purposes of determining compliance with
financial covenants in this Agreement, such accounting terms shall be defined in
accordance with GAAP applied in preparation of the audited financial statements
of Borrowers on a consolidated basis for the fiscal period ended December 27,
1998.

     1.2. General Terms.
          -------------

     For purposes of this Agreement the following terms shall have the following
     meanings:

     "Acquisition Agreement" shall mean the Stock Purchase Agreement including
      ---------------------
all exhibits and schedules thereto dated as of October 28, 1996 among Richard
Davidovich, Richard Davidovich Charitable Trust, James River Paper Company,
Inc., Grupo Industrial Hermes, S.A. de C.V., E.M. Rosenthal, Rozanne Rosenthal,
Ashli M. Rosenthal Trust, Benjamin A. Rosenthal Trust, Madelyn E. Rosenthal
Trust, JMC Family Investment Ltd. Partnership and Richard C. Penshorn
(collectively, "Sellers") as sellers and Radnor as buyer.

     "Advances" shall mean and include the Revolving Advances, Letters of Credit
      --------
and Swingline Loans.

     "Affiliate" of any Person shall mean (a) any Person (other than a
      ---------
Subsidiary) which, directly or indirectly) is in control of, is controlled by,
or is under common control with such Person, or (b) any Person who is a partner,
shareholder, director or officer (i) of such Person, (ii) of any Subsidiary of
such Person or (iii) of any Person described in clause (a) above.  For purposes
of this definition, control of a Person shall mean the power, direct or
indirect, (x) to vote 5% or more of the securities having ordinary voting power
for the election of directors of such Person, or (y) to direct or cause the
direction of the management and policies of such Person whether by contract or
otherwise.

     "Agent" shall mean the Bank, in its capacity as administrative and
      -----
collateral agent for the Lenders, or any successor agent designated pursuant to
Section 14.3 hereof.

     "Agent's Spot Rate of Exchange" shall mean the Agent's spot rate of
      -----------------------------
exchange for the purchase of the relevant Optional Currency in the London
foreign exchange market with Dollars

                                       2
<PAGE>

(as supplied to it at its request by the Reference Banks) at or about 11 a.m.
(London time) on a particular day.

     "Alternate Base Rate" shall mean, for any day, a rate per annum equal to
      -------------------
the higher of (i) the Prime Rate in effect on such day and (ii) the Federal
Funds Rate in effect on such day plus 1/2 of 1%.

     "Applicable Margin" for any period shall be determined by the ratio of
      -----------------
Funded Indebtedness to EBITDA calculated for the most recent fiscal quarter with
respect to the four fiscal quarters then ended which shall be subject to
adjustment from time to time as set forth in Section 3.1 and Section 3.3(b).
The Applicable Margin with respect to Eurodollar Rate Loans, Domestic Rate Loans
and the Facility Fee provided for in Section 3.3(b) hereof, as the case may be,
shall be the percentage set forth below as corresponds to the applicable ratio
set forth below:

<TABLE>
<CAPTION>
              Funded Indebtedness                   Domestic         Eurodollar       Facility
                   To EBITDA                      Rate Margin       Rate Margin         Fee
                   ---------                      -----------       -----------         ---
       <S>                                        <C>               <C>               <C>
       Greater than 5.0 to 1.0                       .50%               2.00%           .50%

       Greater than 4.1 to 1.0 but equal to          .25%               1.75%          .375%
       or less than 5.0 to 1.0

       Greater than 3.1 to 1.0 but equal to            0%               1.50%           .25%
       or less than 4.1 to 1.0

       Greater than 2.1 to 1.0 but equal to            0%               1.25%          .125%
       or less than 3.1 to 1.0

       Equal to or less than 2.1 to 1.0                0%               1.00%          .125%
</TABLE>

     In the event of a Default or Event of Default hereunder, the Applicable
Margin shall be .50% in the case of the Domestic Rate Margin, 2.00% in the case
of the Eurodollar Rate Margin and .50% in the case of the Facility Fee.

     "Authority" shall have the meaning set forth in Section 4.19(c).
      ---------

     "Average Monthly Eurodollar Rate" shall mean, as to any one month Interest
      -------------------------------
Period, the average one month LIBOR as published in the Wall Street Journal over
the course of such one month Interest Period.

     "Bank" shall mean Bank of America, N.A. or its successor.
      ----

     "Blocked Accounts" shall have the meaning set forth in Section 4.15(h).
      ----------------

     "Borrower" or "Borrowers" shall have the meaning set forth in the preamble
      --------      ---------
to this Agreement and shall include all permitted successors and assigns of such
Persons.

                                       3
<PAGE>

     "Borrowers on a consolidated basis" shall mean the consolidation in
      ---------------------------------
accordance with GAAP of the accounts or other items of Borrowers.

     "Borrowing Agent" shall mean Radnor.
      ---------------

     "Borrowing Base" shall mean the sum of the U.S. Borrowing Base and the
      --------------
European Borrowing Base.

     "Business Day" shall mean with respect to Eurodollar Rate Loans, any day on
      ------------
which commercial banks are open for domestic and international business,
including dealings in Dollar deposits in London, England and New York, New York
and with respect to all other loans, any day other than a day on which
commercial banks in New York, New York or Charlotte, North Carolina are
authorized or required by law to close.

     "CERCLA" shall mean the Comprehensive Environmental Response, Compensation
      ------
and Liability Act of 1980, as amended, 42 U.S.C. (S)(S)9601 et seq.
                                                            -- ---

     "Change of Control" shall mean (a) the occurrence of any event (whether in
      -----------------
one or more transactions) which results in a transfer of control of any Borrower
to a Person who is not an Original Owner or an Affiliate of an Original Owner or
(b) any merger or consolidation of or with any Borrower or sale or transfer of
all or substantially all of the property or assets of any Borrower with or to a
Person that is not a Borrower hereunder.  For purposes of this definition,
"control of any Borrower" shall mean the power, direct or indirect, (x) to vote
50% or more of the securities having ordinary voting power for the election of
directors of any Borrower or (y) to direct or cause the direction of the
management and policies of Borrower, by contract or otherwise.

     "Change of Ownership" shall mean (a) any transfer (whether in one or more
      -------------------
transactions) of ownership of 50% or more of the common stock of any Borrower
(including for the purposes of the calculation of percentage ownership, any
shares of common stock into which any capital stock of any Borrower held by any
Original Owner is convertible or for which any such shares of the capital stock
of any Borrower or of any other Person may be exchanged and any shares of common
stock issuable to its Parent upon exercise of any warrants, options or similar
rights which may at the time of calculation be held by such Original Owners) to
a Person who is neither (at the time of such transfer) an Original Owner nor an
Affiliate of an Original Owner or (b) any merger, consolidation or sale of
substantially all of the property or assets of any Borrower with or to a Person
that is not a Borrower hereunder.

     "Charges" shall mean all taxes, charges, fees, imposts, levies or other
      -------
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation and property taxes,
custom duties, fees, assessments, liens, claims and charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts, imposed by any taxing or other authority, domestic or
foreign (including, without limitation, the PBGC or

                                       4
<PAGE>

any environmental agency or superfund), upon the Collateral, any Borrower or any
of its Affiliates.

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

     "Collateral" with respect to the European Borrowers shall be determined in
      ----------
accordance with the European Security Documents and with respect to the U.S.
Borrowers, shall mean and include:

          (a)  all Receivables;

          (b)  all General Intangibles;

          (c)  all Inventory;

          (d)  all of each Borrower's right, title and interest in and to (i)
     all merchandise returned or rejected by Customers, relating to or securing
     any of the Receivables; (ii) all of each Borrower's rights with respect to
     Inventory as a consignor, a consignee, an unpaid vendor, mechanic, artisan,
     or other lienor, including stoppage in transit, setoff, detinue, replevin,
     reclamation and repurchase; (iii) all additional amounts due to any
     Borrower from any Customer relating to the Receivables; (iv) other
     property, including warranty claims, relating to any goods securing this
     Agreement; (v) all of each Borrower's contract rights, rights of payment
     which have been earned under a contract right, instruments, documents,
     chattel paper, warehouse receipts, deposit accounts, money and securities;
     (vi) if and when obtained by any Borrower, all real and personal property
     of third parties in which such Borrower has been granted a lien or security
     interest as security for the payment or enforcement of Receivables; and
     (vii) any other goods, personal property or real property now owned or
     hereafter acquired in which any Borrower has expressly granted a security
     interest or may in the future grant a security interest to Agent for the
     ratable benefit of the Lenders hereunder, or in any amendment or supplement
     hereto or thereto, or under any other agreement between Agent and any
     Borrower (it being understood that any such security interest shall arise
     only as of the date it is expressly granted to the Agent and that this
     subclause (vii) shall not be interpreted so as to grant to the Agent a
     prior or priming security interest ahead of a security interest
     constituting a Permitted Encumbrance granted to a purchase money lender or
     other creditor in connection with Indebtedness permitted to be incurred
     hereunder);

          (e) all of each Borrower's ledger sheets, ledger cards, files,
     correspondence, records, books of account, business papers, computers,
     computer software (whether owned by any Borrower or in which it has an
     interest), computer programs, tapes, disks and documents relating to (a),
     (b), (c) or (d) of this Paragraph; and

          (f) all proceeds and products of (a), (b), (c), (d) and (e) in
     whatever form, including, but not limited to: cash, deposit accounts
     (whether or not comprised solely of

                                       5
<PAGE>

     proceeds), certificates of deposit, insurance proceeds (including hazard,
     flood and credit insurance), negotiable instruments and other instruments
     for the payment of money, chattel paper, security agreements, documents,
     eminent domain proceeds, condemnation proceeds and tort claim proceeds.

     "Commitment Percentage" shall mean (i) as to each Lender, the percentage
      ---------------------
set forth below such Lender's name on the signature page hereof as same may be
adjusted upon any assignment by a Lender pursuant to Section 15.3(b) hereof and
(ii) with respect to the Swingline Lender, the Swingline Commitment.

     "Commitment Transfer Supplement" shall mean a document in the form of
      ------------------------------
Exhibit 15.3 hereto, properly completed and otherwise in form and substance
------------
satisfactory to Agent by which the Purchasing Lender purchases and assumes a
portion of the obligation of Lenders to make Advances under this Agreement.

     "Consents" shall mean all filings and all licenses, permits, consents,
      --------
approvals, authorizations, qualifications and orders of governmental authorities
and other third parties, domestic or foreign, necessary to carry on a Borrower's
business, including, without limitation, any Consents required under all
applicable federal, state or other applicable law.

     "Contract Rate" shall mean, as applicable, the Revolving Interest Rate or
      -------------
the Default Rate.

     "Controlled Group" shall mean all members of a controlled group of
      ----------------
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with any Borrower, are treated as a single
employer under Section 414 of the Code.

     "Current Assets" at a particular date, shall mean all cash, cash
      --------------
equivalents, accounts and inventory of Radnor on a Consolidated Basis and all
other items which would, in conformity with GAAP, be included under current
assets on a balance sheet of Radnor on a Consolidated Basis as at such date;
provided, however, that such amounts shall not include (a) any amounts for any
--------  -------
Indebtedness owing by an Affiliate of Radnor or any of its consolidated
subsidiaries, unless such Indebtedness arose in connection with the sale of
goods or rendition of services in the ordinary course of business and would
otherwise constitute current assets in conformity with GAAP, (b) any shares of
stock issued by an Affiliate of Radnor or any of its consolidated subsidiaries,
or (c) the cash surrender value of any life insurance policy.

     "Current Liabilities" at a particular date, shall mean all amounts which
      -------------------
would, in conformity with GAAP, be included under current liabilities on a
balance sheet of Radnor on a Consolidated Basis as at such date, but in any
event including, without limitation, the amounts of (a) all Indebtedness of any
Borrower payable on demand, or, at the option of the Person to whom such
Indebtedness is owed, not more than twelve (12) months after such date, (b) any
payments in respect of any Indebtedness of any Borrower (whether installment,
serial maturity, sinking fund payment or otherwise) required to be made not more
than twelve (12) months after such date, (c) all reserves in respect of
liabilities or Indebtedness payable on demand or, at the option of the Person to
whom such Indebtedness is owed, not more than twelve (12) months after such

                                       6
<PAGE>

date, the validity of which is not contested at such date, and (d) all accruals
for federal or other taxes measured by income payable within a twelve (12) month
period.

     "Customer" shall mean and include the account debtor with respect to any
      --------
Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with any Borrower,
pursuant to which any Borrower is to deliver any personal property or perform
any services.

     "Debt Payments" shall mean and include all cash actually expended by Radnor
      -------------
on a Consolidated Basis to make (a) total interest payments on any Indebtedness,
plus, (b) scheduled principal payments on all Indebtedness.
----

     "Default" shall mean an event which, with the giving of notice or passage
      -------
of time or both, would constitute an Event of Default.

     "Default Rate" shall have the meaning set forth in Section 3.1 hereof.
      ------------

     "Depository Accounts" shall have the meaning set forth in Section 4.15(h)
      -------------------
hereof.

     "Determination Date" shall have the meaning set forth in Section 2.15
      ------------------
hereof.

     "Deutschemarks" shall mean the national currency unit of Germany.
      -------------

     "Documents" shall have the meaning set forth in Section 8.1(c) hereof.
      ---------

     "Dollars" and the sign "$" shall mean lawful money of the United States of
      -------
America.

     "Domestic Rate Loan" shall mean any Advance that bears interest based upon
      ------------------
the Alternate Base Rate.

     "EBITDA" shall mean Net Income (calculated in accordance with Section 6.9
      ------
below) plus interest expense, taxes, depreciation and amortization deducted in
calculating net income for such period, determined on a pro forma basis after
giving effect to acquisitions of operating businesses made in compliance with
subsection 7.1(a) of this Agreement or otherwise approved by the Lenders.

     "Effective Date" shall mean December 29, 1999 or such other date as may be
      --------------
agreed to by the parties hereto.

     "Eligible Inventory" shall mean and include Inventory excluding work in
      ------------------
process, with respect to each Borrower, valued at the lower of cost or market
value, determined on a first-in-first-out basis, which is not, in Agent's
opinion, obsolete, slow moving or unmerchantable and which Agent, in its sole
discretion, shall not deem ineligible Inventory, based on such considerations as
Agent may from time to time deem appropriate including, without limitation,
whether the Inventory is subject to a perfected, first priority security
interest in favor of Agent

                                       7
<PAGE>

for the ratable benefit of the Lenders and whether the Inventory conforms to all
standards imposed by any governmental agency, division or department thereof
which has regulatory authority over such goods or the use or sale thereof

     "Eligible Receivables" shall mean and include, with respect to each
      --------------------
Borrower, each Receivable arising in the ordinary course of such entity's
business and which Agent, in its sole credit judgment, shall deem to be an
Eligible Receivable, based on such considerations as Agent may from time to time
deem appropriate.  A Receivable shall not be deemed eligible unless such
Receivable is subject to Agent's first priority perfected security interest (or,
in the case of the European Borrowers, a floating charge) for the ratable
benefit of the Lenders and no other Lien other than Permitted Encumbrances, and
is evidenced by an invoice, bill of lading or other documentary evidence
satisfactory to Agent.  In addition, no Receivable shall be an Eligible
Receivable if:

          (a) it arises out of a sale made by any Borrower to an Affiliate of
     any Borrower or to a Person controlled by an Affiliate of any Borrower;

          (b) it is due or unpaid more than ninety (90) days after the original
     invoice date;

          (c) twenty-five percent (25%) or more of the Receivables from the
     Customer are not deemed Eligible Receivables hereunder.  Such percentage
     may, in Agent's sole discretion, be increased or decreased from time to
     time;

          (d) any covenant, representation or warranty contained in this
     Agreement with respect to such Receivable has been breached;

          (e) the Customer shall (i) apply for, suffer, or consent to the
     appointment of, or the taking of possession by, a receiver, custodian,
     trustee or liquidator of itself or of all or a substantial part of its
     property or call a meeting of its creditors, (ii) admit in writing its
     inability, or be generally unable, to pay its debts as they become due or
     cease operations of its present business, (iii) make a general assignment
     for the benefit of creditors, (iv) commence a voluntary case under any
     state or federal bankruptcy laws (as now or hereafter in effect), (v) be
     adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take
     advantage of any other law providing for the relief of debtors, (vii)
     acquiesce to, or fail to have dismissed, any petition which is filed
     against it in any involuntary case under such bankruptcy laws, or (viii)
     take any action for the purpose of effecting any of the foregoing;

          (f) except in the case of a Borrower that is a European Borrower, the
     sale is to a Customer outside the continental United States of America,
     unless the sale is on letter of credit, guaranty or acceptance terms, in
     each case acceptable to Agent in its sole discretion;

                                       8
<PAGE>

          (g) the sale to the Customer is on a bill-and-hold, guaranteed sale,
     sale-and-return, sale on approval, consignment or any other repurchase or
     return basis or is evidenced by chattel paper;

          (h) Agent believes, in its sole judgment, that collection of such
     Receivable is insecure or that such Receivable may not be paid by reason of
     the Customer's financial inability to pay;

          (i) the Customer is the United States of America, any state or any
     department, agency or instrumentality of any of them, unless the applicable
     Borrower effectuates an assignment of its right to payment of such
     Receivable to Agent pursuant to the Assignment of Claims Act of 1940, as
     amended (31 U.S.C. Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et
                                         -- ---                               --
     seq.) or has otherwise complied with other applicable statutes or
     ---
     ordinances;

          (j) the goods giving rise to such Receivable have not been shipped and
     delivered to and accepted by the Customer or the services giving rise to
     such Receivable have not been performed by the applicable Borrower and
     accepted by the Customer or the Receivable otherwise does not represent a
     final sale;

          (k) the Receivables of the Customer exceed a credit limit determined
     by Agent, in its sole discretion, to the extent such Receivable exceeds
     such limit;

          (l) the Receivable is subject to any offset, deduction, defense,
     dispute, or counterclaim to the extent of such offset, deduction, defense,
     dispute or counterclaim, the Customer is also a creditor or supplier of a
     Borrower or the Receivable is contingent in any respect or for any reason;

          (m) the applicable Borrower has made any agreement with a Customer for
     any deduction therefrom, except for discounts or allowances made in the
     ordinary course of business for prompt payment, all of which discounts or
     allowances are reflected in the calculation of the face value of each
     respective invoice related thereto;

          (n) shipment of the merchandise or the rendition of services has not
     been completed;

          (o) any return, rejection or repossession of the merchandise has
     occurred;

          (p) such Receivable is not payable to a Borrower; or

          (q) such Receivable is not otherwise satisfactory to Agent as
     determined in good faith by Agent in the exercise of its discretion in a
     reasonable manner.

     "Environmental Laws" shall mean all federal, state and local environmental,
      ------------------
land use, zoning, health, chemical use, safety and sanitation laws, statutes,
ordinances and codes relating to the protection of the environment and/or
governing the use, storage, treatment, generation,

                                       9
<PAGE>

transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.

     "Equipment" shall mean and include as to each Borrower all of such
      ---------
Borrower's goods (excluding Inventory) whether now owned or hereafter acquired
and wherever located including, without limitation, all equipment, machinery,
apparatus, motor vehicles, fittings, furniture, furnishings, fixtures, parts,
accessories and all replacements and substitutions therefor or accessions
thereto.

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

     "Eurodollar Rate Loan" shall mean an Advance at any time that bears
      --------------------
interest based on the Eurodollar Rate or the Average Monthly Eurodollar Rate.

     "Eurodollar Rate" shall mean for any Eurodollar Rate Loan for the then
      ---------------
current Interest Period relating thereto the rate per annum (such Eurodollar
Rate to be adjusted to the next higher 1/100 of one (1%) percent) equal to the
quotient of (a) LIBOR, divided by (b) a number equal to 1.00 minus the aggregate
of the rates (expressed as a decimal) of reserve requirements current on the day
that is two Business Days prior to the beginning of the Interest Period
(including without limitation basic, supplemental, marginal and emergency
reserves) under any regulation promulgated by the Board of Governors of the
Federal Reserve System (or any other governmental authority having jurisdiction
over the Bank) as in effect from time to time, dealing with reserve requirements
prescribed for Eurocurrency funding including any reserve requirements with
respect to "Eurocurrency liabilities" under Regulation D of the Board of
Governors of the Federal Reserve System.

     "European Advances" shall mean European Revolving Advances and European
      -----------------
Letters of Credit.

     "European Advance Rates" shall have the meaning set forth in Section
      ----------------------
2.1A(a) hereof.

     "European Borrower" shall have the meaning set forth in the recitals
      -----------------
hereto.

     "European Borrowing Base" shall have the meaning set forth in Section 2.1A
      -----------------------
hereof.

     "European Collateral" shall mean all Collateral provided by the European
      -------------------
Borrowers.

     "European Inventory Advance Rate" shall have the meaning set forth in
      -------------------------------
Section 2.1A(a)(ii).

     "European Letters of Credit" shall have the meaning set forth in Section
      --------------------------
2.9 hereof.

                                      10
<PAGE>

     "European Obligations" shall mean all obligations of each of the European
      --------------------
Borrowers (in their capacity as such) hereunder, under the European Revolving
Notes, in connection with European Letters of Credit or otherwise in connection
with the European Advances.

     "European Receivables Advance Rate" shall have the meaning set forth in
      ---------------------------------
Section 2.1(A)(a)(i) hereof.

     "European Revolving Advances" shall mean the Advances made to the European
      ---------------------------
Borrowers pursuant to Section 2.1A hereunder.

     "European Revolving Notes" shall mean the promissory notes referred to in
      ------------------------
Section 2.1A hereof.

     "European Security Documents" shall mean each agreement executed by
      ---------------------------
StyroChem Finland or ThermiSol Finland pursuant to which promissory notes
secured by a floating charge (yrityskiinnitys) and pledged in favor of the Prior
U.K. Agent are assigned and pledged to the Agent, for the benefit of the
Lenders, pursuant to which the Agent, for the benefit of the Lenders, is granted
a floating charge upon the European Collateral as security for the European
Obligations, as such documents may be amended, restated or supplemented from
time to time, and the term "European Security Documents" shall also include
documents substantially similar to the foregoing and executed by any other
European Borrower.

     "Euros" shall mean the lawful currency of the European Union as constituted
      -----
by the Treaty of European Union.

     "Event of Default" shall mean the occurrence and continuance of any of the
      ----------------
events set forth in Article X hereof

     "Federal Funds Rate" shall mean, for any day, the weighted average of the
      ------------------
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day which is a Business Day, the average of quotations for such day on such
transactions received by the Bank from three Federal funds brokers of recognized
standing selected by the Bank.

     "Finnish Markka" shall mean the national currency unit of Finland.
      --------------

     "Fixed Charge Coverage" for any period shall mean the ratio for such period
      ---------------------
of (1) EBITDA to (2) all Debt Payments plus (a) the aggregate amount of capital
                                       ----
expenditures actually made plus (b) the aggregate amount of cash payments of
                           ----
taxes made.

     "Funded Indebtedness" means as to any Person and its Subsidiaries on a
      -------------------
consolidated basis, as of any date of determination, (i) the aggregate of all
Indebtedness for Borrowed Money of such Person and its Subsidiaries, whether
secured or unsecured (but excluding, without duplication, loans by such Person
to one or more of its Subsidiaries), having a final maturity (or

                                      11
<PAGE>

which by the terms thereof is renewable or extendible at the option of the
obligor for a period ending) more than one year after that date, including
current maturities of long-term Indebtedness for Borrowed Money (as determined
in accordance with GAAP), less (ii) the aggregate amount of all cash balances
and cash equivalents of such Person and/or any of its Subsidiaries. Unless
otherwise provided, the term "Funded Indebtedness" as used herein refers to the
Funded Indebtedness of Radnor on a Consolidated Basis.

     "GAAP" shall mean generally accepted accounting principles in the United
      ----
States of America in effect from time to time.

     "General Intangibles" shall mean and include as to each Borrower all of
      -------------------
such Borrower's general intangibles, whether now owned or hereafter acquired
including, without limitation, all choses in action, causes of action, corporate
or other business records, inventions, designs, patents, patent applications,
trademarks, service marks, trade secrets, goodwill, copyrights, design rights,
registrations, licenses, franchises, customer lists, tax refunds, tax refund
claims, computer programs, all claims under guaranties, security interests or
other security held by or granted to such Borrower to secure payment of any of
the Receivables by a Customer, all rights of indemnification and all other
intangible property of every kind and nature (other than Receivables).

     "Governmental Body" shall mean any nation or government, any state or other
      -----------------
political subdivision thereof or any entity exercising the legislative,
judicial, regulatory or administrative functions of or pertaining to a
government.

     "Hazardous Discharge" shall have the meaning set forth in Section 4.19(d)
      -------------------
hereof.

     "Hazardous Substance" shall mean, without limitation, any flammable
      -------------------
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or toxic substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C.  Sections 1801, et seq.), RCRA or any other
                                           -- ---
applicable Environmental Law and in the regulations adopted pursuant thereto.

     "Hazardous Wastes" shall mean all waste materials subject to regulation
      ----------------
under CERCLA, RCRA or applicable state law, and any other applicable Federal and
state laws now in force or hereafter enacted relating to hazardous waste
disposal.

     "Indebtedness" of a Person at a particular date shall mean all obligations
      ------------
of such Person which in accordance with GAAP would be classified upon a balance
sheet as liabilities (except capital stock and surplus earned or otherwise) and
in any event, without limitation by reason of enumeration, shall include all
indebtedness, debt and other similar monetary obligations of such Person whether
direct or guaranteed, and all premiums, if any, due at the required prepayment
dates of such indebtedness, and all indebtedness secured by a Lien on assets
owned by such Person, whether or not such indebtedness actually shall have been
created, assumed or incurred by such Person.  Any indebtedness of such Person
resulting from the acquisition by such Person of any assets subject to any Lien
shall be deemed, for the purposes hereof, to be the equivalent of

                                      12
<PAGE>

the creation, assumption and incurring of the indebtedness secured thereby,
whether or not actually so created, assumed or incurred.

     "Indebtedness for Borrowed Money" of a person means at any time the sum at
      -------------------------------
such time of (a) Indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, (b) any obligations of such
Person in respect of letters of credit, banker's or other acceptances or similar
obligations issued or created for the account of such Person, (c) lease
obligations of such Person with respect to capital leases, (d) all liabilities
secured by any Lien on any property owned by such Person, to the extent attached
to such Person's interest in such property, even though such Person has not
assumed or become personally liable for the payment thereof, (e) obligations of
third parties which are being guarantied or indemnified against by such Person
or which are secured by the property of such Person; (f) any obligation of such
Person or a member of Controlled Group to a Multiemployer Plan; and (h) any
obligations, liabilities or indebtedness, contingent or otherwise, under or in
connection with, any interest rate or currency swap agreements, cap, floor, and
collar agreements, currency spot, foreign exchange and forward contracts and
other similar agreements and arrangements; but excluding trade and other
accounts payable in the ordinary course of business.

     "Indenture" shall mean the Indenture dated as of December 5, 1996 between
      ---------
Radnor, as issuer, WinCup, Radnor Chemical Corporation f/k/a/ SP Acquisition
Co., Radnor Delaware, Radnor Management, Inc., StyroChem, WinCup Texas,
StyroChem GP, L.L.C., StyroChem LP, L.L.C., WinCup GP, L.L.C., WinCup LP,
L.L.C., Radnor Management Delaware, Inc., StyroChem Delaware and WinCup Europe
Delaware, Inc. as guarantors and First Union National Bank, as trustee, as
amended through the date hereof.

     "Interest Coverage" for any period shall mean the ratio of (1) EBITDA to
      -----------------
(2) Total Interest.

     "Interest Period" shall mean (i), as to any Eurodollar Rate Loan, the
      ---------------
period provided for any Eurodollar Rate Loan pursuant to Section 2.2(b) and (ii)
as to any Swingline Loan, a period commencing in each case on the date of the
borrowing and ending on the date agreed to by one or more of the Borrowers and
the Swingline Lender in accordance with Section 2.14.

     "Inventory" shall mean and include as to each Borrower all of such
      ---------
Borrower's now owned or hereafter acquired goods, merchandise and other personal
property, wherever located, to be furnished under any contract of service or
held for sale or lease, all raw materials, work in process, finished goods and
materials and supplies of any kind, nature or description which are or might be
used or consumed in such Borrower's business or used in selling or furnishing
such goods, merchandise and other personal property, and all documents of title
or other documents representing them.

     "James River" shall mean Fort James Operating Company f/k/a James River
      -----------
Paper Company, Inc.

                                      13
<PAGE>

     "Lender" and "Lenders" shall have the meaning ascribed to such term in the
      ------
Preamble, each Purchasing Lender and shall include each person which is a
transferee, successor or assign of any Lender or any Purchasing Lender.

     "Letters of Credit" shall have the meaning set forth in Section 2.9.
      -----------------

     "Letter of Credit Fees" shall mean the fees set forth in Section 3.2.
      ---------------------

     "LIBOR" shall mean for the Interest Period for each Eurodollar Rate Loan
      -----
comprising part of the same borrowing (including conversions, extensions and
renewals), a per annum interest rate (rounded upwards, if necessary, to the
nearest whole multiple of 1/100 of 1%) equal to the rate of interest, determined
by the Agent on the basis of the offered rates for deposits in dollars for a
period of time corresponding to such Interest Period (and commencing on the
first day of such Interest Period), appearing on Telerate Page 3750 (or, if, for
any reason, Telerate Page 3750 is not available, the Reuters Screen LIBO Page)
as of approximately 11:00 A.M. (London time) two (2) Business Days before the
first day of such Interest Period.  As used herein, "Telerate Page 3750" means
the display designated as page 3750 by Dow Jones Telerate, Inc. (or such other
page as may replace such page on that service for the purpose of displaying the
British Bankers Association London interbank offered rates) and "Reuters Screen
LIBO Page" means the display designated as page "LIBO" on the Reuters Monitor
Money Rates Service (or such other page as may replace the LIBO page on that
service for the purpose of displaying London interbank offered rates of major
banks).

     "Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
      ----
assignment, security interest, lien (whether statutory or otherwise), Charge,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature whatsoever including, without limitation, any conditional sale or other
title retention agreement, any lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give, any
financing statement under the Uniform Commercial Code or comparable law of any
jurisdiction.

     "Material Adverse Effect" shall mean a material adverse effect on (a) the
      -----------------------
condition, operations, assets, business or prospects of the applicable Person or
Persons, (b) any Borrower's ability to pay the Obligations in accordance with
the terms thereof, (c) the value of the Collateral, the Liens on the Collateral
or the priority of any such Lien, or (d) the practical realization of the
benefits of Agent and Lenders' rights and remedies under this Agreement and the
Other Documents, all as determined by the Required Lenders in the good faith
exercise of their sole and absolute discretion.

     "Maximum European Loan Amount" shall mean $8,000,000.
      ----------------------------

     "Maximum U.S. Loan Amount" shall mean $32,000,000.
      ------------------------

     "Monthly Advances" shall have the meaning set forth in Section 3.1 hereof.
      ----------------

     "Multiemployer Plan" shall mean a "multiemployer plan" as defined in
      ------------------
Sections 3(37) and 4001(a)(3) of ERISA.

                                      14
<PAGE>

     "Net Income" shall mean the net income of Radnor on a Consolidated Basis,
      ----------
determined in accordance with GAAP.

     "Net Worth" at a particular date, shall mean the aggregate amount of all
      ---------
assets of Radnor on a Consolidated Basis as may properly be classified as such
in accordance with GAAP consistently applied and such other assets as are
properly classified as "intangible assets", less (b) the aggregate amount of all
Indebtedness of Radnor on a Consolidated Basis.

     "Notes" shall mean collectively, the U.S. Revolving Credit Notes, the
      -----
European Revolving Notes and the Swingline Note.

     "Obligations" shall mean and include any and all of each Borrower's
      -----------
Indebtedness and/or liabilities to Agent, the Swingline Lender or any of the
Lenders or any corporation that directly or indirectly controls or is controlled
by or is under common control with any Lender of every kind, nature and
description, direct or indirect, secured or unsecured, joint, several, joint and
several, absolute or contingent, due or to become due, now existing or hereafter
arising, contractual or tortious, liquidated or unliquidated under this
Agreement or under any Other Document and all obligations of any Borrower to
Agent or the Lenders to perform acts or refrain from taking any action under
this Agreement or any Other Document.

     "Optional Currencies" shall mean Deutschemarks, Euros and Finnish Markkas.
      -------------------

     "Original Dollar Amount" in relation to an Advance, means (a) if the
      ----------------------
Advance is denominated in Dollars, the amount of that Advance, or (b) if the
Advance is denominated in an Optional Currency, the equivalent in Dollars of the
amount of that Advance at the Agent's Spot Rate of Exchange two Business Days
prior to the proposed day of borrowing.

     "Other Documents" shall mean the Notes, the Questionnaire and any and all
      ---------------
other agreements, instruments and documents, including, without limitation,
guaranties, pledges, powers of attorney, consents, letter of credit applications
and agreements and all other writings heretofore, now or hereafter executed
and/or delivered by any Borrower to Agent or any Lender in respect of the
transactions contemplated by this Agreement, as such documents may be amended,
restated or supplemented from time to time.

     "Parent" shall mean with respect to any Person, a corporation or other
      ------
entity owning, directly or indirectly at least 50% of the shares of stock or
other ownership interests having ordinary voting power to elect a majority of
the directors of the Person, or other Persons performing similar functions for
any such Person.

     "Participant" shall mean each Person who shall be granted the right by any
      -----------
Lender to participate in any of the Advances and who shall have entered into a
participation agreement in form and substance satisfactory to such Lender.

                                      15
<PAGE>

     "Payment Office" shall mean initially Independence Center, 15th Floor,
      --------------
Charlotte, North Carolina 28255; thereafter, such other office of Agent, if any,
which it may designate by notice to Borrowing Agent and each Lender to be the
Payment Office.

     "PBGC" shall mean the Pension Benefit Guaranty Corporation.
      ----

     "Permitted Encumbrances" shall mean (a) Liens in favor of Agent for the
      ----------------------
ratable benefit of the Lenders; (b) Liens for taxes, assessments or other
governmental charges not delinquent or being contested in good faith and by
appropriate proceedings and with respect to which proper reserves have been
taken by Borrowers; provided, that, the Lien shall have no effect on the
                    --------  ----
priority of the Liens in favor of Agent for the ratable benefit of the Lenders
or the value of the assets in which Agent has such a Lien and a stay of
enforcement of any such Lien for the ratable benefit of the Lenders shall be in
effect; (c) Liens disclosed in the financial statements referred to in Section
5.5; (d) deposits or pledges to secure obligations under worker's compensation,
social security or similar laws, or under unemployment insurance; (e) deposits
or pledges to secure bid tenders, contracts (other than contracts for the
payment of money), leases, statutory obligations, surety and appeal bonds and
other obligations of like nature arising in the ordinary course of any
Borrower's business; (f) judgment Liens that have been stayed or bonded and
mechanics', worker's, materialmen's or other like Liens arising in the ordinary
course of any Borrower's business with respect to obligations which are not due
or which are being contested in good faith by the applicable Borrower; (g) Liens
placed upon fixed assets hereafter acquired to secure a portion of the purchase
price thereof, provided that (x) any such lien shall not encumber any other
property of any Borrower (other than replacements and additions to the acquired
fixed assets) and (y) the aggregate amount of Indebtedness secured by such Liens
incurred as a result of such purchases during any fiscal year shall not exceed
the amount provided for in Section 7.6; and (g) Liens disclosed on Schedule 1.2.
                                                                   ------------

     "Person" shall mean any individual, sole proprietorship, partnership,
      ------
corporation, business trust, joint stock company, trust, unincorporated
organization, association, limited liability company, institution, public
benefit corporation, joint venture, entity or government (whether Federal,
state, county, city, municipal or otherwise, including any instrumentality,
division, agency, body or department thereof).

     "Plan" shall mean any employee benefit plan within the meaning of Section
      ----
3(3) of ERISA, maintained for employees of a U.S. Borrower or any U.S. member of
the Controlled Group or any such Plan to which a U.S. Borrower or any U.S.
member of the Controlled Group is required to contribute on behalf of any of its
employees.

     "Prepayment Date" shall have the meaning set forth in Section 13.1 hereof.
      ---------------

     "Prime Rate" shall mean the prime commercial lending rate of the Bank as
      ----------
publicly announced to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This rate of interest is determined from time to time by the Bank as a means of
pricing some loans to its customers and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest rate of interest
actually charged by the Bank to any particular class or category of customers of
the Bank.

                                      16
<PAGE>

     "Prior Agent" shall mean GMAC Commercial Credit LLC, formerly BNY Factoring
      -----------
LLC, formerly BNY Financial Corporation.

     "Prior U.K. Agent" shall mean GMAC Commercial Credit Development Limited,
      ----------------
formerly BNY Financial Limited.

     "Projections" shall have the meaning set forth in Section 5.5(b) hereof .
      -----------

     "Purchasing Lender" shall have the meaning set forth in Section 15.3
      -----------------
hereof.

     "Questionnaire" shall mean the Perfection Certificate and the responses
      -------------
thereto provided by Borrowers and delivered to Agent and/or its counsel.

     "Radnor" shall mean Radnor Holdings Corporation, a corporation organized
      ------
and existing under the laws of the State of Delaware.

     "Radnor Chemical" shall mean Radnor Chemical Corporation, a corporation
      ---------------
organized and existing under the laws of the State of Delaware.

     "Radnor Delaware" shall mean Radnor Delaware, Inc., a corporation organized
      ---------------
and existing under the laws of the State of Delaware.

     "Radnor on a Consolidated Basis" shall mean the consolidation in accordance
      ------------------------------
with GAAP of the accounts or other items of Radnor and its Subsidiaries.

     "RCRA" shall mean the Resource Conservation and Recovery Act, 42 U.S.C.
      ----
(S)(S) 6901 et seq., as same may be amended from time to time.
            -- ---

     "Receivables" shall mean and include as to each Borrower all of such
      -----------
Borrower's accounts, contract rights, instruments (including those evidencing
indebtedness among Borrowers and its Affiliates), documents, chattel paper,
general intangibles relating to accounts, drafts and acceptances, and all other
forms of obligations owing to such Borrower arising out of or in connection with
the sale or lease of Inventory or the rendition of services, all guarantees and
other security therefor, whether secured or unsecured, now existing or hereafter
created, and whether or not specifically sold or assigned to the Agent for the
ratable benefit of the Lenders hereunder.

     "Reference Bank" shall mean the London offices of Bank of America, N.A.,
      --------------
First Union National Bank and The Chase Manhattan Bank or such other bank as the
Agent and the Borrowing Agent may agree.

     "Related Person" shall mean as to any Person, any other Person which,
      --------------
together with such Person, is treated as a single employer under Section 414(c)
of the Code.

     "Release" shall have the meaning set forth in Section 5.7(c)(i) hereof
      -------

                                      17
<PAGE>

     "Reportable Event" shall mean a reportable event described in Section
      ----------------
4043(b) of ERISA or the regulations promulgated thereunder.

     "Required Lenders" shall mean Lenders holding at least fifty one percent
      ----------------
(51%) of the Advances or if no Advances are outstanding, fifty one percent (51%)
of the Commitment Percentages.

     "Revolving Advances" shall mean collectively, the U.S. Revolving Advances
      ------------------
and the European Revolving Advances.

     "Revolving Interest Rate" shall mean an interest rate per annum equal to
      -----------------------
(a) the sum of the Alternate Base Rate plus the Applicable Margin with respect
to Domestic Rate Loans, (b) the sum of the Eurodollar Rate plus the Applicable
Margin with respect to Eurodollar Rate Loans (other than Eurodollar Rate Loans
made pursuant to Section 2.2(b) hereof) or (c) the sum of the Average Monthly
Eurodollar Rate plus the Applicable Margin with respect to Eurodollar Rate Loans
made pursuant to Section 2.2(h) hereof.

     "Second Indenture" shall mean the Indenture dated as of October 15, 1997
      ----------------
between Radnor, as Issuer, WinCup, Radnor Chemical, StyroChem, Radnor
Management, Inc., Radnor Delaware, WinCup Texas, StyroChem GP, L.L.C., StyroChem
LP, L.L.C., WinCup GP, L.L.C., WinCup LP, L.L.C., Radnor Management Delaware,
Inc., StyroChem Delaware and WinCup Europe Delaware, Inc. as guarantors and
First Union National Bank, as trustee.

     "Second Senior Notes" shall mean the 10% Series B Senior Notes due 2003
      -------------------
issued by Radnor pursuant to the Second Indenture and any notes issued in
exchange or substitution therefor.

     "Senior Notes" shall mean the 10% Senior Notes due 2003 issued by Radnor
      ------------
pursuant to the Indenture in conjunction with the transactions contemplated by
the Acquisition Agreement and any notes issued in exchange or substitution
therefor.

     "Settlement Date" shall mean the Effective Date and thereafter Wednesday of
      ---------------
each week unless such day is not a Business Day in which case it shall be the
next succeeding Business Day.

     "StyroChem" shall mean StyroChem US, Ltd. formerly StyroChem International,
      ---------
Inc., a limited partnership organized and existing under the laws of the State
of Texas.

     "StyroChem Delaware" shall mean StyroChem Delaware, Inc., a corporation
      ------------------
organized and existing under the laws of the State of Delaware.

     "Subsidiary" shall mean a corporation or other entity of whose shares of
      ----------
stock or other ownership interests having ordinary voting power (other than
stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the

                                      18
<PAGE>

directors of such corporation, or other Persons performing similar functions for
such entity, are owned, directly or indirectly, by such Person.

     "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 2.14(a).

     "Swingline Lender" means Bank of America.
      ----------------

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

     "Swingline Loan Request" means a request by one or more of the U.S.
      ----------------------
Borrowers for a Swingline Loan in substantially the form of Exhibit 2.14(b)(i).

     "Swingline Note" means the promissory note of the U.S. Borrowers 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.

     "Term" shall mean the Effective Date through October 15, 2002.
      ----

     "Termination Event" shall mean (i) a Reportable Event with respect to any
      -----------------
Plan or Multiemployer Plan; (ii) the withdrawal of either Borrower or any member
of the Controlled Group from a Plan or Multiemployer Plan during a plan year in
which such entity was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA; (iii) the providing of notice of intent to terminate a Plan in a
distress termination described in Section 4041(c) of ERISA; (iv) the institution
by the PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) any
event or condition (a) which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan or Multiemployer Plan, or (b) that may result in termination of a
Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or
complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of
either Borrower or any member of the Controlled Group from a Multiemployer Plan.

     "Total Interest" for any period shall mean the accrued and unpaid interest
      --------------
obligations of Radnor on a Consolidated Basis with respect to its outstanding
Indebtedness during such period.

     "Toxic Substance" shall mean and include any material present on any real
      ---------------
property owned by any Borrower or any leasehold interests of any Borrower which
has been shown to have significant adverse effect on human health or which is
subject to regulation under the Toxic Substances Control Act (TSCA), 15 U.S.C.
(S)(S) 2601 et seq., applicable state law, or any other applicable Federal or
            -- ---
state laws now in force or hereafter enacted relating to toxic substances.
"Toxic substance" includes but is not limited to asbestos, polychlorinated
biphenyls (PCBs) and lead-based paints.

     "Transferee" shall have the meaning set forth in Section 15.3(b) hereof.
      ----------

                                      19
<PAGE>

     "Treaty of European Union" shall mean the treaty of Rome of March 25, 1957,
      ------------------------
as amended by the Single European Act of 1986 and the Maastricht Treaty (which
was signed at Maastricht on February 7, 1992, and came into force on November 1,
1993), as amended from time to time.

     "Undrawn Availability" at a particular date shall mean an amount equal to
      --------------------
(a) the Borrowing Base, minus (b) the sum of (i) the outstanding amount of
                        -----
Advances plus (ii) all amounts due and owing to Borrowers' trade creditors which
are outstanding more than sixty (60) days past the due date therefor.

     "U.S. Advance Rates" shall have the meaning set forth in Section 2.1
      ------------------
hereof.

     "U.S. Advances" shall mean U.S. Revolving Advances, U.S. Letters of Credit
      -------------
and Swingline Loans.

     "U.S. Borrowing Base" shall have the meaning set forth in Section 2.1
      -------------------
hereof.

     "U.S. Collateral" shall mean all Collateral provided by the U.S. Borrowers.
      ---------------

     "U.S. Inventory Advance Rate" shall have the meaning ascribed to such term
      ---------------------------
in Section 2.1(a)(ii).

     "U.S. Letters of Credit" shall have the meaning set forth in Section 2.9
      ----------------------
hereof.

     "U.S. Obligations" shall mean all obligations of each of the U.S. Borrowers
      ----------------
(in their capacity as such) hereunder, under the U.S. Revolving Credit Notes, in
connection with U.S. Letters of Credit, under the Swingline Loans or otherwise
in connection with the U.S. Advances.

     "U.S. Receivables Advance Rate" shall have the meaning set forth in Section
      -----------------------------
2.1(a) hereof.

     "U.S. Revolving Advances" shall mean Advances made pursuant to Section
      -----------------------
2.1(a) hereof.

     "U.S. Revolving Credit Notes" shall mean the promissory notes referred to
      ---------------------------
in Section 2.1 hereof.

     "Week" shall mean the time period commencing with a Wednesday and ending on
      ----
the following Tuesday.

     "WinCup" shall mean WinCup Holdings, Inc., a corporation organized and
      ------
existing under the laws of the State of Delaware.

                                      20
<PAGE>

     "WinCup L.P." shall mean WinCup Holdings, L.P., a limited partnership
      -----------
organized under the laws of the State of Delaware which was dissolved effective
July 7, 1997 pursuant to that certain Certificate of Dissolution dated August
25, 1997.

     "WinCup Texas" shall mean WinCup Texas, Ltd., a limited partnership
      ------------
organized and existing under the laws of the State of Texas.

     "Working Capital" at a particular date, shall mean the excess, if any, of
      ---------------
Current Assets over Current Liabilities at such date.

     1.3. Uniform Commercial Code Terms.
          -----------------------------

     All terms used herein and defined in the Uniform Commercial Code as adopted
in the State of New York shall have the meaning given therein unless otherwise
defined herein.

     1.4. Certain Matters of Construction.
          -------------------------------

     The terms "herein", "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular section,
paragraph or subdivision.  Any pronoun used shall be deemed to cover all
genders.  Wherever appropriate in the context, terms used herein in the singular
also include the plural and vice versa.  All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations.  All references to any instruments or agreements to which Agent is
a party, including, without limitation, references to any of the Other Documents
shall include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.

II.  ADVANCES, PAYMENTS
     ------------------

     2.1. U.S. Revolving Advances.
          -----------------------

          (a)  U.S. Borrowing Base.  Subject to the terms and conditions set
               -------------------
     forth in this Agreement, each Lender, severally and not jointly, agrees to
     make U.S. Revolving Advances to U.S. Borrowers in accordance with the
     procedures provided for herein in an aggregate amount outstanding at any
     time not greater than such Lender's Commitment Percentage of the U.S.
     Borrowing Base (as defined below) minus (1) the undrawn or unreimbursed
                                       -----
     amount of outstanding U.S. Letters of Credit and (2) Swingline Loans
     outstanding.  For purposes hereof, "U.S. Borrowing Base" shall mean the
     lesser of (x) the Maximum U.S. Loan Amount or (y) the sum of:

               (i)  up to 85%, subject to the provisions of Section 2.1(b)
          hereof ("U.S. Receivables Advance Rate"), of Eligible Receivables of
          U.S. Borrowers, plus
                          ----
               (ii) the lesser of (x) $15,000,000 or (y) up to 60%, subject to
          the provisions of Section 2.1(b) hereof ("U.S. Inventory Advance
          Rate"), of Eligible Inventory of U.S. Borrowers (the U.S. Receivables
          Advance Rate and the U.S.

                                      21
<PAGE>

           Inventory Advance Rate shall be referred to, collectively, as the
           "U.S. Advance Rates"), minus
                                  -----

               (iii)  such reserves as Agent may, in a commercially reasonable
           manner, reasonably deem proper and necessary.

           The U.S. Revolving Advances shall otherwise be evidenced by a U.S.
     Revolving Credit Note in the form attached hereto as Exhibit 2.1.
                                                          -----------

           (b)  Discretionary Rights. The U.S. Advance Rates may be increased by
                --------------------
     the Agent, with the consent of the Required Lenders, or decreased by the
     Agent, with the consent of the Required Lenders, at any time and from time
     to time in the exercise of its reasonable discretion.  U.S. Borrowers
     consent to any such increases or decreases and acknowledge that decreasing
     the Advance Rates or increasing the reserves may limit or restrict Advances
     requested by any U.S. Borrower.

     2.1A. European Revolving Advances.
           ---------------------------

           (a)  European Borrowing Base. Subject to the terms and conditions set
                -----------------------
     forth in this Agreement, each Lender, severally and not jointly, agrees to
     make European Advances to European Borrowers in accordance with the
     procedures provided for herein in an aggregate amount outstanding at any
     time not greater than such Lender's Commitment Percentage of the European
     Borrowing Base (as defined below) minus the undrawn or unreimbursed amount
                                       -----
     of outstanding European Letters of Credit.  For purposes hereof, "European
     Borrowing Base" shall mean the lesser of (x) the Maximum European Loan
     Amount or (y) the sum of:

               (i)   up to 85%, subject to the provisions of Section 2.1A(b)
           hereof ("European Receivables Advance Rate"), of Eligible Receivables
           of European Borrowers, plus
                                  ----

               (ii)  the lesser of (x) $5,000,000 or (y) up to 60%, subject to
           the provisions of Section 2.1A(b) hereof ("European Inventory Advance
           Rate"), of Eligible Inventory of European Borrowers (the European
           Receivables Advance Rate and the European Inventory Advance Rate
           shall be referred to, collectively, as the "European Advance Rates"),
           minus
           -----

               (iii) such reserves as Agent may, in a commercially reasonable
           manner, reasonably deem proper and necessary.

           The European Revolving Advances shall otherwise be evidenced by a
     European Revolving Note in the form attached hereto as Exhibit 2.1A.
                                                            ------------

           (b)  Discretionary Rights. The European Advance Rates may be
                --------------------
     increased by the Agent, with the consent of the Required Lenders, or
     decreased by the Agent, with the consent of the Required Lenders, at any
     time and from time to time in the exercise of its

                                      22
<PAGE>

     reasonable discretion. European Borrowers consent to any such increases or
     decreases and acknowledge that decreasing the European Advance Rates or
     increasing the reserves may limit or restrict European Advances requested
     by any European Borrower.

     2.2. Procedure for Borrowing.
          -----------------------

     (a)  Borrowing Agent on behalf of any Borrower may notify Agent prior to
11:00 a.m. on a Business Day of a Borrower's request to incur by delivery of a
Notice of Borrowing, substantially in the form of Exhibit 2.2(a) attached
                                                  --------------
hereto, on that day, a Revolving Advance hereunder.  Should any amount required
to be paid as interest hereunder, or as fees or other charges under this
Agreement or any other agreement with Agent or any Lender, or with respect to
any other Obligation, become due, same shall be deemed a request for a Revolving
Advance as of the date such payment is due, in the amount required to pay in
full such interest, fee, charge or Obligation under this Agreement or any other
agreement with Agent or any Lender, and such request shall be irrevocable.  Any
request for a Revolving Advance shall be deemed reduced automatically and
without notice so as not to be in excess of, after giving effect to the
requested Revolving Advance, (i) in the case of a request for a U.S. Revolving
Advance, an amount which would cause the aggregate amount of all U.S. Advances
outstanding to be greater than the U.S. Borrowing Base or (ii) in the case of a
request for a European Revolving Advance, an amount which would cause the
aggregate amount of all European Advances outstanding to be greater than the
European Borrowing Base.

     (b)  Notwithstanding the provisions of (a) above, in the event any Borrower
desires to obtain a Eurodollar Rate Loan, it shall give Agent at least three (3)
Business Days' prior written notice; specifying (i) the date of the proposed
borrowing (which shall be a Business Day), (ii) the amount on the date of such
Revolving Advance to be borrowed, which amount shall be an integral multiple of
$500,000 in the case of Finnish Markka and $1,000,000 in the case of any other
currency, and (iii) the duration of the first Interest Period therefor.
Interest Periods for Eurodollar Loans shall be for 7 days, 14 days, one (1), two
(2), three (3) or six (6) months.  There shall not be outstanding more than ten
(10) Eurodollar Rate Loans, in the aggregate.

     (c)  Each Interest Period of a Eurodollar Rate Loan shall commence on the
date such Eurodollar Rate Loan is made and shall end on such date as a Borrower
may elect as set forth in (b)(iii) above provided that:

          (i)   any Interest Period which would otherwise end on a day which is
     not a Business Day shall be the next preceding or succeeding Business Day
     as is Bank's custom in the market to which such Eurodollar Rate Loan
     relates;

          (ii)  no Interest Period shall end after the last day of the Term; and

          (iii) any Interest Period which begins on a day for which there is no
     numerically corresponding day in the calendar month during which such
     Interest Period is to end, shall (subject to clause (i) above) end on the
     last day of such calendar month.

                                      23
<PAGE>

     Borrowing Agent shall elect the initial Interest Period applicable to a
Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to
Section 2.2(b) or by its notice of conversion given to Agent pursuant to Section
2.2(d), as the case may be.  Borrowing Agent shall elect the duration of each
succeeding Interest Period by giving irrevocable written notice to Agent of such
duration not less than three (3) Business Days prior to the last day of the then
current Interest Period applicable to such Eurodollar Rate Loan.  If Agent does
not receive timely notice of the Interest Period elected by Borrowing Agent,
Borrowers shall be deemed to have elected to convert to a Domestic Rate Loan
subject to Section 2.2(d) hereinbelow.

     (d) Provided that no Event of Default shall have occurred and be
continuing, any Borrower may, on the last Business Day of the then current
Interest Period applicable to any outstanding Eurodollar Rate Loan or Domestic
Rate Loan convert any such loan into a loan of another type in the same
aggregate principal amount provided that any conversion of a Eurodollar Rate
Loan shall be made only on the last Business Day of the then current Interest
Period applicable to such Eurodollar Rate Loan.  If Borrower desires to convert
a loan, Borrowing Agent shall give the Agent not less than three (3) Business
Days' prior written notice, specifying the date of such conversion, the loans to
be converted and if the conversion is from a Domestic Rate Loan to any other
type of loan, the duration of the first Interest Period therefor.

     (e) Borrowers may prepay the Revolving Advances in accordance with the
provisions of Section 13.1 with accrued interest on the principal being prepaid
to the date of such repayment.  In the event that any prepayment of a Eurodollar
Rate Loan is required or permitted on a date other than the last Business Day of
the then current Interest Period with respect thereto Borrowers shall indemnify
Agent and Lenders therefor in accordance with Section 2.2(f) hereof.

     (f) Subject to the limitations of the Cross-Guaranty set forth in Section
17.1 hereof, each Borrower shall indemnify Agent and Lenders and hold Agent and
Lenders harmless from and against any and all losses or expenses that Agent and
any Lender may sustain or incur as a consequence of any prepayment or any
default by any Borrower in the payment of the principal of or interest on any
Eurodollar Rate Loan or failure by any Borrower to complete a borrowing of, a
prepayment of or conversion of or to a Eurodollar Rate Loan after notice thereof
has been given, including but not limited to, any interest payable by Agent or
any Lender to lenders of funds obtained by it in order to make or maintain its
Eurodollar Rate Loans hereunder.

     (g) Notwithstanding any other provision hereof, if any applicable law,
treaty, regulation or directive, or any change therein or in the interpretation
or application thereof, shall make it unlawful for any Lender (for purposes of
this subsection (g), the term "Lender" shall include any Lender and the office
or branch where any Lender or any corporation or bank controlling such Lender
makes or maintains any Eurodollar Rate Loans) to make or maintain its Eurodollar
Rate Loans, the obligation of any Lender to make Eurodollar Rate Loans hereunder
shall forthwith be cancelled and Borrower shall, if any affected Eurodollar Rate
Loans are then outstanding, promptly upon request from Agent, either pay all
such affected Eurodollar Rate Loans or convert such affected Eurodollar Rate
Loans into loans of another type.  If any such payment or conversion of any
Eurodollar Rate Loan is made on a day that is not applicable to such Eurodollar
Rate Loan, Borrowers shall pay such Lender, upon such Lender's request, such
amount or amounts as may be necessary to compensate such Lender for any loss or
expense

                                      24
<PAGE>

sustained or incurred by such Lender in respect of such Eurodollar Rate Loan as
a result of such payment or conversion, including (but not limited to) any
interest or other amounts payable by such Lender to lenders of funds obtained by
such Lender in order to make or maintain such Eurodollar Rate Loan. A
certificate as to any additional amounts payable pursuant to the foregoing
sentence submitted by Agent to Borrower shall be conclusive absent manifest
error; provided, each Lender shall use its best efforts to minimize or avoid any
such additional payment.

     (h) Anything in Section 2.2(b) to the contrary notwithstanding, any
Borrower may obtain a Eurodollar Rate Loan upon at least three (3) Business
Days' prior written notice for an Interest Period of one month with interest on
such Eurodollar Rate Loans to be charged at the Average Monthly Eurodollar Rate.
Borrowing Agent shall specifically provide in the prior written notice that
interest is to be charged at the Average Monthly Eurodollar Rate; otherwise,
interest shall be charged at the Eurodollar Rate for Eurodollar Rate Loans
having an Interest Period of one month.

     2.3. Disbursement of Advance Proceeds.
          --------------------------------

     All Revolving Advances shall be disbursed from whichever office or other
place Agent may designate from time to time and, together with any and all other
Obligations of Borrowers to Agent or any of the Lenders, shall be charged to the
applicable Borrower's account on Agent's books.  During the Term, Borrowers may
use the Revolving Advances by borrowing, prepaying and reborrowing, all in
accordance with the terms and conditions hereof.  The proceeds of each Revolving
Advance requested on behalf of any Borrower or deemed to have been requested by
such Borrower under Section 2.2(a) hereof shall, with respect to requested
Revolving Advances to the extent the Lenders make such Revolving Advances, be
made available to such Borrower on the day so requested by way of credit to such
Borrower's operating account at the Bank, or such other bank as Borrowing Agent
may designate following notification to Agent, in federal funds or other
immediately available funds or, with respect to Revolving Advances deemed to
have been requested, be disbursed to Agent to be applied to the outstanding
Obligations giving rise to such deemed request.

     2.4. Optional Currencies.
          -------------------

          (a) Selection.  A Borrower shall, through the Borrowing Agent, select
              ---------
the currency of a Revolving Advance in the relevant notice for borrowing, which
currency must be Dollars or an Optional Currency.  No Borrower may choose a
currency if as a result the Revolving Advances would be denominated at any one
time in more than four currencies.  The Agent shall notify each Lender of the
currency and the Original Dollar Amount of each Revolving Advance and the
applicable Agent's Spot Rate of Exchange promptly after they are ascertained.

          (b) Revocation of currency.  If before 9:30 a.m. on any day falling
              ----------------------
two Business Days prior to the commencement of an Interest Period relating to a
Revolving Advance, the Agent receives notice from a Lender that:  (i) it is
impracticable for the Lender to fund its Commitment Percentage of the relevant
Revolving Advance in the relevant Optional

                                      25
<PAGE>

Currency during its Interest Period in the ordinary course of business in the
London interbank market; and/or (ii) the use of the proposed Optional Currency
might contravene any law or regulation, the Agent shall give notice to the
relevant Borrower and to the Lenders to that effect before 11:00 a.m. on that
day. In this event, (i) the relevant Borrower and the Lender may agree that the
drawdown will not be made; or (ii) (1) that Lender's Commitment Percentage of
the Revolving Advance (or, if more than one Lender is similarly affected, those
Lender's participation in the Revolving Advance) shall be treated as a separate
Advance denominated in Dollars during the relevant Interest Period; (2) in the
definition of "LIBOR" (insofar as it applies to that Revolving Advance) in
Section 1.1 (Definitions) there shall be substituted for the time "11.00 a.m."
the time "1.00 p.m.".

     (c)  Amount of Optional Currencies

          (i)  Drawdowns.  If a Revolving Advance is to be drawn in an Optional
               ---------
     Currency, the amount of each Lender's participation in that Revolving
     Advance will be determined by converting into that Optional Currency the
     Lender's participation in the Original Dollar Amount of that Revolving
     Advance on the basis of the Agent's Spot Rate of Exchange two Business Days
     before its date of borrowing.

          (ii) Notification.  The Agent shall notify the Lenders and the
               ------------
     Borrower of Optional Currency amounts (and the applicable Agent's Spot Rate
     of Exchange) promptly after they are ascertained.

     (d)  Change of Currency
          ------------------

     (i)  If more than one currency or currency unit are at the same time
          recognized by the central bank of any country as the lawful currency
          of that country, then:

          (1)  any reference in this Agreement or any other Agreement to, and
               any obligations arising under this Agreement or any other
               Agreement in, the currency of that county shall be translated
               into, or paid in, the currency or currency unit of that country
               designated by the Agent; and

          (2)  any translation from one currency or currency unit to another
               shall be at the official rate of exchange recognized by the
               central bank for the conversion of that currency or currency unit
               into the other, rounded up or down by the Agent acting
               reasonably.

     (ii) If a change in any currency of a country occurs, this Agreement will
          and each other Agreement shall be deemed to be amended to the extent
          the Agent (having consulted with the Lenders) specifies it to be
          necessary to reflect the change in currency and to put the Lenders in
          the same position, so far as possible, that they would have been in if
          no change in currency had occurred.

                                      26
<PAGE>

     2.5. Maximum Advances.
          ----------------

     The (i) aggregate balance of U.S. Advances outstanding at any time to U.S.
Borrowers shall not exceed the U.S. Borrowing Base and (ii) the aggregate
balance of European Advances outstanding at any time to European Borrowers shall
not exceed the European Borrowing Base.

     2.6. Repayment of Advances.
          ---------------------

     (a)  The Advances shall be due and payable in full on the last day of the
Term subject to earlier prepayment as herein provided.

     (b)  Borrowers recognize that the amounts evidenced by checks, notes,
drafts or any other items of payment relating to and/or proceeds of Collateral
may not be collectible by Agent on the date received. In consideration of
Agent's agreement to conditionally credit a Borrower's account as of the
Business Day on which Agent receives those items of payment, each Borrower
agrees that, in computing the charges under this Agreement, all items of payment
shall be deemed applied by Agent on account of such Borrower's Obligations one
(1) Business Day after receipt by Agent of good funds with respect to such items
of payment. Agent is not, however, required to credit any Borrower's account for
the amount of any item of payment which is unsatisfactory to Agent and Agent may
charge such Borrower's account for the amount of any item of payment which is
returned to Agent unpaid.

     (c)  Except as set forth in Section 2.7, all payments of principal,
interest and other amounts payable hereunder, or under any of the related
agreements shall be made to Agent at the Payment Office not later than 1:00 P.M.
New York Time) on the due date therefor in lawful money of the United States of
America in federal funds or other funds immediately available to Agent. Agent
shall have the right to effectuate payment on any and all Obligations due and
owing hereunder by charging the applicable Borrower's account or by making
Advances as provided in Section 2.2 hereof.

     (d)  Borrowers shall pay principal, interest, and all other amounts payable
hereunder, or under any related agreement, without any deduction whatsoever,
including, but not limited to, any deduction for any setoff or counterclaim.

     2.7. Currency.
          --------

          (i)   A repayment or prepayment of an Advance or any part of an
                Advance is payable in the currency in which such Advance is
                denominated on its due date.

          (ii)  Interest is payable in the currency in which the relevant amount
                in respect of which it is payable is denominated.

          (iii) Amounts payable in respect of costs, expenses and taxes and the
                like are payable in the currency in which they are incurred.

                                      27
<PAGE>

          (iv)  Any other amount payable under this Agreement is, except as
                otherwise provided in this Agreement, payable in Dollars.

     2.8. Statement of Account.
          --------------------

     Agent shall maintain, in accordance with its customary procedures, a loan
account in the name of each Borrower in which shall be recorded the date and
amount of each Advance made by Lenders and the date and amount of each payment
in respect thereof; provided, however, the failure by Agent to record the date
                    --------  -------
and amount of any Advance shall not adversely affect Agent or any Lender.  Each
month, Agent shall send to Borrowing Agent a statement showing the accounting
for the Advances made, payments made or credited in respect thereof, and other
transactions between Lenders and each Borrower, during such month.  The monthly
statements shall be deemed correct and binding upon Borrowers in the absence of
manifest error and shall constitute an account stated between Lenders and
Borrowers unless Agent receives a written statement of a Borrower's specific
exceptions thereto within thirty (30) days after such statement is received by
Borrowing Agent.  The records of Agent with respect to the loan account shall be
prima facie evidence of the amounts of Advances and other charges thereto and of
----- -----
payments applicable thereto, absent manifest error.

     2.9. Letters of Credit.
          -----------------

     (a)  Subject to the terms and conditions hereof, (i) Agent shall issue or
cause the issuance of standby and documentary letters of credit for the U.S.
Borrowers ("U.S. Letters of Credit") provided, however, that Agent will not be
                                     --------  -------
required to issue or cause to be issued U.S. Letters of Credit to the extent
that the face amount of such U.S. Letters of Credit plus Swingline Loans
                                                    ----
outstanding plus the U.S. Revolving Advances outstanding (with the requested
            ----
U.S. Letter of Credit being deemed to be outstanding for purposes of this
calculation) would exceed the U.S. Borrowing Base and (ii) Agent shall issue or
cause the issuance of standby and documentary letters of credit for the European
Borrowers ("European Letters of Credit" and, together with the U.S. Letters of
Credit, "Letters of Credit") provided, however, that Agent will not be required
                             --------  -------
to issue or cause to be issued European Letters of Credit to the extent that the
face amount of such European Letters of Credit plus the European Revolving
                                               ----
Advances outstanding (with the requested European Letter of Credit being deemed
to be outstanding for purposes of this calculation) would exceed the European
Borrowing Base.

     (b)  The maximum amount of outstanding (i) U.S. Letters of Credit that are
standby letters of credit hereunder shall not exceed $5,000,000 in the aggregate
at any time, (ii) U.S. Letters of Credit that are documentary letters of credit
hereunder shall not exceed $2,000,000 in the aggregate at any time, (iii)
European Letters of Credit that are standby letters of credit hereunder shall
not exceed $5,000,000 in the aggregate at any time, and (iv) European Letters of
Credit that are documentary letters of credit hereunder shall not exceed
$2,000,000 in the aggregate at any time.  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 end of the Term.

                                      28
<PAGE>

     (c)  (i)  All disbursements or payments related to U.S. Letters of Credit
     shall be deemed to be U.S. Revolving Advances and shall bear interest at
     the Revolving Interest Rate for Domestic Rate Loans (unless and until
     converted to a Eurodollar Rate Loan); and to the extent not drawn upon,
     Letters of Credit that have not been drawn upon shall not bear interest.
     U.S. Letters of Credit shall be subject to the terms and conditions set
     forth in the Application and Agreement for Letter of Credit attached hereto
     as Exhibit 2.9.
        -----------

          (ii) All disbursements or payments related to European Letters of
     Credit shall be deemed to be European Revolving Advances and shall bear
     interest at the Revolving Interest Rate for Domestic Rate Loans (unless and
     until converted to a Eurodollar Rate Loan); and to the extent not drawn
     upon, Letters of Credit that have not been drawn upon shall not bear
     interest.  European Letters of Credit shall be subject to the terms and
     conditions set forth in the Application and Agreement for Letter of Credit
     attached hereto as Exhibit 2.9.
                        -----------

     2.10.  Issuance of Letters of Credit.
            -----------------------------

     (a)  Borrowing Agent on behalf of any Borrower may request Agent to issue
or cause the issuance of a Letter of Credit by delivering to Agent at the
Payment Office, Agent's standard form of Letter of Credit and Security Agreement
together with Bank's standard form of Letter of Credit Application
(collectively, the "Letter of Credit Application") completed to the satisfaction
of Agent; and, such other certificates, documents and other papers and
information as Agent may reasonably request.

     (b)  Each Letter of Credit shall, among other things, (i) provide for the
payment of sight drafts when presented for honor thereunder in accordance with
the terms thereof and when accompanied by the documents described therein and
(ii) have an expiry date not later than twelve (12) months after such Letter of
Credit's date of issuance and in no event later than the last day of the Term.
Each Letter of Credit Application and each Letter of Credit shall be subject to
the Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500) and any amendments or
revision thereof and, to the extent not inconsistent therewith, the laws of the
State of New York.

     2.11.  Requirements For Issuance of Letters of Credit.
            ----------------------------------------------

     (a)  In connection with the issuance of any Letter of Credit, (subject to
the limitations of the Cross-Guaranty set forth in Section 17.1 hereof)
Borrowers shall indemnify, save and hold Agent and each Lender harmless from any
loss, cost, expense or liability, including, without limitation, payments made
by Agent and any Lender, and expenses and reasonable attorneys' fees incurred by
Agent or any Lender arising out of, or in connection with, any Letter of Credit
to be issued or created for a Borrower.  Borrowers shall be bound by Agent's or
any issuing or accepting bank's regulations and good faith interpretations of
any Letter of Credit issued or created for its account, although this
interpretation may be different from its own, and, neither Agent nor any Lender,
the bank which opened the Letter of Credit, nor any of its correspondents shall
be liable for any error, negligence, or mistakes, whether of omission or
commission, in

                                      29
<PAGE>

following Borrowing Agent's or any Borrower's instructions or those contained in
any Letter of Credit or of any modifications, amendments or supplements thereto
or in issuing or paying any Letter of Credit, except for Agent's or any Lender's
or such correspondents' willful misconduct or gross (not mere) negligence.

     (b)  Borrowing Agent shall authorize and direct any bank which issues a
Letter of Credit to name the applicable Borrower as the "Account Party" therein
and to deliver to Agent all instruments, documents, and other writings and
property received by the bank pursuant to the Letter of Credit and to accept and
rely upon Agent's instructions and agreements with respect to all matters
arising in connection with the Letter of Credit, the application therefor or any
acceptance therefor.

     (c)  In connection with all Letters of Credit issued or caused to be issued
by Agent under this Agreement, each Borrower hereby appoints Agent, or its
designee, as its attorney, with full power and authority, (i) to sign and/or
endorse such Borrower's name upon any warehouse or other receipts, letter of
credit applications and acceptances; (ii) to sign such Borrower's name on bills
of lading; (iii) to clear Inventory through the United States of America Customs
Department ("Customs") in the name of such Borrower or Agent or Agent's
designee, and to sign and deliver to Customs officials powers of attorney in the
name of such Borrower for such purpose; and (iv) to complete in such Borrower's
name or Agent's, or in the name of Agent's designee, any order, sale or
transaction, obtain the necessary documents in connection therewith, and collect
the proceeds thereof.  Neither Agent nor its attorneys will be liable for any
acts or omissions nor for any error of judgment or mistakes of fact or law,
except for Agent's or its attorney's willful misconduct or gross (not mere)
negligence.  This power, being coupled with an interest, is irrevocable as long
as any Letters of Credit remain outstanding.

     (d)  Each Lender shall to the extent of the percentage amount equal to the
product of such Lender's Commitment Percentage times the aggregate amount of all
disbursements made with respect to the Letters of Credit be deemed to have
irrevocably purchased an undivided participation in each U.S. Revolving Advance,
in the case of U.S. Letters of Credit, and European Revolving Advance, in the
case of European Letters of Credit, made as a consequence of such disbursement.
In the event that at the time a disbursement is made the (i) unpaid balance of
U.S. Revolving Advances exceeds or would exceed, with the making of such
disbursement, the U.S. Borrowing Base minus (1) the undrawn or unreimbursed
                                      -----
amount of outstanding U.S. Letters of Credit issued on behalf of the U.S.
Borrowers and (2) Swingline Loans outstanding, and such disbursement is not
reimbursed by U.S. Borrowers within two (2) Business Days or (ii) the unpaid
balance of European Revolving Advances exceeds or would exceed, with the making
of such disbursement, the European Borrowing Base minus the undrawn or
                                                  -----
unreimbursed amount of outstanding European Letters of Credit issued on behalf
of the European Borrowers, and such disbursement is not reimbursed by European
Borrowers within two (2) Business Days, Agent shall promptly notify each Lender
and upon Agent's demand each Lender shall pay to Agent such Lender's
proportionate share of such unreimbursed disbursement together with such
Lender's proportionate share of Agent's unreimbursed costs and expenses relating
to such unreimbursed disbursement.  Upon receipt by Agent of a repayment from
Borrowers of any amount disbursed by Agent for which Agent had already been
reimbursed by the Lenders, Agent shall deliver to each of the Lenders that
Lender's pro rata share of such repayment.  Each

                                      30
<PAGE>

Lender's participation commitment shall continue until the last to occur of any
of the following events: (A) Agent ceases to be obligated to issue Letters of
Credit hereunder; (B) no Letter of Credit issued hereunder remains outstanding
and uncancelled or (C) all Persons (other than Borrowers) have been fully
reimbursed for all payments made under or relating to Letters of Credit.

     2.12.  Additional Payments.
            -------------------

     Any sums expended by Agent or any Lender due to any Borrower's failure to
perform or comply with its obligations under this Agreement or any Other
Document including, without limitation, any Borrower's obligations under
Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be charged to such
Borrower's account as a Revolving Advance and added to the Obligations, provided
Agent shall promptly thereafter provide to Borrowing Agent a copy of
documentation supporting such charges.

     2.13.  Manner of Borrowing and Payment.
            -------------------------------

     (a)  Each borrowing of Revolving Advances shall be advanced according to
the Commitment Percentages of the Lenders.

     (b)  Each payment (including each prepayment) by Borrowers on account of
the principal of and interest on the Revolving Advances, shall be applied to the
Revolving Advances pro rata according to the applicable Commitment Percentages
of the Lenders. Except as expressly provided herein, all payments (including
prepayments) to be made by Borrowers on account of principal, interest and fees
shall be made without set-off or counterclaim and shall be made to Agent on
behalf of the Lenders to the Payment Office, in each case on or prior to
1:00P.M., New York time, in Dollars and in immediately available funds.

     (c)  (i)  Notwithstanding anything to the contrary contained in Sections
2.13(a) and (b) hereof, commencing with the first Business Day following the
Effective Date, each borrowing of Revolving Advances shall be advanced by Agent
and each payment by Borrowers on account of Revolving Advances shall be applied
first to those Revolving Advances made by Agent.  On or before 1:00 P.M., New
York time, on each Settlement Date commencing with the first Settlement Date
following the Effective Date, Agent and the Lenders shall make certain payments
as follows: (I) if the aggregate amount of new Revolving Advances made by Agent
during the preceding Week exceeds the aggregate amount of repayments applied to
outstanding Revolving Advances during such preceding Week (if any), then each
Lender shall provide Agent with funds in an amount equal to its Commitment
Percentage of the difference between (w) such Revolving Advances and (x) such
repayments and (II) if the aggregate amount of repayments applied to outstanding
Revolving Advances during such Week exceeds the aggregate amount of new
Revolving Advances made during such Week, then Agent shall provide each Lender
with funds in an amount equal to its Commitment Percentage of the difference
between (y) such repayments and (z) such Revolving Advances.

          (ii) Each Lender shall be entitled to earn interest at the applicable
     Contract Rate on outstanding Advances which it has funded.

                                      31
<PAGE>

          (iii)  Promptly following each Settlement Date, Agent shall submit to
     each Lender a certificate with respect to payments received and Advances
     made during the Week immediately preceding such Settlement Date.  Such
     certificate of Agent shall be conclusive in the absence of manifest error.

     (d)  If any Lender or any Transferee (a "benefitted Lender") shall at any
time receive any payment of all or part of its Advances, or interest thereon, or
receive any Collateral in respect thereof (whether voluntarily or involuntarily
or by set-off) in a greater proportion than any such payment to and Collateral
received by any other Lender, if any, in respect of such other Lender's
Advances, or interest thereon, and such greater proportionate payment or receipt
of Collateral is not expressly permitted hereunder, such benefitted Lender shall
purchase for cash from the other Lenders such portion of each such other
Lender's Advances, or shall provide such other Lender with the benefits of any
such Collateral, or the proceeds thereof as shall be necessary to cause such
benefitted Lender to share the excess payment or benefits of such Collateral or
proceeds ratably with each of the Lenders; provided, however, that if all or any
                                           --------  -------
portion of such excess payment or benefits is thereafter recovered from such
benefitted Lender, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest Each
Lender so purchasing a portion of another Lender's Advances may exercise all
rights of payment (including, without limitation, rights of set-off) with
respect to such portion as fully as if such Lender were the direct holder of
such portion.

     (e)  Unless Agent shall have been notified by telephone, confirmed in
writing, by any Lender that such Lender will not make the amount which would
constitute its applicable Commitment Percentage of the Advances available to
Agent, Agent may (but shall not be obligated to) assume that such Lender shall
make such amount available to Agent and, in reliance upon such assumption, make
available to Borrowers a corresponding amount.  Agent will promptly notify
Borrowing Agent of its receipt of any such notice from a Lender.  If such amount
is made available to Agent on a date after a Settlement Date, such Lender shall
pay to Agent on demand an amount equal to the product of (i) the daily average
Federal Funds Rate (computed on the basis of a year of 360 days) during such
period as quoted by Agent, times (ii) such amount, times (iii) the number of
days from and including such Settlement Date to the date on which such amount
becomes immediately available to Agent.  A certificate of Agent submitted to any
Lender with respect to any amounts owing under this paragraph (e) shall be
conclusive, in the absence of manifest error.  If such amount is not in fact
made available to Agent by such Lender within three (3) Business Days after such
Settlement Date, Agent shall be entitled to recover such an amount, with
interest thereon at the domestic rate per annum then applicable to Revolving
Advances hereunder, on demand from Borrowers; provided, however, that Agent's
                                              --------  -------
right to such recovery shall not prejudice or otherwise adversely affect any
Borrower's rights (if any) against such Lender.

     (f)  Notwithstanding anything to the contrary contained herein, in the
event any Lender (x) has refused (which refusal constitutes a breach by such
Lender of its obligations under this Agreement) to make available its Commitment
Percentage of any Advance or (y) notifies either Agent or Borrowers that it does
not intend to make available its Commitment Percentage of any Advance (if the
actual refusal would constitute a breach by such Lender of its

                                      32
<PAGE>

obligations under this Agreement) (each, a "Lender Default"), all rights and
obligations hereunder of such Lender (a "Defaulting Lender") as to which a
Lender Default is in effect and of the other parties hereto shall be modified to
the extent of the express provisions of this Section 2.13(f) while such Lender
Default remains in effect.

          (i)   Revolving Advances shall be allocated pro rata among Lenders
                                                      --- ----
     (the "Non-Defaulting Lenders") which are not Defaulting Lenders in
     accordance with their respective Commitment Percentages, and no Commitment
     Percentage of any Lender or any pro rata share of any Revolving Advances
                                     --- ----
     required to be advanced by any Lender shall be increased as a result of
     such Lender Default. Amounts received in respect of principal of Advances
     shall be applied to reduce Advances of each Lender pro rata based on the
                                                        --- ----
     aggregate of the outstanding Advances of all Lenders at the time of such
     application; provided that, such amount shall not be applied to any
     Advances of a Defaulting Lender at any time when, and to the extent that,
     the aggregate amount of Advances of any Lender that is not a Defaulting
     Lender exceeds such Lender's Commitment Percentage of all Advances then
     outstanding.

          (ii)  Lenders shall participate in Letters of Credit on the basis of
     their respective pro rata shares, and no participation or reimbursement
                      --- ----
     obligation of any Lender shall be increased as a result of a failure of any
     Defaulting Lender to reimburse Agent with respect to any amounts drawn on
     or otherwise payable with respect to any Letters of Credit (the amount that
     any such Defaulting Lender has failed to reimburse is hereinafter referred
     to as such Defaulting Lender's "Unreimbursed Amount").  Until such
     Defaulting Lender has reimbursed Agent for any Unreimbursed Amount owed by
     it, all payments and other amounts received from any source with respect to
     the Obligations or otherwise under or in connection with this Agreement
     (including any letter of credit fees) which would otherwise be payable to
     such Defaulting Lender will instead be paid to Agent for application to
     such Unreimbursed Amount until such Unreimbursed Amount has been paid in
     full.  A Defaulting Lender shall not be entitled to receive any portion of
     the letter of credit fees or any other fees payable in connection with this
     Agreement, or any indemnity arising from its agreement to make Revolving
     Advances and/or participate in Letters of Credit hereunder.

          (iii) A Defaulting Lender shall not be entitled to give instructions
     to Agent or to approve, disapprove, consent to or vote on any matters
     relating to this Agreement or the Other Documents.  All amendments, waivers
     and other modifications of this Agreement and the Other Documents may be
     made without regard to a Defaulting Lender and, solely for purposes of the
     definition of "Required Lenders", a Defaulting Lender shall be deemed not
     to be a Lender and not to have Advances outstanding.

          (iv)  Other than as expressly set forth in this Section 2.13(f), the
     rights and obligations of a Defaulting Lender (including the obligation to
     indemnify Agent) and the other parties hereto shall remain unchanged.
     Nothing in this Section 2.13(f) shall be deemed to release any Defaulting
     Lender from its obligations under this Agreement or the Other Documents,
     shall alter such obligations, shall operate as a waiver of any default by
     such Defaulting Lender hereunder, or shall prejudice any rights which any
     Borrower,

                                      33
<PAGE>

     Agent or any Lender may have against any Defaulting Lender as a result of
     any default by such Defaulting Lender hereunder.

          (v) In the event a Defaulting Lender retroactively cures, to the
     satisfaction of Agent, the breach which caused such Lender to become a
     Defaulting Lender, such Defaulting Lender shall no longer be a Defaulting
     Lender and shall be treated as a Lender under this Agreement.

     2.14. Swingline Loans.
           ---------------

     (a)  Swingline Commitment.  Subject to the terms and conditions hereof and
          --------------------
in reliance upon the representations and warranties herein set forth, the
Swingline Lender, in its individual capacity, agrees to make certain revolving
credit loans to the U.S. Borrowers (each a "Swingline Loan" and, collectively,
                                            --------------
the "Swingline Loans") from time to time during the Term for the purposes
     ---------------
hereinafter set forth; provided, however, (i) the aggregate principal amount of
                       --------  -------
Swingline Loans outstanding at any time shall not exceed FIVE MILLION DOLLARS
("$5,000,000) (the "Swingline Committed Amount"), and (ii) the aggregate
                    --------------------------
principal amount of all U.S. Revolving Advances outstanding at any time plus
                                                                        ----
U.S. Letters of Credit plus the requested Swingline Loan shall not exceed the
                       ----
U.S. Borrowing Base.  Swingline Loans hereunder shall be made as Domestic Rate
Loans as the U.S. Borrowers may request in accordance with the provisions of
this Section 2.14, and may be repaid and reborrowed in accordance with the
provisions hereof.

     (b)  Swingline Loan Advances.
          -----------------------

          (i)   Notices; Disbursement. By no later than 1:00 p.m. (New York
                ---------------------
     time) on the Business Day of the requested Swingline Loan advance, one or
     more of the U.S. Borrowers shall submit a written Swingline Loan Request in
     the form of Exhibit 2.14(b)(i) to the Agent setting forth (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 such notice
     shall be irrevocable. Each Swingline Loan shall be made as a Domestic Rate
     Loan and shall have such maturity date as the Swingline Lender and the
     applicable Borrower shall agree upon receipt by the Swingline Lender of any
     such Swingline Loan Request. The Swingline Lender shall initiate the
     transfer of funds representing the Swingline Loan advance to the applicable
     U.S. Borrower by 12:00 noon (New York time) on the Business Day of the
     requested borrowing.

          (ii)  Minimum Amount.  Each Swingline Loan shall be in a minimum
                --------------
     principal amount of $100,000 and in integral multiples of $100,000 in
     excess thereof (or the remaining amount of the Swingline Committed Amount,
     if less).

          (iii) Repayment of Swingline Loans.  The principal amount of all
                ----------------------------
     Swingline Loans shall be due and payable on the earlier of (A) the maturity
     date agreed to by the Swingline Lender and the applicable U.S. Borrower
     with respect to such Loan or (B) the last day of the Term.  The Swingline
     Lender may, upon the occurrence of any Default or Event of Default, in its
     sole discretion, by written notice to the Borrowing Agent and the Lenders,
     demand repayment of its Swingline Loans by way of a U.S. Revolving Advance,
     in which case the U.S. Borrowers shall be deemed to have requested an
     advance comprised solely of
                                      34
<PAGE>

     Domestic 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 expiration of the Term and on the date of the
     occurrence of any Event of Default described in Section 10.1 and upon
     acceleration of the indebtedness hereunder and the exercise of remedies in
     accordance with the provisions of Section 11.1 provided, further that the
                                                    --------
     Lenders shall have no obligation to make a U.S. Revolving Advance to repay
     an outstanding Swingline Loan, if such Swingline Loan was made to a
     Borrower during the occurrence or continuance of a Default or Event of
     Default. Upon notice from the Agent each Lender hereby
     irrevocably agrees to make its pro rata share of each such U.S. Revolving
     Advance 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 U.S. Revolving Advances otherwise
     required hereunder, (II) whether any conditions specified in Section 8.2
     are then satisfied, (III) whether a Default or Event of Default then
     exists, (IV) failure of any such request or deemed request for U.S.
     Revolving Advances to be made by the time otherwise required hereunder, (V)
     whether the date of such borrowing is a date on which U.S. Revolving
     Advances are otherwise permitted to be made hereunder of (VI) any
     termination of the commitments relating thereto immediately prior to or
     contemporaneously with such borrowing.  In the event that any U.S.
     Revolving Advance 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 any
     one of the Borrowers), 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 U.S. Borrowers 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 Commitment Percentage (determined before giving
     effect to any termination of the commitments hereunder pursuant to Section
     11.1), 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, 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.

     (c)  Interest on Swingline Loans.
          ---------------------------

          (i)  Subject to the provisions of Section 3.1, each Swingline Loan
          shall bear interest at a per annum rate equal to the Alternate Base
          Rate plus the Applicable Percentage.
               ----

          (ii) Interest on Swingline Loans shall be payable in arrears in
          accordance with Section 3.1 hereof (or at such other times as may be
          specified herein).

     (d)  Swingline Note.  The Swingline Loans shall be evidenced by a duly
          --------------
executed promissory note of the U.S. Borrowers to the Swingline Lender in
substantially the form of Exhibit 2.14(d).
                          ---------------

                                      35
<PAGE>

     2.15. Utilization of Advances in Optional Currencies.
           ----------------------------------------------

     The Agent will determine the Original Dollar Amount with respect to any (i)
Advance that is requested in an Optional Currency as of the requested borrowing
date and as of any requested continuation date and (ii) outstanding Advances
denominated in Optional Currencies as of the last Business Day of each month,
and, during the occurrence and continuation of an Event of Default, such other
dates as may be requested by the Required Lenders (but in no event more
frequently than once a week) (each such date under clause (i) and (ii), a
"Determination Date").
-------------------

III  INTEREST AND FEES.
     -----------------

     3.1.  Interest.
           --------

     Interest on Advances shall be payable in arrears on the last day of each
month with respect to Domestic Rate Loans and, with respect to Eurodollar Rate
Loans, at the end of each Interest Period or, for Eurodollar Rate Loans with an
Interest Period in excess of three months, at the earlier of (a) the last day of
each three month period from the date of the commencement of such Eurodollar
Rate Loan or (b) the end of the Interest Period.  Interest charges shall be
computed on the actual principal of Advances outstanding during the month (the
"Monthly Advances") at a rate per annum equal to the applicable Contract Rate.
Whenever, subsequent to the date of this Agreement, the Alternate Base Rate is
increased or decreased, the applicable Contract Rate with respect to Domestic
Rate Loans shall be similarly changed without notice or demand of any kind by an
amount equal to the amount of such change in the Alternate Base Rate during the
time such change or changes remain in effect.  Upon and after the occurrence of
an Event of Default, and during the continuation thereof, the Obligations shall
bear interest at the applicable Revolving Interest Rate plus two (2%) percent
per annum (the "Default Rate").  So long as no Default or Event of Default shall
have occurred and be continuing, the Applicable Margin shall be increased or
decreased, as the case may be, as of the first day of each month following the
fiscal quarter reported upon in the financial statements delivered pursuant to
Sections 9.8 and 9.9 hereof, commencing with fiscal quarter ending September 24,
1999, based upon the ratio of Funded Indebtedness to EBITDA with respect to the
four (4) fiscal quarters then ended as reported upon in the applicable financial
statements.

     3.2.  Letter of Credit Fees.
           ---------------------

     Borrowers shall pay Agent (i) for the ratable benefit of the Lenders for
issuing or causing the issuance of a Standby Letter of Credit, a fee computed at
a rate per annum of one and three quarters percent (1.75%) on the outstanding
amount thereof from time to time, (ii) for the ratable benefit of the Lenders
for issuing or causing the issuance of a Documentary Letter of Credit, a fee
computed at a rate per annum of one and one half percent (1.50%) of the original
and each increase in the face amount thereof, (iii) for its own account, a
letter of credit fronting and negotiation fee of .125% per annum on the maximum
amount available to be drawn under each Letter of Credit, payable upon the
issuance of each such Letter of Credit, and (iv) Bank's other customary charges
payable in connection with Letters of Credit as in effect from time to time

                                      36
<PAGE>

(which charges shall be furnished to Borrowers by Agent upon request). Such fees
and charges shall be payable in the case of any Letter of Credit, on its opening
monthly thereafter in advance and upon each increase in the outstanding amount
thereof. Any such charge in effect at the time of a particular transaction shall
be the charge for that transaction, notwithstanding any subsequent change in
Bank's prevailing charges for that type of transaction. All Letter of Credit
Fees payable hereunder shall be deemed earned in full on the date when the same
are due and payable hereunder and shall not be subject to rebate or proration
upon the termination of this Agreement for any reason.

     3.3. Fees.
          ----

     (a)  Intentionally Omitted.

     (b)  Facility Fee.

          If, for any month during the Term, the average daily unpaid balance of
     the Revolving Advances for each day of such month plus outstanding Letters
                                                       ----
     of Credit does not equal the Maximum Loan Amount (any outstanding Swingline
     Loans being considered unused for this purpose) then Borrowers shall pay to
     Agent for the ratable benefit of the Lenders a fee at a rate equal to the
     Applicable Margin for Facility Fee per annum on the amount by which the
     Maximum Loan Amount exceeds such average daily unpaid balance plus
     outstanding Letters of Credit.  Such fee shall be payable to Agent in
     arrears on the last day of each month and on the last day of the Term.  So
     long as no Default or Event of Default shall have occurred and be
     continuing, the Applicable Margin with respect to the facility fee shall be
     increased or decreased, as the case may be, as of the first day of each
     month following the fiscal quarter reported upon in the financial
     statements delivered pursuant to Sections 9.8 and 9.9 hereof, commencing
     with fiscal quarter ending September 24, 1999, based upon the ratio of
     Funded Indebtedness to EBITDA with respect to the four (4) fiscal quarters
     then ended as reported upon in the applicable financial statements.

     (c)  Agency Fee.

     Borrower shall pay to Agent (for the sole benefit of Agent) an agency fee
of $40,000 per annum payable to Agent on the Effective Date and on each
anniversary date thereafter during the Term.  The agency fee shall be deemed
earned in full on the date when same is due and payable hereunder and shall not
be subject to rebate or proration upon termination of this Agreement for any
reason.

                                      37
<PAGE>

     3.4. Collateral Monitoring Fee.
          -------------------------

     Borrower shall pay to Agent (for the sole benefit of Agent) on the first
day of each month following any month in which Agent performs any collateral
monitoring - namely any field examination, collateral analysis or other business
analysis, the need for which is to be determined by Agent and which monitoring
is undertaken by Agent or for Agent's benefit - a collateral monitoring fee in
an amount equal to $750 per day for each person performing such monitoring, plus
all costs and disbursements incurred by Agent in the performance of such
examination or analysis.

     3.5. Computation of Interest and Fees.
          --------------------------------

     Interest and fees hereunder shall be computed on the basis of a year of 360
days and for the actual number of days elapsed.  If any payment to be made
hereunder becomes due and payable on a day other than a Business Day, the due
date thereof shall be extended to the next succeeding Business Day and interest
thereon shall be payable at the applicable Contract Rate during such extension.

     3.6. Maximum Charges.
          ---------------

     In no event whatsoever shall interest and other charges charged hereunder
exceed the highest rate permissible under law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto.  In the
event that a court determines that Agent or any Lender has received interest and
other charges hereunder in excess of the highest rate permissible hereto, such
excess amount shall be first applied to any unpaid principal balance owed by
Borrowers, and if the then remaining excess amount is greater than the
previously unpaid principal balance, the Lenders shall promptly refund such
excess amount to Borrowers and the provisions hereof shall be deemed amended to
provide for such permissible rate.

     3.7. Increased Costs.
          ---------------

     In the event that any applicable law, treaty or governmental regulation, or
any change therein or in the interpretation or application thereof or compliance
by any Lender (for purposes of this Section 3.7, the term "Lender" shall include
Agent or any Lender and any corporation or bank controlling Agent or any Lender)
and the office or branch where Agent or any Lender (as so defined) makes or
maintains any Eurodollar Rate Loans with any request or directive (whether or
not having the force of law) from any central bank or other financial, monetary
or other authority, shall:

     (a)  subject Agent or any Lender to any tax of any kind whatsoever with
respect to this Agreement or any Eurodollar Rate Loan or change the basis of
taxation of payments to Agent or any Lender of principal, fees, interest or any
other amount payable hereunder or under any Other Documents (except for changes
in the rate of tax on the overall net income of Agent or any Lender by the
jurisdiction in which it maintains its principal office);

                                      38
<PAGE>

     (b) change the currency of a country, impose, modify or hold applicable any
reserve, special deposit, assessment or similar requirement against assets held
by, or deposits in or for the account of, advances or loans by, or other credit
extended by, any office of Agent or any Lender, including (without limitation)
pursuant to Regulation D of the Board of Governors of the Federal Reserve
System; or

     (c) impose on Agent or any Lender or the London interbank Eurodollar market
any other condition with respect to this Agreement, any Other Documents or any
Eurodollar Rate Loan;

and the result of any of the foregoing is to increase the cost to Agent or
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or such Lender deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender deems to be material, then, in
any case Borrowers shall promptly pay Agent or such Lender, upon its demand,
such additional amount as will compensate Agent or such Lender for such
additional cost or such reduction, as the case may be, provided that the
foregoing shall not apply to increased costs which are reflected in the
Alternate Base Rate or the Eurodollar Rate, as the case may be.  Agent or such
Lender shall certify the amount of such additional cost or reduced amount to
Borrowing Agent, and such certification shall be conclusive absent manifest
error.

     3.8. Basis For Determining Interest Rate Inadequate or Unfair.
          --------------------------------------------------------

     In the event that Agent or any Lender shall have determined that:

     (a) reasonable means do not exist for ascertaining the Eurodollar Rate for
any Interest Period; or

     (b) Dollar deposits in the relevant amount and for the relevant maturity
are not available in the London interbank Eurodollar market, with respect to an
outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan, or a proposed
conversion of a Domestic Rate Loan into a Eurodollar Rate Loan;

Agent shall give Borrowing Agent prompt written, telephonic or telegraphic
notice of such determination.  If such notice is given, (i) any such requested
Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrowing
Agent shall notify Agent no later than 10:00 a.m. (New York City time) two (2)
Business Days prior to the date of such proposed borrowing, that its request for
such borrowing shall be cancelled or made as an unaffected type of Eurodollar
Rate Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to have
been converted to an affected type of Eurodollar Rate Loan shall be continued as
or converted into a Domestic Rate Loan, or, if Borrowing Agent shall notify
Agent, no later than 10:00 a.m. New York City time) two (2) Business Days prior
to the proposed conversion, shall be maintained as an unaffected type of
Eurodollar Rate Loan, and (iii) any outstanding affected Eurodollar Rate Loans
shall be converted into a Domestic Rate Loan, or, if Borrowing Agent shall
notify Agent, no later than 10:00 a.m. New York City time) two (2) Business Days
prior to the last Business Day of the then current Interest Period applicable to
such affected Eurodollar Rate Loan, shall be

                                      39
<PAGE>

converted into an unaffected type of Eurodollar Rate Loan, on the last Business
Day of the then current Interest Period for such affected Eurodollar Rate Loans.
Until such notice has been withdrawn, the Lenders shall have no obligation to
make an affected type of Eurodollar Rate Loan or maintain outstanding affected
Eurodollar Rate Loans and no Borrower shall have the right to convert a Domestic
Rate Loan or an unaffected type of Eurodollar Rate Loan into an affected type of
Eurodollar Rate Loan.

     3.9. Capital Adequacy.
          ----------------

     (a)  In the event that Agent or any Lender shall have determined that any
applicable law, rule, regulation or guideline regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Agent or any Lender
(for purposes of this Section 3.9, the term "Lender" shall include Agent or any
Lender and any corporation or bank controlling Agent or any Lender) and the
office or branch where Agent or any Lender (as so defined) makes or maintains
any Eurodollar Rate Loans 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 Agent or any Lender's capital as a consequence of its obligations
hereunder to a level below that which Agent or such Lender could have achieved
but for such adoption, change or compliance (taking into consideration Agent's
and each Lender's policies with respect to capital adequacy) by an amount deemed
by Agent or any Lender to be material, then, from time to time, Borrowers shall
pay upon demand to Agent or such Lender such additional amount or amounts as
will compensate Agent or such Lender for such reduction.  In determining such
amount or amounts, Agent or such Lender may use any reasonable averaging or
attribution methods.  The protection of this Section 3.9 shall be available to
Agent and each Lender regardless of any possible contention of invalidity or
inapplicability with respect to the applicable law, regulation or condition.

     (b)  A certificate of Agent or such Lender setting forth such amount or
amounts as shall be necessary to compensate Agent or such Lender with respect to
Section 3.9(a) hereof when delivered to Borrowers shall be conclusive absent
manifest error.

IV.  COLLATERAL; GENERAL TERMS.
     -------------------------

     For the purpose of this Article IV, references herein to the "Agent" shall
be deemed to mean "the Agent, for the ratable benefit of the Lenders".

     4.1. Acknowledgement and Grant of Security Interests.
          -----------------------------------------------

     (a)  Each Borrower hereby acknowledges, confirms and agrees that Agent for
the ratable benefit of Lenders has and shall continue to have a lien upon and
security interest in all Collateral heretofore granted to Agent pursuant to the
Existing Loan Agreement and the European Security Documents to secure the U.S.
Obligations, in the case of the U.S. Borrowers and the European Obligations, in
the case of the European Borrowers and, to the extent not otherwise granted
thereunder or under the Other Documents or otherwise granted to or held by

                                      40
<PAGE>

Agent.  Each Borrower hereby pledges and assigns to Agent for the ratable
benefit of Lenders and grants to Agent for the ratable benefit of Lenders a
continuing security interest to secure the U.S. Obligations, in the case of the
U.S. Borrowers and the European Obligations, in the case of the European
Borrowers in all of such Borrower's Collateral, wherever located, whether in any
Borrower's possession or in the possession and control of a third party for any
Borrower's or Agent's or any Lender's account.  All of each Borrower's ledger
sheets, files, records, books of account, business papers and documents relating
to the Collateral shall, until delivered to or removed by Agent, be kept by such
Borrower in trust for Agent for the ratable benefit of Lenders.

     (b)  The liens and security interests of Agent for the ratable benefit of
Lenders in the Collateral shall be deemed to be continuously perfected from the
earliest date of the granting of such liens and security interests, whether
hereunder, under the Other Documents, or under the Existing Loan Agreement.

     (c)  Anything else herein to the contrary notwithstanding the Lenders and
the Agent acknowledge that the U.S. Collateral is granted as security only for
the U.S. Obligations and the European Collateral is granted as security only for
the European Obligations.

     4.2. Perfection of Security Interest.
          -------------------------------

     Each Borrower shall take all action that may be necessary or desirable, or
that Agent may request, so as at all times to maintain the validity, perfection,
enforceability and priority of Agent's security interest for the ratable benefit
of the Lenders in the Collateral or to enable Agent to protect, exercise or
enforce its rights hereunder and in the Collateral, including, but not limited
to (i) immediately discharging all Liens other than Permitted Encumbrances, (ii)
obtaining landlords' or mortgagees' lien waivers, (iii) delivering to Agent,
endorsed or accompanied by such instruments of assignment as Agent may specify,
and stamping or marking, in such manner as Agent may specify, any and all
chattel paper, instruments, letters of credits and advices thereof and documents
evidencing or forming a part of the Collateral, (iv) entering into warehousing,
lockbox and other custodial arrangements satisfactory to Agent, and (v)
executing and delivering financing statements, instruments of pledge, mortgages,
notices and assignments, in each case in form and substance satisfactory to the
Required Lenders, relating to the creation, validity, perfection, maintenance or
continuation of Agent's security interest for the ratable benefit of the Lenders
under the Uniform Commercial Code or other applicable law.  Agent is hereby
authorized to file financing statements covering the Collateral signed by Agent
instead of Borrower in accordance with Section 9-402(2) of the Uniform
Commercial Code as adopted in the State of New York.  All charges, expenses and
fees Agent may incur in doing any of the foregoing, and any local taxes relating
thereto, shall be charged to Borrower's account as a Revolving Advance and added
to (i) the U.S. Obligations, with respect to charges, expenses and fees related
to the U.S. Borrowers, or (ii) the European Obligations with respect to charges,
expenses and fees related to the European Borrowers or, at the Agent's option,
shall be paid to Agent for the ratable benefit of the Lenders immediately upon
demand.

                                      41
<PAGE>

     4.3. Disposition of Collateral.
          -------------------------

     Each Borrower will safeguard and protect all Collateral granted by such
Borrower for Agent's general account and make no disposition thereof whether by
sale, lease or otherwise except the sale of Inventory in the ordinary course of
business.

     4.4  Preservation of Collateral.
          --------------------------

     Following the occurrence and during the continuance of an Event of Default,
in addition to the rights and remedies set forth in Section 11.1 hereof, Agent:
(a) may at any time take such steps as Agent deems necessary to protect Agent's
and Lenders' interest in and to preserve the Collateral,\\ including the hiring
of such security guards or the placing of other security protection measures as
Agent may deem appropriate; (b) may employ and maintain at any Borrower's
premises a custodian who shall have full authority to do all acts necessary to
protect Agent's and Lenders' interests in the Collateral; (c) may lease
warehouse facilities to which Agent may move all or part of the Collateral; (d)
may use any Borrower's owned or leased lifts, hoists, trucks and other
facilities or equipment for handling or removing the Collateral; and (e) shall
have, and is hereby granted, a right of ingress and egress to the places where
the Collateral is located, and may proceed over and through any Borrower's owned
or leased property.  Each Borrower shall cooperate fully with all of Agent's
efforts to preserve the Collateral and will take such actions to preserve the
Collateral as Agent may direct.  All of Agent's expenses of preserving the
Collateral, including any expenses relating to the bonding of a custodian, shall
be charged (i) to the European Borrowers' accounts as a European Revolving
Advance, in the case of Collateral of a European Borrower and (ii) to the U.S.
Borrowers' accounts as a U.S. Revolving Advance in the case of Collateral of a
U.S. Borrower; each in such manner as Agent deems appropriate and added to the
U.S. Obligations, in the case of the U.S. Borrowers or the European Obligations,
in the case of the European Borrowers.

     4.5. Ownership of Collateral.
          -----------------------

     With respect to the Collateral, at the time the Collateral becomes subject
to Agent's security interest for its benefit and for the ratable benefit of the
Lenders:  (a) each Borrower shall be the sole owner of and fully authorized and
able to sell, transfer, pledge and/or grant a first security interest in each
and every item of the Collateral to Agent for its benefit and for the ratable
benefit of the Lenders; and, except for Permitted Encumbrances the Collateral
shall be free and clear of all Liens and encumbrances whatsoever; (b) each
document and agreement executed by each Borrower or delivered to Agent or any
Lender in connection with this Agreement shall be true and correct in all
respects; (c) all signatures and endorsements of each Borrower that appear on
such documents and agreements shall be genuine and each Borrower shall have full
capacity to execute same; and (d) each Borrower's Inventory shall be located as
set forth on Schedule 4.5 and shall not be removed from such location(s) without
             ------------
the prior written consent of Agent except with respect to the sale of Inventory
in the ordinary course of business.

                                      42
<PAGE>

     4.6. Defense of Agent's and Lender's Interests.
          -----------------------------------------

     Until (a) payment and performance in full of all of the U.S. Obligations,
in the case of the U.S. Borrowers or the European Obligations, in the case of
the European Borrowers and (b) termination of this Agreement, Agent's and
Lenders' interests in the Collateral shall continue in full force and effect.
During such period no Borrower shall, without Required Lenders' prior written
consent, pledge, sell (except Inventory in the ordinary course of business),
assign, transfer, create or suffer to exist a Lien upon or encumber or allow or
suffer to be encumbered in any way except for Permitted Encumbrances, any part
of such Borrower's Collateral.  Each Borrower shall defend Agent and Lenders'
interests in such Borrower's Collateral against any and all persons whatsoever.
At any time following the occurrence and during the continuance of an Event of
Default and a demand by Agent for payment of all Obligations, Agent shall have
the right to take possession of the indicia of the Collateral and the Collateral
in whatever physical form contained, including without limitation: labels,
stationery, documents, instruments and advertising materials. If Agent exercises
this right to take possession of the Collateral, each Borrower shall, upon
demand, assemble the Collateral provided by it in the best manner possible and
make it available to Agent at a place reasonably convenient to Agent. In
addition, with respect to all Collateral, Agent and the Lenders shall be
entitled to all of the rights and remedies set forth herein and further provided
by the Uniform Commercial Code or other applicable law. Each Borrower shall, and
Agent may, at its option, instruct all suppliers, carriers, forwarders,
warehouses or others receiving or holding cash, checks, Inventory, documents or
instruments in which Agent holds a security interest for its benefit and for the
ratable benefit of the Lenders to deliver same to Agent and/or subject to
Agent's order and if they shall come into any Borrower's possession, they, and
each of them, shall be held by Borrower in trust as Agent's trustee, and such
Borrower, as the case may be, will immediately deliver them to Agent in their
original form together with any necessary endorsement.

     4.7. Books and Records.
          -----------------

     Each Borrower (a) shall keep proper books of record and account in which
full, true and correct entries will be made of all dealings or transactions of
or in relation to its business and affairs; (b) set up on its books accruals
with respect to all taxes, assessments, charges, levies and claims; and (c) on a
reasonably current basis set up on its books, from its earnings, allowances
against doubtful Receivables as the case may be, advances and investments and
all other proper accruals (including without limitation by reason of
enumeration, accruals for premiums, if any, due on required payments and
accruals for depreciation, obsolescence, or amortization of properties), which
should be set aside from such earnings in connection with its business.  All
determinations pursuant to this subsection shall be made in accordance with, or
as required by, GAAP consistently applied in the opinion of such independent
public accountant as shall then be regularly engaged by Borrowers.

     4.8. Financial Disclosure.
          --------------------

     Each Borrower hereby irrevocably authorizes and directs all accountants and
auditors employed by Borrowers at any time during the Term to exhibit and
deliver to Agent and each Lender copies of any Borrower's financial statements,
trial balances or other accounting records

                                      43
<PAGE>

of any sort in the accountant's or auditor's possession, and to disclose to
Agent and each Lender any information such accountants may have concerning any
Borrower's financial status and business operations. Each Borrower hereby
authorizes all federal, state and municipal authorities to furnish to Agent and
each Lender copies of reports or examinations relating to Borrowers, whether
made by a Borrower or otherwise; however, Agent and each Lender will attempt to
obtain such information or materials directly from Borrowers, as the case may
be, prior to obtaining such information or materials from such accountants or
such authorities.

     4.9.  Compliance with Laws.
           --------------------

     Each Borrower shall comply in all material respects with all acts, rules,
regulations and orders of any legislative, administrative or judicial body or
official applicable to the Collateral or any part thereof or to the operation of
such Borrower's business the noncompliance with which could have a Material
Adverse Effect on such Borrower.  Each Borrower may, however, contest or dispute
any acts, rules, regulations, orders and directions of those bodies or officials
in any reasonable manner, provided that any related lien is inchoate or stayed
and sufficient reserves are established to the reasonable satisfaction of the
Lenders to protect Agent's Lien on or security interest in the Collateral.  The
Collateral at all times shall be maintained in accordance with the requirements
of all insurance carriers which provide insurance with respect to the Collateral
so that such insurance shall remain in full force and effect.

     4.10. Inspection of Premises.
           ----------------------

     At all reasonable times Agent and each Lender shall have full access to and
the right to audit, check, inspect and make abstracts and copies from any
Borrower's books, records, audits, correspondence and all other papers relating
to the Collateral and the operation of their respective businesses.  Agent, any
Lender and their agents may enter upon any Borrower's premises at any time
during business hours and at any other reasonable time, and from time to time
without prior notice, for the purpose of inspecting the Collateral and any and
all records pertaining thereto and the operation of their respective businesses.

     4.11. Insurance.
           ---------

     Each Borrower shall bear the full risk of any loss of any nature whatsoever
with respect to the Collateral.  At Borrowers' own cost and expense in amounts
and with carriers acceptable to Agent, each Borrower shall (a) keep all
insurable properties and properties in which it has an interest insured against
the hazards of fire, flood, sprinkler leakage, those hazards covered by extended
coverage insurance and such other hazards, and for such amounts, as is customary
in the case of companies engaged in similar businesses including, without
limitation, business interruption insurance; (b) maintain a bond in such amounts
as is customary in the case of companies engaged in similar businesses insuring
against larceny, embezzlement or other criminal misappropriation of insured's
officers and employees who may either singly or jointly with others at any time
have access to the assets or funds of Borrowers either directly or through
authority to draw upon such funds or to direct generally the disposition of such
assets; (c) maintain public and product liability insurance against claims for
personal injury, death or property damage suffered by others; (d) maintain all
such worker's compensation or similar

                                      44
<PAGE>

insurance as may be required under the laws of any state or jurisdiction in
which it is engaged in business; (e) furnish Agent with (i) copies of all
policies and evidence of the maintenance of such policies by the renewal thereof
at least thirty (30) days before any expiration date, and (ii) appropriate loss
payable endorsements in form and substance satisfactory to Agent, naming Agent
as a co-insured and loss payee as its interests may appear with respect to all
insurance coverage referred to in clauses (a) and (b) above, and providing (A)
that all proceeds thereunder in excess of $100,000 shall be payable to Agent for
the ratable benefit of the Lenders, (B) no such insurance shall be affected by
any act or neglect of the insured or owner of the property described in such
policy, and (C) that such policy and loss payable clauses may not be cancelled,
amended or terminated unless at least thirty (30) days' prior written notice is
given to Agent. In the event of any loss thereunder, the carriers named therein
hereby are directed by Agent or any Borrower to make payment for such loss in
excess of $100,000 to Agent and not to a Borrower and Agent jointly. If any
insurance losses are paid by check, draft or other instrument payable to a
Borrower and Agent jointly, Agent may endorse such Borrower's name thereon and
do such other things as Agent may deem advisable to reduce the same to cash.
Agent is hereby authorized to adjust and compromise claims under insurance
coverage referred to in clauses (a) and (b) above. All loss recoveries received
by Agent upon any such insurance related to U.S. Collateral may be applied to
the U.S. Obligations and all loss recoveries received by Agent upon any such
insurance related to the European Collateral may be applied to the European
Obligations, in such order as Agent in its sole discretion shall determine;
provided, upon any Borrower's request such proceeds shall be disbursed to such
--------
Borrower for the restoration of damaged property if such proceeds together with
other amounts provided by such Borrower are sufficient to fully restore such
property to its condition prior to the casualty loss. Any surplus shall be paid
by Agent to Borrowers or applied as may be otherwise required by law. Any
deficiency thereon shall be paid by Borrowers, to Agent, on demand.

     4.12.  Failure to Pay Insurance.
            ------------------------

     If any Borrower shall fail to obtain insurance as hereinabove provided, or
to keep the same in force, Agent, if Agent so elects, may obtain such insurance
and pay the premium therefor for such Borrower's account, and charge such
Borrower's account therefor and such expenses so paid shall be part of the U.S.
Obligations, in the case of a U.S. Borrower and the European Obligations, in the
case of a European Borrower, provided Agent shall promptly thereafter provide to
such Borrower documentation supporting such charges.

     4.13.  Payment of Taxes.
            ----------------

     Each Borrower will pay, when due, all taxes, assessments and other Charges
lawfully levied or assessed upon any Borrower or any of the Collateral
including, without limitation, real and personal property taxes, assessments and
charges and all franchise, income, employment, social security benefits,
withholding, and sales taxes.  If any tax by any governmental authority is or
may be imposed on or as a result of any transaction between any Borrower and
Agent or any Lender which Agent or any Lender may be required to withhold or pay
or if any taxes, assessments, or other Charges remain unpaid after the date
fixed for their payment, or if any claim shall be made which, in Agent's or
Lender's opinion, may possibly create a valid Lien on the Collateral, Agent may
without notice to such Borrower pay the taxes, assessments or other

                                      45
<PAGE>

Charges and Borrowers hereby indemnify and hold Agent and each Lender harmless
in respect thereof. The amount of any payment by Agent under this Section 4.13
shall be charged to the applicable Borrower's accounts as a Revolving Advance
and added to the U.S. Obligations in the case of a U.S. Borrower or the European
Obligations, in the case of a European Borrower and, until a Borrower shall
furnish Agent with an indemnity therefor (or supply Agent with evidence
satisfactory to Agent that due provision for the payment thereof has been made),
Agent may hold without interest any balance standing to any Borrower's credit
and Agent shall retain its security interest in any and all Collateral held by
Agent.

     4.14.  Payment of Leasehold Obligations.
            --------------------------------

     Each Borrower shall at all times pay, when and as due, its rental
obligations under all leases under which it is a tenant, and shall otherwise
comply, in all material respects, with all other terms of such leases and keep
them in full force and effect and, at Agent's request, will provide evidence of
having done so.

     4.15.  Receivables.
            -----------

            (a) Nature of Receivables.  Each of the Receivables shall be a bona
                ---------------------
fide and valid account representing a bona fide indebtedness incurred by the
Customer therein named, for a fixed sum as set forth in the invoice relating
thereto provided immaterial or unintentional invoice errors shall not be deemed
to be a breach hereof) with respect to an absolute sale or lease and delivery of
goods upon stated terms of such Borrower, or work, labor or services theretofore
rendered by Borrower as of the date each Receivable is created. Same shall be
due and owing in accordance with such Borrower's standard terms of sale without
dispute, setoff or counterclaim except as may be stated on the accounts
receivable schedules delivered by Borrowers to Agent.

            (b) Solvency of Customers.  Each Customer of each Borrower, to the
                ---------------------
best of such Borrower's knowledge, as of the date each Receivable is created, is
and will be solvent and able to pay all Receivables on which the Customer is
obligated in full when due or with respect to such Customers of such Borrower
who are not solvent such Borrower has set up on its books and in its financial
records bad debt reserves adequate to cover such Receivables.

            (c) Locations of Borrower. Each Borrower's chief executive office
                ---------------------
and the office at which each maintains its books and records pertaining to
Receivables is the address set forth on Schedule 4.15(c) hereto. Until written
                                        ----------------
notice is given to Agent by Borrowing Agent of any other office at which it
keeps its records pertaining to Receivables all such records shall be kept at
such offices.

            (d) Collection of Receivables. Until a Borrower's authority to do so
                -------------------------
is terminated by Agent (which notice Agent may give at any time following the
occurrence of an Event of Default or a Default), such Borrower will, at its sole
cost and expense, but on Agent's behalf and for Agent's account, collect as
Agent's property and in trust for Agent all amounts received on Receivables of
such Borrower, and shall not commingle such collections with its respective
funds or use the same except to pay Obligations. Each Borrower shall, upon
request, deliver to Agent or the Blocked Account in original form and on the
date of receipt thereof, all

                                      46
<PAGE>

checks, drafts, notes, money orders, acceptances, cash and other evidences of
Indebtedness received by such Borrower.

          (e) Notification of Assignment of Receivables.  At any time following
              -----------------------------------------
the occurrence and during the continuance of an Event of Default or a Default,
Agent shall have the right to send notice of the assignment of, and Agent's
security interest in, the Receivables of the U.S. Borrowers to any and all
Customers or any third party holding or otherwise concerned with any of the
Collateral of the U.S. Borrowers.  Thereafter, Agent shall have the sole right
to collect the Receivables of the U.S. Borrowers, take possession of the
Collateral of the U.S. Borrowers, or both, for the ratable benefit of the
Lenders, to be applied, in the case of U.S. Collateral, to the U.S. Obligations.
Agent's actual collection expenses, including, but not limited to, stationery
and postage, telephone and telegraph, secretarial and clerical expenses and the
salaries of any collection personnel used for collection, may be charged to
Borrower's accounts and added to the U.S. Obligations, in the case of the U.S.
Borrowers or the European Obligations, in the case of the European Borrower.

          (f) Power of Agent to Act on Borrowers' Behalf.  Agent shall have the
              ------------------------------------------
right to receive, endorse, assign and/or deliver in the name of Agent, or any
Borrower any and all checks, drafts and other instruments for the payment of
money relating to the Receivables of the U.S. Borrowers, and Borrower hereby
waives notice of presentment, protest and non-payment of any instrument so
endorsed.  Each Borrower hereby constitutes Agent or Agents designee as its
respective attorney with power (A) at any time following the occurrence and
during the continuance of an Event of Default hereunder (i) to endorse its name
upon any notes, acceptances, checks, drafts, money orders or other evidences of
payment or Collateral of the U.S. Borrowers; (ii) to sign its name on any
invoice or bill of lading relating to any of the Receivables of the U.S.
Borrowers, drafts against Customers or assignments of Receivables of the U.S.
Borrowers; (iii) to demand payment of the Receivables of the U.S. Borrowers;
(iv) to enforce payment of the Receivables of the U.S. Borrowers by legal
proceedings or otherwise; (v) to exercise all of its rights and remedies with
respect to the collection of the Receivables of the U.S. Borrowers and any other
Collateral of the U.S. Borrowers; (vi) to settle, adjust, compromise, extend
or renew the Receivables of the U.S. Borrowers; (vii) to settle, adjust or
compromise any legal proceedings brought to collect Receivables of the U.S.
Borrowers; (viii) to prepare, file and sign its name on a proof of claim in
bankruptcy or similar document against any Customer; (ix) to prepare, file and
sign its name on any notice of Lien, assignment or satisfaction of Lien or
similar document in connection with the Receivables of the U.S. Borrowers; and
(B) at any time (i) to send verifications of Receivables of the U.S. Borrowers
to any Customer; (ii) to sign its name on all financing statements or any other
documents or instruments deemed necessary or appropriate by Agent to preserve,
protect, or perfect Agent's interest in the Collateral and to file same; (iii)
to do all other acts and things necessary to carry out this Agreement.  All acts
of said attorney or designee are hereby ratified and approved, and said attorney
or designee shall not be liable for any acts of omission or commission nor for
any error of judgment or mistake of fact or of law, unless done maliciously or
with gross (not mere) negligence; this power being coupled with an interest is
irrevocable while any of the Obligations remain unpaid.  Agent shall have the
right at any time following the occurrence and during the continuance of an
Event of Default, to change the address for delivery of mail addressed to any
Borrower to such address as Agent may designate.

                                      47
<PAGE>

            (g) No Liability.  Neither Agent nor any Lender shall, under any
                ------------
circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or payment
of any of the Receivables of the U.S. Borrowers or any instrument received in
payment thereof, or for any damage resulting therefrom.  Following the
occurrence and during the continuance of an Event of Default Agent may, without
notice or consent from any Borrower, sue upon or otherwise collect, extend the
time of payment of, compromise or settle for cash, credit or upon any terms any
of the Receivables of the U.S. Borrowers or any other securities, instruments or
insurance applicable thereto and/or release any obligor thereof.  Agent is
authorized and empowered to accept following the occurrence and during the
continuance of an Event of Default the return of the goods represented by any of
the Receivables of the U.S. Borrowers, without notice to or consent by any
Borrower, all without discharging or in any way affecting the Obligations
hereunder.

            (h) Establishment of a Lockbox Account, Dominion Account.  All
                ----------------------------------------------------
proceeds of U.S. Collateral shall, at the direction of Agent, be deposited by
U.S. Borrowers into a lockbox account, dominion account or such other "blocked
account" ("Blocked Accounts") as Agent may require pursuant to an arrangement
with such bank(s) as may be selected by U.S. Borrowers and be acceptable to
Agent. U.S.  Unless as otherwise may be required at any time by Agent, for the
benefit of the Lenders, Borrowers may transfer any such funds so deposited into
the Blocked Accounts to one or more operating accounts designated by the
Borrowers to be used for general corporate purpose.  Agent assumes no
responsibility for such "blocked account" arrangement including, without
limitation, any claim of accord and satisfaction or release with respect to
deposits accepted by any bank thereunder.  Alternatively, Agent may establish
depository accounts ("Depository Accounts") in the name of Agent at a bank or
banks for the deposit of such funds and Borrowers shall deposit all proceeds of
Collateral or cause same to be deposited, in kind, in such Depository Accounts
of Agent in lieu of depositing same to the Blocked Accounts.

            (i) Adjustments.  No Borrower will, without Agent's consent,
                -----------
compromise or adjust any Receivables (or extend the time for payment thereof) or
accept any material returns of merchandise or grant any additional discounts,
allowances or credits thereon except for those compromises, adjustments,
returns, discounts, credits and allowances as have been heretofore customary in
the business of such Borrower, as the case may be.

     4.16.  Inventory.
            ---------

     All Inventory has been, and will be, produced by U.S. Borrowers with the
Federal Fair Labor Standards Act of 1938 (to the extent applicable to such
Borrower), as amended, and all rules, regulations and orders thereunder.

     4.17.  Intentionally Omitted.
            ---------------------

                                      48
<PAGE>

     4.18.  Exculpation of Liability.
            ------------------------

     Nothing herein contained shall be construed to constitute Agent or any
Lender as any Borrower's agent for any purpose whatsoever, nor shall Agent or
any Lender be responsible or liable for any shortage, discrepancy, damage, loss
or destruction of any part of the Collateral wherever the same may be located
and regardless of the cause thereof, unless such shortage, discrepancy, damage,
loss or destruction results from the gross (not mere) negligence or willful
misconduct of Agent or Lenders.  Neither Agent nor any Lender, whether by
anything herein or in any assignment or otherwise, assume any Borrower's
obligations under any contract or agreement assigned to Agent or such Lender,
and neither Agent nor any Lender shall be responsible in any way for the
performance by any Borrower of any of the terms and conditions thereof.

     4.19.  Environmental Matters.
            ---------------------

            (a) Borrowers will ensure that all real property owned or occupied
by Borrowers remains in compliance in all material respects with all
Environmental Laws and they will not place or permit to be placed any Hazardous
Substances on any such property except as not prohibited by applicable law or
appropriate governmental authorities.

            (b) Borrowers will establish and maintain a system to assure and
monitor continued compliance with all applicable Environmental Laws which system
shall include periodic reviews of such compliance.

            (c) Promptly upon the written request of Agent from time to time,
Borrowers shall provide Agent, at Borrowers' expense, with an environmental site
assessment or environmental audit report prepared by an environmental
engineering firm acceptable in the reasonable opinion of Agent, to assess with a
reasonable degree of certainty the existence of a Hazardous Discharge and the
potential costs in connection with abatement, cleanup and removal of any
Hazardous Substances found on, under, at or within any real property owned or
occupied by a Borrower.  Any report or investigation of such Hazardous Discharge
proposed and acceptable to an appropriate Authority that is charged to oversee
the clean-up of such Hazardous Discharge (an "Authority") shall be acceptable to
Agent.  If such estimates, individually or in the aggregate, exceed $100,000,
Agent shall have the right to require Borrowers to post a bond, letter of credit
or other security reasonably satisfactory to Agent to secure payment of these
costs and expenses.

            (d) Each Borrower shall defend and indemnify Agent and the Lenders
and hold Agent, the Lenders and their respective employees, agents, directors
and officers harmless from and against all loss, liability, damage and expense,
claims, costs, fines and penalties, including attorney's fees, suffered or
incurred by Agent or the Lenders under or on account of any Environmental Laws,
including, without limitation, the assertion of any lien thereunder, with
respect to any Hazardous Discharge, the presence of any Hazardous Substances,
whether or not the same originates or emerges from any real property owned or
occupied by such Borrower or any contiguous real estate, except to the extent
such loss, liability, damage and expense is attributable to any Hazardous
Discharge resulting from actions on the part of Agent or any

                                      49
<PAGE>

Lender. Each Borrower's obligations under this Section 4.19 shall arise upon the
discovery of the presence of any Hazardous Substances at any real property owned
or occupied by such Borrower, whether or not any federal, state, or local
environmental agency has taken or threatened any action in connection with the
presence of any Hazardous Substances. Borrowers obligations and the
indemnifications hereunder shall survive the termination of this Agreement.

            (e) For purposes of Sections 4.19 and 5.7, all references to any
real property owned or occupied by a Borrower shall be deemed to include all of
such Borrower's right, title and interest in and to its owned and leased
premises.

     4.20.  Financing Statements.
            --------------------

     Except as respects the financing statements filed by Agent and the
financing statements described on Schedule 4.20, no financing statement covering
                                  -------------
any of the Collateral or any proceeds thereof is on file in any public office.

     4.21.  ThermiSol Sweden.
            ----------------

            (a) Thermisol Sweden shall not, where the distribution restrictions
in the provisions of Chapter 12 Section 2 of the Swedish Companies Act
(Aktiebolagslagen (1975:1385)) apply in relation to the guarantee given by it
hereunder, in each case taking into account the extent to which any commercial
benefit is derived by it in giving such guarantee, assume any liability as a
guarantor in respect of any European Obligations owing by a European Borrower
under or in connection with this Agreement or the Security Documents to the
extent that the obligations and liabilities of Thermisol Sweden in respect
thereof would exceed an amount equal to the lesser of:

            (i)   the amount of distributable reserves according to its last
            audited and adopted balance sheet as at the date hereof; and

            (ii)  an amount being available for distribution by it under Chapter
            12 Section 2 second paragraph of the aforementioned Swedish
            Companies Act.

            (b)   The provision of Section 4.21 also applies to:

            (i)   any undertaking by Thermisol Sweden that is stated to be joint
            and several in nature;

            (ii)  any indemnity given by Thermisol Sweden for the benefit of any
            other Borrower; and

            (iii) any undertaking as a primary obligor of obligations not
            corresponding to the benefit derived by the company.

                                      50
<PAGE>

V.   REPRESENTATIONS AND WARRANTIES.
     ------------------------------

     Each Borrower represents and warrants as follows:

     5.1. Authority.
          ---------

     It has full power, authority and legal right to enter into this Agreement
and the Other Documents and perform its respective Obligations hereunder and
thereunder.  The execution, delivery and performance hereof and of the Other
Documents (a) are within its respective corporate powers, have been duly
authorized, are not in contravention of law or the terms of any Borrower's by-
laws, certificate of incorporation or other applicable documents relating to the
formation or conduct of its respective business or of any material agreement or
undertaking to which it is a party or by which it is bound, and (b) will not
conflict with nor result in any breach in any of the provisions of or constitute
a default under or result in the creation of any Lien except Permitted
Encumbrances upon any of its respective assets under the provisions of any
agreement, charter document, instrument, by-law, or other instrument to which it
or its property is a party or by which it may be bound.

     5.2. Formation and Qualification.
          ---------------------------

          (a) Each is duly formed and in good standing under the laws of its
state or other jurisdiction of incorporation or formation and is qualified to do
business and is in good standing in the states or other jurisdictions listed on
Schedule 5.2(a) which constitute all states in which qualification and good
---------------
standing are necessary for each to conduct its business and own its property and
where the failure to so qualify could have a Material Adverse Effect.  Each
Borrower has delivered to Agent true and complete copies of its certificate of
incorporation and/or by-laws and each will promptly notify Agent of any
amendment or changes thereto.

          (b) The only Subsidiaries of Borrowers are listed on Schedule 5.2(b).
                                                               ---------------

     5.3. Survival of Representations and Warranties.
          ------------------------------------------

     All representations and warranties of each Borrower contained in this
Agreement and the Other Documents shall be true at the time of the execution of
this Agreement and the Other Documents, and shall survive the execution,
delivery and acceptance thereof by the parties thereto and the closing of the
transactions described therein or related thereto.

     5.4. Tax Returns.
          -----------

     Each U.S. Borrower's federal tax identification number is set forth on
Schedule 5.4.  Borrowers have each filed all federal, state and local tax
------------
returns and other reports it is required by law to file and has paid all taxes,
assessments, fees and other governmental charges that are due and payable.  The
provision for taxes on the books of Borrowers are adequate for all years not
closed by applicable statutes, and for its current fiscal year, and no Borrower
has any knowledge of any deficiency or additional assessment in connection
therewith not provided for on its books.

                                      51
<PAGE>

     5.5. Financial Statements.
          --------------------

          (a) The balance sheet of Radnor on a Consolidated Basis as of December
27, 1998 and the related statements of income, changes in stockholder's equity,
and changes in cash flow for the period ended on such date, furnished to Agent
and the Lenders on or prior to the Effective Date, are accurate, complete and
correct and fairly reflect in all material respects the financial condition of
Radnor on a Consolidated Basis as of December 27, 1998, and have been prepared
in accordance with GAAP, consistently applied.  Such financial statements have
been certified as accurate, complete and correct in all material respects by the
Chief Financial Officer of Radnor.  All financial statements referred to in this
subsection 5.5(a), including the related schedules and notes thereto, have been
prepared, in accordance with GAAP, except as may be disclosed in such financial
statements.

          (b) The twelve-month cash flow projections of Radnor on a Consolidated
Basis, copies of which have been previously submitted to Agent and the Lenders
(the "Projections") were prepared by the Chief Financial Officer of each
Borrower, are based on underlying assumptions which provide a reasonable basis
for the projections contained therein and reflect such Borrower's judgment based
on present circumstances of the most likely set of conditions and course of
action for the projected period.

          (c) The balance sheets of each Borrower as of September 24, 1999, and
the related statements of income, changes in stockholder's equity, and changes
in cash flow for the period ended on such date, which have been delivered to
Agent, have been prepared in accordance with GAAP, consistently applied and
present fairly in all material respects the financial position of each Borrower
at such date and the results of their operations for such period.  Since
September 24, 1999 there has been no change in the condition, financial or
otherwise, of any Borrower as shown on the balance sheets as of such date,
except changes in the ordinary course of business, none of which individually or
in the aggregate has caused a Material Adverse Effect.

     5.6. Corporate Name.
          --------------

     No Borrower has been known by any other corporate name in the past five
years and does not sell Inventory under any other name except as set forth on
Schedule 5.6, nor has any Borrower been the surviving entity of a merger or
------------
consolidation or acquired all or substantially all of the assets of any Person
during the preceding five (5) years, except for (i) the dissolution of WinCup
L.P., (ii) the acquisition of certain assets of WinCup L.P. from James River and
WinCup, (iii) the acquisition of stock of Radnor Chemical pursuant to the
Acquisition Agreement, (iv) the acquisition by Radnor of the limited partnership
interest of James River in WinCup L.P., (v) the contribution of El Campo assets
to WinCup Texas, (vi) the transfer of Minton assets to WinCup Texas, (vii) the
acquisition of the assets of Neste Oy's polystyrene business, and (viii) the
purchase of the stock of Epsilevy Oy by ThermiSol Finland.

                                      52
<PAGE>

     5.7. O.S.H.A. and Environmental Compliance.
          -------------------------------------

     Except as disclosed in the Phase I and Phase II environmental reports
prepared by Dames & Moore and Conestoga Rovers & Associates and delivered to
Agent on or before the Effective Date:

          (a) Each Borrower has duly complied in all material respects with, and
the facilities, business, assets, property and leaseholds of each are in
compliance in all material respects with, the provisions of the Federal
Occupational Safety and Health Act, the Environmental Protection Act, RCRA and
all other Environmental Laws (to the extent applicable); there have been no
outstanding citations, notices or orders of material non-compliance issued to a
Borrower or relating to its business, assets, property, leaseholds or equipment
under any such laws, rules or regulations.

          (b) Each Borrower has been issued all required federal, state and
local licenses, certificates or permits relating to all applicable Environmental
Laws.

          (c) Except as set forth on Schedule 5.7, there are no visible signs of
                                     ------------
releases, spills, discharges, leaks or disposal (collectively referred to as
"Releases") of Hazardous Substances at, upon, under or within any Borrower's
premises; (i) there are no underground storage tanks or polychlorinated
biphenyls on any Borrower's premises; (ii) none of any Borrower's premises have
ever been used as a treatment, storage or disposal facility of Hazardous Waste;
and (iii) no Hazardous Substances are present on any Borrower's premises,
excepting such quantities as are handled in accordance with all applicable
manufacturer's instructions and governmental regulations and in proper storage
containers and as are necessary for the operation of the commercial business of
any Borrower or its tenants.

     5.8. Solvency: No Litigation, Violation, Indebtedness or Default.
          -----------------------------------------------------------

          (a) Each Borrower is solvent, able to pay its respective debts as they
mature, has capital sufficient to carry on its respective business and all
businesses in which it is about to engage, and (i) as of the Effective Date,
the fair present saleable value of its assets, calculated on a going concern
basis, is in excess of the amount of its liabilities and (ii) subsequent to the
Effective Date, the fair saleable value of its assets (calculated on a going
concern basis) will be in excess of the amount of its liabilities.

          (b) Except as disclosed in Schedule 5.8(b) or the Pro Forma Financial
                                     --------------
Statements, no Borrower has (i) any pending or threatened litigation,
arbitration, actions or proceedings which involve the possibility of having a
Material Adverse Effect on such Borrower or on its ability to perform this
Agreement, and (ii) any liabilities nor indebtedness other than the Obligations.

          (c) No Borrower is in violation of any applicable statute, regulation
or ordinance in any respect which could have a Material Adverse Effect on such
Borrower and no Borrower is in violation of any order of any court, governmental
authority or arbitration board or tribunal which could have a Material Adverse
Effect on such Borrower.

                                      53
<PAGE>

          (d) No U.S. Borrower nor any member of the Controlled Group maintains
or contributes to any Plan other than those listed on Schedule 5.8(d) hereto.
                                                      ---------------
Except as set forth in Schedule 5.8(d), (i) no Plan has incurred any
                       ---------------
"accumulated funding deficiency," as defined in Section 302(a)(2) of ERISA and
Section 412(a) of the Code, whether or not waived, and each Borrower and each
member of the Controlled Group has met all applicable minimum funding
requirements under Section 302 of ERISA in respect of each Plan, (ii) each Plan
which is intended to be a qualified plan under Section 401(a) of the Code as
currently in effect has been determined by the Internal Revenue Service to be
qualified under Section 401(a) of the Code and the trust related thereto is
exempt from federal income tax under Section 501(a) of the Code, (iii) no
Borrower nor any member of the Controlled Group has incurred any liability to
the PBGC other than for the payment of premiums, and there are no premium
payments which have become due which are unpaid, (iv) no Plan has been
terminated by the plan administrator thereof nor by the PBGC, and there is no
occurrence which would cause the PBGC to institute proceedings under Title IV of
ERISA to terminate any Plan, (v) at this time, the current value of the assets
of each Plan exceeds the present value of the accrued benefits and other
liabilities of such Plan and no Borrower nor any member of the Controlled Group
knows of any facts or circumstances which would materially change the value of
such assets and accrued benefits and other liabilities, (vi) no Borrower nor any
member of the Controlled Group has breached any of the responsibilities,
obligations or duties imposed on it by ERISA with respect to any Plan, (vii) no
Borrower nor any member of a Controlled Group has incurred any liability for any
excise tax arising under Section 4972 or 4980B of the Code, and no fact exists
which could give rise to any such liability, (viii) no Borrower nor any member
of the Controlled Group nor any fiduciary of, nor any trustee to, any Plan, has
engaged in a "prohibited transaction" described in Section 406 of the ERISA or
Section 4975 of the Code nor taken any action which would constitute or result
in a Termination Event with respect to any such Plan which is subject to ERISA,
(ix) Borrower and each member of the Controlled Group has made all contributions
due and payable with respect to each Plan, (x) there exists no event described
in Section 4043(b) of ERISA, for which the thirty (30) day notice period
contained in 29 CFR (S)2615.3 has not been waived, (xi) no Borrower nor any
member of the Controlled Group has any fiduciary responsibility for investments
with respect to any plan existing for the benefit of persons other than
employees or former employees of Borrowers and any member of the Controlled
Group, and (xii) no Borrower nor any member of the Controlled Group has
withdrawn, completely or partially, from any Multiemployer Plan so as to incur
liability under the Multiemployer Pension Plan Amendments Act of 1980.

     5.9. Patents, Trademarks, Copyrights and Licenses.
          --------------------------------------------

     All patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, copyrights, copyright applications,
design rights, tradenames, assumed names, trade secrets and licenses owned or
utilized by any Borrower are set forth on Schedule 5.9, are valid and have been
                                          ------------
duly registered or filed with all appropriate governmental authorities and
constitute all of the intellectual property rights which are necessary for the
operation of its business; there is no objection to or pending challenge to the
validity of any such material patent, trademark, copyright, design rights
tradename, trade secret or license and Borrower is not aware of any grounds for
any challenge, except as set forth in Schedule 5.9
                                      ------------

                                      54
<PAGE>

hereto. Each patent, patent application, patent license, trademark, trademark
application, trademark license, service mark, service mark application, service
mark license, copyright, copyright application and copyright license owned or
held by any Borrower and all trade secrets used by any Borrower consist of
original material or property developed by such Borrower or was lawfully
acquired by such Borrower from the proper and lawful owner thereof Each of such
items has been maintained so as to preserve the value thereof from the date of
creation or acquisition thereof With respect to all software used by any
Borrower, such Borrower is in possession of all source and object codes related
to each piece of software or is the beneficiary of a source code escrow
agreement, each such source code escrow agreement being listed on Schedule 5.9
                                                                  ------------
hereto.

     5.10.  Licenses and Permits.
            --------------------

     Except as set forth in Schedule 5.10, each Borrower (a) is in compliance
                            -------------
with and (b) has procured and is now in possession of, all material licenses or
permits required by any applicable federal, state or local law or regulation for
the operation of its business in each jurisdiction wherein it is now conducting
or proposes to conduct business and where the failure to procure such licenses
or permits could have a Material Adverse Effect.

     5.11.  Default of Indebtedness.
            -----------------------

     No Borrower is in default in the payment of the principal of or interest on
any Indebtedness or under any instrument or agreement under or subject to which
any Indebtedness has been issued and no event has occurred under the provisions
of any such instrument or agreement which with or without the lapse of time or
the giving of notice, or both, constitutes or would constitute an event of
default thereunder.

     5.12.  No Default.
            ----------

     No Borrower is in default in the payment or performance of any of its
material contractual obligations and no Default has occurred.

     5.13.  No Burdensome Restrictions.
            --------------------------

     No Borrower is party to any contract or agreement the performance of which
could have a Material Adverse Effect.  No Borrower has agreed or consented to
cause or permit in the future (upon the happening of a contingency or otherwise)
any of its property, whether now owned or hereafter acquired, to be subject to a
Lien which is not a Permitted Encumbrance.

     5.14.  No Labor Disputes.
            -----------------

     No Borrower is involved in any labor dispute; there are no strikes or
walkouts or union organization of any Borrower's employees threatened or in
existence and no labor contract is scheduled to expire during the Term other
than as set forth on Schedule 5.14 hereto.
                     -------------

                                      55
<PAGE>

     5.15.  Margin Regulations.
            ------------------

     No Borrower is engaged, nor will either of them engage, principally or as
one of its important activities, in the business of extending credit for the
purpose of "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U or Regulation G of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect.  No part of the proceeds of any Advance win be used for
"purchasing" or "carrying" "margin stock" as defined in Regulation U of such
Board of Governors.

     5.16.  Investment Company Act.
            ----------------------

     No Borrower is an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended, nor is either
entity controlled by such a company.

     5.17.  Disclosure.
            ----------

     No representation or warranty made by any Borrower in this Agreement or in
any financial statement, report, certificate or any other document furnished in
connection herewith or therewith contains any untrue statement of a material
fact or omits to state any material fact necessary to make the statements herein
or therein not misleading.

     5.18.  Intentionally Omitted.
            ---------------------

     5.19.  Swaps.
            -----

     No Borrower is a party to, nor will it be a party to, any swap agreement
whereby such Borrower has agreed or will agree to swap interest rates or
currencies unless same provides that damages upon termination following an event
of default thereunder are payable on an unlimited "two-way basis" without regard
to fault on the part of either party.

     5.20.  Conflicting Agreements.
            ----------------------

     No provision of any mortgage, indenture, contract, agreement, judgment,
decree or order binding on any Borrower or affecting the Collateral conflicts
with, or requires any Consent which has not already been obtained to, or would
in any way prevent the execution, delivery or performance of the terms of this
Agreement or the Other Documents.

     5.21.  Application of Certain Laws and Regulations.
            -------------------------------------------

     No Borrower nor any Affiliate of any Borrower is subject to any statute,
rule or regulation which regulates the incurrence of any Indebtedness, including
without limitation, statutes or regulations relative to common or interstate
carriers or to the sale of electricity, gas, steam, water, telephone, telegraph
or other public utility services.

                                      56
<PAGE>

     5.22.  Business and Property of Borrowers.
            ----------------------------------

     Upon and after the Effective Date, Borrowers propose to engage
substantially only in the business of manufacturing and/or distributing
polystyrene beads, disposable products sold to or through the food service
industry and insulation and protective packaging products and activities
necessary to conduct the foregoing.  On the Effective Date, each Borrower will
own all the property and possess all of the rights and Consents necessary for
the conduct of its business.

     5.23.  Acquisition.
            -----------

     Each Borrower has acquired all of its assets and property in accordance
with all applicable statutes and laws, such property is free and clear of all
Liens other than Permitted Encumbrances.

     5.24.  Year 2000 Matters.
            -----------------

     Any reprogramming required to permit the proper functioning, in and
following the year 2000, of (i) any Borrower's computer system and (ii)
equipment containing embedded microchips (including systems and equipment
supplied by others or with which any Borrower's systems interface) and the
testing of all such systems and equipment, as so reprogrammed, will be completed
within such period of time as is required to avoid the occurrence of a Material
Adverse Effect as a result of the failure to complete such reprogramming.  The
cost to the Borrower of such reprogramming and testing and of the reasonably
foreseeable consequences of year 2000 to the Borrowers (including, without
limitation, reprogramming errors and the failure of others' systems or
equipment) will not result in a Material Adverse Effect.

VI.  AFFIRMATIVE COVENANTS.
     ----------------------

     Each Borrower shall, until payment in full of the Obligations and
termination of this Agreement:

     6.1. Payment of Fees.
          ---------------

     Pay to Agent on demand all usual and customary fees and expenses which
Agent incurs in connection with (a) the forwarding of Advance proceeds and (b)
the establishment and maintenance of any Blocked Accounts or Depository Accounts
as provided for in Section 4.15(h).  Agent may, without making demand, charge
the accounts of Borrowers for all such fees and expenses, provided Agent shall
promptly thereafter provide Borrowing Agent with copies of supporting
documentation.

     6.2. Conduct of Business and Maintenance of Existence and Assets.
          -----------------------------------------------------------

     (a) Conduct continuously and operate actively its business according to
good business practices and maintain all of its properties useful or necessary
in its business in good working order and condition (reasonable wear and tear
excepted and except as may be disposed of in accordance with the terms of this
Agreement), including, without limitation, all licenses, patents,

                                      57
<PAGE>

copyrights, design rights, tradenames, trade secrets and trademarks and take all
actions necessary to enforce and protect the validity of any intellectual
property right or other right included in the Collateral; (b) keep in full force
and effect its existence and comply in all material respects with the laws and
regulations governing the conduct of its business; and (c) make all such reports
and pay all such franchise and other taxes and license fees and do all such
other acts and things as may be lawfully required to maintain its rights,
licenses, leases, powers and franchises under the laws of the United States or
any political subdivision thereof.

     6.3.  Violations.

     Promptly notify Agent in writing of any violation of any law, statute,
regulation or ordinance of any Governmental Body, or of any agency thereof,
applicable to any Borrower which may have a Material Adverse Effect on any
Borrower.

     6.4.  Government Receivables.
           ----------------------

     Take all steps necessary to protect Agent's and Lenders' interest in the
Collateral under the Federal Assignment of Claims Act or other applicable state
or local statutes or ordinances and deliver to Agent appropriately endorsed, any
instrument or chattel paper connected with any arising out of contracts between
any Borrower and the United States, any state or any department, agency or
instrumentality of any of them.

     6.5.  Net Worth.
           ----------

     Cause to be maintained Net Worth in an amount not less than the amounts set
forth below as of the dates set forth below:

                Date             Amount
                ----             ------

              12-31-99         $ 9,000,000
              12-31-00         $10,000,000
              12-31-01         $10,000,000

     6.6.  Current Ratio.
           -------------

     Cause to be maintained a ratio of Current Assets to Current Liabilities of
not less than 1.00 to 1.00 at the end of each fiscal quarter.

     6.7.  Fixed Charge Coverage.
           ---------------------

     Cause to be maintained a Fixed Charge Coverage for Radnor on a Consolidated
Basis to be equal to or greater than 1.00 to 1.00 as at the end of each fiscal
quarter for the most recent four fiscal quarters then ended.

                                      58
<PAGE>

     6.8.  Interest Coverage.
           -----------------

     Cause to be maintained an Interest Coverage for Radnor on a Consolidated
Basis equal to or greater than 1.25 to 1.00 as at the end of each fiscal quarter
for the most recent four fiscal quarters then ended.

     6.9.  Net Income.
           ----------

     Achieve Net Income (excluding non-cash extraordinary items and the non-
recurring charge for discontinued operations recognized in fiscal 1999 in
connection with the 1995 disposition of assets) of at least $1 in each fiscal
year for Radnor on a Consolidated Basis.

     6.10. Funded Indebtedness to EBITDA Ratio.
           -----------------------------------

     Cause to be maintained a ratio of Funded Indebtedness to EBITDA for Radnor
on a Consolidated Basis equal to or less than the respective ratios set forth
below as at the end of each fiscal quarter ending during the respective periods
set forth below for the most recent four fiscal quarters then ended:

                                                    Maximum Ratio of
                        Period                Funded Indebtedness to EBITDA
                        ------                -----------------------------

              3/31/2000 through 9/30/2000              6.00 to 1.0
              12/31/2000 through 9/30/2001             5.25 to 1.0
              12/31/2001 and thereafter                4.00 to 1.0

     6.11.  Execution of Supplemental Instruments.
            -------------------------------------

     Execute and deliver to Agent from time to time, upon demand, such
supplemental agreements, statements, assignments and transfers, or instructions
or documents relating to the Collateral, and such other instruments as Agent may
request, in order that the full intent of this Agreement may be carried into
effect.

     6.12.  Payment of Indebtedness.
            -----------------------

     Pay, discharge or otherwise satisfy at or before maturity (subject, where
applicable, to specified grace periods and, in the case of the trade payables,
to normal payment practices) all its material obligations and liabilities of
whatever nature, except when the amount or validity thereof is currently being
contested in good faith by appropriate proceedings and each Borrower shall have
provided for such reserves as Agent may reasonably deem proper and necessary,
subject at all times to any applicable subordination arrangement in favor of
Agent and the Lenders.

     6.13.  Standards of Financial Statements.
            ---------------------------------

     Cause all financial statements referred to in Sections 9.7, 9.8, 9.9, 9.10,
9.11 and 9.12 as to those to which GAAP is applicable to be complete and correct
in all material respects (subject,

                                      59
<PAGE>

in the case of interim financial statements, to normal year-end audit
adjustments) and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except as
concurred in by such reporting accountants or officer, as the case may be, and
disclosed therein).

     6.14.  Exercise of Rights.
            ------------------

     Enforce all of its rights under the Acquisition Agreement and all documents
executed in connection therewith including, but not limited to, all
indemnification rights and pursue all remedies available to it with diligence
and in good faith in connection with the enforcement of any such rights.

     6.15.  Landlord Waivers; Bailee Letters.
            --------------------------------

     Not later than sixty (60) days following the Effective Date, Borrowers
shall deliver either (a) acknowledgements from each landlord or bailee that
executed a landlord's waiver or bailee letter, respectively, in favor of Agent
acknowledging the continuing effectiveness of such landlord's waiver or bailee
letter or (b) assignments of such previously executed landlord's waivers and
bailee letters in favor of the Agent, in each case as reasonably required by the
Agent and in form and substance satisfactory to the Agent.

VII. NEGATIVE COVENANTS.
     ------------------

     No Borrower (or in the case of Section 7.16 only, no U.S. Borrower) shall,
until satisfaction in full of the Obligations and termination of this Agreement:

     7.1.  Merger, Consolidation, Acquisition and Sale of Assets.
           -----------------------------------------------------

           (a) Enter into any merger, consolidation or other reorganization with
or into any other Person (other than another Borrower) or acquire all or a
substantial portion of the assets or stock of any Person (other than another
Borrower) or permit any other Person (other than another Borrower) to
consolidate with or merge with it; provided, however, that the Borrowers shall
                                   --------
be permitted to acquire (by merger or otherwise, and notwithstanding the
limitations set forth in Section 7.6 hereof) all or substantially all of the
assets or all or substantially all of the shares of capital stock of a Person,
provided that no such acquisition shall be permitted hereunder unless (i) at the
time of and after giving effect to such acquisition, no Event of Default or
Default shall have occurred and be continuing, (ii) the aggregate purchase price
of all such acquisitions plus amounts expended pursuant to Section 7.12(b)
hereof shall not exceed $5,000,000 during any fiscal year, and (iii) Agent shall
have a perfected first priority security interest in the Collateral of the
acquired entity.

           (b) Sell, lease, transfer or otherwise dispose of all or any material
part of its properties or assets, except in the ordinary course of its business.

                                      60
<PAGE>

     7.2.  Creation of Liens.
           -----------------

     Create or suffer to exist any Lien or transfer upon or against any of its
property or assets now owned or hereafter acquired, except Permitted
Encumbrances.

     7.3.  Guarantees.
           ----------

     Become liable upon the obligations of any Person by assumption, endorsement
or guaranty thereof or otherwise (other than to Lenders or to any Affiliate of
Lenders) except (a) as disclosed on Schedule 7.3, (b) the endorsement of checks
                                    ------------
in the ordinary course of business and (c) guaranties not to exceed a liability
of $5,000,000 in the aggregate at any one time.

     7.4.  Investments.
           -----------

     Purchase or acquire obligations or stock of; or any other interest in, any
Person, except (a) obligations issued or guaranteed by the United States of
America or any agency thereof; (b) commercial paper with maturities of not more
than 180 days and a published rating of not less than A-1 or P-1 (or the
equivalent rating); (c) certificates of time deposit and bankers' acceptances
having maturities of not more than 180 days and repurchase agreements backed by
United States government securities of a commercial bank if (i) such bank has a
combined capital and surplus of at least $500,000,000, or (ii) its debt
obligations, or those of a holding company of which it is a Subsidiary, are
rated not less than A (or the equivalent rating) by a nationally recognized
investment rating agency; (d) U.S. money market funds that invest solely in
obligations issued or guaranteed by the United States of America or an agency
thereof; (e) investments in one or more Subsidiaries, joint ventures or other
Affiliates in an aggregate sum not to exceed the sum of (i) 50% of cumulative
Net Income (excluding non-cash extraordinary items and the non-recurring charge
for discontinued operations recognized in fiscal year 1999 in connection with
the 1995 disposition of assets) since October 15, 1997 of Radnor on a
Consolidated Basis plus (ii) $3,000,000; provided, at the time of such
                                         --------
investment no Event of Default has occurred or would occur after giving effect
to such payment; (f) investments by any U.S. Borrower in any other U.S.
Borrower; (g) investments by any European Borrower in any other Borrower; (h)
investments by the U.S. Borrowers in any European Borrower in an aggregate
amount for all such investments not to exceed $5,000,000; and (i) intercompany
investments existing on the Effective Date made in connection with the
acquisition of the polystyrene business of Neste Oy.

     7.5.  Loans.
           -----

     Make advances, loans or extensions of credit to any Person, including
without limitation, any Parent, Subsidiary or Affiliate except with respect to
(a) the extension of commercial trade credit in connection with the sale of
Inventory in the ordinary course of its business, (b) loans to its employees in
the ordinary course of business not to exceed the aggregate amount of $100,000
at any time outstanding; provided, the provisions of this subclause (b) shall
                         --------
not prohibit any loans to an irrevocable life insurance trust established by
Michael T. Kennedy ("Insurance Trust") for the purposes of paying annual
premiums on the life insurance policies owned by the Insurance Trust on the life
of Michael T. Kennedy in an aggregate amount not to exceed

                                      61
<PAGE>

$700,000 outstanding at any one time, (c) loans to a Subsidiary so long as at
the time of such loan no Event of Default has occurred or would occur after
giving effect to such loan or advance, (d) loans to StyroChem International,
Ltd. in an aggregate amount not to exceed $4,000,000 at any time outstanding so
long as at the time of such loan no Event of Default has occurred or would occur
after giving effect to such loan or advance, (e) loans to Affiliates of the
Borrowers not to exceed $5,000,000 in the aggregate, (f) loans made by any U.S.
Borrower to any other U.S. Borrower, (g) loans made by any European Borrower to
any other Borrower (h) loans made by the U.S. Borrowers to any European Borrower
in an aggregate amount for all such loans outstanding at any time not to exceed
$8,000,000 and (i) intercompany loans outstanding on the Effective Date made in
connection with the acquisition of the polystyrene business of Neste Oy.

     7.6.  Capital Expenditures.
           --------------------

     Contract for, purchase or make any expenditure or commitments for fixed or
capital assets (including capitalized leases) in an amount in excess of the
amounts set forth below for the fiscal years set forth below with respect to
Radnor on a Consolidated Basis:

<TABLE>
<CAPTION>
               Fiscal Year Ended          Amount
               -----------------        ----------
               <S>                      <C>

               12-31-99                 22,500,000
               12-31-00                 13,900,000
               12-31-01                  9,900,000
               12-31-02                  7,400,000
</TABLE>

     Notwithstanding that the amount of permitted capital expenditures for the
fiscal year ended December 31, 1999 is $22,500,000, Borrowers may make
additional capital expenditures in fiscal year ended December 31, 1999 solely to
purchase that certain foam packaging plant in Tolleson, Arizona in an aggregate
amount not to exceed $9,300,000.

     7.7.  Dividends: Distributions.
           ------------------------

     Declare, pay or make any dividend or distribution to any of its
shareholders or apply any of its funds, property or assets to the purchase,
redemption or other retirement of any of its capital stock except, so long as
(a)  notice of termination with regard to this Agreement shall not be
outstanding and (b) if Undrawn Availability is less than $5,000,000 the purpose
for such distribution shall be as set forth in writing to Lenders at least ten
(10) days prior to such distribution and such distribution shall in fact be used
for any of the following purposes: (i) any Borrower shall be permitted to make
distributions to any of its shareholders who are Borrowers hereunder to enable
Radnor to make its regularly scheduled payments of interest on the Senior Notes
and the Second Senior Notes if (x) the aggregate amount of such distributions do
not exceed the interest payments then required to be paid by Radnor on the
Senior Notes or the Second Senior Notes) as the case may be, and (y) at the time
of and after giving effect to any such distribution no Event of Default has
occurred or would occur; and (ii) any Borrower shall be permitted to make
distributions to any of its shareholders for any purpose if (x) at the time of
and after giving effect to such distribution no Event of Default has occurred or
would occur, (y) in the event that Borrowers have Revolving Advances outstanding
hereunder in excess of

                                      62
<PAGE>

$2,000,000 at the time of such distribution, after giving effect to such
distribution Undrawn Availability is more than $2,000,000 and (z) in the event
such distribution is made by Radnor, after giving effect to such distribution,
the aggregate amount of all payments or distributions made by Radnor during such
fiscal year does not exceed 50% of Net Income for the immediately preceding
fiscal year.

     7.8.  Indebtedness.
           ------------

     Create, incur, assume or suffer to exist any Indebtedness (exclusive of
trade debt) except in respect of (i) Indebtedness to Lenders; (ii) Indebtedness
incurred for capital expenditures permitted under Section 7.6 hereof; (iii)
Indebtedness due under the guaranties issued in respect of the Senior Notes and
the Second Senior Notes; (iv) Indebtedness of any Borrower to any other Borrower
permitted under Section 7.5; and (v) Indebtedness in a maximum aggregate amount
outstanding not greater than $10,000,000 for all Borrowers. Notwithstanding the
foregoing, Borrowers may incur Indebtedness in excess of the foregoing amounts
if, after giving pro forma effect to the incurrence of such Indebtedness,
Interest Coverage for each of the four fiscal quarters most recently ended would
equal or exceed 2.0 to 1.0 if calculated as if such Indebtedness was outstanding
for the entire four quarter period.

     7.9.  Nature of Business.
           ------------------

     Substantially change the nature of the business in which it is presently
engaged, nor except as specifically permitted hereby purchase or invest,
directly or indirectly, in any assets or property other than in the ordinary
course of business for assets or property which are useful in, necessary for and
are to be used in its business as presently conducted.

     7.10. Transactions with Affiliates.
           ----------------------------

     Except for investments permitted under Section 7.4, loans permitted under
Section 7.5, and dividends and distributions permitted under Section 7.7,
directly or indirectly, purchase, acquire or lease any property from, or sell,
transfer or lease any property to, or otherwise deal with, any Affiliate, except
transactions disclosed in the ordinary course of business, on an arm's-length
basis on terms no less favorable than terms which would have been obtainable
from a Person other than an Affiliate provided, the provisions of this Section
7.10 shall not prohibit any payments to Radnor Management, Inc.  ("Management")
in accordance with the provisions of the Management Services Agreement dated as
of December 18, 1996 among Management, Borrowers, StyroChem US, Ltd. and
StyroChem FSC, Ltd. ("Management Agreement") in an aggregate amount not to
exceed the actual Expenses under and as defined in the Management Agreement.

     7.11. Leases.
           ------

     Enter as lessee into any lease arrangement for real or personal property
(unless capitalized and permitted under Section 7.6 hereof) if after giving
effect thereto, aggregate annual rental payments for all leased property would
exceed $7,500,000 in any one fiscal year.

                                      63
<PAGE>

     7.12.  Subsidiaries.
            ------------

            (a) Form any Subsidiary unless (A) (i) such Subsidiary either
expressly joins in this Agreement as a borrower and becomes jointly and
severally liable for the Obligations pursuant to the form of Joinder attached
hereto as Exhibit 7.12-A or executes a guaranty of the Obligations in the form
attached hereto as Exhibit 7.12-B, each in form satisfactory to Agent and (ii)
Agent shall have received all documents, including legal opinions, it may
reasonably require to establish compliance with each of the foregoing conditions
or (B) such Subsidiary is formed pursuant to the provisions of Section 7.4
hereof.

            (b) Enter into any partnership, joint venture or similar arrangement
unless (i) at the time of and after giving effect to such arrangement no Event
of Default or Default shall have occurred and be continuing and (ii) the
aggregate amount invested therein plus amounts expended pursuant to Section
7.1(a) hereof shall not exceed $5,000,000 during any fiscal year.

     7.13.  Fiscal Year and Accounting Changes.
            ----------------------------------

     Change its fiscal year from December 31 or make any change (i) in
accounting treatment and reporting practices except as required by GAAP or (ii)
in tax reporting treatment except as required by law.

     7.14.  Pledge of Credit.
            ----------------

     Now or hereafter pledge any Lender's credit on any purchases or for any
purpose whatsoever or use any portion of any Advance in or for any business
other than Borrower's business as conducted on the date of this Agreement.

     7.15.  Amendment of Certificate of Incorporation, Etc.
            ----------------------------------------------

     Amend, modify or waive any material term or material provision of its
Certificate of Incorporation, By-laws the Senior Notes or the Second Senior
Notes.

     7.16.  Compliance with ERISA.
            ---------------------

     (i) (x) Maintain, or permit any member of the Controlled Group to maintain,
or (y) become obligated to contribute, or permit any member of the Controlled
Group to become obligated to contribute, to any Plan, other than those Plans
disclosed on Schedule 5.8(d); (ii) engage, or permit any member of the
             ---------------
Controlled Group to engage, in any non-exempt "prohibited transaction", as that
term is defined in section 406 of ERISA and Section 4975 of the Code; (iii)
incur, or permit any member of the Controlled Group to incur, any "accumulated
funding deficiency", as that term is defined in Section 302 of ERISA or Section
412 of the Code; (iv) terminate, or permit any member of the Controlled Group to
terminate, any Plan where such event could result in any liability of any
Borrower or any member of the Controlled Group or the imposition of a lien on
the property of any Borrower or any member of the Controlled Group pursuant to
Section 4068 of ERISA; (v) assume, or permit any member of the Controlled Group
to assume, any obligation to contribute to any Multiemployer Plan not disclosed
on

                                      64
<PAGE>

Schedule 5.8(d); (vi) incur, or permit any member of the Controlled Group to
---------------
incur, any withdrawal liability to any Multiemployer Plan; (vii) fail promptly
to notify the Agent of the occurrence of any Termination Event; (viii) fail to
comply, or permit a member of the Controlled Group to fail to comply, with the
requirements of ERISA or the Code or other applicable laws in respect of any
Plan; (ix) fail to meet, or permit any member of the Controlled Group to fail to
meet, all minimum funding requirements under ERISA or the Code or postpone or
delay or allow any member of the Controlled Group to postpone or delay any
funding requirement with respect of any Plan.

     7.17.  Senior Notes.
            ------------

     At any time, directly or indirectly, pay, prepay, repurchase, redeem,
retire or otherwise acquire, or make any payment on account of any principal of;
interest on or premium payable in connection with the repayment or redemption of
the Senior Notes, except that Radnor may (i) pay all regularly scheduled
payments of interest on the Senior Notes so long as no Event of Default has
occurred or would occur after giving effect to such payment and (ii) repurchase
Senior Notes so long as after giving effect to such repurchase Undrawn
Availability of the Borrowers under this Agreement is not less than $15,000,000.

     7.18.  Second Senior Notes.
            -------------------

     At any time, directly or indirectly, pay, prepay, repurchase, redeem,
retire or otherwise acquire, or make any payment on account of any principal of;
interest on or premium payable in connection with the repayment or redemption of
the Second Senior Notes, except that Radnor may (i) pay all regularly scheduled
payments of interest on the Second Senior Notes so long as no Event of Default
has occurred or would occur after giving effect to such payment and (ii)
repurchase Second Senior Notes so long as after giving effect to such repurchase
Undrawn Availability of the Borrowers under this Agreement is not less than
$15,000,000.

     7.19.  Prepayment of Indebtedness.
            --------------------------

     At any time, directly or indirectly, prepay any Indebtedness (other than to
Agent and the Lenders and Indebtedness of any Borrower to any other Borrower
permitted hereunder), or repurchase, redeem, retire or otherwise acquire any
Indebtedness of Borrower, except Senior Notes and Second Senior Notes in
accordance with Section 7.17 or 7.18 and Indebtedness incurred for capital
expenditures permitted under Section 7.6 hereof, to the extent that such
prepayment is necessary in connection with the refinancing of such Indebtedness
and such Indebtedness is on similar terms.

VIII.  CONDITIONS PRECEDENT.
       --------------------

     8.1.   Conditions to Initial Advances.
            ------------------------------

     The agreement of Lenders to make the initial Advances requested to be made
on the Effective Date is subject to the satisfaction, or waiver by Required
Lenders, immediately prior to or concurrently with the making of such Advances,
of the following conditions precedent:

                                      65
<PAGE>

          (a) Ratification Agreement.  Agent shall have received a Ratification
              ----------------------
Agreement duly executed and delivered by Borrowers pursuant to which Borrowers
reaffirm and ratify certain ancillary documents delivered in connection with the
Existing Loan Agreement.

          (b) Agreement; Notes.  Agent shall have received (i) this Agreement
              ----------------
duly executed and delivered by an authorized officer of Borrowers and Lenders,
(ii) the Notes duly executed and delivered by an authorized officer of Borrowers
(and a Swingline Note for the Swingline Lender), and (iii) the Assignment of
Financing and Security Agreements.

          (c) Filings, Registrations and Recordings.  Each document (including,
              -------------------------------------
without limitation, any Uniform Commercial Code financing statement or
assignments thereof) required by this Agreement, any related agreement or under
law or reasonably requested by the Agent to be filed, registered or recorded in
order to create, in favor of Agent for its benefit and for the ratable benefit
of the Lenders, a perfected security interest in or lien upon the Collateral, or
in the case of the European Borrowers, a registered floating charge
(yrityskiinnitys in the case of Finland, and foretagshypotek, in the case of
Sweden) shall have been properly filed, registered or recorded in each
jurisdiction in which the filing, registration or recordation thereof is so
required or requested, and Agent shall have received an acknowledgment copy, or
other evidence satisfactory to it, of each such filing, registration or
recordation and satisfactory evidence of the payment of any necessary fee, tax
or expense relating thereto;

          (d) Proceedings of Borrowers.  Agent shall have received a copy of the
              ------------------------
resolutions in form and substance reasonably satisfactory to Agent, of the Board
of Directors of Borrowers, authorizing (i) the execution, delivery and
performance of this Agreement, the Notes, any related agreements and all
documents executed in connection therewith (collectively the "Documents") and
(ii) the granting by Borrowers of the security interests in and liens upon the
Collateral in each case certified by the President of each Borrower as of the
Effective Date; and, such certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded as of the date
of such certificate;

          (e) Incumbency Certificates of Borrowers.  Agent shall have received a
              ------------------------------------
certificate of the Secretary of each Borrower, dated the Effective Date, as to
the incumbency and signature of the officers of each Borrower executing this
Agreement, any certificate or other documents to be delivered by it pursuant
hereto, together with evidence of the incumbency of such officer;

          (f) Certificates.  Agent shall have received a copy of the Articles or
              ------------
Certificate of Incorporation, and all amendments to the foregoing, certified by
the Secretary of State together with copies of the by-laws and shareholders
agreements of each Borrower, as applicable, certified as accurate and complete
by the general partner or secretary of each Borrower;

          (g) Good Standing Certificates.  Agent shall have received good
              --------------------------
standing certificates for each U.S. Borrower dated not more than ten (10) days
prior to the Effective Date, issued by the Secretary of State or other
appropriate official of each U.S. Borrower's jurisdiction

                                      66
<PAGE>

of formation and each jurisdiction where the conduct of a U.S. Borrower's
business activities or the ownership of its properties necessitates
qualification;

          (h) Legal Opinion.  Agent shall have received the executed legal
              -------------
opinions of Duane Morris & Heckscher LLP and such other counsel as may be
required by the Lenders in form and substance satisfactory to the Lenders which
shall cover such matters incident to the transactions contemplated by this
Agreement, the Notes, and related agreements as Agent may reasonably require and
Borrowers hereby authorize and direct such counsel to deliver such opinions to
Agent and the Lender;

          (i) No Litigation.  (i) No litigation, investigation or proceeding
              -------------
before or by any arbitrator or Governmental Body shall be continuing or
threatened against any Borrower or against the officers or directors of any
Borrower (A) in connection with the Documents or any of the transactions
contemplated thereby and which, in the reasonable opinion of the Agent, is
deemed material or (B) which if adversely determined, could, in the reasonable
opinion of the Agent, have a Material Adverse Effect on any Borrower; and (ii)
no injunction, writ, restraining order or other order of any nature materially
adverse to any Borrower or the conduct of its business shall have been issued by
any Governmental Body;

          (j) Financial Condition Opinions.  Agent shall have received an
              ----------------------------
executed Officers' Certificate in the form of Exhibit 8.1(j);
                                              --------------

          (k) Collateral Examination.  Agent and Lenders shall have received the
              ----------------------
Borrowers' most recent field audit (which shall be less than twelve months old),
the results of which shall be satisfactory in form and substance to the Agent
and Lenders;

          (l) Fees.  Agent shall have received all fees payable to Agent and to
              ----
the Lenders on or prior to the Effective Date pursuant to Article III hereof;

          (m) Intentionally Omitted.

          (n) Intentionally Omitted.

          (o) Payment Instructions.  Agent shall have received written
              --------------------
instructions from Borrowers directing the application of proceeds of the initial
Advances made pursuant to this Agreement;

          (p) Consents.  Agent shall have received any and all Consents
              --------
necessary to permit the effectuation of the transactions contemplated by this
Agreement and the Other Documents; and Agent shall have received such Consents
and waivers of such third parties as might assert claims with respect to the
Collateral, as Agent and its counsel shall deem necessary;

          (q) No Material Adverse Change.  (i) since December 31, 1998 (a) no
              --------------------------
material adverse change shall have occurred in the condition, financial or
otherwise, operations, properties or prospects of any Borrower, (b) no material
damage or destruction shall have occurred to any of the Collateral and no
material depreciation in the value thereof, (c) no

                                      67
<PAGE>

material adverse deviation shall have occurred from the forecasts and
projections previously delivered to Agent and (d) no event, condition or state
of facts which could reasonably be expected to have a Material Adverse Effect on
any Borrower shall have occurred and (ii) no representations made or information
supplied to Agent or the Lenders shall have been proven to be inaccurate or
misleading in any material respect;

          (r) Contract Review.  Agent shall have had the opportunity to review
              ---------------
all material contracts of each Borrower including, without limitation, leases,
union contracts, labor contracts, vendor supply contracts, license agreements
and distributorship agreements and any such contracts and agreements reviewed
shall be satisfactory in all respects to Agent;

          (s) Closing Certificate.  Agent shall have received closing
              -------------------
certificate signed by the Chief Financial Officer of Radnor dated as of the date
hereof, stating that (i) all representations and warranties made by each
Borrower as set forth in this Agreement and the Other Documents are true and
correct on and as of such date, (ii) Borrowers are on such date in compliance
with all the terms and provisions set forth in this Agreement and the other
Documents and (iii) on such date no Default or Event of Default has occurred or
is continuing;

          (t) Borrowing Base.  Agent and Lenders shall have received evidence
              --------------
from Borrowers that (i) the U.S. Borrowing Base is sufficient in value and
amount to support the U.S. Advances in the amounts requested by the U.S.
Borrowers on the Effective Date, and (ii) the European Borrowing Base is
sufficient in value and amount to support the European Advances in the amounts
requested by the European Borrowers on the Effective Date;

          (u) Agreements.  Agent and Lenders shall have received copies of all
              ----------
agreements evidencing the obligations of any Borrower with respect to its
Indebtedness for borrowed money, which agreements shall be in form and substance
satisfactory to Agent and shall set forth the conditions on which (i) such
Borrower may make and the holder(s) of such indebtedness may receive payments
with respect thereto and (ii) the holder(s) of such indebtedness may accelerate
such obligations, commence any action against or otherwise exercise any rights
or enforce any remedies against such Borrower, which conditions shall be
satisfactory in form and substance to Agent in its discretion.

          (v) Intentionally Omitted.

          (w) Intentionally Omitted.

          (x) Other Documents.  Agent shall have received the executed Other
              ---------------
Documents, each in form and substance satisfactory to Lenders;

          (y) Insurance.  Agent shall have received in form and substance
              ---------
satisfactory to Agent, certified copies of each Borrower's casualty insurance
policies evidencing coverage on all Collateral in such amounts, with such
carriers and covering such risks as is acceptable to Agent, together with loss
payable endorsements on Agent's standard form of loss payee endorsement naming
Agent as loss payee, and certified copies of each Borrower's liability insurance
policies, together with endorsements naming Agent as an additional or co-
insured;

                                      68
<PAGE>

           (z)  Leasehold Agreements.  Agent shall have received landlord,
                --------------------
mortgagee or warehouseman agreements satisfactory to Agent with respect to all
premises leased or owned by any Borrower at which Inventory is located;

           (aa) Resignation and Assignment by Prior Agent. The Prior Agent shall
                -----------------------------------------
have resigned as administrative agent under the Existing Loan Agreement and
shall have executed all necessary assignment agreements and related documents,
including but not limited to collateral assignment agreements and assignment of
UCC-1 financing statements in favor of Bank of America, as Agent for the
Lenders.

     8.2.  Conditions to Each Advance.
           --------------------------

     The agreement of the Lenders to make any Advance requested to be made on
any date (including, without limitation, the initial Advance but excluding any
Revolving Advance deemed requested by Borrowing Agent in connection with a
disbursement relating to a Letter of Credit pursuant to Section 2.9(c) hereof or
a Revolving Advance necessary to fund a Swingline Loan pursuant to Section 2.14
hereof), is subject to the satisfaction of the following conditions precedent as
of the date such Advance is made:

           (a)  Representations and Warranties.  Each of the representations and
                ------------------------------
warranties made by the Borrowers in or pursuant to this Agreement and any
related agreements to which it is a party, and each of the representations and
warranties contained in any certificate, document or financial or other
statement furnished at any time under or in connection with this Agreement or
any related agreement shall be true and correct in all material respects on and
as of such date as if made on and as of such date except as such representations
and warranties are modified in a manner consistent with this Agreement;

           (b)  No Default.  No Event of Default or Default shall have occurred
                ----------
and be continuing on such date, or would exist after giving effect to the
Advances requested to be made, on such date; provided, however that Lenders in
                                             --------- -------
their sole discretion, may continue to make Advances notwithstanding the
existence of an Event of Default or Default and that any Advances so made shall
not be deemed a waiver of any such Event of Default or Default; and

           (c)  Maximum Advances.
                ----------------

           (i)  in the case of any U.S. Revolving Advances or Swingline Loans
     requested to be made or U.S. Letters of Credit to be issued, after giving
     effect thereto, the aggregate of all U.S. Advances outstanding shall not
     exceed the U.S. Borrowing Base.

           (ii) in the case of any European Revolving Advances requested or
     European Letters of Credit requested to be issued, after giving effect
     thereto, the aggregate of all European Advances outstanding shall not
     exceed the European Borrowing Base.

     Each request for an Advance by any Borrower hereunder shall constitute a
representation and warranty by each Borrower as of the date of such Advance that
the conditions contained in this subsection shall have been satisfied.

                                      69
<PAGE>

IX.  INFORMATION.
     -----------

     Each Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:

     9.1.  Disclosure of Material Matters.
           ------------------------------

     Immediately upon learning thereof, report to Agent all matters materially
affecting the value, enforceability or collectibility of any portion of the
Collateral including, without limitation, any Borrower's reclamation or
repossession of, or the return to any Borrower of, a material amount of goods or
claims or disputes asserted by any Customer or other obligor.

     9.2.  Schedules.
           ---------

     Deliver to Agent and if requested, the Lenders, on or before the fifteenth
(15th) day of each month as and for the prior month (a) accounts receivable
agings, (b) accounts payable schedules and (c) Inventory reports for each
Borrower.  In addition, each Borrower will deliver to Agent at such intervals as
Agent may require: (i) confirmatory assignment schedules, (ii) copies of
Customer's invoices, (iii) evidence of shipment or delivery, and (iv) such
further schedules, documents and/or information regarding the Collateral as
Agent may require including, without limitation, trial balances and test
verifications.  Agent shall have the right to confirm and verify all Receivables
by any manner and through any medium it considers advisable and do whatever it
may deem reasonably necessary to protect its interests hereunder.  The items to
be provided under this Section are to be in form satisfactory to Agent and
executed by each Borrower and delivered to Agent from time to time solely for
Agent's convenience in maintaining records of the Collateral, and any Borrower's
failure to deliver any of such items to Agent shall not affect, terminate,
modify or otherwise limit Agent's Lien with respect to the Collateral.

     9.3.  Intentionally Omitted.
           ---------------------

     9.4.  Litigation.
           ----------

     Promptly notify Agent and Lenders in writing of any litigation, suit or
administrative proceeding affecting any Borrower, whether or not the claim is
covered by insurance, and of any suit or administrative proceeding, which may
have a Material Adverse Effect on any Borrower.

     9.5.  Material Occurrences.
           --------------------

     Promptly notify Agent and Lenders in writing upon the occurrence of (a) any
Event of Default or Default; (b) any event of default or (c) any event which
with the giving of notice or lapse of time, or both, would constitute an event
of default under the Senior Notes; (d) any event, development or circumstance
whereby any financial statements or other reports furnished to Agent or any
Lender fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of any
Borrower as of the date of such statements; (e) any accumulated retirement plan
funding deficiency which, if such

                                      70
<PAGE>

deficiency continued for two plan years and was not corrected as provided in
Section 4971 of the Internal Revenue Code, could subject Borrower to a tax
imposed by Section 4971 of the Internal Revenue Code; (f) each and every default
by any Borrower which might result in the acceleration of the maturity of any
Indebtedness, including the names and addresses of the holders of such
Indebtedness with respect to which there is a default existing or with respect
to which the maturity has been or could be accelerated, and the amount of such
Indebtedness; and (g) any other development in the business or affairs of any
Borrower which might reasonably be expected to be materially adverse; in each
case describing the nature thereof and the action such Borrower proposes to take
with respect thereto.

     9.6.  Government Receivables.
           ----------------------

     Notify Agent immediately if any of the Receivables arise out of contracts
between any Borrower and the United States, any state, or any department, agency
or instrumentality of any of them.

     9.7.  Annual Financial Statements.
           ---------------------------

     Furnish Agent and the Lenders within ninety (90) days after the end of each
fiscal year of Borrowers, financial statements of Radnor on a consolidated and
consolidating basis, including, but not limited to, statements of income and
stockholders' equity and cash flow from the beginning of the current fiscal year
to the end of such fiscal year and the balance sheet as at the end of such
fiscal year, all prepared in accordance with GAAP applied on a basis consistent
with prior practices, and in reasonable detail and reported upon without
qualification by an independent certified public accounting firm selected by
Borrower and satisfactory to Agent (the "Accountants").  The report of such
accounting firm shall be accompanied by a statement of such accounting firm
certifying that (i) they have caused this Agreement to be reviewed, (ii) in
making the examination upon which such report was based either no information
came to their attention which to their knowledge constituted an Event of Default
or a Default under this Agreement or any related agreement or, if such
information came to their attention, specifying any such Default or Event of
Default, its nature, when it occurred and whether it is continuing, and such
report shall contain or have appended thereto calculations which set forth
Borrowers' compliance with the requirements or restrictions imposed by Sections
6.5, 6.6, 6.7, 6.8, 6.9, 6.10, 7.6 and 7.11 hereof.  In addition, the reports
shall be accompanied by a certificate of each Borrower's Chief Financial Officer
which shall state that, based on an examination sufficient to permit him to make
an informed statement, no Default or Event of Default exists, or, if such is not
the case, specifying such Default or Event of Default, its nature, when it
occurred, whether it is continuing and the steps being taken by such Borrower
with respect to such event and, such certificate shall have appended thereto
calculations which set forth Borrowers' compliance with the requirements or
restrictions imposed by Sections 6.5, 6.6, 6.7, 6.8, 6.9, 6.10, 7.6 and 7.11
hereof.

     9.8.  Quarterly Financial Statements.
           ------------------------------

     Furnish Agent and Lenders within 45 days after the end of each fiscal
quarter, an unaudited balance sheet of Radnor on a Consolidated Basis and
unaudited statements of income

                                      71
<PAGE>

and stockholders' equity and cash flow reflecting results of operations from the
beginning of the fiscal year to the end of such quarter and for such quarter,
prepared on a basis consistent with prior practices and complete and correct in
all material respects, subject to normal year end adjustments. The reports shall
be accompanied by a certificate of each Borrower's Chief Financial Officer which
shall state that, based on an examination sufficient to permit him to make an
informed statement, no Default or Event of Default exists, or, if such is not
the case, specifying such Default or Event of Default, its nature, when it
occurred, whether it is continuing and the steps being taken by such Borrower
with respect to such event and, such certificate shall have appended thereto
calculations which set forth Borrowers' compliance with the requirements or
restrictions imposed by Sections 6.5, 6.6, 6.7, 6.8, 6.9, 6.10, 7.6 and 7.11
hereof.

     9.9.  Monthly Financial Statements.
           ----------------------------

     Furnish Agent and Lenders within thirty (30) days after the end of each
month, an unaudited balance sheet of Radnor on a consolidated and consolidating
basis and unaudited statements of income and stockholders' equity and cash flow
reflecting results of operations from the beginning of the fiscal year to the
end of such month and for such month, prepared on a basis consistent with prior
practices and complete and correct in all material respects, subject to normal
year end adjustments.  The reports shall be accompanied by a certificate of each
Borrower's Chief Financial Officer which shall state that, based on an
examination sufficient to permit him to make an informed statement, no Default
or Event of Default exists, or, if such is not the case, specifying such Default
or Event of Default, its nature, when it occurred, whether it is continuing and
the steps being taken by such Borrower with respect to such event and, such
certificate shall have appended thereto calculations which set forth Borrowers'
compliance with the requirements or restrictions imposed by Sections 6.5, 6.6,
6.7, 6.8, 6.9, 6.10, 7.6 and 7.11 hereof.

     9.10. Other Reports.
           -------------

     Furnish Agent and Lenders as soon as available, but in any event within ten
(10) days after the issuance thereof, (i) with copies of such financial
statements, reports and returns as Radnor shall send to its stockholders and
(ii) copies of all notices sent pursuant to the Senior Notes.

     9.11. Additional Information.
           ----------------------

     Furnish Agent and Lenders with such additional information as Agent and
Lenders shall reasonably request in order to enable Agent and Lenders to
determine whether the terms, covenants, provisions and conditions of this
Agreement and the Notes have been complied with by Borrowers including, without
limitation and without the necessity of any request by Agent or any Lender, (a)
copies of all environmental audits and reviews, (b) at least thirty (30) days
prior thereto, notice of any Borrower's opening of any new office or place of
business or any Borrower's closing of any existing office or place of business,
and (c) promptly upon learning thereof, notice of any labor dispute to which any
Borrower may become a party, any strikes or walkouts relating to any of its
plants or other facilities, and the expiration of any labor contract to which
any Borrower is a party or by which any Borrower is bound.

                                      72
<PAGE>

     9.12.  Projected Operating Budget.
            --------------------------

     Furnish Agent and Lenders, no later than (x) ninety (90) days following the
Effective Date and (y) thirty (30) days prior to the beginning of each fiscal
year commencing with fiscal year 2000, a month by month projected operating
budget and cash flow of Radnor on a Consolidated Basis for such fiscal year
(including an income statement for each month and a balance sheet as at the end
of the last month in each fiscal quarter), such projections to be accompanied by
a certificate signed by each Borrower's Chief Financial Officer to the effect
that such projections have been prepared on the basis of sound financial
planning practice consistent with past budgets and financial statements and that
such officer has no reason to question the reasonableness of any material
assumptions on which such projections were prepared.

     9.13.  Intentionally Omitted.
            ---------------------

     9.14.  Notice of Suits, Adverse Events.
            -------------------------------

     Furnish Agent and Lenders with prompt notice of (i) any lapse or other
termination of any Consent issued to Borrowers by any Governmental Body or any
other Person that is material to the operation of any Borrower's business, (ii)
any refusal by any Governmental Body or any other Person to renew or extend any
such Consent; and (iii) copies of any periodic or special reports filed by any
Borrower with any Governmental Body or Person, if such reports indicate any
material change in the business, operations, affairs or condition of any
Borrower, or if copies thereof are requested by Agent or any Lender, and (iv)
copies of any material notices and other communications from any Governmental
Body or Person which specifically relate to any Borrower.

     9.15.  ERISA Notices and Requests.
            --------------------------

     Furnish Agent and Lenders with immediate written notice in the event that
(i) any Borrower or any member of the Controlled Group knows or has reason to
know that a Termination Event has occurred, together with a written statement
describing such Termination Event and the action, if any, which Borrower or
member of the Controlled Group has taken, is taking, or proposes to take with
respect thereto and, when known, any action taken or threatened by the Internal
Revenue Service, Department of Labor or PBGC with respect thereto, (ii)
Borrower, or any member of the Controlled Group knows or has reason to know that
a prohibited transaction (as defined in Sections 406 of ERISA and 4975 of the
Internal Revenue Code) has occurred together with a written statement describing
such transaction and the action which such Borrower or any member of the
Controlled Group has taken, is taking or proposes to take with respect thereto,
(iii) a funding waiver request has been filed with respect to any Plan together
with all communications received by Borrower, or any member of the Controlled
Group with respect to such request, (iv) any increase in the benefits of any
existing Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which such Borrower or any member of the Controlled
Group was not previously contributing shall occur, (v) any Borrower or any
member of the Controlled Group shall receive from the PBGC a notice of intention
to terminate a Plan or to have a trustee appointed to administer a Plan,
together with copies of each such notice, (vi) any Borrower or any member of the
Controlled Group shall

                                      73
<PAGE>

receive any favorable or unfavorable determination letter from the Internal
Revenue Service regarding the qualification of a Plan under Section 401(a) of
the Internal Revenue Code, together with copies of each such letter; (vii) any
Borrower or any member of the Controlled Group shall receive a notice regarding
the imposition of withdrawal liability, together with copies of each such
notice; (viii) any Borrower or any member of the Controlled Group shall fail to
make a required installment or any other required payment under Section 412 of
the Internal Revenue Code on or before the due date for such installment or
payment; (ix) any Borrower or any member of the Controlled Group knows that (a)
a Multiemployer Plan has been terminated) (b) the administrator or plan sponsor
of a Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the
PBGC has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.

     9.16.  Additional Documents.
            --------------------

     Execute and deliver to Agent, upon request, such documents and agreements
as Agent may, from time to time, reasonably request to carry out the purposes,
terms or conditions of this Agreement.

X.   EVENTS OF DEFAULT.
     -----------------

     The occurrence of any one or more of the following events shall constitute
an "Event of Default":

     10.1.  failure by any Borrower to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant
to the terms of this Agreement or by notice of intention to prepay, or by
required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein or any Other Document when due;

     10.2.  any representation or warranty made or deemed made by any Borrower
in this Agreement or any related agreement or in any certificate, document or
financial or other statement furnished at any time in connection herewith or
therewith shall prove to have been misleading in any material respect on the
date when made or deemed to have been made;

     10.3.  failure by any Borrower to (i) furnish financial information when
due or when requested, or (ii) permit the inspection of its books or records;

     10.4.  issuance of a notice of Lien, levy, assessment, injunction or
attachment against a material portion of any Borrower's property;

     10.5.  (i) a failure or neglect of any Borrower to perform, keep or observe
any term, provision, condition or covenant, contained in Sections 4.7, 4.8, 4.9,
4.14, 4.17, 4.19, 6.1, 6.2, 6.3, and 6.9 hereof which is not cured within thirty
(30) days from the occurrence of such failure or neglect; or (ii) failure or
neglect of any Borrower to perform, keep or observe any other term, provision,
condition, covenant herein contained, or contained in any other agreement or

                                      74
<PAGE>

arrangement, now or hereafter entered into between any Borrower, Agent and the
Lenders after expiration of all applicable grace periods;

     10.6.  any judgment in excess of $300,000 is rendered against any Borrower
or judgment liens filed against any Borrower of judgments in excess of
$1,000,000 in the aggregate are rendered against all Borrowers for an amount
which within thirty (30) days of such rendering or filing is not either
satisfied, stayed or discharged of record;

     10.7.  any Borrower shall (i) apply for, consent to or suffer the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of creditors, (iii)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vi) acquiesce to, or fail to have dismissed, within forty five (45)
days, any petition filed against it in any involuntary case under such
bankruptcy laws, or (vii) take any action for the purpose of effecting any of
the foregoing;

     10.8.  any Borrower shall admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business;

     10.9.  any Subsidiary of any Borrower or any Guarantor, shall (i) apply
for, consent to or suffer the appointment of: or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar fiduciary of itself or of
all or a substantial part of its property, (ii) admit in writing its inability,
or be generally unable, to pay its debts as they become due or cease operations
of its present business, (iii) make a general assignment for the benefit of
creditors, (iv) commence a voluntary case under any state or federal bankruptcy
laws (as now or hereafter in effect), (v) be adjudicated a bankrupt or
insolvent, (vi) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vii) acquiesce to, or fail to have
dismissed, within forty five (45) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (viii) take any action for the
purpose of effecting any of the foregoing;

     10.10. any change in the condition or affairs (financial or otherwise) of
any Borrower which in Agent's opinion impairs the Collateral or the ability of
any Borrower to perform its Obligations under this Agreement;

     10.11. any Lien created hereunder or provided for hereby or under any
related agreement for any reason ceases to be or is not a valid and perfected
Lien having a first priority interest;

     10.12. an event of default has occurred and been declared under the Senior
Notes which default shall not have been cured or waived within any applicable
grace period;

     10.13.  a default of the obligations of any Borrower under any other
agreement to which it is a party shall occur which materially adversely affects
its condition, affairs or prospects (financial or otherwise) which default is
not cured within any applicable grace period;

                                      75
<PAGE>

     10.14. termination or breach of any Guaranty or similar agreement executed
and delivered to Agent in connection with the Obligations of any Borrower, or if
any Guarantor attempts to terminate, challenges the validity of, or its
liability under, any such Guaranty or similar agreement;

     10.15. any Change of Ownership or Change of Control shall have occurred;

     10.16. any material provision of this Agreement shall, for any reason,
cease to be valid and binding on any Borrower, or Borrower shall so claim in
writing to Agent;

     10.17. (i) any Governmental Body shall (A) revoke, terminate, suspend or
adversely modify any license, permit, patent, trademark or tradename of any
Borrower, the continuation of which is material to the continuation of any
Borrower's business, or (B) commence proceedings to suspend, revoke, terminate
or adversely modify any such license, permit, trademark, tradename or patent and
such proceedings shall not be dismissed or discharged within sixty (60) days, or
(c) schedule or conduct a hearing on the renewal of any license, permit,
trademark, tradename or patent necessary for the continuation of any Borrower's
business and the staff of such Governmental Body issues a report recommending
the termination, revocation, suspension or material, adverse modification of
such license, permit, trademark, tradename or patent; (ii) any agreement which
is necessary or material to the operation of any Borrower's business shall be
revoked or terminated and not replaced by a substitute acceptable to Agent
within thirty (30) days after the date of such revocation or termination, and
such revocation or termination and non-replacement could reasonably be expected
to have a Material Adverse Effect on any Borrower;

     10.18. any portion of the Collateral shall be seized or taken by a
Governmental Body or the title and rights of any Borrower shall have become the
subject matter of litigation which might, in the opinion of Agent, upon final
determination, result in impairment or loss of the security provided by this
Agreement or the Other Documents;

     10.19. the operations of any Borrower's manufacturing facilities are
interrupted at any time for more than fourteen (14) consecutive days, or if any
Borrower's manufacturing capacity is reduced by 25% as a result of such an
interruption of operations (other than permanent interruptions resulting from
planned closing of up to three (3) plants) unless such Borrower shall (i) be
entitled to receive for such period of interruption, proceeds of business
interruption insurance sufficient to assure that its per diem cash needs during
such period is at least equal to its average per diem cash needs for the
consecutive twelve (12) month period immediately preceding the initial date of
interruption and (ii) receive such proceeds in the amount described in clause
(i) preceding not later than thirty (30) days following the initial date of any
such interruption; provided, however, that notwithstanding the provisions of
clauses (i) and (ii) of this section, an Event of Default shall be deemed to
have occurred if any Borrower shall be receiving the proceeds of business
interruption insurance for a period of thirty (30) consecutive days;

     10.20. an event or condition specified in Sections 7.16 or 9.15 hereof
shall occur or exist with respect to any Plan and, as a result of such event or
condition, together with all other such events or conditions, any Borrower or
any member of the Controlled Group shall incur, or in the

                                      76
<PAGE>

opinion of Lender be reasonably likely to incur, a liability to a Plan or the
PBGC (or both) which, in the reasonable judgment of the Required Lenders, could
have a Material Adverse Effect on any Borrower;

XI.  LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
     ------------------------------------------

     11.1.  Rights and Remedies.
            -------------------

     Upon the occurrence of (i) an Event of Default pursuant to Section 10.7 all
Obligations shall be immediately due and payable and this Agreement and the
obligation of Lenders to make Advances shall be deemed terminated; and, (ii) any
of the other Events of Default and at any time thereafter (such default not
having previously been cured), at the option of Required Lenders all Obligations
shall be immediately due and payable and the Lenders shall have the right to
terminate this Agreement and to terminate the obligation of Lenders to make
Advances.  Upon the occurrence of any Event of Default, Agent may, and at the
direction of the Required Lenders shall, exercise any and all other rights and
remedies provided for herein, under the Uniform Commercial Code and at law or
equity generally, including, without limitation, the right to foreclose the
security interests granted herein and to realize upon any Collateral by any
available judicial procedure and/or to take possession of and sell any or all of
the Collateral with or without judicial process.  Agent may enter any Borrower's
premises or other premises without legal process and without incurring liability
to any Borrower therefor, and Agent may thereupon, or at any time thereafter, in
its discretion without notice or demand, take the Collateral and remove the same
to such place as Agent may deem advisable and Agent may require Borrowers to
make the Collateral available to Agent at a convenient place.  With or without
having the Collateral at the time or place of sale, Agent may sell the
Collateral, or any part thereof, at public or private sale, at any time or
place, in one or more sales, at such price or prices, and upon such terms)
either for cash, credit or future delivery, as Agent may elect.  Except as to
that part of the Collateral which is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Agent shall
give Borrowers reasonable notification of such sale or sales, it being agreed
that in all events written notice mailed to Borrowing Agent at least five (5)
days prior to such sale or sales is reasonable notification.  At any public sale
Agent or any Lender may bid for and become the purchaser, and Agent, any Lender
or any other purchaser at any such sale thereafter shall hold the Collateral
sold absolutely free from any claim or right of whatsoever kind, including any
equity of redemption and such right and equity are hereby expressly waived and
released by each Borrower.  In connection with the exercise of the foregoing
remedies, Agent is granted permission to use (a) all of each Borrower's
trademarks, trade styles, trade names, patents, patent applications, licenses,
franchises and other proprietary rights which are used in connection with
Inventory for the purpose of disposing of such Inventory and (b) Equipment for
the purpose of completing the manufacture of unfinished goods without cost to
Agent.  The proceeds realized from the sale of any Collateral shall be applied
as follows: first, to the reasonable costs, expenses and attorneys' fees and
expenses incurred by Agent for collection and for acquisition, completion,
protection, removal, storage, sale and delivery of the Collateral; second, to
interest due upon any of the Obligations; and, third, to the principal of the
Obligations.  If any deficiency shall arise, each Borrower shall remain liable
to Agent and the Lenders therefor.

                                      77
<PAGE>

     11.2.  Agent's Discretion.
            ------------------

     Agent shall have the right in its sole discretion, but with the consent of
the Required Lenders to determine which rights, Liens, security interests or
remedies Agent may at any time pursue, relinquish, subordinate, or modify or to
take any other action with respect thereto and such determination will not in
any way modify or affect any of Agent's or Lenders' rights hereunder.

     11.3.  Setoff.
            ------

     In addition to any other rights which Agent or any Lender may have under
applicable law, upon the occurrence of an Event of Default hereunder, Agent and
such Lender shall have a right to apply any of Borrowers' property held by Agent
and such Lender or by the Bank to reduce the Obligations.

     11.4.  Rights and Remedies not Exclusive.
            ---------------------------------

     The enumeration of the foregoing rights and remedies is not intended to be
exhaustive and the exercise of any right or remedy shall not preclude the
exercise of any other right or remedies provided for herein or otherwise
provided by law, all of which shall be cumulative and not alternative.

     11.5.  Actions in Concert.
            ------------------

     Anything in this Agreement to the contrary notwithstanding, each Lender
hereby agrees with each other Lender that no Lender shall take any action to
protect or enforce its rights arising out of this Agreement or the Notes
(including, without limitation, exercising any right of set-off) without first
obtaining the prior written consent of Agent and Required Lenders, it being the
intent of Lenders that any such action to protect or enforce rights under this
Agreement and the Notes shall be taken in concert and at the direction or with
the consent of the Agent and the Required Lenders.

XII. WAIVERS AND JUDICIAL PROCEEDINGS.
     --------------------------------

     12.1.  Waiver of Notice.
            ----------------

     Each Borrower each hereby waives notice of non-payment of any of the
Receivables, demand, presentment, protest and notice thereof with respect to any
and all instruments, notice of acceptance hereof, notice of loans or advances
made, credit extended, Collateral received or delivered) or any other action
taken in reliance hereon, and all other demands and notices of any description,
except such as are expressly provided for herein.

                                      78
<PAGE>

       12.2.  Delay.
              -----

       No delay or omission on Agent's or any Lender's part in exercising any
right, remedy or option shall operate as a waiver of such or any other right,
remedy or option or of any default.

       12.3.  Jury Waiver.
              -----------

       EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

XIII.  EFFECTIVE DATE AND TERMINATION.
       ------------------------------

       13.1.  Term.
              ----

       This Agreement, which shall inure to the benefit of and shall be binding
upon the respective successors and permitted assigns of each Borrower, Agent and
each Lender, shall become effective on the date hereof and shall continue in
full force and effect until the last day of the Term unless sooner terminated as
herein provided. Borrower may terminate this Agreement at any time upon five (5)
days' prior written notice upon payment in full of the Obligations (the
"Prepayment Date").

       13.2.  Termination.
              -----------

       The termination of the Agreement shall not affect any Borrower's, Agent's
or any Lender's rights, or any of the Obligations having their inception prior
to the effective date of such termination, and the provisions hereof shall
continue to be fully operative until all transactions entered into, rights or
interests created or Obligations have been fully disposed of, concluded or
liquidated.  The security interests, Liens and rights granted to Agent and the
Lenders hereunder and the financing statements filed hereunder shall continue in
full force and effect, notwithstanding the termination of this Agreement or the
fact that Borrower's account may from time to time be temporarily in a zero or
credit position, until all of the Obligations of

                                      79
<PAGE>

Borrowers have been paid or performed in full after the termination of this
Agreement or Borrowers have furnished Agent and the Lenders with an
indemnification satisfactory to Agent and the Lenders with respect thereto.
Accordingly, each Borrower waives any rights which it may have under Section 9-
404(1) of the Uniform Commercial Code to demand the filing of termination
statements with respect to the Collateral, and Agent shall not be required to
send such UCC termination statements to Borrowers, or to file them with any
filing office, unless and until this Agreement shall have been terminated in
accordance with its terms and all Obligations paid in full in immediately
available funds.

XIV.  REGARDING AGENT.
      ---------------

      14.1.  Appointment.
             -----------

      Each Lender hereby designates Bank of America to act as Agent for such
Lender under this Agreement and the Other Documents.  Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in Sections
3.3(a)(i), 3.3(c), 3.4(a) and 3.4(b) charges and collections (without giving
effect to any collection days) received pursuant to this Agreement, for the
ratable benefit of Lenders.  Agent may perform any of its duties hereunder by or
through its agents or employees.  As to any matters not expressly provided for
by this Agreement (including without limitation, collection of the Notes) Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Required Lenders,
and such instructions shall be binding; provided, however, that Agent shall
                                        --------- -------
not be required to take any action which exposes Agent to liability or which is
contrary to this Agreement or the Other Documents or applicable law unless Agent
is furnished with an indemnification reasonably satisfactory to Agent with
respect thereto.

      14.2.  Nature of Duties.
             ----------------

      Agent shall have no duties or responsibilities except those expressly set
forth in this Agreement and the Other Documents.  Neither Agent nor any of its
officers, directors, employees or agents shall be (i) liable for any action
taken or omitted by them as such hereunder or in connection herewith, unless
caused by their gross negligence (but not mere negligence) or willful
misconduct, (ii) liable for any action taken or omitted by the Prior Agent or
any of its officers, directors, employees or agents, or (iii) responsible in any
manner for any recitals, statements, representations or warranties made by any
Borrower or any officer thereof contained in this Agreement, or in any of the
Other Documents or in any certificate, report, statement or other document
referred to or provided for in, or received by Agent under or in connection
with, this Agreement or any of the Other Documents or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, or
any of the Other Documents or for any failure of any Borrower to perform its
respective obligations hereunder.  Agent shall not be under any obligation to
any Lender to ascertain or to inquire as to the observance or

                                      80
<PAGE>

performance of any of the agreements contained in, or conditions of, this
Agreement or any of the Other Documents, or to inspect the properties, books or
records of any Borrower. The duties of Agent as respects the Advances to any
Borrower shall be mechanical and administrative in nature; Agent shall not have
by reason of this Agreement a fiduciary relationship in respect of any Lender;
and nothing in this Agreement, expressed or implied, is intended to or shall be
so construed as to impose upon Agent any obligations in respect of this
Agreement except as expressly set forth herein.

      14.3.  Lack of Reliance on Agent and Resignation.
             -----------------------------------------

      Independently and without reliance upon Agent or any other Lender, each
Lender has made and shall continue to make (i) its own independent investigation
of the financial condition and affairs of each Borrower in connection with the
making and the continuance of the Advances hereunder and the taking or not
taking of any action in connection herewith, and (ii) its own appraisal of the
creditworthiness of Borrowers.  Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Lender with any credit
or other information with respect thereto, whether coming into its possession
before making of the Advances or at any time or times thereafter except as shall
be provided by Borrower pursuant to the terms hereof.  Agent shall not be
responsible to any Lender for any recitals, statements, information,
representations or warranties herein or in any agreement, document, certificate
or a statement delivered in connection with or for the execution, effectiveness,
genuineness, validity, enforceability, collectibility or sufficiency of this
Agreement or any Other Document, or of the financial condition of each Borrower,
or be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this Agreement, the
Notes, the Other Documents or the financial condition of each Borrower, or the
existence of any Event of Default or any Default.

     Agent may resign on sixty (60) days' written notice to each of Lenders and
Borrowers and upon such resignation, the Required Lenders will promptly
designate a successor Agent reasonably satisfactory to Borrowers.

     Any such successor Agent shall succeed to the rights, powers and duties
of Agent, and the term "Agent" shall mean such successor agent effective upon
its appointment, and the former Agent's rights, powers and duties as Agent shall
be terminated, without any other or further act or deed on the part of such
former Agent.  After any Agent's resignation as Agent, the provisions of this
Article XIV shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement.

     14.4.  Certain Rights of Agent.
            -----------------------

     If Agent shall request instructions from Lenders with respect to any act or
action (including failure to act) in connection with this Agreement or any Other
Document, Agent shall be entitled to refrain from such act or taking such action
unless and until Agent shall have received instructions from the Required
Lenders; and Agent shall not incur liability to any Person by reason of so
refraining.  Without limiting the foregoing, Lenders shall not have any

                                      81
<PAGE>

right of action whatsoever against Agent as a result of its acting or refraining
from acting hereunder in accordance with the instructions of the Required
Lenders.

     14.5.  Reliance.
            --------

     Agent shall be entitled to rely, and shall be fully protected in relying,
upon any note, writing, resolution, notice, statement, certificate, telex,
teletype or telecopier message, cablegram, order or other document or telephone
message believed by it to be genuine and correct and to have been signed, sent
or made by the proper person or entity, and, with respect to all legal matters
pertaining to this Agreement and the Other Documents and its duties hereunder,
upon advice of counsel selected by it.  Agent may employ agents and attorneys-
in-fact and shall not be liable for the default or misconduct of any such agents
or attorneys-in-fact selected by Agent with reasonable care.

     14.6.  Notice of Default.
            -----------------

     Agent shall not be deemed to have knowledge or notice of the occurrence of
any Default or Event of Default hereunder or under the Other Documents, unless
Agent has received notice from a Lender or any Borrower referring to this
Agreement or the Other Documents, describing such Default or Event of Default
and stating that such notice is a "notice of default".  In the event that Agent
receives such a notice, Agent shall give notice thereof to Lenders.  Agent shall
take such action with respect to such Default or Event of Default as shall be
directed by the Required Lenders; provided, that, unless and until Agent shall
                                  --------  ----
have received such directions, Agent may but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of Lenders.

     14.7.  Indemnification.
            ---------------

     To the extent Agent is not reimbursed and indemnified by Borrowers, each
Lender will reimburse and indemnify Agent in proportion to its respective
portion of the Advances (or, if no Advances are outstanding, according to its
Commitment Percentage), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against Agent in performing its duties hereunder, or in any way
relating to or arising out of this Agreement or any Other Document; provided
                                                                    --------
that, Lenders shall not be liable for any portion of such liabilities,
----
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from Agent's willful misconduct or gross
(not mere) negligence.

     14.8.  Agent in its Individual Capacity.
            --------------------------------

     With respect to the obligation of Agent to lend under this Agreement, the
Advances made by it shall have the same rights and powers hereunder as any other
Lender and as if it were not performing the duties as Agent specified herein;
and the term "Lender" or any similar term shall, unless the context clearly
otherwise indicates, include Agent in its individual capacity as a Lender.
Agent may engage in business with Borrowers as if it were not performing the
duties

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<PAGE>

specified herein, and may accept fees and other consideration from any Borrower
for services in connection with this Agreement or otherwise without having to
account for the same to Lenders.

     14.9.  Delivery of Documents.
            ---------------------

     To the extent Agent receives documents and information from any Borrower
pursuant to the terms of this Agreement, Agent will promptly furnish such
documents and information to Lenders.

     14.10.  Borrowers' Undertaking to Agent.
             -------------------------------

     Without prejudice to their respective obligations to the Lenders under the
other provisions of this Agreement, each Borrower hereby undertakes with Agent
to pay to Agent from time to time on demand all amounts from time to time due
and payable by it for the account of Agent or the Lenders or any of them
pursuant to this Agreement to the extent not already paid.  Any payment made
pursuant to any such demand shall pro tanto satisfy Borrowers' obligations to
                                  --- -----
make payments for the account of the Lenders or the relevant one or more of them
pursuant to this Agreement.

XV.  MISCELLANEOUS.
     -------------

     15.1.  Governing Law.
            -------------

     This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applied to contracts to be performed wholly within
the State of New York.  Any judicial proceeding brought by or against any
Borrower with respect to any of the Obligations, this Agreement or any related
agreement may be brought in any court of competent jurisdiction in the State of
New York, United States of America, and, by execution and delivery of this
Agreement, each Borrower each accepts for itself and in connection with its
properties, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts, and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement.  Each Borrower hereby waives personal
service of any and all process upon it and consents that all such service of
process may be made by registered mail (return receipt requested) directed to
Borrowing Agent at its address set forth in Section 15.6.  Nothing herein shall
affect the right to serve process in any manner permitted by law or shall limit
the right of the Agent to bring proceedings against any Borrower in the courts
of any other jurisdiction.  Each Borrower waives any objection to jurisdiction
and venue of any action instituted hereunder and shall not assert any defense
based on lack of jurisdiction or venue or based upon forum non conveniens.  Any
                                                     --------------------
judicial proceeding by any Borrower against the Agent or Lenders involving,
directly or indirectly, any matter or claim in any way arising out of: related
to or connected with this Agreement or any related agreement, shall be brought
only in a federal or state court located in the City of New York, State of New
York.

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<PAGE>

     15.2  Entire Understanding.
           --------------------

           (a) This Agreement and the documents executed concurrently herewith
contain the entire understanding between Borrowers, Agent and each Lender and
supersedes all prior agreements and understandings, if any, relating to the
subject matter hereof.  Any promises, representations, warranties or guarantees
not herein contained and hereinafter made shall have no force and effect unless
in writing, signed by each Borrower's, Agent's and each Lender's respective
officers.  Neither this Agreement nor any portion or provisions hereof may be
changed, modified, amended, waived, supplemented, discharged, cancelled or
terminated orally or by any course of dealing, or in any manner other than by an
agreement in writing, signed by the party to be charged.  Each Borrower
acknowledges that it has been advised by counsel in connection with the
execution of this Agreement and Other Documents and is not relying upon oral
representations or statements inconsistent with the terms and provisions of this
Agreement.

           (b) The Required Lenders, Agent with the consent in writing of the
Required Lenders, and each Borrower may, subject to the provisions of this
Section 15.2(b), from time to time enter into written supplemental agreements to
this Agreement, the Notes or the Other Documents executed by Borrowers, for the
purpose of adding or deleting any provisions or otherwise changing, varying or
waiving in any manner the rights of the Lenders, Agent or any Borrower
thereunder or the conditions, provisions or terms thereof or waiving any Event
of Default thereunder, but only to the extent specified in such written
agreements; provided, however, that no such supplemental agreement shall (x)
            --------- -------
amend Sections 6.5, 6.6, 6.7, 6.8, 6.9, 6.10 or 7.6 without the consent of 67%
of the Lenders or (y) without the consent of all the Lenders:

               (i)    increase or decrease the Commitment Percentage of any
Lender or the Maximum Loan Amount or the Advance Rates.

               (ii)   extend the maturity of any Note or the due date for any
amount payable hereunder, or decrease the rate of interest or reduce any fee
payable by Borrowers to Agent or Lenders pursuant to this Agreement.

               (iii)  alter the definition of the term Required Lenders or
alter, amend or modify this Section 15.2(b).

               (iv)   release any Collateral during any calendar year having an
aggregate value in excess of $100,000.

               (v)    change the rights and duties of Agent.

Any such supplemental agreement shall apply equally to each of the Lenders and
shall be binding upon Borrowers, the Lenders and Agent and all future holders of
the Obligations.  In the case of any waiver, Borrowers, Agent and the Lenders
shall be restored to their former positions and rights, and any Event of Default
waived shall be deemed to be cured and not continuing, but no waiver of a
specific Event of Default shall extend to any subsequent Event of Default

                                      84
<PAGE>

(whether or not the subsequent Event of Default is the same as the Event of
Default which was waived), or impair any right consequent thereon.

     15.3  Successors and Assigns; Participations; New Lenders.
           ---------------------------------------------------

           (a) This Agreement shall be binding upon and inure to the benefit of
     Borrowers, Agent, each Lender, all future holders of the Notes and their
     respective successors and assigns, except that no Borrower may assign or
     transfer any of its rights or obligations under this Agreement without the
     prior written consent of Agent and Lenders holding at least seventy-six
     percent (76%) of the Advances or if no Advances are outstanding, seventy-
     six percent (76%) of the Commitment Percentages.

           (b) Each Borrower acknowledges that in the regular course of
     commercial banking business one or more Lenders may at any time and from
     time to time sell participating interests in the Advances to other
     financial institutions (each such transferee or purchaser of a
     participating interest, a "Transferee").  Each Transferee may exercise
     all rights of payment (including without limitation rights of set-off) with
     respect to the portion of such Advances held by it or other Obligations
     payable hereunder as fully as if such Transferee were the direct holder
     thereof provided that Borrowers shall not be required to pay to any
     Transferee more than the amount which it would have been required to pay to
     the Lender which granted an interest in its Advances or other Obligations
     payable hereunder to such Transferee had such Lender retained such interest
     in the Advances hereunder or other Obligations payable hereunder and in no
     event shall Borrowers be required to pay any such amount arising from the
     same circumstances and with respect to the same Advances or other
     Obligations payable hereunder to both such Lender and such Transferee.
     Each Borrower hereby grants to any Transferee a continuing security
     interest in any deposits, moneys or other property actually or
     constructively held by such Transferee as security for the Transferee's
     interest in the Advances.

           (c) Any Lender may with the consent of Agent which shall not be
     unreasonably withheld or delayed sell, assign or transfer all or any part
     of its rights under this Agreement and the Other Documents to one or more
     additional banks or financial institutions and one or more additional banks
     or financial institutions may commit to make Advances hereunder (each a
     "Purchasing Lender"), pursuant to a Commitment Transfer Supplement,
     executed by a Purchasing Lender, the transferor Lender, and Agent and
     delivered to Agent for recording provided no Purchasing Lender shall be
     sold an aggregate commitment of less than $5,000,000.  Upon such execution,
     delivery, acceptance and recording, from and after the transfer effective
     date determined pursuant to such Commitment Transfer Supplement, (i)
     Purchasing Lender thereunder shall be a party hereto and, to the extent
     provided in such Commitment Transfer Supplement, have the rights and
     obligations of a Lender thereunder with a Commitment Percentage as set
     forth therein, and (ii) the transferor Lender thereunder shall, to the
     extent provided in such Commitment Transfer Supplement, be released from
     its obligations under this Agreement, the Commitment Transfer Supplement
     creating a novation for that purpose.  Such Commitment Transfer Supplement
     shall be deemed to amend this Agreement to the

                                      85
<PAGE>

     extent, and only to the extent, necessary to reflect the addition of such
     Purchasing Lender and the resulting adjustment of the Commitment
     Percentages arising from the purchase by such Purchasing Lender of all or a
     portion of the rights and obligations of such transferor Lender under this
     Agreement and the Other Documents. Each Borrower hereby consent to the
     addition of such Purchasing Lender and the resulting adjustment of the
     Commitment Percentages arising from the purchase by such Purchasing Lender
     of all or a portion of the rights and obligations of such transferor Lender
     under this Agreement and the Other Documents. Each Borrower shall execute
     and deliver such further documents and do such further acts and things in
     order to effectuate the foregoing.

          (d) Agent shall maintain at its address a copy of each Commitment
     Transfer Supplement delivered to it and a register (the "Register") for the
     recordation of the names and addresses of the Advances owing to each Lender
     from time to time.  The entries in the Register shall be conclusive, in the
     absence of manifest error, and each Borrower, Agent and Lenders may treat
     each Person whose name is recorded in the Register as the owner of the
     Advance recorded therein for the purposes of this Agreement.  The Register
     shall be available for inspection by Borrowers, or any Lender at any
     reasonable time and from time to time upon reasonable prior notice.  Agent
     shall receive a fee in the amount of $2500 payable by the applicable
     Purchasing Lender upon the effective date of each transfer or assignment to
     such Purchasing Lender.

          (e) Each Borrower authorizes each Lender to disclose to any Transferee
     or Purchasing Lender and any prospective Transferee or Purchasing Lender
     any and all financial information in such Lender's possession concerning
     Borrowers which has been delivered to such Lender by or on behalf of any
     Borrower pursuant to this Agreement or in connection with such Lender's
     credit evaluation of Borrowers.

     15.4.  Application of Payments.
            -----------------------

     Agent shall have the continuing and exclusive right to apply or reverse and
re-apply any payment and any and all proceeds of Collateral to any portion of
the Obligations.  To the extent that any Borrower makes a payment or Agent or
any Lender receives any payment or proceeds of the Collateral for any Borrower's
benefit, which are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver, custodian or any other party under any bankruptcy law,
common law or equitable cause, then, to such extent, the Obligations or part
thereof intended to be satisfied shall be revived and continue as if such
payment or proceeds had not been received by Agent or such Lender.

     15.5.  Indemnity.
            ---------

     Each Borrower shall indemnify Agent and each Lender and their officers,
employees and agents from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
fees and disbursements of counsel) which may be imposed on, incurred by, or
asserted against Agent or any Lender in any litigation, proceeding or
investigation instituted or

                                      86
<PAGE>

conducted by any governmental agency or instrumentality or any other Person with
respect to any aspect of, or any transaction contemplated by, or referred to in,
or any matter related to, this Agreement, whether or not Agent or any Lender is
a party thereto, except to the extent that any of the foregoing arises out of
the willful misconduct or gross (not mere) negligence of the party being
indemnified.

     15.6.  Notice.
            ------

     Any notice or request hereunder may be given to any Borrower or to Agent or
any Lender at their respective addresses set forth below or at such other
address as may hereafter be specified in a notice designated as a notice of
change of address under this Section.  Any notice or request hereunder shall be
given by (a) hand delivery, (b) overnight courier, (c) registered or certified
mail, return receipt requested, (d) telex or telegram, subsequently confirmed by
registered or certified mail, or (e) telecopy to the number set out below (or
such other number as may hereafter be specified in a notice designated as a
notice of change of address) with telephone communication to a duly authorized
officer of the recipient confirming its receipt as subsequently confirmed by
registered or certified mail.  Any notice or other communication required or
permitted pursuant to this Agreement shall be deemed given (a) when personally
delivered to any officer of the party to whom it is addressed, (b) on the
earlier of actual receipt thereof or three (3) days following posting thereof by
certified or registered mail, postage prepaid, or (c) upon actual receipt
thereof when sent by a recognized overnight delivery service or (d) upon actual
receipt thereof when sent by telecopier to the number set forth below with
telephone communication confirming receipt and subsequently confirmed by
registered, certified or overnight mail to the address set forth below, in each
case addressed to each party at its address set forth below or at such other
address as has been furnished in writing by a party to the other by like notice:

     (A)  If to Agent or Bank of America at: Bank of America, N.A.
                                             Agency Services
                                             Independence Center, 15th Floor
                                             Charlotte, NC  28255
                                             Attention:  Kelly Weaver
                                             Telephone:  (704)  388-6483
                                             Telecopier:  (704)  409-0014

          with a copy to
          (other than with respect
          to matters relating solely
          to fundings and payments):         Bank of America, N.A.
                                             335 Madison Ave.
                                             New York, NY 10017
                                             Attention:  David Noda
                                             Telephone:  (212) 503-7948
                                             Telecopy:  (212) 503-7878

                                      87
<PAGE>

     (B) If to a Lender other than Agent, as specified on the signature pages
hereof

     (C)  If to a Borrower:         c/o Radnor Holdings Corporation
                                    Three Radnor Corporate Center
                                    Suite 300
                                    100 Matsonford Road
                                    Radnor, Pennsylvania 19087
                                    Attention: Michael T.  Kennedy
                                    Telephone:  (610) 995-2568
                                    Telecopier:  (610) 995-2697

          with a copy to:           Duane Morris & Heckscher
                                    One Liberty Place
                                    Philadelphia, Pennsylvania 19103
                                    Attention: Stephen Teaford, Esq.
                                    Telephone:  (215) 979-1220
                                    Telecopier:  (215) 979-1020

     15.7.  Survival.
            --------

     The obligations of Borrowers under Sections 2.2(f), 3.7, 3.8, 3.9, 14.7 and
15.5 shall survive termination of this Agreement and the Other Documents and
payment in full of the Obligations.

     15.8.  Severability.
            ------------

     If any part of this Agreement is contrary to, prohibited by, or deemed
invalid under applicable laws or regulations, such provision shall be
inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given effect so far as possible.

     15.9.  Expenses.
            --------

     Borrowers shall pay all costs and expenses including, without limitation,
reasonable attorneys' fees and disbursements incurred by Agent, any Lender and
Agent on behalf of the Lenders (a) in all efforts made to enforce payment of any
Obligation or effect collection of any Collateral, or (b) in connection with the
entering into, modification, amendment, administration and enforcement of this
Agreement or any consents or waivers hereunder and all related agreements
documents and instruments, or (c) in instituting, maintaining, preserving,
enforcing and foreclosing on Agent's security interest in or Lien on any of the
Collateral, whether through judicial proceedings or otherwise, or (d) in
defending or prosecuting any actions or proceedings arising out of or relating
to Agent's or any Lender's transactions with any Borrower, or (e) in connection
with any advice given to Agent or any Lender with respect to its rights and
obligations under this Agreement and all related agreements.

                                      88
<PAGE>

     15.10.  Injunctive Relief.
             -----------------

     Each Borrower recognizes that, in the event any Borrower fails to perform,
observe or discharge any of its obligations or liabilities under this Agreement,
any remedy at law may prove to be inadequate relief to Agent and the Lenders;
therefore, Agent and each Lender, if Agent or such Lender so requests, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving that actual damages are not an adequate remedy.

     15.11.  Consequential Damages.
             ---------------------

     Neither Agent nor Lenders nor any agent or attorney for any of them shall
be liable to any Borrower for consequential damages arising from any breach of
contract, tort or other wrong relating to the establishment, administration or
collection of the Obligations.

     15.12.  Captions.
             --------

     The captions at various places in this Agreement are intended for
convenience only and do not constitute and shall not be interpreted as part of
this Agreement.

     15.13.  Counterparts:  Telecopied Signatures.
             ------------------------------------

     This Agreement may be executed in any number of and by different parties
hereto on separate counterparts, all of which, when so executed, shall be deemed
an original, but all such counterparts shall constitute one and the same
agreement.  Any signature delivered by a party by facsimile transmission shall
be deemed to be an original signature hereto.

     15.14.  Construction.
             ------------

     The parties acknowledge that each party and its counsel have reviewed this
Agreement and that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any amendments, schedules or exhibits
thereto.

     15.15.  Currency Indemnity.
             ------------------

     Except as set forth in Section 2.7,

             (a) If: (i) any amount payable by a Borrower hereunder or in
     connection herewith is received by the Agent or any Lender in a currency
     (the "Payment Currency") other than that agreed to be payable hereunder
     (the "Agreed Currency"), whether as a result of any judgment or order or
     the enforcement thereof, the liquidation of such Borrower or otherwise
     howsoever; and (ii) the amount produced by converting the Payment Currency
     so received into the Agreed Currency is less than the relevant amount of
     the Agreed Currency; then such Borrower shall indemnify each of the Agent
     and the Lenders for the deficiency and any loss sustained as a result.
     Such conversion shall be made at such prevailing rate of exchange, on such
     date and in such market as is

                                      89
<PAGE>

     determined by the Agent, or the relevant Lender as being most appropriate
     for such conversion. Such Borrower shall in addition pay the costs of such
     conversion.

            (b) The above indemnity shall constitute separate and independent
     obligations of each Borrower from its other obligations hereunder and shall
     apply irrespective of any indulgence granted by the Agent or any Lender.

XVI. BORROWING AGENCY
     ----------------

     16.1.  Borrowing Agency Provisions.
            ---------------------------

            (a) Each Borrower hereby irrevocably designates Borrowing Agent to
     be its attorney and agent and in such capacity to borrow, sign and endorse
     notes, and execute and deliver all instruments, documents, writings and
     further assurances now or hereafter required hereunder, on behalf of such
     Borrower or Borrowers, and hereby authorizes Agent to pay over or credit
     all loan proceeds hereunder in accordance with the request of Borrowing
     Agent.

            (b) The handling of this credit facility as a co-borrowing facility
     with a borrowing agent in the manner set forth in this Agreement is solely
     as an accommodation to Borrowers and at their request.  Neither Agent nor
     any Lender shall incur liability to Borrowers as a result thereof.  To
     induce Agent and Lenders to do so and in consideration thereof, each
     Borrower hereby indemnifies Agent and each Lender and holds Agent and each
     Lender harmless from and against any and all liabilities, expenses, losses,
     damages and claims of damage or injury asserted against Agent or any Lender
     by any Person arising from or incurred by reason of the handling of the
     financing arrangements of Borrowers as provided herein, reliance by Agent
     or any Lender on any request or instruction from Borrowing Agent or any
     other action taken by Agent or any Lender with respect to this Section 15.1
     except due to willful misconduct or gross (not mere) negligence by the
     indemnified party.

            (c) All U.S. Obligations shall be joint and several obligations of
     the U.S. Borrowers, and each U.S. Borrower shall make payment upon the
     maturity of the U.S. Obligations by acceleration or otherwise, and such
     obligation and liability on the part of each U.S. Borrower shall in no way
     be affected by any extensions, renewals and forbearance granted by Agent
     or any Lender to any other U.S. Borrower, failure of Agent or any Lender to
     give any U.S. Borrower notice of borrowing or any other notice, any failure
     of Agent or any Lender to pursue or preserve its rights against any U.S.
     Borrower, the release by Agent or any Lender of any Collateral now or
     thereafter acquired from any U.S. Borrower, and such agreement by each U.S.
     Borrower to pay upon any notice issued pursuant thereto is unconditional
     and unaffected by prior recourse by Agent or any Lender to the other U.S.
     Borrowers or any Collateral for such U.S. Borrower's Obligations or the
     lack thereof.

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<PAGE>

            (d) All European Obligations shall be joint and several as among the
       European Borrowers, and each European Borrower shall make payment upon
       the maturity of the European Obligations by acceleration or otherwise,
       and such obligation and liability on the part of each European Borrower
       shall in no way be affected by any extensions, renewals and forbearance
       granted by Agent or any Lender to any other European Borrower, failure of
       Agent or any Lender to give any European Borrower notice of borrowing or
       any other notice, any failure of Agent or any Lender to pursue or
       preserve its rights against any European Borrower, the release by Agent
       or any Lender of any Collateral now or thereafter acquired from any
       European Borrower, and such agreement by each European Borrower to pay
       upon any notice issued pursuant thereto is unconditional and unaffected
       by prior recourse by Agent or any Lender to the other European Borrowers
       or any Collateral for such European Borrower's European Obligations or
       the lack thereof.

       16.2.  Waiver of Subrogation.
              ---------------------

       Each Borrower expressly waives any and all rights of subrogation,
reimbursement, indemnity, exoneration, contribution of any other claim which
such Borrower may now or hereafter have against the other Borrowers or other
Person directly or contingently liable for the Obligations hereunder, or against
or with respect to the other Borrowers' property (including, without limitation,
any property which is Collateral for the Obligations), arising from the
existence or performance of this Agreement, until termination of this Agreement
and repayment in full of the Obligations.

XVII.  GUARANTY.
       --------

       17.1.  Cross-Guaranty.
              --------------

              (a) U.S. Cross-Guaranty.  Each U.S. Borrower hereby acknowledges
                  -------------------
       and agrees that such U.S. Borrower is jointly and severally liable for,
       and hereby absolutely and unconditionally guarantees to each other U.S.
       Borrower, Agent and Lenders the full and prompt payment of, all U.S.
       Obligations owed or hereafter owing by each other U.S. Borrower. Each
       U.S. Borrower further agrees to pay all costs and expenses including,
       without limitation, all court costs and reasonable attorneys' and
       paralegals' fees and expenses, paid or incurred by Lender in endeavoring
       to collect all or any part of the U.S. Obligations from, or in
       prosecuting any action against, such U.S. Borrower or any other guarantor
       of all or any part of the U.S. Obligations.

              (b) European Cross-Guaranty.  Each European Borrower hereby
                  -----------------------
       acknowledges and agrees that such European Borrower is jointly and
       severally liable for, and hereby absolutely and unconditionally
       guarantees to each other European Borrower, Agent and Lenders the full
       and prompt payment of, all European Obligations owed or hereafter owing
       by each other European Borrower. Each European Borrower further agrees to
       pay all costs and expenses including, without limitation, all court costs
       and reasonable attorneys' and paralegals' fees and expenses, paid or
       incurred by the Lenders

                                      91
<PAGE>

     in endeavoring to collect all or any part of the European Obligations from,
     or in prosecuting any action against, such European Borrower or any other
     guarantor of all or any part of the European Obligations. No guarantee,
     indemnity, joint or other obligation, as referred to in this Section
     17.1(b), provided by ThermiSol Denmark shall be made or construed or
     enforced as serving (directly or indirectly) as security for any
     indebtedness to the Lenders with respect to any obligation of a direct or
     indirect shareholder of ThermiSol Denmark.

            (c) Guaranty by U.S. Borrowers of the European Obligations.  Each
                ------------------------------------------------------
     U.S. Borrower hereby acknowledges and agrees that such U.S. Borrower is
     jointly and severally liable for, and hereby absolutely and unconditionally
     guarantees to each other Borrower, Agent and Lenders the full and prompt
     payment of all, European Obligations owed or hereafter owing by each
     European Borrower. Each U.S. Borrower further agrees to pay all costs and
     expenses including, without limitation, all court costs and reasonable
     attorneys' and paralegals' fees and expenses paid or incurred by the
     Lenders in endeavoring to collect all or any part of the European
     Obligations from, or in prosecuting any action against such U.S. Borrower
     or any other guarantor of all or any part of the European Obligations.

     17.2.  Contribution with Respect to Guaranty Obligations.
            -------------------------------------------------

            (a) To the extent that any Borrower shall make a payment under this
     Section 17 of all or any of the Obligations for which such Borrower is not
     primarily liable (a "Guarantor Payment") which, taking into account all
     other Guarantor Payments then previously or concurrently made by the other
     Borrower, exceeds the amount which such Borrower would otherwise have paid
     if each Borrower had paid the aggregate Obligations satisfied by such
     Guarantor Payment in the same proportion that such Borrower's "Allocable
     Amount" (as defined below) (in effect immediately prior to such Guarantor
     Payment) bore to the aggregate Allocable Amounts of all of the Borrowers in
     effect immediately prior to the making of such Guarantor Payment, then such
                                                                       ----
     Borrower shall be entitled to receive contribution and indemnification
     payments from, and be reimbursed by, the other Borrower for the amount of
     such excess, pro rata based upon their respective Allocable Amounts in
                  --- ----
     effect immediately prior to such Guarantor Payment.

            (b) As of any date of determination, the "Allocable Amount" of any
                                                      --------- ------
     Borrower shall be equal to the maximum amount of the claim which could then
     be recovered from such Borrower under this Section 17 without rendering
     such claim voidable or avoidable under Section 548 of chapter 11 of the
     Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer
     Act, Uniform Fraudulent Conveyance Act or similar statute or common law.

            (c) This subsection 17.2 is intended only to define the relative
     rights of the Borrowers and nothing set forth in this subsection 17.2 is
     intended to or shall impair the obligations of the Borrowers, jointly and
     severally, to pay any amounts as and when the same shall become due and
     payable in accordance with the terms of this Agreement, and

                                      92
<PAGE>

     nothing contained in this subsection 17.2 shall limit the liability of any
     Borrower to pay the Obligations for which it is primarily liable.

            (d) The parties hereto acknowledge that the rights of contribution
     and indemnification hereunder shall constitute assets of any Borrower to
     which such contribution and indemnification is owing.

     17.3.  Obligations Absolute.
            --------------------

     The liability of each Borrower to Agent and Lenders hereunder shall not be
affected or impaired by any of the following:  (a) the validity or
enforceability of the Obligations or any part thereof, or of the Note or other
instrument or document evidencing all or any part of the Obligations, (b) the
absence of any attempt to collect the Obligations from a Borrower or any other
guarantor or other action to enforce the same, (c) any acceptance of collateral
security, guarantors, accommodation parties or sureties for any or all
Obligations; (d) one or more extensions or renewals of Obligations (whether or
not for longer than the original period) or any modification of the interest
rates, fees, maturities or principal amount of, or other contractual terms
applicable to any Obligations; (e) any waiver or indulgence granted to a
Borrower, any delay or lack of diligence in the enforcement of Obligations, or
any failure to institute proceedings, file a claim, give any required notices or
otherwise protect any Obligations; (f) any full or partial release of;
compromise or settlement with, or agreement not to sue a Borrower or any
guarantor or other person liable in respect of any Obligations; (g) any release,
surrender, cancellation or other discharge of any evidence of any of the
Obligations or the acceptance of any instrument in renewal or substitution
therefore; (h) any failure to obtain collateral security (including rights of
setoff) for any of the Obligations, or to obtain or maintain the proper or
sufficient creation and perfection thereof; or to establish the priority
thereof; or to preserve, protect, insure care for, exercise or enforce any
collateral security; (i) any collection, sale, lease or disposition of; or any
other foreclosure or enforcement of or realization on, any collateral security;
(j) any assignment, pledge or other transfer of any of the Obligations or any
evidence thereof; (k) any manner, order or method of application of any payments
or credits upon any of the Obligations; (1) Agent's or any Lender's election, in
any case or proceedings under the Bankruptcy Code of the application of Section
111 (b)(2) thereof; (xiii) any borrowing or grant of a Lien by a Borrower as
debtor in possession under Section 364 of the Bankruptcy Code and (m) the
disallowance under the Bankruptcy Code of all or any portion of Agent's or such
Lender's claim for repayment of the Obligations.  Each Borrower hereby waives
any and all legal and equitable defenses and discharges available to a surety
guarantor, or accommodation co-obligor.

     Each Borrower hereby assumes responsibility for keeping itself informed of
the financial condition of the other Borrower, and any and all endorsers and
other guarantors of any agreement, instrument or document evidencing or security
all or any part of the Obligations and of all other circumstances bearing upon
the risk of nonpayment of the Obligations or any part thereof that diligent
inquiry would reveal, and each Borrower hereby agrees that neither Agent nor any
Lender shall have any duty to advise such Borrower of information regarding such
condition or any such circumstances.  Each Borrower hereby acknowledges
familiarity with the other Borrower's financial condition and has not relied on
any statements by Agent or Lenders in

                                      93
<PAGE>

obtaining such information. In the event Agent or any Lender, in its sole
discretion, undertakes at any time or from time to time to provide any such
information to a Borrower, it shall not be under any obligation (i) to undertake
any investigation with respect thereto, (ii) to disclose any information which,
pursuant to accepted or reasonable credit practices, Agent wishes to maintain
confidential or (iii) to make any other or future disclosures of such
information, or any other information, to such Borrower.

     17.4.  Waiver.
            ------

     UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, AGENT OR ANY LENDER MAY, AT ITS
SOLE ELECTION, PROCEED DIRECTLY WITHOUT NOTICE, AGAINST A BORROWER TO COLLECT
AND RECOVER ALL OR ANY PART OF THE OBLIGATIONS WITHOUT FIRST PROCEEDING AGAINST
THE OTHER BORROWER, ANY OTHER GUARANTOR, OR ANY COLLATERAL FOR THE
OBLIGATIONS.

     EACH BORROWER ALSO WAIVES ALL SETOFFS AND COUNTERCLAIMS AND ALL
PRESENTMENTS, DEMANDS FOR PERFORMANCE, NOTICES OF NONPERFORMANCE, PROTESTS,
NOTICES OF PROTEST, NOTICES OF DISHONOR, AND NOTICES OF ACCEPTANCE OF THIS
GUARANTY.  EACH BORROWER FURTHER WAIVES ALL NOTICES OF THE EXISTENCE, CREATION
OR INCURRING OF NEW OR ADDITIONAL INDEBTEDNESS, ARISING EITHER FROM ADDITIONAL
LOANS EXTENDED TO THE OTHER BORROWERS OR OTHERWISE, AND EXCEPT FOR NOTICES
EXPRESSLY REQUIRED HEREUNDER, ALSO WAIVES ALL NOTICES THAT THE PRINCIPAL AMOUNT,
OR ANY PORTION THEREOF, OR ANY INTEREST ON ANY AGREEMENT, INSTRUMENT OR DOCUMENT
EVIDENCING OR SECURING ALL OR ANY PART OF THE OBLIGATIONS IS DUE, NOTICES OF ANY
AND ALL PROCEEDINGS TO COLLECT FROM THE MAKER, ANY ENDORSER OR ANY OTHER
GUARANTOR OF ALL OR ANY PART OF THE OBLIGATIONS, OR FROM ANY OTHER PERSON, AND
TO THE EXTENT PERMITTED BY LAW, NOTICES OF EXCHANGE, SALE, SURRENDER OR OTHER
HANDLING OF ANY COLLATERAL GIVEN TO AGENT AND LENDERS TO SECURE PAYMENT OF THE
OBLIGATIONS.

     17.5.  Recovery.
            --------

     Each Borrower agrees that, to the extent that the other Borrower makes a
payment or payments to Agent or any Lender, or receives any proceeds of
Collateral, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to such other Borrower, its estate, trustee, receiver or any other
party under any bankruptcy law, state or federal law, common law or equitable
cause, then to the extent of such payment or repayment, the Obligations or the
part thereof which has been paid, reduced or satisfied by such amount shall be
reinstated and continued in full force and effect as of the date such initial
payment, reduction or satisfaction occurred, and this cross guaranty shall
continue to be in existence and full force and effect, irrespective of whether
any evidence of the Obligations has been surrendered or canceled.

                                      94
<PAGE>

     17.6.  Liability Cumulative.
            --------------------

     The liability of the Borrowers under this Section 17 is in addition to and
shall be cumulative with all liabilities of each Borrower to Agent and Lenders
under this Agreement and the Other Documents to which such Borrower is a party
or in respect of any Obligations or obligation of the other Borrowers, without
any limitation as to amount, unless the instrument or agreement evidencing or
creating such other liability specifically provides to the contrary.

                                      95
<PAGE>

     Each of the parties has signed this Agreement as of the day and year first
above written.

U.S. BORROWERS:               WINCUP HOLDINGS, INC.

                              By:  /s/ R. Radcliffe Hastings
                                   -------------------------
                              Its:  SVP
                                    ------------------------

                              RADNOR CHEMICAL CORPORATION

                              By:  /s/ R. Radcliffe Hastings
                                   -------------------------
                              Its:  SVP
                                    ------------------------

                              STYROCHEM U.S., LTD.

                              By:  /s/ R. Radcliffe Hastings
                                   -------------------------
                              Its:  SVP
                                    ------------------------

                              RADNOR HOLDINGS CORPORATION

                              By:  /s/ R. Radcliffe Hastings
                                   -------------------------
                              Its:  SVP
                                    ------------------------

                              RADNOR DELAWARE, INC.

                              By:  /s/ R. Radcliffe Hastings
                                   -------------------------
                              Its:  SVP
                                    ------------------------

                              STYROCHEM DELAWARE, INC.

                              By:  /s/ R. Radcliffe Hastings
                                   -------------------------
                              Its:  SVP
                                    ------------------------

                              WINCUP TEXAS, LTD.

                              By:  /s/ R. Radcliffe Hastings
                                   -------------------------
                              Its:  SVP
                                    ------------------------
<PAGE>

EUROPEAN BORROWERS:      STYROCHEM EUROPE (THE NETHERLANDS) B.V.

                              By:  /s/ R. Radcliffe Hastings
                                   -------------------------
                              Its:  Authorized Representative
                                    -------------------------

                              STYROCHEM FINLAND OY

                              By:  /s/ R. Radcliffe Hastings
                                   -------------------------
                              Its:  Director
                                    ------------------------

                              THERMISOL DENMARK A/S

                              By:  /s/ R. Radcliffe Hastings
                                   -------------------------
                              Its:  Director
                                    ------------------------

                              THERMISOL SWEDEN AB

                              By:  /s/ R. Radcliffe Hastings
                                   -------------------------
                              Its:  Director
                                    ------------------------

                              THERMISOL FINLAND OY

                              By:  /s/ R. Radcliffe Hastings
                                   -------------------------
                              Its:  Director
                                    ------------------------

                                       2
<PAGE>

                              BANK OF AMERICA, N.A.,
                              as a Lender and as Agent

                              By:  /s/ David Noda
                                   ------------------------
                              Its:  Managing Director
                                    -----------------------

                              Commitment Percentage: 50%

                              FIRST UNION NATIONAL BANK,
                              as a Lender

                              By:  /s/Constantin E. Chepurny
                                   _________________________
                              Its: Senior Vice President
                                   ________________________

                              Commitment Percentage: 50%

                                       3

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