Document:

<PAGE>   1
                                                                    EXHIBIT 10.2
                               FIRST AMENDMENT TO
                          LOAN AND SECURITY AGREEMENT

     This FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is
made as of September 30, 2000 by and between SPINCYCLE, INC., a Delaware
corporation (the "Borrower") and ALLIANCE LAUNDRY SYSTEMS LLC, a Delaware
limited liability company ("Lender")

                                   BACKGROUND

          A.   Borrower and Lender are parties to a Loan and Security Agreement
dated as of November 12, 1999 (as the same may be hereafter amended, modified
or supplemented from time to time, the "Loan Agreement"), pursuant to which
Lender extended to Borrower a $3,000,000 term loan.

          B.   Borrower has requested that Lender modify its Tangible Net Worth
covenant and its Capital Expenditures covenant.

          C.   Lender is willing to modify such financial covenants, provided
that Borrower and Lender enter into this Amendment and upon the terms and
conditions set forth herein.

          D.   Capitalized terms used herein but not defined herein shall have
the meanings assigned to them in the Loan Agreement.

          NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, and intending to be legally bound hereby, the parties
hereto agree as follows:

          SECTION 1. AMENDMENTS TO LOAN AGREEMENT.

          1.1  Section 8.20(i) of the Loan Agreement is hereby amended to
provide that for Borrower's 2000 Fiscal Year only, Borrower shall be permitted
to make up to $2,000,000 in Capital Expenditures. After the end of Borrower's
2000 Fiscal Year, Borrower shall again be limited to up to $1,000,000 in
Capital Expenditures in any Fiscal Year.

          1.2  Section 11.1 of the Loan Agreement is hereby amended and
restated in its entirety as follows:

          "11.1 Tangible Net Worth. Borrower shall maintain its Tangible Net
          Worth in an amount of not less than the amount set forth opposite the
          periods set forth below,

                                       1
<PAGE>   2
          measured on a quarterly basis showing the results for each
          period during such Fiscal Quarter, as of the last day of
          each Fiscal Quarter:

                           MINIMUM TANGIBLE NET WORTH

<TABLE>
<CAPTION>
Reporting Period                        Minimum Level
----------------                        -------------
<S>                                     <C>
FISCAL 2000
Period 7-Period 10                      $75,000,000
Period 11-Period 13                     $70,000,000

FISCAL 2001
Period 1-Period 5                       $70,000,000
Period 6-Period 7                       $65,000,000
Period 8                                $62,500,000
Period 9                                $60,000,000
</TABLE>

                   SECTION 2. REPRESENTATIONS AND WARRANTIES.

          To induce Lender to amend the Loan Agreement and grant the requested
waivers, Borrower represents and warrants to Lender that:

          2.1  Compliance with Loan Agreement. Upon the effectiveness of this
Amendment, no Event of Default specified in Article VII of the Loan Agreement
nor any event which would, upon notice or lapse of time, or both, constitute
such an Event of Default, has occurred, and to the best of Borrower's knowledge,
on the date hereof, Borrower is in compliance with the terms and provisions set
forth in the Loan Agreement (as modified by this Amendment).

          2.2  Representations and Warranties. On the date hereof, the
representations and warranties and covenants set forth in the Loan Agreement (as
modified by this Amendment) are true and correct with the same effect as though
such representations and warranties and covenants had been made on the date
hereof, except to the extent that such representations and warranties and
covenants expressly relate to an earlier date.

          2.3  Corporate Authority of Borrower. Borrower has full power and
authority to enter into this Amendment, to borrow additional funds and to incur
and perform the obligations provided for under this Amendment and the Loan
Agreement, all of which have been duly authorized by all proper and necessary
corporate action. No consent or approval of stockholders or of any public
authority or regulatory body is required as a condition to the validity or
enforceability of this Amendment.

                                       2

<PAGE>   3
          2.4  Amendment as Binding Agreement. This Amendment constitutes the
valid and legally binding obligation of Borrower, fully enforceable against
Borrower, in accordance with its terms.

          2.5  No Conflicting Agreements. To the best of Borrower's knowledge,
the execution and performance by Borrower of this Amendment will not (i)
violate any provision of law, any order of any court or other agency of
government, or the Certificate of Incorporation or Bylaws of Borrower, or (ii)
violate any indenture, contract, agreement or other instrument to which
Borrower is a party, or by which its property is bound, or be in conflict
with, result in a breach of or constitute (with due notice and/or lapse of
time) a default under, any such indenture, contract, agreement or other
instrument, or result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the property or assets of
Borrower.

                        SECTION 3. CONDITIONS PRECEDENT.

          The agreement by Lender to amend the Loan Agreement is subject to the
delivery by Borrower to Lender of the following:

          3.1  In form and substance satisfactory to Lender, such documents
which Lender may reasonably request from Borrower to effect the intent of this
Amendment. Without limiting the generality of the foregoing, Borrower shall
deliver to Lender comparable documentation and other materials as Borrower
delivers to Bank in connection with the parallel modification of that certain
Amended and Restated Loan and Security Agreement dated as of November 17, 1999
between Bank and Borrower.

                         SECTION 4. GENERAL PROVISIONS.

          4.1  Except as amended by this Amendment, the terms and provisions of
the Loan Agreement shall remain in full force and effect and are herby affirmed,
confirmed and ratified in all respects. Borrower ratifies, confirms and affirms,
without condition, all liens and security interests granted to Lender pursuant
to the Loan Agreement and the Loan Documents, and Borrower agrees that such
liens and security interests shall continue to secure the Obligations,
including but not limited to, all loans made by Lender to Borrower under the
Loan Agreement as amended by this Amendment.

          4.2  This Amendment shall be construed in accordance with and
governed by the laws of the State of Illinois, and the obligations of Borrower
under this Amendment are and shall arise absolutely and unconditionally upon
the execution and delivery of this Amendment.

                                       3
<PAGE>   4
     4.3  This Amendment may be executed in any number of counterparts.

     4.4  Borrower hereby agrees to pay all out-of-pocket expenses incurred by
Lender in connection with the preparation, negotiation and consummation of this
Amendment, and all other documents related thereto, including without
limitation, the reasonable fees and expenses of Lender's counsel, and any
filing fees required in connection with the filing of any documents necessary
to consummate the provisions of this Amendment.

     4.5  On or after the effective date hereof, each reference in the Loan
Agreement or any of the Loan Documents to this "Agreement," the "Loan
Agreement," or words of like import, shall unless the context otherwise
requires, be deemed to refer to the Loan Agreement as amended hereby.

     IN WITNESS WHEREOF, Borrower and Lender have caused this Amendment to be
duly executed by their duly authorized officers, all as of the date and year
first above written.

                                             Borrower:

                                             SPINCYCLE, INC.

                                             By:  /s/ Tim Yost
                                                  ------------------------------
                                             Title: VP Finance
                                                    ----------------------------

                                             LENDER:

                                             ALLIANCE LAUNDRY SYSTEMS LLC

                                             By:  /s/ Bruce P. Rounds
                                                  ------------------------------
                                             Title: Vice President - CFO
                                                    ----------------------------

                                       4------------------
                                                                EXECUTION COPY
                                                              ------------------

                           LOAN AND SECURITY AGREEMENT

                           Dated as of July 25, 2000

                                     Among

                    THE FINANCIAL INSTITUTIONS NAMED HEREIN

                                 AS THE LENDERS

                                      and

                             BANK OF AMERICA, N.A.

                                  AS THE AGENT

                                      and

                                 WORLDTEX, INC.

                       REGAL MANUFACTURING COMPANY, INC.

                      ELASTIC CORPORATION OF AMERICA, INC.

                    WILLCOX & GIBBS FILIX OF DELAWARE, INC.

                         REGAL YARNS OF ARGENTINA, INC.

                              WTX COLOMBIA I, INC.

                             WTX COLOMBIA II, INC.

                                AS THE BORROWERS

<PAGE>

                                TABLE OF CONTENTS
SECTION                                                                   PAGE

ARTICLE 1   INTERPRETATION OF THIS AGREEMENT...............................  1
      1.1   Definitions....................................................  1
      1.2   Accounting Terms............................................... 26
      1.3   Interpretive Provisions........................................ 27
ARTICLE 2   LOANS AND LETTERS OF CREDIT.................................... 27
      2.1   Total Facility................................................. 27
      2.2   Revolving Loans................................................ 28
      2.3   Term Loans..................................................... 34
      2.4   Letters of Credit.............................................. 35
      2.5   Bank Products.................................................. 42
ARTICLE 3   INTEREST AND FEES.............................................. 43
      3.1   Interest....................................................... 43
      3.2   Continuation and Conversion Elections.......................... 43
      3.3   Maximum Interest Rate.......................................... 45
      3.4   Closing Fee.................................................... 45
      3.5   Unused Line Fee................................................ 45
      3.6   Letter of Credit Fee........................................... 46
ARTICLE 4   PAYMENTS AND PREPAYMENTS....................................... 46
      4.1   Revolving Loans................................................ 46
      4.2   Termination of Facility........................................ 47
      4.3   Repayment of Term Loans........................................ 47
      4.4   Voluntary Prepayments of the Term Loans........................ 47
      4.5   Mandatory Prepayments of the Term Loans........................ 47
      4.6   Payments by the Borrowers...................................... 48
      4.7   Payments as Revolving Loans.................................... 48
      4.8   Apportionment, Application and Reversal of Payments............ 49
      4.9   Indemnity for Returned Payments................................ 49
      4.10  Agent's and Lenders' Books and Records; Monthly
            Statements..................................................... 50
ARTICLE 5   TAXES, YIELD PROTECTION AND ILLEGALITY......................... 50
      5.1   Taxes.......................................................... 50
      5.2   Illegality..................................................... 51
      5.3   Increased Costs and Reduction of Return........................ 51
      5.4   Funding Losses................................................. 52
      5.5   Inability to Determine Rates................................... 52
      5.6   Certificates of Lenders........................................ 53
      5.7   Survival....................................................... 53
ARTICLE 6   COLLATERAL..................................................... 53
      6.1   Grant of Security Interest..................................... 53
      6.2   Perfection and Protection of Security Interest................. 55
      6.3   Location of Collateral......................................... 56
      6.4   Title to, Liens on, and Sale and Use of Collateral............. 56

<PAGE>

      6.5   Appraisals..................................................... 56
      6.6   Access and Examination; Confidentiality; Consent to
            Advertising.................................................... 57
      6.7   Collateral Reporting........................................... 58
      6.8   Accounts....................................................... 58
      6.9   Collection of Accounts; Payments............................... 60
      6.10  Inventory; Perpetual Inventory................................. 61
      6.11  Equipment...................................................... 61
      6.12  Assigned Contracts............................................. 62
      6.13  Documents, Instruments, and Chattel Paper...................... 63
      6.14  Right to Cure.................................................. 63
      6.15  Power of Attorney.............................................. 63
      6.16  The Agent's and Lenders' Rights, Duties and
            Liabilities.................................................... 64
      6.17  Site Visits, Observations and Testing.......................... 64
ARTICLE 7   BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES.............. 65
      7.1   Books and Records.............................................. 65
      7.2   Financial Information.......................................... 65
      7.3   Notices to Lenders............................................. 68
ARTICLE 8   GENERAL WARRANTIES AND REPRESENTATIONS......................... 70
      8.1   Authorization, Validity, and Enforceability of this
            Agreement and the Loan Documents............................... 70
      8.2   Validity and Priority of Security Interest..................... 71
      8.3   Organization and Qualification................................. 71
      8.4   Corporate Name; Prior Transactions............................. 71
      8.5   Subsidiaries................................................... 71
      8.6   Financial Statements and Projections........................... 71
      8.7   Capitalization................................................. 72
      8.8   Solvency....................................................... 72
      8.9   Debt........................................................... 72
      8.10  Distributions.................................................. 72
      8.11  Title to Property.............................................. 73
      8.12  Real Estate; Leases............................................ 73
      8.13  Proprietary Rights............................................. 73
      8.14  Trade Names.................................................... 73
      8.15  Litigation..................................................... 73
      8.16  Restrictive Agreements......................................... 74
      8.17  Labor Disputes................................................. 74
      8.18  Environmental Laws............................................. 74
      8.19  No Violation of Law............................................ 75
      8.20  No Default..................................................... 75
      8.21  ERISA Compliance............................................... 75
      8.22  Taxes.......................................................... 76
      8.23  Regulated Entities............................................. 76
      8.24  Use of Proceeds; Margin Regulations............................ 77
      8.25  Copyrights, Patents, Trademarks and Licenses, etc.............. 77
      8.26  No Material Adverse Change..................................... 77

<PAGE>

      8.27  Full Disclosure................................................ 77
      8.28  Material Agreements............................................ 77
      8.29  Bank Accounts.................................................. 78
      8.30  Governmental Authorization..................................... 78
ARTICLE 9   AFFIRMATIVE AND NEGATIVE COVENANTS............................. 78
      9.1   Taxes and Other Obligations.................................... 78
      9.2   Corporate Existence and Good Standing.......................... 78
      9.3   Compliance with Law and Agreement; Maintenance of
            Licenses....................................................... 79
      9.4   Maintenance of Property........................................ 79
      9.6   Condemnation................................................... 80
      9.7   Environmental Laws............................................. 81
      9.8   Compliance with ERISA.......................................... 82
      9.9   Mergers, Consolidations or Sales............................... 82
      9.10  Distributions; Capital Change; Restricted Investments.......... 82
      9.11  Transactions Affecting Collateral or Obligations............... 83
      9.12  Guaranties..................................................... 83
      9.13  Debt........................................................... 83
      9.14  Prepayment..................................................... 84
      9.15  Transactions with Affiliates................................... 84
      9.16  Investment Banking and Finder's Fees........................... 84
      9.17  ]Intentionally Omitted......................................... 84
      9.18  Business Conducted............................................. 84
      9.19  Liens.......................................................... 84
      9.20  Sale and Leaseback Transactions................................ 85
      9.21  New Subsidiaries............................................... 85
      9.22  Fiscal Year.................................................... 85
      9.23  Capital Expenditures........................................... 85
      9.24  Operating Lease Obligations.................................... 85
      9.25  Minimum EBITDA................................................. 85
      9.26  [Intentionally Omitted]........................................ 86
      9.27  Total Availability............................................. 86
      9.28  Use of Proceeds................................................ 86
      9.29  Further Assurances............................................. 86
ARTICLE 10  CONDITIONS OF LENDING.......................................... 86
      10.1  Conditions Precedent to Making of Loans on the
            Closing Date................................................... 86
      10.2  Conditions Precedent to Making of Additional Term
            Loans on the Term Loan Second Funding Date..................... 88
      10.3  Conditions Precedent to Each Loan.............................. 89
ARTICLE 11  DEFAULT; REMEDIES.............................................. 90
      11.1  Events of Default.............................................. 90
      11.2  Remedies....................................................... 93
ARTICLE 12  TERM AND TERMINATION........................................... 94
      12.1  Term and Termination........................................... 94

<PAGE>

ARTICLE 13  AMENDMENTS; WAIVERS; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS... 95
      13.1  Amendments and Waivers......................................... 95
      13.2  Assignments; Participations.................................... 96
ARTICLE 14  THE AGENT...................................................... 99
      14.1  Appointment and Authorization.................................. 99
      14.2  Delegation of Duties........................................... 99
      14.3  Liability of Agent.............................................100
      14.4  Reliance by Agent..............................................100
      14.5  Notice of Default..............................................100
      14.6  Credit Decision................................................101
      14.7  Indemnification................................................101
      14.8  Agent in Individual Capacity...................................102
      14.9  Successor Agent................................................102
      14.10 Withholding Tax................................................102
      14.11 Collateral Matters.............................................103
      14.12 Restrictions on Actions by Lenders; Sharing of
            Payments.......................................................104
      14.13 Agency for Perfection..........................................105
      14.14 Payments by Agents to Lenders..................................105
      14.15 Concerning the Collateral and the Related Loan
            Documents......................................................106
      14.16 Field Audit and Examination Reports; Disclaimer by
            Lenders........................................................106
      14.17 Relation Among Lenders.........................................106
ARTICLE 15  MISCELLANEOUS..................................................107
      15.1  No Waivers; Cumulative Remedies................................107
      15.2  Severability...................................................107
      15.3  Governing Law; Choice of Forum; Service of Process.............107
      15.4  WAIVER OF JURY TRIAL...........................................108
      15.5  Survival of Representations and Warranties.....................109
      15.6  Other Security and Guaranties..................................109
      15.7  Fees and Expenses..............................................109
      15.8  Notices........................................................110
      15.9  Waiver of Notices..............................................111
      15.10 Binding Effect.................................................111
      15.11 Indemnity of the Agent and the Lenders by the Borrower.........111
      15.12 Limitation of Liability........................................112
      15.13 Final Agreement................................................112
      15.14 Counterparts...................................................113
      15.15 Captions.......................................................113
      15.16 Right of Setoff................................................113
      15.17 Joint and Several Liability....................................113
      15.18 Contribution and Indemnification among the Borrowers...........115
      15.19 Agency of the Parent for each other Borrower...................115

<PAGE>

                             EXHIBITS AND SCHEDULES

EXHIBIT A - FORM OF TERM NOTE

EXHIBIT B - FORM OF BORROWING BASE CERTIFICATE

EXHIBIT C - FINANCIAL STATEMENTS

EXHIBIT D - FORM OF NOTICE OF BORROWING

EXHIBIT E - FORM OF NOTICE OF CONTINUATION/CONVERSION

EXHIBIT F - FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT

SCHEDULE 1.1 - ASSIGNED CONTRACTS

SCHEDULE 2.3 - EXISTING LETTERS OF CREDIT

SCHEDULE 6.3  - LOCATION OF COLLATERAL AND CHIEF EXECUTIVE  OFFICE

SCHEDULE 8.3  - ORGANIZATION  AND   QUALIFICATIONS

SCHEDULE 8.4  - CORPORATE  NAMES;   PRIOR TRANSACTIONS

SCHEDULE 8.5  - SUBSIDIARIES

SCHEDULE 8.9  - DEBT

SCHEDULE 8.11 - LIENS

SCHEDULE 8.12 - REAL ESTATE;  LEASES

SCHEDULE 8.13 - PROPRIETARY  RIGHTS

SCHEDULE 8.14 - TRADE NAMES

SCHEDULE 8.15 - LITIGATION

SCHEDULE 8.17 - LABOR DISPUTES

SCHEDULE 8.18 - ENVIRONMENTAL LAW

SCHEDULE 8.20 - DEFAULTS

<PAGE>

SCHEDULE 8.21 - ERISA COMPLIANCE

SCHEDULE 8.28 - MATERIAL AGREEMENTS

SCHEDULE 8.29 - BANK ACCOUNTS

SCHEDULE 9.10 - INVESTMENTS

<PAGE>

                           LOAN AND SECURITY AGREEMENT

      Loan  and  Security  Agreement,  dated  as of July  25,  2000,  among  the
financial  institutions  listed on the  signature  pages hereof (such  financial
institutions,  together  with  their  respective  successors  and  assigns,  are
referred to hereinafter each  individually as a "Lender" and collectively as the
"Lenders"),  Bank of America,  N.A. with an office at Bank of America  Corporate
Center,  100 North Tryon Street,  Charlotte,  North Carolina 28255, as agent for
the  Lenders  (in its  capacity  as agent,  the  "Agent"),  and  Worldtex,  Inc.
("Worldtex" or the  "Parent"),  Regal  Manufacturing  Company,  Inc.  ("Regal"),
Elastic Corporation of America, Inc. ("ECA"), Willcox & Gibbs Filix of Delaware,
Inc.  ("Willcox"),  Regal Yarns of  Argentina,  Inc.  ("Regal  Argentina"),  WTX
Colombia I, Inc. ("WTX I") and WTX Colombia II, Inc. ("WTX II"), each a Delaware
corporation (other than Regal Argentina,  which is a North Carolina corporation)
with offices at 915 Tate Boulevard,  S.E.,  Suite 106,  Hickory,  North Carolina
28602 (Worldtex,  Regal,  ECA,  Willcox,  Regal Argentina,  WTX I and WTX II are
hereinafter  referred to  individually  as a "Borrower" and  collectively as the
"Borrowers").

                               W I T N E S S E T H

      WHEREAS, the Borrowers have requested the Lenders to make available to the
Borrowers  a  revolving  line of credit  for loans and  letters  of credit in an
amount not to exceed $40 million and to make term loans to the  Borrowers in the
aggregate  principal amount of up to $7.5 million and which extensions of credit
the Borrowers will use to refinance  existing Debt and for their working capital
needs and general business purposes;

      WHEREAS,  the Lenders  have agreed to make  available  to the  Borrowers a
revolving credit facility and term loans upon the terms and conditions set forth
in this Agreement.

      NOW,  THEREFORE,  in consideration of the mutual conditions and agreements
set  forth  in this  Agreement,  and for good and  valuable  consideration,  the
receipt  of which is  hereby  acknowledged,  the  Lenders,  the  Agent,  and the
Borrowers hereby agree as follows.

                                    ARTICLE 1
                        INTERPRETATION OF THIS AGREEMENT

      1.1   DEFINITIONS.

      As used herein:

      "ACCOUNTS" means all of the Borrowers' now owned or hereafter  acquired or
arising accounts as defined in the UCC,  including any rights to payment for the
sale or lease of goods or rendition  of services,  whether or not they have been
earned by performance.

      "ACCOUNT  DEBTOR"  means  each  Person  obligated  in  any  way  on  or in
connection with an Account.

<PAGE>

      "ACH TRANSACTIONS" means any cash management or related services including
the automatic  clearing  house  transfer of funds by the Bank for the account of
any Borrower pursuant to agreement or overdrafts.

      "AFFILIATE" means, as to any Person,  any other Person which,  directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person or which owns, directly or indirectly,  five percent (5%) or more of
the  outstanding  equity  interest of such  Person.  A Person shall be deemed to
control  another  Person  if  the  controlling  Person  possesses,  directly  or
indirectly,  the power to direct or cause the  direction of the  management  and
policies  of  the  other  Person,   whether  through  the  ownership  of  voting
securities, by contract, or otherwise.

      "AGENT"  means the Bank,  solely in its capacity as agent for the Lenders,
and any successor agent.

      "AGENT ADVANCES" has the meaning specified in SECTION 2.2(I).

      "AGENT'S FEE LETTER" means that certain letter agreement, dated as of July
25,  2000,  between  the  Agent  and  the  Borrowers,   as  amended,   modified,
supplemented or replaced from time to time.

      "AGENT'S  LIENS" means the Liens in the  Collateral  granted to the Agent,
for the benefit of the Lenders,  Bank,  and Agent pursuant to this Agreement and
the other Loan Documents.

      "AGENT-RELATED PERSONS" means the Agent, together with its Affiliates, and
the officers,  directors,  employees,  agents and attorneys-in-fact of the Agent
and such Affiliates.

      "AGGREGATE REVOLVER OUTSTANDINGS" means, at any date of determination, the
sum of (a) the unpaid balance of Revolving Loans, (b) one hundred percent (100%)
of the aggregate undrawn face amount of all outstanding  Letters of Credit,  and
(c) the aggregate amount of any unpaid  reimbursement  obligations in respect of
Letters of Credit.

      "AGREEMENT"  means this Loan and Security  Agreement and the schedules and
exhibits hereto, as amended and modified from time to time.

      "ANNIVERSARY DATE" means each anniversary of the Closing Date.

      "APPLICABLE MARGIN" means, for any day, the rate per annum set forth below
opposite the applicable "Pricing Level" then in effect, it being understood that
the Applicable  Margin for (i) Base Rate Revolving Loans shall be the percentage
set forth under the column "Base Rate Revolving  Loans  Margin",  (ii) Base Rate
Term Loans shall be the  percentage  set forth under the column  "Base Rate Term
Loans Margin", (iii) LIBOR Revolving Loans and the Letter of Credit Fee shall be
the  percentage  set forth under the column  "LIBOR  Revolving  Loans Margin and
Letter of Credit Fee",  (iv) LIBOR Term Loans shall be the  percentage set forth
under the column "LIBOR Term Loans Margin", and (v) the Unused Line Fee shall be
the percentage set forth under the column "Unused Line Fee":

<PAGE>

<TABLE>
<CAPTION>

                                                             LIBOR
                                                           Revolving
                           Base Rate       Base Rate      Loans Margin
Pricing      Leverage      Revolving       Term Loans     and Letter of      LIBOR Term     Unused Line
 Level        Ratio       Loans Margin       Margin        Credit Fee       Loans Margin        Fee
-------     ---------     ------------     ----------     -------------     -------------   -----------
<S>         <C>           <C>              <C>            <C>               <C>             <C>

   I      > 5.50 to 1.0      1.00%           1.25%            3.00%             3.25%          0.375%

  II      > 5.00 to 1.0      0.75%           1.00%            2.75%             3.00%          0.375%
               but
          < 5.50 to 1.0
          -

  III     > 4.50 to 1.0      0.50%           0.75%            2.50%             2.75%          0.375%
               but
          < 5.00 to 1.0
          -

  IV      > 4.00 to 1.0      0.25%           0.50%            2.25%             2.50%          0.375%
               but
          < 4.50 to 1.0
          -

   V      > 3.50 to 1.0      0%              0.25%            2.00%             2.25%          0.375%
               but
          < 4.00 to 1.0
          -

  VI      > 3.00 to 1.0      0%              0%               1.75%             2.00%          0.375%
               but
          < 3.50 to 1.0
          -

  VII     > 2.50 to 1.0      0%              0%               1.50%             1.75%          0.375%
          -    but
          < 3.00 to 1.0
          -

  VIII    < 2.50 to 1.0      0%              0%               1.25%             1.50%          0.375%

</TABLE>

      The  Applicable   Margins  shall  be  based  on  the  Pricing  Level  that
corresponds to the Leverage Ratio then in effect.  The Applicable  Margins shall
be  determined  and adjusted  quarterly on the date (each a "RATE  DETERMINATION
DATE") five (5) Business  Days after the date by which the Parent is required to
provide the officer's  certificate in accordance  with the provisions of Section
7.2(e);  PROVIDED that (i) the respective  initial  Applicable  Margins shall be
based on  Pricing  Level III and shall  remain in effect at such  Pricing  Level
until the Rate  Determination  Date  following the fiscal  quarter of the Parent
ending  December  31, 2000 and (ii) if the Parent  fails to provide to the Agent
the officer's certificate required by Section 7.2(e) on or before the applicable
Rate  Determination  Date  corresponding  to delivery of such  certificate,  the
Applicable  Margins from such Rate  Determination Date shall be based on Pricing
Level I until such time as an  appropriate  officer's  certificate  is provided,
whereupon the Applicable Margins shall be determined by the Leverage Ratio as of
the fiscal quarter end immediately  preceding the applicable Rate  Determination
Date.

      Subject to the  qualifications  set forth above,  each  Applicable  Margin
shall be effective from a Rate  Determination Date until (but not including) the
next Rate  Determination  Date.  Adjustments in the Applicable  Margins shall be
effective  as to  existing  Loans and Letters of Credit as well as new Loans and
Letters of Credit made thereafter.

      "ASSIGNED CONTRACTS" means, collectively, all of the Borrowers' rights and
remedies under,  and all moneys and claims for money due or to become due to any
Borrower  under,  those  contracts  set  forth on  SCHEDULE  1.1,  and any other
material contracts that do not expressly prohibit  assignment without consent or
for which a consent to assignment has been obtained, and any and all amendments,
supplements, extensions, and renewals thereof including all rights and claims of
any Borrower now or hereafter  existing:  (i) under any insurance,  indemnities,
warranties,  and guarantees provided for or arising out of or in connection with

<PAGE>

any of the  foregoing  agreements;  (ii) for any  damages  arising out of or for
breach or default  under or in connection  with any of the foregoing  contracts;
(iii)  to all  other  amounts  from  time to time  paid or  payable  under or in
connection with any of the foregoing agreements;  or (iv) to exercise or enforce
any and all covenants, remedies, powers and privileges thereunder.

      "ASSIGNEE" has the meaning specified in SECTION 13.2(A).

      "ASSIGNMENT AND ACCEPTANCE" has the meaning specified in SECTION 13.2(a).

      "ASSIGNMENT OF FACTORING  PROCEEDS"  means,  with respect to any Factoring
Agreement,  an assignment of factoring  proceeds  consented to in writing by the
applicable Factor and otherwise in form and substance satisfactory to the Agent.

      "ATTORNEY  COSTS"  means and includes all  reasonable  fees,  expenses and
disbursements  of any law  firm or  other  counsel  engaged  by the  Agent,  the
reasonable  allocated  costs of  internal  legal  services  of the Agent and the
reasonable expenses of internal counsel to the Agent.

      "AVAILABILITY"   means,   at  any  time  with   respect  to  any  Borrower
individually,  (a) the portion of the Borrowing  Base allocable to such Borrower
(as shown on the most recent Borrowing Base Certificate  delivered to the Agent)
MINUS (b) the portion of Aggregate Revolver  Outstandings arising from Revolving
Loans made to such Borrower and Letters of Credit issued for the benefit of such
Borrower.

      "BANK" means Bank of America, N.A., a national banking association, or any
successor entity thereto.

      "BANK  PRODUCTS"  means any one or more of the following types of services
or facilities  extended to any Borrower by the Bank or any affiliate of the Bank
in reliance on the Bank's  agreement to  indemnify  such  affiliate:  (i) credit
cards; (ii) ACH Transactions; and (iii) Hedge Agreements.

      "BANK PRODUCT  RESERVES"  means all reserves  which the Agent from time to
time  establishes  in its  reasonable  discretion  for the  Bank  Products  then
provided or outstanding.

      "BANKRUPTCY  CODE"  means  Title 11 of the United  States  Code (11 U.S.C.
Section 101 ET SEQ.).

      "BASE RATE"  means,  for any day,  the rate of interest in effect for such
day as  publicly  announced  from time to time by the Bank in  Charlotte,  North
Carolina  as its "prime  rate" (the  "prime  rate"  being a rate set by the Bank
based upon  various  factors  including  the Bank's  costs and  desired  return,
general economic conditions and other factors,  and is used as a reference point
for pricing some loans,  which may be priced at, above,  or below such announced
rate).  Any change in the prime rate  announced by the Bank shall take effect at
the opening of business on the day specified in the public  announcement of such
change.  Each  Interest  Rate  based  upon  the  Base  Rate  shall  be  adjusted
simultaneously with any change in the Base Rate.

      "BASE RATE LOANS" means,  collectively,  the Base Rate Revolving Loans and
the Base Rate Term Loans.

<PAGE>

      "BASE RATE  REVOLVING  LOAN" means a  Revolving  Loan during any period in
which it bears interest based on the Base Rate.

      "BASE RATE TERM LOAN"  means any  portion of a Term Loan during any period
in which such portion bears interest based on the Base Rate.

      "BLOCKED ACCOUNT  AGREEMENT"  means an agreement among the Borrowers,  the
Agent and a Clearing  Bank,  in form and  substance  satisfactory  to the Agent,
concerning the  collection of payments which  represent the proceeds of Accounts
or of any other Collateral.

      "BORROWER" and "BORROWERS" have the meanings specified in the introductory
paragraph hereof.

      "BORROWING" means a borrowing  hereunder  consisting of Revolving Loans or
Term Loans made on the same day to the  Borrowers  by the  Lenders or by Bank in
the case of a Borrowing funded by Non-Ratable  Loans or by the Agent in the case
of a Borrowing  consisting  of an Agent  Advance,  or the issuance of Letters of
Credit hereunder.

      "BORROWING  BASE" means, at any time, an amount equal to (a) the lesser of
(i) the Maximum Revolver Amount or (ii) the sum of (A) eighty-five percent (85%)
of the Net Amount of Eligible  Non-Factored  Accounts;  PLUS (B) ninety  percent
(90%) of the Net Amount of Eligible Factored Accounts; PLUS (C) the least of (I)
the sum of (x) sixty  percent  (60%) of the value of Eligible  Inventory  (other
than  intermediate,  sub-assembly  or off-site  Inventory)  PLUS (y) thirty-five
percent (35%) of the value of Eligible  Inventory  consisting of intermediate or
sub-assembly  Inventory PLUS (z) the lesser of (1) thirty-five  percent (35%) of
off-site  Inventory  or  (2)  $1,000,000,  (II)  eighty  (80%)  of  the  orderly
liquidation  value of all Inventory or (III)  $20,000,000;  MINUS (b) the sum of
(i)  reserves  for accrued  and unpaid  interest  on the  Obligations,  (ii) the
Environmental  Compliance Reserve,  (iii) the Bank Product Reserves and (iv) all
other reserves which the Agent deems necessary in the exercise of its reasonable
credit  judgment to maintain with respect to any Borrower's  account,  including
reserves  for any amounts  which the Agent or any Lender may be obligated to pay
in the future for the account of any  Borrower  and  reserves  equal to four (4)
months of scheduled  rental payments with respect to all leased locations of any
Borrower where Eligible Inventory is located and the lessor of such location has
failed to deliver a landlord's waiver agreement in form and substance acceptable
to the Agent.

      "BORROWING BASE CERTIFICATE" means a certificate by a Responsible  Officer
of the Parent,  substantially  in the form of EXHIBIT B as updated  from time to
time by the Agent by notice to the Parent (or  another  form  acceptable  to the
Agent),  setting  forth the  calculation  of the  Borrowing  Base,  including  a
calculation of each component thereof and a break-down by Borrower,  all in such
detail as shall be satisfactory to the Agent.  All calculations of the Borrowing
Base in connection with the preparation of any Borrowing Base Certificate  shall
originally be made by the Parent and certified to the Agent; provided,  that the
Agent  shall  have the  right to  review  and  adjust,  in the  exercise  of its
reasonable  credit judgment,  any such calculation (1) to reflect its reasonable
estimate of declines in value of any of the Collateral  described  therein,  and
(2) to  the  extent  that  such  calculation  is not  in  accordance  with  this
Agreement.

<PAGE>

      "BUSINESS DAY" means (a) any day that is not a Saturday,  Sunday, or a day
on which banks in  Charlotte,  North  Carolina  are  required or permitted to be
closed,  and (b) with  respect  to all  notices,  determinations,  fundings  and
payments in connection with the LIBOR Rate or LIBOR Rate Loans,  any day that is
a  Business  Day  pursuant  to CLAUSE  (A) above and that is also a day on which
trading in Dollars is carried on by and  between  banks in the London  interbank
market.

      "CAPITAL ADEQUACY REGULATION" means any guideline, request or directive of
any central  bank or other  Governmental  Authority,  or any other law,  rule or
regulation,  whether  or not having  the force of law,  in each case,  regarding
capital adequacy of any bank or of any corporation controlling a bank.

      "CAPITAL  EXPENDITURES"  means all  payments  due (whether or not paid) in
respect  of  the  cost  of any  fixed  asset  or  improvement,  or  replacement,
substitution, or addition thereto, which has a useful life of more than one year
or which in  accordance  with GAAP  would  otherwise  be  classified  as capital
expenditures,  including,  without limitation, those costs arising in connection
with the  direct  or  indirect  acquisition  of such  asset by way of  increased
product or service charges or in connection with a Capital Lease.

      "CAPITAL  LEASE"  means any lease of property by any  Borrower  which,  in
accordance  with GAAP,  should be  reflected  as a capital  lease on the balance
sheet of such Borrower.

      "CHANGE OF CONTROL" means the  occurrence of any of the following  events:
(i) other than EGS,  any Person or two or more Persons  acting in concert  shall
have acquired beneficial  ownership,  directly or indirectly,  of, or shall have
acquired by  contract or  otherwise,  or shall have  entered  into a contract or
arrangement that, upon consummation,  will result in its or their acquisition of
or control  over,  Voting Stock of the Parent (or other  securities  convertible
into such Voting Stock) representing 25% or more of the combined voting power of
all  Voting  Stock  of the  Parent,  (ii) EGS  shall  have  acquired  beneficial
ownership,  directly or  indirectly,  of, or shall have  acquired by contract or
otherwise,  or shall have  entered  into a contract or  arrangement  that,  upon
consummation,  will result in their acquisition of or control over, Voting Stock
of  the  Parent  (or  other  securities  convertible  into  such  Voting  Stock)
representing  in the aggregate 34.2% or more of the combined voting power of all
Voting  Stock of the  Parent,  (iii)  during any period of up to 24  consecutive
months,  commencing after the Closing Date,  individuals who at the beginning of
such 24  month  period  were  directors  of the  Parent  (together  with any new
director whose  election by the Parent's board of directors or whose  nomination
for  election by the  Parent's  shareholders  was approved by a vote of at least
two-thirds  of the directors  then still in office who either were  directors at
the beginning of such period or whose  election or  nomination  for election was
previously  so  approved)  cease for any reason to  constitute a majority of the
directors of the Parent then in office, or (iv) the Parent ceases to own 100% of
the Voting Stock of each of the other  Borrowers.  As used  herein,  "beneficial
ownership"  shall have the meaning  provided in Rule 13d-3 of the Securities and
Exchange Commission under the Exchange Act.

      "CLEARING BANK" means the Bank or any other banking  institution with whom
a Payment Account has been established pursuant to a Blocked Account Agreement.

      "CLOSING DATE" means the date of this Agreement.

<PAGE>

      "CLOSING FEE" has the meaning specified in SECTION 3.4.

      "CODE"  means the Internal  Revenue Code of 1986,  as amended from time to
time, and any successor statute, and regulations promulgated thereunder.

      "COLLATERAL" has the meaning specified in SECTION 6.1.

      "COMMITMENT"  means,  at any time with respect to a Lender,  the principal
amount set forth beside such Lender's name under the heading "COMMITMENT" on the
signature pages of this Agreement or on the signature page of the Assignment and
Acceptance pursuant to which such Lender became a Lender hereunder in accordance
with the  provisions of SECTION 13.2,  as such  Commitment  may be adjusted from
time  to  time  in  accordance   with  the   provisions  of  SECTION  13.2,  and
"COMMITMENTS"  means,  collectively,  the aggregate amount of the commitments of
all of the Lenders.

      "CONTAMINANT"  means any  waste,  pollutant,  hazardous  substance,  toxic
substance,  hazardous  waste,  special  waste,  petroleum  or  petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated biphenyls
("PCBs"), or any constituent of any such substance or waste.

      "CONTINUATION/CONVERSION  DATE"  means  the  date  on  which  any  Loan is
converted into or continued as a LIBOR Rate Loan.

      "CREDIT SUPPORT" has the meaning specified in SECTION 2.4(A).

      "DEBT"  means,  without  duplication,  all  liabilities,  obligations  and
indebtedness of any Borrower or any of its  Subsidiaries  to any Person,  of any
kind or nature,  now or  hereafter  owing,  arising,  due or payable,  howsoever
evidenced,  created,  incurred,  acquired or owing, whether primary,  secondary,
direct,  contingent,  fixed or  otherwise,  and  including,  without  in any way
limiting the generality of the foregoing: (a) the liabilities and obligations to
trade creditors; (b) all Obligations; (c) all obligations and liabilities of any
Person  secured by any Lien on such  Borrower's or such  Subsidiary's  property,
even though such  Borrower or such  Subsidiary  shall not have assumed or become
liable for the payment thereof; PROVIDED, HOWEVER, that all such obligations and
liabilities  which are limited in recourse to such property shall be included in
Debt only to the extent of the book value of such  property as would be shown on
a balance sheet of such Borrower or such Subsidiary  prepared in accordance with
GAAP; (d) all  obligations  or liabilities  created or arising under any Capital
Lease or  conditional  sale or other title  retention  agreement with respect to
property  used or acquired  by such  Borrower  or such  Subsidiary,  even if the
rights and remedies of the lessor,  seller or lender  thereunder  are limited to
repossession of such property;  PROVIDED, HOWEVER, that all such obligations and
liabilities  which are limited in recourse to such property shall be included in
Debt only to the extent of the book value of such  property as would be shown on
a balance sheet of such Borrower or such Subsidiary  prepared in accordance with
GAAP; and (e) all obligations and liabilities  under Guaranties of such Borrower
or such Subsidiary.

<PAGE>

      "DEBT FOR BORROWED MONEY" means,  as to any Person,  (a) Debt for borrowed
money or as evidenced by notes,  bonds,  debentures or similar  evidences of any
such Debt of such  Person,  (b) the deferred  and unpaid  purchase  price of any
property or business (other than trade accounts payable incurred in the ordinary
course of business and constituting current liabilities) and (c) all obligations
under Capital Leases.

      "DEFAULT"  means  any  event or  circumstance  which,  with the  giving of
notice,  the lapse of time, or both, would (if not cured,  waived,  or otherwise
remedied during such time) constitute an Event of Default.

      "DEFAULTING LENDER" has the meaning specified in SECTION 2.2(G)(II).

      "DEFAULT  RATE" means a fluctuating  per annum  interest rate at all times
equal to the sum of (a) the  otherwise  applicable  Interest  Rate  PLUS (b) two
percent 2%. Each Default Rate shall be adjusted  simultaneously  with any change
in the applicable Interest Rate. In addition, with respect to Letters of Credit,
the  Default  Rate shall mean an increase in the Letter of Credit Fee by two (2)
percentage points.

      "DISTRIBUTION"  means, in respect of any  corporation:  (a) the payment or
making of any dividend or other  distribution  of property in respect of capital
stock (or any  options or  warrants  for or other  rights  with  respect to such
stock) of such  corporation,  other than  distributions in capital stock (or any
options or warrants  for or other rights with respect to such stock) of the same
class;  or (b) the redemption or other  acquisition  by such  corporation of any
capital stock (or any options or warrants for such stock) of such corporation.

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

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

      "EBITDA"  means  for  any  period  with  respect  to the  Parent  and  its
Subsidiaries on a consolidated basis the sum of Net Income PLUS Interest Expense
PLUS all provisions for any Federal,  state or other domestic and foreign income
taxes PLUS depreciation,  amortization and other non-cash charges,  in each case
determined  in  accordance  with GAAP applied on a consistent  basis.  Except as
expressly  provided  otherwise,  the  applicable  period  shall  be for the four
consecutive quarters ending as of the date of determination.

      "EGS" means,  collectively,  (i) EGS Associates,  L.P., a Delaware limited
partnership,  (ii) EGS Partners,  L.L.C., a Delaware limited liability  company,
(iii) Bev Partners,  L.P., a Delaware limited partnership,  (iv) Jonas Partners,
L.P.,  a New York  limited  partnership,  (v) FK  Investments,  L.P., a Delaware
limited partnership, (vi) William Ehrman, (vii) Frederic Greenberg, (viii) Jonas
Gerstl,  (ix) Julia Oliver and (x) EGS Management,  L.L.C.,  a Delaware  limited
liability company.

      "ELIGIBLE  ACCOUNTS" means the Accounts which the Agent in the exercise of
its reasonable commercial discretion determines to be Eligible Accounts. Without

<PAGE>

limiting  the   discretion  of  the  Agent  to  establish   other   criteria  of
ineligibility,  Eligible  Accounts  shall  not,  unless  the  Agent  in its sole
discretion elects, include any Account:

      (a)  with  respect  to  which  more  than  90  days  (or,  in the  case of
non-letter-of-credit-backed  Accounts owed by Warner's and Accounts owed by Bike
Athletic, 120 days) have elapsed since the date of the original invoice therefor
or which is more than 60 days past due;

      (b)  with  respect  to  which  any  of  the  representations,  warranties,
covenants,  and agreements contained in SECTION 6.8 are not or have ceased to be
complete  and  correct in all  material  respects  or have been  breached in any
material respect;

      (c) with  respect to which  Account  (or any other  Account  due from such
Account Debtor),  in whole or in part, a check,  promissory note,  draft,  trade
acceptance  or other  instrument  for the  payment  of money has been  received,
presented for payment and returned  uncollected on one or more occasions (or two
or more occasions, PROVIDED there is not a dispute, quality control issue or any
other reason that would otherwise make such Account ineligible) for any reason;

      (d) which represents a progress billing (as hereinafter  defined) or as to
which any Borrower has extended the time for payment  without the consent of the
Agent; for the purposes hereof,  "progress  billing" means any invoice for goods
sold or leased or services  rendered  under a contract or agreement  pursuant to
which the Account Debtor's  obligation to pay such invoice is conditioned upon a
Borrower's   completion  of  any  further  performance  under  the  contract  or
agreement;

      (e) with  respect  to which any one or more of the  following  events  has
occurred to the Account Debtor on such Account: death or judicial declaration of
incompetency of an Account Debtor who is an individual; the filing by or against
the Account  Debtor of a request or petition  for  liquidation,  reorganization,
arrangement,  adjustment of debts,  adjudication as a bankrupt,  winding-up,  or
other relief  under the  bankruptcy,  insolvency,  or similar laws of the United
States,  any state or territory  thereof,  or any foreign  jurisdiction,  now or
hereafter in effect;  the making of any general assignment by the Account Debtor
for the benefit of creditors;  the  appointment of a receiver or trustee for the
Account  Debtor  or for any of the  assets  of the  Account  Debtor,  including,
without limitation, the appointment of or taking possession by a "custodian," as
defined in the  Federal  Bankruptcy  Code;  the  institution  by or against  the
Account Debtor of any other type of insolvency  proceeding (under the bankruptcy
laws of the United States or otherwise) or of any formal or informal  proceeding
for the dissolution or liquidation of, settlement of claims against,  or winding
up of affairs of, the Account Debtor; the sale,  assignment,  or transfer of all
or  substantially  all of the  assets  of the  Account  Debtor;  the  nonpayment
generally  by the  Account  Debtor  of its  debts  as they  become  due;  or the
cessation of the business of the Account Debtor as a going concern;

      (f) if fifty  percent  (50%) or more of the  aggregate  Dollar  amount  of
outstanding  Accounts  owed  at such  time  by the  Account  Debtor  thereon  is
classified as ineligible under CLAUSE (A) above;

<PAGE>

      (g) owed by an Account  Debtor  which:  (i) does not maintain an office in
the United States of America or Canada;  or (ii) is not organized under the laws
of the United States of America or Canada or any state or province  thereof;  or
(iii) is the  government of any foreign  country or sovereign  state,  or of any
state, province, municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof; except
to the extent  that such  Account is secured or payable by a letter of credit or
has credit insurance,  in each case satisfactory to the Agent in its discretion;
PROVIDED,  HOWEVER, that with respect to Accounts collected in Canada, a maximum
of $500,000 of such Accounts may be deemed Eligible Accounts in a given calendar
month, unless Blocked Account Agreements covering all of the Borrowers' Canadian
bank  accounts  used for  collection  of such  Accounts  have been  executed and
delivered to the Agent;

      (h) owed by an Account  Debtor  which is an  Affiliate  or employee of any
Borrower;

      (i) except as provided in CLAUSE (K) below,  with  respect to which either
the perfection, enforceability, or validity of the Agent's Lien in such Account,
or the  Agent's  right or ability to obtain  direct  payment to the Agent of the
proceeds of such Account, is governed by any federal,  state, or local statutory
requirements other than those of the UCC;

      (j)  owed  by an  Account  Debtor  to  which  any  Borrower  or any of its
Subsidiaries  is indebted in any way, or which is subject to any right of setoff
or recoupment by the Account Debtor,  unless the Account Debtor has entered into
an agreement  acceptable to the Agent to waive setoff rights;  or if the Account
Debtor  thereon has  disputed  liability  or made any claim with respect to such
Account or any other Account due from such Account Debtor; but in each such case
the aggregate  amount of Eligible  Accounts owed by such Account Debtor shall be
reduced only to the extent of such indebtedness, setoff, recoupment, dispute, or
claim;

      (k)  owed by the  government  of the  United  States  of  America,  or any
department, agency, public corporation, or other instrumentality thereof, unless
the Federal Assignment of Claims Act of 1940, as amended (31 U.S.C. Section 3727
ET SEQ.),  and any other steps  necessary to perfect the Agent's  Lien  therein,
have  been  complied  with to the  Agent's  satisfaction  with  respect  to such
Account;

      (l) owed by any state, municipality, or other political subdivision of the
United States of America,  or any department,  agency,  public  corporation,  or
other instrumentality thereof and as to which the Agent determines that its Lien
therein is not or cannot be perfected;

      (m) which represents a sale on a bill-and-hold,  guaranteed sale, sale and
return, sale on approval, consignment, or other repurchase or return basis;

      (n) which is  evidenced  by a promissory  note or other  instrument  or by
chattel  paper,  unless such note,  instrument or chattel paper is delivered and
assigned to the Agent in a manner acceptable to the Agent;

<PAGE>

      (o) if the Agent  believes,  in the exercise of its  reasonable  judgment,
that the prospect of  collection of such Account is impaired or that the Account
may not be paid by reason of the Account Debtor's financial inability to pay;

      (p) with  respect  to which the  Account  Debtor is  located  in any State
requiring the filing of a Notice of Business Activities Report or similar report
in order to permit any Borrower to seek  judicial  enforcement  in such State of
payment of such  Account,  unless such  Borrower has qualified to do business in
such State or has filed a Notice of  Business  Activities  Report or  equivalent
report for the then current year or could file such report upon the need to seek
judicial  enforcement  in such  State of  payment of such  Account  without  any
material penalties or loss of rights for failing to have filed such report prior
to such time;

      (q)   which arises out of a sale not made in the ordinary  course of the
Borrowers' business;

      (r) with  respect to which the goods  giving rise to such Account have not
been shipped and delivered to and accepted by the Account Debtor or the services
giving rise to such Account have not been  performed  by any  Borrower,  and, if
applicable,  accepted by the Account  Debtor,  or the Account Debtor revokes its
acceptance of such goods or services;

      (s)  owed  by an  Account  Debtor  which  is  obligated  to  any  Borrower
respecting  Accounts the aggregate  unpaid balance of which exceeds  twenty-five
percent (25%) or with respect to Fruit of the Loom,  Inc.,  thirty-five  percent
(35%), of the aggregate  unpaid balance of all Accounts owed to such Borrower at
such time by all of such Borrower's  Account Debtors,  but only to the extent of
such excess;

      (t) which arises out of an  enforceable  contract or order  which,  by its
terms, forbids,  restricts or makes void or unenforceable the granting of a Lien
by the applicable Borrower to the Agent with respect to such Account; or

      (u)  which is not  subject  to a first  priority  and  perfected  security
interest in favor of the Agent for the benefit of the Lenders.

      If any  Account at any time ceases to be an  Eligible  Account,  then such
Account shall promptly be excluded from the calculation of Eligible Accounts.

      "ELIGIBLE  ASSIGNEE"  means  (a) a  commercial  bank,  commercial  finance
company  or  other  asset  based  lender,  having  total  assets  in  excess  of
$1,000,000,000;  (b) any Lender listed on the signature page of this  Agreement;
(c) any  Affiliate  of any Lender;  and (d) if an Event of Default  exists,  any
Person.

      "ELIGIBLE   EQUIPMENT"   means   Equipment,   valued  based  upon  orderly
liquidation  value,  located in the United  States  and  subject to the  Agent's
Liens,  which are perfected as to such  Equipment,  and subject to no other Lien
whatsoever  (other than the Liens  described in CLAUSE (D) of the  definition of
Permitted Liens provided that such Permitted Liens (i) are junior in priority to
the Agent's Liens or (ii) do not impair  directly or  indirectly  the ability of
the Agent to realize on or obtain the full benefit of the Collateral).

<PAGE>

      "ELIGIBLE  FACTORED ACCOUNTS" means Eligible Accounts which are subject to
Factoring Agreements.

      "ELIGIBLE  INVENTORY" means  Inventory,  valued at the lower of cost (on a
"first-in,  first-out"  basis) or  market,  which the Agent,  in its  reasonable
discretion, determines to be Eligible Inventory. Without limiting the discretion
of the Agent to establish  other  criteria of  eligibility,  Eligible  Inventory
shall meet all of the following requirements:

      (a) such Inventory is owned by a Borrower;

      (b) such Inventory is subject to the Agent's Liens, which are perfected as
to such Inventory,  and is subject to no other Lien  whatsoever  (other than the
Liens described in CLAUSE (D) of the definition of Permitted Liens provided that
such Permitted  Liens (i) are junior in priority to the Agent's Liens or (ii) do
not impair  directly  or  indirectly  the  ability of the Agent to realize on or
obtain the full benefit of the Collateral);

      (c) such Inventory consists of finished goods or raw materials;

      (d)  such  Inventory  does  not  consist  of  work-in-process,  chemicals,
supplies, or packing and shipping materials;

      (e) such Inventory is in good condition, not unmerchantable, and meets all
standards imposed by any Governmental  Authority,  having  regulatory  authority
over such goods, their use or sale;

      (f) such  Inventory  is  currently  either  usable or  salable,  at prices
approximating  at least cost, in the normal course of the applicable  Borrower's
business,  and is not,  in the  Agent's  reasonable  discretion,  slow moving or
stale;

      (g) such  Inventory is not obsolete or returned  (unless  returned in good
and  merchantable  condition and the fair market value of such Inventory is less
than $25,000 in any single  instance and less than  $100,000 in the aggregate at
any one time) or repossessed or used goods taken in trade;

      (h) such Inventory is located within the United States of America (and not
in-transit from vendors or suppliers);

      (i) if such Inventory is located in a public warehouse, in possession of a
bailee,  in a facility leased by a Borrower or otherwise located off-site of the
Real Estate, either the warehouseman, or the bailee, or the lessor, or the owner
has  delivered  to the Agent a  subordination  agreement  in form and  substance
satisfactory  to the  Agent  or, in the case of  inventory  located  at a leased
facility, a four (4) month rent reserve has been applied to such Inventory;

      (j) if such Inventory contains or bears any Proprietary Rights licensed to
a Borrower  by any  Person,  the Agent  shall be  satisfied  that it may sell or
otherwise  dispose  of such  Inventory  in  accordance  with  ARTICLE 11 without

<PAGE>

infringing  the rights of the licensor of such  Proprietary  Rights or violating
any contract with such licensor (and without payment of any royalties other than
any  royalties  due with respect to the sale or  disposition  of such  Inventory
pursuant  to the  existing  license  agreement),  and,  if the  Agent  deems  it
necessary,  such  Borrower  shall  deliver to the Agent a consent or  sublicense
agreement from such licensor in form and substance acceptable to the Agent;

      (k) such Inventory is not consigned out or commingled with inventory owned
by a Person other than a Borrower; and

      (l) such  Inventory  is not  determined  by the  Agent  in its  reasonable
discretion, to be ineligible for any other reason.

      If any  Inventory  at any  time  ceases  to be  Eligible  Inventory,  such
Inventory shall promptly be excluded from the calculation of Eligible Inventory.

      "ELIGIBLE  REAL  ESTATE"  means  Real  Estate,  valued  as  determined  by
appraisal  reports in form and substance  satisfactory to the Agent,  located in
the United  States and subject to the Agent's  Liens,  which are perfected as to
such Real Estate,  and subject to no other Lien whatsoever (other than the Liens
described  in CLAUSES  (D), (E) and (K) of the  definition  of  Permitted  Liens
provided  that such  Permitted  Liens (i) are junior in  priority to the Agent's
Liens or (ii) do not impair  directly or indirectly  the ability of the Agent to
realize on or obtain the full benefit of the Collateral).

      "ENVIRONMENTAL   CLAIMS"  means  all  claims,  however  asserted,  by  any
Governmental   Authority  or  other  Person  alleging  potential   liability  or
responsibility  for  violation  of any  Environmental  Law,  or for a Release or
injury to the environment.

      "ENVIRONMENTAL  COMPLIANCE  RESERVE"  means any  reserve  which the Agent,
after the Closing Date,  establishes in its reasonable  discretion  from time to
time for amounts  that are  reasonably  likely to be expended by any Borrower in
order for such Borrower and its  operations  and property (a) to comply with any
notice from a Governmental  Authority  asserting  material  non-compliance  with
Environmental  Laws,  or  (b)  to  correct  any  such  material   non-compliance
identified  in a report  delivered  to the Agent  and the  Lenders  pursuant  to
SECTION 9.7.

      "ENVIRONMENTAL  LAWS" means all  federal,  state or local laws,  statutes,
common law duties, rules,  regulations,  ordinances and codes, together with all
administrative orders, directed duties, licenses, authorizations and permits of,
and  agreements  with,  any  Governmental  Authority,  in each case  relating to
environmental, health, safety and land use matters.

      "ENVIRONMENTAL  LIEN" means a Lien in favor of any Governmental  Authority
for (a) any liability under  Environmental Laws, or (b) damages arising from, or
costs  incurred by such  Governmental  Authority  in  response  to, a Release or
threatened Release of a Contaminant into the environment.

      "EQUIPMENT"  means all of the Borrowers' now owned and hereafter  acquired
machinery,  equipment,  furniture,  furnishings,  fixtures,  and other  tangible
personal property (except  Inventory),  including motor vehicles with respect to

<PAGE>

which a certificate of title has been issued,  aircraft,  dies, tools, jigs, and
office  equipment,  as well as all of  such  types  of  property  leased  by any
Borrower and all of the  Borrowers'  rights and interests  with respect  thereto
under such leases (including, without limitation, options to purchase); together
with all present  and future  additions  and  accessions  thereto,  replacements
therefor,  component  and  auxiliary  parts and  supplies  used or to be used in
connection  therewith,  and all  substitutes  for any of the foregoing,  and all
manuals,  drawings,  instructions,  warranties and rights with respect  thereto;
wherever any of the foregoing is located.

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

      "ERISA   AFFILIATE"   means  any  trade  or   business   (whether  or  not
incorporated) under common control with the Parent within the meaning of Section
414(b) or (c) of the Code (and Sections  414(m) and (o) of the Code for purposes
of provisions relating to Section 412 of the Code).

      "ERISA EVENT" means (a) a Reportable Event with respect to a Pension Plan,
(b) a  withdrawal  by the  Borrower or any ERISA  Affiliate  from a Pension Plan
subject  to  Section  4063  of  ERISA  during  a plan  year  in  which  it was a
substantial  employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations  which is treated as such a withdrawal  under  Section  4062(e) of
ERISA, (c) a complete or partial withdrawal by the Parent or any ERISA Affiliate
from a  Multi-employer  Plan or notification  that a  Multi-employer  Plan is in
reorganization, (d) the filing of a notice of intent to terminate, the treatment
of a Plan  amendment as a termination  under Section 4041 or 4041A of ERISA,  or
the  commencement  of  proceedings  by the PBGC to  terminate a Pension  Plan or
Multi-employer  Plan,  (e) the  occurrence of an event or condition  which might
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer,  any Pension Plan
or  Multi-employer  Plan, or (f) the imposition of any material  liability under
Title IV of ERISA,  other than for PBGC  premiums due but not  delinquent  under
Section 4007 of ERISA, upon the Parent or any ERISA Affiliate.

      "EVENT OF DEFAULT" has the meaning specified in SECTION 11.1.

      "EXCHANGE ACT" means the Securities  Exchange Act of 1934, and regulations
promulgated thereunder.

      "EXISTING  LETTERS OF  CREDIT"  means any  letter of credit  described  on
SCHEDULE 2.3.

      "FACTOR"  means  such term as  defined  in the  definition  of  "FACTORING
AGREEMENT" set forth in this Section 1.1.

      "FACTORING  AGREEMENT"  means each  agreement  between a Borrower and HSBC
Business Credit (USA) Inc. ("HSBC"),  formerly known as Republic Business Credit
Corporation,  or any other Person (each of HSBC and each such other  Person,  in
such capacity,  a "FACTOR")  providing for credit,  collection  and  application
services to be performed by a Factor with respect to accounts receivable of such

<PAGE>

Borrower or any of its Subsidiaries, as applicable, and/or for the purchase by a
Factor,  subject  to  the  terms  thereof,  of  some  or all  of  such  accounts
receivable,  and which may grant to a Factor a security interest in the factored
accounts receivable of such Borrower or any of its Subsidiaries, as applicable.

      "FDIC"  means  the  Federal  Deposit   Insurance   Corporation,   and  any
Governmental Authority succeeding to any of its principal functions.

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

      "FEDERAL  RESERVE  BOARD"  means the  Board of  Governors  of the  Federal
Reserve System or any successor thereto.

      "FINANCIAL  STATEMENTS"  means,  according  to the  context in which it is
used, the financial statements referred to in SECTION 8.6 or any other financial
statements required to be given to the Lenders pursuant to this Agreement.

      "FISCAL  YEAR" means a  Borrower's  fiscal year for  financial  accounting
purposes.  The current  Fiscal Year of each  Borrower  will end on December  31,
2000.

      "FIXED ASSETS" means the Equipment and Real Estate of the Borrowers.

      "FUNDED  DEBT"  means as of any date with  respect  to the  Parent and its
Subsidiaries on a consolidated basis, without duplication, all Debt For Borrowed
Money and all Guaranties of Debt For Borrowed Money.

      "FUNDING DATE" means the date on which a Borrowing occurs.

      "GAAP" means generally  accepted  accounting  principles and practices set
forth in the opinions and pronouncements of the Accounting  Principles Board and
the American  Institute of  Certified  Public  Accountants  and  statements  and
pronouncements  of the Financial  Accounting  Standards  Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession),  which are applicable to the  circumstances as of the Closing Date.
Any change in GAAP  following  the Closing Date must be acceptable to the Parent
and the Required Lenders.

      "GENERAL  INTANGIBLES"  means all of the Borrowers' now owned or hereafter
acquired  general  intangibles,  choses in action  and  causes of action and all
other  intangible  personal  property  of any  Borrower of every kind and nature

<PAGE>

(other than  Accounts),  including,  without  limitation,  all contract  rights,
Proprietary Rights,  corporate or other business records,  inventions,  designs,
blueprints,  plans,  specifications,  patents, patent applications,  trademarks,
service  marks,  trade names,  trade  secrets,  goodwill,  copyrights,  computer
software,  customer  lists,  registrations,  licenses,  franchises,  tax  refund
claims,  any funds which may become due to any Borrower in  connection  with the
termination of any Plan or other employee benefit plan or any rights thereto and
any  other  amounts  payable  to any  Borrower  from any Plan or other  employee
benefit  plan,  rights and  claims  against  carriers  and  shippers,  rights to
indemnification, business interruption insurance and proceeds thereof, property,
casualty or any similar type of insurance and any proceeds thereof,  proceeds of
insurance  covering  the  lives  of key  employees  on  which  any  Borrower  is
beneficiary,  and any letter of credit,  guarantee,  claim, security interest or
other security held by or granted to any Borrower.

      "GOVERNMENTAL  AUTHORITY"  means any  nation or  government,  any state or
other political  subdivision  thereof,  any central bank (or similar monetary or
regulatory  authority) thereof,  any entity exercising  executive,  legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any  corporation  or other  entity  owned or  controlled,  through  stock or
capital ownership or otherwise, by any of the foregoing.

      "GUARANTY"  means,  with respect to any Person,  all  obligations  of such
Person which in any manner  directly or  indirectly  guarantee or assure,  or in
effect  guarantee or assure,  the payment or  performance  of any  indebtedness,
dividend  or  other   obligations   of  any  other   Person   (the   "guaranteed
obligations"),  or assure  or in  effect  assure  the  holder of the  guaranteed
obligations  against loss in respect  thereof,  including  any such  obligations
incurred  through an agreement,  contingent  or  otherwise:  (a) to purchase the
guaranteed  obligations or any property constituting  security therefor;  (b) to
advance  or  supply  funds  for  the  purchase  or  payment  of  the  guaranteed
obligations or to maintain a working  capital or other balance sheet  condition;
or (c) to lease  property or to purchase any debt or equity  securities or other
property or services.

      "HEDGE AGREEMENT" means any and all transactions,  agreements or documents
now existing or hereafter  entered into,  which  provides for an interest  rate,
credit,  commodity or equity swap, cap, floor, collar,  forward foreign exchange
transaction,  currency swap, cross currency rate swap,  currency option,  or any
combination  of, or option with respect to, these or similar  transactions,  for
the purpose of hedging the Borrower's  exposure to  fluctuations  in interest or
exchange  rates,  loan,  credit  exchange,  security or currency  valuations  or
commodity prices.

      "INTERCOMPANY ACCOUNTS" means all assets and liabilities, however arising,
which are due to any Borrower from, which are due from any Borrower to, or which
otherwise  arise from any  transaction by any Borrower with, any Borrower or any
Subsidiary or other Affiliate of a Borrower.

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

<PAGE>

      "INTEREST  PERIOD" means, as to any LIBOR Rate Loan, the period commencing
on the Funding Date of such Loan or on the Continuation/Conversion Date on which
any Loan is converted  into or continued as a LIBOR Rate Loan, and ending on the
date one, two,  three,  four,  five or six months  thereafter as selected by the
applicable  Borrower in its Notice of Borrowing,  in the form attached hereto as
EXHIBIT D, or Notice of Continuation/Conversion,  in the form attached hereto as
EXHIBIT E provided that:

      (a) if any  Interest  Period  would  otherwise  end on a day that is not a
Business Day, that Interest  Period shall be extended to the following  Business
Day unless the result of such extension  would be to carry such Interest  Period
into another  calendar  month,  in which event such Interest Period shall end on
the preceding Business Day;

      (b) any Interest Period pertaining to a LIBOR Rate Loan that begins on the
last  Business  Day of a  calendar  month  (or on a day for  which  there  is no
numerically  corresponding day in the calendar month at the end of such Interest
Period) shall end on the last  Business Day of the calendar  month at the end of
such Interest Period; and

      (c) no Interest Period shall extend beyond the Stated Termination Date.

      "INTEREST  RATE" means each or any of the interest  rates,  including  the
Default Rate, set forth in SECTION 3.1.

      "INVENTORY"  means all of the Borrowers' now owned and hereafter  acquired
inventory,  goods and merchandise,  wherever located,  to be furnished under any
contract  of  service  or held  for  sale or  lease,  all  returned  goods,  raw
materials, other materials and supplies of any kind, nature or description which
are used or consumed in the Borrowers'  business or used in connection  with the
packing,  shipping,   advertising,   selling  or  finishing  of  such  goods  or
merchandise, and all documents of title or other documents representing them.

      "INVESTMENT  PROPERTY"  means  all  of the  Borrowers'  right,  title  and
interest  in and  to  any  and  all:  (a)  securities  whether  certificated  or
uncertificated;  (b)  securities  entitlements;  (c)  securities  accounts;  (d)
commodity contracts; or (e) commodity accounts.

      "IRB  FINANCING"  means the financing for $8,100,000  aggregate  principal
amount of Revenue  Bonds  (NFA  Corp.  Project),  Series  1992-A,  issued by The
Industrial  Development Board of the City of Columbiana,  Alabama (the "Issuer")
pursuant to that certain Trust Indenture dated June 1, 1992, as amended, between
the Issuer and AmSouth Bank N.A., as Trustee.

      "IRS" means the Internal  Revenue Service and any  Governmental  Authority
succeeding to any of its principal functions under the Code.

      "LATEST  PROJECTIONS"  means: (a) on the Closing Date and thereafter until
the Agent receives new projections  pursuant to SECTION 7.2(F),  the projections
of the Borrower's  financial condition,  results of operations,  and cash flows,
for the period commencing on January 1, 2000 and ending on December 31, 2000 and
delivered  to the Agent  prior to the  Closing  Date;  and (b)  thereafter,  the
projections most recently received by the Agent pursuant to SECTION 7.2(F).

<PAGE>

      "LENDER" and  "LENDERS"  have the meanings  specified in the  introductory
paragraph  hereof and shall include the Agent to the extent of any Agent Advance
outstanding  and the Bank to the  extent of any  Non-Ratable  Loan  outstanding;
PROVIDED  that no such  Agent  Advance or  Non-Ratable  Loan shall be taken into
account in determining any Lender's Pro Rata Share.

      "LETTER OF CREDIT" has the meaning specified in SECTION 2.4(A).

      "LETTER OF CREDIT FEE" has the meaning specified in SECTION 3.6.

      "LETTER OF CREDIT ISSUER" means the Bank (or, to the extent  designated by
the Bank,  any  affiliate  of the Bank) or, if  requested  by any  Borrower  and
consented  to by the Agent,  any other  financial  institution  that  issues any
Letter of Credit pursuant to this Agreement, as applicable.

      "LEVERAGE  RATIO"  means,  as of the last day of any fiscal  quarter,  the
ratio of (i) Funded  Debt as of such date to (ii)  EBITDA for the period of four
consecutive fiscal quarters then ended.

      "LIBOR RATE" means,  for any Interest  Period,  with respect to LIBOR Rate
Loans,  the rate of interest  per annum  determined  pursuant  to the  following
formula:

            LIBOR Rate  =            OFFSHORE BASE RATE
                           --------------------------------------
                            1.00 - Eurodollar Reserve Percentage

            Where,

            "OFFSHORE BASE RATE" means the rate per annum  appearing on Telerate
      Page 3750 (or any successor page) as the London interbank offered rate for
      deposits in Dollars at approximately 11:00 a.m. (London time) two Business
      Days prior to the first day of such Interest  Period for a term comparable
      to such Interest Period. If for any reason such rate is not available, the
      Offshore Base Rate shall be, for any Interest  Period,  the rate per annum
      appearing on Reuters Screen LIBO Page as the London interbank offered rate
      for  deposits in Dollars at  approximately  11:00 a.m.  (London  time) two
      Business  Days prior to the first day of such  Interest  Period for a term
      comparable to such Interest Period;  PROVIDED,  HOWEVER,  if more than one
      rate is specified on Reuters Screen LIBO Page,  the applicable  rate shall
      be the  arithmetic  mean of all such rates.  If for any reason none of the
      foregoing  rates is  available,  the Offshore  Base Rate shall be, for any
      Interest Period, the rate per annum determined by the Agent as the rate of
      interest at which dollar deposits in the  approximate  amount of the LIBOR
      Rate Loan comprising part of such Borrowing would be offered by the Bank's
      London  Branch  to major  banks in the  offshore  dollar  market  at their
      request at or about 11:00 a.m.  (London  time) two Business  Days prior to
      the  first  day of such  Interest  Period  for a term  comparable  to such
      Interest Period.

            "EURODOLLAR  RESERVE  PERCENTAGE"  means,  for  any day  during  any
      Interest Period, the reserve percentage  (expressed as a decimal,  rounded
      upward to the next  1/100th  of 1%) in effect  on such day  applicable  to
      member  banks  under  regulations  issued from time to time by the Federal
      Reserve Board for determining the maximum reserve  requirement  (including
      any emergency,  supplemental or other marginal reserve  requirement)  with
      respect to Eurocurrency  funding  (currently  referred to as "Eurocurrency

<PAGE>

      liabilities").  The LIBOR Rate for each outstanding  LIBOR Rate Loan shall
      be adjusted  automatically  as of the effective  date of any change in the
      Eurodollar Reserve Percentage.

      "LIBOR RATE LOANS" means, collectively,  the LIBOR Revolving Loans and the
LIBOR Term Loans.

      "LIBOR  REVOLVING  LOAN" means a Revolving Loan during any period in which
it bears interest based on the LIBOR Rate.

      "LIBOR  TERM LOAN"  means any  portion of a Term Loan during any period in
which such portion bears interest based on the LIBOR Rate.

      "LIEN" means: (a) any interest in property securing an obligation owed to,
or a claim by, a Person  other  than the  owner of the  property,  whether  such
interest is based on the common  law,  statute,  or  contract,  and  including a
security  interest,  charge,  claim,  or lien arising  from a mortgage,  deed of
trust,  encumbrance,  pledge,  hypothecation,  assignment,  deposit arrangement,
agreement,  security  agreement,  conditional  sale or trust receipt or a lease,
consignment  or bailment for security  purposes;  (b) to the extent not included
under  CLAUSE  (A),  any   reservation,   exception,   encroachment,   easement,
right-of-way,  covenant, condition,  restriction, lease or other title exception
or encumbrance affecting property;  and (c) any contingent or other agreement to
provide any of the foregoing.

      "LOAN  ACCOUNT"  means the loan account of the  Borrowers,  which  account
shall be (i) in the name of the Parent for the benefit of each of the  Borrowers
hereunder and (ii) maintained by the Agent.

      "LOAN DOCUMENTS" means this Agreement, the Term Loan Notes, the Mortgages,
the Pledge  Agreements,  the  Assignments  of  Factoring  Proceeds,  the Blocked
Account Agreement, the Agent's Fee Letter and any other agreements, instruments,
and documents heretofore, now or hereafter evidencing, securing, guaranteeing or
otherwise  relating to the Obligations,  the Collateral,  or any other aspect of
the transactions contemplated by this Agreement.

      "LOANS"  means,  collectively,  all loans  and  advances  provided  for in
ARTICLE 2.

      "MARGIN  STOCK" means "margin stock" as such term is defined in Regulation
T, U or X of the Federal Reserve Board.

      "MATERIAL  ADVERSE  EFFECT" means (a) a material  adverse  change in, or a
material adverse effect upon, the operations,  business,  properties,  condition
(financial or otherwise) or prospects of the Borrowers, taken as a whole, or the
Collateral;  (b) a material impairment of the ability of the Borrowers, taken as
a whole,  to perform  under any Loan Document and to avoid any Event of Default;
or (c) a material adverse effect upon the legality,  validity, binding effect or
enforceability against any Borrower of any Loan Document to which it is a party.

      "MAXIMUM REVOLVER AMOUNT" means $40,000,000 (as such amount may be reduced
in accordance with Section 4.1(b).

<PAGE>

      "MORTGAGES"  means and  includes  any and all of the  mortgages,  deeds of
trust,  deeds to secure debt,  assignments  and other  instruments  executed and
delivered by any Borrower to or for the benefit of the Agent by which the Agent,
on  behalf  of the  Lenders,  acquires  a Lien on Real  Estate  or a  collateral
assignment  of such  Borrower's  interest  under leases of Real Estate,  and all
amendments, modifications and supplements thereto.

      "MULTI-EMPLOYER  PLAN" means a "multi-employer plan" as defined in Section
4001(a)(3)  of ERISA which is or was at any time during the current  year or the
immediately  preceding six (6) years  contributed  to by the Parent or any ERISA
Affiliate.

      "NET AMOUNT OF ELIGIBLE  FACTORED  ACCOUNTS" means, at any time, the gross
amount of all amounts  owing to any  Borrower  at such time under all  Factoring
Agreements  for which  the  Agent has  received  a  satisfactory  Assignment  of
Factoring  Proceeds  (net of any amounts  (i) which the Factors are  entitled to
offset against amounts owing to any Borrower under such Factoring Agreements and
(ii) owing by Account Debtors located outside of the United States (except, with
respect to this  clause  (ii),  to the  extent  that (a)  payment  for the goods
shipped  is  secured  by an  irrevocable  letter of credit in a form and from an
institution  reasonably  acceptable to the Agent or (b) a Factor has assumed the
credit risk of the related  Accounts)) less sales,  excise or similar taxes, and
less returns,  discounts,  claims,  credits and  allowances of any nature at any
time issued, owing, granted, outstanding, available or claimed.

      "NET AMOUNT OF ELIGIBLE  NON-FACTORED  ACCOUNTS"  means,  at any time, the
gross amount of Eligible Accounts (other than Eligible  Factored  Accounts) less
sales, excise or similar taxes, and less returns, discounts, claims, credits and
allowances  of any  nature  at any time  issued,  owing,  granted,  outstanding,
available or claimed.

      "NET  INCOME"  means for any  period the net  income  with  respect to the
Parent and its Subsidiaries on a consolidated  basis as determined in accordance
with GAAP applied on a consistent  basis, but excluding any gains or losses from
sales  of Real  Estate,  Equipment  and  other  capital  assets  and  any  other
extraordinary  gains or losses and any taxes on such excluded  gains and any tax
deductions  or  credits  on  account  of any  such  excluded  gains  and any tax
deductions  or  credits  on  account  of any such  excluded  losses.  Except  as
expressly  provided  otherwise,  the  applicable  period  shall  be for the four
consecutive quarters ending as of the date of determination.

      "NON-RATABLE LOAN" and "NON-RATABLE  LOANS" have the meanings specified in
SECTION 2.2(H).

      "NOTICE OF BORROWING" has the meaning specified in SECTION 2.2(B).

      "NOTICE OF  CONTINUATION/CONVERSION"  has the meaning specified in SECTION
3.2(B).

      "OBLIGATIONS" means all present and future loans,  advances,  liabilities,
obligations,  covenants,  duties,  and debts owing by any  Borrower to the Agent
and/or any Lender,  arising  under or pursuant to this  Agreement  or any of the
other Loan Documents,  whether or not evidenced by any note, or other instrument

<PAGE>

or document, whether arising from an extension of credit, opening of a letter of
credit, acceptance, loan, guaranty, indemnification or otherwise, whether direct
or indirect, absolute or contingent, due or to become due, primary or secondary,
as principal or  guarantor,  and  including all  principal,  interest,  charges,
expenses,  fees,  attorneys' fees,  filing fees and any other sums chargeable to
any Borrower  hereunder or under any of the other Loan Documents.  "Obligations"
includes, without limitation, (a) all debts, liabilities, and obligations now or
hereafter  arising from or in connection  with the Letters of Credit and (b) all
debts,  liabilities  and  obligations  now  or  hereafter  arising  from  or  in
connection with Bank Products.

      "OTHER  TAXES" means any present or future stamp or  documentary  taxes or
any other excise or property  taxes,  charges or similar levies which arise from
any payment made hereunder or from the execution,  delivery or registration  of,
or otherwise with respect to, this Agreement or any other Loan Documents.

      "PARENT" has the meaning specified in the introductory paragraph hereof.

      "PARTICIPANT"  means any Person who shall have been  granted  the right by
any Lender to  participate  in the financing  provided by such Lender under this
Agreement, and who shall have entered into a participation agreement in form and
substance satisfactory to such Lender.

      "PAYMENT ACCOUNT" means each bank account established  pursuant to SECTION
6.9, to which the proceeds of Accounts  and other  Collateral  are  deposited or
credited, and which is maintained in the name of the Agent or the Parent, as the
Agent may determine, on terms acceptable to the Agent.

      "PBGC" means the Pension Benefit Guaranty  Corporation or any Governmental
Authority succeeding to the functions thereof.

      "PENDING  REVOLVING  LOANS" means,  at any time,  the aggregate  principal
amount of all Revolving Loans  requested in any Notice of Borrowing  received by
the Agent which have not yet been advanced.

      "PENSION  PLAN" means a pension plan (as defined in Section 3(2) of ERISA)
subject to Title IV of ERISA which any Borrower sponsors, maintains, or to which
it makes, is making, or is obligated to make contributions,  or in the case of a
Multi-employer  Plan has made  contributions  at any time during the immediately
preceding five (5) plan years.

      "PERMITTED LIENS" means:

      (a)  Liens for taxes not  delinquent  or  statutory  Liens for taxes in an
amount not to exceed $250,000  provided that the payment of such taxes which are
due and payable is being contested in good faith and by appropriate  proceedings
diligently  pursued and as to which adequate  reserves  determined in accordance
with GAAP have been  established on the applicable  Borrower's books and records
and a stay of enforcement of any such Lien is in effect (or the property subject
to any such Lien is otherwise  not yet subject to  foreclosure,  sale or loss on
account thereof);

<PAGE>

      (b) the Agent's Liens;

      (c) Liens  consisting of deposits made in the ordinary  course of business
in  connection  with,  or to  secure  payment  of,  obligations  under  worker's
compensation, unemployment insurance, social security and other similar laws, or
to secure the  performance  of bids,  tenders or  contracts  (other than for the
repayment  of  borrowed  money) or to  secure  indemnity,  performance  or other
similar bonds for the performance of bids,  tenders or contracts (other than for
the repayment of borrowed money) or to secure statutory  obligations (other than
liens arising under ERISA or Environmental  Liens) or surety or appeal bonds, or
to secure indemnity, performance or other similar bonds;

      (d) Liens  securing  the  claims or  demands  of  materialmen,  mechanics,
carriers,  warehousemen,  landlords and other like Persons, PROVIDED that if any
such Lien arises  from the  nonpayment  of such claims or demand when due,  such
claims or demands do not exceed $250,000 in the aggregate;

      (e)  Liens  constituting  encumbrances  in  the  nature  of  reservations,
exceptions, encroachments,  easements, rights of way, covenants running with the
land,  and other similar title  exceptions  or  encumbrances  affecting any Real
Estate;  PROVIDED that they do not in the aggregate  materially detract from the
value of the Real Estate or  materially  interfere  with its use in the ordinary
conduct of the applicable Borrower's business;

      (f) Liens arising from judgments and  attachments in connection with court
proceedings  provided that the attachment or enforcement of such Liens would not
result in an Event of Default  hereunder  and such Liens are being  contested in
good faith by appropriate proceedings,  adequate reserves have been set aside in
accordance  with GAAP and no material  property is subject to a material risk of
loss or forfeiture  and the claims in respect of such Liens are fully covered by
insurance  (subject  to  ordinary  and  customary  deductibles)  and a  stay  of
execution pending appeal or proceeding for review is in effect;

      (g) Liens existing as of the Closing Date under the IRB Financing;

      (h)  Liens  on  property  of  any  Person  securing  purchase  money  Debt
(including  Capital Leases) of such Person to the extent permitted under Section
9.13(e), provided that any such Lien attaches only to the property financing and
such  Lien  attaches  thereto  concurrently  with or  within  90 days  after the
acquisition thereof;

      (i) Liens  granted  pursuant  to a  Factoring  Agreement,  but only if the
proceeds  payable  under such  Factoring  Agreement  are  subject to the Agent's
Liens;

      (j) Liens existing on the Closing Date and set forth on SCHEDULE 8.11; and

      (k) leases or subleases  granted to others not interfering in any material
respect with the business of any Borrower, PROVIDED such lease or sublease shall
(i) be expressly  subject and  subordinate  to this  Agreement,  (ii) be at fair
market rental value of such property, (iii) be short-term, but in no event shall
such  lease or  sublease  extend  beyond the term of this  Agreement  and (v) be
otherwise acceptable to the Agent.

<PAGE>

      "PERMITTED RENTALS" has the meaning specified in SECTION 9.24.

      "PERSON" means any individual, sole proprietorship,  partnership,  limited
liability   company,   joint  venture,   trust,   unincorporated   organization,
association, corporation, Governmental Authority, or any other entity.

      "PLAN"  means an  employee  benefit  plan (as  defined in Section  3(3) of
ERISA) which any Borrower  sponsors or maintains or to which any Borrower makes,
is making, or is obligated to make contributions and includes any Pension Plan.

      "PLEDGE  AGREEMENTS"  means those Pledge  Agreements  dated as of the date
hereof given by the Parent or certain or its Subsidiaries to the Agent to secure
the Obligations, as amended and modified from time to time.

      "PRO RATA SHARE" means, with respect to a Lender, a fraction (expressed as
a percentage),  the numerator of which is the amount of such Lender's Commitment
and the  denominator  of which is the sum of the amounts of all of the  Lenders'
Commitments,  or if no Commitments are outstanding,  a fraction  (expressed as a
percentage),  the numerator of which is the amount of  Obligations  owed to such
Lender and the  denominator of which is the aggregate  amount of the Obligations
owed to the Lenders,  in each case giving effect to a Lender's  participation in
Non-Ratable Loans and Agent Advances.

      "PROPRIETARY  RIGHTS" means all of the  Borrowers' now owned and hereafter
arising or acquired:  licenses,  franchises,  permits,  patents,  patent rights,
copyrights,  works  which  are the  subject  matter of  copyrights,  trademarks,
service marks,  trade names,  trade styles,  patent,  trademark and service mark
applications,  and all  licenses  and rights  related  to any of the  foregoing,
including those patents,  trademarks,  service marks, trade names and copyrights
set  forth on  SCHEDULE  8.13  hereto,  and all  other  rights  under any of the
foregoing, all extensions,  renewals, reissues,  divisions,  continuations,  and
continuations-in-part  of any of the foregoing,  and all rights to sue for past,
present and future infringement of any of the foregoing.

      "REAL ESTATE" means all of the Borrowers' now or hereafter owned or leased
estates in real property,  including,  without limitation,  all fees, leaseholds
and future interests, together with all of the Borrowers' now or hereafter owned
or leased interests in the improvements  thereon,  the fixtures attached thereto
and the easements appurtenant thereto.

      "RELEASE" means a release, spill, emission,  leaking, pumping,  injection,
deposit, disposal, discharge,  dispersal, leaching or migration of a Contaminant
into the  indoor or  outdoor  environment  or into or out of any Real  Estate or
other property,  including the movement of  Contaminants  through or in the air,
soil, surface water, groundwater or Real Estate or other property.

      "RENTALS" has the meaning specified in SECTION 9.24.

      "REPORTABLE  EVENT" means,  any of the events set forth in Section 4043(b)
of ERISA or the regulations thereunder,  other than any such event for which the
30-day notice  requirement under ERISA has been waived in regulations  issued by
the PBGC.

<PAGE>

      "REQUIRED  LENDERS" means at any date of  determination  Lenders whose Pro
Rata Shares  aggregate more than 66.66% as such  percentage is determined  under
the definition of Pro Rata Share set forth herein;  PROVIDED,  HOWEVER,  that at
any time there are only two Lenders party to this Agreement,  "Required Lenders"
shall mean both of such Lenders.

      "REQUIREMENT  OF LAW"  means,  as to any  Person,  any law  (statutory  or
common),  treaty,  rule or regulation or  determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.

      "RESPONSIBLE  OFFICER" means the chief executive  officer or the president
of the applicable  Borrower,  or any other officer having substantially the same
authority  and  responsibility;  or, with respect to compliance  with  financial
covenants and the  preparation of the Borrowing Base  Certificate  and Financial
Statements,  the chief  financial  officer or the  treasurer  of the  applicable
Borrower,  or any other  officer  having  substantially  the same  authority and
responsibility.

      "RESTRICTED  INVESTMENT"  means,  as to any Borrower,  any  acquisition of
property by such Borrower in exchange for cash or other property, whether in the
form of an acquisition of stock, debt, or other  indebtedness or obligation,  or
the purchase or acquisition of any other property,  or a loan, advance,  capital
contribution,  or  subscription,  except  the  following:  (a)  acquisitions  of
Equipment to be used in the business of such Borrower so long as the acquisition
costs  thereof  constitute  Capital  Expenditures   permitted   hereunder;   (b)
acquisitions  of Inventory in the ordinary  course of business of such Borrower;
(c)  acquisitions  of current assets acquired in the ordinary course of business
of such Borrower; (d) direct obligations of the United States of America, or any
agency  thereof,  or  obligations  guaranteed  by the United  States of America,
PROVIDED  that  such  obligations  mature  within  one  year  from  the  date of
acquisition thereof; (e) acquisitions of certificates of deposit maturing within
one year from the date of  acquisition,  bankers'  acceptances,  Eurodollar bank
deposits,  or overnight  bank  deposits,  in each case issued by, created by, or
with a bank or trust  company  organized  under the laws of the United States of
America or any state thereof  having  capital and surplus  aggregating  at least
$100,000,000;  (f) repurchase obligations with a term of not more than seven (7)
days for  underlying  securities  of the types  described in clauses (d) and (e)
above entered into with any  financial  institution  meeting the  qualifications
specified in clause (e) above;  (g)  acquisitions  of  commercial  paper given a
rating of "A2" or better by Standard & Poor's  Corporation  or "P2" or better by
Moody's Investors Service, Inc. and maturing not more than 90 days from the date
of creation thereof;  (h) money market funds at least 95% of the assets of which
constitute cash in Dollars or of types described in clauses (d) - (g) above; (i)
Hedge Agreements;  (j) loans or capital contributions to or other investments in
a Borrower;  (k) advances to employees  with respect to salary,  bonus,  travel,
relocation and similar matters in an aggregate  amount not to exceed $500,000 at
any one time outstanding during the term of this Agreement;  and (l) investments
existing as of the Closing Date and set forth on SCHEDULE 9.10.

      "REVOLVING  LOANS" has the meaning  specified  in SECTION 2.2 and includes
each Agent Advance and Non-Ratable Loan.

<PAGE>

      "SENIOR  NOTE" means any of the 95/8%  Senior Notes due 2007 issued by the
Parent in favor of the Senior Noteholders pursuant to the Senior Note Indenture,
as such Senior Notes may be amended,  modified,  restated or supplemented and in
effect from time to time.

      "SENIOR NOTE INDENTURE" means that certain  Indenture dated as of December
1, 1997 among the Parent,  the other  Borrowers  and IBJ  Schroder  Bank & Trust
Company, in its capacity as trustee for the Senior Noteholders,  as the same may
be amended, modified, restated or supplemented and in effect from time to time.

      "SENIOR  NOTEHOLDER" means any one of the holders from time to time of the
Senior Notes.

      "SETTLEMENT" AND "SETTLEMENT DATE" have the meanings  specified in SECTION
2.2(J)(I).

      "SOLVENT"  means when used with  respect to any Person that at the time of
determination:

      (a) the assets of such Person,  at a fair valuation,  are in excess of the
total amount of its debts (including contingent liabilities); and

      (b) the  present  fair  saleable  value of its assets is greater  than its
probable  liability  on its  existing  debts as such debts  become  absolute and
matured; and

      (c) it is then able and  expects  to be able to pay its  debts  (including
contingent debts and other commitments) as they mature; and

      (d) it has capital sufficient to carry on its business as conducted and as
proposed to be conducted.

      For purposes of determining whether a Person is Solvent, the amount of any
contingent  liability  shall be computed as the amount that, in light of all the
facts and  circumstances  existing at such time,  represents the amount that can
reasonably be expected to become an actual or matured liability.

      "STATED TERMINATION DATE" means July 25, 2005.

      "SUBSIDIARY" of a Person means any corporation,  association, partnership,
limited liability company,  joint venture or other business entity of which more
than fifty percent  (50%) of the voting stock or other equity  interests (in the
case of Persons other than  corporations),  is owned or  controlled  directly or
indirectly by such Person, or one or more of the Subsidiaries of such Person, or
a combination thereof. Unless the context otherwise clearly requires, references
herein to a "Subsidiary" refer to a Subsidiary of the Parent.

      "TAXES"  means any and all  present  or  future  taxes,  levies,  imposts,
deductions,  charges or withholdings,  and all liabilities with respect thereto,
excluding,  in the case of each  Lender  and the Agent,  such  taxes  (including
income taxes or franchise taxes) as are imposed on or measured by the Agent's or
such  Lender's,  as the case may be,  net  income in any  jurisdiction  (whether
federal,  state or local and including any political  subdivision thereof) under
the laws of which such Lender or the Agent,  as the case may be, is organized or
maintains a lending office.

<PAGE>

      "TERM  LOAN" and "TERM  LOANS"  have the  meanings  specified  in  SECTION
2.3(A).

      "TERM LOAN AMOUNT" means the least of (i) $7,500,000,  (ii) the sum of (a)
fifty percent (50%) of Eligible  Equipment  PLUS (b) thirty percent (30%) of the
value of Eligible Real Estate and (iii) such  aggregate  amount as the Borrowers
may request to be funded as Term Loans.

      "TERM LOAN SECOND  FUNDING  DATE" has the meaning  specified in SECTION
2.3(A).

      "TERM LOAN NOTE" and "TERM LOAN  NOTES"  have the  meanings  specified  in
SECTION 2.3(C).

      "TERMINATION  DATE"  means  the  earliest  to  occur  of  (i)  the  Stated
Termination  Date, (ii) the date the Total Facility is terminated  either by the
Parent  pursuant to SECTION 4.2 or by the Required  Lenders  pursuant to SECTION
11.2, and (iii) the date this  Agreement is otherwise  terminated for any reason
whatsoever pursuant to the terms of this Agreement.

      "TOTAL  AVAILABILITY" means, at any time, (a) the Borrowing Base MINUS (b)
the Aggregate Revolver Outstandings.

      "TOTAL FACILITY" has the meaning specified in SECTION 2.1.

      "UCC" means the Uniform Commercial Code (or any successor statute),  as in
effect  from time to time,  of the  State of New York or of any other  state the
laws of which are required as a result thereof to be applied in connection  with
the issue of perfection of security interests.

      "UNFUNDED  PENSION  LIABILITY"  means  the  excess  of  a  Plan's  benefit
liabilities  under Section  4001(a)(16) of ERISA, over the current value of that
Plan's assets,  determined in accordance with the  assumptions  used for funding
the Pension  Plan  pursuant to Section 412 of the Code for the  applicable  plan
year.

      "UNUSED LETTER OF CREDIT  SUBFACILITY" means an amount equal to $5,000,000
MINUS the sum of (a) the aggregate undrawn amount of all outstanding  Letters of
Credit PLUS (b) the aggregate unpaid  reimbursement  obligations with respect to
all Letters of Credit.

      "UNUSED LINE FEE" has the meaning specified in SECTION 3.5.

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

      1.2   ACCOUNTING TERMS.

      Any accounting  term used in this Agreement shall have,  unless  otherwise
specifically  provided herein, the meaning  customarily given in accordance with
GAAP,  and all  financial  computations  hereunder  shall  be  computed,  unless
otherwise  specifically provided herein, in accordance with GAAP as consistently
applied  and  using  the same  method  for  inventory  valuation  as used in the
preparation of the Financial Statements.

<PAGE>

      1.3   INTERPRETIVE PROVISIONS.

      (a) The meanings of defined  terms are equally  applicable to the singular
and plural forms of the defined terms.

      (b) The words "hereof,"  "herein,"  "hereunder" and similar words refer to
this Agreement as a whole and not to any particular provision of this Agreement;
and Subsection,  Section,  Schedule and Exhibit references are to this Agreement
unless otherwise specified.

      (c) (i) The term "documents" includes any and all instruments,  documents,
agreements,  certificates,  indentures,  notices  and  other  writings,  however
evidenced.

      (ii) The term  "including"  is not limiting and means  "including  without
limitation."

      (iii) In the  computation  of periods of time from a  specified  date to a
later specified date, the word "from" means "from and including," the words "to"
and "until" each mean "to but excluding"  and the word  "through"  means "to and
including."

      (d)  Unless  otherwise   expressly  provided  herein,  (i)  references  to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be  construed  as  including  all  statutory  and  regulatory  provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.

      (e) The captions and headings of this  Agreement  are for  convenience  of
reference only and shall not affect the interpretation of this Agreement.

      (f) This  Agreement  and other Loan  Documents  may use several  different
limitations,  tests or measurements to regulate the same or similar matters. All
such  limitations,  tests and  measurements  are  cumulative  and shall  each be
performed in accordance with their terms.

      (g)  This  Agreement  and the  other  Loan  Documents  are the  result  of
negotiations  among and have been reviewed by counsel to the Agent,  each of the
Borrowers  and  the  other  parties,  and  are  the  products  of  all  parties.
Accordingly, they shall not be construed against the Lenders or the Agent merely
because of the Agent's or Lenders' involvement in their preparation.

                                    ARTICLE 2
                           LOANS AND LETTERS OF CREDIT

      2.1   TOTAL FACILITY.

      Subject to all of the terms and conditions of this Agreement,  the Lenders
severally  agree to make available a total credit  facility of up to $47,500,000
(the "Total  Facility") for the Borrowers' use from time to time during the term

<PAGE>

of this Agreement. The Total Facility shall be composed of: (a) a revolving line
of  credit  consisting  of  Revolving  Loans  and  Letters  of  Credit up to the
Borrowing  Base,  as  described  in SECTIONS 2.2 and 2.4; and (b) the Term Loans
described in SECTION 2.3.

      2.2   REVOLVING LOANS.

      (a) AMOUNTS.  Subject to the satisfaction of the conditions  precedent set
forth in SECTIONS 10.1 and 10.3, each Lender severally, but not jointly, agrees,
upon any  Borrower's  request  from time to time on any  Business Day during the
period from the Closing Date to the  Termination  Date, to make revolving  loans
(the  "Revolving  Loans") to such Borrower in amounts not to exceed  (except for
the Bank with respect to Non-Ratable Loans and except for the Agent with respect
to Agent  Advances) such Lender's Pro Rata Share of the portion of the Borrowing
Base  allocable  to such  Borrower (as shown on the most recent  Borrowing  Base
Certificate  delivered  to the Agent);  PROVIDED,  HOWEVER,  that the  aggregate
principal amount of all outstanding  Revolving Loans made to the Borrowers shall
not exceed the  Borrowing  Base,  except to the extent  permitted  under SECTION
13.1. The Lenders,  however,  in their unanimous  discretion,  may elect to make
Revolving  Loans or issue or arrange to have issued  Letters of Credit in excess
of the  Availability for a particular  Borrower or Total  Availability on one or
more  occasions,  but if they do so,  neither the Agent nor the Lenders shall be
deemed  thereby  to have  changed  the  limits  of the  Borrowing  Base or to be
obligated to exceed such limits on any other occasion. If the Aggregate Revolver
Outstandings exceed, or after giving effect to the Pending Revolving Loans would
exceed, the Borrowing Base, the Lenders may refuse to make or otherwise restrict
the making of  Revolving  Loans as the Lenders  determine  until such excess has
been eliminated,  subject to the Agent's authority,  in its sole discretion,  to
make Agent Advances pursuant to the terms of SECTION 2.2(I).

      (b)  PROCEDURE  FOR  BORROWING.  (1) Each  Borrowing  shall be made upon a
Borrower's  irrevocable  written notice  delivered to the Agent in the form of a
notice of  borrowing  ("Notice of  Borrowing")  together  with a Borrowing  Base
Certificate  reflecting  sufficient  Availability  for such  Borrower  and Total
Availability,  which must be received by the Agent prior to 11:00 a.m.  (Atlanta
time) (i) three  Business Days prior to the requested  Funding Date, in the case
of LIBOR Rate Loans and (ii) on the requested  Funding Date, in the case of Base
Rate Loans, specifying:

                  (A)   the  amount  of the  Borrowing  which in the case of a
            LIBOR Rate Loan may not be less than $1,000,000;

                  (B)   the requested  Funding Date, which shall be a Business
            Day;

                  (C) whether the Revolving  Loans requested are to be Base Rate
            Revolving Loans or LIBOR  Revolving Loans (and if not specified,  it
            shall be deemed a request for a Base Rate Revolving Loan); and

                  (D) the  duration  of the  Interest  Period  if the  requested
            Revolving  Loans are to be LIBOR  Revolving  Loans. If the Notice of
            Borrowing  fails to specify the duration of the Interest  Period for
            any Borrowing  comprised of LIBOR Rate Loans,  such Interest  Period
            shall be one month;

<PAGE>

provided,  however, that with respect to the Borrowing to be made on the Closing
Date, such Borrowings will consist of Base Rate Revolving Loans only.

            (2) With respect to any request for Base Rate  Revolving  Loans,  in
      lieu of delivering the above-described  Notice of Borrowing the applicable
      Borrower  may give the  Agent  telephonic  notice of such  request  by the
      required  time,  with such  telephonic  notice to be  confirmed in writing
      within 24 hours of the giving of such  notice,  but the Agent at all times
      shall  be  entitled  to rely on such  telephonic  notice  in  making  such
      Revolving Loans,  regardless of whether any such  confirmation is received
      by Agent.

            (3) The  Borrowers  shall have no right to request a LIBOR Rate Loan
      while a Default or Event of Default has occurred and is continuing.

      (c) RELIANCE UPON  AUTHORITY.  Each  Borrower  shall deliver to the Agent,
prior to the Closing Date, a writing  setting forth the account of such Borrower
to which the Agent is authorized to transfer the proceeds of the Revolving Loans
requested  pursuant to this SECTION 2.2,  which account  shall  initially be the
Loan Account and shall at all times be reasonably satisfactory to the Agent. The
Agent  shall be  entitled  to rely  conclusively  on any  person's  request  for
Revolving  Loans on  behalf  of a  Borrower,  the  proceeds  of which  are to be
transferred  to  the  account   specified  by  such  Borrower  pursuant  to  the
immediately  preceding  sentence,  until the Agent receives  written notice from
such  Borrower  that the  proceeds  of the  Revolving  Loans are to be sent to a
different  account.  The Agent shall have no duty to verify the  identity of any
individual  representing himself or herself as a person authorized by a Borrower
to make such requests on its behalf.

      (d) NO LIABILITY.  The Agent shall not incur any liability to any Borrower
as a result of acting upon any notice  referred  to in SECTIONS  2.2(B) and (C),
which  notice the Agent  believes in good faith to have been given by an officer
or other person duly  authorized by such Borrower to request  Revolving Loans on
its behalf or for otherwise acting in good faith under this SECTION 2.2, and the
crediting  of  Revolving  Loans  to such  Borrower's  deposit  account,  as such
Borrower  shall direct,  shall  conclusively  establish  the  obligation of such
Borrower to repay such Revolving Loans as provided herein.

      (e) NOTICE  IRREVOCABLE.  Any Notice of Borrowing (or telephonic notice in
lieu  thereof)  made  pursuant to SECTION  2.2(B) shall be  irrevocable  and the
applicable  Borrower  shall be bound to borrow  the funds  requested  therein in
accordance therewith.

      (f) AGENT'S ELECTION.  Promptly after receipt of a Notice of Borrowing (or
telephonic notice in lieu thereof)  pursuant to SECTION 2.2(B),  the Agent shall
elect, in its discretion,  (i) to have the terms of SECTION 2.2(G) apply to such
requested  Borrowing,  or (ii) to request  the Bank to make a  Non-Ratable  Loan
pursuant  to the  terms  of  SECTION  2.2(H)  in  the  amount  of the  requested
Borrowing;  PROVIDED,  HOWEVER, that if the Bank declines in its sole discretion
to make a Non-Ratable Loan pursuant to SECTION 2.2(H),  the Agent shall elect to
have the terms of SECTION 2.2(G) apply to such requested Borrowing.

<PAGE>

      (g) MAKING OF REVOLVING LOANS. (i) In the event that the Agent shall elect
to have the terms of this  SECTION  2.2(G)  apply to a  requested  Borrowing  as
described  in  SECTION  2.2(F),  then  promptly  after  receipt  of a Notice  of
Borrowing  or  telephonic  notice  pursuant to SECTION  2.2(B),  the Agent shall
notify the Lenders by telecopy, telephone or other similar form of transmission,
of the requested  Borrowing.  Each Lender shall make the amount of such Lender's
Pro Rata Share of the requested  Borrowing available to the Agent in immediately
available  funds,  to such account of the Agent as the Agent may designate,  not
later than 12:00 noon  (Atlanta  time) on the Funding Date  applicable  thereto.
After the Agent's  receipt of the proceeds of such  Revolving  Loans,  the Agent
shall make the proceeds of such  Revolving  Loans  available  to the  applicable
Borrower on the applicable  Funding Date by transferring same day funds equal to
the proceeds of such Revolving Loans received by the Agent to the account of the
applicable  Borrower,  designated  in writing  by the  applicable  Borrower  and
acceptable  to the Agent;  PROVIDED,  HOWEVER,  that (A) the amount of Revolving
Loans so made on any date  shall in no event  exceed  the  Availability  for the
applicable  Borrower or Total  Availability  on such date and (B) each  Borrower
covenants  and agrees that it will  withdraw  from the Loan Account or any other
commingled  account of the Borrowers into which  Revolving Loans are funded only
those Revolving Loans that are made to such Borrower upon its request hereunder.

            (ii) Unless the Agent  receives  notice from a Lender on or prior to
      the Closing Date or, with respect to any Borrowing after the Closing Date,
      at least one Business Day prior to the date of such  Borrowing,  that such
      Lender will not make available as and when required hereunder to the Agent
      for the account of the applicable Borrower the amount of that Lender's Pro
      Rata Share of the  Borrowing,  the Agent may assume  that each  Lender has
      made such amount available to the Agent in immediately  available funds on
      the  Funding  Date and the Agent may (but  shall not be so  required),  in
      reliance upon such assumption,  make available to the applicable  Borrower
      on such date a corresponding amount. If and to the extent any Lender shall
      not have  made its  full  amount  available  to the  Agent in  immediately
      available funds and the Agent in such  circumstances has made available to
      the applicable Borrower such amount, that Lender shall on the Business Day
      following  such  Funding  Date make such  amount  available  to the Agent,
      together  with interest at the Federal Funds Rate for each day during such
      period.  A notice by the Agent  submitted  to any Lender  with  respect to
      amounts owing under this subsection  shall be conclusive,  absent manifest
      error.  If such  amount is so made  available,  such  payment to the Agent
      shall  constitute  such Lender's  Revolving  Loan for all purposes of this
      Agreement.  If such  amount  is not  made  available  to the  Agent on the
      Business  Day  following  the  Funding  Date,  the Agent  will  notify the
      applicable Borrower of such failure to fund and, upon demand by the Agent,
      the applicable Borrower shall pay such amount to the Agent for the Agent's
      account,  together  with  interest  thereon for each day elapsed since the
      date of such  Borrowing,  at a rate per annum equal to the  Interest  Rate
      applicable at the time to the Revolving  Loans  comprising such Borrowing.
      The failure of any Lender to make any  Revolving  Loan on any Funding Date
      (any such Lender,  prior to the cure of such  failure,  being  hereinafter
      referred to as a "Defaulting  Lender")  shall not relieve any other Lender
      of any obligation hereunder to make a Revolving Loan on such Funding Date,
      but no Lender shall be responsible  for the failure of any other Lender to
      make the  Revolving  Loan to be made by such other  Lender on any  Funding
      Date.

<PAGE>

            (iii) The Agent shall not be  obligated  to transfer to a Defaulting
      Lender any payments made by the Borrowers to the Agent for the  Defaulting
      Lender's benefit; nor shall a Defaulting Lender be entitled to the sharing
      of any payments  hereunder.  Amounts payable to a Defaulting  Lender shall
      instead be paid to or  retained  by the Agent.  The Agent may hold and, in
      its  discretion,  re-lend to the Borrowers the amount of all such payments
      received or retained by it for the account of such Defaulting  Lender. Any
      amounts so re-lent to the Borrowers  shall bear interest  initially at the
      rate applicable to Base Rate Revolving Loans and for all other purposes of
      this Agreement shall be treated as if they were Revolving Loans, provided,
      however, that for purposes of voting or consenting to matters with respect
      to the Loan Documents and  determining  Pro Rata Shares,  such  Defaulting
      Lender  shall be deemed not to be a "Lender".  Until a  Defaulting  Lender
      cures its  failure  to fund its Pro Rata Share of any  Borrowing  (A) such
      Defaulting  Lender shall not be entitled to any portion of the Unused Line
      Fee and (B) the  Unused  Line  Fee (as  reduced  by the  amount  otherwise
      payable for the account of such Defaulting  Lender,  which amount need not
      be paid by the Borrowers)  shall accrue in favor of the Lenders which have
      funded their  respective Pro Rata Shares of such  requested  Borrowing and
      shall be allocated among such performing  Lenders ratably based upon their
      relative Commitments.  This Section shall remain effective with respect to
      such Lender until such time as the Defaulting Lender shall no longer be in
      default of any of its obligations under this Agreement.  The terms of this
      Section  shall not be  construed  to  increase  or  otherwise  affect  the
      Commitment  of any  Lender,  or relieve or excuse the  performance  by the
      Borrower of its duties and obligations hereunder.

      (h) MAKING OF NON-RATABLE  LOANS.  (i) In the event the Agent shall elect,
with the consent of the Bank, to have the terms of this SECTION  2.2(H) apply to
a requested  Borrowing  as described  in SECTION  2.2(F),  the Bank shall make a
Revolving  Loan in the amount of such  Borrowing  (any such  Revolving Loan made
solely by the Bank  pursuant  to this  SECTION  2.2(H)  being  referred  to as a
"Non-Ratable  Loan" and such Revolving  Loans being referred to  collectively as
"Non-Ratable  Loans")  available to the applicable  Borrower on the Funding Date
applicable  thereto  by  transferring  same  day  funds  to an  account  of  the
applicable  Borrower,  designated  in writing  by the  applicable  Borrower  and
acceptable to the Agent. Each Non-Ratable Loan shall be subject to all the terms
and  conditions  applicable  to other  Revolving  Loans except that all payments
thereon  shall be payable to the Bank  solely for its own  account  (and for the
account  of the  holder  of any  participation  interest  with  respect  to such
Revolving  Loan).  The Agent shall not request the Bank to make any  Non-Ratable
Loan if (A) the Agent shall have  received  written  notice from any Lender that
one or more of the applicable  conditions precedent set forth in ARTICLE 10 will
not be satisfied on the requested Funding Date for the applicable Borrowing,  or
(B) the requested  Borrowing  would exceed the  Availability  for the applicable
Borrower  or Total  Availability  on such  Funding  Date.  The  Agent  shall not
otherwise be required to determine whether the applicable  conditions  precedent
set forth in ARTICLE 10 have been  satisfied or the  requested  Borrowing  would
exceed the Availability for the applicable Borrower or Total Availability on the
Funding Date applicable  thereto prior to making,  in its sole  discretion,  any
Non-Ratable Loan.

<PAGE>

            (ii) The Non-Ratable  Loans shall be secured by the Agent's Liens in
      and to the Collateral,  shall  constitute  Revolving Loans and Obligations
      hereunder, and shall bear interest at the rate applicable to the Revolving
      Loans from time to time.

      (i)  AGENT  ADVANCES.  (i)  Subject  to the  limitations  set forth in the
proviso contained in this SECTION 2.2(I),  the Agent is hereby authorized by the
Borrowers and the Lenders, from time to time in the Agent's sole discretion, (A)
after the  occurrence  of a Default or an Event of  Default,  or (B) at any time
that any of the other  applicable  conditions  precedent set forth in ARTICLE 10
have not been  satisfied,  to make Base Rate Revolving Loans to the Borrowers on
behalf of the Lenders  which the Agent,  in its  reasonable  business  judgment,
deems necessary or desirable (1) to preserve or protect the  Collateral,  or any
portion  thereof,  (2) to enhance the  likelihood of, or maximize the amount of,
repayment  of the Loans and other  Obligations,  or (3) to pay any other  amount
chargeable to the Borrowers  pursuant to the terms of this Agreement,  including
costs,  fees and  expenses as  described  in SECTION  15.7 (any of the  advances
described  in this  SECTION  2.2(I)  being  hereinafter  referred  to as  "Agent
Advances");  PROVIDED,  that the  Required  Lenders  may at any time  revoke the
Agent's  authorization  contained in this SECTION 2.2(I) to make Agent Advances,
any such revocation to be in writing and to become effective  prospectively upon
the Agent's receipt thereof;

            (ii) The Agent  Advances shall be repayable on demand and secured by
      the Agent's Liens in and to the  Collateral,  shall  constitute  Revolving
      Loans and  Obligations  hereunder,  and shall  bear  interest  at the rate
      applicable to Base Rate Revolving Loans from time to time. The Agent shall
      notify each Lender in writing of each such Agent Advance.

      (j)  SETTLEMENT.  It is agreed that each  Lender's  funded  portion of the
Revolving  Loans is  intended  by the  Lenders  to be equal at all times to such
Lender's Pro Rata Share of the outstanding Revolving Loans. Notwithstanding such
agreement,  the Agent,  the Bank,  and the other Lenders agree (which  agreement
shall not be for the benefit of or enforceable  by the Borrowers)  that in order
to facilitate the administration of this Agreement and the other Loan Documents,
settlement among them as to the Revolving  Loans, the Non-Ratable  Loans and the
Agent  Advances  shall  take place on a periodic  basis in  accordance  with the
following provisions:

            (i) The  Agent  shall  request  settlement  ("Settlement")  with the
      Lenders  on at least a weekly  basis,  or on a more  frequent  basis if so
      determined by the Agent,  (A) on behalf of the Bank,  with respect to each
      outstanding  Non-Ratable Loan, (B) for itself,  with respect to each Agent
      Advance,  and (C) with respect to collections  received,  in each case, by
      notifying the Lenders of such requested Settlement by telecopy,  telephone
      or other similar form of transmission,  of such requested  Settlement,  no
      later  than  11:00  a.m.  (Atlanta  time)  on the  date of such  requested
      Settlement (the "Settlement  Date").  Each Lender (other than the Bank, in
      the case of Non-Ratable Loans and the Agent in the case of Agent Advances)
      shall make the amount of such  Lender's Pro Rata Share of the  outstanding
      principal amount of the Non-Ratable  Loans and Agent Advances with respect
      to which  Settlement is requested  available to the Agent, to such account

<PAGE>

      of the Agent as the Agent may designate, not later than 2:00 p.m. (Atlanta
      time), on the Settlement Date applicable  thereto,  which may occur before
      or after the  occurrence  or during  the  continuation  of a Default or an
      Event of Default and whether or not the  applicable  conditions  precedent
      set forth in  ARTICLE  10 have  then been  satisfied.  Such  amounts  made
      available  to the  Agent  shall be  applied  against  the  amounts  of the
      applicable  Non-Ratable  Loan or  Agent  Advance  and,  together  with the
      portion of such Non-Ratable Loan or Agent Advance  representing the Bank's
      Pro Rata Share thereof,  shall constitute Revolving Loans of such Lenders.
      If any such amount is not made available to the Agent by any Lender on the
      Settlement Date applicable  thereto,  the Agent shall (A) on behalf of the
      Bank,  with  respect to each  outstanding  Non-Ratable  Loan,  and (B) for
      itself,  with respect to each Agent  Advance,  be entitled to recover such
      amount on demand from such Lender  together with  interest  thereon at the
      Federal  Funds  Rate for the  first  three  (3) days  from and  after  the
      Settlement  Date and  thereafter at the Interest  Rate then  applicable to
      Base Rate Revolving Loans.

            (ii)  Notwithstanding the foregoing,  not more than one (1) Business
      Day  after  demand  is made by the  Agent  (whether  before  or after  the
      occurrence  of a Default or an Event of Default and  regardless of whether
      the Agent has requested a Settlement with respect to a Non-Ratable Loan or
      Agent   Advance),   each   other   Lender   (A)  shall   irrevocably   and
      unconditionally  purchase  and  receive  from  the Bank or the  Agent,  as
      applicable,  without  recourse or  warranty,  an  undivided  interest  and
      participation  in such  Non-Ratable  Loan or Agent  Advance  equal to such
      Lender's Pro Rata Share of such  Non-Ratable Loan or Agent Advance and (B)
      if Settlement has not previously occurred with respect to such Non-Ratable
      Loans or Agent  Advances,  upon  demand by Bank or Agent,  as  applicable,
      shall pay to Bank or Agent,  as applicable,  as the purchase price of such
      participation  an  amount  equal to  one-hundred  percent  (100%)  of such
      Lender's Pro Rata Share of such  Non-Ratable  Loans or Agent Advances.  If
      such amount is not in fact made available to the Agent by any Lender,  the
      Agent shall be entitled to recover  such amount on demand from such Lender
      together  with  interest  thereon at the Federal  Funds Rate for the first
      three (3) days from and after such demand and  thereafter  at the Interest
      Rate then applicable to Base Rate Revolving Loans.

            (iii) From and after the date, if any, on which any Lender purchases
      an undivided  interest and  participation in any Non-Ratable Loan or Agent
      Advance  pursuant  to CLAUSE  (II)  preceding,  the Agent  shall  promptly
      distribute to such Lender, such Lender's Pro Rata Share of all payments of
      principal  and  interest and all  proceeds of  Collateral  received by the
      Agent in respect of such Non-Ratable Loan or Agent Advance.

            (iv) Between  Settlement  Dates,  the Agent,  to the extent no Agent
      Advances are outstanding,  may pay over to the Bank any payments  received
      by the Agent,  which in accordance  with the terms of this Agreement would
      be applied to the reduction of the Revolving Loans, for application to the
      Bank's  Revolving  Loans  including  Non-Ratable  Loans.  If,  as  of  any
      Settlement Date, collections received since the then immediately preceding
      Settlement  Date have been  applied to the Bank's  Revolving  Loans (other
      than to Non-Ratable  Loans or Agent Advances in which a Lender has not yet
      funded its  purchase of a  participation  pursuant  to SECTION  2.2(J)(II)
      above),  as provided for in the previous  sentence,  the Bank shall pay to

<PAGE>

      the  Agent  for  the  accounts  of  the  Lenders,  to be  applied  to  the
      outstanding  Revolving  Loans of such  Lenders,  an amount  such that each
      Lender shall,  upon receipt of such amount,  have,  as of such  Settlement
      Date, its Pro Rata Share of the Revolving Loans. During the period between
      Settlement  Dates,  the Bank with respect to Non-Ratable  Loans, the Agent
      with  respect  to Agent  Advances,  and each  Lender  with  respect to the
      Revolving Loans other than Non-Ratable Loans and Agent Advances,  shall be
      entitled to interest at the  applicable  rate or rates  payable under this
      Agreement  on the actual  average  daily  amount of funds  employed by the
      Bank, the Agent and the other Lenders.

      (k) NOTATION.  The Agent shall record on its books the principal amount of
the Revolving Loans owing to each Lender,  including the Non-Ratable Loans owing
to the Bank, and the Agent  Advances  owing to the Agent,  from time to time. In
addition,  each Lender is authorized,  at such Lender's option, to note the date
and amount of each payment or prepayment of principal of such Lender's Revolving
Loans in its books and  records,  including  computer  records,  such  books and
records  constituting  presumptive  evidence,  absent  manifest  error,  of  the
accuracy of the information contained therein.

      (l)  LENDERS'  FAILURE  TO  PERFORM.   All  Revolving  Loans  (other  than
Non-Ratable   Loans  and  Agent   Advances)   shall  be  made  by  the   Lenders
simultaneously  and in accordance  with their Pro Rata Shares.  It is understood
that (i) no Lender shall be  responsible  for any failure by any other Lender to
perform its  obligation to make any  Revolving  Loans  hereunder,  nor shall any
Commitment of any Lender be increased or decreased as a result of any failure by
any  other  Lender  to  perform  its  obligation  to make  any  Revolving  Loans
hereunder,  (ii) no failure by any Lender to perform its  obligation to make any
Revolving  Loans  hereunder shall excuse any other Lender from its obligation to
make any Revolving  Loans  hereunder,  and (iii) the  obligations of each Lender
hereunder shall be several, not joint and several.

      2.3   TERM LOANS.

      (a) AMOUNTS OF TERM LOANS. Each Lender severally agrees to make term loans
(any such term loan being referred to as a "Term Loan" and such term loans being
referred to  collectively  as the "Term Loans") to the Borrowers in two separate
fundings on the terms and conditions set forth below. The first funding shall be
made by each Lender to the respective  Borrowers (with each Borrower receiving a
pro  rata  amount  of such  funding  based  on the  proportion  of all  Eligible
Equipment  represented  by such  Borrower's  Eligible  Equipment) on the Closing
Date, upon the  satisfaction  of the conditions  precedent set forth in SECTIONS
10.1 and 10.3, in an amount equal to such Lender's Pro Rata Share of $3,000,000.
The second  funding  shall be made by each  Lender to the  respective  Borrowers
(with each  Borrower  receiving a pro rata amount of such  funding  based on the
proportion of all Eligible Real Estate  represented by such Borrower's  Eligible
Real  Estate)  on any  Business  Day on or after the  Closing  Date and prior to
September 15, 2000 designated by the Borrowers for such funding (such designated
Business Day is referred to herein as the "Term Loan Second Funding Date"), upon
the  satisfaction  of the  conditions  precedent  set forth in SECTIONS 10.2 and
10.3,  in an  amount  equal to such  Lender's  Pro Rata  Share of the  remaining
unfunded Term Loan Amount.  The Term Loans on each respective Funding Date shall
initially be Base Rate Term Loans.

      (b) MAKING OF TERM LOANS.  On each of the  Closing  Date and the Term Loan
Second  Funding  Date,  each Lender shall make the amount of such  Lender's Term

<PAGE>

Loans to be  funded  on such  Funding  Date  available  to the Agent in same day
funds,  to such account of the Agent as the Agent may designate,  not later than
11:00 a.m.  (Atlanta time) on the respective  Funding Date. On each such Funding
Date,  after the  Agent's  receipt of the  proceeds  of such Term Loans and upon
satisfaction  of the  conditions  precedent set forth in SECTION 10.1 or SECTION
10.2, as applicable, and SECTION 10.3, the Agent shall make the proceeds of such
Term Loans funded on such date available to the Borrowers by  transferring  same
day funds equal to the proceeds of such Term Loans  received by the Agent to the
respective  accounts of the Borrowers  designated in writing by the Borrowers or
as the Borrowers shall otherwise instruct in writing.

      (c) TERM LOAN NOTES.  The Borrowers shall execute and deliver to the Agent
on behalf of each Lender, on the Closing Date, a promissory note,  substantially
in the form of EXHIBIT A attached hereto and made a part hereof (such promissory
notes,  together with any new notes issued  pursuant to SECTION 13.2(C) upon the
assignment of any portion of any Lender's Term Loan, being hereinafter  referred
to collectively as the "Term Loan Notes" and each of such promissory notes being
hereinafter  referred to individually  as a "Term Loan Note"),  to evidence such
Lender's Term Loans, in an original principal amount equal to the amount of such
Lender's Pro Rata Share of  $7,500,000  (or, if less,  the Term Loan Amount) and
with other appropriate insertions. The Term Loan Notes delivered to the Agent on
behalf of each Lender  shall be dated the  Closing  Date and stated to mature in
nineteen (19) quarterly  installments  of principal.  Each of the first eighteen
(18)  installments of principal shall be in an amount equal to such Lender's Pro
Rata Share of five  percent (5%) of the Term Loan Amount and shall be payable on
the first day of each calendar quarter, commencing on January 1, 2001 and ending
on April 1, 2005, and the final  installment of principal  shall be in an amount
equal to such Lender's Pro Rata Share of the then remaining principal balance of
the Term Loan Notes, and shall be payable on the Stated  Termination  Date. Each
such installment shall be payable to the Agent for the account of the applicable
Lender.

      (d)  NOTATION  AND  ENDORSEMENT.  The Agent shall  record on its books the
principal  amount of the Term Loans owing to each  Lender from time to time.  In
addition,  each Lender is authorized,  at such Lender's option, to note the date
and amount of each payment or  prepayment  of principal  of such  Lender's  Term
Loans in its books and records,  such books and records constituting  rebuttably
presumptive evidence,  absent manifest error, of the accuracy of the information
contained  therein.  Prior to the transfer of a Term Loan Note,  the  applicable
Lender  shall  endorse on the reverse  side  thereof the  outstanding  principal
balance of the Term Loan evidenced thereby.  Failure by such Lender to make such
notation or endorsement  shall not affect the obligations of the Borrowers under
such Term Loan Note or any of the other Loan Documents.

      2.4   LETTERS OF CREDIT.

      (a)  AGREEMENT  TO ISSUE  OR CAUSE TO  ISSUE.  Subject  to the  terms  and
conditions  of this  Agreement,  and in reliance  upon the  representations  and
warranties of the Borrowers  herein set forth, the Agent agrees (i) to cause the
Bank (or an  affiliate  thereof) to issue for the  account of a Borrower  one or
more  commercial/documentary  and standby letters of credit (each, together with
each  Existing  Letter of Credit,  a "Letter of Credit")  and/or (ii) to provide

<PAGE>

credit support or other  enhancement to a Letter of Credit Issuer  acceptable to
the Agent,  which  issues a Letter of Credit for the account of a Borrower  (any
such  credit  support  or  enhancement  being  herein  referred  to as a "Credit
Support") in accordance  with this SECTION 2.4 from time to time during the term
of this Agreement.

      (b)  AMOUNTS;  OUTSIDE  EXPIRATION  DATE.  The  Agent  shall  not have any
obligation  to take steps to issue or cause to be issued any Letter of Credit or
to  provide  Credit  Support  for any  Letter of Credit at any time if:  (i) the
maximum face amount of the requested Letter of Credit is greater than the Unused
Letter of Credit  Subfacility at such time;  (ii) the maximum  undrawn amount of
the requested Letter of Credit and all  commissions,  fees, and charges due from
the Borrowers in connection with the opening thereof exceed the Availability for
the applicable Borrower or Total Availability at such time; or (iii) such Letter
of Credit has an expiration date later than thirty (30) days prior to the Stated
Termination  Date or more than twelve (12) months from the date of issuance  for
standby letters of credit and 180 days for merchandise letters of credit.

      (c) OTHER CONDITIONS.  In addition to being subject to the satisfaction of
the applicable  conditions  precedent contained in ARTICLE 10, the obligation of
the Agent to issue or to cause to be issued  any  Letter of Credit or to provide
Credit  Support for any Letter of Credit is subject to the following  conditions
precedent  having been  satisfied  in a manner  reasonably  satisfactory  to the
Agent:

            (1) The  applicable  Borrower  shall have delivered to the Letter of
      Credit  Issuer,  at such times and in such manner as such Letter of Credit
      Issuer may prescribe, an application in form and substance satisfactory to
      such Letter of Credit Issuer and reasonably  satisfactory to the Agent for
      the  issuance of the Letter of Credit and such other  documents  as may be
      required  pursuant  to the  terms  thereof,  and the form and terms of the
      proposed  Letter of Credit shall be reasonably  satisfactory  to the Agent
      and the Letter of Credit Issuer; and

            (2) As of the date of issuance, no order of any court, arbitrator or
      Governmental  Authority  shall  purport by its terms to enjoin or restrain
      money center banks  generally  from issuing  letters of credit of the type
      and in the amount of the proposed  Letter of Credit,  and no law,  rule or
      regulation  applicable  to money center banks  generally and no request or
      directive  (whether or not having the force of law) from any  Governmental
      Authority  with  jurisdiction  over money  center  banks  generally  shall
      prohibit,  or request that the proposed  Letter of Credit  Issuer  refrain
      from, the issuance of letters of credit  generally or the issuance of such
      Letters of Credit.

      (d)   ISSUANCE OF LETTERS OF CREDIT.

            (1) REQUEST FOR ISSUANCE.  The  applicable  Borrower  shall give the
      Agent five (5)  Business  Days  prior  written  notice of such  Borrower's
      request  for the  issuance  of a Letter of Credit.  Such  notice  shall be
      irrevocable (except that a Borrower may cancel its request for a Letter of
      Credit by giving  the Agent at least one (1)  Business  Day prior  written
      notice  so  long  as  such  Borrower  pays  to the  Agent  all  reasonable

<PAGE>

      out-of-pocket  costs,  fees and  expenses  already  incurred  by the Agent
      and/or the Letter of Credit Issuer with respect to such  requested  Letter
      of Credit as required by SECTION 3.6) and shall  specify the original face
      amount of the Letter of Credit  requested,  the effective date (which date
      shall be a Business Day) of issuance of such  requested  Letter of Credit,
      whether  such  Letter  of Credit  may be drawn in a single  or in  partial
      draws,  the date on which  such  requested  Letter  of Credit is to expire
      (which date shall be a Business Day), the purpose for which such Letter of
      Credit is to be issued,  and the  beneficiary  of the requested  Letter of
      Credit.  The applicable  Borrower shall attach to such notice the proposed
      form of the Letter of Credit.

            (2)  RESPONSIBILITIES  OF  THE  AGENT;  ISSUANCE.  The  Agent  shall
      determine,  as of the Business Day  immediately  preceding  the  requested
      effective date of issuance of the Letter of Credit set forth in the notice
      from the applicable Borrower pursuant to SECTION 2.4(D)(1), (A) the amount
      of the  applicable  Unused  Letter  of  Credit  Subfacility  and  (B)  the
      Availability for the applicable Borrower and Total Availability as of such
      date. If (i) the undrawn  amount of the requested  Letter of Credit is not
      greater than the Unused Letter of Credit  Subfacility  and (ii) the amount
      of such requested Letter of Credit and all commissions,  fees, and charges
      due from the  Borrowers in connection  with the opening  thereof would not
      exceed the Availability for the applicable Borrower or Total Availability,
      the Agent shall, so long as the other conditions hereof are met, cause the
      Letter of Credit  Issuer to issue the  requested  Letter of Credit on such
      requested effective date of issuance.

            (3) NOTICE OF ISSUANCE.  On each  Settlement  Date,  the Agent shall
      give notice to each Lender of the issuance of all Letters of Credit issued
      since the last Settlement Date.

            (4) NO EXTENSIONS OR AMENDMENT.  The Agent shall not be obligated to
      cause the Letter of Credit  Issuer to extend or amend any Letter of Credit
      issued pursuant hereto unless the requirements of this SECTION 2.4 are met
      as though a new Letter of Credit were being  requested  and  issued.  With
      respect  to any  Letter  of  Credit  which  contains  any  "evergreen"  or
      automatic renewal provision, each Lender shall be deemed to have consented
      to any such  extension  or  renewal  unless  any such  Lender  shall  have
      provided  to the Agent,  not less than  thirty (30) days prior to the last
      date on which the Letter of Credit Issuer can in accordance with the terms
      of the applicable  Letter of Credit decline to extend or renew such Letter
      of  Credit,  written  notice  that it  declines  to  consent  to any  such
      extension or renewal;  provided,  that if all of the  requirements of this
      SECTION 2.4 are met and no Default or Event of Default  exists,  no Lender
      shall decline to consent to any such extension or renewal.

      (e)   PAYMENTS PURSUANT TO LETTERS OF CREDIT.

            (1) PAYMENT OF LETTER OF CREDIT  OBLIGATIONS.  The  Borrowers  agree
      immediately  upon demand to reimburse  the Letter of Credit Issuer for any
      draw  under  any  Letter of Credit  and the Agent for the  account  of the
      Lenders upon any payment  pursuant to any Credit  Support,  and to pay the
      Letter of Credit  Issuer  the  amount of all other  obligations  and other

<PAGE>

      amounts  payable to such Letter of Credit  Issuer  under or in  connection
      with any Letter of Credit immediately when due, irrespective of any claim,
      setoff,  defense or other  right which any  Borrower  may have at any time
      against such issuer or any other Person.

            (2)  REVOLVING  LOANS TO  SATISFY  REIMBURSEMENT  OBLIGATIONS.  Each
      drawing  under any  Letter of Credit  shall  constitute  a request  by the
      applicable  Borrower to the Agent for a Borrowing of a Base Rate Revolving
      Loan in the amount of such drawing.  The Funding Date with respect to such
      Borrowing shall be the date of such drawing.

      (f)   PARTICIPATIONS.

            (1) PURCHASE OF PARTICIPATIONS.  On the Closing Date with respect to
      Existing  Letters of Credit and  immediately  upon  issuance  of any other
      Letter of Credit in accordance with SECTION  2.4(D),  each Lender shall be
      deemed to have  irrevocably  and  unconditionally  purchased  and received
      without  recourse or  warranty,  an undivided  interest and  participation
      equal to such Lender's Pro Rata Share of the face amount of such Letter of
      Credit or the Credit Support  provided  through the Agent to the Letter of
      Credit Issuer,  if not the Agent,  in connection with the issuance of such
      Letter of Credit  (including all obligations of the Borrowers with respect
      thereto, and any security therefor or guaranty pertaining thereto).

            (2) SHARING OF REIMBURSEMENT OBLIGATION PAYMENTS. Whenever the Agent
      receives  a  payment  from  the  Borrowers  on  account  of  reimbursement
      obligations in respect of a Letter of Credit or Credit Support as to which
      the Agent has previously  received for the account of the Letter of Credit
      Issuer thereof  payment from a Lender pursuant to SECTION  2.4(E)(2),  the
      Agent shall  promptly  pay to such Lender such  Lender's Pro Rata Share of
      such payment from the  Borrowers  in Dollars.  Each such payment  shall be
      made  by the  Agent  on the  Business  Day on  which  the  Agent  receives
      immediately   available  funds  pursuant  to  the  immediately   preceding
      sentence,  if received prior to 1:00 p.m.  (Atlanta time) on such Business
      Day, and otherwise on the next succeeding Business Day.

            (3)  DOCUMENTATION.  Upon the request of any Lender, the Agent shall
      furnish to such Lender copies of any Letter of Credit,  Credit Support for
      any Letter of Credit,  reimbursement  agreements  executed  in  connection
      therewith,   applications  for  any  Letter  of  Credit,  and  such  other
      documentation as may reasonably be requested by such Lender.

            (4) OBLIGATIONS IRREVOCABLE.  The obligations of each Lender to make
      payments to the Agent with respect to any Letter of Credit or with respect
      to its participation therein or with respect to any Credit Support for any
      Letter of Credit or with respect to the  Revolving  Loans made as a result
      of a drawing under a Letter of Credit and the obligations of the Borrowers
      for whose  account  the Letter of Credit or Credit  Support  was issued to
      make  payments  to the Agent,  for the  account of the  Lenders,  shall be
      irrevocable,  not subject to any  qualification  or exception  whatsoever,
      including any of the following circumstances:

<PAGE>

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

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

                  (iii) any draft,  certificate or any other document  presented
            under the Letter of Credit proving to be forged, fraudulent, invalid
            or insufficient in any respect or any statement therein being untrue
            or inaccurate in any respect;

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

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

                  (vi)  the   failure  of  the   Borrowers   to  satisfy   the
            applicable conditions precedent set forth in ARTICLE 10;

            PROVIDED,  HOWEVER, that this SECTION 2.4(F)(4) shall not operate to
            waive or preclude a Borrower's  right to  institute  an  independent
            claim  against the Letter of Credit  Issuer for gross  negligence or
            willful misconduct.

      (g) RECOVERY OR  AVOIDANCE OF PAYMENTS.  In the event any payment by or on
behalf of the  Borrowers  received  by the Agent  with  respect to any Letter of
Credit or Credit  Support  provided for any Letter of Credit and  distributed by
the Agent to the Lenders on account of their respective  participations  therein
is thereafter set aside,  avoided or recovered from the Agent in connection with
any receivership,  liquidation or bankruptcy proceeding, the Lenders shall, upon
demand by the Agent,  pay to the Agent their  respective Pro Rata Shares of such
amount set aside,  avoided or  recovered,  together  with  interest  at the rate
required to be paid by the Agent upon the amount required to be repaid by it.

      (h)   INDEMNIFICATION; EXONERATION; POWER OF ATTORNEY

            (1)  INDEMNIFICATION.  In addition to amounts  payable as  elsewhere
      provided in this  SECTION  2.4,  the  Borrowers  hereby  agree to protect,
      indemnify,  pay and save  the  Lenders  and the  Agent  harmless  from and
      against any and all claims, demands, liabilities,  damages, losses, costs,
      charges and  expenses  (including  reasonable  attorneys'  fees) which any
      Lender  or the Agent  (other  than the Bank in its  capacity  as Letter of
      Credit  Issuer)  may incur or be  subject to as a  consequence,  direct or
      indirect,  of the issuance of any Letter of Credit or the provision of any

<PAGE>

      Credit Support or enhancement  in connection  therewith.  The agreement in
      this  SECTION   2.4(H)(1)  shall  survive  payment  of  all   Obligations.
      Notwithstanding  anything to the  contrary  contained  in this  subsection
      (h)(1),  the Borrowers shall have no obligation to indemnify the Letter of
      Credit Issuer in respect of any liability incurred by the Letter of Credit
      Issuer  (A)  arising  solely  out  of  the  gross  negligence  or  willful
      misconduct  of the Letter of Credit  Issuer,  as  determined by a court of
      competent  jurisdiction,  or (B) caused by the  Letter of Credit  Issuer's
      failure to pay under any Letter of Credit  after  presentation  to it of a
      request strictly complying with the terms and conditions of such Letter of
      Credit,  as determined by a court of competent  jurisdiction,  unless such
      payment is prohibited by any law, regulation, court order or decree.

            (2) ASSUMPTION OF RISK BY THE BORROWER. As among the Borrowers,  the
      Lenders,  and the Agent,  the  Borrowers  assume all risks of the acts and
      omissions of, or misuse of any of the Letters of Credit by, the respective
      beneficiaries  of  such  Letters  of  Credit.  In  furtherance  and not in
      limitation  of the  foregoing,  the  Lenders  and the  Agent  shall not be
      responsible   for:  (A)  the  form,   validity,   sufficiency,   accuracy,
      genuineness  or legal  effect of any  document  submitted by any Person in
      connection with the  application  for and issuance of and  presentation of
      drafts  with  respect to any of the  Letters of Credit,  even if it should
      prove  to be in any or all  respects  invalid,  insufficient,  inaccurate,
      fraudulent or forged;  (B) the validity or  sufficiency  of any instrument
      transferring  or assigning or  purporting to transfer or assign any Letter
      of Credit or the rights or benefits  thereunder  or proceeds  thereof,  in
      whole or in part,  which may prove to be  invalid or  ineffective  for any
      reason;  (C) the  failure  of the  beneficiary  of any Letter of Credit to
      comply duly with conditions  required in order to draw upon such Letter of
      Credit; (D) errors, omissions, interruptions, or delays in transmission or
      delivery of any messages, by mail, cable,  telegraph,  telex or otherwise,
      whether  or not  they  be in  cipher;  (E)  errors  in  interpretation  of
      technical terms; (F) any loss or delay in the transmission or otherwise of
      any  document  required  in order to make a drawing  under  any  Letter of
      Credit  or  of  the  proceeds  thereof;  (G)  the  misapplication  by  the
      beneficiary  of any Letter of Credit of the proceeds of any drawing  under
      such Letter of Credit; or (H) any consequences  arising from causes beyond
      the control of the Lenders or the Agent,  including  any act or  omission,
      whether rightful or wrongful, of any present or future DE JURE or DE FACTO
      Governmental  Authority.  None of the foregoing  shall  affect,  impair or
      prevent  the  vesting  of any  rights or powers of the Agent or any Lender
      under this SECTION 2.4(H).

            (3)   EXONERATION.   In  furtherance  and  extension,   and  not  in
      limitation,  of the specific  provisions set forth above, any action taken
      or omitted by the Agent or any Lender under or in  connection  with any of
      the Letters of Credit or any related certificates,  if taken or omitted in
      good  faith,  shall not put the Agent or any  Lender  under any  resulting
      liability  to  the  Borrower  or  relieve  the  Borrower  of  any  of  its
      obligations  hereunder  to any  such  Person.  Nothing  contained  in this
      Agreement is intended to limit any Borrower's rights, if any, with respect
      to the Letter of Credit  Issuer  which  arise as a result of the letter of
      credit  application  and  related  documents  executed  by and between any
      Borrower and the Letter of Credit Issuer.

            (4)  INDEMNIFICATION BY LENDERS.  The Lenders agree to indemnify the
      Letter of Credit Issuer (to the extent not reimbursed by the Borrowers and
      without  limiting the obligations of the Borrowers  hereunder)  ratably in

<PAGE>

      accordance  with  their  respective  Pro  Rata  Shares,  for  any  and all
      liabilities,  obligations, losses, damages, penalties, actions, judgments,
      suits, costs, expenses (including attorneys' fees) or disbursements of any
      kind and nature whatsoever that may be imposed on, incurred by or asserted
      against the Letter of Credit  Issuer in any way relating to or arising out
      of any Letter of Credit or the  transactions  contemplated  thereby or any
      action taken or omitted by the Letter of Credit Issuer under any Letter of
      Credit or any Loan  Document in  connection  therewith;  PROVIDED  that no
      Lender  shall be liable for any of the  foregoing  to the extent it arises
      from the  gross  negligence  or  willful  misconduct  of the  Person to be
      indemnified.  Without  limitation of the foregoing,  each Lender agrees to
      reimburse  the Letter of Credit  Issuer  promptly  upon demand for its Pro
      Rata Share of any costs or expenses payable by the Borrowers to the Letter
      of Credit  Issuer,  to the extent that the Letter of Credit  Issuer is not
      promptly  reimbursed  for such costs and  expenses by the  Borrowers.  The
      agreement  contained in this Section shall survive  payment in full of all
      Obligations.

            (5) POWER OF ATTORNEY.  In connection with all Inventory financed by
      Letters of Credit,  each Borrower hereby appoint the Agent, or the Agent's
      designee,  as its  attorney,  with full power and  authority:  (a) to sign
      and/or endorse such  Borrower's name upon any warehouse or other receipts;
      (b) to sign such Borrower's  name on bills of lading and other  negotiable
      and  non-negotiable  documents;  (c) to clear Inventory through customs in
      the Agent's or such  Borrower's  name,  and to sign and deliver to customs
      officials powers of attorney in such Borrower's name for such purpose; (d)
      to complete in such  Borrower's or the Agent's name,  any order,  sale, or
      transaction,  obtain the necessary documents in connection therewith,  and
      collect the proceeds thereof;  and (e) to do such other acts and things as
      are necessary in order to enable the Agent to obtain possession or control
      of the Inventory and to obtain payment of the  Obligations.  Except to the
      extent arising solely out of gross  negligence or willful  misconduct,  as
      determined by a court of competent jurisdiction, neither the Agent nor its
      designee,  as a  Borrower's  attorney,  will be  liable  for  any  acts or
      omissions,  nor for any error of judgment or mistakes of fact or law. This
      power,   being  coupled  with  an  interest,   is  irrevocable  until  all
      Obligations have been paid and satisfied.

            (6) ACCOUNT PARTY.  Each Borrower hereby  authorizes and directs any
      Letter of  Credit  Issuer to name such  Borrower  as the  "Account  Party"
      therein and to deliver to the Agent all  instruments,  documents and other
      writings and property  received by the Letter of Credit Issuer pursuant to
      any Letter of Credit, and to accept and rely upon the Agent's instructions
      and  agreements  with  respect to  administrative  matters,  or during the
      existence of an Event of Default all matters,  arising in connection  with
      such Letter of Credit or the application therefor.

            (7) CONTROL OF INVENTORY.  In connection with all Inventory financed
      by Letters of Credit, the Borrowers will, at the Agent's request, instruct
      all suppliers, carriers, forwarders, customs brokers, warehouses or others
      receiving or holding cash, checks, Inventory,  documents or instruments in
      which the Agent  holds a security  interest  to deliver  them to the Agent
      and/or  subject  to the  Agent's  order,  and if they  shall come into any

<PAGE>

      Borrower's  possession,  to deliver them,  upon  request,  to the Agent in
      their  original form.  The Borrowers  shall also, at the Agent's  request,
      designate  the Agent as the  consignee  on all  bills of lading  and other
      negotiable and non-negotiable documents.

      (i) SUPPORTING LETTER OF CREDIT; CASH COLLATERAL.  If, notwithstanding the
provisions of SECTION  2.4(B) and SECTION  12.1,  any Letter of Credit or Credit
Support is outstanding  upon the termination of this  Agreement,  then upon such
termination the Borrowers shall deposit with the Agent,  for the ratable benefit
of the Agent and the  Lenders,  with  respect to each Letter of Credit or Credit
Support then  outstanding,  as the Required  Lenders,  in their discretion shall
specify, either (A) a standby letter of credit (a "Supporting Letter of Credit")
in  form  and  substance   satisfactory  to  the  Agent,  issued  by  an  issuer
satisfactory  to the Agent in an amount equal to the  greatest  amount for which
such  Letter of Credit or such  Credit  Support  may be drawn  plus any fees and
expenses  associated  with such Letter of Credit or such Credit  Support,  under
which  Supporting  Letter  of  Credit  the  Agent is  entitled  to draw  amounts
necessary to reimburse  the Agent and the Lenders for payments to be made by the
Agent and the Lenders under such Letter of Credit or Credit Support and any fees
and expenses  associated  with such Letter of Credit or Credit  Support,  or (B)
cash in amounts  necessary to  reimburse  the Agent and the Lenders for payments
made by the Agent or the  Lenders  under  such  Letter of Credit or such  Credit
Support and any fees and expenses  associated  with such Letter of Credit.  Such
Supporting  Letter of Credit or deposit of cash shall be held by the Agent,  for
the  ratable  benefit of the Agent and the  Lenders,  as  security  for,  and to
provide for the  payment of, the  aggregate  undrawn  amount of such  Letters of
Credit or such Credit Support remaining outstanding.

      (j)  EXISTING  LETTERS OF CREDIT.  The  Borrowers  and the Lenders  hereby
acknowledge and agree that the Existing  Letters of Credit are Letters of Credit
hereunder  and the  Borrowers  hereby  assume  and  are  jointly  and  severally
obligated with respect to all Obligations related thereto.

      2.5   BANK PRODUCTS.

      Each  Borrower  may  request  and the Bank may,  in its sole and  absolute
discretion,  arrange  for such  Borrower  to obtain  from the Bank or the Bank's
Affiliates  Bank  Products  although  no  Borrower  is required to do so. To the
extent Bank  Products are provided by an  Affiliate of the Bank,  each  Borrower
agrees to indemnify and hold the Bank and the Lenders  harmless from any and all
costs  and  obligations  now or  hereafter  incurred  by the  Bank or any of the
Lenders  which  arise  from the  indemnity  given by the Bank to its  Affiliates
related to such Bank Products;  PROVIDED,  HOWEVER, (i) nothing contained herein
is  intended  to limit a  Borrower's  rights,  with  respect  to the Bank or its
Affiliates, if any, which arise as a result of the execution of documents by and
between such Borrower and the Bank which relate to Bank Products and (ii) if the
Bank gives a specific  written  indemnity to an Affiliate in  connection  with a
Bank  Product  provided  to a  Borrower,  the Bank  will  provide a copy of such
written indemnity to the Parent.  The agreement  contained in this Section shall
survive  termination of this Agreement.  Each Borrower  acknowledges  and agrees
that the obtaining of Bank Products from the Bank or the Bank's  Affiliates  (a)
is in the sole and absolute discretion of the Bank or the Bank's Affiliates, and
(b)  is  subject  to  all  rules  and  regulations  of the  Bank  or the  Bank's
Affiliates.

<PAGE>

                                    ARTICLE 3
                                INTEREST AND FEES

      3.1   INTEREST.

      (a) INTEREST RATES. All outstanding Obligations shall bear interest on the
unpaid principal amount thereof  (including,  to the extent permitted by law, on
interest  thereon  not paid when due) from the date made  until  paid in full in
cash at a rate  determined  by  reference to the Base Rate or the LIBOR Rate and
SECTIONS  3.1(A)(I),  (II), (III) or (IV), as applicable,  but not to exceed the
Maximum Rate described in SECTION 3.3. Subject to the provisions of SECTION 3.2,
any of the Loans may be  converted  into,  or  continued  as, Base Rate Loans or
LIBOR Rate Loans in the manner provided in SECTION 3.2. If at any time Loans are
outstanding  with respect to which notice has not been delivered to the Agent in
accordance with the terms of this Agreement specifying the basis for determining
the interest rate applicable thereto,  then those Loans shall be Base Rate Loans
and shall bear interest at a rate determined by reference to the Base Rate until
notice  to the  contrary  has been  given to the Agent in  accordance  with this
Agreement  and such notice has become  effective.  Except as otherwise  provided
herein, the outstanding Obligations shall bear interest as follows:

            (i) For all Base Rate Term  Loans at a  fluctuating  per annum  rate
      equal to the Base Rate plus the Applicable Margin;

            (ii) For all Base Rate Revolving Loans and other Obligations  (other
      than Base Rate Term Loans and LIBOR Rate Loans) at a fluctuating per annum
      rate equal to the Base Rate plus the Applicable Margin;

            (iii) For all LIBOR  Term  Loans at a per  annum  rate  equal to the
      LIBOR Rate PLUS the Applicable Margin; and

            (iv) For all LIBOR  Revolving Loans at a per annum rate equal to the
      LIBOR Rate PLUS the Applicable Margin.

Each change in the Base Rate shall be reflected in the interest  rate  described
in  CLAUSES  (I) AND (II) above as of the  effective  date of such  change.  All
interest charges shall be computed on the basis of a year of 360 days and actual
days elapsed  (which results in more interest being paid than if computed on the
basis of a 365-day  year).  Interest  accrued  on all Loans  will be  payable in
arrears on the first day of each month hereafter and on the Termination Date.

      (b)  DEFAULT  RATE.  If any  Default  or Event of  Default  occurs  and is
continuing and the Required  Lenders in their  discretion so elect,  then, while
any such Default or Event of Default is continuing, all of the Obligations shall
bear interest at the Default Rate applicable thereto.

      3.2   CONTINUATION AND CONVERSION ELECTIONS.

      (a) The Borrowers  may, upon  irrevocable  written  notice to the Agent in
accordance with SECTION 3.2(B):

<PAGE>

            (i) elect, as of any Business Day, in the case of Base Rate Loans to
      convert  any such  Loans (or any part  thereof  in an amount not less than
      $1,000,000,  or that is in an integral  multiple of  $1,000,000  in excess
      thereof) into LIBOR Rate Loans; or

            (ii) elect, as of the last day of the applicable Interest Period, to
      continue any LIBOR Rate Loans having Interest Periods expiring on such day
      (or any part thereof in an amount not less than $1,000,000,  or that is in
      an integral multiple of $1,000,000 in excess thereof);

PROVIDED,  that if at any time the  aggregate  amount  of  LIBOR  Rate  Loans in
respect of any Borrowing is reduced,  by payment,  prepayment,  or conversion of
part  thereof  to  be  less  than  $1,000,000,   such  LIBOR  Rate  Loans  shall
automatically convert into Base Rate Loans, and on and after such date the right
of the Borrowers to continue  such Loans as, and convert such Loans into,  LIBOR
Rate Loans, as the case may be, shall  terminate,  and PROVIDED  FURTHER that if
the notice  shall fail to specify the  duration  of the  Interest  Period,  such
Interest Period shall be one month.

      (b)   The    applicable    Borrower    shall    deliver    a   notice   of
continuation/conversion  ("Notice of Continuation/Conversion") to be received by
the Agent not later than 11:00 am.  (Atlanta  time) at least three (3)  Business
Days in  advance  of the  Continuation/Conversion  Date,  if the Loans are to be
converted into or continued as LIBOR Rate Loans and specifying:

            (i) the proposed Continuation/Conversion Date;

            (ii) the aggregate amount of Loans to be converted or renewed;

            (iii) the type of Loans  resulting  from the proposed  conversion or
      continuation; and

            (iv)  the  duration  of the  requested  Interest  Period,  PROVIDED,
      HOWEVER,  the Borrower  may not select an Interest  Period with respect to
      any portion of the Term Loans which extends beyond an installment  payment
      date for the Term Loans unless, after giving effect to such election,  the
      portion of the Term Loans not subject to  Interest  Periods  ending  after
      such  installment  payment date is equal to or greater than the  principal
      due on such installment payment date.

      (c) If upon the expiration of any Interest Period applicable to LIBOR Rate
Loans, the applicable Borrower has failed to select timely a new Interest Period
to be  applicable to LIBOR Rate Loans or if any Default or Event of Default then
exists, such Borrower shall be deemed to have elected to convert such LIBOR Rate
Loans into Base Rate Loans  effective as of the expiration date of such Interest
Period.

      (d) The Agent will promptly  notify each Lender of its receipt of a Notice
of  Continuation/Conversion.  All  conversions and  continuations  shall be made
ratably according to the respective  outstanding  principal amounts of the Loans
with respect to which the notice was given held by each Lender.

<PAGE>

      (e) During the  existence of a Default or Event of Default,  the Borrowers
may not elect to have a Loan converted into or continued as a LIBOR Rate Loan.

      (f) After giving effect to any conversion or continuation of Loans,  there
may not be more than six (6) different Interest Periods in effect hereunder.

      3.3   MAXIMUM INTEREST RATE.

      In no event shall any  interest  rate  provided for  hereunder  exceed the
maximum rate legally  chargeable  by any Lender  under  applicable  law for such
Lender with respect to loans of the type  provided for  hereunder  (the "Maximum
Rate"). If, in any month, any interest rate, absent such limitation,  would have
exceeded the Maximum  Rate,  then the interest  rate for that month shall be the
Maximum Rate,  and, if in future months,  that interest rate would  otherwise be
less than the Maximum Rate,  then that interest rate shall remain at the Maximum
Rate until such time as the amount of interest paid hereunder  equals the amount
of interest  which would have been paid if the same had not been  limited by the
Maximum Rate. In the event that,  upon payment in full of the  Obligations,  the
total amount of interest  paid or accrued  under the terms of this  Agreement is
less than the total amount of interest  which  would,  but for this SECTION 3.3,
have been paid or  accrued  if the  interest  rate  otherwise  set forth in this
Agreement  had at all times been in effect,  then the  Borrowers  shall,  to the
extent  permitted  by  applicable  law,  pay the Agent,  for the  account of the
Lenders,  an amount  equal to the  excess of (a) the lesser of (i) the amount of
interest  which would have been  charged if the Maximum  Rate had, at all times,
been in effect or (ii) the amount of interest  which would have  accrued had the
interest  rate  otherwise  set forth in this  Agreement,  at all times,  been in
effect  over (b) the amount of  interest  actually  paid or  accrued  under this
Agreement.  In the event that a court of competent jurisdiction  determines that
the Agent and/or any Lender has received interest and other charges hereunder in
excess of the Maximum Rate,  such excess shall be deemed received on account of,
and shall  automatically  be  applied  to  reduce,  the  Obligations  other than
interest,  in the inverse  order of  maturity,  and if there are no  Obligations
outstanding,  the Agent and/or such Lender shall  refund to the  Borrowers  such
excess.

      3.4   CLOSING FEE.

      The Borrowers agree to pay the Agent,  for the account of the Lenders,  in
accordance with their  respective Pro Rata Share on the Closing Date the closing
fee set forth in the Agent's Fee Letter (the "Closing  Fee"),  which Closing Fee
shall be fully earned by the Lenders on the Closing Date. The Agent, the Lenders
and the Borrowers agree that the Closing Fee may be financed by the Lenders as a
Revolving Loan.

      3.5   UNUSED LINE FEE.

      Until the Loans have been paid in full and this Agreement terminated,  the
Borrowers  agree to pay,  on the first day of each month and on the  Termination
Date, to the Agent,  for the account of the Lenders,  in  accordance  with their
respective Pro Rata Shares,  an unused line fee (the "Unused Line Fee") equal to
the Applicable  Margin per annum times the amount by which the Maximum  Revolver
Amount  exceeded the sum of the average  daily  outstanding  amount of Revolving

<PAGE>

Loans and the  average  daily  undrawn  face  amount of  outstanding  Letters of
Credit,  during the immediately  preceding month or shorter period if calculated
on the Termination Date. The Unused Line Fee shall be computed on the basis of a
360-day year for the actual number of days elapsed. All payments received by the
Agent  shall be deemed  to be  credited  to the Loan  Account  immediately  upon
receipt for purposes of calculating the Unused Line Fee pursuant to this SECTION
3.5.

      3.6   LETTER OF CREDIT FEE.

      The Borrowers  agree to pay to the Agent,  for the account of the Lenders,
in accordance with their respective Pro Rata Shares,  for each Letter of Credit,
a fee (the "Letter of Credit Fee") equal to the  Applicable  Margin per annum of
the  undrawn  face  amount  of  each  Letter  of  Credit,  PLUS  all  reasonable
out-of-pocket  costs,  fees and expenses incurred by the Agent (or the Letter of
Credit Issuer) in connection with the application  for,  processing of, issuance
of, or amendment to any Letter of Credit,  which costs,  fees and expenses shall
include a "fronting  fee", as agreed to between the applicable  Borrower and the
Letter of Credit Issuer at the time of issuance, payable to the Letter of Credit
Issuer.  The  Letter  of  Credit  Fee  shall  be  payable  (a) with  respect  to
commercial/documentary Letters of Credit, monthly in arrears on the first day of
each  month  following  any  month in which a  commercial/documentary  Letter of
Credit  was  issued  and/or in which a  commercial/documentary  Letter of Credit
remains  outstanding and on the Termination Date and (b) with respect to standby
Letters  of Credit,  in full in advance on the day on which a standby  Letter of
Credit is issued;  provided,  HOWEVER,  that upon (i) an early  cancellation and
return of any such standby  Letter of Credit by the  beneficiary  thereunder  or
(ii) a drawing  under any such standby  Letter of Credit which is  reimbursed by
the Borrowers  through the proceeds of new Revolving Loans made  hereunder,  the
Agent  shall  refund a pro rata  amount  of such  Letter  of  Credit  Fee to the
Borrowers.  The Letter of Credit Fee shall be computed on the basis of a 360-day
year for the actual number of days from the date of issuance  through the stated
expiration date of the relevant Letter of Credit.

                                    ARTICLE 4
                            PAYMENTS AND PREPAYMENTS

      4.1   REVOLVING LOANS.

      (a) The Borrowers  shall repay the  outstanding  principal  balance of the
Revolving  Loans,  plus  all  accrued  but  unpaid  interest  thereon,   on  the
Termination  Date.  The Borrowers may prepay  Revolving  Loans at any time,  and
reborrow subject to the terms of this Agreement;  PROVIDED,  HOWEVER,  that with
respect  to any LIBOR  Revolving  Loans  prepaid by the  Borrowers  prior to the
expiration date of the Interest Period applicable  thereto,  the Borrowers shall
pay to the Agent for account of the Lenders  the  amounts  described  in SECTION
5.4.

      (b) Upon at least five (5)  Business  Days'  prior  written  notice to the
Agent and the Lenders, the Borrowers may permanently reduce by up to $10,000,000
the unused portion of the Maximum  Revolver  Amount provided such reduction must
be in a minimum  amount of $5,000,000  and in increments of $1,000,000 in excess

<PAGE>

thereof,  PROVIDED FURTHER after giving effect to such reduction,  the Aggregate
Revolver Outstandings shall not be greater than the Maximum Revolver Amount.

      (c) In addition,  and without  limiting the  generality of the  foregoing,
upon demand the  Borrowers  shall pay to the Agent,  for account of the Lenders,
the amount,  without duplication,  by which the Aggregate Revolver  Outstandings
exceeds the Borrowing Base.

      4.2   TERMINATION OF FACILITY.

      The Parent may terminate this Agreement upon at least thirty (30) Business
Days' notice to the Agent and the  Lenders,  upon (a) the payment in full of all
outstanding  Revolving Loans,  together with accrued interest  thereon,  and the
cancellation and return of all outstanding Letters of Credit, (b) the prepayment
in full of the Term Loans,  together with accrued and unpaid  interest  thereon,
(c) the payment of the early termination fee set forth in the next sentence, (d)
the payment in full in cash of all other  Obligations  together with accrued and
unpaid interest thereon, and (e) with respect to any LIBOR Rate Loans prepaid in
connection  with such  termination  prior to the expiration date of the Interest
Period applicable thereto,  the payment of the amounts described in SECTION 5.4.
If this Agreement is terminated at any time on or prior to the first Anniversary
Date,  whether  pursuant  to this  Section  or  pursuant  to SECTION  11.2,  the
Borrowers  shall pay to the  Agent,  for the  account of the  Lenders,  an early
termination fee in an amount equal to one percent (1%) of the Total Facility.

      4.3   REPAYMENT OF TERM LOANS.

      The  Borrowers  agrees to repay  the  principal  of the Term  Loans to the
Agent, for the account of the Lenders,  in accordance with the terms of the Term
Loan Notes.

      4.4   VOLUNTARY PREPAYMENTS OF THE TERM LOANS.

      The  Borrowers  may prepay the  principal of the Term Loans in whole or in
part,  at any time and from  time to time  upon (a) at least  five (5)  Business
Days' prior  written  notice to the Agent and the  Lenders,  and (b) payment of,
with respect to any LIBOR Term Loans to be prepaid prior to the expiration  date
of the Interest Period applicable thereto, the amounts described in SECTION 5.4.
All  voluntary  prepayments  of  the  principal  of  the  Term  Loans  shall  be
accompanied by the payment of all accrued but unpaid  interest on the Term Loans
to the date of prepayment.  Any voluntary  prepayment  under this SECTION 4.4 of
less than all of the outstanding principal of the Term Loans shall be applied to
the  installments  of  principal  of the  Term  Loans  in the  inverse  order of
maturity,  PROVIDED once the last scheduled installment payment of principal has
been paid in full then, the Borrowers may elect to apply additional  prepayments
pro rata to the remaining installments of principal.  Amounts prepaid in respect
of the Term Loans pursuant to this SECTION 4.4 may not be reborrowed.

      4.5   MANDATORY PREPAYMENTS OF THE TERM LOANS.

      The Borrowers shall prepay the entire unpaid principal balance of the Term
Loans, and all accrued but unpaid interest thereon,  on the Termination Date. In
connection with any such  prepayment,  if any LIBOR Term Loans are prepaid prior

<PAGE>

to the expiration date of the Interest Period applicable thereto,  the Borrowers
shall pay to the Lenders the amounts described in SECTION 5.4.

      4.6   PAYMENTS BY THE BORROWERS.

      (a) All  payments  to be  made  by the  Borrowers  shall  be made  without
set-off,  recoupment or  counterclaim.  Except as otherwise  expressly  provided
herein, all payments by the Borrowers shall be made to the Agent for the account
of the  Lenders,  at the  account  designated  by the Agent and shall be made in
Dollars and in immediately  available  funds,  no later than 12:00 noon (Atlanta
time) on the date specified herein. Any payment received by the Agent later than
12:00 noon (Atlanta time) shall be deemed to have been received on the following
Business Day and any applicable interest or fee shall continue to accrue.

      (b) Subject to the  provisions  set forth in the  definition  of "Interest
Period" herein,  whenever any payment is due on a day other than a Business Day,
such payment shall be due on the following  Business Day, and such  extension of
time shall in such case be included in the  computation  of interest or fees, as
the case may be.

      (c) Unless the Agent receives  notice from the Borrowers prior to the date
on which any payment is due to the Lenders that the Borrowers will not make such
payment in full as and when  required,  the Agent may assume that the  Borrowers
have  made  such  payment  in full to the  Agent  on  such  date in  immediately
available  funds and the Agent may (but shall not be so  required),  in reliance
upon such assumption, distribute to each Lender on such due date an amount equal
to the amount then due such Lender.  If and to the extent the Borrowers have not
made such payment in full to the Agent,  each Lender shall repay to the Agent on
demand such amount distributed to such Lender, together with interest thereon at
the Federal Funds Rate for each day from the date such amount is  distributed to
such Lender until the date repaid.

      4.7   PAYMENTS AS REVOLVING LOANS.

      All  payments  of  principal,   interest,   reimbursement  obligations  in
connection  with  Letters of Credit and Credit  Support  for  Letters of Credit,
fees, premiums and other sums payable hereunder, including all reimbursement for
expenses  pursuant to SECTION 15.7, may, at the option of the Agent, in its sole
discretion,  subject  only to the terms of this  SECTION  4.7,  be paid from the
proceeds of Revolving Loans made hereunder,  whether made following a request by
the  Borrowers  pursuant to SECTION 2.2 or a deemed  request as provided in this
SECTION 4.7. The Borrowers hereby irrevocably  authorize the Agent to charge the
Loan  Account  for the  purpose  of paying  principal,  interest,  reimbursement
obligations in connection  with Letters of Credit and Credit Support for Letters
of  Credit,   fees,  premiums  and  other  sums  payable  hereunder,   including
reimbursing  expenses  pursuant to SECTION 15.7, and agree that all such amounts
charged shall constitute Revolving Loans (including  Non-Ratable Loans and Agent
Advances) and that all such Revolving Loans so made shall be deemed to have been
requested by Borrowers  pursuant to SECTION 2.2. The Agent shall provide  notice
to the Parent of the  amounts  charged  pursuant  to the  immediately  preceding
sentence pursuant to monthly loan statements.

<PAGE>

      4.8   APPORTIONMENT, APPLICATION AND REVERSAL OF PAYMENTS.

      Principal and interest  payments  shall be  apportioned  ratably among the
Lenders  (according to the unpaid  principal  balance of the Loans to which such
payments  relate  held by each  Lender)  and  payments  of the  fees  shall,  as
applicable,  be  apportioned  ratably among the Lenders.  All payments  shall be
remitted  to the  Agent and all such  payments  not  relating  to  principal  or
interest of specific  Loans, or not  constituting  payment of specific fees, and
all  proceeds of Accounts or other  Collateral  received by the Agent,  shall be
applied, ratably, subject to the provisions of this Agreement, FIRST, to pay any
fees, indemnities or expense  reimbursements,  including any amounts relating to
Bank Products, then due to the Agent from any Borrower;  SECOND, to pay any fees
or expense reimbursements then due to the Lenders from the Borrowers;  THIRD, to
pay interest due in respect of all Revolving Loans,  including Non-Ratable Loans
and Agent Advances;  FOURTH, to pay or prepay principal of the Non-Ratable Loans
and Agent  Advances;  FIFTH,  to pay or prepay  principal of the Revolving Loans
(other  than  Non-Ratable  Loans and Agent  Advances)  and unpaid  reimbursement
obligations in respect of Letters of Credit;  SIXTH, to pay or prepay  principal
of the Term Loans;  and SEVENTH,  to the payment of any other  Obligation due to
the  Agent or any  Lender  by the  Borrowers.  Notwithstanding  anything  to the
contrary  contained in this  Agreement,  unless so directed by any Borrower,  or
unless an Event of Default has occurred and is continuing, neither the Agent nor
any Lender  shall apply any  payments  which it receives to any LIBOR  Revolving
Loan or LIBOR  Term  Loan,  except (a) on the  expiration  date of the  Interest
Period  applicable to any such LIBOR Rate Loan, or (b) in the event, and only to
the extent, that there are no outstanding Base Rate Revolving Loans or Base Rate
Term Loans. The Agent shall promptly distribute to each Lender,  pursuant to the
applicable wire transfer instructions received from each Lender in writing, such
funds  as it may be  entitled  to  receive,  subject  to a  Settlement  delay as
provided  for in  SECTION  2.2(J).  The Agent  and the  Lenders  shall  have the
continuing and exclusive right to apply and reverse and reapply any and all such
proceeds and payments to any portion of the Obligations.

      4.9   INDEMNITY FOR RETURNED PAYMENTS.

      If after  receipt of any payment which is applied to the payment of all or
any part of the Obligations, the Agent or any Lender is for any reason compelled
to  surrender  such  payment or proceeds to any Person  because  such payment or
application  of  proceeds  is  invalidated,   declared  fraudulent,  set  aside,
determined to be void or voidable as a preference,  impermissible  setoff,  or a
diversion of trust funds, or for any other reason,  then the Obligations or part
thereof  intended  to be  satisfied  shall be  revived  and  continued  and this
Agreement  shall  continue in full force as if such  payment or proceeds had not
been received by the Agent or such Lender and the  Borrowers  shall be liable to
pay to the Agent and the Lenders,  and hereby does  indemnify  the Agent and the
Lenders  and hold the  Agent and the  Lenders  harmless  for the  amount of such
payment or proceeds surrendered. The provisions of this SECTION 4.9 shall be and
remain effective  notwithstanding  any contrary action which may have been taken
by the Agent or any  Lender in  reliance  upon such  payment or  application  of
proceeds,  and any such contrary  action so taken shall be without  prejudice to
the Agent's and the Lenders'  rights under this Agreement and shall be deemed to
have been conditioned upon such payment or application of proceeds having become
final and  irrevocable.  The  provisions  of this SECTION 4.9 shall  survive the
termination of this Agreement.

<PAGE>

      4.10  AGENT'S AND LENDERS' BOOKS AND RECORDS; MONTHLY STATEMENTS.

      Each Borrower  agrees that the Agent's and each Lender's books and records
showing the Obligations and the transactions  pursuant to this Agreement and the
other Loan  Documents  shall be admissible  in any action or proceeding  arising
therefrom,   and  shall  constitute   rebuttably   presumptive   proof  thereof,
irrespective of whether any Obligation is also evidenced by a promissory note or
other  instrument.  The Agent will provide to the Parent a monthly  statement of
Loans,  payments,  and  other  transactions  pursuant  to this  Agreement.  Such
statement shall be deemed correct, accurate, and binding on the Borrowers and an
account  stated  (except for  reversals and  reapplications  of payments made as
provided  in SECTION 4.8 and  corrections  of errors  discovered  by the Agent),
unless a Borrower  notifies the Agent in writing to the contrary  within  thirty
(30) days after such statement is rendered. In the event a timely written notice
of objections is given by the  Borrowers,  only the items to which  exception is
expressly made will be considered to be disputed by the Borrowers.

                                    ARTICLE 5
                     TAXES, YIELD PROTECTION AND ILLEGALITY

      5.1   TAXES.

      (a) Except as otherwise provided in this Section 5.1, any and all payments
by any Borrower to each Lender or the Agent under this  Agreement  and any other
Loan  Document  shall be made  free and  clear  of,  and  without  deduction  or
withholding  for, any Taxes.  In  addition,  the  Borrowers  shall pay all Other
Taxes.

      (b) Each  Borrower  agrees to indemnify  and hold harmless each Lender and
the Agent for the full  amount of Taxes or Other Taxes  (including  any Taxes or
Other Taxes imposed by any  jurisdiction  on amounts payable under this Section)
paid  by any  Lender  or the  Agent  and  any  liability  (including  penalties,
interest,  additions  to tax and  expenses)  arising  therefrom  or with respect
thereto,  whether or not such Taxes or Other  Taxes  were  correctly  or legally
asserted.  Payment under this indemnification shall be made within 30 days after
the date such Lender or the Agent makes written demand therefor.

      (c) If any  Borrower  shall be required  by law to deduct or withhold  any
Taxes or Other  Taxes  from or in respect of any sum  payable  hereunder  to any
Lender or the Agent, then:

            (i) the sum payable  shall be  increased  as necessary so that after
      making all required deductions and withholdings  (including deductions and
      withholdings  applicable  to  additional  sums payable under this Section)
      such Lender or the Agent,  as the case may be, receives an amount equal to
      the sum it would have received had no such deductions or withholdings been
      made;

            (ii) such Borrower shall make such deductions and withholdings;

            (iii) such Borrower  shall pay the full amount  deducted or withheld
      to the relevant  taxing  authority or other  authority in accordance  with
      applicable law; and

<PAGE>

            (iv) such  Borrower  shall also pay to each  Lender or the Agent for
      the account of such Lender,  at the time interest is paid,  all additional
      amounts which the respective Lender specifies as necessary to preserve the
      after-tax  yield such  Lender  would have  received if such Taxes or Other
      Taxes had not been imposed;

PROVIDED,  HOWEVER,  that the Borrowers shall be entitled to deduct and withhold
any Taxes or Other Taxes and shall not be required to increase  any such amounts
payable to any Lender that is not organized  under the laws of the United States
of America or a State thereof if such Lender fails to comply with the applicable
requirements of SECTION 14.10 whenever any such Taxes or Other Taxes are payable
by a Borrower.

      (d) Within 30 days after the date of any payment by any  Borrower of Taxes
or Other  Taxes,  such  Borrower  shall  furnish  the  Agent the  original  or a
certified copy of a receipt  evidencing  payment  thereof,  or other evidence of
payment satisfactory to the Agent.

      (e) If the Borrowers are required to pay additional  amounts to any Lender
or the Agent pursuant to subsection (c) of this Section,  then such Lender shall
use reasonable  efforts  (consistent with legal and regulatory  restrictions) to
change  the  jurisdiction  of its  lending  office so as to  eliminate  any such
additional  payment by the Borrowers which may thereafter accrue, if such change
in the judgment of such Lender is not otherwise disadvantageous to such Lender.

      5.2   ILLEGALITY.

      (a) If any Lender  determines that the  introduction of any Requirement of
Law,  or any  change in any  Requirement  of Law,  or in the  interpretation  or
administration  of any  Requirement  of Law, has made it  unlawful,  or that any
central bank or other  Governmental  Authority has asserted that it is unlawful,
for such Lender or its applicable lending office to make LIBOR Rate Loans, then,
on notice  thereof  by that  Lender to the  Borrowers  through  the  Agent,  any
obligation of that Lender to make LIBOR Rate Loans shall be suspended until that
Lender notifies the Agent and the Borrowers that the  circumstances  giving rise
to such determination no longer exist.

      (b) If a Lender  determines that it is unlawful to maintain any LIBOR Rate
Loan,  each Borrower  shall,  upon its receipt of notice of such fact and demand
from such  Lender  (with a copy to the  Agent),  prepay in full such  LIBOR Rate
Loans of that Lender then  outstanding,  together with interest  accrued thereon
and amounts  required under SECTION 5.4,  either on the last day of the Interest
Period thereof, if that Lender may lawfully continue to maintain such LIBOR Rate
Loans to such day, or immediately,  if that Lender may not lawfully  continue to
maintain  such LIBOR Rate Loans.  If the Borrowers are required to so prepay any
LIBOR Rate Loans, then  concurrently  with such prepayment,  the Borrowers shall
borrow from the affected  Lender,  in the amount of such repayment,  a Base Rate
Loan.

      5.3   INCREASED COSTS AND REDUCTION OF RETURN.

      (a) If any Lender determines that due to either (i) the introduction of or
any change in the  interpretation of any law or regulation after the date hereof
or (ii) the  compliance  by that Lender with any guideline or request made after

<PAGE>

the date hereof from any central bank or other  Governmental  Authority (whether
or not having the force of law), there shall be any increase in the cost to such
Lender of  agreeing  to make or making,  funding or  maintaining  any LIBOR Rate
Loans, then the Borrowers shall be liable for, and shall from time to time, upon
demand  (with a copy of such demand to be sent to the  Agent),  pay to the Agent
for  the  account  of such  Lender,  additional  amounts  as are  sufficient  to
compensate such Lender for such increased costs.

      (b) If any Lender shall have  determined that (i) the  introduction  after
the date hereof of any Capital  Adequacy  Regulation,  (ii) any change after the
date hereof in any Capital Adequacy Regulation,  (iii) any change after the date
hereof  in  the   interpretation  or  administration  of  any  Capital  Adequacy
Regulation by any central bank or other Governmental  Authority charged with the
interpretation or administration  thereof,  or (iv) compliance by such Lender or
any  corporation or other entity  controlling  such Lender with any such Capital
Adequacy  Regulation  introduced,  changed or newly  interpreted or administered
after the date hereof, affects or would affect the amount of capital required or
expected to be  maintained  by such Lender or any  corporation  or other  entity
controlling  such Lender and (taking into  consideration  such  Lender's or such
corporation's  or other entity's  policies with respect to capital  adequacy and
such  Lender's  desired  return on capital)  determines  that the amount of such
capital is increased as a  consequence  of its  Commitments,  loans,  credits or
obligations  under  this  Agreement,  then,  upon  demand of such  Lender to the
Borrowers  through the Agent, the Borrowers shall pay to such Lender,  from time
to time as specified by such Lender, additional amounts sufficient to compensate
such Lender for such increase.

      5.4   FUNDING LOSSES.

      The Borrowers  shall  reimburse each Lender and hold each Lender  harmless
from any loss or expense which such Lender may sustain or incur as a consequence
of:

      (a) the failure of any  Borrower to make on a timely  basis any payment of
principal of any LIBOR Rate Loan;

      (b) the  failure of any  Borrower  to borrow,  continue  or convert a Loan
after such Borrower has given (or is deemed to have given) a Notice of Borrowing
or a Notice of Continuation/Conversion; or

      (c) the prepayment or other payment (including after acceleration thereof)
of any  LIBOR  Rate  Loans on a day  that is not the  last  day of the  relevant
Interest  Period;  including any loss or expense arising from the liquidation or
reemployment  of funds  obtained by it to maintain  its LIBOR Rate Loans or from
fees payable to terminate the deposits from which such funds were obtained,  but
excluding any loss of anticipated profit.  Borrower shall also pay any customary
administrative fees charged by any Lender in connection with the foregoing.

      5.5   INABILITY TO DETERMINE RATES.

      If the Agent  determines that for any reason adequate and reasonable means
do not exist for  determining  the LIBOR Rate for any requested  Interest Period
with  respect  to a proposed  LIBOR  Rate  Loan,  or that the LIBOR Rate for any

<PAGE>

requested  Interest  Period with respect to a proposed  LIBOR Rate Loan does not
adequately  and fairly reflect the cost to the Lenders of funding such Loan, the
Agent will  promptly so notify the Borrowers  and each Lender.  Thereafter,  the
obligation of the Lenders to make or maintain LIBOR Rate Loans  hereunder  shall
be suspended  until the Agent  revokes  such notice in writing.  Upon receipt of
such  notice,  any  Borrower  may revoke any  Notice of  Borrowing  or Notice of
Continuation/Conversion  then submitted by it. If the  applicable  Borrower does
not revoke such Notice,  the Lenders shall make,  convert or continue the Loans,
as proposed by such Borrower,  in the amount specified in the applicable  notice
submitted by such Borrower, but such Loans shall be made, converted or continued
as Base Rate Loans instead of LIBOR Rate Loans.

      5.6   CERTIFICATES OF LENDERS.

      Any Lender claiming  reimbursement  or  compensation  under this Article 5
shall deliver to the Borrowers (with a copy to the Agent) a certificate  setting
forth in reasonable  detail the amount payable to such Lender hereunder and such
certificate  shall be conclusive  and binding on the Borrowers in the absence of
manifest error.

      5.7   SURVIVAL.

      The  agreements  and  obligations of the Borrowers in this Article 5 shall
survive the payment of all other Obligations.

                                    ARTICLE 6
                                   COLLATERAL

      6.1   GRANT OF SECURITY INTEREST.

      (a) As security for all  Obligations,  each of the Borrowers hereby grants
to the  Agent,  for the  benefit  of the  Agent,  the  Bank and the  Lenders,  a
continuing  security  interest in, lien on,  assignment  of and right of set-off
against, all of the following property and assets of such Borrower,  whether now
owned or existing or hereafter acquired or arising, regardless of where located:

            (i) all Accounts (including any credit enhancement therefor);

            (ii) all Inventory;

            (iii) all contract rights,  letters of credit,  Assigned  Contracts,
      chattel paper, instruments, notes, documents, and documents of title;

            (iv) all General Intangibles;

            (v) all  Equipment  (to the  extent  not  already  subject to a Lien
      granted pursuant to the IRB Financing);

            (vi) all Investment Property;

<PAGE>

            (vii)  all  money,  cash,  cash  equivalents,  securities  and other
      property of any kind of such  Borrower  held directly or indirectly by the
      Agent or any Lender;

            (viii)  all  of  such  Borrower's  deposit  accounts,  credits,  and
      balances  with and other claims  against the Agent or any Lender or any of
      their  Affiliates  or any other  financial  institution  with  which  such
      Borrower maintains deposits, including any Payment Accounts;

            (ix) all books,  records and other property  related to or referring
      to any of the foregoing,  including books, records,  account ledgers, data
      processing  records,  computer  software  and other  property  and General
      Intangibles  at any time  evidencing or relating to any of the  foregoing;
      and

            (x) all accessions to, substitutions for and replacements,  products
      and  proceeds  of any of the  foregoing,  including,  but not  limited to,
      proceeds of any insurance  policies,  claims  against third  parties,  and
      condemnation  or  requisition  payments  with respect to all or any of the
      foregoing.

All of the  foregoing,  together with the Real Estate  covered by the Mortgages,
the Pledged  Collateral  referred  to in the Pledge  Agreements,  the  factoring
proceeds  referred to in the  Assignments  of  Factoring  Proceeds and all other
property  of each  Borrower  in which the Agent or any Lender may at any time be
granted a Lien, is herein collectively referred to as the "Collateral."

      (b) On or before  September 15, 2000, the applicable  Borrowers  shall (i)
execute and deliver to the Agent, as security for all Obligations,  Mortgages on
all owned Real  Estate  located in the United  States (to the extent not already
subject  to a Lien  granted  pursuant  to the  IRB  Financing  and  specifically
excluding the condominium  owned by the Borrowers in Banner Elk, North Carolina)
and on the Real Estate  leased by Regal in Hickory,  North  Carolina on which an
80,000 square foot distribution  center is located and (ii) deliver to the Agent
such title insurance policies, legal opinions,  officer's certificates and other
supporting documents as the Agent may reasonably request in connection with such
Mortgages,  all such documents to be in form and substance reasonably acceptable
to the Agent.  In  addition,  if at any time the Real  Estate  subject to a Lien
granted  pursuant to the IRB Financing  shall no longer be subject to such Lien,
the applicable Borrowers shall promptly (x) execute and deliver to the Agent, as
security for the  Obligations,  Mortgages on such Real Estate and (y) deliver to
the Agent such title insurance policies, legal opinions,  officer's certificates
and other supporting documents as the Agent may reasonably request in connection
with such Mortgages,  all such documents to be in form and substance  reasonably
acceptable to the Agent.

      (c) At the request of the Agent,  the  Borrowers  shall (i) use their best
efforts  to obtain  any  necessary  consents  to  assignment  with  respect to a
collateral  assignment to the Agent of the Borrowers' interests in and under (A)
that certain Supply  Agreement  dated December 30, 1998 between Union  Underwear
Company,  Inc. d/b/a Fruit of the Loom and Worldtex, as amended or modified from
time to time, and (B) that certain Joint Venture Agreement dated August 18, 1999

<PAGE>

between Spinwell Valliappa Private Limited and Worldtex,  as amended or modified
from time to time, and (ii) execute such documents as the Agent reasonably deems
necessary to make such contracts  subject to the Agent's Liens and a part of the
Collateral.

      (d) All of the Obligations shall be secured by all of the Collateral.

      6.2   PERFECTION AND PROTECTION OF SECURITY INTEREST.

      (a) Each  Borrower  shall,  at its expense,  perform all steps  reasonably
requested by the Agent at any time to perfect,  maintain,  protect,  and enforce
the Agent's  Liens,  including:  (i)  executing,  delivering  and/or  filing and
recording  of the  Mortgages,  the  Notices of Grant of  Security  Interests  in
Patents  and the  Notices  of Grant of  Security  Interests  in  Trademarks  and
executing  and filing  financing  or  continuation  statements,  and  amendments
thereof,  in form and  substance  reasonably  satisfactory  to the  Agent;  (ii)
delivering to the Agent the originals of all instruments, documents, and chattel
paper,  and all other  Collateral  of which the Agent  determines it should have
physical  possession  in order to  perfect  and  protect  the  Agent's  security
interest  therein,  duly  pledged,  endorsed or  assigned  to the Agent  without
restriction;  (iii)  delivering  to the Agent  warehouse  receipts  covering any
portion of the Collateral located in warehouses and for which warehouse receipts
are issued and  certificates of title covering any portion of the collateral for
which  certificates  of title  have been  issued;  (iv) when an Event of Default
exists,  transferring  Inventory to warehouses or other locations  designated by
the Agent; (v) placing notations on such Borrower's books of account to disclose
the  Agent's  security  interest;  (vi)  delivering  to the Agent all letters of
credit on which such Borrower is named beneficiary;  and (vii) taking such other
steps as are deemed  necessary or desirable by the Agent to maintain and protect
the Agent's  Liens.  To the extent  permitted by  applicable  law, the Agent may
file, without applicable Borrower's signature,  one or more financing statements
disclosing the Agent's Liens. Each Borrower agrees that a carbon,  photographic,
photostatic, or other reproduction of this Agreement or of a financing statement
is sufficient as a financing statement.

      (b) If any  Collateral is at any time in the  possession or control of any
warehouseman,  bailee or any of a  Borrower's  agents or  processors,  then such
Borrower  shall  notify the Agent  thereof  and shall,  at the request of Agent,
notify such Person of the Agent's security interest in such Collateral and, upon
and during the continuation of an Event of Default, instruct such Person to hold
all such Collateral for the Agent's account subject to the Agent's instructions.
If at any time any Collateral is located in any operating facility of a Borrower
not owned by such  Borrower,  then such  Borrower  shall,  at the request of the
Agent,  obtain  written  landlord  lien waivers or  subordinations,  in form and
substance reasonably  satisfactory to the Agent, of all present and future Liens
to which the owner or lessor of such premises may be entitled to assert  against
the Collateral.

      (c) From time to time,  each  Borrower  shall,  upon the Agent's  request,
execute and deliver  confirmatory written instruments pledging to the Agent, for
the ratable benefit of the Agent and the Lenders, the Collateral with respect to
such Borrower,  but such  Borrower's  failure to do so shall not affect or limit
any  security  interest or any other rights of the Agent or any Lender in and to
the Collateral  with respect to such  Borrower.  So long as this Agreement is in
effect and until all Obligations  have been fully  satisfied,  the Agent's Liens

<PAGE>

shall continue in full force and effect in all Collateral (whether or not deemed
eligible for the purpose of  calculating  the  Availability  for any Borrower or
Total Availability or as the basis for any advance,  loan,  extension of credit,
or other financial accommodation).

      6.3   LOCATION OF COLLATERAL.

      Each Borrower  represents  and warrants to the Agent and the Lenders that:
(a)  SCHEDULE  6.3 is a  correct  and  complete  list of such  Borrower's  chief
executive  office,  the location of its books and records,  the locations of the
Collateral,  and the  locations of all of its other places of business;  and (b)
SCHEDULE 6.3 correctly  identifies any of such facilities and locations that are
not owned by such Borrower and sets forth the names of the owners and lessors or
sublessors of such facilities and locations.  Each Borrower covenants and agrees
that it will not (i) maintain any  Collateral  at any location  other than those
locations listed for such Borrower on SCHEDULE 6.3, (ii) otherwise change or add
to any of such  locations,  or (iii) change the location of its chief  executive
office from the  location  identified  in  SCHEDULE  6.3, in each case unless it
gives the Agent at least  thirty (30) days'  prior  written  notice  thereof and
executes any and all financing  statements  and other  documents  that the Agent
reasonably  requests in connection  therewith.  Without  limiting the foregoing,
each  Borrower  represents  that all of its Inventory  (other than  Inventory in
transit) is, and covenants that all of its Inventory will be, located either (a)
on premises  owned by such  Borrower,  (b) on premises  leased by such Borrower,
provided  that the Agent has, if  requested  by the Agent,  received an executed
landlord  waiver  from the  landlord  of such  premises  in form  and  substance
satisfactory to the Agent, or (c) in a warehouse or with a bailee, provided that
the Agent has, if requested  by the Agent,  received an executed  bailee  letter
from the applicable Person in form and substance satisfactory to the Agent.

      6.4   TITLE TO, LIENS ON, AND SALE AND USE OF COLLATERAL.

      Each  Borrower  represents  and  warrants to the Agent and the Lenders and
agrees with the Agent and the Lenders  that:  (a) all of the  Collateral  is and
will  continue  to be  owned  by such  Borrower  free  and  clear  of all  Liens
whatsoever,  except for Permitted Liens; (b) the Agent's Liens in the Collateral
will not be subject to any prior Lien  except  for  Permitted  Liens  (excluding
Liens permitted under CLAUSE (F) of the definition of Permitted Liens);  and (c)
such Borrower will use,  store,  and maintain the Collateral with all reasonable
care and will use such Collateral for lawful purposes only.

      6.5   APPRAISALS.

      At such times as the Agent requests, the Borrowers shall, at their expense
and upon the  Agent's  request,  provide  the Agent with  appraisals  or updates
thereof of any or all of the  Collateral  from an  appraiser,  and prepared on a
basis,  satisfactory  to the Agent,  such  appraisals  and  updates to  include,
without limitation, information required by applicable law and regulation and by
the internal  policies of the Lenders.  Without  limiting the  generality of the
foregoing,  the  Borrowers  agree to provide  the Agent with  updated  Inventory
appraisals within 90 days following the Closing Date.

<PAGE>

      6.6   ACCESS AND EXAMINATION; CONFIDENTIALITY; CONSENT TO ADVERTISING.

      (a) The  Agent,  accompanied  by any Lender  which so  elects,  may at all
reasonable  times during regular business hours and upon reasonable prior notice
(and at any time when a Default  or Event of Default  exists and is  continuing)
have access to, examine,  audit, make extracts from or copies of and inspect any
or  all  of the  Borrowers'  records,  files,  and  books  of  account  and  the
Collateral,  and discuss the Borrowers' affairs with the Borrowers' officers and
management. Each Borrower will deliver to the Agent any instrument necessary for
the Agent to obtain records from any service bureau maintaining records for such
Borrower.  The Agent may, and at the direction of the Required Lenders shall, at
the Borrowers' expense,  make copies of all of the Borrowers' books and records,
or require the  Borrowers  to deliver  such copies to the Agent.  The Agent may,
without expense to the Agent, use such of the Borrowers'  respective  personnel,
supplies,  and Real Estate as may be  reasonably  necessary for  maintaining  or
enforcing the Agent's Liens. The Agent shall have the right, at any time, in the
Agent's name or in the name of a nominee of the Agent,  to verify the  validity,
amount  or any  other  matter  relating  to the  Accounts,  Inventory,  or other
Collateral, by mail, telephone, or otherwise.

      (b) Each Borrower hereby consents that the Agent and each Lender may issue
and  disseminate  to  the  public  general  information  describing  the  credit
accommodation  entered into pursuant to this  Agreement,  including the name and
address of such Borrower and a general  description of such Borrower's  business
and may use such Borrower's name in advertising and other promotional  material,
in each case (other than in connection with a traditional  tombstone) subject to
the Parent's prior review and approval of such  information and materials,  such
approval not to be unreasonably withheld or delayed.

      (c) Each Lender severally agrees to take normal and reasonable precautions
and  exercise  due  care to  maintain  the  confidentiality  of all  information
identified  as  "confidential",  "proprietary"  or  "secret"  by a Borrower  and
provided  to the Agent or such  Lender by or on behalf of such  Borrower,  under
this  Agreement  or any other  Loan  Document,  except to the  extent  that such
information (i) was or becomes generally available to the public other than as a
result  of  disclosure  by the  Agent or such  Lender,  or (ii)  was or  becomes
available on a  nonconfidential  basis from a source  other than such  Borrower,
provided that such source is not bound by a confidentiality  agreement with such
Borrower known to the Agent or such Lender;  PROVIDED,  HOWEVER,  that the Agent
and any Lender may disclose such  information  (1) at the request or pursuant to
any requirement of any Governmental  Authority to which the Agent or such Lender
is subject or in connection  with an  examination of the Agent or such Lender by
any such  Governmental  Authority;  (2)  pursuant  to  subpoena  or other  court
process;  (3) when  required to do so in accordance  with the  provisions of any
applicable  Requirement  of  Law;  (4)  to the  extent  reasonably  required  in
connection with any litigation or proceeding (including, but not limited to, any
bankruptcy  proceeding)  to which the  Agent,  any  Lender  or their  respective
Affiliates  may be party;  (5) to the extent  reasonably  required in connection
with the exercise of any remedy hereunder or under any other Loan Document;  (6)
to the Agent's or such Lender's independent auditors, accountants, attorneys and
other professional  advisors,  provided that such professional advisors agree to
keep such  information  confidential  to the same extent required of the Lenders
hereunder;  (7) to any prospective  Participant or Assignee under any Assignment
and Acceptance,  actual or potential, provided that such prospective Participant

<PAGE>

or  Assignee  agrees to keep such  information  confidential  to the same extent
required  of the Agent and the Lenders  hereunder;  (8) as  expressly  permitted
under the terms of any other document or agreement regarding  confidentiality to
which such  Borrower is party or is deemed  party with the Agent or such Lender;
and (9) to its  Affiliates,  provided  that such  Affiliates  agree to keep such
information  confidential to the same extent required of the Lenders  hereunder;
PROVIDED FURTHER that the Agent or such Lender, as applicable,  will endeavor to
provide  notice to the Parent of any  disclosure  pursuant  to clauses (1) - (4)
above.

      6.7   COLLATERAL REPORTING.

      The Parent  shall  provide the Agent with the  following  documents at the
following times in form satisfactory to the Agent: (a) within six (6) days after
the last day of each  calendar  week,  or more  frequently  if  requested by the
Agent,  (i) upon  request of the Agent,  a schedule of the  Borrowers'  Accounts
created,  and a  detailed  report  of  collections  made,  since  the last  such
schedule, (ii) a Borrowing Base Certificate with respect to the last day of such
week and (iii) a calculation of ineligible  Accounts and  ineligible  Inventory;
(b) on a monthly basis, by the fifteenth  (15th) day of the following  month, or
more frequently if requested by the Agent, an aging of the Borrowers'  Accounts,
together with a  reconciliation  to the previous month's aging of the Borrowers'
Accounts and to the  Borrowers'  general  ledger;  (c) on a monthly basis by the
fifteenth  (15th) day of the following month, or more frequently if requested by
the Agent, an aging of the Borrowers'  accounts payable;  (d) on a monthly basis
by the  fifteenth  (15th)  day of the  following  month (or more  frequently  if
requested  by the Agent),  Inventory  reports by  category  and  location,  with
additional  detail  showing  additions  to and  deletions  from  the  Inventory,
together  with a  reconciliation  to the  Borrowers'  general  ledger;  (e) upon
request, copies of invoices in connection with the Borrowers' Accounts, customer
statements,  credit  memos,  remittance  advices  and  reports,  deposit  slips,
shipping and delivery  documents in connection with the Borrowers'  Accounts and
for Inventory  and  Equipment  acquired by the  Borrowers,  purchase  orders and
invoices;  (f)  upon  request,  a  statement  of  the  balance  of  each  of the
Intercompany  Accounts;  (g) such  other  reports  as to the  Collateral  of the
Borrowers as the Agent shall reasonably  request from time to time; and (h) with
the delivery of each of the foregoing,  a certificate of the Parent  executed by
an  officer  thereof  certifying  as to the  accuracy  and  completeness  of the
foregoing.  If any of the  Borrowers  records or reports of the  Collateral  are
prepared  by  an  accounting  service  or  other  agent,  the  Borrowers  hereby
authorizes such service or agent to deliver such records,  reports,  and related
documents to the Agent, for distribution to the Lenders.

      6.8   ACCOUNTS.

      (a) Each  Borrower  hereby  represents  and  warrants to the Agent and the
Lenders,  with respect to such  Borrower's  Accounts,  that:  (i) each  existing
Account represents,  and each future Account will represent, a BONA FIDE sale or
lease and delivery of goods by such  Borrower,  or rendition of services by such
Borrower, in the ordinary course of such Borrower's business; (ii) each existing
Account is, and each future Account will be, for a liquidated  amount payable by
the Account Debtor thereon on the terms set forth in the invoice  therefor or in
the  schedule  thereof  delivered to the Agent,  without any offset,  deduction,

<PAGE>

defense,  or  counterclaim  except those known to such Borrower and disclosed to
the Agent and the Lenders to the extent  required  pursuant  to this  Agreement;
(iii) no payment will be received  with  respect to any Account,  and no credit,
discount,  or extension,  or agreement  therefor will be granted on any Account,
except  in the  ordinary  course  of the  Borrowers'  business  when no Event of
Default exists hereunder and, to the extent required  hereunder,  as reported to
the Agent and the Lenders in accordance with this  Agreement;  (iv) each copy of
an invoice delivered to the Agent by such Borrower will be a genuine copy of the
original  invoice sent to the Account  Debtor named  therein;  and (v) all goods
described in any invoice  representing  a sale of goods will have been delivered
to the  Account  Debtor and all  services  of such  Borrower  described  in each
invoice will have been performed.

      (b) No  Borrower  shall  re-date  any  invoice  or sale or make  sales  on
extended dating beyond that customary in such  Borrower's  business or extend or
modify any Account,  except in the ordinary  course of the  Borrowers'  business
when no Event of Default exists  hereunder.  If a Borrower  becomes aware of any
matter  adversely  affecting  the  collectibility  of any Account or the Account
Debtor therefor involving an amount greater than $250,000, including information
regarding the Account Debtor's creditworthiness,  such Borrower will promptly so
advise the Agent.

      (c) No Borrower shall accept any note or other instrument  (except a check
or other  instrument  for the  immediate  payment of money) with  respect to any
Account  without  the  Agent's  written  consent.  If the Agent  consents to the
acceptance  of any such  instrument,  it shall be  considered as evidence of the
applicable  Account and not payment  thereof and the  applicable  Borrower  will
promptly deliver such instrument to the Agent,  endorsed by such Borrower to the
Agent in a manner satisfactory in form and substance to the Agent.

      (d)  Without   limiting  the  obligation  of  the  Borrowers  to  disclose
ineligible  Accounts on the Borrowing Base  Certificates  delivered  pursuant to
Section 6.6, each Borrower  shall notify the Agent  promptly of all disputes and
claims in excess of  $250,000  with any  Account  Debtor,  and agrees to settle,
contest,  or adjust  such  dispute  or claim at no  expense  to the Agent or any
Lender.  No discount,  credit or allowance  shall be granted to any such Account
Debtor without the Agent's prior written consent, except for discounts,  credits
and allowances made or given in the ordinary  course of the Borrowers'  business
when no Event of Default exists  hereunder.  The applicable  Borrower shall send
the Agent a copy of each  credit  memorandum  in excess of  $250,000  as soon as
issued.  The Agent may at all times when an Event of Default  exists  hereunder,
settle or adjust  disputes and claims  directly with Account Debtors for amounts
and upon terms which the Agent or the Required  Lenders,  as  applicable,  shall
consider  advisable  and, in all cases,  the Agent will credit the Loan  Account
with the net amounts received by the Agent in payment of any Accounts.

      (e) If an Account Debtor returns any Inventory to a Borrower when no Event
of Default  exists,  then such Borrower shall promptly  determine the reason for
such return and shall  issue a credit  memorandum  to the Account  Debtor in the
appropriate  amount.  The Borrowers  shall  immediately  report to the Agent any
return  involving  an  amount  in excess of  $250,000.  Each such  report  shall
indicate  the reasons for the returns and the  locations  and  condition  of the
returned  Inventory.  In the event any Account Debtor  returns  Inventory to the
Borrowers when an Event of Default  exists,  the Borrowers,  upon the request of

<PAGE>

the Agent,  shall: (i) hold the returned  Inventory in trust for the Agent; (ii)
segregate all returned  Inventory from all of its other property;  (iii) dispose
of the returned Inventory solely according to the Agent's written  instructions;
and (iv) not issue any credits or allowances  with respect  thereto  without the
Agent's prior written  consent.  All returned  Inventory shall be subject to the
Agent's Liens thereon.  Whenever any Inventory is returned,  the related Account
shall be deemed  ineligible  to the  extent of the amount  owing by the  Account
Debtor with respect to such returned Inventory

      6.9   COLLECTION OF ACCOUNTS; PAYMENTS.

      (a) The Borrowers  shall  establish a lock-box  service for collections of
all Accounts  (other than Accounts  collected in Canada) at one or more Clearing
Banks acceptable to the Agent and subject to a Blocked Account  Agreement and/or
other  documentation  acceptable to the Agent. At the request of the Agent, each
of the Borrowers'  collection  accounts not already subject to a Blocked Account
Agreement  shall be made subject to a Blocked Account  Agreement.  The Borrowers
shall instruct all Account Debtors to make all payments  directly to the address
established  for  such  service.  If,  notwithstanding  such  instructions,  any
Borrower  receives any proceeds of Accounts,  it shall  receive such payments as
the Agent's trustee, and shall immediately deliver such payments to the Agent in
their  original  form  duly  endorsed  in blank or  deposit  them into a Payment
Account,  as the Agent may direct.  All collections  received in any lock-box or
Payment  Account or directly by any Borrower or the Agent,  and all funds in any
Payment  Account or other account to which such  collections are deposited shall
be subject to the Agent's sole control and  withdrawals  by the Borrowers  shall
not be permitted.  The Agent or the Agent's  designee may, at any time after the
occurrence and during the  continuation  of an Event of Default,  notify Account
Debtors  that the  Accounts  have been  assigned to the Agent and of the Agent's
security  interest  therein,  and may  collect  them  directly  and  charge  the
collection  costs and expenses to the Loan Account as a Revolving  Loan. So long
as an Event of Default has occurred and is  continuing,  the  Borrowers,  at the
Agent's  request,  shall execute and deliver to the Agent such  documents as the
Agent  shall  require to grant the Agent  access to any post office box in which
collections of Accounts are received.

      (b) If sales of Inventory are made or services are rendered for cash,  the
applicable  Borrower  shall  immediately  deliver to the Agent or deposit into a
Payment Account the cash which such Borrower receives.

      (c) All payments  including  immediately  available  funds received by the
Agent at a bank account  designated by it, will be the Agent's sole property for
its  benefit  and the  benefit of the  Lenders  and will be credited to the Loan
Account (conditional upon final collection) after allowing two (2) Business Days
for  collection;  PROVIDED,  HOWEVER,  that such payments  shall be deemed to be
credited  to the Loan  Account  immediately  upon  receipt  for  purposes of (i)
determining   Availability  for  any  Borrower  or  Total   Availability,   (ii)
calculating  the Unused Line Fee pursuant to SECTION 3.5, and (iii)  calculating
the amount of interest  accrued  thereon solely for purposes of determining  the
amount of interest to be  distributed  by the Agent to the Lenders  (but not the
amount of interest payable by the Borrowers).

      (d) In the  event the  Borrowers  repay  all of the  Obligations  upon the
termination of this Agreement or upon  acceleration  of the  Obligations,  other
than  through  the Agent's  receipt of  payments  on account of the  Accounts or

<PAGE>

proceeds of the other  Collateral,  such payment  will be credited  (conditional
upon final  collection)  to the Loan Account two (2)  Business  Day(s) after the
Agent's receipt of such funds.

      6.10  INVENTORY; PERPETUAL INVENTORY.

      (a) Each Borrower represents and warrants to the Agent and the Lenders and
agrees with the Agent and the Lenders  that all of the  Inventory  owned by such
Borrower is and will be held for sale or lease, or to be furnished in connection
with the  rendition  of  services,  in the  ordinary  course of such  Borrower's
business, and is and will be fit for such purposes.  Each Borrower will keep its
Inventory  in good and  marketable  condition,  except for damaged or  defective
goods arising in the ordinary course of such Borrower's business.  Each Borrower
will not, without the prior written consent of the Agent,  acquire or accept any
Inventory on  consignment or approval.  Each Borrower  agrees that all Inventory
produced by such  Borrower in the United  States of America  will be produced in
accordance  with the Federal Fair Labor  Standards Act of 1938, as amended,  and
all rules,  regulations,  and orders  thereunder.  Each  Borrower will conduct a
physical  count of the  Inventory  at least once per Fiscal Year and,  after the
occurrence  and during the  continuation  of an Event of Default,  at such other
times as the Agent requests.  Each Borrower will maintain a perpetual  inventory
reporting  system at all times.  Each  Borrower  will not,  without  the Agent's
written consent,  sell any Inventory on a  bill-and-hold,  guaranteed sale, sale
and return, sale on approval, consignment, or other repurchase or return basis.

      (b) On or before August 31, 2000, the applicable  Borrowers shall cause to
be  executed  and  delivered  to the  Agent a Notice  of  Security  Interest  to
Warehousing  Customer  in a form and  substance  acceptable  to the  Agent  with
respect to each location where inventory is stored off-site.

      6.11  EQUIPMENT.

      (a) Each Borrower represents and warrants to the Agent and the Lenders and
agrees with the Agent and the Lenders  that all of the  Equipment  owned by such
Borrower is and will be used or held for use in such Borrower's business, and is
and will be fit for such  purposes.  Each  Borrower  shall keep and maintain its
Equipment  in good  operating  condition  and  repair  (ordinary  wear  and tear
excepted) and shall make all necessary replacements thereof.

      (b)  Each  Borrower  shall  promptly  inform  the  Agent  of any  material
additions to or deletions from the Equipment. Each Borrower shall not permit any
Equipment  to become a fixture  with  respect to real  property  or to become an
accession with respect to other personal  property with respect to which real or
personal property the Agent does not have a Lien. No Borrower will,  without the
Agent's prior written consent,  alter or remove any identifying symbol or number
on any of such Borrower's Equipment constituting Collateral.

      (c) No Borrower shall,  without the Agent's prior written  consent,  sell,
lease as a lessor,  or otherwise  dispose of any of such  Borrower's  Equipment;
PROVIDED,  HOWEVER,  that such  Borrower  may  dispose of  obsolete  or unusable
Equipment  having an orderly  liquidation  value no greater than $250,000 in the
aggregate in any Fiscal Year,  or $750,000 in the  aggregate  during the term of

<PAGE>

this Agreement, without the Agent's consent, subject to the conditions set forth
in the next sentence. In the event any of such Equipment is sold, transferred or
otherwise  disposed  of pursuant to the  proviso  contained  in the  immediately
preceding  sentence,  (1) if such sale,  transfer  or  disposition  is  effected
without  replacement  of  such  Equipment,  or such  Equipment  is  replaced  by
Equipment  leased by such  Borrower or by Equipment  purchased by such  Borrower
subject to a purchase money Lien,  then such Borrower shall deliver the net cash
proceeds of any such sale,  transfer or disposition to the Agent, which proceeds
shall be applied to the  reduction  of the Term Loans (in the  inverse  order of
maturity),  or (2) if such sale,  transfer or  disposition is made in connection
with the purchase by the Borrower of replacement  Equipment,  then such Borrower
shall use the proceeds of such sale,  transfer or  disposition  to purchase such
replacement Equipment and shall deliver to the Agent written evidence of the use
of the proceeds for such purchase.  All replacement  Equipment purchased by such
Borrower shall be free and clear of all Liens except the Agent's Lien.

      6.12  ASSIGNED CONTRACTS.

      Each Borrower shall fully perform all of its obligations under each of the
Assigned Contracts, and shall enforce all of its rights and remedies thereunder,
in each  case,  as it deems  appropriate  in its  business  judgment;  PROVIDED,
HOWEVER,  that no Borrower shall take any action or fail to take any action with
respect  to its  Assigned  Contracts  which  would  cause the  termination  of a
material  Assigned  Contract.  Without limiting the generality of the foregoing,
each Borrower  shall take all action  necessary or  appropriate  to permit,  and
shall not take any action which would have any  materially  adverse effect upon,
the full enforcement of all indemnification rights under its Assigned Contracts.
The Borrowers shall notify the Agent and the Lenders in writing,  promptly after
any Borrower  becomes aware thereof,  of any event or fact which could give rise
to a  material  claim  by it for  indemnification  under  any  of  its  Assigned
Contracts, and shall diligently pursue such right and report to the Agent on all
further developments with respect thereto.  Each Borrower shall deposit into the
Payment  Account  or  remit  directly  to  the  Agent  for  application  to  the
Obligations in such order as the Required Lenders shall determine (PROVIDED that
so long as no Event of Default then exists,  such amounts shall be applied first
to  outstanding  Revolving  Loans),  all amounts  received  by such  Borrower as
indemnification or otherwise pursuant to its Assigned Contracts. If any Borrower
shall fail after the Agent's  demand to pursue  diligently  any  material  right
under its Assigned  Contracts,  or if an Event of Default then exists, the Agent
may, and at the direction of the Required  Lenders shall,  directly enforce such
right in its own or such Borrower's name and may enter into such  settlements or
other agreements with respect thereto as the Agent or the Required  Lenders,  as
applicable,  shall determine.  In any suit,  proceeding or action brought by the
Agent for the benefit of the Lenders  under any  Assigned  Contract  for any sum
owing  thereunder  or to enforce any  provision  thereof,  the  Borrowers  shall
indemnify and hold the Agent and Lenders  harmless from and against all expense,
loss or  damage  suffered  by  reason  of any  defense,  setoff,  counterclaims,
recoupment,  or  reduction  of liability  whatsoever  of the obligor  thereunder
arising out of a breach by a Borrower of any  obligation  thereunder  or arising
out of any other  agreement,  indebtedness or liability at any time owing from a
Borrower to or in favor of such obligor or its successors.  All such obligations
of the Borrowers shall be and remain  enforceable only against the Borrowers and
shall not be enforceable  against the Agent or the Lenders.  Notwithstanding any
provision hereof to the contrary, each Borrower shall at all times remain liable

<PAGE>

to observe  and  perform all of its duties and  obligations  under its  Assigned
Contracts,  and the Agent's or any Lender's  exercise of any of their respective
rights with respect to the Collateral shall not release any Borrower from any of
such duties and obligations. Neither the Agent nor any Lender shall be obligated
to perform or fulfill  any of any  Borrower's  duties or  obligations  under its
Assigned Contracts or to make any payment thereunder,  or to make any inquiry as
to the  nature  or  sufficiency  of  any  payment  or  property  received  by it
thereunder or the  sufficiency  of performance  by any party  thereunder,  or to
present  or file any claim,  or to take any  action to  collect  or enforce  any
performance, any payment of any amounts, or any delivery of any property.

      6.13  DOCUMENTS, INSTRUMENTS, AND CHATTEL PAPER.

      Each  Borrower  represents  and warrants to the Agent and the Lenders that
(a) all documents,  instruments,  and chattel paper describing,  evidencing,  or
constituting  Collateral,  and all signatures and endorsements  thereon, are and
will be  complete,  valid,  and  genuine,  and (b) all goods  evidenced  by such
documents,  instruments,  and  chattel  paper  are  and  will be  owned  by such
Borrower, free and clear of all Liens other than Permitted Liens.

      6.14  RIGHT TO CURE.

      The Agent may,  in its  discretion,  and shall,  at the  direction  of the
Required  Lenders,  pay  any  amount  or do any  act  required  of any  Borrower
hereunder  or under any  other  Loan  Document  in order to  preserve,  protect,
maintain  or enforce  the  Obligations,  the  Collateral  or the  Agent's  Liens
therein,  and which such Borrower fails to pay or do,  including  payment of any
judgment against such Borrower, any insurance premium, any warehouse charge, any
finishing or processing  charge, any landlord's or bailee's claim, and any other
Lien upon or with respect to the  Collateral.  All payments that the Agent makes
under this SECTION 6.14 and all out-of-pocket  costs and expenses that the Agent
pays or incurs in  connection  with any action  taken by it  hereunder  shall be
charged to the Loan  Account as a  Revolving  Loan.  Any  payment  made or other
action taken by the Agent under this SECTION 6.14 shall be without  prejudice to
any right to assert an Event of Default  hereunder and to proceed  thereafter as
herein provided.

      6.15  POWER OF ATTORNEY.

      The  Borrowers  hereby  appoint the Agent and the Agent's  designee as the
Borrowers'  attorney,  with  power:  (a) to endorse any  Borrower's  name on any
checks, notes, acceptances,  money orders, or other forms of payment or security
that  come  into  the  Agent's  or any  Lender's  possession;  (b) to  sign  any
Borrower's  name  (i) so  long as any  Event  of  Default  has  occurred  and is
continuing,  on any invoice, bill of lading, warehouse receipt or other document
of title relating to any Collateral, on drafts against customers, on assignments
of  Accounts,  and  (ii)  at any  time,  on  notices  of  assignment,  financing
statements and other public records and to file any such financing statements by
electronic  means with or without a  signature  as  authorized  or  required  by
applicable  law or filing  procedure;  (c) so long as any Event of  Default  has
occurred and is continuing,  to notify the post office authorities to change the
address for delivery of each  Borrower's  mail to an address  designated  by the
Agent and to receive,  open and dispose of all mail  addressed to any  Borrower;
(d) so long as any Event of Default  has  occurred  and is  continuing,  to send
requests for  verification of Accounts to customers or Account  Debtors;  (e) to

<PAGE>

clear Inventory through customs in each Borrower's name, the Agent's name or the
name of the  Agent's  designee,  and to sign and  deliver to  customs  officials
powers of attorney in each Borrower's  name for such purpose;  and (f) to do all
things  necessary  to carry  out this  Agreement.  Each  Borrower  ratifies  and
approves all acts of such attorney  that are taken in accordance  with the terms
hereof and do not constitute gross negligence or willful misconduct. None of the
Lenders  or the  Agent  nor  their  attorneys  will be  liable  for any  acts or
omissions  or for any error of  judgment  or  mistake  of fact or law except for
their gross negligence or willful misconduct.  This power, being coupled with an
interest,  is  irrevocable  until this  Agreement  has been  terminated  and the
Obligations have been fully satisfied.

      6.16  THE AGENT'S AND LENDERS' RIGHTS, DUTIES AND LIABILITIES.

      Each Borrower  assumes all  responsibility  and liability  arising from or
relating to the use, sale or other disposition of the Collateral,  except to the
extent of gross negligence or willful misconduct on the part of the Agent or any
Lender. The Obligations shall not be affected by any failure of the Agent or any
Lender to take any steps to perfect the  Agent's  Liens or to collect or realize
upon the Collateral,  nor shall loss of or damage to the Collateral  release any
Borrower from any of the  Obligations.  Following the  occurrence and during the
continuation  of an Event of  Default,  the Agent may (but shall not be required
to), and at the direction of the Required  Lenders  shall,  without notice to or
consent from any Borrower,  sue upon or otherwise  collect,  extend the time for
payment of, modify or amend the terms of, compromise or settle for cash, credit,
or otherwise  upon any terms,  grant other  indulgences,  extensions,  renewals,
compositions,  or  releases,  and take or omit to take  any  other  action  with
respect  to the  Collateral,  any  security  therefor,  any  agreement  relating
thereto,  any insurance  applicable  thereto,  or any Person liable  directly or
indirectly in  connection  with any of the  foregoing,  without  discharging  or
otherwise  affecting the liability of any Borrower for the  Obligations or under
this  Agreement or any other  agreement  now or hereafter  existing  between the
Agent and/or any Lender and any Borrower.

      6.17  SITE VISITS, OBSERVATIONS AND TESTING.

      The Agent and its  representatives  will have the right at any  reasonable
time to enter and visit the Real Estate and any other  place where any  property
of any Borrower is located for the purposes of observing the Real Estate, taking
and removing soil or groundwater  samples,  and conducting  tests on any part of
the Real Estate.  The Agent is under no duty,  however,  to visit or observe the
Real Estate or to conduct  tests,  and any such acts by the Agent will be solely
for the purposes of protecting  the Agent's Liens and preserving the Agent's and
the Lenders' rights under this Agreement. No site visit,  observation or testing
by the Agent and the  Lenders  will  result  in a waiver of any  default  of any
Borrower  or impose any  liability  on the Agent or the  Lenders,  except to the
extent of any damage actually caused by the actions of the Agent or a Lender. In
no  event  will  any  site  visit,  observation  or  testing  by the  Agent be a
representation that hazardous  substances are or are not present in, on or under
the  Real  Estate,  or that  there  has  been or will  be  compliance  with  any
Environmental  Law. Neither any Borrower nor any other party is entitled to rely
on any site  visit,  observation  or  testing  by the  Agent.  The Agent and the
Lenders owe no duty of care to protect any Borrower or any other party  against,
or to inform any Borrower or any other party of, any hazardous substances or any
other  adverse  condition  affecting  the  Real  Estate.  The  Agent  may in its

<PAGE>

discretion disclose to the Borrowers or to any other party if so required by law
any report or  findings  made as a result of, or in  connection  with,  any site
visit, observation or testing by the Agent. Each Borrower understands and agrees
that the Agent makes no warranty or  representation to any Borrower or any other
party  regarding  the truth,  accuracy  or  completeness  of any such  report or
findings that may be disclosed. Each Borrower also understands that depending on
the results of any site visit, observation or testing by the Agent and disclosed
to any Borrower, such Borrower may have a legal obligation to notify one or more
environmental  agencies of the results,  that such  reporting  requirements  are
site-specific,  and are to be  evaluated  by such  Borrower  without  advice  or
assistance from the Agent.  In each instance,  the Agent will give the Borrowers
reasonable  notice before  entering the Real Estate or any other place the Agent
is permitted to enter under this SECTION  6.17.  The Agent will make  reasonable
efforts to avoid  interfering  with any Borrower's use of the Real Estate or any
other property in exercising any rights provided hereunder.

                                    ARTICLE 7
              BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES

      7.1   BOOKS AND RECORDS.

      Each Borrower shall  maintain,  at all times,  correct and complete books,
records and accounts in which  complete,  correct and timely entries are made of
its transactions in accordance with GAAP applied  consistently  with the audited
Financial  Statements  required to be delivered pursuant to SECTION 7.2(A). Each
Borrower shall, by means of appropriate entries, reflect in such accounts and in
all  Financial  Statements  proper  liabilities  and  reserves for all taxes and
proper  provision for  depreciation  and amortization of property and bad debts,
all in accordance with GAAP. Each Borrower shall maintain at all times books and
records pertaining to the Collateral in such detail, form and scope as the Agent
or any Lender shall reasonably require,  including,  but not limited to, records
of (a) all payments received and all credits and extensions granted with respect
to the Accounts; (b) the return, rejection,  repossession,  stoppage in transit,
loss,  damage,  or  destruction  of any  Inventory;  and (c) all other  dealings
affecting the Collateral.

      7.2   FINANCIAL INFORMATION.

      Each Borrower  shall promptly  furnish to each Lender,  all such financial
information  as  the  Agent  shall  reasonably  request.  Without  limiting  the
foregoing,  the  Parent  will  furnish to the Agent,  in  sufficient  copies for
distribution  by the Agent to each  Lender,  in such  detail as the Agent or the
Lenders shall request, the following:

      (a) As soon as available, but in any event not later than one hundred five
(105)  days  after the  close of each  Fiscal  Year,  consolidated  audited  and
consolidating  unaudited  balance sheets,  and statements of income and expense,
cash  flow and of  stockholders'  equity  for the  Parent  and its  consolidated
Subsidiaries for such Fiscal Year, and the accompanying  notes thereto,  setting
forth in each case in comparative form figures for the previous Fiscal Year, all
in reasonable  detail,  fairly presenting the financial position and the results
of operations  of the Parent and its  consolidated  Subsidiaries  as at the date
thereof and for the Fiscal  Year then ended,  and  prepared in  accordance  with
GAAP.  Such statements  shall be examined in accordance with generally  accepted
auditing  standards  by  and,  in the  case of such  statements  performed  on a

<PAGE>

consolidated  basis,  accompanied by a report  thereon of independent  certified
public  accountants  selected by the Parent and reasonably  satisfactory  to the
Agent, which report shall not contain a "going concern" or like qualification or
exception,  or  qualification  indicating  that  the  scope  of  the  audit  was
inadequate to permit such independent  certified  public  accountants to certify
such statements  without such  qualification.  The Parent,  simultaneously  with
retaining  such  independent  public  accountants  to conduct such annual audit,
shall  send a  letter  to such  accountants,  with a copy to the  Agent  and the
Lenders,  notifying  such  accountants  that  one of the  primary  purposes  for
retaining such  accountants'  services and having audited  financial  statements
prepared by them is for use by the Agent and the Lenders.  The Borrowers  hereby
authorize  the  Agent  to  communicate   directly  with  its  certified   public
accountants and, by this provision,  authorizes those accountants to disclose to
the Agent  any and all  financial  statements  and  other  supporting  financial
documents and schedules relating to the Parent and its consolidated Subsidiaries
and to discuss  directly  with the Agent the  finances and affairs of the Parent
and its consolidated Subsidiaries.

      (b) As soon as available,  but in any event not later than forty-five (45)
days after the end of each month  (other than the close of any fiscal  quarter),
consolidated and  consolidating  unaudited  balance sheets of the Parent and its
consolidated  Subsidiaries  as at the end of such month,  and  consolidated  and
consolidating  unaudited  statements of income and expense and cash flow for the
Parent and its consolidated  Subsidiaries for such month and for the period from
the  beginning  of the Fiscal Year to the end of such month,  all in  reasonable
detail,  fairly  presenting the financial  position and results of operations of
the Parent and its consolidated Subsidiaries as at the date thereof and for such
periods,  and prepared in  accordance  with GAAP applied  consistently  with the
audited  Financial  Statements  required  to be  delivered  pursuant  to SECTION
7.2(A).  The Parent  shall  certify  by a  certificate  signed by a  Responsible
Officer that all such  statements have been prepared in accordance with GAAP and
present fairly,  subject to normal year-end adjustments,  the Parent's financial
position as at the dates thereof and its results of  operations  for the periods
then ended.

      (c) As soon as available,  but in any event not later than sixty (60) days
after the close of each fiscal quarter other than the fourth quarter of a Fiscal
Year,  consolidated and consolidating unaudited balance sheets of the Parent and
its  consolidated  Subsidiaries as at the end of such quarter,  and consolidated
and  consolidating  unaudited  statements of income and expense and statement of
cash flows for the  Parent and its  Subsidiaries  for such  quarter  and for the
period from the beginning of the Fiscal Year to the end of such quarter,  all in
reasonable  detail,  fairly  presenting  the  financial  position and results of
operation of the Parent and its Subsidiaries as at the date thereof and for such
periods,  prepared in accordance with GAAP consistent with the audited Financial
Statements required to be delivered pursuant to SECTION 7.2(A). The Parent shall
certify  by a  certificate  signed  by  a  Responsible  Officer  that  all  such
statements  have been  prepared  in  accordance  with GAAP and  present  fairly,
subject to normal year-end  adjustments,  the Parent's  financial position as at
the dates thereof and its results of operations for the periods then ended.

      (d) With each of the audited Financial  Statements  delivered  pursuant to
SECTION 7.2(A), a certificate of the independent  certified  public  accountants
that  examined  such  statement  to the effect that they have  reviewed  and are

<PAGE>

familiar with this Agreement and that, in examining  such Financial  Statements,
they did not become  aware of any fact or  condition  which then  constituted  a
Default or Event of Default  with  respect to a financial  covenant,  except for
those, if any, described in reasonable detail in such certificate.

      (e)  With  each  of the  annual  audited  Financial  Statements  delivered
pursuant  to SECTION  7.2(A),  and within  sixty (60) days after the end of each
fiscal quarter, a certificate of a Responsible Officer of the Parent (i) setting
forth in  reasonable  detail the  calculations  required to  establish  that the
Borrowers  were in  compliance  with the  covenants  set forth in SECTIONS  9.25
through 9.27 during the period  covered in such  Financial  Statements and as at
the end thereof, and (ii) stating that, except as explained in reasonable detail
in  such  certificate,  (A) all of the  representations  and  warranties  of the
Borrowers  contained in this  Agreement and the other Loan Documents are correct
in all material  respects as at the date of such  certificate as if made at such
time, except for those that speak as of a particular date, (B) each Borrower is,
at the date of such certificate, in compliance in all material respects with all
of its respective  covenants and agreements in this Agreement and the other Loan
Documents,  (C) no Default or Event of Default then exists or existed during the
period  covered by such  Financial  Statements,  (D) describing and analyzing in
reasonable detail all material trends, changes, and developments in each and all
Financial  Statements;  and (E)  explaining  the variances of the figures in the
corresponding  budgets  and prior  Fiscal  Year  financial  statements.  If such
certificate  discloses that a representation or warranty is not correct, or that
a covenant  has not been  complied  with,  or that a Default or Event of Default
existed or exists,  such  certificate  shall set forth what action the Borrowers
have taken or propose to take with respect thereto.

      (f) No sooner  than  sixty  (60) days and not less than  thirty  (30) days
prior to the  beginning  of each  Fiscal  Year,  annual  forecasts  (to  include
forecasted  consolidated and consolidating balance sheets,  statements of income
and expenses and statements of cash flow) for the Parent and its Subsidiaries as
at the end of and for each month of such Fiscal Year.

      (g) Promptly after filing with the PBGC and the IRS, a copy of each annual
report or other filing filed with respect to each Plan of any Borrower.

      (h) Promptly upon the filing thereof, copies of all reports, if any, to or
other  documents  filed  by any  Borrower  or any of its  Subsidiaries  with the
Securities and Exchange  Commission  under the Exchange Act  (including  without
limitation  the Parent's  reports on Form 10-K and Form 10-Q),  and all reports,
notices,  or  statements  sent  or  received  by  any  Borrower  or  any  of its
Subsidiaries  to or from the  holders of any equity  interests  of any  Borrower
(other than routine  non-material  correspondence  sent by  shareholders  of any
Borrower to such  Borrower) or any such  Subsidiary  or of any Debt for Borrowed
Money of the Parent or any of its  Subsidiaries  registered under the Securities
Act of 1933 or to or from the trustee under any  indenture  under which the same
is issued.

      (i) As soon as  available,  but in any event not later  than 15 days after
any Borrower's  receipt thereof, a copy of all management reports and management
letters  prepared  for  such  Borrower  by  any  independent   certified  public
accountants of such Borrower.

<PAGE>

      (j)  Promptly  after  their  preparation,  copies  of any  and  all  proxy
statements, financial statements, and reports which any Borrower makes available
to its shareholders.

      (k) Promptly after filing with the IRS, a copy of each tax return filed by
the Borrower or by any of its Subsidiaries.

      (l) With all of the financial  information  delivered pursuant to SECTIONS
7.2(A), 7.2(B), 7.2(C) and 7.2(F), a breakdown of that portion of the Borrowers'
consolidated assets, income and expenses and cash flows,  respectively,  that is
attributable  to foreign  operations  (to the  extent  such  information  is not
already reflected in the consolidating balance sheets,  statements of income and
expenses and statements of cash flow,  respectively,  delivered pursuant to such
sections).

      (m) On or before August 31, 2000, a detailed description of the Borrowers'
vehicle leases.

      (n) Such  additional  information  as the Agent and/or any Lender may from
time to time reasonably  request regarding the financial and business affairs of
any Borrower or any Subsidiary.

      7.3   NOTICES TO LENDERS.

      Each  Borrower  shall  notify the Agent and the  Lenders in writing of the
following matters at the following times:

      (a)  Immediately,  but in any event no later than two (2)  Business  Days,
after becoming aware of any Default or Event of Default;

      (b)  Immediately,  but in any event no later than two (2)  Business  Days,
after  becoming aware of the assertion by the holder of any capital stock of any
Borrower  or of any  Subsidiary  or of any Debt in a face  amount  in  excess of
$500,000  that a default  exists with respect  thereto or that such  Borrower or
such  Subsidiary is not in compliance  with the terms thereof,  or the threat or
commencement by such holder of any  enforcement  action because of such asserted
default or non-compliance;

      (c)  Immediately,  but in any event no later than two (2)  Business  Days,
after  becoming  aware of any event or  circumstance  which could  reasonably be
expected to have a Material Adverse Effect;

      (d)  Immediately,  but in any event no later than two (2)  Business  Days,
after becoming aware of any pending or threatened  action,  suit, or proceeding,
by any Person,  or any pending or  threatened  investigation  by a  Governmental
Authority, which could reasonably be expected to have a Material Adverse Effect;

      (e)  Immediately,  but in any event no later than two (2)  Business  Days,
after becoming aware of any pending or threatened strike, work stoppage,  unfair
labor practice  claim,  or other labor dispute  affecting any Borrower or any of
its  Subsidiaries  in a manner  which  could  reasonably  be  expected to have a
Material Adverse Effect;

<PAGE>

      (f)  Immediately,  but in any event no later than two (2)  Business  Days,
after  becoming  aware of any  violation  of any law,  statute,  regulation,  or
ordinance of a Governmental  Authority  affecting any Borrower or any Subsidiary
which could reasonably be expected to have a Material Adverse Effect;

      (g)  Immediately,  but in any event no later than two (2)  Business  Days,
after  receipt  of any notice of any  violation  by any  Borrower  or any of its
Subsidiaries of any Environmental Law which could reasonably be expected to have
a Material  Adverse  Effect or that any  Governmental  Authority has asserted in
writing  that any  Borrower  or any  Subsidiary  is not in  compliance  with any
Environmental  Law or is  investigating  such  Borrower's  or such  Subsidiary's
compliance therewith;

      (h)  Immediately,  but in any event no later than two (2)  Business  Days,
after receipt of any written notice that any Borrower or any of its Subsidiaries
is or may be liable  to any  Person as a result  of the  Release  or  threatened
Release of any  Contaminant or that any Borrower or any Subsidiary is subject to
investigation  by any  Governmental  Authority  evaluating  whether any remedial
action is  needed  to  respond  to the  Release  or  threatened  Release  of any
Contaminant  which,  in  either  case,  is  reasonably  likely  to give  rise to
liability in excess of $500,000;

      (i)  Immediately,  but in any event no later than two (2)  Business  Days,
after receipt of any written notice of the imposition of any Environmental  Lien
against any property of any Borrower or any of its Subsidiaries;

      (j) Any change in any Borrower's name,  state of organization,  or form of
organization, trade names under which any Borrower will sell Inventory or create
Accounts, or to which instruments in payment of Accounts may be made payable, in
each case at least thirty (30) days prior thereto;

      (k)  Within  ten (10)  Business  Days  after  any  Borrower  or any  ERISA
Affiliate  knows or has  reason  to know,  that an ERISA  Event or a  prohibited
transaction  (as  defined  in  Sections  406 of ERISA  and 4975 of the Code) has
occurred, and, when known, any action taken or threatened by the IRS, the DOL or
the PBGC with respect thereto;

      (l) Upon request, or, in the event that such filing reflects a significant
change with  respect to the matters  covered  thereby,  within five (5) Business
Days after the filing  thereof with the PBGC, the DOL or the IRS, as applicable,
copies of the  following:  (i) each annual report (form 5500 series),  including
Schedule B thereto, filed with the PBGC, the DOL or the IRS with respect to each
Plan, (ii) a copy of each funding waiver request filed with the PBGC, the DOL or
the IRS with respect to any Plan and all communications received by any Borrower
or any ERISA  Affiliate  from the PBGC,  the DOL or the IRS with respect to such
request,  and (iii) a copy of each other  filing or notice  filed with the PBGC,
the DOL or the IRS,  with respect to each Plan by either a Borrower or any ERISA
Affiliate;

      (m)  Upon  request,  copies  of each  actuarial  report  for  any  Plan or
Multi-employer  Plan and annual report for any  Multi-employer  Plan; and within
five (5)  Business  Days  after  receipt  thereof by any  Borrower  or any ERISA

<PAGE>

Affiliate,  copies of the following:  (i) any notices of the PBGC's intention to
terminate a Plan or to have a trustee  appointed to administer  such Plan;  (ii)
any  favorable or  unfavorable  determination  letter from the IRS regarding the
qualification  of a Plan under  Section  401(a) of the Code; or (iii) any notice
from a Multi-employer  Plan regarding the imposition of withdrawal  liability in
excess of $500,000;

      (n) Within five (5) Business Days after the  occurrence  thereof:  (i) any
changes in the  benefits of any  existing  Plan which  increase  any  Borrower's
annual  costs with respect  thereto by an amount in excess of  $500,000,  or the
establishment  of any new Plan or the  commencement of contributions to any Plan
to which any Borrower or any ERISA Affiliate was not previously contributing; or
(ii) any  failure  by any  Borrower  or any ERISA  Affiliate  to make a required
installment  or any other  required  payment under Section 412 of the Code on or
before the due date for such installment or payment; or

      (o)  Within  five (5)  Business  Days  after  any  Borrower  or any  ERISA
Affiliate  knows or has reason to know that any of the  following  events has or
will occur: (i) a Multi-employer  Plan has been or will be terminated;  (ii) the
administrator  or plan sponsor of a  Multi-employer  Plan intends to terminate a
Multi-employer  Plan;  or  (iii)  the  PBGC  has  instituted  or will  institute
proceedings under Section 4042 of ERISA to terminate a Multi-employer Plan.

      Each notice given under this  Section  shall  describe the subject  matter
thereof in  reasonable  detail,  and shall set forth the action that a Borrower,
its Subsidiary, or any ERISA Affiliate, as applicable,  has taken or proposes to
take with respect thereto.

                                    ARTICLE 8
                     GENERAL WARRANTIES AND REPRESENTATIONS

      Each  Borrower  warrants and  represents to the Agent and the Lenders that
except as  hereafter  disclosed  to and  accepted by the Agent and the  Required
Lenders in writing:

      8.1   AUTHORIZATION, VALIDITY, AND ENFORCEABILITY OF THIS AGREEMENT AND
THE LOAN DOCUMENTS.

      Each  Borrower has the corporate  power and authority to execute,  deliver
and perform this  Agreement and the other Loan Documents to which it is a party,
to incur the  Obligations,  and to grant to the Agent  Liens  upon and  security
interests in the  Collateral.  Each Borrower has taken all  necessary  corporate
action  (including  obtaining  approval of its  stockholders  if  necessary)  to
authorize its  execution,  delivery,  and  performance of this Agreement and the
other Loan  Documents to which it is a party.  This Agreement and the other Loan
Documents to which it is a party have been duly  executed and  delivered by each
Borrower,  and  constitute  the legal,  valid and  binding  obligations  of each
Borrower,  enforceable against each Borrower in accordance with their respective
terms without defense,  setoff or counterclaim,  except as enforceability may be
limited by  applicable  bankruptcy,  insolvency,  reorganization,  moratorium or
similar laws  affecting the  enforcement of creditors'  rights  generally and by
general equitable  principles  (whether  enforcement is sought by proceedings in
equity or at law). Each Borrower's execution,  delivery, and performance of this
Agreement  and the other Loan  Documents  to which it is a party do not and will
not conflict  with,  or  constitute  a violation  or breach of, or  constitute a

<PAGE>

default under,  or result in, or require the creation or imposition of, any Lien
upon the property of such Borrower or any of its  Subsidiaries by reason of, the
terms of (a) any contract,  mortgage,  Lien,  lease,  agreement,  indenture,  or
instrument  to which such  Borrower is a party or which is binding  upon it, (b)
any  Requirement of Law applicable to such Borrower or any of its  Subsidiaries,
or (c) the certificate or articles of  incorporation or by-laws of such Borrower
or any of its Subsidiaries.

      8.2   VALIDITY AND PRIORITY OF SECURITY INTEREST.

      The  provisions  of this  Agreement,  the  Mortgages,  and the other  Loan
Documents  create  legal and valid Liens on all the  Collateral  in favor of the
Agent,  for the  ratable  benefit of the Agent and the  Lenders,  and such Liens
constitute perfected and continuing Liens on all the Collateral, having priority
over all other Liens on the Collateral,  except for Permitted  Liens  (excluding
Liens permitted under CLAUSE (F) of the definition of Permitted  Liens) securing
all the  Obligations,  and  enforceable  against  the  Borrowers  and all  third
parties.

      8.3   ORGANIZATION AND QUALIFICATION.

      Each Borrower (a) is duly  incorporated and organized and validly existing
in good  standing  under  the  laws of the  state of its  incorporation,  (b) is
qualified to do business as a foreign corporation and is in good standing in the
jurisdictions  set forth on  SCHEDULE  8.3 which are the only  jurisdictions  in
which  qualification  is  necessary in order for it to own or lease its property
and conduct its  business,  except where the failure to so qualify or be in good
standing could not reasonably be expected to have a Material Adverse Effect, and
(c) has all requisite power and authority to conduct its business and to own its
property.

      8.4   CORPORATE NAME; PRIOR TRANSACTIONS.

      Except as set forth on SCHEDULE 8.4, no Borrower has, during the past five
(5) years, been known by or used any other corporate or fictitious name, or been
a party to any merger or consolidation,  or acquired all or substantially all of
the  assets of any  Person,  or  acquired  any of its  property  outside  of the
ordinary course of business.

      8.5   SUBSIDIARIES.

      SCHEDULE 8.5 is a correct and complete  list of the name and  relationship
to the  Parent of each and all of the  Parent's  Subsidiaries.  Each  Subsidiary
(other than any  Borrower) is (a) duly  incorporated  and  organized and validly
existing in good standing under the laws of its state of incorporation set forth
on SCHEDULE 8.5, and (b) qualified to do business as a foreign  corporation  and
in good standing in each  jurisdiction  in which the failure to so qualify or be
in good standing could  reasonably be expected to have a material adverse effect
on any such Subsidiary's business, operations, prospects, property, or condition
(financial  or  otherwise)  and (c) has all  requisite  power and  authority  to
conduct its business and own its property.

      8.6   FINANCIAL STATEMENTS AND PROJECTIONS.

      (a) The Parent has  delivered  to the Agent and the  Lenders  the  audited
balance sheet and related statements of income,  retained earnings,  cash flows,

<PAGE>

and  changes  in  stockholders  equity  for  the  Parent  and  its  consolidated
Subsidiaries  as of  December  31,  1999,  and for the Fiscal  Year then  ended,
accompanied by the report thereon of the Parent's  independent  certified public
accountants,  Deloitte & Touche LLP. The Parent has also  delivered to the Agent
and the Lenders the unaudited balance sheet and related statements of income and
cash  flows for the  Parent and its  consolidated  Subsidiaries  as of March 31,
2000.  Such  Financial  Statements  are  attached  hereto as EXHIBIT C. All such
Financial Statements have been prepared in accordance with GAAP (subject, in the
case of the  Financial  Statements  as of March 31,  2000,  to  normal  year-end
adjustments)  and present  fairly the  financial  position of the Parent and its
consolidated  Subsidiaries  as  at  the  dates  thereof  and  their  results  of
operations for the periods then ended.

      (b) The Latest  Projections  when  submitted  to the  Lenders as  required
herein represent the Parent's best estimate of the future financial  performance
of the  Parent  and its  consolidated  Subsidiaries  for the  periods  set forth
therein.  The  Latest  Projections  have  been  prepared  on  the  basis  of the
assumptions set forth therein, which the Parent believes are fair and reasonable
in light of current and reasonably  foreseeable  business conditions at the time
submitted to the Lender.

      8.7   CAPITALIZATION.

      The Parent's  authorized  capital stock  consists of 10,000,000  shares of
preferred stock,  par value $0.01 per share, of which no shares are issued,  and
40,000,000  shares  of  common  stock,  par  value  $0.01  per  share,  of which
14,271,171   shares  are  validly  issued  and   outstanding,   fully  paid  and
non-assessable.

      8.8   SOLVENCY.

      Each Borrower is Solvent prior to and after giving effect to the making of
the Term Loans and the  Revolving  Loans to be made on the Closing  Date and the
issuance of the Letters of Credit to be issued on the  Closing  Date,  and shall
remain Solvent during the term of this Agreement.

      8.9   DEBT.

      After  giving  effect to the  making of the Term  Loans and the  Revolving
Loans to be made on the  Closing  Date and the  application  of a portion of the
proceeds  thereof  to  paydown  certain  Debt  outstanding,  the  Parent and its
Subsidiaries  have no Debt,  except (a) the  Obligations,  (b) Debt described on
SCHEDULE 8.9, (c) trade payables and other  contractual  obligations  arising in
the ordinary course of business, (d) other Debt existing on the Closing Date and
reflected in the Financial Statements attached hereto as EXHIBIT C and (e) other
Debt permitted under SECTION 9.13.

      8.10  DISTRIBUTIONS.

      Since December 31, 1999, no Distribution has been declared,  paid, or made
upon or in respect of any capital stock or other securities of the Parent or any
of its Subsidiaries.

<PAGE>

      8.11  TITLE TO PROPERTY.

      Each  Borrower  has good and  marketable  title in fee  simple to the Real
Estate identified on SCHEDULE 8.12 as owned by such Borrower,  and each Borrower
has good, indefeasible, and merchantable title to, or a valid leasehold interest
in, all of its other material  property  (including the assets  reflected on the
December 31, 1999 Financial  Statements  delivered to the Agent and the Lenders,
except  as  disposed  of in the  ordinary  course  of  business  since  the date
thereof), free of all Liens except Permitted Liens.

      8.12  REAL ESTATE; LEASES.

      SCHEDULE  8.12 sets forth,  as of the Closing Date, a correct and complete
list of all Real Estate owned by each Borrower and of any real property owned by
any of its  Subsidiaries,  all leases and subleases of real or personal property
held by each  Borrower  as lessee or  sublessee  (other  than leases of personal
property  as to which a Borrower is lessee or  sublessee  for which the value of
such personal  property is less than (a) $25,000 with respect to any  individual
item of personal  property  and (b) $250,000  with respect to all  substantially
similar items of personal  property;  e.g.,  if a Borrower  leases 13 forklifts,
each valued at $20,000, the leases of these forklifts should be scheduled),  and
all leases and  subleases of real or personal  property held by each Borrower as
lessor,  or  sublessor;  PROVIDED,  HOWEVER,  that  SCHEDULE 8.12 may, as of the
Closing Date,  contain only summary  information with respect to vehicle leases.
Each of such leases and subleases is valid and  enforceable  in accordance  with
its  terms  and is in full  force  and  effect,  and,  to the  knowledge  of the
Borrowers,  no  material  default  by any  party to any such  lease or  sublease
exists.

      8.13  PROPRIETARY RIGHTS.

      SCHEDULE  8.13  sets  forth  a  correct  and  complete  list of all of the
Borrowers'  Proprietary Rights. None of the Proprietary Rights is subject to any
licensing agreement or similar arrangement except as set forth on SCHEDULE 8.13.
To the  best of  each  Borrower's  knowledge,  none  of the  Proprietary  Rights
infringes  on or  conflicts  with  any  other  Person's  property,  and no other
Person's  property  infringes on or conflicts with the Proprietary  Rights.  The
Proprietary  Rights described on SCHEDULE 8.13 constitute all of the property of
such type  necessary  to the  current  and  anticipated  future  conduct  of the
Borrowers' business.

      8.14  TRADE NAMES.

      All  trade  names  or  styles  under  which  any  Borrower  or  any of its
Subsidiaries will sell Inventory or create Accounts,  or to which instruments in
payment of Accounts may be made payable, are listed on SCHEDULE 8.14.

      8.15  LITIGATION.

      Except as set forth on SCHEDULE 8.15, there is no pending,  or to the best
of  each  Borrower's  knowledge  threatened,   action,  suit,   proceeding,   or
counterclaim  by any  Person,  or to  the  best  of  each  Borrower's  knowledge

<PAGE>

investigation  by any  Governmental  Authority,  or  any  basis  for  any of the
foregoing,  which  could  reasonably  be  expected  to cause a Material  Adverse
Effect.

      8.16  RESTRICTIVE AGREEMENTS.

      No Borrower is a party to any  contract  or  agreement,  or subject to any
charter or other corporate  restriction,  which adversely affects its ability to
execute,  deliver,  and perform the Loan Documents and repay the  Obligations of
which could reasonably be expected to cause a Material Adverse Effect.

      8.17  LABOR DISPUTES.

      Except as set forth on SCHEDULE  8.17, as of the Closing Date (a) there is
no collective bargaining agreement or other labor contract covering employees of
any  Borrower  or any of its  Subsidiaries,  (b) no such  collective  bargaining
agreement or other labor contract is scheduled to expire during the term of this
Agreement,  (c) no union or other labor organization is seeking to organize,  or
to be recognized as, a collective  bargaining  unit of employees of any Borrower
or any of its  Subsidiaries  or for any  similar  purpose,  and (d)  there is no
pending or (to the best of each Borrower's knowledge)  threatened,  strike, work
stoppage,  material unfair labor practice claim, or other material labor dispute
against or affecting any Borrower or its Subsidiaries or their Employees.

      8.18  ENVIRONMENTAL LAWS.

      Except as otherwise disclosed on SCHEDULE 8.18:

      (a) Each  Borrower  and its  Subsidiaries  have  complied in all  material
respects  with  all  Environmental  Laws  and  neither  such  Borrower  nor  any
Subsidiary nor any of its presently  owned real property or presently  conducted
operations,  nor its  previously  owned real  property or prior  operations,  is
subject  to  any  enforcement  order  from  or  liability   agreement  with  any
Governmental  Authority or private Person  respecting  (i)  compliance  with any
Environmental Law or (ii) any potential liabilities and costs or remedial action
arising from the Release or threatened Release of a Contaminant.

      (b) Each Borrower and its Subsidiaries have obtained all permits necessary
for their current operations under  Environmental Laws, and all such permits are
in good standing and such Borrower and its  Subsidiaries  are in compliance with
all material terms and conditions of such permits.

      (c) Neither any Borrower nor any of its Subsidiaries,  nor, to the best of
such Borrower's knowledge, any of its predecessors in interest, has in violation
of applicable law stored, treated or disposed of any hazardous waste.

      (d) Neither any  Borrower  nor any of its  Subsidiaries  has  received any
summons,  complaint,  order or similar written notice  indicating that it is not
currently  in   compliance   with,  or  that  any   Governmental   Authority  is

<PAGE>

investigating its compliance with, any  Environmental  Laws or that it is or may
be liable to any other Person as a result of a Release or threatened  Release of
a Contaminant.

      (e) To the best of each Borrower's knowledge,  none of the present or past
operations  of  any  Borrower  and  its  Subsidiaries  is  the  subject  of  any
investigation  by any  Governmental  Authority  evaluating  whether any remedial
action is needed to respond to a Release or threatened Release of a Contaminant.

      (f) There is not now,  nor to the best of each  Borrower's  knowledge  has
there ever been, on or in the Real Estate:

            (1) any underground storage tanks or surface impoundments,

            (2) any asbestos-containing material, or

            (3) any  polychlorinated  biphenyls  (PCBs) used in hydraulic  oils,
electrical transformers or other equipment.

      (g) Neither any Borrower nor any of its  Subsidiaries has filed any notice
under any requirement of  Environmental  Law reporting a spill or accidental and
unpermitted Release or discharge of a Contaminant into the environment.

      (h) Neither any Borrower nor any of its  Subsidiaries has entered into any
negotiations or settlement agreements with any Person (including the prior owner
of its property)  imposing material  obligations or liabilities on such Borrower
or any of its  Subsidiaries  with respect to any remedial  action in response to
the Release of a Contaminant or environmentally related claim.

      (i) None of the products manufactured, distributed or sold by any Borrower
or any of its Subsidiaries contain asbestos containing material.

      (j) No Environmental Lien has attached to the Real Estate.

      8.19  NO VIOLATION OF LAW.

      Neither any  Borrower nor any of its  Subsidiaries  is in violation of any
law, statute, regulation, ordinance, judgment, order, or decree applicable to it
which violation could reasonably be expected to have a Material Adverse Effect.

      8.20  NO DEFAULT.

      Neither  any  Borrower  nor any of its  Subsidiaries  is in  default  with
respect to any note, indenture, loan agreement,  mortgage, lease, deed, or other
agreement to which such Borrower or such Subsidiary is a party or by which it is
bound,  which  default could  reasonably be expected to have a Material  Adverse
Effect.

      8.21  ERISA COMPLIANCE.

      Except as specifically disclosed in SCHEDULE 8.21.

<PAGE>

      (a)  Each  Plan  is in  compliance  in  all  material  respects  with  the
applicable  provisions  of ERISA,  the Code and other federal or state law. Each
Plan which is intended to qualify under Section  401(a) of the Code has received
a favorable  determination letter from the IRS and to the best knowledge of each
Borrower, nothing has occurred which would cause the loss of such qualification.
Each Borrower and each ERISA  Affiliate has made all required  contributions  to
any Plan subject to Section 412 of the Code,  and no  application  for a funding
waiver or an extension of any amortization period pursuant to Section 412 of the
Code has been made with respect to any Plan.

      (b)  There are no  pending  or, to the best  knowledge  of each  Borrower,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could  reasonably  be expected to
result in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary  responsibility  rules with respect to any Plan which
has  resulted or could  reasonably  be expected to result in a Material  Adverse
Effect.

      (c) (i) No ERISA Event has  occurred or is  reasonably  expected to occur;
(ii) no Pension  Plan has any  Unfunded  Pension  Liability;  (iii)  neither any
Borrower nor any ERISA Affiliate has incurred,  or reasonably  expects to incur,
any material  liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent  under Section 4007 of ERISA);  (iv)
neither any Borrower nor any ERISA Affiliate has incurred, or reasonably expects
to incur,  any material  liability  (and no event has occurred  which,  with the
giving of notice under  Section 4219 of ERISA,  would result in such  liability)
under Section 4201 or 4243 of ERISA with respect to a  Multi-employer  Plan; and
(v) neither any Borrower nor any ERISA  Affiliate  has engaged in a  transaction
that could be subject to Section 4069 or 4212(c) of ERISA.

      8.22  TAXES.

      Each  Borrower and its  Subsidiaries  have filed all federal and other tax
returns and material reports required to be filed, and have paid all federal and
other taxes, assessments,  fees and other governmental charges levied or imposed
upon them or their properties, income or assets otherwise due and payable unless
such unpaid taxes and assessments  (a) would  constitute a Permitted Lien or (b)
are  (i)  not yet  past  due or  (ii)  being  contested  in  good  faith  and by
appropriate  proceedings  diligently  pursued and as to which adequate  reserves
determined  in  accordance  with GAAP have been  established  on the  applicable
Borrower's  or  Subsidiary's  books  and  records  and no Lien with  respect  to
nonpayment thereof has been asserted.

      8.23  REGULATED ENTITIES.

      None  of  the  Borrowers,  any  Person  controlling  a  Borrower,  or  any
Subsidiary,  is an  "Investment  Company"  within the meaning of the  Investment
Company  Act of 1940.  No  Borrower  is subject to  regulation  under the Public
Utility  Holding  Company Act of 1935,  the Federal  Power Act,  the  Interstate
Commerce  Act, any state public  utilities  code or law, or any other federal or
state statute or regulation limiting its ability to incur indebtedness.

<PAGE>

      8.24  USE OF PROCEEDS; MARGIN REGULATIONS.

      The proceeds of the Loans are to be used solely to refinance existing Debt
and for working capital and general corporate purposes. Neither any Borrower nor
any  Subsidiary is engaged in the business of purchasing or selling Margin Stock
or extending credit for the purpose of purchasing or carrying Margin Stock.

      8.25  COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES, ETC.

      Each Borrower owns or is licensed or otherwise has the right to use all of
the patents,  trademarks,  service marks, trade names,  copyrights,  contractual
franchises,  licenses,  rights of way,  authorizations and other rights that are
reasonably necessary for the operation of its businesses,  without conflict with
the rights of any other  Person.  To the best  knowledge  of each  Borrower,  no
slogan or other advertising device, product, process, method, substance, part or
other material now employed, or now contemplated to be employed, by any Borrower
or any Subsidiary  infringes upon any rights held by any other Person.  No claim
or litigation  regarding any of the foregoing is pending or, to the knowledge of
the  Borrowers,  threatened,  and no  patent,  invention,  device,  application,
principle or any statute, law, rule, regulation, standard or code is pending or,
to the  knowledge of each  Borrower,  proposed,  which,  in either  case,  could
reasonably be expected to have a Material Adverse Effect.

      8.26  NO MATERIAL ADVERSE CHANGE.

      No  material  adverse  change has  occurred  in any  Borrower's  property,
business,  operations,  or conditions (financial or otherwise) since the date of
the Financial Statements delivered to the Lenders pursuant to SECTION 8.6(A).

      8.27  FULL DISCLOSURE.

      None of the  representations  or  warranties  made by any  Borrower or any
Subsidiary  in the  Loan  Documents  as of the  date  such  representations  and
warranties are made or deemed made, and none of the statements  contained in any
exhibit,  report,  statement  or  certificate  furnished  by or on behalf of any
Borrower or any Subsidiary in connection with the Loan Documents  (including the
offering and disclosure  materials  delivered by or on behalf of any Borrower to
the Lenders  prior to the Closing  Date),  contains  any untrue  statement  of a
material  fact or omits any  material  fact  required  to be stated  therein  or
necessary to make the  statements  made therein,  in light of the  circumstances
under which they are made, not misleading as of the time when made or delivered.

      8.28  MATERIAL AGREEMENTS.

      SCHEDULE  8.28  hereto  sets  forth as of the  Closing  Date all  material
agreements and contracts to which any Borrower or any of its  Subsidiaries  is a
party or is bound as of the date hereof.

<PAGE>

      8.29  BANK ACCOUNTS.

      SCHEDULE 8.29 contains as of the Closing Date a complete and accurate list
of all  bank  accounts  maintained  by the  Borrowers  with  any  bank or  other
financial institution.

      8.30  GOVERNMENTAL AUTHORIZATION.

      No approval,  consent,  exemption,  authorization,  or other action by, or
notice  to,  or filing  with,  any  Governmental  Authority  or other  Person is
necessary or required in connection with the execution,  delivery or performance
by, or  enforcement  against,  any Borrower or any of its  Subsidiaries  of this
Agreement or any other Loan  Document  (except for those filings as are required
by Section 6.2.

                                    ARTICLE 9
                       AFFIRMATIVE AND NEGATIVE COVENANTS

      Each  Borrower  covenants to the Agent and each Lender that so long as any
of the Obligations remain outstanding or this Agreement is in effect:

      9.1   TAXES AND OTHER OBLIGATIONS.

      Each Borrower shall, and shall cause each of its Subsidiaries to, (a) file
when due all tax returns  and other  reports  which it is required to file;  (b)
pay, or provide for the payment,  when due, of all taxes, fees,  assessments and
other  governmental  charges  against  it  or  upon  its  property,  income  and
franchises,  make all required withholding and other tax deposits, and establish
adequate  reserves  for the payment of all such items,  and provide to the Agent
and the Lenders,  upon request,  satisfactory  evidence of its timely compliance
with the  foregoing;  and (c) pay when due all Debt owed by it and all claims of
materialmen, mechanics, carriers, warehousemen,  landlords, processors and other
like Persons, and all other indebtedness owed by it and perform and discharge in
a timely manner all other obligations  undertaken by it; PROVIDED,  HOWEVER,  so
long as the Borrowers have notified the Agent in writing,  neither the Borrowers
nor  any  of  their  Subsidiaries  need  pay  any  such  tax,  fee,  assessment,
governmental  charge,  Debt,  claim  or  other  indebtedness,  that  (i)  it  is
contesting in good faith by appropriate proceedings diligently pursued, (ii) the
applicable  Borrower  or its  Subsidiary,  as the case may be,  has  established
proper reserves  therefor as provided in accordance with GAAP, and (iii) no Lien
(other than a Permitted Lien) results from such non-payment.

      9.2   CORPORATE EXISTENCE AND GOOD STANDING.

      Each Borrower shall, and shall cause each of its Subsidiaries to, maintain
its  corporate  existence  and  its  qualification  and  good  standing  in  all
jurisdictions in which the failure to maintain such existence and  qualification
or good standing could reasonably be expected to have a Material Adverse Effect.

<PAGE>

      9.3   COMPLIANCE WITH LAW AND AGREEMENT; MAINTENANCE OF LICENSES.

      Each Borrower shall comply,  and shall cause each Subsidiary to comply, in
all material respects with all Requirements of Law of any Governmental Authority
having  jurisdiction  over it or its business  (including the Federal Fair Labor
Standards Act and all Environmental  Laws). Each Borrower shall, and shall cause
each  of its  Subsidiaries  to,  obtain  and  maintain  all  licenses,  permits,
franchises, and governmental authorizations necessary to own its property and to
conduct its business as conducted on the Closing Date. No Borrower shall modify,
amend or alter its  certificate  or  article  of  incorporation  other than in a
manner which does not adversely affect the rights of the Lenders or the Agent.

      9.4   MAINTENANCE OF PROPERTY.

      Each Borrower shall, and shall cause each of its Subsidiaries to, maintain
all of its property necessary and useful in the conduct of its business, in good
operating condition and repair, ordinary wear and tear excepted.

      (a) Each Borrower shall maintain, and shall cause each of its Subsidiaries
to maintain, with financially sound and reputable insurers having a rating of at
least AVII or better by Best Rating Guide or which are  otherwise  acceptable to
the Agent,  insurance  against  loss or damage by fire with  extended  coverage;
theft, burglary, pilferage and loss in transit; public liability and third party
property damage;  larceny,  embezzlement or other criminal  liability;  business
interruption;  public liability and third party property damage;  and such other
hazards or of such other types as is customary  for Persons  engaged in the same
or similar business, as the Agent, in its discretion, or acting at the direction
of  the  Required  Lenders,  shall  specify,  in  amounts,  and  under  policies
reasonably  acceptable to the Agent and the Required  Lenders.  Without limiting
the foregoing,  each Borrower  shall also maintain,  and shall cause each of its
Subsidiaries to maintain,  flood insurance, in the event of a designation of the
area in which any Real Estate  covered by the Mortgages and any of the Equipment
and  Inventory  located on such Real  Estate is  located  as "flood  prone" or a
"flood  risk  area,"  (hereinafter  "SFHA")  as  defined  by the Flood  Disaster
Protection  Act of 1973, in an amount to be reasonably  determined by the Agent,
and  shall  comply  with  the  additional  requirements  of the  National  Flood
Insurance  Program as set forth in said Act. Each  Borrower  shall also maintain
flood insurance for its Inventory and Equipment  which is, at any time,  located
in a SFHA.

      (b) Each Borrower  shall cause the Agent,  for the ratable  benefit of the
Agent  and the  Lenders,  to be named as  secured  party or  mortgagee  and sole
(except  with  respect to  vehicles,  equipment  and other  property  subject to
purchase money Liens) loss payee or additional  insured,  in a manner acceptable
to the Agent.  Each policy of insurance  shall  contain a clause or  endorsement
requiring  the insurer to give not less than  thirty  (30) days'  prior  written
notice to the Agent in the event of  cancellation  of the  policy for any reason
whatsoever  and a clause or  endorsement  stating that the interest of the Agent
shall not be impaired or  invalidated  by any act or neglect of any  Borrower or
any of its  Subsidiaries or the owner of any Real Estate.  All premiums for such
insurance shall be paid by the Borrowers when due, and certificates of insurance

<PAGE>

and, if requested by the Agent or any Lender, photocopies of the policies, shall
be delivered to the Agent, in each case in sufficient  quantity for distribution
by the Agent to each of the  Lenders.  If any  Borrower  fails to  procure  such
insurance  or to pay the premiums  therefor  when due, the Agent may, and at the
direction of the Required  Lenders  shall,  do so from the proceeds of Revolving
Loans.

      (c) Each Borrower shall  promptly  notify the Agent and the Lenders of any
material loss, damage, or destruction to the Collateral,  whether or not covered
by insurance.  The Agent is hereby authorized to collect all insurance  proceeds
in respect of Collateral directly and to apply or remit them as follows:

            (i) With respect to insurance  proceeds relating to Collateral other
      than Fixed  Assets,  after  deducting  from such  proceeds the  reasonable
      expenses,  if any,  incurred  by the Agent in the  collection  or handling
      thereof, the Agent shall apply such proceeds, ratably, to the reduction of
      the Obligations in the order provided for in SECTION 4.8.

            (ii) With  respect to  insurance  proceeds  relating  to  Collateral
      consisting  of Fixed  Assets,  after  deducting  from  such  proceeds  the
      reasonable  expenses,  if any,  incurred by the Agent in the collection or
      handling thereof,  the Agent shall apply such proceeds to the reduction of
      the Term Loans  (applying  such proceeds to the  installments  of the Term
      Loans in the inverse order of maturity),  or at the option of the Required
      Lenders,  may permit or require the  Borrowers  to use such money,  or any
      part thereof,  to replace,  repair,  restore or rebuild the relevant Fixed
      Assets in a diligent and expeditious manner with materials and workmanship
      of  substantially  the same quality as existed before the loss,  damage or
      destruction;  PROVIDED, HOWEVER, that so long as there does not then exist
      any Default or Event of Default,  the Borrowers  shall be permitted to use
      insurance proceeds relating to Collateral consisting of Fixed Assets in an
      aggregate  amount not to exceed $150,000 with respect to any occurrence or
      $750,000 during the term of this Agreement, to replace, repair, restore or
      rebuild  the  relevant  Fixed  Assets,  in the  manner  set  forth in this
      sentence; and PROVIDED,  FURTHER, that the Borrowers first (i) provide the
      Agent and the Required Lenders with plans and  specifications for any such
      repair or restoration which shall be reasonably  satisfactory to the Agent
      and  the  Required   Lenders  and  (ii)   demonstrate  to  the  reasonable
      satisfaction  of the  Agent  and  the  Required  Lenders  that  the  funds
      available to it will be  sufficient to complete such project in the manner
      provided therein.

      9.6   CONDEMNATION.

      (a) Each Borrower shall,  immediately  upon learning of the institution of
any proceeding for the  condemnation or other taking of any material  portion of
its property,  notify the Agent of the pendency of such  proceeding,  and agrees
that the Agent may  participate in any such  proceeding,  and each Borrower from
time to time will deliver to the Agent all instruments  reasonably  requested by
the Agent to permit such participation.

      (b) The  Agent  is  hereby  authorized  to  collect  the  proceeds  of any
condemnation claim or award directly, and to apply or remit them as follows:

<PAGE>

            (i) With respect to  condemnation  proceeds  relating to  Collateral
      other than Fixed Assets, after deducting from such proceeds the reasonable
      expenses,  if any,  incurred  by the Agent in the  collection  or handling
      thereof, the Agent shall apply such proceeds, ratably, to the reduction of
      the Obligations in the order provided for in SECTION 4.8.

            (ii) With respect to  condemnation  proceeds  relating to Collateral
      consisting  of Fixed  Assets,  after  deducting  from  such  proceeds  the
      reasonable  expenses,  if any,  incurred by the Agent in the collection or
      handling  thereof,  the Agent shall apply such proceeds,  ratably,  to the
      reduction of the Term Loans (applying such proceeds to the installments of
      the Term Loans in the inverse order of maturity),  or at the option of the
      Required  Lenders,  may permit or require the Borrowers to use such money,
      or any part thereof, to replace,  repair,  restore or rebuild the relevant
      Fixed  Assets in a diligent  and  expeditious  manner with  materials  and
      workmanship  of  substantially  the same  quality  as  existed  before the
      condemnation; PROVIDED, HOWEVER, that so long as there does not then exist
      any Default or Event of Default,  the Borrowers  shall be permitted to use
      proceeds relating to Collateral consisting of Fixed Assets in an aggregate
      amount not to exceed  $50,000 with respect to any  occurrence  or $250,000
      during the term of this Agreement, to replace,  repair, restore or rebuild
      the relevant Fixed Assets,  in the manner set forth in this sentence;  and
      PROVIDED,  FURTHER,  that plans and  specifications for any such repair or
      restoration shall be reasonably satisfactory to the Agent and the Required
      Lenders and shall be subject to the  reasonable  approval of the Agent and
      the Required Lenders.

      9.7   ENVIRONMENTAL LAWS.

      (a) Each  Borrower  shall,  and shall cause each of its  Subsidiaries  to,
conduct  its  business  in  compliance   in  all  material   respects  with  all
Environmental Laws applicable to it, including those relating to the generation,
handling,  use, storage,  and disposal of any Contaminant.  Each Borrower shall,
and shall cause each of its Subsidiaries to, take prompt and appropriate  action
to respond to any  non-compliance  with  Environmental  Laws and shall regularly
report to the Agent on such response.

      (b) Without limiting the generality of the foregoing,  each Borrower shall
submit  to  the  Agent  and  the  Lenders  annually,  commencing  on  the  first
Anniversary  Date, and on each  Anniversary  Date  thereafter,  an update of the
status of each  environmental  compliance or liability  issue.  The Agent or any
Lender may request copies of technical  reports prepared by any Borrower and its
communications  with  any  Governmental  Authority  to  determine  whether  such
Borrower or any of its Subsidiaries is proceeding reasonably to correct, cure or
contest in good faith any alleged  non-compliance  or  environmental  liability.
Each Borrower shall, at the Agent's or the Required  Lenders' request and at the
Borrowers' expense, (i) retain an independent  environmental engineer reasonably
acceptable to the Agent to evaluate the site,  including  tests if  appropriate,
where the non-compliance or alleged  non-compliance  with Environmental Laws has
occurred  and prepare  and  deliver to the Agent,  in  sufficient  quantity  for
distribution by the Agent to the Lenders,  a report setting forth the results of

<PAGE>

such evaluation,  a proposed plan for responding to any  environmental  problems
described therein, and an estimate of the costs thereof, and (ii) provide to the
Agent and the Lenders a supplemental  report of such engineer whenever the scope
of the  environmental  problems,  or the response thereto or the estimated costs
thereof, shall change in any material respect.

      9.8   COMPLIANCE WITH ERISA.

      Each Borrower shall,  and shall cause each of its ERISA Affiliates to: (a)
maintain each Plan in compliance  in all material  respects with the  applicable
provisions  of ERISA,  the Code and other  federal or state law;  (b) cause each
Plan  which is  qualified  under  Section  401(a) of the Code to  maintain  such
qualification;  (c) make all  required  contributions  to any  Plan  subject  to
Section 412 of the Code; (d) not engage in a prohibited transaction or violation
of the  fiduciary  responsibility  rules with  respect to any Plan;  and (e) not
engage in a  transaction  that could be  subject  to Section  4069 or 4212(c) of
ERISA

      9.9   MERGERS, CONSOLIDATIONS OR SALES.

      Neither  any  Borrower  nor any of its  Subsidiaries  shall enter into any
transaction of merger,  reorganization,  or  consolidation,  or transfer,  sell,
assign,  lease, or otherwise dispose of all or any part of its property, or wind
up,  liquidate or dissolve,  or agree to do any of the  foregoing,  except (i) a
Borrower may be a party to a transaction of merger or consolidation with another
Borrower, provided that if the Parent is a party to such transaction, the Parent
shall be the surviving entity, (ii) for transfers of property between Borrowers,
(iii) a Subsidiary  that is not a Borrower may (a) merge or consolidate  with or
into (x) a Borrower,  so long as such Borrower is the surviving  entity,  or (y)
another Subsidiary that is not a Borrower or (b) transfer property to a Borrower
or another Subsidiary that is not a Borrower, (iv) for sales of Inventory in the
ordinary  course  of its  business,  (v) for  sales  or  other  dispositions  of
Equipment  in the  ordinary  course of business  that are  obsolete or no longer
useable by such  Borrower in its  business as permitted  by SECTION  6.11,  (vi)
sales of accounts  receivable  to a Factor under a Factoring  Agreement  that is
subject to an Assignment of Factoring Proceeds,  (vii) the sale, for fair market
value, of the  condominium  owned by the Borrowers in Banner Elk, North Carolina
and (viii) a dissolution of a wholly owned  Subsidiary  that is no longer active
and that has no material assets,  PROVIDED that if such dissolving Subsidiary is
a Borrower,  (a) at least ten (10) Business  Days prior  written  notice of such
dissolution  shall  have been  given to the Agent and the  Lenders,  and (b) the
Agent  shall  have  consented  to  such  dissolution  (such  consent  not  to be
unreasonably  withheld) and executed  appropriate  releases with respect to such
Borrower's  obligations  under the Loan Documents.  The inclusion of proceeds in
the  definition of Collateral  shall not be deemed to constitute  the Agent's or
any Lender's consent to any sale or other  disposition of the Collateral  except
as expressly permitted herein.

      9.10  DISTRIBUTIONS; CAPITAL CHANGE; RESTRICTED INVESTMENTS.

      Neither any  Borrower  nor any of its  Subsidiaries  shall (i) directly or
indirectly  declare or make, or incur any liability to make,  any  Distribution,
except Distributions to a Borrower by its Subsidiaries,  (ii) make any change in
its  capital  structure  which could  reasonably  be expected to have a Material
Adverse Effect or (iii) make or maintain any Restricted Investment.

<PAGE>

      9.11  TRANSACTIONS AFFECTING COLLATERAL OR OBLIGATIONS.

      Neither  any  Borrower  nor any of its  Subsidiaries  shall enter into any
transaction  which  would be  reasonably  expected  to have a  Material  Adverse
Effect.

      9.12  GUARANTIES.

      Neither any Borrower nor any of its Subsidiaries  shall make, issue, or be
or become liable on any Guaranty,  except (a)  Guaranties of the  Obligations in
favor of the Agent,  (b)  Guaranties of the  obligations of the Parent under the
Senior Note  Indenture  and the Senior Notes,  (c)  Guaranties by the Parent and
Regal of trade creditors of the Foreign Subsidiaries in the ordinary course, (d)
Guaranties by the Parent of Rubyco's existing Debt as shown on SCHEDULE 8.3, (e)
Guaranties by ECA in connection  with the IRB  Financing,  (f) Guaranties by the
Parent of the purchase agreement obligations described on SCHEDULE 8.20, and (g)
Guaranties  of Debt  permitted  under SECTION 9.13 or of  obligations  permitted
under SECTION 9.24

      9.13  DEBT.

      Neither any Borrower nor any of its  Subsidiaries  shall incur or maintain
any Debt,  other than: (a) the  Obligations;  (b) trade payables and contractual
obligations  to  suppliers  and  customers  arising  in the  ordinary  course of
business;  (c) other Debt  existing on the  Closing  Date and  reflected  in the
Financial  Statements  attached  hereto  as  EXHIBIT  C; (d) Debt  described  on
SCHEDULE  8.9; (e) purchase  money Debt  (including  obligations  under  Capital
Leases)  incurred to provide all or a portion of the purchase  price or costs of
construction  of an asset,  PROVIDED that that (i) such Debt when incurred shall
not exceed the purchase price or costs of  construction  of such asset,  (ii) no
such Debt shall be refinanced for a principal  amount in excess of the principal
balance  outstanding  thereon  at the time of such  refinancing,  and  (iii) the
aggregate  principal  outstanding  amount  of all such  Debt  shall  not  exceed
$5,000,000 at any time  outstanding;  (f) Debt and  obligations  in an aggregate
principal  amount  outstanding not to exceed  $2,000,000 at any time outstanding
owing under Hedge  Agreements  relating to the Obligations  hereunder or entered
into in the ordinary course of business to manage existing or anticipated  risks
and not for  speculative  purposes;  (g)  intercompany  Debt  owing  from  (i) a
Borrower to (x) another  Borrower or (y) a  Subsidiary  of a Borrower,  PROVIDED
that the terms of such  intercompany  Debt owing to a  Subsidiary  of a Borrower
shall  provide  that (A) such  Debt is fully  subordinated  in right and time of
payment  to the  Obligations,  (B) no  principal  on such Debt  shall be due and
payable prior to the Stated  Termination Date, unless an earlier payment date is
necessary for the Borrowers to avoid  materially  adverse tax consequences or to
avoid  violating an applicable  statute or regulation,  (C) payment of interest,
principal  and other amounts in respect of such Debt shall be payable only if no
Default or Event of Default  exists under this  Agreement  and (D) the aggregate
amount required to be repaid (excluding interest to the extent required to avoid
materially  adverse tax consequences or to avoid violating an applicable statute
or regulation)  shall not exceed the amount borrowed,  or (ii) a Subsidiary that
is not a  Borrower  to a  Borrower  in  connection  with a loan  made  from such
Borrower to such  Subsidiary  in  accordance  with  SECTION  9.10(III);  and (h)
Guaranties permitted under SECTION 9.12.

<PAGE>

      9.14  PREPAYMENT.

      Neither any Borrower nor any of its Subsidiaries  shall voluntarily prepay
any Debt, except the Obligations in accordance with the terms of this Agreement.

      9.15  TRANSACTIONS WITH AFFILIATES.

      Except  as  set  forth  below,   neither  any  Borrower  nor  any  of  its
Subsidiaries  shall sell,  transfer,  distribute,  or pay any money or property,
including,  but not limited  to, any fees or expenses of any nature  (including,
but not  limited  to, any fees or  expenses  for  management  services),  to any
Affiliate,  or lend or advance money or property to any Affiliate,  or invest in
(by capital  contribution  or otherwise) or purchase or repurchase  any stock or
indebtedness,  or any  property,  of any  Affiliate,  or  become  liable  on any
Guaranty of the indebtedness,  dividends, or other obligations of any Affiliate.
Notwithstanding  the  foregoing,  while no Event of Default has  occurred and is
continuing,  each Borrower and its Subsidiaries may engage in transactions  with
Affiliates in the ordinary course of business consistent with past practices, in
amounts and upon terms  fully  disclosed  to the Agent and the  Lenders  (unless
otherwise  expressly  permitted herein),  and no less favorable to such Borrower
and its  Subsidiaries  than  would  be  obtained  in a  comparable  arm's-length
transaction with a third party who is not an Affiliate.

      9.16  INVESTMENT BANKING AND FINDER'S FEES.

      Neither any  Borrower  nor any of its  Subsidiaries  shall pay or agree to
pay, or  reimburse  any other party with respect to, any  investment  banking or
similar or related fee,  underwriter's fee, finder's fee, or broker's fee to any
Person in  connection  with this  Agreement,  other than the fees payable to the
Agent and the Lenders pursuant to the Agent's Fee Letter or this Agreement. Each
Borrower  shall defend and indemnify the Agent and the Lenders  against and hold
them  harmless  from all claims of any Person that such Borrower is obligated to
pay for any  such  fees,  and  all  costs  and  expenses  (including  reasonable
attorneys'  fees)  incurred  by  the  Agent  and/or  any  Lender  in  connection
therewith.

      9.17  [INTENTIONALLY OMITTED.]

      9.18  BUSINESS CONDUCTED.

      No Borrower shall,  nor shall it permit any of its Subsidiaries to, engage
directly  or  indirectly,  in any  line  of  business  other  than  the  same or
substantially  similar  businesses  in which  such  Borrower  is  engaged on the
Closing Date.

      9.19  LIENS.

      Neither any  Borrower nor any of its  Subsidiaries  shall  create,  incur,
assume,  or  permit  to exist any Lien on any  property  now owned or  hereafter
acquired by any of them, except Permitted Liens.

<PAGE>

      9.20  SALE AND LEASEBACK TRANSACTIONS.

      Neither  any  Borrower  nor any of its  Subsidiaries  shall,  directly  or
indirectly,  enter  into any  arrangement  with any  Person  providing  for such
Borrower or such Subsidiary to lease or rent property that such Borrower or such
Subsidiary has sold or will sell or otherwise transfer to such Person, except to
the extent permitted under SECTION 9.13(E).

      9.21  NEW SUBSIDIARIES.

      No Borrower shall, directly or indirectly,  organize,  create,  acquire or
permit to exist any Subsidiary  other than those listed on SCHEDULE 8.5,  except
with at least 30 days prior  written  notice to the Agent (or a lesser number of
days as agreed by the Agent) and upon execution and delivery of such guaranties,
security agreements,  joinder agreements,  corporate authority documents,  legal
opinions, etc. as the Agent may reasonably require.

      9.22  FISCAL YEAR.

      No Borrower shall change its Fiscal Year.

      9.23  CAPITAL EXPENDITURES.

      Neither any Borrower nor any of its  domestic  Subsidiaries  shall make or
incur any Capital  Expenditure  if, after giving effect  thereto,  the aggregate
amount of all Capital  Expenditures by the Parent and its domestic  Subsidiaries
on a consolidated basis would exceed $6,000,000 during any Fiscal Year.

      9.24  OPERATING LEASE OBLIGATIONS.

      Neither any  Borrower  nor any of its  Subsidiaries  shall enter into,  or
suffer to exist,  any lease of real or personal  property as lessee or sublessee
(other than a Capital  Lease),  if, after giving effect  thereto,  the aggregate
amount of  Rentals  (as  hereinafter  defined)  payable  by the  Parent  and its
Subsidiaries on a consolidated basis in any Fiscal Year in respect of such lease
and all other such leases  would  exceed  $4,000,000  (Rentals up to such amount
being referred to herein as "Permitted  Rentals").  The term "Rentals" means all
payments  due from the lessee or  sublessee  under a lease,  including,  without
limitation,  basic rent, percentage rent, property taxes, utility or maintenance
costs, and insurance premiums.

      9.25  MINIMUM EBITDA.

      The Borrowers  will maintain,  as of the last day of each calendar  month,
EBITDA  with  respect  to such  month of at least the  amount  set  forth  below
opposite the relevant period:

            CALENDAR MONTHS                          MINIMUM EBITDA
            ---------------                          --------------
    July, August and September, 2000                   $1,070,000
   October, November, December, 2000                   $1,095,000
     January, February, March, 2001                    $1,325,000
         April, May, June, 2001                        $1,275,000
               Thereafter                              $1,300,000

<PAGE>

      9.26  [INTENTIONALLY OMITTED.]

      9.27  TOTAL AVAILABILITY.

      The Borrowers will maintain at all times Total Availability  (after giving
effect  to  any  Pending  Revolving  Loans)  of not  less  than  the  sum of (i)
$2,000,000  PLUS  (ii)  as  of  any  date  of   determination,   the  Borrowers'
mark-to-market  swap  exposure (as  determined  by the Agent on a weekly  basis)
under all Hedge Agreements as of such date; PROVIDED,  HOWEVER, that (a) for the
15 days  preceding  the date of any payment of interest  with respect to amounts
outstanding  under the Senior Notes,  average Total  Availability  (after giving
effect to any Pending  Revolving  Loans) shall be not less than  $8,000,000 on a
pro  forma  basis  after  giving  effect  to such  payment,  (b) for the 15 days
preceding  the  date  of any  payment  of  principal  with  respect  to the  IRB
Financing,  average  Total  Availability  (after  giving  effect to any  Pending
Revolving  Loans) shall be not less than  $6,000,000  on a pro forma basis after
giving  effect to such payment and (c) solely for purposes of this Section Agent
Advances  shall be excluded from the  calculation of Total  Availability  to the
extent  that  Agent  Advances  are made no more than two (2) times per  calendar
year, each Advance is outstanding no more than 30 days and no more than $750,000
is advanced in any calendar year.

      9.28  USE OF PROCEEDS.

      No Borrower  shall,  nor shall it suffer or permit any  Subsidiary to, use
any portion of the Loan  proceeds,  directly or  indirectly,  (i) to purchase or
carry Margin Stock,  (ii) to repay or otherwise  refinance  indebtedness of such
Borrower or others  incurred to purchase or carry Margin Stock,  (iii) to extend
credit for the purpose of purchasing  or carrying any Margin  Stock,  or (iv) to
acquire any security in any  transaction  that is subject to Section 13 or 14 of
the Exchange Act.

      9.29  FURTHER ASSURANCES.

      Each  Borrower  shall  execute and  deliver,  or cause to be executed  and
delivered,  to the Agent and/or the Lenders such documents and  agreements,  and
shall take or cause to be taken such  actions,  as the Agent or any Lender  may,
from time to time,  reasonably  request to carry out the terms and conditions of
this Agreement and the other Loan Documents.

                                   ARTICLE 10
                              CONDITIONS OF LENDING

      10.1  CONDITIONS PRECEDENT TO MAKING OF LOANS ON THE CLOSING DATE.

      The obligation of the Lenders to make the initial  Revolving Loans and the
initial Term Loans on the Closing Date, and the obligation of the Agent to cause
the Letter of Credit  Issuer to issue any Letter of Credit on the Closing  Date,
are subject to the following  conditions  precedent  having been  satisfied in a
manner satisfactory to the Agent and each Lender:

<PAGE>

      (a) This Agreement and the other Loan Documents (other than the Mortgages)
shall have been  executed  by each party  thereto and the  Borrowers  shall have
performed and complied with all covenants,  agreements and conditions  contained
herein  and the other Loan  Documents  which are  required  to be  performed  or
complied with by the Borrowers before or on such Closing Date.

      (b) Upon making of the requested Revolving Loans (including such Revolving
Loans made to finance the Closing Fee or  otherwise as  reimbursement  for fees,
costs and expenses  then payable under this  Agreement)  and the issuance of any
requested  Letters of Credit or Credit Support on the Closing Date, and with all
its  obligations  current,  the Borrowers  would have Total  Availability  in an
amount no less than $9,000,000.

      (c) All  representations  and  warranties  made hereunder and in the other
Loan Documents shall be true and correct as if made on such date.

      (d) No Default or Event of Default  shall  exist on the Closing  Date,  or
would exist after giving  effect to the Loans to be made,  the Letters of Credit
to be issued and the Credit Support to be in place on such date.

      (e) The Agent and the Lenders shall have received such opinions of counsel
for the  Borrowers  and  their  Subsidiaries  as the Agent or any  Lender  shall
request, each such opinion to be in a form, scope, and substance satisfactory to
the Agent, the Lenders, and their respective counsel.

      (f) The Agent shall have received:

            (i) acknowledgment copies of proper financing statements, duly filed
      on or before the Closing Date under the UCC of all  jurisdictions and such
      other instruments, in form and substance satisfactory to the Agent, as the
      Agent may deem  necessary  or  desirable  in order to perfect  the Agent's
      Liens with respect to the Borrowers' personal property; and

            (ii) duly  executed  UCC-3  Termination  Statements  and such  other
      instruments,  in form and substance satisfactory to the Agent, as shall be
      necessary  to  terminate  and  satisfy  all Liens on the  property  of the
      Borrowers and their Subsidiaries except Permitted Liens.

      (g) The  Borrowers  shall have paid all fees and expenses of the Agent and
the Attorney Costs incurred in connection with any of the Loan Documents and the
transactions contemplated thereby to the extent invoiced.

      (h) The Agent shall have received evidence,  in form, scope, and substance
reasonably  satisfactory to the Agent, of all insurance  coverage as required by
this Agreement.

      (i) The Agent and the Lenders  shall have had an  opportunity,  if they so
choose,  to examine  the books of  account  and other  records  and files of the
Borrowers and to make copies thereof,  and to conduct a pre-closing  audit which

<PAGE>

shall include, without limitation,  verification of Inventory, Accounts, and the
Borrowing  Base, and the results of such  examination  and audit shall have been
satisfactory to the Agent and the Lenders in all respects.

      (j) All  proceedings  taken  in  connection  with  the  execution  of this
Agreement,  the Term Loan Notes,  all other Loan Documents and all documents and
papers relating  thereto shall be satisfactory in form,  scope, and substance to
the Agent and the Lenders.

      The  acceptance by Borrowers of any Loans made or Letters of Credit issued
on the Closing Date shall be deemed to be a representation  and warranty made by
the Borrowers to the effect that all of the  conditions  precedent to the making
of such Loans or the  issuance of such  Letters of Credit  have been  satisfied,
with the same effect as  delivery to the Agent and the Lenders of a  certificate
signed by a Responsible  Officer of the Parent,  dated the Closing Date, to such
effect.

      Execution and delivery to the Agent by a Lender of a  counterpart  of this
Agreement  shall be deemed  confirmation  by such Lender that (i) all conditions
precedent in this SECTION 10.1 have been fulfilled to the  satisfaction  of such
Lender,  (ii) the decision of such Lender to execute and deliver to the Agent an
executed counterpart of this Agreement was made by such Lender independently and
without  reliance on the Agent or any other Lender as to the satisfaction of any
condition precedent set forth in this SECTION 10.1, and (iii) all documents sent
to such Lender for approval,  consent,  or satisfaction  were acceptable to such
Lender.

      10.2  CONDITIONS  PRECEDENT TO MAKING OF ADDITIONAL TERM LOANS ON THE TERM
LOAN SECOND FUNDING DATE.

      The  obligation  of the Lenders to make the  additional  Term Loans on the
TERM LOAN SECOND FUNDING DATE is subject to the following  conditions  precedent
having been satisfied in a manner satisfactory to the Agent and each Lender:

      (a) The  Mortgages  shall have been executed by each party thereto and the
Borrowers  shall have performed and complied with all covenants,  agreements and
conditions contained therein which are required to be performed or complied with
by the Borrowers before or on such Term Loan Second Funding Date.

      (b) All  representations  and  warranties  made hereunder and in the other
Loan Documents shall be true and correct as if made on such date.

      (c) No  Default or Event of Default  shall  exist on the Term Loan  Second
Funding Date,  or would exist after giving  effect to the Loans to be made,  the
Letters  of Credit to be issued  and the  Credit  Support to be in place on such
date.

      (d) The Agent and the Lenders shall have received such additional opinions
of counsel for the Borrowers and their  Subsidiaries  as the Agent or any Lender
shall request with respect to the Mortgages,  each such opinion to be in a form,
scope,  and substance  reasonably  satisfactory to the Agent,  the Lenders,  and
their respective counsel.

<PAGE>

      (e) The Agent shall have received  title  policies,  in form and substance
reasonably acceptable to Agent, with respect to the Mortgages.

      (f) The Agent shall have received:

            (i) acknowledgment copies of proper financing statements, duly filed
      on or  before  the Term  Loan  Second  Funding  Date  under the UCC of all
      jurisdictions   and  such  other   instruments,   in  form  and  substance
      satisfactory to the Agent, as the Agent may deem necessary or desirable in
      order to perfect the Agent's Liens granted under or in connection with the
      Mortgages; and

            (ii) duly  executed  UCC-3  Termination  Statements  and such  other
      instruments,  in form and substance satisfactory to the Agent, as shall be
      necessary  to  terminate  and satisfy all Liens on the Real Estate  except
      Permitted Liens.

      (g) The  Borrowers  shall have paid all fees and expenses of the Agent and
the Attorney Costs incurred in connection  with the Mortgages,  any of the other
Loan Documents and the transactions contemplated thereby to the extent invoiced.

      (h) To the extent not required on the Closing  Date,  the Agent shall have
received evidence, in form, scope, and substance reasonably  satisfactory to the
Agent, of all insurance  coverage with respect to the Real Estate as required by
this Agreement.

      (i)  All  proceedings  taken  in  connection  with  the  execution  of the
Mortgages and all documents and papers relating thereto shall be satisfactory in
form, scope, and substance to the Agent and the Lenders.

      The  acceptance by the Borrowers of any Loans made on the Term Loan Second
Funding Date shall be deemed to be a  representation  and  warranty  made by the
Borrowers  to the effect that all of the  conditions  precedent to the making of
such Loans have been  satisfied,  with the same  effect as delivery to the Agent
and the Lenders of a certificate signed by a Responsible  Officer of the Parent,
dated the Term Loan Second Funding Date, to such effect.

      10.3 CONDITIONS PRECEDENT TO EACH LOAN.

      The  obligation  of the Lenders to make each Loan,  including  the initial
Revolving  Loans and initial Term Loans to be funded on the Closing Date and the
additional Term Loans to be funded on the Term Loan Second Funding Date, and the
obligation of the Agent to cause the Letter of Credit Issuer to issue any Letter
of Credit,  shall be subject to the further conditions  precedent that on and as
of the date of any such extension of credit:

      (a) the  following  statements  shall be true,  and the  acceptance by the
Borrowers  of any  extension  of credit shall be deemed to be a statement to the
effect  set forth in CLAUSES  (I) AND (II)  below,  with the same  effect as the
delivery to the Agent and the Lenders of a  certificate  signed by a Responsible
Officer, dated the date of such extension of credit, stating that:

<PAGE>

            (i) The representations and warranties of the Borrowers contained in
      this  Agreement  and the other Loan  Documents are correct in all material
      respects on and as of the date of such  extension of credit as though made
      on and as of such date,  other than any such  representation  or  warranty
      which relates to a specified prior date and except to the extent the Agent
      and  the  Lenders   have  been   notified  by  the   Borrowers   that  any
      representation  or warranty is not correct and the  Required  Lenders have
      explicitly  waived  in  writing  compliance  with such  representation  or
      warranty; and

            (ii) No event has occurred and is  continuing,  or would result from
      such  extension  of  credit,  which  constitutes  a Default or an Event of
      Default; and

      (b) The amount of the Borrowing  Base (and the amount of the Borrower Base
allocable to the applicable Borrower) shall be sufficient to make such Revolving
Loans or issue such Letters of Credit without exceeding the Availability for the
applicable Borrower or Total Availability, PROVIDED, HOWEVER, that the foregoing
conditions  precedent  are not  conditions  to each Lender  participating  in or
reimbursing  the Bank or the  Agent  for  such  Lenders'  Pro Rata  Share of any
Non-Ratable  Loan or Agent  Advance made in  accordance  with the  provisions of
SECTIONS 2.2(H), (I) and (J).

                                   ARTICLE 11
                                DEFAULT; REMEDIES

      11.1 EVENTS OF DEFAULT.

      It shall constitute an event of default ("Event of Default") if any one or
more of the following shall occur for any reason:

      (a)  any  failure  by the  Borrowers  to pay the  principal  of any of the
Obligations when due, whether upon demand or otherwise;

      (b) any failure by the Borrowers,  and such failure shall continue for two
(2) or more Business Days, to pay interest or premium on any of the  Obligations
or any fee or other  amount  owing  hereunder  when due,  whether upon demand or
otherwise;

      (c) any  representation or warranty made or deemed made by any Borrower in
this Agreement or by any Borrower or any of its Subsidiaries in any of the other
Loan Documents,  any Financial  Statement,  or any certificate  furnished by any
Borrower or any of its Subsidiaries at any time to the Agent or any Lender shall
prove to be untrue in any material respect as of the date on which made,  deemed
made, or furnished;

      (d) (i) any default shall occur shall in the  observance or performance of
any of the covenants and agreements  contained in SECTION 6.9, SECTION 7.3(A) or
SECTION 9.9 through 9.28, inclusive;

            (ii) any  default,  and such default  shall  continue for two (2) or
      more Business Days, shall occur in the observance or performance of any of

<PAGE>

      the covenants and agreements contained in SECTION 7.2(A), (B), (C), (D) or
      (E) or SECTION 7.3(B), (C), (D), (E), (F), (G), (H) or (I);

            (iii) any default,  and such default shall  continue for thirty (30)
      or more Business Days, shall occur in the observance or performance of any
      of the covenants and agreements  contained in this  Agreement  (other than
      those  referred to in clauses (a),  (b),  (c),  (d)(i) and (d)(ii) of this
      SECTION 11.1),  any other Loan Documents,  or any other agreement  entered
      into at any time to which any Borrower or any  Subsidiary and the Agent or
      any Lender are party  (including in respect of any Bank  Products),  or if
      any such agreement or document shall  terminate  (other than in accordance
      with its terms or the  terms  hereof or with the  written  consent  of the
      Agent and the Required Lenders) or become void or  unenforceable,  without
      the written consent of the Agent and the Required Lenders;

      (e) default shall occur with respect to any Debt For Borrowed Money (other
than  the  Obligations)  of  any  Borrower  or any  of  its  Subsidiaries  in an
outstanding  principal amount which exceeds $500,000,  or under any agreement or
instrument  under or pursuant to which any such Debt For Borrowed Money may have
been  issued,  created,  assumed,  or  guaranteed  by any Borrower or any of its
Subsidiaries, and such default shall continue for more than the period of grace,
if any, therein specified,  if the effect thereof (with or without the giving of
notice or  further  lapse of time or both) is to  accelerate,  or to permit  the
holders of any such Debt For Borrowed Money to  accelerate,  the maturity of any
such Debt For  Borrowed  Money;  or any such Debt For  Borrowed  Money  shall be
declared due and payable or be required to be prepaid (other than by a regularly
scheduled required prepayment) prior to the stated maturity thereof;

      (f) any  Borrower  or any of its  Subsidiaries  shall (i) file a voluntary
petition in  bankruptcy  or file a voluntary  petition or an answer or otherwise
commence  any  action  or  proceeding  seeking  reorganization,  arrangement  or
readjustment  of its debts or for any other relief under the federal  Bankruptcy
Code, as amended,  or under any other bankruptcy or insolvency act or law, state
or federal,  now or hereafter existing,  or consent to, approve of, or acquiesce
in, any such petition, action or proceeding;  (ii) apply for or acquiesce in the
appointment  of  a  receiver,  assignee,  liquidator,  sequestrator,  custodian,
monitor,  trustee  or  similar  officer  for it or for  all or any  part  of its
property;  (iii) make an  assignment  for the benefit of  creditors;  or (iv) be
unable generally to pay its debts as they become due;

      (g) an  involuntary  petition or  proposal  shall be filed or an action or
proceeding    otherwise   commenced   seeking    reorganization,    arrangement,
consolidation  or  readjustment  of  the  debts  of any  Borrower  or any of its
Subsidiaries  or for any other  relief  under the federal  Bankruptcy  Code,  as
amended,  or under any  other  bankruptcy  or  insolvency  act or law,  state or
federal,  now or  hereafter  existing  and either (i) such  petition,  proposal,
action or  proceeding  shall not have been  dismissed  within a period of thirty
(30)  days  after  its  commencement  or (ii) an order for  relief  against  any
Borrower or such Subsidiary shall have been entered in such proceeding;

      (h) a receiver, assignee,  liquidator,  sequestrator,  custodian, monitor,
trustee or similar  officer for any Borrower or any of its  Subsidiaries  or for

<PAGE>

all or any part of its property  shall be appointed or a warrant of  attachment,
execution or similar  process  shall be issued  against any material part of the
property of any Borrower or any of its Subsidiaries;

      (i) any Borrower or any of its  Subsidiaries  shall file a certificate  of
dissolution  under  applicable  state law or shall be  liquidated,  dissolved or
wound-up or shall commence or have commenced against it any action or proceeding
for dissolution,  winding-up or liquidation,  or shall take any corporate action
in furtherance thereof, except as otherwise permitted in SECTION 9.9;

      (j) all or any material part of the property of any Borrower or any of its
Subsidiaries  shall  be  nationalized,  expropriated  or  condemned,  seized  or
otherwise  appropriated,  or  custody  or  control  of such  property  or of any
Borrower or such Subsidiary  shall be assumed by any  Governmental  Authority or
any  court  of  competent  jurisdiction  at the  instance  of  any  Governmental
Authority, except where contested in good faith by proper proceedings diligently
pursued where a stay of enforcement is in effect;

      (k) any  Guaranty  of the  Obligations  shall be  terminated,  revoked  or
declared void or invalid;

      (l) one or more  judgments,  orders,  decrees  or  arbitration  awards  is
entered against any Borrower involving in the aggregate liability (to the extent
not covered by  independent  third-party  insurance as to which the insurer does
not  dispute  coverage)  as to any  single or  related  or  unrelated  series of
transactions, incidents or conditions, of, together with all related liabilities
affecting  the other  Borrowers,  $500,000  or more,  and the same shall  remain
unsatisfied,  unvacated and unstayed  pending appeal for a period of thirty (30)
days after the entry thereof;

      (m) any  loss,  theft,  damage  or  destruction  of any  item or  items of
Collateral  or other  property of any  Borrower or any  Subsidiary  occurs which
could  reasonably  be  expected  to cause a Material  Adverse  Effect and is not
adequately covered by insurance;

      (n) there occurs a Material Adverse Effect;

      (o) there is filed  against any  Borrower or any of its  Subsidiaries  any
action,  suit or  proceeding  under any  federal or state  racketeering  statute
(including the Racketeer Influenced and Corrupt Organization Act of 1970), which
action,  suit or proceeding (i) is not dismissed within one hundred twenty (120)
days,  and (ii) could  reasonably be expected to result in the  confiscation  or
forfeiture of any material portion of the Collateral;

      (p) for any reason  other than the failure of the Agent to take any action
available to it to maintain  perfection  of the Agent's  Liens,  pursuant to the
Loan  Documents,  any Loan Document ceases to be in full force and effect or any
Lien with  respect to any  material  portion of the  Collateral  intended  to be
secured thereby ceases to be, or is not, valid, perfected and prior to all other
Liens (other than Permitted Liens) or is terminated, revoked or declared void;

      (q) an  ERISA  Event  shall  occur  with  respect  to a  Pension  Plan  or
Multi-employer Plan which has resulted or could reasonably be expected to result
in  liability  of any  Borrower  under  Title IV of ERISA to the  Pension  Plan,

<PAGE>

Multi-employer  Plan or the PBGC in an  aggregate  amount in excess of $500,000;
(ii) the aggregate amount of Unfunded Pension  Liability among all Pension Plans
at any time exceeds $500,000; or (iii) any Borrower or any ERISA Affiliate shall
fail to pay when due, after the expiration of any applicable  grace period,  any
installment payment with respect to its withdrawal  liability under Section 4201
of ERISA  under a  Multi-employer  Plan in an  aggregate  amount  in  excess  of
$500,000;

      (r) there occurs a Change of Control; or

      (s) a failure by the Borrowers to obtain, on or prior to March 31, 2001, a
substitute  letter of credit under, and in accordance with the terms of, the IRB
Financing  (to  replace the letter of credit  issued by AmSouth  Bank of Alabama
with respect to the IRB Financing).

      11.2 REMEDIES.

      (a) If a Default  or an Event of  Default  exists,  the Agent may  (unless
otherwise directed by the Required Lenders and after having attempted to contact
each Lender),  in its  discretion,  and shall,  at the direction of the Required
Lenders,  do one or more of the following at any time or times and in any order,
without  notice to or demand on any  Borrower:  (i) reduce the Maximum  Revolver
Amount, or the advance rates against Eligible Accounts and/or Eligible Inventory
used in  computing  the  Borrowing  Base,  or reduce (or increase in the case of
reserves)  one or more of the other  elements  used in computing  the  Borrowing
Base; (ii) restrict the amount of or refuse to make Revolving  Loans;  and (iii)
restrict or refuse to provide Letters of Credit or Credit  Support.  If an Event
of Default exists, the Agent shall, at the direction of the Required Lenders, do
one or more of the  following,  in  addition  to the  actions  described  in the
preceding sentence,  at any time or times and in any order, without notice to or
demand on any Borrower:  (A) terminate the Commitments  and this Agreement;  (B)
declare any or all  Obligations  to be  immediately  due and payable;  PROVIDED,
HOWEVER,  that upon the occurrence of any Event of Default described in SECTIONS
11.1(E),  11.1(F),  11.1(G),  OR 11.1(H)  (with  respect to any  Borrower),  the
Commitments shall automatically and immediately expire and all Obligations shall
automatically become immediately due and payable without notice or demand of any
kind;  and (C) pursue its other rights and remedies under the Loan Documents and
applicable law.

      (b) If an Event of Default has occurred and is  continuing:  (i) the Agent
shall have for the benefit of the  Lenders,  in addition to all other  rights of
the Agent and the Lenders,  the rights and remedies of a secured party under the
UCC; (ii) the Agent may, at any time, take possession of the Collateral and keep
it on any Borrower's premises,  at no cost to the Agent or any Lender, or remove
any part of it to such  other  place or places as the Agent may  desire,  or the
Borrowers shall, upon the Agent's demand,  at the Borrowers' cost,  assemble the
Collateral and make it available to the Agent at a place  reasonably  convenient
to the Agent;  and (iii) the Agent may sell and deliver any Collateral at public
or private sales,  for cash,  upon credit or otherwise,  at such prices and upon
such terms as the Agent deems advisable, in its sole discretion, and may, if the
Agent deems it reasonable,  postpone or adjourn any sale of the Collateral by an
announcement  at the time and place of sale or of such  postponed  or  adjourned
sale without giving a new notice of sale. Without in any way requiring notice to

<PAGE>

be given in the following  manner,  the  Borrowers  agree that any notice by the
Agent of sale,  disposition or other intended action  hereunder or in connection
herewith,  whether required by the UCC or otherwise, shall constitute reasonable
notice to the  Borrowers  if such notice is mailed by  registered  or  certified
mail,  return receipt  requested,  postage prepaid,  or is delivered  personally
against  receipt,  at least ten (10)  Business  Days prior to such action to the
Borrowers'  address  specified in or pursuant to SECTION 15.8. If any Collateral
is sold on terms other than payment in full at the time of sale, no credit shall
be given against the Obligations until the Agent or the Lenders receive payment,
and if the buyer  defaults  in  payment,  the Agent may  resell  the  Collateral
without  further notice to the  Borrowers.  In the event the Agent seeks to take
possession  of all or any portion of the  Collateral by judicial  process,  each
Borrower  irrevocably  waives:  (A) the posting of any bond,  surety or security
with respect  thereto  which might  otherwise  be  required;  (B) any demand for
possession  prior to the  commencement  of any suit or  action  to  recover  the
Collateral;  and (C) any  requirement  that the Agent retain  possession and not
dispose of any  Collateral  until after trial or final  judgment.  The Borrowers
agree that the Agent has no obligation to preserve  rights to the  Collateral or
marshal  any  Collateral  for the  benefit  of any  Person.  The Agent is hereby
granted a license or other right to use, without charge,  any Borrower's labels,
patents,   copyrights,   name,  trade  secrets,  trade  names,  trademarks,  and
advertising  matter,  or any similar  property,  in  completing  production  of,
advertising  or selling any  Collateral,  and any  Borrower's  rights  under all
licenses and all  franchise  agreements  shall inure to the Agent's  benefit for
such  purpose.  The  proceeds of sale shall be applied  first to all expenses of
sale,  including  attorneys' fees, and then to the  Obligations.  The Agent will
return any excess to the Borrowers and the Borrowers shall remain liable for any
deficiency.

      (c) If an Event of Default occurs and is continuing,  each Borrower hereby
waives all rights to notice and  hearing  prior to the  exercise by the Agent of
the Agent's rights to repossess the Collateral  without  judicial  process or to
reply, attach or levy upon the Collateral without notice or hearing.

      (d) The remedies  exercisable  by the Agent  pursuant to this SECTION 11.2
shall not  prejudice the rights of the Agent or any Lender to enforce its claims
against the Borrowers.

                                   ARTICLE 12
                              TERM AND TERMINATION

      12.1 TERM AND TERMINATION.

      The term of this Agreement shall end on the Stated  Termination  Date. The
Agent upon  direction  from the Required  Lenders may terminate  this  Agreement
without notice upon the occurrence  and during the  continuation  of an Event of
Default. Upon the effective date of termination of this Agreement for any reason
whatsoever, all Obligations (including all unpaid principal,  accrued and unpaid
interest and any early termination or prepayment fees or penalties) shall become
immediately due and payable and the Borrowers shall immediately  arrange for the
cancellation and return of Letters of Credit then  outstanding.  Notwithstanding
the termination of this Agreement,  until all Obligations are indefeasibly  paid
and performed in full in cash, the Borrowers  shall remain bound by the terms of
this  Agreement and shall not be relieved of any of its  Obligations  hereunder,
and the  Agent and the  Lenders  shall  retain  all their  rights  and  remedies
hereunder or under any other Loan Document  (including  the Agent's Liens in and
all rights and  remedies  with respect to all then  existing  and  after-arising
Collateral).

<PAGE>

                                   ARTICLE 13
         AMENDMENTS; WAIVERS; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS

      13.1 AMENDMENTS AND WAIVERS.

      No  amendment or waiver of any  provision  of this  Agreement or any other
Loan  Document,  and no consent  with  respect to any  departure by any Borrower
therefrom,  shall be effective unless the same shall be in writing and signed by
the  Required  Lenders (or by the Agent at the written  request of the  Required
Lenders)  and the  Borrowers  and then  any  such  waiver  or  consent  shall be
effective only in the specific  instance and for the specific  purpose for which
given;  PROVIDED,  HOWEVER,  that no such waiver,  amendment,  or consent shall,
unless  in  writing  and  signed  by all  the  Lenders  and  the  Borrowers  and
acknowledged by the Agent, do any of the following:

      (a) increase or extend the Commitment of any Lender;

      (b)  postpone or delay any date fixed by this  Agreement or any other Loan
Document for any payment of  principal,  interest,  fees or other amounts due to
the Lenders (or any of them) hereunder or under any other Loan Document;

      (c) reduce the principal of, or the rate of interest  specified  herein on
any Loan, or any fees or other amounts payable hereunder or under any other Loan
Document;

      (d) change the percentage of the  Commitments  or of the aggregate  unpaid
principal  amount of the Loans which is required  for the Lenders or any of them
to take any action hereunder;

      (e) increase any of the  percentages  set forth in the  definition  of the
Borrowing Base;

      (f) amend this Section or any  provision of this  Agreement  providing for
consent or other action by all Lenders;

      (g)  release   Collateral  other  than  as  permitted  by  SECTION  14.12;

      (h) release any Borrower from its obligations  under the Credit  Documents
(other than in accordance with the provisions of SECTION 9.9);

      (i) change the definitions of "Required Lenders"; or

      (j)  increase  the  Maximum  Revolver  Amount or  Unused  Letter of Credit
Subfacility;

PROVIDED, HOWEVER, the Agent may, in its sole discretion and notwithstanding the
limitations  contained  in CLAUSES (E) AND (J) above and any other terms of this
Agreement,  make Revolving Loans  (including Agent Advances) in an amount not to
exceed  $750,000 and,  PROVIDED  FURTHER,  that no amendment,  waiver or consent
shall, unless in writing and signed by the Agent, affect the rights or duties of
the Agent under this Agreement or any other Loan Document.

<PAGE>

      13.2  ASSIGNMENTS; PARTICIPATIONS.

      (a) Any Lender may, with the written  consent of the Agent (which  consent
shall not be  unreasonably  withheld)  and prior  consultation  with the Parent,
assign and delegate to one or more Eligible Assignees  (provided that no consent
of the Agent or  consultation  with the Parent  shall be required in  connection
with any  assignment  and delegation by a Lender to an Affiliate of such Lender)
(each  an  "ASSIGNEE")  all,  or any  ratable  part of all,  of the  Loans,  the
Commitments and the other rights and obligations of such Lender hereunder,  in a
minimum  amount of  $5,000,000  (provided  that,  unless an assignor  Lender has
assigned and  delegated  all of its Loans and  Commitments,  no such  assignment
and/or delegation shall be permitted unless,  after giving effect thereto,  such
assignor  Lender  retains  a  Commitment  in a minimum  amount  of  $5,000,000);
PROVIDED,  HOWEVER, that the Borrowers and the Agent may continue to deal solely
and directly with such Lender in connection  with the interest so assigned to an
Assignee  until (i) written  notice of such  assignment,  together  with payment
instructions,  addresses and related  information  with respect to the Assignee,
shall  have been  given to the  Borrowers  and the Agent by such  Lender and the
Assignee;  (ii)  such  Lender  and its  Assignee  shall  have  delivered  to the
Borrowers  and the Agent an Assignment  and  Acceptance in the form of EXHIBIT F
("ASSIGNMENT AND  Acceptance"),  together with any note or notes subject to such
assignment,  and (iii) the  assignor  Lender or Assignee has paid to the Agent a
processing fee in the amount of $3,000.

      (b) From and after the date that the Agent  notifies the  assignor  Lender
that it has received an executed  Assignment  and  Acceptance and payment of the
above-referenced  processing fee, (i) the Assignee  thereunder  shall be a party
hereto  and,  to the extent  that  rights and  obligations,  including,  but not
limited  to,  the  obligation  to  participate  in  Letters of Credit and Credit
Support have been  assigned to it pursuant to such  Assignment  and  Acceptance,
shall have the rights and obligations of a Lender under the Loan Documents,  and
(ii) the  assignor  Lender  shall,  to the extent  that  rights and  obligations
hereunder and under the other Loan  Documents  have been assigned by it pursuant
to such  Assignment and  Acceptance,  relinquish its rights and be released from
its  obligations  under this  Agreement  (and in the case of an  Assignment  and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and  obligations  under this  Agreement,  such Lender  shall cease to be a party
hereto).

      (c)  By  executing  and  delivering  an  Assignment  and  Acceptance,  the
assigning  Lender  thereunder and the Assignee  thereunder  confirm to and agree
with each  other and the other  parties  hereto as  follows:  (i) other  than as
provided in such  Assignment  and  Acceptance,  such  assigning  Lender makes no
representation  or warranty  and assumes no  responsibility  with respect to any
statements,  warranties or  representations  made in or in connection  with this
Agreement or the execution,  legality,  validity,  enforceability,  genuineness,
sufficiency  or value of this  Agreement  or any other Loan  Document  furnished
pursuant hereto or the attachment,  perfection,  or priority of any Lien granted
by any  Borrower  to the  Agent  or any  Lender  in the  Collateral;  (ii)  such
assigning   Lender   makes  no   representation   or  warranty  and  assumes  no
responsibility  with respect to the  financial  condition of any Borrower or the
performance or observance by any Borrower of any of its  obligations  under this
Agreement  or any other Loan  Document  furnished  pursuant  hereto;  (iii) such

<PAGE>

Assignee  confirms that it has received a copy of this Agreement,  together with
such other  documents and  information as it has deemed  appropriate to make its
own credit  analysis and decision to enter into such  Assignment and Acceptance;
(iv) such Assignee will, independently and without reliance upon the Agent, such
assigning  Lender  or  any  other  Lender,  and  based  on  such  documents  and
information as it shall deem  appropriate at the time,  continue to make its own
credit  decisions in taking or not taking action under this Agreement;  (v) such
Assignee  appoints and  authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this  Agreement as are delegated to the
Agent  by  the  terms  hereof,   together   with  such  powers,   including  the
discretionary rights and incidental power, as are reasonably incidental thereto;
and (vi) such  Assignee  agrees that it will  perform in  accordance  with their
terms all of the  obligations  which by the terms of this Agreement are required
to be performed by it as a Lender.

      (d) Immediately upon  satisfaction of the requirements of SECTION 13.2(A),
this  Agreement  shall be deemed to be  amended to the  extent,  but only to the
extent,  necessary to reflect the  addition of the  Assignee  and the  resulting
adjustment of the Commitments  arising  therefrom.  The Commitment  allocated to
each Assignee shall reduce such Commitments of the assigning Lender PRO TANTO.

      (e) Any  Lender  may at any  time  sell to one or more  commercial  banks,
financial  institutions,  or other  Persons not  Affiliates  of the Borrowers (a
"PARTICIPANT")  participating  interests in any Loans,  the  Commitment  of that
Lender  and the  other  interests  of that  Lender  (the  "originating  Lender")
hereunder and under the other Loan Documents;  PROVIDED,  HOWEVER,  that (i) the
originating  Lender's  obligations  under this Agreement shall remain unchanged,
(ii) the originating  Lender shall remain solely responsible for the performance
of such  obligations,  (iii) the Borrowers and the Agent shall  continue to deal
solely  and  directly  with  the  originating  Lender  in  connection  with  the
originating  Lender's rights and obligations  under this Agreement and the other
Loan  Documents,  and (iv) no Lender shall  transfer or grant any  participating
interest under which the  Participant has rights to approve any amendment to, or
any  consent  or waiver  with  respect  to,  this  Agreement  or any other  Loan
Document, and all amounts payable by the Borrowers hereunder shall be determined
as if such  Lender  had not sold such  participation;  except  that,  if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant  shall be deemed to have the right of set-off in respect of its
participating  interest in amounts owing under this Agreement to the same extent
and  subject  to the  same  limitation  as if the  amount  of its  participating
interest were owing directly to it as a Lender under this Agreement.

      (f) Notwithstanding any other provision in this Agreement,  any Lender may
at any time create a security interest in, or pledge,  all or any portion of its
rights under and interest in this Agreement in favor of any Federal Reserve Bank
in accordance  with Regulation A of the FRB or U.S.  Treasury  Regulation 31 CFR
Section  203.14,  and such  Federal  Reserve  Bank may  enforce  such  pledge or
security interest in any manner permitted under applicable law.

      (g) In the event of an  assignment  or  transfer  (and  subject to the due
execution  of  any  amendment,  variation,  accession  memoranda  or  any  other
supplemental  agreement or deed as may be required by the Agent hereunder),  the
following will apply, namely:

<PAGE>

            (i)   the rights and  benefits  so  assigned  or  transferred  shall
                  consist of a solidary  interest  of such  Lender in all of its
                  rights and benefits hereunder and under the Agent's Liens, the
                  Collateral  and the  other  Loan  Documents,  the whole to the
                  extent of the interest so assigned or transferred;

            (ii)  the assignee/transferee party shall assume, to the exoneration
                  of such Lender,  the obligations of such Lender  hereunder and
                  under the other Loan Documents,  to the extent of the interest
                  so assigned or transferred;

            (iii) such Lender  shall be  released  from its  obligations  to the
                  Borrowers hereunder and under the other Loan Documents, to the
                  extent of the interest so assigned or transferred;

            (iv)  such assignment or transfer will not result in novation of the
                  Commitments,  the Obligations,  or any other obligations under
                  this   Agreement,   such  novation   being  hereby   expressly
                  disclaimed;

            (v)   the  obligation  of  the  assignee/transferee  party  to  make
                  Revolving  Loans and/or advances of the Term Loan and to issue
                  or arrange  for the  issuance of Letters of Credit will be the
                  same  obligation as that of such Lender before the  assignment
                  or  transfer  and not a new  obligation,  notwithstanding  any
                  release of such Lender from such obligation;

            (vi)  the assignee/transferee  party shall be a party hereto and, to
                  the extent provided in any Assignment and Acceptance, have the
                  rights  and  obligations  of  a  Lender   hereunder  with  the
                  commitment as set forth  therein,  and the  obligations of the
                  Borrowers  arising  from any Loans  advanced by, or Letters of
                  Credit  issued or  arranged by the  assignee/transferee  party
                  will  form part of the  Obligations,  will be  secured  by the
                  Agent's Liens and the Collateral  and the  assignee/transferee
                  party, such Lender and the Agent will have a solidary interest
                  therein in the same manner as if the assignee/transferee party
                  had specifically been named as a Lender thereunder;

            (vii) subject  to  Section  14.12  and to the  rights of each of the
                  Borrowers under the Civil Code of Quebec not altered or waived
                  by the terms hereof,  the rights of such Lender, the Agent and
                  the assignee/transferee party shall be solidary such that each
                  of them shall be entitled to:

                  1.    demand repayment of Loans  outstanding from time to time
                        in accordance with this Agreement;

                  2.    exact the whole  performance of the Obligations from the
                        Borrowers;

                  3.    benefit from the Agent's Liens;

<PAGE>

                  4.    give a full acquittance of the Obligations  (each Lender
                        hereby agreeing to be bound by such acquittance); and

                  5.    exercise  all  rights  and  recourses   under  the  Loan
                        Documents  with respect to the  Collateral  located,  or
                        deemed located, in Quebec;

                  the  whole  to the  extent  of the  interest  so  assigned  or
                  transferred.

                                   ARTICLE 14
                                    THE AGENT

      14.1  APPOINTMENT AND AUTHORIZATION.

      Each Lender  hereby  designates  and  appoints the Bank as its Agent under
this Agreement and the other Loan  Documents and each Lender hereby  irrevocably
authorizes  the Agent to take such action on its behalf under the  provisions of
this  Agreement  and each other Loan  Document  and to exercise  such powers and
perform  such  duties  as are  expressly  delegated  to it by the  terms of this
Agreement  or  any  other  Loan  Document,  together  with  such  powers  as are
reasonably  incidental  thereto.  The Agent agrees to act as such on the express
conditions  contained in this ARTICLE 14. The  provisions of this ARTICLE 14 are
solely for the benefit of the Agent and the  Lenders,  and the  Borrowers  shall
have no rights as a third party  beneficiary of any of the provisions  contained
herein.  Notwithstanding  any provision to the contrary  contained  elsewhere in
this  Agreement  or in any other  Loan  Document,  the Agent  shall not have any
duties or  responsibilities,  except those expressly set forth herein, nor shall
the Agent have or be deemed to have any fiduciary  relationship with any Lender,
and no implied covenants,  functions,  responsibilities,  duties, obligations or
liabilities  shall be read into this  Agreement  or any other Loan  Document  or
otherwise  exist  against the Agent.  Without  limiting  the  generality  of the
foregoing sentence, the use of the term "agent" in this Agreement with reference
to the Agent is not  intended  to connote  any  fiduciary  or other  implied (or
express)  obligations  arising  under  agency  doctrine of any  applicable  law.
Instead,  such term is used merely as a matter of market custom, and is intended
to create or reflect only an  administrative  relationship  between  independent
contracting  parties.  Except as expressly otherwise provided in this Agreement,
the Agent shall have and may use its sole  discretion with respect to exercising
or refraining from exercising any  discretionary  rights or taking or refraining
from taking any actions which the Agent is expressly  entitled to take or assert
under  this  Agreement  and  the  other  Loan   Documents,   including  (a)  the
determination of the applicability of ineligibility criteria with respect to the
calculation of the Borrowing Base, (b) the making of Agent Advances  pursuant to
SECTION 2.2(I),  and (c) the exercise of remedies  pursuant to SECTION 11.2, and
any action so taken or not taken shall be deemed consented to by the Lenders.

      14.2  DELEGATION OF DUTIES.

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

<PAGE>

The Agent shall not be responsible for the negligence or misconduct of any agent
or  attorney-in-fact  that it selects as long as such selection was made without
gross negligence or willful misconduct.

      14.3  LIABILITY OF AGENT.

      None of the Agent-Related Persons shall (i) be liable for any action taken
or omitted to be taken by any of them under or in connection with this Agreement
or any other Loan Document or the transactions  contemplated  hereby (except for
its own gross negligence or willful  misconduct),  or (ii) be responsible in any
manner to any of the  Lenders  for any  recital,  statement,  representation  or
warranty made by any Borrower or any Subsidiary or Affiliate of any Borrower, or
any officer thereof,  contained in this Agreement or in any other Loan Document,
or in any  certificate,  report,  statement  or other  document  referred  to or
provided  for in, or  received by the Agent under or in  connection  with,  this
Agreement  or  any  other  Loan  Document,   or  the  validity,   effectiveness,
genuineness,  enforceability  or sufficiency of this Agreement or any other Loan
Document,  or for any  failure of any  Borrower  or any other  party to any Loan
Document to perform its obligations  hereunder or thereunder.  No  Agent-Related
Person shall be under any obligation to any Lender to ascertain or to inquire as
to the  observance  or  performance  of any of the  agreements  contained in, or
conditions  of, this  Agreement  or any other Loan  Document,  or to inspect the
properties,  books  or  records  of  any  Borrower  or any  of  such  Borrower's
Subsidiaries or Affiliates.

      14.4  RELIANCE BY AGENT.

      The Agent  shall be  entitled  to rely,  and shall be fully  protected  in
relying, upon any writing, resolution, notice, consent, certificate,  affidavit,
letter,  telegram,  facsimile,  telex or telephone  message,  statement or other
document  or  conversation  believed by it to be genuine and correct and to have
been signed,  sent or made by the proper Person or Persons,  and upon advice and
statements of legal counsel  (including  counsel to the Borrowers),  independent
accountants  and other experts  selected by the Agent.  The Agent shall be fully
justified in failing or refusing to take any action under this  Agreement or any
other Loan Document  unless it shall first receive such advice or concurrence of
the Required Lenders as it deems  appropriate  and, if it so requests,  it shall
first be  indemnified  to its  satisfaction  by the Lenders  against any and all
liability  and  expense  which  may be  incurred  by it by  reason  of taking or
continuing  to take any  such  action.  The  Agent  shall in all  cases be fully
protected in acting,  or in refraining from acting,  under this Agreement or any
other Loan  Document  in  accordance  with a request or consent of the  Required
Lenders (or all Lenders if so required by SECTION 13.1) and such request and any
action taken or failure to act pursuant thereto shall be binding upon all of the
Lenders.

      14.5  NOTICE OF DEFAULT.

      The  Agent  shall  not be  deemed  to  have  knowledge  or  notice  of the
occurrence  of any  Default or Event of  Default,  unless  the Agent  shall have
received written notice from a Lender or a Borrower referring to this Agreement,
describing  such  Default or Event of Default and stating  that such notice is a
"notice of  default."  The Agent will  notify the  Lenders of its receipt of any
such  notice.  The Agent shall take such action with  respect to such Default or

<PAGE>

Event of Default as may be requested by the Required  Lenders in accordance with
SECTION 11; PROVIDED,  HOWEVER, that unless and until the Agent has received any
such request, the Agent may (but shall not be obligated to) take such action, or
refrain  from  taking  such  action,  with  respect to such  Default or Event of
Default as it shall deem advisable.

      14.6  CREDIT DECISION.

      Each Lender  acknowledges that none of the Agent-Related  Persons has made
any  representation  or warranty to it, and that no act by the Agent hereinafter
taken,  including  any  review  of  the  affairs  of  the  Borrowers  and  their
Affiliates,  shall be deemed to constitute any representation or warranty by any
Agent-Related  Person to any Lender. Each Lender represents to the Agent that it
has,  independently and without reliance upon any Agent-Related Person and based
on such  documents and  information as it has deemed  appropriate,  made its own
appraisal  of  and  investigation  into  the  business,  prospects,  operations,
property,  financial and other condition and  creditworthiness  of the Borrowers
and their  Affiliates,  and all applicable  bank regulatory laws relating to the
transactions  contemplated  hereby, and made its own decision to enter into this
Agreement and to extend  credit to the  Borrowers.  Each Lender also  represents
that it will,  independently and without reliance upon any Agent-Related  Person
and based on such documents and information as it shall deem  appropriate at the
time,  continue to make its own credit  analysis,  appraisals  and  decisions in
taking or not taking action under this  Agreement and the other Loan  Documents,
and to make such investigations as it deems necessary to inform itself as to the
business,  prospects,  operations,  property,  financial and other condition and
creditworthiness  of the  Borrowers.  Except  for  notices,  reports  and  other
documents expressly herein required to be furnished to the Lenders by the Agent,
the Agent shall not have any duty or  responsibility  to provide any Lender with
any credit or other information concerning the business, prospects,  operations,
property,  financial and other  condition or  creditworthiness  of the Borrowers
which may come into the possession of any of the Agent-Related Persons

      14.7  INDEMNIFICATION.

      Whether or not the transactions  contemplated hereby are consummated,  the
Lenders shall indemnify upon demand the Agent-Related Persons (to the extent not
reimbursed by or on behalf of the Borrowers and without  limiting the obligation
of the Borrowers to do so), pro rata,  from and against any and all  Indemnified
Liabilities as such term is defined in SECTION 15.11; provided, HOWEVER, that no
Lender  shall be liable  for the  payment  to the  Agent-Related  Persons of any
portion of such  Indemnified  Liabilities  resulting  solely from such  Person's
gross  negligence or willful  misconduct.  Without  limitation of the foregoing,
each Lender shall  reimburse  the Agent upon demand for its ratable share of any
costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent
in  connection  with  the  preparation,   execution,  delivery,  administration,
modification,  amendment or enforcement  (whether  through  negotiations,  legal
proceedings  or  otherwise)  of,  or  legal  advice  in  respect  of  rights  or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated  by or  referred  to herein,  to the  extent  that the Agent is not
reimbursed for such expenses by or on behalf of the Borrowers.  The  undertaking
in this Section shall survive the payment of all  Obligations  hereunder and the
resignation or replacement of the Agent.

<PAGE>

      14.8  AGENT IN INDIVIDUAL CAPACITY.

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

      14.9  SUCCESSOR AGENT.

      The Agent may resign as Agent upon 30 days  notice to the  Lenders and the
Borrowers,  such  resignation to be effective upon the acceptance of a successor
agent to its  appointment  as  Agent.  In the  event  the Bank  sells all of its
Commitment and Revolving Loans as part of a sale,  transfer or other disposition
by the Bank of substantially all of its loan portfolio, the Bank shall resign as
Agent  and such  purchaser  or  transferee  shall  become  the  successor  Agent
hereunder,  provided  that  such  successor  Agent is  either  already  a Lender
hereunder or is  reasonably  acceptable to the  Borrowers.  If the Agent resigns
under this Agreement,  the Required Lenders shall appoint from among the Lenders
a successor  agent for the Lenders.  If no successor agent is appointed prior to
the effective date of the resignation of the Agent, the Agent may appoint, after
consulting with the Lenders and the Borrowers,  a successor agent from among the
Lenders.  Upon the acceptance of its appointment as successor  agent  hereunder,
such successor  agent shall succeed to all the rights,  powers and duties of the
retiring  Agent and the term  "Agent"  shall mean such  successor  agent and the
retiring  Agent's  appointment,  powers and duties as Agent shall be terminated.
After any retiring  Agent's  resignation  hereunder as Agent,  the provisions of
this ARTICLE 14 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement.

      14.10 WITHHOLDING TAX.

      (a) Each  Lender  that is a "foreign  corporation,  partnership  or trust"
within the meaning of the Code shall claim  exemption from U.S.  withholding tax
under Sections 1441 or 1442 of the Code, and each such Lender agrees with and in
favor of the Agent to deliver to the Agent:

            (i) if such Lender claims an exemption from  withholding tax under a
      United States of America tax treaty, properly completed IRS Forms 1001 and
      W-8 (or any successor  form(s))  before the payment of any interest in the
      first  calendar  year and before the payment of any interest in each third
      succeeding  calendar  year during  which  interest  may be paid under this
      Agreement;

<PAGE>

            (ii) if such Lender claims that  interest paid under this  Agreement
      is exempt  from  United  States of America  withholding  tax because it is
      effectively connected with a United States of America trade or business of
      such Lender,  two properly  completed and executed copies of IRS Form 4224
      (or any  successor  form) before the payment of any interest is due in the
      first taxable year of such Lender and in each  succeeding  taxable year of
      such Lender during which  interest may be paid under this  Agreement,  and
      IRS Form W-9; and

            (iii) such other form or forms as may be required  under the Code or
      other laws of the United  States of America as a  condition  to  exemption
      from United States of America withholding tax.

      Such  Lender  agrees  to  promptly  notify  the  Agent  of any  change  in
circumstances which would modify or render invalid any claimed exemption.

      (b) If any Lender claims  exemption  from  withholding  tax under a United
States of America tax treaty by providing IRS Form 1001 (or any successor  form)
and  such  Lender  sells,  assigns,  grants a  participation  in,  or  otherwise
transfers  all or part of the  Obligations  owing to such  Lender,  such  Lender
agrees to notify the Agent of the percentage amount in which it is no longer the
beneficial  owner of Obligations of the Borrowers to such Lender.  To the extent
of such percentage  amount, the Agent will treat such Lender's IRS Form 1001 (or
any successor form) as no longer valid.

      (c) If any  Lender  claiming  exemption  from  United  States  of  America
withholding  tax by filing IRS Form 4224 (or any successor  form) with the Agent
sells, assigns, grants a participation in, or otherwise transfers all or part of
the  Obligations  owing to such Lender,  such Lender  agrees to  undertake  sole
responsibility  for complying with the withholding tax  requirements  imposed by
Sections 1441 and 1442 of the Code.

      (d) If the IRS or any other Governmental Authority of the United States of
America or other  jurisdiction  asserts a claim that the Agent did not  properly
withhold tax from amounts paid to or for the account of any Lender  (because the
appropriate form was not delivered,  was not properly executed,  or because such
Lender failed to notify the Agent of a change in  circumstances  which  rendered
the exemption from  withholding tax  ineffective,  or for any other reason) such
Lender  shall  indemnify  the Agent  fully for all  amounts  paid,  directly  or
indirectly, by the Agent as tax or otherwise,  including penalties and interest,
and including any taxes imposed by any  jurisdiction  on the amounts  payable to
the Agent under this Section,  together  with all costs and expenses  (including
Attorney  Costs).  The  obligation  of the Lenders under this  subsection  shall
survive the payment of all Obligations and the resignation or replacement of the
Agent.

      14.11 COLLATERAL MATTERS.

      (a) The Lenders hereby irrevocably  authorize the Agent, at its option and
in its sole discretion, to release any Agent's Lien upon any Collateral (i) upon
the termination of the  Commitments and payment and  satisfaction in full by the

<PAGE>

Borrowers of all Loans and  reimbursement  obligations  in respect of Letters of
Credit and Credit Support,  and the  termination of all  outstanding  Letters of
Credit  (whether  or not  any  of  such  obligations  are  due)  and  all  other
Obligations;  (ii) constituting property being sold or disposed of if a Borrower
certifies to the Agent that the sale or disposition  is made in compliance  with
SECTION  9.9  (and the  Agent  may rely  conclusively  on any such  certificate,
without further inquiry); (iii) constituting property in which no Borrower owned
an interest at the time the Lien was granted or at any time thereafter;  or (iv)
constituting  property  leased to a Borrower  under a lease which has expired or
been  terminated  in a transaction  permitted  under this  Agreement.  Except as
provided above,  the Agent will not release any of the Agent's Liens without the
prior written authorization of the Lenders;  PROVIDED that the Agent may, in its
discretion,  release the Agent's Liens on Collateral valued in the aggregate not
in excess of  $500,000  during any one year  period  without  the prior  written
authorization of the Lenders.  Upon request by the Agent or the Borrowers at any
time,  the Lenders will confirm in writing the Agent's  authority to release any
Agent's  Liens upon  particular  types or items of  Collateral  pursuant to this
SECTION 14.11.

      (b) Upon receipt by the Agent of any  authorization  required  pursuant to
SECTION  14.11(A)  from the  Lenders of the  Agent's  authority  to release  any
Agent's Liens upon  particular  types or items of Collateral,  and upon at least
five (5) Business Days prior written  request by the  applicable  Borrower,  the
Agent  shall (and is hereby  irrevocably  authorized  by the Lenders to) execute
such  documents as may be necessary to evidence the release of the Agent's Liens
upon  such  Collateral;  PROVIDED,  HOWEVER,  that (i) the  Agent  shall  not be
required to execute any such  document on terms which,  in the Agent's  opinion,
would  expose  the Agent to  liability  or create any  obligation  or entail any
consequence  other than the release of such Liens without  recourse or warranty,
and (ii) such release  shall not in any manner  discharge,  affect or impair the
Obligations or any Liens (other than those  expressly  being  released) upon (or
obligations  of the  Borrowers  in respect  of) all  interests  retained  by the
Borrowers,  including the proceeds of any sale,  all of which shall  continue to
constitute part of the Collateral.

      (c) The Agent shall have no obligation whatsoever to any of the Lenders to
assure that the Collateral  exists or is owned by the Borrowers or is cared for,
protected or insured or has been encumbered, or that the Agent's Liens have been
properly or sufficiently or lawfully created,  perfected,  protected or enforced
or are  entitled  to any  particular  priority,  or to exercise at all or in any
particular  manner  or under any duty of care,  disclosure  or  fidelity,  or to
continue  exercising,  any of the  rights,  authorities  and  powers  granted or
available  to  the  Agent  pursuant  to  any of the  Loan  Documents,  it  being
understood and agreed that in respect of the Collateral, or any act, omission or
event related thereto,  the Agent may act in any manner it may deem appropriate,
in its sole  discretion  given the Agent's own interest in the Collateral in its
capacity  as one of the  Lenders  and that the Agent shall have no other duty or
liability whatsoever to any Lender as to any of the foregoing.

      14.12 RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS.

      (a) Each of the  Lenders  agrees  that it shall not,  without  the express
consent of all Lenders, and that it shall, to the extent it is lawfully entitled
to do so, upon the request of all Lenders, set off against the Obligations,  any
amounts owing by such Lender to any Borrower or any accounts of any Borrower now

<PAGE>

or hereafter  maintained  with such Lender.  Each of the Lenders  further agrees
that it shall not, unless specifically  requested to do so by the Agent, take or
cause to be taken any action to  enforce  its rights  under  this  Agreement  or
against any  Borrower,  including  the  commencement  of any legal or  equitable
proceedings,  to  foreclose  any Lien on,  or  otherwise  enforce  any  security
interest in, any of the Collateral.

      (b) If at any time or times  any  Lender  shall  receive  (i) by  payment,
foreclosure,  setoff or  otherwise,  any proceeds of  Collateral or any payments
with respect to the  Obligations  of the Borrowers to such Lender arising under,
or relating to, this Agreement or the other Loan Documents,  except for any such
proceeds  or payments  received  by such  Lender from the Agent  pursuant to the
terms of this  Agreement,  or (ii)  payments  from the  Agent in  excess of such
Lender's  ratable portion of all such  distributions  by the Agent,  such Lender
shall  promptly  (1) turn the same  over to the  Agent,  in kind,  and with such
endorsements  as may be required to negotiate the same to the Agent,  or in same
day  funds,  as  applicable,  for  the  account  of all of the  Lenders  and for
application to the Obligations in accordance  with the applicable  provisions of
this  Agreement,  or (2) purchase,  without  recourse or warranty,  an undivided
interest and  participation in the Obligations owed to the other Lenders so that
such excess payment  received  shall be applied  ratably as among the Lenders in
accordance with their Pro Rata Shares; PROVIDED, however, that if all or part of
such excess  payment  received by the purchasing  party is thereafter  recovered
from it,  those  purchases of  participations  shall be rescinded in whole or in
part,  as  applicable,  and the  applicable  portion of the purchase  price paid
therefor shall be returned to such purchasing party, but without interest except
to the  extent  that  such  purchasing  party is  required  to pay  interest  in
connection with the recovery of the excess payment.

      14.13 AGENCY FOR PERFECTION.

      Each Lender hereby  appoints each other Lender as agent for the purpose of
perfecting the Lenders'  security  interest in assets which,  in accordance with
Article 9 of the UCC can be  perfected  only by  possession.  Should  any Lender
(other than the Agent)  obtain  possession of any such  Collateral,  such Lender
shall notify the Agent thereof,  and, promptly upon the Agent's request therefor
shall deliver such  Collateral  to the Agent or in  accordance  with the Agent's
instructions.

      14.14 PAYMENTS BY AGENTS TO LENDERS.

      All payments to be made by the Agent to the Lenders  shall be made by bank
wire transfer or internal transfer of immediately available funds to each Lender
pursuant to wire transfer  instructions  delivered in writing to the Agent on or
prior to the Closing Date (or if such Lender is an Assignee,  on the  applicable
Assignment and Acceptance), or pursuant to such other wire transfer instructions
as each  party  may  designate  for  itself  by  written  notice  to the  Agent.
Concurrently  with each such  payment,  the Agent shall  identify  whether  such
payment (or any portion thereof)  represents  principal,  premium or interest on
the Revolving Loans, Term Loans or otherwise.

<PAGE>

      14.15 CONCERNING THE COLLATERAL AND THE RELATED LOAN DOCUMENTS.

      Each Lender  authorizes and directs the Agent to enter into this Agreement
and the other Loan  Documents,  for the ratable  benefit and  obligation  of the
Agent and the Lenders.  Each Lender agrees that any action taken by the Agent or
Required Lenders, as applicable,  in accordance with the terms of this Agreement
or the other  Loan  Documents,  and the  exercise  by the Agent or the  Required
Lenders, as applicable,  of their respective powers set forth therein or herein,
together with such other powers that are reasonably incidental thereto, shall be
binding upon all of the Lenders.

      14.16 FIELD AUDIT AND EXAMINATION REPORTS; DISCLAIMER BY LENDERS.

      By signing this Agreement, each Lender:

      (a) is  deemed  to have  requested  that the Agent  furnish  such  Lender,
promptly after it becomes  available,  a copy of each field audit or examination
report (each a "Report" and collectively, "Reports") prepared by the Agent;

      (b) expressly agrees and acknowledges  that neither the Bank nor the Agent
(i) makes any  representation  or warranty as to the accuracy of any Report,  or
(ii) shall be liable for any information contained in any Report;

      (c)  expressly   agrees  and   acknowledges   that  the  Reports  are  not
comprehensive audits or examinations,  that the Agent or the Bank or other party
performing  any audit or  examination  will  inspect only  specific  information
regarding the Borrowers and will rely  significantly  upon the Borrowers'  books
and records, as well as on representations of the Borrowers' personnel;

      (d) agrees to keep all Reports  confidential and strictly for its internal
use, and not to distribute except to its participants,  or use any Report in any
other manner; and

      (e) without limiting the generality of any other indemnification provision
contained in this  Agreement,  agrees:  (i) to hold the Agent and any such other
Lender preparing a Report harmless from any action the  indemnifying  Lender may
take or conclusion the indemnifying  Lender may reach or draw from any Report in
connection with any loans or other credit  accommodations  that the indemnifying
Lender  has  made or may  make to any  Borrower,  or the  indemnifying  Lender's
participation  in, or the indemnifying  Lender's purchase of, a loan or loans of
any Borrower;  and (ii) to pay and protect,  and indemnify,  defend and hold the
Agent and any such other Lender  preparing a Report  harmless  from and against,
the claims,  actions,  proceedings,  damages,  costs, expenses and other amounts
(including  Attorney  Costs)  incurred  by the Agent and any such  other  Lender
preparing  a Report as the direct or  indirect  result of any third  parties who
might obtain all or part of any Report through the indemnifying Lender.

      14.17 RELATION AMONG LENDERS.

      The  Lenders  are not  partners or  co-venturers,  and no Lender  shall be
liable for the acts or omissions of, or (except as otherwise set forth herein in
case of the Agent) authorized to act for, any other Lender.

<PAGE>

                                   ARTICLE 15
                                  MISCELLANEOUS

      15.1 NO WAIVERS; CUMULATIVE REMEDIES.

      No failure by the Agent or any Lender to exercise  any right,  remedy,  or
option under this Agreement or any present or future supplement  thereto,  or in
any other  agreement  between  or among any  Borrower  and the Agent  and/or any
Lender, or delay by the Agent or any Lender in exercising the same, will operate
as a waiver  thereof.  No waiver by the Agent or any  Lender  will be  effective
unless it is in writing,  and then only to the extent  specifically  stated.  No
waiver by the Agent or the Lenders on any occasion  shall affect or diminish the
Agent's and each Lender's rights thereafter to require strict performance by any
Borrower  of any  provision  of this  Agreement.  The Agent and the  Lenders may
proceed  directly to collect the  Obligations  without any prior recourse to the
Collateral.  The Agent's and each Lender's  rights under this  Agreement will be
cumulative and not exclusive of any other right or remedy which the Agent or any
Lender may have.

      15.2 SEVERABILITY.

      The illegality or  unenforceability  of any provision of this Agreement or
any Loan Document or any instrument or agreement required hereunder shall not in
any way  affect  or impair  the  legality  or  enforceability  of the  remaining
provisions of this Agreement or any instrument or agreement required hereunder.

      15.3 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS.

      (a) THIS AGREEMENT  SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF
THE PARTIES HERETO  DETERMINED IN ACCORDANCE  WITH THE INTERNAL LAWS (AS OPPOSED
TO THE CONFLICT OF LAWS PROVISIONS  PROVIDED THAT PERFECTION ISSUES WITH RESPECT
TO ARTICLE 9 OF THE UCC MAY GIVE EFFECT TO APPLICABLE  CHOICE OR CONFLICT OF LAW
RULES SET FORTH IN ARTICLE 9 OF THE UCC) OF THE STATE OF NEW YORK; PROVIDED THAT
THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

      (b) ANY LEGAL ACTION OR PROCEEDING  WITH RESPECT TO THIS  AGREEMENT OR ANY
OTHER  LOAN  DOCUMENT  MAY BE BROUGHT IN THE COURTS OF THE STATES OF NEW YORK OR
NORTH  CAROLINA OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN  DISTRICT OF
NEW  YORK OR THE  WESTERN  DISTRICT  OF NORTH  CAROLINA,  AND BY  EXECUTION  AND
DELIVERY OF THIS  AGREEMENT,  EACH OF THE  BORROWERS,  THE AGENT AND THE LENDERS
CONSENTS,  FOR  ITSELF  AND IN RESPECT  OF ITS  PROPERTY,  TO THE  NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS.  EACH OF THE BORROWERS,  THE AGENT AND THE LENDERS
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON  CONVENIENS,  WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT
OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. NOTWITHSTANDING THE FOREGOING:

<PAGE>

(1) THE  AGENT AND THE  LENDERS  SHALL  HAVE THE  RIGHT TO BRING  ANY  ACTION OR
PROCEEDING  AGAINST  ANY  BORROWER  OR ITS  PROPERTY  IN THE COURTS OF ANY OTHER
JURISDICTION  THE AGENT OR THE LENDERS DEEM NECESSARY OR APPROPRIATE IN ORDER TO
REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE  OBLIGATIONS AND (2) EACH OF
THE PARTIES HERETO  ACKNOWLEDGES  THAT ANY APPEALS FROM THE COURTS  DESCRIBED IN
THE  IMMEDIATELY  PRECEDING  SENTENCE  MAY HAVE TO BE  HEARD BY A COURT  LOCATED
OUTSIDE THOSE JURISDICTIONS.

      (c) 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 SUCH  BORROWER AT ITS ADDRESS SET
FORTH IN SECTION 15.8 AND SERVICE SO MADE SHALL BE DEEMED TO BE  COMPLETED  FIVE
(5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S.  MAILS  POSTAGE
PREPAID. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF AGENT OR THE LENDERS
TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.

      15.4 WAIVER OF JURY TRIAL.

      THE  BORROWERS,  THE  LENDERS AND THE AGENT EACH  IRREVOCABLY  WAIVE THEIR
RESPECTIVE  RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS  CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES  AGAINST ANY OTHER PARTY OR
ANY  AGENT-RELATED  PERSON,  PARTICIPANT  OR  ASSIGNEE,  WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.  THE BORROWERS,  THE LENDERS AND THE
AGENT  EACH  AGREE  THAT ANY SUCH  CLAIM OR CAUSE OF ACTION  SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING,  THE PARTIES FURTHER
AGREE THAT THEIR  RESPECTIVE  RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION AS TO ANY ACTION,  COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR  ENFORCEABILITY OF THIS AGREEMENT
OR THE OTHER LOAN  DOCUMENTS  OR ANY  PROVISION  HEREOF OR THEREOF.  THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

<PAGE>

      15.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.

      All of the Borrowers'  representations  and  warranties  contained in this
Agreement shall survive the execution,  delivery,  and acceptance thereof by the
parties,  notwithstanding any investigation by the Agent or the Lenders or their
respective agents.

      15.6 OTHER SECURITY AND GUARANTIES.

      The  Agent,  may,  without  notice or demand  and  without  affecting  any
Borrower's  obligations  hereunder,  from time to time: (a) take from any Person
and hold  collateral  (other than the  Collateral) for the payment of all or any
part of the Obligations and exchange,  enforce or release such collateral or any
part thereof;  and (b) accept and hold any endorsement or guaranty of payment of
all or any part of the  Obligations  and release or substitute any such endorser
or  guarantor,  or any Person who has given any Lien in any other  collateral as
security  for the  payment of all or any part of the  Obligations,  or any other
Person in any way obligated to pay all or any part of the Obligations.

      15.7 FEES AND EXPENSES.

      The Borrowers agree to pay to the Agent, for its benefit,  on demand,  all
reasonable  costs and expenses that the Agent pays or incurs in connection  with
the  negotiation,   preparation,  syndication,   consummation,   administration,
enforcement,  and  termination  of  this  Agreement  or any of  the  other  Loan
Documents,  including:  (a) Attorney  Costs;  (b) reasonable  costs and expenses
(including reasonable attorneys' and paralegals' fees and disbursements) for any
amendment, supplement, waiver, consent, or subsequent closing in connection with
the Loan  Documents and the  transactions  contemplated  thereby;  (c) costs and
expenses of lien and title  searches and title  insurance;  (d) taxes,  fees and
other charges for recording  the  Mortgages,  filing  financing  statements  and
continuations,  and other actions to perfect,  protect, and continue the Agent's
Liens  (including costs and expenses paid or incurred by the Agent in connection
with the consummation of Agreement); (e) sums paid or incurred to pay any amount
or take any action  required of any Borrower  under the Loan Documents that such
Borrower fails to pay or take; (f) reasonable costs of appraisals,  inspections,
and verifications of the Collateral,  including travel,  lodging,  and meals for
inspections of the  Collateral  and any Borrower's  operations by the Agent plus
the Agent's  then  customary  charge for field  examinations  and audits and the
preparation  of  reports  thereof  (such  charge is  currently  $750 per day (or
portion  thereof)  for each agent or employee of the Agent with  respect to each
field examination or audit); (g) costs and expenses of forwarding loan proceeds,
collecting  checks and other items of payment,  and establishing and maintaining
Payment  Accounts  and lock  boxes;  (h) costs and  expenses of  preserving  and
protecting  the  Collateral;  and (i) reasonable  costs and expenses  (including
Attorneys' Costs) paid or incurred to obtain payment of the Obligations, enforce
the Agent's Liens, sell or otherwise realize upon the Collateral,  and otherwise
enforce the  provisions of the Loan  Documents,  or to defend any claims made or
threatened  against  the Agent or any  Lender  arising  out of the  transactions
contemplated hereby (including preparations for and consultations concerning any
such  matters).  The  Borrowers  agree to pay to each  Lender,  on  demand,  all
reasonable costs and expenses that such Lender actually pays or incurs following
a Default or Event of Default or otherwise in connection with enforcement of the

<PAGE>

Loan Documents and the documents and instruments referred to therein (including,
without limitation, in connection with any such enforcement, the reasonable fees
and  disbursements  of counsel  for such  Lender).  The  foregoing  shall not be
construed to limit any other  provisions of the Loan Documents  regarding  costs
and  expenses  to be paid  by the  Borrowers.  All of the  foregoing  costs  and
expenses shall be charged to the Loan Account as Revolving Loans as described in
SECTION 4.7.

      15.8 NOTICES.

      Except as  otherwise  provided  herein,  all notices,  demands,  requests,
consents,  approvals,  declarations and other  communications  that any party is
required  or  elects  to  give  to  any  other  shall  be  in  writing,  or by a
telecommunications  device  capable of creating a written  record,  and any such
notice shall become effective (a) upon personal delivery thereof, including, but
not limited to,  delivery by overnight  mail and courier  service,  (b) four (4)
days  after it shall  have been  mailed  by United  States  mail,  first  class,
certified or registered,  with postage prepaid,  or (c) in the case of notice by
such a  telecommunications  device,  when  properly  transmitted,  in each  case
addressed to the party to be notified as follows:

                        If to the Agent or to the Bank:

                              Bank of America, N.A.
                              Bank of America Commercial Finance
                              600 Peachtree Street, 13th Floor
                              GA1-006-13-11
                              Atlanta, GA 30308
                              Attention:  Andrew Doherty
                              Telecopy No: (404) 607-6437

                        with a copy to:

                             Moore & Van Allen, PLLC
                             100 N. Tryon Street, 49th floor
                             Charlotte, NC 28202
                             Attention:  C. Wayne McKinzie, Esq.
                             Telecopy No. (704) 331-1159

                        If to any other  Lender,  at the  address of such Lender
                        specified on its signature  page to this Agreement or in
                        its applicable Assignment and Acceptance.

                        If to a Borrower:

                             [Name of Borrower]
                             c/o Worldtex, Inc.
                             915 Tate Boulevard, S.E., Suite 106
                             Hickory, NC 28602
                             Attention: Mitchell Setzer
                             Telecopy No. (828) 327-6417

<PAGE>

                        with a copy to:

                             Hughes Hubbard & Reed LLP
                             One Battery Park Plaza
                             New York, NY 10004
                             Attention:  John Hoyns, Esq.
                             Telecopy No. (212) 422-4726

or to such other  address as each party may designate for itself by like notice.
Failure or delay in delivering copies of any notice, demand,  request,  consent,
approval,  declaration or other communication to the persons designated above to
receive  copies shall not  adversely  affect the  effectiveness  of such notice,
demand, request, consent, approval, declaration or other communication.

      15.9 WAIVER OF NOTICES.

      Unless  otherwise   expressly   provided  herein,   each  Borrower  waives
presentment,  and notice of demand or dishonor and protest as to any instrument,
notice of intent to accelerate the Obligations and notice of acceleration of the
Obligations, as well as any and all other notices to which it might otherwise be
entitled.  No notice to or demand on any Borrower  which the Agent or any Lender
may elect to give shall entitle any Borrower to any or further  notice or demand
in the same, similar or other circumstances.

      15.10 BINDING EFFECT.

      The  provisions of this  Agreement  shall be binding upon and inure to the
benefit  of the  respective  representatives,  successors,  and  assigns  of the
parties hereto;  PROVIDED,  HOWEVER,  that no interest herein may be assigned by
any Borrower  without  prior written  consent of the Agent and each Lender.  The
rights  and  benefits  of the Agent and the  Lenders  hereunder  shall,  if such
Persons so agree,  inure to any party  acquiring any interest in the Obligations
or any part thereof.

      15.11 INDEMNITY OF THE AGENT AND THE LENDERS BY THE BORROWER.

      (a) The Borrowers  agree to defend,  indemnify and hold the  Agent-Related
Persons,  and  each  Lender  and  each of its  respective  officers,  directors,
employees, counsel, agents and attorneys-in-fact (each, an "INDEMNIFIED PERSON")
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses and disbursements
(including  Attorney  Costs) of any kind or nature  whatsoever  which may at any
time  (including  at  any  time  following   repayment  of  the  Loans  and  the
termination,  resignation  or  replacement  of the Agent or  replacement  of any
Lender) be imposed on,  incurred  by or asserted  against any such Person in any
way relating to or arising out of this Agreement or any document contemplated by
or referred to herein,  or the transactions  contemplated  hereby, or any action
taken or  omitted  by any such  Person  under or in  connection  with any of the
foregoing, including with respect to any investigation, litigation or proceeding
(including  any  Insolvency  Proceeding or appellate  proceeding)  related to or
arising out of this Agreement,  any other Loan Document, or the Loans or the use
of the  proceeds  thereof,  whether  or not any  Indemnified  Person  is a party
thereto  (all  the  foregoing,  collectively,  the  "INDEMNIFIED  LIABILITIES");

<PAGE>

PROVIDED,  that  the  Borrowers  shall  have  no  obligation  hereunder  to  any
Indemnified Person with respect to Indemnified Liabilities resulting solely from
the gross negligence or willful  misconduct of such  Indemnified  Person and the
provisions  of this  SECTION  15.11  shall not  operate  to waive or  preclude a
Borrower's  right to  institute an  independent  claim  against any  Indemnified
Person  for gross  negligence  or willful  misconduct.  The  agreements  in this
Section shall survive payment of all other Obligations.

      (b) The Borrowers  agree to indemnify,  defend and hold harmless the Agent
and the Lenders from any loss or liability directly or indirectly arising out of
the use,  generation,  manufacture,  production,  storage,  release,  threatened
release,  discharge,  disposal or presence of a hazardous  substance relating to
any Borrower's operations,  business or property, except to the extent resulting
solely  from  any  action  taken  by the  Agent  or any  Lender  (or an agent or
representative  thereof) with respect to any Collateral that has been foreclosed
on by the Agent or such Lender.  This indemnity will apply whether the hazardous
substance  is on,  under or about  any  Borrower's  property  or  operations  or
property leased to such Borrower.  The indemnity  includes but is not limited to
Attorneys  Costs.  The  indemnity  extends to the Agent and the  Lenders,  their
parents,  affiliates,   subsidiaries  and  all  of  their  directors,  officers,
employees,  agents,  successors,  attorneys and assigns.  "Hazardous substances"
means  any  substance,  material  or  waste  that is or  becomes  designated  or
regulated as "toxic,"  "hazardous,"  "pollutant," or  "contaminant" or a similar
designation or regulation  under any federal,  state or local law (whether under
common law,  statute,  regulation or  otherwise)  or judicial or  administrative
interpretation of such,  including petroleum or natural gas. This indemnity will
survive repayment of all other Obligations.

      15.12 LIMITATION OF LIABILITY.

      NO CLAIM  MAY BE MADE BY THE  AGENT,  ANY  BORROWER,  ANY  LENDER OR OTHER
PERSON AGAINST THE AGENT, ANY LENDER, ANY BORROWER OR THE AFFILIATES, DIRECTORS,
OFFICERS,  OFFICERS,  EMPLOYEES,  OR  AGENTS  OF ANY OF THEM  FOR  ANY  SPECIAL,
INDIRECT,  CONSEQUENTIAL  OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH
OF CONTRACT OR ANY OTHER  THEORY OF  LIABILITY  ARISING OUT OF OR RELATED TO THE
TRANSACTIONS  CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,  OR ANY
ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, AND THE BORROWERS, THE
AGENT AND EACH LENDER HEREBY WAIVE,  RELEASE AND AGREE NOT TO SUE UPON ANY CLAIM
FOR SUCH  DAMAGES,  WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED
TO EXIST IN ITS FAVOR.

      15.13 FINAL AGREEMENT.

      This Agreement and the other Loan Documents are intended by the Borrowers,
the Agent and the Lenders to be the final, complete, and exclusive expression of
the agreement between them. This Agreement  supersedes any and all prior oral or
written  agreements  relating to the subject  matter  hereof.  No  modification,
rescission,  waiver, release, or amendment of any provision of this Agreement or

<PAGE>

any other Loan Document shall be made,  except by a written  agreement signed by
the  Borrowers  and a duly  authorized  officer  of  each of the  Agent  and the
requisite Lenders.

      15.14 COUNTERPARTS.

      This Agreement may be executed in any number of  counterparts,  and by the
Agent,  each Lender and each  Borrower in separate  counterparts,  each of which
shall be an original,  but all of which shall  together  constitute  one and the
same  agreement;   signature  pages  may  be  detached  from  multiple  separate
counterparts  and attached to a single  counterpart so that all signature  pages
are physically attached to the same document.

      15.15 CAPTIONS.

      The captions  contained in this Agreement are for convenience of reference
only,  are without  substantive  meaning and should not be  construed to modify,
enlarge, or restrict any provision.

      15.16 RIGHT OF SETOFF.

      In addition to any rights and remedies of the Lenders  provided by law, if
an Event of Default  exists or the Loans have been  accelerated,  each Lender is
authorized  at any time  and from  time to time,  without  prior  notice  to any
Borrower,  any such notice being waived by each  Borrower to the fullest  extent
permitted by law, to set off and apply any and all deposits (general or special,
time  or  demand,  provisional  or  final)  at  any  time  held  by,  and  other
indebtedness  at any time  owing by,  such  Lender  to or for the  credit or the
account of such Borrower  against any and all Obligations  owing to such Lender,
now or  hereafter  existing,  irrespective  of  whether or not the Agent or such
Lender  shall have made demand  under this  Agreement  or any Loan  Document and
although such  Obligations  may be  contingent or unmatured.  Each Lender agrees
promptly  to notify  the  Borrowers  and the Agent  after any such  set-off  and
application  made by such Lender;  PROVIDED,  HOWEVER,  that the failure to give
such  notice  shall not affect the  validity of such  set-off  and  application.
NOTWITHSTANDING  THE  FOREGOING,  NO LENDER SHALL EXERCISE ANY RIGHT OF SET-OFF,
BANKER'S  LIEN,  OR THE LIKE  AGAINST  ANY  DEPOSIT  ACCOUNT OR  PROPERTY OF ANY
BORROWER HELD OR MAINTAINED BY SUCH LENDER  WITHOUT THE PRIOR WRITTEN  UNANIMOUS
CONSENT OF THE LENDERS.

      15.17 JOINT AND SEVERAL LIABILITY.

      Each of the Borrowers is accepting joint and several  liability  hereunder
in  consideration  of the financial  accommodation to be provided by the Lenders
under this Agreement, for the mutual benefit,  directly and indirectly,  of each
of the  Borrowers  and in  consideration  of the  undertakings  of  each  of the
Borrowers to accept joint and several  liability for the  obligations of each of
them.

      Each Borrower shall be jointly and severally liable for all amounts due to
the Agent and/or any Lender under this  Agreement,  regardless of which Borrower
actually receives Loans or other extensions of credit hereunder or the amount of

<PAGE>

such Loans received or the manner in which the Agent and/or such Lender accounts
for such  Loans or other  extensions  of credit on its books and  records.  Each
Borrower's  Obligations  with  respect to Loans made to it, and each  Borrower's
Obligations  arising  as a result  of the joint and  several  liability  of such
Borrower hereunder, with respect to Loans made to the other Borrowers hereunder,
shall be separate and distinct  obligations,  but all such Obligations  shall be
primary obligations of each Borrower.

      Each Borrower's  Obligations  arising as a result of the joint and several
liability of such Borrower  hereunder with respect to Loans or other  extensions
of credit made to the other  Borrowers  hereunder  shall,  to the fullest extent
permitted  by  law,  be  unconditional  irrespective  of  (i)  the  validity  or
enforceability,  avoidance  or  subordination  of the  Obligations  of the other
Borrowers or of any promissory note or other document evidencing all or any part
of the  Obligations of the other  Borrowers,  (ii) the absence of any attempt to
collect the Obligations  from the other Borrowers,  any other guarantor,  or any
other security therefor, or the absence of any other action to enforce the same,
(iii) the waiver, consent, extension,  forbearance or granting of any indulgence
by the Agent and/or any Lender with respect to any  provision of any  instrument
evidencing the Obligations of the other Borrowers,  or any part thereof,  or any
other  agreement now or hereafter  executed by the other Borrowers and delivered
to the Agent and/or any Lender,  (iv) the failure by the Agent and/or any Lender
to take any steps to  perfect  and  maintain  its  security  interest  in, or to
preserve its rights to, any security or collateral  for the  Obligations  of the
other Borrowers, (v) the Agent's and/or any Lender's election, in any proceeding
instituted under the Bankruptcy  Code, of the application of Section  1111(b)(2)
of the Bankruptcy  Code,  (vi) any borrowing or grant of a security  interest by
the other Borrowers, as debtor-in-possession under Section 364 of the Bankruptcy
Code,  (vii) the  disallowance  of all or any portion of the Agent's  and/or any
Lender's  claim(s) for the repayment of the  Obligations of the other  Borrowers
under  Section 502 of the  Bankruptcy  Code,  or (viii) any other  circumstances
which might constitute a legal or equitable  discharge or defense of a guarantor
or of the other Borrowers.  With respect to each Borrower's  Obligations arising
as a result of the joint and several  liability of such Borrower  hereunder with
respect  to Loans or other  extensions  of  credit  made to  either of the other
Borrowers hereunder, such Borrower waives, until the Obligations shall have been
paid in full and the Loan  Agreement  shall have been  terminated,  any right to
enforce any right of subrogation or any remedy which the Agent and/or any Lender
now has or may  hereafter  have  against  such  Borrower,  any  endorser  or any
guarantor  of all or any part of the  Obligations,  and any  benefit of, and any
right to  participate  in, any security or collateral  given to the Agent and/or
any Lender to secure payment of the  Obligations  or any other  liability of the
Borrowers to the Agent and/or any Lender.

      Upon the occurrence and during the  continuation  of any Event of Default,
the Agent may proceed directly and at once, without notice, against any Borrower
to collect  and  recover the full  amount,  or any  portion of the  Obligations,
without first  proceeding  against the other  Borrowers or any other Person,  or
against any security or collateral for the Obligations.  Each Borrower  consents
and agrees that the Agent shall be under no  obligation to marshal any assets in
favor of any Borrower or against or in payment of any or all of the Obligations.

<PAGE>

      15.18 CONTRIBUTION AND INDEMNIFICATION AMONG THE BORROWERS.

      The Borrowers are obligated to repay the  Obligations as joint and several
obligors under this Agreement. To the extent that any Borrower shall, under this
Agreement  as a  joint  and  several  obligor,  repay  any  of  the  Obligations
constituting  Loans  made to another  Borrower  hereunder  or other  Obligations
incurred  directly  and  primarily  by any  other  Borrower  (an  "Accommodation
Payment"), then the Borrower making such Accommodation Payment shall be entitled
to  contribution  and  indemnification  from,  and be reimbursed by, each of the
other  Borrowers  in an  amount,  for each of such other  Borrowers,  equal to a
fraction of such Accommodation  Payment, the numerator of which fraction is such
other  Borrower's  "Allocable  Amount" (as defined below) and the denominator of
which is the sum of the  Allocable  Amounts of all of the  Borrowers.  As of any
date of determination, the "Allocable Amount" of each Borrower shall be equal to
the  maximum  amount of  liability  for  Accommodation  Payments  which could be
asserted  against such Borrower  hereunder  without (a) rendering  such Borrower
"insolvent"  within  the  meaning of Section  101 (31) of the  Bankruptcy  Code,
Section 2 of the Uniform  Fraudulent  Transfer  Act ("UFTA") or Section 2 of the
Uniform  Fraudulent  Conveyance  Act  ("UFCA"),  (ii) leaving such Borrower with
unreasonably  small capital or assets,  within the meaning of Section 548 of the
Bankruptcy  Code,  Section 4 of the  UFTA,  or  Section 5 of the UFCA,  or (iii)
leaving  such  Borrower  unable to pay its debts as they  become  due within the
meaning  of Section  548 of the  Bankruptcy  Code or  Section 4 of the UFTA,  or
Section 5 of the UFCA.  All rights and claims of  contribution,  indemnification
and reimbursement under this Section shall be subordinate in right of payment to
the prior  payment in full of the  Obligations.  The  provisions of this Section
shall,  to the extent  expressly  inconsistent  with any  provision  in any Loan
Document, supersede such inconsistent provision.

      15.19 AGENCY OF THE PARENT FOR EACH OTHER BORROWER.

      Each of the  other  Borrowers  appoints  the  Parent  as its agent for all
purposes relevant to this Agreement, including the giving and receipt of notices
and  execution  and  delivery of all  documents,  instruments  and  certificates
contemplated herein and all modifications  hereto. Any acknowledgment,  consent,
direction,  certification  or other  action  which might  otherwise  be valid or
effective only if given or taken by all of the Borrowers or acting singly, shall
be valid and effective if given or taken only by the Parent,  whether or not any
of the other Borrowers joins therein.

<PAGE>

      IN WITNESS  WHEREOF,  the parties have entered into this  Agreement on the
date first above written.

                                       "BORROWERS"

                                       Worldtex, Inc.
                                       Regal Manufacturing Company, Inc.
                                       Elastic Corporation of America, Inc.
                                       Willcox & Gibbs Filix of Delaware, Inc.
                                       Regal Yarns of Argentina, Inc.
                                       WTX Colombia I, Inc.
                                       WTX Colombia II, Inc.

                                       By:____________________________________
                                       Name:__________________________________
                                       Title:_________________________________

<PAGE>

                                       "AGENT"

                                       Bank of America, N.A., as the Agent

                                       By:___________________________________
                                       Name:_________________________________
                                       Title:________________________________

<PAGE>

                                       "LENDERS"

Commitment:  $29,500,000               Bank of America, N.A., as a Lender

Pro Rata Share:  62.105%               By:___________________________________
                                       Name:  Andrew A. Doherty
                                       Title:  Vice President

<PAGE>

Commitment:  $18,000,000               Fleet Capital Corporation, a Rhode
                                       Island corporation, as a Lender
Pro Rata Share:  37.895%
                                       By:___________________________________
                                       Name:_________________________________
                                       Title:________________________________

Address for Notices:

 Fleet Capital Corporation
 6100 Fairview Road
 Charlotte, NC 28210
 Attention:  Roland J. Robinson
 Telecopy No: (704) 553-6738

<PAGE>

                                    EXHIBIT A

                                FORM OF TERM NOTE

$_________________                                                 July 25, 2000

            FOR VALUE RECEIVED,  Worldtex,  Inc., Regal  Manufacturing  Company,
Inc. and Elastic Corporation of America, Inc., each a Delaware corporation,  and
such other Borrowers  which are  signatories to the Loan Agreement  (hereinafter
defined) (each a "BORROWER" and collectively, the "BORROWERS"),  hereby promise,
jointly and severally,  to pay to the order of  __________________________,  its
successors and assigns (the "LENDER"),  at the office of Bank of America,  N.A.,
as Agent (the "AGENT"),  at 600 Peachtree Street, 13th Floor,  Atlanta, GA 30308
(or at such other place or places as the holder  hereof may  designate),  at the
times set forth below,  but in no event later than the Termination  Date defined
in the  Loan  and  Security  Agreement  dated  as of July  25,  2000  among  the
Borrowers,  the  lenders  party  thereto  and the Agent  (as it may be  amended,
modified,  restated or supplemented from time to time, the "LOAN AGREEMENT"; all
capitalized terms not otherwise defined herein shall have the meanings set forth
in the Loan  Agreement),  in Dollars and in  immediately  available  funds,  the
principal  amount of  ________________________DOLLARS  ($____________)  (or,  if
less, the Lender's Pro Rata Share of the Term Loan Amount),  and to pay interest
from the date hereof on the unpaid  principal  amount hereof,  in like money, at
said office,  on the dates and at the rates selected in accordance  with Section
3.1 of the Loan Agreement.

      Principal  hereunder shall mature in nineteen (19) quarterly  installments
of principal. Each of the first eighteen (18) installments of principal shall be
in an amount  equal to the  Lender's  Pro Rata Share of five percent (5%) of the
Term Loan Amount and shall be payable on the first day of each calendar quarter,
commencing  on  January  1,  2001 and  ending  on April 1,  2005,  and the final
installment  of  principal  shall be in an amount equal to the Lender's Pro Rata
Share of the then remaining  principal balance of the Term Loan Notes, and shall
be payable on the Stated Termination Date

      Upon the occurrence and during the continuance of an Event of Default, the
balance outstanding  hereunder shall bear interest as provided in Section 3.1(b)
of the  Loan  Agreement.  Further,  in the  event  the  payment  of all sums due
hereunder is accelerated  under the terms of the Loan  Agreement,  this Note and
all other  indebtedness of the Borrowers to the Lender shall become  immediately
due and payable, without presentment, demand, protest or notice of any kind, all
of which are hereby waived by the Borrowers.

      In the event this Note is not paid when due at any  stated or  accelerated
maturity, the Borrowers agree to pay, in addition to the principal and interest,
all costs of collection, including reasonable attorneys' fees.

      This Note and the Loans evidenced hereby may be transferred in whole or in
part pursuant to the terms of Section 13.2 of the Loan Agreement.

<PAGE>

      IN WITNESS WHEREOF, each Borrower has caused this Note to be duly executed
by its duly authorized officer as of the day and year first above written.

                                    Worldtex, Inc.,
                                    a Delaware corporation

                                    By:___________________________________

                                    Title:________________________________

                                    Regal Manufacturing Company, Inc.,
                                    a Delaware corporation

                                    By:___________________________________

                                    Title:________________________________

                                    Elastic Corporation of America, Inc.,
                                    a Delaware corporation

                                    By:___________________________________

                                    Title:________________________________

                                    Willcox & Gibbs Filix of Delaware, Inc.,
                                    a Delaware corporation

                                    By:___________________________________

                                    Title:________________________________

<PAGE>

                                    Regal Yarns of Argentina, Inc.,
                                    a North Carolina corporation

                                    By:___________________________________

                                    Title:________________________________

                                    WTX Colombia I, Inc.,
                                    a Delaware corporation

                                    By:___________________________________

                                    Title:________________________________

                                    WTX Colombia II, Inc.,
                                    a Delaware corporation

                                    By:___________________________________

                                    Title:________________________________

<PAGE>

                                    EXHIBIT B

                       FORM OF BORROWING BASE CERTIFICATE

                                   (attached)

<PAGE>

                                    EXHIBIT C

                              FINANCIAL STATEMENTS

                                   (attached)

<PAGE>

                                    EXHIBIT D

                           FORM OF NOTICE OF BORROWING

                                                   Date:  ______________, 200_

To:   Bank of  America,  N.A.,  as Agent for the  Lenders who are parties to the
      Loan  and  Security  Agreement  dated as of July  25,  2000 (as  extended,
      renewed,  amended or restated  from time to time,  the "Loan and  Security
      Agreement") among Worldtex,  Inc., Regal Manufacturing  Company,  Inc. and
      Elastic  Corporation of America,  Inc., each a Delaware  corporation,  and
      such other Borrowers which are signatories thereto,  certain Lenders which
      are signatories thereto and Bank of America, N.A., as Agent

Ladies and Gentlemen:

      The undersigned,  [applicable  Borrower],  refers to the Loan and Security
Agreement,  the terms defined therein being used herein as therein defined,  and
hereby gives you notice irrevocably of the Borrowing specified below:

      1. The Business Day of the proposed Borrowing is , 200_ .

      2. The aggregate amount of the proposed Borrowing is $ .

      3. The Borrowing is to be comprised of $ of Base Rate Loans and $ of LIBOR
      Rate Loans.

      4. The duration of the Interest  Period for the LIBOR Rate Loans,  if any,
      included in the Borrowing shall be _____ month(s).

      The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the proposed Borrowing,  before
and  after  giving  effect  thereto  and to  the  application  of  the  proceeds
therefrom:

            (a) The representations and warranties of the Borrowers contained in
      the Loan and  Security  Agreement  are true and  correct  in all  material
      respects as though made on and as of such date;

            (b) No Default or Event of Default has occurred  and is  continuing,
      or would result from such proposed Borrowing; and

<PAGE>

            (c) The proposed  Borrowing will not exceed the Availability for the
      undersigned   Borrower  or  Total  Availability  or  cause  the  aggregate
      principal  amount of all  outstanding  Revolving  Loans plus the aggregate
      amount  available for drawing under all  outstanding  Letters of Credit to
      exceed the combined Commitments of the Lenders.

                                          [applicable Borrower]

                                          By:___________________________________
                                          Title:________________________________

<PAGE>

                                    EXHIBIT E

                   FORM OF NOTICE OF CONTINUATION/CONVERSION

Date:  ______________, 200_

To:   Bank of  America,  N.A.,  as Agent for the  Lenders who are parties to the
      Loan  and  Security  Agreement  dated as of July  25,  2000 (as  extended,
      renewed,  amended or  restated  from time to time,  the "Loan  Agreement")
      among  Worldtex,  Inc.,  Regal  Manufacturing  Company,  Inc.  and Elastic
      Corporation of America, Inc., each a Delaware corporation,  and such other
      Borrowers  which  are  signatories  thereto,  certain  Lenders  which  are
      signatories thereto and Bank of America, N.A., as Agent

Ladies and Gentlemen:

      The undersigned,  [applicable Borrower], refers to the Loan Agreement, the
terms defined therein being used herein as therein defined, and hereby gives you
notice  irrevocably of the  [conversion]  [continuation]  of the Loans specified
herein, that:

      1. The Continuation/Conversion Date is ____________, 200_ .

      2. The  aggregate  amount of the Loans to be  [converted]  [continued]  is
      $______________.

      3. The Loans are to be [converted  into] [continued as] [LIBOR Rate] [Base
      Rate] Loans.

      4. The duration of the Interest  Period for the LIBOR Rate Loans  included
      in the [conversion] [continuation] shall be ____ month(s). -

      The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the proposed  Continuation/Conversion Date,
before and after giving effect  thereto and to the  application  of the proceeds
therefrom:

            (a) The representations and warranties of the Borrowers contained in
            the Loan and Security Agreement are true and correct in all material
      respects as though made on and as of such date;

            (b) No Default or Event of Default has occurred  and is  continuing,
      or would result from such proposed [conversion] [continuation]; and

<PAGE>

            (c) The  proposed  [conversion][continuation]  will  not  cause  the
      aggregate  principal  amount of all  outstanding  Revolving Loans PLUS the
      aggregate  amount  available for drawing under all outstanding  Letters of
      Credit to exceed the Total Availability or the combined Commitments of the
      Lenders.

                                          [applicable Borrower]

                                          By:___________________________________
                                          Title:________________________________

<PAGE>

                                    EXHIBIT F

                  FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT

      This   ASSIGNMENT  AND  ACCEPTANCE   AGREEMENT   (this   "ASSIGNMENT   AND
ACCEPTANCE")   dated   as  of   ____________________,   200_  is  made   between
______________________________  (the "ASSIGNOR") and  __________________________
(the "ASSIGNEE").

                                    RECITALS

      WHEREAS, the Assignor is party to that certain Loan and Security Agreement
dated  as of  July  25,  2000  (as  amended,  amended  and  restated,  modified,
supplemented  or renewed,  the "LOAN  AGREEMENT")  among Worldtex,  Inc.,  Regal
Manufacturing  Company,  Inc. and Elastic  Corporation of America,  Inc., each a
Delaware  corporation,  and such other Borrowers which are signatories  thereto,
the several financial  institutions  from time to time party thereto  (including
the  Assignor,  the  "LENDERS"),  and Bank of  America,  N.A.,  as agent for the
Lenders (the  "AGENT").  Any terms defined in the Loan Agreement and not defined
in this  Assignment  and  Acceptance  are used  herein  as  defined  in the Loan
Agreement;

      WHEREAS, as provided under the Loan Agreement,  the Assignor has committed
to making Loans (the "COMMITTED  LOANS") to the Borrowers in an aggregate amount
not to exceed $__________ (the "COMMITMENT");

      WHEREAS,  the Assignor has made Committed Loans in the aggregate principal
amount of $__________ to the Borrowers;

      WHEREAS,  [the Assignor has acquired a participation in its pro rata share
of the Lenders'  liabilities  under Letters of Credit in an aggregate  principal
amount of  $____________  (the "L/C  OBLIGATIONS")]  [no  Letters  of Credit are
outstanding under the Loan Agreement]; and

      WHEREAS, the Assignor wishes to assign to the Assignee [part of the] [all]
rights and  obligations  of the Assignor  under the Loan Agreement in respect of
its Commitment, together with a corresponding portion of each of its outstanding
Committed  Loans and L/C  Obligations,  in an amount equal to  $__________  (the
"ASSIGNED  AMOUNT") on the terms and subject to the  conditions set forth herein
and the Assignee  wishes to accept  assignment of such rights and to assume such
obligations from the Assignor on such terms and subject to such conditions;

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

      1. ASSIGNMENT AND ACCEPTANCE.

            (a)  Subject  to the terms and  conditions  of this  Assignment  and
      Acceptance,  (i) the Assignor  hereby sells,  transfers and assigns to the
      Assignee,  and (ii) the Assignee hereby purchases,  assumes and undertakes

<PAGE>

      from the Assignor, without recourse and without representation or warranty
      (except  as  provided  in  this   Assignment  and   Acceptance)  __%  (the
      "ASSIGNEE'S PERCENTAGE SHARE") of (A) the Commitment,  the Committed Loans
      and the L/C  Obligations  of the  Assignor  and  (B) all  related  rights,
      benefits,  obligations,  liabilities and indemnities of the Assignor under
      and in connection with the Loan Agreement and the Loan Documents.

            (b) With  effect on and  after the  Effective  Date (as  defined  in
      Section 5 hereof), the Assignee shall be a party to the Loan Agreement and
      succeed  to all of the  rights  and be  obligated  to  perform  all of the
      obligations  of  a  Lender  under  the  Loan   Agreement,   including  the
      requirements    concerning    confidentiality    and   the    payment   of
      indemnification,  with a  Commitment  in an amount  equal to the  Assigned
      Amount.  The Assignee agrees that it will perform in accordance with their
      terms all of the obligations  which by the terms of the Loan Agreement are
      required  to be  performed  by it as a  Lender.  It is the  intent  of the
      parties  hereto  that the  Commitment  of the  Assignor  shall,  as of the
      Effective  Date, be reduced by an amount equal to the Assigned  Amount and
      the  Assignor  shall  relinquish  its  rights  and be  released  from  its
      obligations  under the Loan Agreement to the extent such  obligations have
      been assumed by the Assignee;  provided,  however,  the Assignor shall not
      relinquish  its rights under Sections 5.1 and 5.3 of the Loan Agreement to
      the extent such rights relate to the time prior to the Effective Date.

            (c) After giving effect to the  assignment  and assumption set forth
      herein,   on  the  Effective  Date  the  Assignee's   Commitment  will  be
      $__________ and the Assignee's Pro Rata Share of all  Commitments  will be
      ______%.

            (d) After giving effect to the  assignment  and assumption set forth
      herein,   on  the  Effective  Date  the  Assignor's   Commitment  will  be
      $__________ and the Assignor's Pro Rata Share of all  Commitments  will be
      ______%.

      2. PAYMENTS.

            (a)  As  consideration   for  the  sale,   assignment  and  transfer
      contemplated  in Section 1 hereof,  the Assignee shall pay to the Assignor
      on the Effective  Date in immediately  available  funds an amount equal to
      $__________,  representing  the Assignee's Pro Rata Share of the principal
      amount of all Committed Loans.

            (b) The Assignee further agrees to pay to the Agent a processing fee
      in the amount specified in Section 13.2(a)(iii) of the Loan Agreement.

      3. REALLOCATION OF PAYMENTS.

      Any interest,  fees and other payments  accrued to the Effective Date with
respect to the Commitment,  and Committed Loans and L/C Obligations shall be for
the account of the Assignor.  Any interest,  fees and other payments  accrued on
and after the  Effective  Date with respect to the Assigned  Amount shall be for
the account of the Assignee.  Each of the Assignor and the Assignee  agrees that

<PAGE>

it will hold in trust for the other party any  interest,  fees and other amounts
which it may  receive  to which  the other  party is  entitled  pursuant  to the
preceding  sentence  and pay to the other  party any such  amounts  which it may
receive promptly upon receipt.

      4. INDEPENDENT CREDIT DECISION.

      The  Assignee  (a)  acknowledges  that it has  received a copy of the Loan
Agreement and the Schedules  and Exhibits  thereto,  together with copies of the
most recent financial  statements of the Borrower,  and such other documents and
information  as it has  deemed  appropriate  to make its own  credit  and  legal
analysis  and decision to enter into this  Assignment  and  Acceptance;  and (b)
agrees that it will,  independently and without reliance upon the Assignor,  the
Agent or any other  Lender and based on such  documents  and  information  as it
shall deem  appropriate  at the time,  continue to make its own credit and legal
decisions in taking or not taking action under the Loan Agreement.

      5. EFFECTIVE DATE; NOTICES.

            (a) As between the Assignor and the Assignee, the effective date for
      this Assignment and Acceptance  shall be __________,  200_ (the "EFFECTIVE
      DATE");  PROVIDED  that  the  following  conditions  precedent  have  been
      satisfied on or before the Effective Date:

            (i) this  Assignment and Acceptance  shall be executed and delivered
      by the Assignor and the Assignee;

            (ii)  if  applicable,  the  consent  of the  Agent  required  for an
      effective  assignment  of  the  Assigned  Amount  by the  Assignor  to the
      Assignee  shall  have been duly  obtained  and shall be in full  force and
      effect as of the Effective Date;

            (iii) the Assignee  shall pay to the Assignor all amounts due to the
      Assignor under this Assignment and Acceptance;

            (iv) the Assignee shall have complied with Section 14.10 of the Loan
      Agreement (if applicable);

            (v) the  processing  fee  referred to in Section  2(b) hereof and in
      Section  13.2(a)(iii)  of the Loan  Agreement  shall have been paid to the
      Agent; and

            (b)  Promptly   following  the  execution  of  this  Assignment  and
      Acceptance,  the  Assignor  shall  deliver to the Parent and the Agent for
      acknowledgment  by the Agent,  a Notice of Assignment in the form attached
      hereto as SCHEDULE 1.

      6. [AGENT. [INCLUDE ONLY IF ASSIGNOR IS AGENT]

            (a) The Assignee hereby appoints and authorizes the Assignor to take
      such action as agent on its behalf and to exercise  such powers  under the
      Loan  Agreement as are  delegated to the Agent by the Lenders  pursuant to
      the terms of the Loan Agreement.

<PAGE>

            (b) The Assignee shall assume no duties or  obligations  held by the
      Assignor in its capacity as Agent under the Loan Agreement.]

      7. WITHHOLDING TAX.

      The Assignee (a) represents and warrants to the Lender,  the Agent and the
Borrowers  that under  applicable law and treaties no tax will be required to be
withheld by the Lender with  respect to any  payments to be made to the Assignee
hereunder,  (b)  agrees to  furnish  (if it is  organized  under the laws of any
jurisdiction other than the United States or any State thereof) to the Agent and
the  Borrowers  prior to the time that the Agent or any  Borrower is required to
make any  payment  of  principal,  interest  or fees  under the Loan  Agreement,
duplicate  executed  originals of either U.S. Internal Revenue Service Form 4224
(or any  successor  form) or U.S.  Internal  Revenue  Service  Form 1001 (or any
successor  form) (wherein the Assignee  claims  entitlement to the benefits of a
tax treaty that  provides  for a complete  exemption  from U.S.  federal  income
withholding tax on all payments  hereunder) and agrees to provide new Forms 4224
or 1001 (or any  successor  form  (s))  upon the  expiration  of any  previously
delivered form or comparable  statements in accordance  with applicable U.S. law
and  regulations  and  amendments  thereto,  duly  executed and completed by the
Assignee, and (c) agrees to comply with all applicable U.S. laws and regulations
with regard to such withholding tax exemption.

      8. REPRESENTATIONS AND WARRANTIES.

            (a) The Assignor  represents  and warrants  that (i) it is the legal
      and  beneficial  owner of the interest  being assigned by it hereunder and
      that such interest is free and clear of any Lien or other  adverse  claim;
      (ii) it is duly  organized  and  existing  and it has the full  power  and
      authority  to take,  and has taken,  all action  necessary  to execute and
      deliver this Assignment and Acceptance and any other documents required or
      permitted  to be  executed  or  delivered  by it in  connection  with this
      Assignment and Acceptance and to fulfill its obligations hereunder;  (iii)
      no notices to, or consents, authorizations or approvals of, any Person are
      required (other than any already given or obtained) for its due execution,
      delivery and performance of this Assignment and Acceptance, and apart from
      any agreements or undertakings or filings  required by the Loan Agreement,
      no further action by, or notice to, or filing with, any Person is required
      of  it  for  such  execution,  delivery  or  performance;  and  (iv)  this
      Assignment  and  Acceptance has been duly executed and delivered by it and
      constitutes  the legal,  valid and  binding  obligation  of the  Assignor,
      enforceable  against the  Assignor in  accordance  with the terms  hereof,
      subject,  as  to  enforcement,  to  bankruptcy,   insolvency,  moratorium,
      reorganization  and  other  laws of  general  application  relating  to or
      affecting creditors' rights and to general equitable principles.

            (b) The Assignor makes no  representation or warranty and assumes no
      responsibility   with   respect   to   any   statements,   warranties   or
      representations  made in or in connection  with the Loan  Agreement or the
      execution, legality, validity, enforceability, genuineness, sufficiency or
      value of the Loan Agreement or any other instrument or document  furnished
      pursuant  thereto.  The Assignor  makes no  representation  or warranty in

<PAGE>

      connection  with,  and  assumes no  responsibility  with  respect  to, the
      solvency,  financial  condition or  statements  of the  Borrowers,  or the
      performance  or observance by the  Borrowers,  of any of their  respective
      obligations  under the Loan Agreement or any other  instrument or document
      furnished in connection therewith.

            (c)  The  Assignee  represents  and  warrants  that  (i) it is  duly
      organized  and existing and it has full power and  authority to take,  and
      has taken, all action necessary to execute and deliver this Assignment and
      Acceptance and any other documents required or permitted to be executed or
      delivered by it in connection with this Assignment and Acceptance,  and to
      fulfill  its  obligations  hereunder;  (ii) no  notices  to, or  consents,
      authorizations  or approvals  of, any Person are required  (other than any
      already given or obtained) for its due execution, delivery and performance
      of this  Assignment  and  Acceptance;  and apart  from any  agreements  or
      undertakings or filings required by the Loan Agreement,  no further action
      by, or notice to, or filing  with,  any Person is  required of it for such
      execution,  delivery or performance;  (iii) this Assignment and Acceptance
      has been duly  executed  and  delivered by it and  constitutes  the legal,
      valid and binding  obligation  of the  Assignee,  enforceable  against the
      Assignee in accordance with the terms hereof,  subject, as to enforcement,
      to bankruptcy,  insolvency,  moratorium,  reorganization and other laws of
      general  application  relating to or  affecting  creditors'  rights and to
      general equitable principles; and (iv) it is an Eligible Assignee.

      9. FURTHER ASSURANCES.

      The  Assignor  and the  Assignee  each hereby agree to execute and deliver
such  other  instruments,  and take  such  other  action,  as  either  party may
reasonably  request in connection  with the  transactions  contemplated  by this
Assignment  and  Acceptance,  including  the  delivery  of any  notices or other
documents or instruments to the Borrowers or the Agent, which may be required in
connection with the assignment and assumption contemplated hereby.

      10. MISCELLANEOUS.

            (a) Any amendment or waiver of any provision of this  Assignment and
      Acceptance  shall be in  writing  and  signed by the  parties  hereto.  No
      failure or delay by either party hereto in exercising any right,  power or
      privilege  hereunder  shall operate as a waiver  thereof and any waiver of
      any breach of the provisions of this  Assignment  and Acceptance  shall be
      without  prejudice  to any  rights  with  respect  to any other or further
      breach thereof.

            (b) All payments made hereunder shall be made without any set-off or
      counterclaim.

            (c) The Assignor  and the Assignee  shall each pay its own costs and
      expenses  incurred  in  connection  with  the  negotiation,   preparation,
      execution and performance of this Assignment and Acceptance.

<PAGE>

            (d) This  Assignment and Acceptance may be executed in any number of
      counterparts and all of such  counterparts  taken together shall be deemed
      to constitute one and the same instrument.

            (e)  THIS  ASSIGNMENT  AND  ACCEPTANCE  SHALL  BE  GOVERNED  BY  AND
      CONSTRUED  IN  ACCORDANCE  WITH  THE LAW OF THE  STATE  OF NEW  YORK.  The
      Assignor and the Assignee each  irrevocably  submits to the  non-exclusive
      jurisdiction  of any State or  Federal  court  sitting in the State of New
      York or the Southern  District of New York,  respectively,  over any suit,
      action or  proceeding  arising out of or relating to this  Assignment  and
      Acceptance  and  irrevocably  agrees  that all  claims in  respect of such
      action or proceeding may be heard and determined in such New York State or
      Federal  court.  Each  party  to this  Assignment  and  Acceptance  hereby
      irrevocably  waives,  to the fullest extent it may  effectively do so, the
      defense of an  inconvenient  forum to the  maintenance  of such  action or
      proceeding.

            (f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY
      AND  INTENTIONALLY  WAIVE ANY  RIGHTS  THEY MAY HAVE TO A TRIAL BY JURY IN
      RESPECT OF ANY LITIGATION  BASED HEREON,  OR ARISING OUT OF, UNDER,  OR IN
      CONNECTION WITH THIS ASSIGNMENT AND  ACCEPTANCE,  THE LOAN AGREEMENT,  ANY
      RELATED  DOCUMENTS  AND  AGREEMENTS  OR ANY COURSE OF  CONDUCT,  COURSE OF
      DEALING, OR STATEMENTS (WHETHER ORAL OR WRITTEN).

      IN WITNESS  WHEREOF,  the  Assignor  and the  Assignee  have  caused  this
Assignment and Acceptance to be executed and delivered by their duly  authorized
officers as of the date first above written.

                                                       [ASSIGNOR]

                                          By:___________________________________
                                          Title:________________________________

                                          By:___________________________________
                                          Title:________________________________

                                          Address:______________________________

<PAGE>

                                                       [ASSIGNEE]

                                          By:___________________________________
                                          Title:________________________________

                                          By:___________________________________
                                          Title:________________________________

                                          Address:______________________________

<PAGE>

                                   SCHEDULE 1

                       NOTICE OF ASSIGNMENT AND ACCEPTANCE

                                                         _______________, 200_

Bank of America, N.A.
600 Peachtree Street, 13th Floor
GA1-006-13-11
Atlanta, GA  30308
Attention:  Andrew Doherty

Re:  [Name and Address of Borrower]

Ladies and Gentlemen:

      We refer to the Loan and Security  Agreement dated as of July 25, 2000 (as
amended,  amended and restated,  modified,  supplemented or renewed from time to
time the "LOAN AGREEMENT") among Worldtex,  Inc., Regal  Manufacturing  Company,
Inc. and Elastic Corporation of America, Inc. each a Delaware  corporation,  and
such other  Borrowers  which are signatories  thereto,  the Lenders  referred to
therein and Bank of America, N.A., as agent for the Lenders (the "AGENT"). Terms
defined in the Loan Agreement are used herein as therein defined.

      1. We hereby  give you  notice  of,  and  request  your  consent  to,  the
assignment  by  __________________  (the  "Assignor")  to  _______________  (the
"Assignee") of _____% of the right, title and interest of the Assignor in and to
the Loan Agreement  (including the right,  title and interest of the Assignor in
and to the  Commitments  of the  Assignor,  all  outstanding  Loans  made by the
Assignor and the Assignor's  participation in the Letters of Credit) pursuant to
the Assignment and Acceptance  Agreement  attached  hereto (the  "Assignment and
Acceptance").  We understand and agree that the Assignor's  Commitment,  as of ,
200_,  is $  ___________,  the  aggregate  amount  of its  outstanding  Loans is
$_____________, and its participation in L/C Obligations is $_____________.

      2. The Assignee  agrees that, upon receiving the consent of the Agent and,
if applicable, the Parent, to such assignment, the Assignee will be bound by the
terms of the Loan  Agreement  as fully and to the same extent as if the Assignee
were the Lender originally holding such interest in the Loan Agreement.

<PAGE>

      3. The following administrative details apply to the Assignee:

            (A)   Notice Address:
                  Assignee name: ________________________________
                  Address:       ________________________________
                       Attention: _______________________________
                       Telephone:  (___) ________________________
                       Telecopier: (___) ________________________
                       Telex (Answerback): ______________________

            (B)   Payment Instructions:
                  Account No.: __________________________________
                       At: ______________________________________
                       Reference: _______________________________
                       Attention: _______________________________

      4. You are  entitled  to rely  upon the  representations,  warranties  and
covenants of each of the Assignor and Assignee  contained in the  Assignment and
Acceptance.

      IN WITNESS WHEREOF,  the Assignor and the Assignee have caused this Notice
of Assignment and Acceptance to be executed by their  respective duly authorized
officials, officers or agents as of the date first above mentioned.

                                          Very truly yours,

                                          [NAME OF ASSIGNOR]

                                          By:___________________________________
                                          Title:________________________________

                                          [NAME OF ASSIGNEE]

                                          By:___________________________________
                                          Title:________________________________

ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:

Bank of America, N.A.
as Agent

By:___________________________________
Title:________________________________

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