Document:

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                                                                  EXHIBIT 10.40

                              DEVELOPMENT AGREEMENT

                                     BETWEEN

                          NOVARTIS CONSUMER HEALTH, SA

                                       AND

                                  GALAGEN INC.

                                                        Dated: December 17, 1999

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                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                 PAGE

<S>                                                                                                              <C>
1.       JDC; Project Activity.................................................................................      4

2.       Project Funding/Payment...............................................................................      6

3.       Intellectual Property Rights..........................................................................      6

4.       Confidentiality.......................................................................................      8

5.       Publication and Publicity.............................................................................      9

6.       Covenants; Representations and Warranties.............................................................      9

7.       Indemnification.......................................................................................     10

8.       Dispute Resolution....................................................................................     10

9.       Term and Termination..................................................................................     11

10.      Independent Contractor................................................................................     11

11.      Notices...............................................................................................     12

12.      General Provisions....................................................................................     12

13.      Debarment Certification...............................................................................     14

         Exhibit A.............................................................................................     15
</TABLE>

                                       2
<PAGE>

                             DEVELOPMENT AGREEMENT

         THIS DEVELOPMENT AGREEMENT ("DEVELOPMENT AGREEMENT"), effective as of
the 17th day of December, 1999, made and entered into by and between GalaGen
Inc., a Delaware corporation ("GALAGEN") and Novartis Consumer Health, SA, a
Swiss corporation ("NCH").

                                   WITNESSETH:

         WHEREAS, GalaGen has expertise in developing food products;

         WHEREAS, Novartis Consumer Health, Inc. and GalaGen have entered into
the License Agreement and the Supply Agreement, that establish all terms and
conditions relating to the license exclusivity and supply of the Licensed
Ingredients (as defined in the License Agreement), and commercialization of the
Products (as defined in the License Agreement);

         WHEREAS, NCH desires that GalaGen carry out various product development
and research projects (each, a "PROJECT") on behalf of NCH as described herein.

         NOW THEREFORE, in consideration of the payments and the mutual promises
and conditions set forth herein, the sufficiency and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:

DEFINITIONS. The following terms shall have the meanings set forth below, or
where indicated, for purposes of this Development Agreement. Defined terms used,
but not defined, herein shall have the meaning assigned to them in the License
Agreement and/or the Supply Agreement.

"ADDITIONAL PRODUCTS" shall mean additional products developed pursuant to this
Development Agreement exclusively for NCH.

"CONFIDENTIAL INFORMATION" shall have the meaning set out in Section 4.1 of
this Development Agreement.

"COPYRIGHTABLE MATERIAL" shall have the meaning set out in Section 3.1 of this
Development Agreement.

"DEVELOPMENTS" shall have the meaning set out in Section 3.1 of this Development
Agreement.

"IMPROVEMENTS" shall mean any enhancement to an Additional Product and/or
Developments, including process technology and/or formulation improvements made
during the term of this Development Agreement.

"JDC" shall mean the joint development committee described more fully in Section
1.1 hereof.

                                       3
<PAGE>

"LICENSE AGREEMENT" shall mean the License Agreement between Novartis Consumer
Health, Inc. and GalaGen, dated October 25, 1999.

[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***]

"NET SALES" shall mean [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]

[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***]

"PROJECT" shall mean research and development projects agreed upon by the
parties.

"PROJECT PLAN" shall have the meaning set out in Section 1.2 of this Development
Agreement.

"SUPPLY AGREEMENT" shall mean the Supply Agreement between Novartis Consumer
Health, Inc. and GalaGen, dated October 25, 1999.

"TERRITORY" shall mean worldwide.

"THIRD PARTY LICENSE" shall have the meaning set out in Section 3.5 of this
Development Agreement.

1.       JDC; PROJECT ACTIVITY

1.1 NCH and GalaGen shall initiate Projects in the area of [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***] and (b) carry out such other research/development work
as the Parties shall agree. A joint development committee consisting of an equal
number of representatives from NCH and GalaGen (initially two (2)
representatives each) (the "JDC") shall be established within sixty (60) days
after the effective date of this Development Agreement to identify Projects to
be pursued and to oversee the work done on the Projects. A representative of NCH
shall act as chairperson of the JDC. NCH and GalaGen each shall have the right
to replace one or more of its representatives on the JDC upon written notice to
the other party. GalaGen and NCH each agree to use commercially reasonable
efforts to carry out its responsibilities under this Development Agreement in a
timely manner.

1.2 GalaGen shall carry out the work on each Project according to a project plan
agreed upon by the JDC in the form attached hereto as EXHIBIT A (each, a
"PROJECT PLAN"). The JDC may update and/or revise each Project Plan by written
amendment signed by both NCH and GalaGen.

1.3      The JDC shall perform the following functions:

                                       4
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         (a) Monitor the progress of and compliance with each Project Plan and
approve any changes to any Project Plan;

         (b) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***];

         (c) Develop research protocols and define the primary endpoint for the
clinical trials;

         (d) Review and evaluate the results of studies performed pursuant to
this Development Agreement; and

         (e) Determine the most appropriate regulatory pathway and develop
appropriate strategy to obtain regulatory approval for the Additional Products.

1.4 The chairperson of the JDC shall call meetings when reasonably deemed
appropriate, currently anticipated to be no less frequently than once every
three (3) months. If possible, the meetings shall be held in person, or where
appropriate, by video or telephone conference. When held in person, the location
of such meetings shall alternate between GalaGen's facilities and NCH's
facilities. The parties shall mutually agree upon the form of and agenda for the
meeting. Additional participants may be invited by any member to attend meetings
where appropriate (e.g., representatives of regulatory affairs or outside
consultants). Such additional participants shall have no vote. Minutes of each
meeting of the JDC shall be exchanged for review and comment by the members.
Thereafter, they shall be signed by the chairperson and distributed to each of
the Parties. Each Party shall be responsible for the expenses incurred by its
representatives in attending such meetings.

1.5 The JDC shall make decisions by majority vote, with at least one consenting
vote of each party's JDC members. If the required majority decision cannot be
found and all the members of each party take the same opposing positions in a
matter either party deems to be of major importance, the matter shall be handled
pursuant to Section 8.1 hereof. Voting by proxy is permissible. Urgent matters,
including regulatory and adverse events matters may be decided by unanimous
votes of the chairperson and a representative designated by GalaGen.

1.6 Except as explicitly set forth herein, in no event shall the chairperson of
the JDC have any additional powers or responsibilities beyond those delegated to
such person by virtue of such person's membership on the JDC. Without limiting
the foregoing, it is understood that, except as a voting member of the JDC, the
chairperson shall not have the power to control or dictate decisions or to veto
any decisions reached by the committee under the decision-making processes set
forth in Section 1.5.

1.7 GalaGen shall permit representatives of NCH, at reasonable times, to (a)
visit the facilities in which the Project Plan is being conducted and to observe
the Project activities being conducted; and (b) review GalaGen's relevant books
and records on a confidential basis, including records relating to expenditures
made on behalf of NCH by GalaGen under the Project Plan.

                                       5

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1.8      GalaGen shall advise NCH, by written or oral communications, as and
when requested, of the progress and status of the Project Plan and shall advise
NCH promptly, by written or oral communications, of all significant developments
regarding the Project Plan.

2.       PROJECT FUNDING/ PAYMENT

[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***]

3.       INTELLECTUAL PROPERTY RIGHTS

3.1      All ideas, designs, methods, prototypes, finished product, data,
product applications, formulas, processes, concepts, techniques, compounds,
inventions, discoveries, Improvements, technology and know-how, whether or not
patentable, that GalaGen conceives, develops or reduces to practice that is
derived directly from the Project Plans (collectively, "DEVELOPMENTS") shall be
the property of NCH. All Copyrightable materials generated or developed in the
course of performing the Project Plan ("COPYRIGHTABLE MATERIALS") shall be
considered works made for hire under United States copyright law. To the extent
that any such materials, under applicable law, may not be considered works made
for hire, GalaGen hereby assigns to NCH the ownership of copyright in such
materials.

         (a) GalaGen shall have the right to obtain a license, with rights to
sublicense, for Developments and Copyrightable Materials for applications that
Novartis declines to commercialize. Terms of any such license shall be
negotiated at that time.

3.2      During the term of this Development Agreement or any time after the
termination thereof, NCH shall, at its option, determine whether or not to make
any applications for United States letters patent or foreign letters patent or
for copyright registration on any Developments, Improvements thereon or
Copyrightable Materials. If NCH determines to do so, GalaGen shall, at NCH'
request, cooperate in the making of applications for United States letters
patent and foreign letters patent or for copyright registration on any
Developments or Improvements thereon or Copyrightable Materials, and GalaGen
hereby assigns to NCH or its designee (a) any such applications for copyright
registration or for letters patent and patents issuing thereon, and (b) any
other rights arising directly out of the Developments, Improvements thereon, and
Copyrightable Materials.

3.3      GalaGen acknowledges that the Development Fees and other fees to be
paid to it under Sections 2.1 and 2.2 of this Development Agreement constitute
full and complete consideration for assignment of all its rights in the
Developments, Improvements thereon, and the Copyrightable Materials. NCH
acknowledges that these fees do not cover additional costs associated with any
Third Party Licenses (as defined in Section 3.5 hereof) that must be obtained
in order to commercialize the Additional Products.

                                       6
<PAGE>

3.4      All of the data and results arising directly from the conduct of the
Project Plan shall be communicated by GalaGen to NCH and shall be the exclusive
property of NCH. NCH shall be free to incorporate such data and results in any
regulatory filings and GalaGen shall have no ownership, license or access rights
in, or to, such regulatory filings. NCH shall grant to GalaGen the right to use
the data and results related to Projects conducted pursuant to this Development
Agreement on terms to be mutually agreed for use as supporting documentation in
filings or patents unrelated to the Projects. Prior to submitting any regulatory
filings and/or patent filings incorporating such data and results, GalaGen shall
provide a copy of such filings to NCH for its review. Such regulatory filings
shall be treated as Confidential Information. In the event NCH wishes to comment
on such filings, GalaGen shall consider such comments reasonably, but shall not
be bound to incorporate them unless failure to incorporate such comments would
result in a violation of NCH's trade secrets or ownership rights.

3.5      In the event that one or more third-party licenses or sublicenses
(each, a "THIRD PARTY LICENSE") are required to commercialize Products
developed as part of the Collaboration, it shall be GalaGen's responsibility to
negotiate such licenses/sublicenses, and arrange sublicenses to NCH for the
Field of Use on terms reasonably acceptable to NCH. In the event GalaGen is
unable to obtain such a license/sublicense on terms reasonably acceptable to
NCH, NCH shall have the right to step in and negotiate the license/sublicense.
NCH will be responsible for any fees related to licenses and sublicenses
obtained on its behalf, to the amounts necessary to cover the NCH Field of Use.

         (b) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]

         3.6 [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]

4.       CONFIDENTIALITY

4.1      Both GalaGen and NCH agree that, subject to the limitations set forth
in Section 4.3 hereof, all information disclosed to the other party, whether in
oral, written or graphic form, and identified in writing by the disclosing party
as confidential shall be deemed "CONFIDENTIAL INFORMATION" of the disclosing
party. In particular, Confidential Information shall be deemed to include, but
not be limited to, any patent application or drawing or potential patent claim,
trade secrets, information, ideas, inventions, samples, processes, procedures,
methods, formulations, packaging designs and materials, test data, future
development plans, Products/ Additional Products launch date, Know-How (as
defined in the License Agreement) and engineering, manufacturing, regulatory,
marketing, servicing, sales, financing or human resources matters relating to
the disclosing party and its business.

4.2      Each party will take precautions as it normally takes with its own
confidential and proprietary information to prevent disclosure to third parties.

                                       7
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4.3      Both GalaGen and NCH agree that, notwithstanding the above, the
obligations of confidentiality shall not be deemed to apply to:

         (a) Information which at the time of disclosure is or thereafter
becomes generally known or available to the public, through no wrongful act or
failure to act on the part of the receiving party.

         (b) Information that was known by or in the possession of the receiving
party at the time of receiving such information from the disclosing party as
evidenced by written records.

         (c) Information obtained by the receiving party from a third party
source who is not breaching a commitment of confidentiality to the disclosing
party by revealing such information to the receiving party.

         (d) Information that is independently developed by the receiving party
without use of confidential information of the other party as evidenced by
written records.

         (e) Information that is the subject of a granted written permission to
disclose that is issued by the disclosing party to the other party.

         (f) Information that is required to be disclosed pursuant to the law,
but only to the extent required to be disclosed; PROVIDED, HOWEVER, the
disclosing party notifies the other party in writing and gives the other party
reasonable time to comment on the same prior to disclosure.

4.4      During the term of this Development Agreement and for a period of five
(5) years thereafter, each party shall maintain all Confidential Information in
trust and confidence and shall not disclose any Confidential Information to any
third party or use any such information for any unauthorized purpose, other than
as authorized in Section 4.3 hereof or as necessary to accomplish the purpose of
this Development Agreement subject to an appropriate binder of confidentiality
as set forth in Section 4.5 hereof. Each party may use such Confidential
Information only to the extent required to accomplish the purposes of this
Development Agreement. Confidential Information shall not be used for any
purpose or in any manner that is not consistent with this Development Agreement
or that would constitute a violation of any laws or regulations including,
without limitation, the export control laws of the United States. Each party
hereby agrees that it will not in any way attempt to obtain, either directly or
indirectly, any information regarding any Confidential Information from any
third party who has been employed by, provided consulting services to, or
received in confidence information from, the other party.

4.5      Both parties will make diligent efforts to ensure that all employees,
consultants, agents, subcontractors and manufacturing contractors who may have
access to Confidential Information of the other party, and any other third
parties who might have access to Confidential Information, will use such
information in a manner consistent with the terms of this Development Agreement
and will be bound by the terms set forth in this Article 4. No Confidential
Information shall be disclosed to any employees, subcontractors, agents or
consultants who do not have a need to receive such information.

                                       8
<PAGE>

4.6      To the extent either party discloses Confidential Information of the
other party to an employee, consultant, subcontractor or manufacturing
contractor (collectively "AGENTS") or permits an Agent to have access to such
Confidential Information, such party shall indemnify the other party for any
claims, damages, losses, liabilities, costs or expenses, including reasonable
attorneys' fees, incurred by the other party as a result of the indemnifying
party's Agent further disclosing or misusing such Confidential Information.

5.       PUBLICATION AND PUBLICITY

5.1 GalaGen and NCH agree not to issue any press release or other public
statement disclosing the existence of or relating to this Development Agreement
without prior written consent of the other party; PROVIDED, HOWEVER, that
neither GalaGen nor NCH shall be prevented from complying with any duty of
disclosure it may have pursuant to law (including SEC regulations) subject to
notifying the other party in writing and giving such other party reasonable time
to comment on the same prior to disclosure.

6.       COVENANTS; REPRESENTATIONS AND WARRANTIES

6.1 GalaGen hereby covenants to NCH that:

         (a) it will use its best efforts to perform the services required to be
performed by it hereunder in a professional and competent manner and in
accordance with the Project Plan; and

         (b) it warrants that all services and goods rendered shall be provided
in compliance with FDA's current Good Laboratory Practices and current Good
Manufacturing Practices and in compliance with any other applicable federal,
state, local, regulations, rules, guidelines and procedures.

6.2      GalaGen hereby represents and warrants that:

         (a) each of the individuals who has provided or will provide services
hereunder either (i) has a relationship with it that has accorded it exclusive
ownership of all patent, copyright and other intellectual property rights in all
Developments and Copyrightable Materials, or (ii) has entered into an agreement
with it that provides for assignment to it of all patent, copyright and other
intellectual property rights in all Developments and Copyrightable Materials;

         (b) it has the right and authority to convey all patent, copyright and
other intellectual property rights in the Developments and the Copyrightable
Materials to NCH in accordance with the terms of this Development Agreement;

         (c) during the term of this Development Agreement it shall be free from
any commitments that would create a conflict of interest impeding the
fulfillment of its obligations under this Development Agreement. NCH and GalaGen
acknowledge and agree that GalaGen may perform services outside of the time
devoted to NCH pursuant to this Development Agreement except where the
performance of such services would impair GalaGen's ability to perform its
obligations

                                       9
<PAGE>

under, or directly conflict with the terms of, this Development Agreement.
GalaGen shall notify NCH of any agreement entered into between GalaGen and third
parties that may create a conflict of interest between the services being
provided to NCH hereunder and those contemplated to be provided to the third
party;

         (d) it has the personnel, facilities and materials to conduct the
Project Plan.

7.       INDEMNIFICATION

7.1      GalaGen shall defend, indemnify and hold harmless NCH (including its
officers, agents, employees and affiliates), from any loss, claim, action damage
expense or liability (including defense costs and attorneys' fees) arising out
of or related to the breach of any covenant, warranty or representation of
GalaGen or the negligence or willful misconduct of GalaGen or its agents.

7.2      NCH shall defend, indemnify and hold harmless GalaGen (including its
officers, agents, employees and affiliates), from any loss, claim, action damage
expense or liability (including defense costs and attorneys' fees) arising out
of or related to the breach of any covenant, warranty or representation of NCH
or the negligence or willful misconduct of NCH or its licensees or agents.

8.       DISPUTE RESOLUTION

8.1      If the JDC is unable to resolve, after thirty (30) days, a dispute
regarding any issue presented to it or arising in it, such dispute will be
referred to the Chief Executive Officer of GalaGen and the Chief Executive
Officer of NCH or his designee for good faith resolution, for a period of ninety
(90) days.

8.2      If a claim of breach, nonperformance, nonpayment or repudiation should
arise related to or connection with this License Agreement (a "DISPUTE"), the
parties shall attempt to resolve the matter (a) within sixty (60) days from the
date that the party raising the Dispute notifies the other party in writing of
the Dispute, or (b) if this License Agreement specifies a cure period for the
subject of the Dispute, (b) within such cure period.

8.3      If the parties do not resolve the JDC Dispute days pursuant to Section
8.1 within ninety (90), or any Dispute pursuant to Section 8.2 within the sixty
(60) day period or relevant cure period, as appropriate, then the parties agree
to submit the matter to binding arbitration administered by the American
Arbitration Association under its Commercial Arbitration Rules by a panel of
three mutually agreeable qualified arbitrators. GalaGen and NCH agree to make
available to the arbitrators on a confidential basis any information, test
results, or research in either party's possession related to the subject of the
Dispute in addition to supplying any other information requested or necessary to
allow the arbitrators to deliver an opinion, which shall be rendered within
forty-five (45) days of selection of the full panel or such additional time as
the arbitrators reasonably need. The arbitrators shall be required to provide to
the parties a written summary of their findings and the facts and law on which
their decision is based.

                                      10
<PAGE>

9.       TERM AND TERMINATION

9.1      [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
         WITH THE SECURITIES AND EXCHANGE COMMISSION.***]

9.2      [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
         WITH THE SECURITIES AND EXCHANGE COMMISSION.***]

9.3      In the event of termination of this Development Agreement, GalaGen will
disclose in writing to NCH such data and results as shall have resulted from the
conduct of the then current Project Plans prior to the effective date of
termination and will deliver to NCH a copy of the complete records (including,
without limitation, laboratory records) regarding the Project Plans.

9.4      Any claim that arises prior to the effective date of termination of
this Development Agreement shall survive such termination.

9.5      [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.***]

10.      INDEPENDENT CONTRACTOR

10.1     The parties acknowledge and agree that: (a) GalaGen shall conduct the
Project Plans as an independent contractor; (b) this Development Agreement does
not create and shall not be construed as creating an employee, representative,
joint venture, partnership or agency relationship between them; and, (c) they
shall each take actions consistent with the provisions of this Section.

11.      NOTICES

11.1     All notices required or permitted hereunder shall be given in writing
and  sent by facsimile transmission, or mailed postage prepaid by first class
certified or registered mail, or sent by a nationally recognized express courier
service, or hand delivered or sent by facsimile at the following addresses:

         Novartis Consumer Health, SA.
         Route de l' Etraz
         CH-1120 Nyon 1, Switzerland
         Attention: Global Head of Research and Development, Nutrition

         GalaGen Inc.
         1275 Red Fox Road
         Arden Hills, Minnesota 55112
         Attention: Robert Hoerr

Any notice, if mailed properly addressed, postage prepaid, shall be deemed made
three (3) days after the date of mailing as indicated on the certified or
registered mail receipt, or on the next

                                       11
<PAGE>

business day if sent by express courier service or on the date of delivery or
transmission if hand delivered or sent by facsimile transmission.

12.      GENERAL PROVISIONS

12.1     ASSIGNMENT. This Development Agreement shall be assignable (a) by
NCH to one or more of its affiliates and (b) by GalaGen to one or more of its
affiliates so long as such assignment by GalaGen does impair the ability of
GalaGen and its affiliates to perform their obligations under this
Development Agreement. Other than as stated in the previous sentence, this
Development Agreement shall not be assignable by either party without the
prior express written consent of the other party. Any assignment or attempt
at same in the absence of such prior written consent shall be void and
without effect. For purposes of the provisions of this Section, a transfer by
either party of all or substantially all of its stock or assets shall be
deemed an assignment.

12.2     AFFILIATES. As used in this Development Agreement, the term
"affiliates" means corporations, partnerships or other business entities, and
the employees and agents thereof, which, directly or indirectly, are
controlled by, control, or are under common control with NCH or GalaGen.

12.3     SUCCESSORS. This Development Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and permitted assigns.

12.4     NO WAIVERS. No delay or omission by either party to exercise any right
under this Development Agreement shall impair any such right or power or be
construed to be a waiver thereof. A waiver by either of the parties hereto of
any of the covenants, conditions or agreements to be performed by the other
shall not be construed to be a waiver of any succeeding breach thereof or of any
covenant, condition or agreement herein contained. No waiver or discharge of any
provisions of this Development Agreement shall be valid unless it is in writing
and is executed by the party against whom such change or discharge is sought to
be enforced.

12.5     SEVERABILITY. If a judicial determination is made that any of the
provisions contained in this Development Agreement constitute an unreasonable
restriction against either party or are otherwise unenforceable, such provision
or provisions shall be rendered void or invalid only to the extent that such
judicial determination finds such provisions to be unreasonable or otherwise
unenforceable, and the remainder of this Development Agreement shall remain
operative and in full force and effect.

12.6     GOVERNING LAW. This Development Agreement shall be governed by, and
construed in accordance with, the laws of the State of New Jersey as though made
and to be fully performed in said State.

12.7     HEADINGS. The headings contained in this Development Agreement do
not form a substantive part of this Development Agreement and shall not be
construed to limit or otherwise modify its provisions.

                                       12
<PAGE>

12.8     ENTIRE AGREEMENT; AMENDMENTS. This Development Agreement and the
Exhibits attached hereto constitute the entire agreement between the parties
with respect to the subject matter hereof, and there are no related
understandings or agreements other than those that are expressed herein, and
no change of any provision of this Development Agreement shall be valid
unless it is in writing and is executed by the party against whom such change
is sought to be enforced. The parties recognize that, during the term of this
Development Agreement, a purchase order, acknowledgement form or similar
routine document (collectively "FORMS") may be used to implement or
administer provisions of this Development Agreement. Therefore, the parties
agree that the terms of this Development Agreement prevail in the event of
any conflict between this Development Agreement and the printed provisions of
such Forms, or typed provisions of Forms that add to, vary, modify or are at
conflict with the provisions of this Development Agreement with respect to
the Project Plan performed during the term of this Development Agreement.

12.9     INSURANCE. GalaGen shall obtain and maintain comprehensive insurance
coverage of at least One Million Dollars ($1,000,000) in aggregate which covers
any and all potential claims, suits, losses expenses or damages arising out of
GalaGen's obligations under this Development Agreement.

13.      DEBARMENT CERTIFICATION

13.1     Neither GalaGen nor any person employed thereby directly in the
performance of the Services has been debarred under section 306(a) or (b) of
the Federal Food, Drug and Cosmetic Act and no debarred person will in the
future be employed by the GalaGen in connection with any work to be performed
for or on behalf of NCH which may later become part of any application for
approval of a drug or biologic by the FDA. If at any time after execution of
this contract, the GalaGen becomes aware that the GalaGen or any person
employed thereby is, or is in the process of being, debarred, the GalaGen
hereby certifies that the GalaGen will so notify NCH at once.

                                       13
<PAGE>

         IN WITNESS WHEREOF, each of the parties hereto has caused this
Development Agreement to be executed by its duly authorized representatives,
effective as of the date first above written.

NOVARTIS CONSUMER HEALTH, SA

By: /s/ [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
         WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
    --------------------------------------------------------------------------
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***]

GALAGEN, INC.

By: /s/ H. J. Cardello
    ------------------------------
      H. J. Cardello
      President

                                       14<PAGE>

                                                                  EXECUTION COPY

                                    $125,000,000

                                 CREDIT AGREEMENT

                                       among

                                   GUESS?, INC.,
                                    as Borrower,

                                The Several Lenders
                         from Time to Time Parties Hereto,

                      SANWA BANK CALIFORNIA, as Co-Agent,

                                       and

                             THE CHASE MANHATTAN BANK,

                              as Administrative Agent

                          Dated as of December 3, 1999

            CHASE SECURITIES INC., as Lead Arranger and Book Manager

<PAGE>

                               TABLE OF CONTENTS

     SECTION 1. DEFINITIONS .......................................1
          1.1 Defined Terms .......................................1
          1.2 Other Definitional Provisions ......................17

     SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT
                COMMITMENTS ......................................18

         2.1  Revolving Credit Commitments .......................18
         2.2  Procedure for Revolving Loan Borrowing..............18
         2.3  Swingline Commitment................................19
         2.4  Procedure for Swingline Borrowing; Refunding
              of Swingline Loans..................................19
         2.5  Commitment Fees, etc........ .......................20
         2.6  Termination or Reduction of Revolving
              Credit Commitments..................................20
         2.7  Optional Prepayments................................21
         2.8  Mandatory Revolving Credit Commitment Reductions....21
         2.9  Conversion and Continuation Options.................21
         2.10 Limitations and Eurodollar Tranches.................22
         2.11 Interest Rates and Payment Dates....................22
         2.12 Computation of Interest and Fees....................22
         2.13 Inability to Determine Interest Rate................23
         2.14 Pro Rata Treatment and Payments.....................23
         2.15 Requirements of Law.................................24
         2.16 Taxes...............................................25
         2.17 Indemnity...........................................27
         2.18 Change of Lending Office............................27
         2.19 Replacement of Lenders..............................28

     SECTION 3. LETTERS OF CREDIT ................................28
         3.1 L/C Commitment.......................................28
         3.2 Procedure for Issuance of Letter of Credit...........28
         3.3 Fees and Other Charges...............................29
         3.4 L/C Participations...................................29
         3.5 Reimbursement Obligation of the Borrower.............30
         3.6 Obligations Absolute.................................30
         3.7 Letter of Credit Payments............................30
         3.8 Applications.........................................31

     SECTION 4. REPRESENTATIONS AND WARRANTIES ...................31
         4.1 Financial Condition..................................31
         4.2 No Change............................................31
         4.3 Corporate Existence; Compliance with Law.............31
         4.4 Corporate Power; Authorization; Enforceable

             Obligations..........................................31
         4.5 No Legal Bar.........................................32
         4.6 Litigation...........................................32
         4.7 No Default...........................................32
         4.8 Ownership of Property; Liens.........................32

<PAGE>

                                      Page

                                                               ----
          4.9 Intellectual Property...............................32
          4.10 Taxes..............................................32
          4.11 Federal Regulations................................33
          4.12 Labor Matters......................................33
          4.13 ERISA..............................................33
          4.14 Investment Company Act; Other Regulations..........33
          4.15 Subsidiaries.......................................33
          4.16 Use of Proceeds....................................34
          4.17 Environmental Matters..............................34
          4.18 Accuracy of Information, etc.......................34
          4.19 Collateral.........................................35
          4.20 Solvency...........................................35
          4.21 Senior Indebtedness................................35
          4.22 Year 2000 Matters..................................35

     SECTION 5 CONDITIONS PRECEDENT...............................36
          5.1 Conditions to Initial Extension of Credit...........36
          5.2 Conditions to Each Extension of Credit..............37

     SECTION 6. AFFIRMATIVE COVENANTS.............................37
         6.1  Financial Statements................................37
         6.2  Certificates; Other Information.....................38
         6.3  Payment of Obligations..............................39
         6.4  Maintenance of Existence; Compliance................39
         6.5  Maintenance of Property; Insurance..................39
         6.6  Inspection of Property; Books and Records;

              Discussions.........................................39
         6.7  Notices.............................................39
         6.8  Environmental Laws..................................40
         6.9  Additional Collateral, etc..........................40

     SECTION 7. NEGATIVE COVENANTS................................41
         7.1  Financial Condition Covenants.......................41
         7.2  Indebtedness........................................41
         7.3  Liens...............................................43
         7.4  Fundamental Changes.................................44
         7.5  Disposition of Property.............................45
         7.6  Restricted Payments.................................46
         7.7  Capital Expenditures................................46
         7.8  Investments.........................................47
         7.9  Payments and Modifications of Certain Debt

              Instruments.........................................48
         7.10 Transactions with Affiliates........................48
         7.11 Sales and Leasebacks................................48
         7.12 Changes in Fiscal Periods...........................49
         7.13 Negative Pledge Clauses.............................49
         7.14 Clauses Restricting Subsidiary Distributions........49
         7.15 Lines of Business...................................49

                                      -ii-

<PAGE>

     SECTION 8. EVENTS OF DEFAULT .................................49

     SECTION 9. THE AGENTS ........................................52
         9.l Appointment...........................................52
         9.2 Delegation of Duties..................................53
         9.3 Exculpatory Provisions................................53
         9.4 Reliance by Administrative Agent......................53
         9.5 Notice of Default.....................................53
         9.6 Non-Reliance on Agents and Other Lenders..............54
         9.7 Indemnification.......................................54
         9.8 Agent in Its Individual Capacity......................54
         9.9 Successor Administrative Agent........................55
         9.10 Co-Agent.............................................55

     SECTION 10. MISCELLANEOUS ....................................55
        10.1 Amendments and Waivers................................55
        10.2 Notices...............................................56
        10.3 No Waiver; Cumulative Remedies........................57
        10.4 Survival of Representations and Warranties............57
        10.5 Payment of Expenses and Taxes.........................57
        10.6 Successors and Assigns; Participations an

             Assignments...........................................58
        10.7 Adjustments; Set-off..................................60
        10.8 Counterparts..........................................60
        10.9 Severability..........................................60
        10.10 Integration..........................................60
        10.11 GOVERNING LAW........................................61
        10.12 Submission To Jurisdiction; Waivers..................61
        10.13 Acknowledgements.....................................61
        10.14 Releases of Guarantees and Liens.....................62
        10.15 Confidentiality......................................62
        10.16 WAIVERS OF JURY TRIAL................................62

                                     - iii -

<PAGE>

    ANNEX:

    A          Pricing Grid

    SCHEDULES:

    1.1        Revolving Credit Commitments

    4.1        Material Guarantee Obligations; Material Dispositions
    4.15       Subsidiaries
    4.19       UCC Filing Jurisdictions
    7.2(e)     Existing Indebtedness
    7.3(f)     Existing Liens

    EXHIBITS:

    A          Form of Guarantee and Collateral Agreement
    B          Form of Compliance Certificate
    C          Form of Closing Certificate
    D          Form of Assignment and Acceptance

    E-1        Form of Legal Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
    E-2        Form of Legal Opinion of Glenn A. Weinman
    F          Form of Exemption Certificate

                                      -iv-

<PAGE>

     CREDIT  AGREEMENT,  dated as of  December  3, 1999 among  GUESS ?, INC.,  a
Delaware  corporation  (the  "Borrower"),  the several banks and other financial
institutions  or  entities  from time to time  parties  to this  Agreement  (the
"Lenders"),   SANWA  BANK  CALIFORNIA,   as  co-agent  (in  such  capacity,  the
"Co-Agent"), and THE CHASE MANHATTAN BANK, as administrative agent.

             The parties hereto hereby agree as follows:

                          SECTION 1. DEFINITIONS

         1.1 Defined Terms.  As used in the Agreement,  the terms listed in this
Section 1.1 shall have the respective meanings set forth in this Section 1.1.

          "ABR": for any day, a rate per annum (rounded  upwards,  if necessary,
to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on
such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal
Funds Effective Rate in effect an such day plus 1/2 of 1%. For purposes  hereof:
"Prime Rate" shall mean the rate of interest per annum  publicly  announced from
time to time by The  Chase  Manhattan  Bank as its  prime  rate in effect at its
principal  office in New York City (the Prime Rate not being  intended to be the
lowest rate of interest  charged by The Chase  Manhattan Bank in connection with
extensions  of credit to debtors):  "Base CD Rate" shall mean the sum of (a) the
product  of (i) the  Three-Month  Secondary  CD Rate  and (ii) a  fraction,  the
numerator  of which is one and the  denominator  of which is one  minus  the C/D
Reserve  Percentage and (b) the C/D Assessment Rate; and "Three-Month  Secondary
CD Rate" shall mean,  for any day,  the  secondary  market rate for  three-month
certificates of deposit reported as being in effect on such day (or, if such day
shall not be a  Business  Day,  the next  preceding  Business  Day) by the Board
through the public information telephone line of the Federal Reserve Bank of New
York (which rate will, under the current practices of the Board, be published in
Federal Reserve  Statistical  Release  H.15(519)  during the week following such
day),  or,  if such  rate  shall  not be so  reported  on such day or such  next
preceding  Business  Day, the average of the  secondary  market  quotations  for
three-month certificates of deposit of major money center banks in New York City
received at  approximately  10:00 A.M.,  New York City time, on such day (or, if
such day shall not be a Business Day, on the next preceding Business Day) by The
Chase Manhattan Bank from three New York City negotiable  certificate of deposit
dealers of  recognized  standing  selected by it. Any change in the ABR due to a
change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective Rate shall be effective as of the opening of business on the effective
day of such change in the Prime Rate, the  Three-Month  Secondary CD Rate or the
Federal Funds Effective Rate, respectively.

          "ABR Loans":  Loans the rate of interest  applicable to which is based
upon the ABR.

          "Adjustment Date": as defined in the Pricing Grid.

          "Administrative  Agent":  The Chase Manhattan Bank,  together with its
affiliates,  as the  arranger of the  Revolving  Credit  Commitments  and as the
administrative  agent for the Lenders  under this  Agreement  and the other Loan
Documents, together with any of its successors.

          "Affiliate":  as to any Person,  any other  Person  that,  directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person.  For purposes of this  definition,  "control" of a Person means the
power, directly or indirectly,  either to (a) vote 10% or more of the securities
having  ordinary  voting  power  for  the  election  of  directors  (or  persons
performing similar fuctions) of such Person or (b) direct or cause the direction
of the management and policies of such Person, whether by contract or otherwise.

<PAGE>

                                                                               2

          "Agents":   the   collective   reference   to  the  Co-Agent  and  the
Administrative Agent.

          "Aggregate  Exposure":  with respect to any Lender at any time, amount
equal to the amount of such Lender's  Revolving Credit Commitment then in effect
or, if the Revolving Credit Commitments have been terminated, the amount of such
Lender's Revolving Extentions of Credit then outstanding.

          "Aggregate  Exposure  Percentage":  with  respect to any Lender at any
time, the ratio (expressed as a percentage) of such Lender's  Aggregate Exposure
at such time to the Aggregate Exposure of all Lenders at such time.

          "Agreement": this Credit Agreement, as amended, restated, supplemented
or otherwise modified from time to time.

          "Apparel   Business":   collectively,   (a)  the   businesses  of  the
manufacture,  wholesale  sale and/or retail sale of clothing  garments and other
wearing apparel or allied or complementary  products for men, women or children,
including accessories,  fragrances,  eyewear, watches, home products,  cosmetics
and  footwear,  or of any  component  materials  thereof,  (b) the  business  of
granting  licenses of the trademarks,  tradenames and other similar  property to
other Persons for the manufacture  and/or sale of such products of any nature by
such Persons and (c)  activities  related or ancillary to, or extensions of, the
businesses and activities described clauses (a) and (b) above.

          "Applicable  Documentary L/C Fee Rate": 0.200%;  provided, that on and
after  the  date  that  is 90  days  after  the  Closing  Date,  the  Applicable
Documentary L/C Fee Rate will be determined pursuant to the Pricing Grid.

          "Applicable  Margin": a per annum rate equal to (a) 1.25%, in the case
of Eurodollar Loans, and (b) 0.25%, in the case of ABR Loans; provided,  that on
and after the date that is 90 days after the Closing Date, the Applicable Margin
will be determined pursuant to the Pricing Grid.

          "Application":  an application, in such form as the Issuing Lender may
specify  from time to time in  accordance  with its  customary  practice and the
terms of this Agreement, and which may be submitted  electronically,  requesting

the Issuing Lender to open a Letter of Credit.

          "Asset  Sale":  any  Disposition  of  property  or series  of  related
Dispositions of property (excluding any issuance or sale of Capital Stock of the
Borrower or any such  Disposition  permitted by clause (a),  (b), (c), (d), (e),
(f),  (g),  (h),  (i),  (j),  (k) or (l) of  Section  7.5) that  yields Net Cash
Proceeds to the Borrower or any of its Subsidiaries in excess of $2,500,000.

          "Assignee": as defined in Section 10.6(c).

          "Assignment   and   Acceptance":   an   Assignment   and   Acceptance,
substantially in the form of Exhibit D.

          "Assignor": as defined in Section 10.6(c).

          "Attributable  Debt":  in respect of a sale and leaseback  transaction
entered  into  by  the  Borrower  or any of its  Subsidiaries,  at the  time  of
determination,  the present value of the obligation of the lessee for net rental
payments  during  the  remaining  term of the  lease  included  in such sale and
leaseback  transaction  including  any  period  for  which  such  lease has been
extended or may, at the sole option of the lessor,  be  extended.  Such  present
value shall be  calculated  using a discount  rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.

<PAGE>

                                                                               3

          "Available Revolving Credit Commitment": as to any Lender at any time,
an amount equal to the excess,  if any, of (a) such  Lender's  Revolving  Credit
Commitment then in effect over (b) such Lender's Revolving  Extensions of Credit
then  outstanding;   provided,   that  in  calculating  any  Lender's  Revolving
Extensions  of Credit for the purpose of  determining  such  Lender's  Available
Revolving Credit Commitment  pursuant to Section 2.5(a), the aggregate principal
amount of Swinging Loans then outstanding shall be deemed to be zero.

          "Basket  Amount":  an amount equal to $75,000,000 on the Closing Date,
permanently  reduced  thereafter by the amount of (a) any  expenditures  made to
repurchase  common stock of the  Borrower  pursuant to Section  7.6(b),  (b) the
Consideration  expended in connection with any Permitted Acquisition pursuant to
Section 7.8(f), and (c) any expenditures made to redeem the Senior  Subordinated
Notes pursuant to Section 7.9(a)(i).

          "Benefitted Lender": as defined in Section 10.7(a).

          "Board":  the Board of Governors of the Federal  Reserve System of the
United States (or any successor).

          "Borrower": as defined in the preamble hereto.

          "Borrowing Date": any Business Day specified by the Borrower as a date
on which the Borrower requests the Lender to make Loans hereunder.

          "Business": as defined in Section 4.17(b).

          "Business  Day":  a day other than a Saturday,  Sunday or other day on
which  commercial  banks in New York City are  authorized  or required by law to
close,  provided,  that with respect to notices and determinations in connection
with, and payments of principal and interest on,  Eurodollar  Loans, such day is
also a day for trading by and between banks in Dollar  deposits in the interbank
eurodollar market.

          "Capital  Expenditures":  for any period,  with respect to any Person,
the aggregate of all  expenditures by such Person and its  Subsidiaries  for the
acquisition or leasing  (pursuant to a capital lease) of fixed or capital assets
or additions  to  equipment  (including  replacements,  capitalized  repairs and
improvements  during such  period)  that should be  capitalized  under GAAP on a
consolidated  balance  sheet  of such  Person  and its  Subsidiaries;  provided,
however,  that Capital  Expenditures  shall not include (a)  property  purchased
simultaneously  with the trade-in of existing  property  owned by such Person or
its  Subsidiaries  to the  extent of the  trade-in  credit  with  respect to the
property  being  traded in at such time,  (b)  expenditures  of  proceeds of any
Recovery Event, (c)  expenditures to replace property  Disposed of in accordance
with this Agreement to the extent of the sales price of such property and to the
extent  replaced  within 365 days of receipt of such sales  price,  (d) property
subject to Capital Lease Obligations or (e) capitalized fees and expenses.

          "Capital Lease Obligations": as to any Person, the obligations of such
Person to pay rent or other  amounts  under  any lease of (or other  arrangement
conveying the right to use) real or personal property, or a combination thereof,
which  obligations  are required to be  classified  and accounted for as capital
leases on a balance  sheet of such Person  under GAAP and,  for the  purposes of
this  Agreement,  the  amount  of such  obligations  at any  time  shall  be the
capitalized amount thereof at such time determined in accordance with GAAP.

<PAGE>

                                                                               4

         "Capital Stock": any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants, rights or options to purchase any of the foregoing.

                  "Cash  Equivalents":  (a) marketable direct obligations issued
by, or unconditionally  guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United States,
in each  case  maturing  within  one  year  from the  date of  acquisition;  (b)
certificates  of deposit,  time deposits,  eurodollar time deposits or overnight
bank deposits having maturities of one year or less from the date of acquisition
issued by any Lender or by any commercial  bank organized  under the laws of the
United States or any state thereof  having  combined  capital and surplus of not
less than $250,000,000;  (c) commercial paper of an issuer rated at least A-1 by
Standard & Poor's Ratings Services ("S&P") or P-1 by Moody's Investors  Service,
Inc.  ("Moody's"),  or carrying an equivalent rating by a nationally  recognized
rating agency, if both of the two named rating agencies cease publishing ratings
of commercial  paper issuers  generally,  and maturing  within one year from the
date  of  acquisition;  (d)  repurchase  obligations  of  any  Lender  or of any
commercial  bank satisfying the  requirements of clause (b) of this  definition,
having a term of not more than 90 days,  with  respect to  securities  issued or
fully guaranteed or insured by the United States government; (e) securities with
maturities  of one year or less  from the date of  acquisition  issued  or fully
guaranteed by any state,  commonwealth or territory of the United States, by any
political  subdivision or taxing  authority of any such state,  commonwealth  or
territory  or  by  any  foreign  government,  the  securities  of  which  state,
commonwealth,  territory,  political  subdivision,  taxing  authority or foreign
government  (as the case may be) are rated at least A by S&P or A by  Moody's or
an  equivalent  rating  by  a  nationally  recognized  rating  agency,  if  such
securities  are  not  rated  by  either  S&P or  Moody's;  (f)  securities  with
maturities of six months or less from the date of acquisition  backed by standby
letters of credit issued by any Lender or any  commercial  bank  satisfying  the
requirements of clause (b) of this definition; (g) shares of money market mutual
or similar funds which invest  exclusively in assets satisfying the requirements
of clauses (a)  through  (f) of this  definition;  (h) demand  deposit  accounts
maintained  in the  ordinary  course  of  business;  and (i) in the  case of any
Foreign  Subsidiary,  (i) direct  obligations  of the  sovereign  nation (or any
agency  thereof) in which such Foreign  Subsidiary is organized or is conducting
business  or  obligations  guaranteed  by such  sovereign  nation (or any agency
thereof),  (ii)  investments  of the type and maturity  described in clauses (a)
through (g) above of foreign  obligors,  which  investments  or obligors (or the
direct or indirect  parents of such  obligors)  have  ratings  described in such
clauses or equivalent  ratings from comparable  foreign rating agencies or (iii)
investments of the type and maturity  described in clauses (a) through (g) above
of foreign  obligors (or the direct or indirect  parents of such  obligors) that
are not rated as provided in such clauses or in clause (ii) above but which are,
in  the  reasonable  judgment  of  the  Borrower  or  the  relevant  Subsidiary,
comparable in investment  quality to such investment and obligors (or the direct
or indirect parents of such obligors).

                  "C/D  Assessment  Rate":  applied to any ABR Loan,  the annual
assessment  rate in effect on such day that is  payable  by a member of the Bank
Insurance Fund  maintained by the Federal  Deposit  Insurance  Corporation  (the
"FDIC") classified as well-capitalized and within supervisory subgroup "B" (or a
comparable successor  assessment risk  classification)  within the meaning of 12
C.F.R. ss: 327.4 (or any successor provision) to the FDIC (or any successor) for
the FDIC's  (or such  successor's)  insuring  time  deposits  at offices of such
institution in the United States.

<PAGE>

                                                                               5

          "C/D Reserve Percentage": for any day as applied to any ABR Loan, that
percentage  (expressed  as a  decimal)  which  is in  effect  on  such  day,  as
prescribed by the Board,  for determining the maximum reserve  requirement for a
Depositary  Institution  (as defined in  Regulation  D of the Board as in effect
from time to time) in  respect  of new  non-personal  time  deposits  in Dollars
having a maturity of 30 days or more.

          "Closing Date":  the date on which the conditions  precedent set forth
in Section 5.1 shall have been satisfied, which date is December 3, 1999.

          "Co-Agent": as defined in the preamble hereto.

          "Code":  the Internal  Revenue  Code of 1986,  as amended from time to
time.

          "Collateral", all property of the Loan Parties, now owned or hereafter
acquired, upon which a Lien is purported to be created by any Security Document.

          "Commitment  Fee Rate":  0.375% per annum;  provided that on and after
the date that is 90 days after the Closing Date, the Commitment Fee Rate will be

determined pursuant to the Pricing Grid.

          "Commonly Controlled Entity": an entity,  whether or not incorporated,
that is under common  control  with the  Borrower  within the meaning of Section
4001 of ERISA  or is part of a group  that  includes  the  Borrower  and that is
treated as a single employer under Section 414 of the Code,

          "Compliance Certificate": a certificate duly executed by a Responsible
Officer substantially in the form of Exhibit B.

          "Confidential  Information  Memorandum":  the Confidential Information
Memorandum dated September 1999 and furnished to the Lenders.

          "Consideraton": in connection with any "acquisition, the consideration
paid  by  the  Borrower  or  any of  its  Subsidiaries  in  connection therewith
(including  the  principal  amount of any  Indebtedness  assumed  in  connection

therewith).

          "Consolidated  EBITDAR":  for any period,  Consolidated Net Income for
such period plus, without duplication and to the extent reflected as a charge in
this statement of such  Consolidated Net Income for such period,  the sum of (a)
income tax  expense,  (b)  interest  expense,  amortization  or writeoff of debt
discount and debt issuance costs and  commissions,  discounts and other fees and
charges associated with indebtedness (including the Loans), (c) depreciation and
amortization  expense,  (d)  amortization  of  intangibles  (including,  but not
limited to, goodwill) and organization  costs, (e) Consolidated  Operating Lease
Expense,  (f) any extraordinary,  unusual or non-recurring  non-cash expenses or
losses (including, whether or not otherwise includable as a separate item in the
statement of such  Consolidated  Net Income for such period,  non-cash losses on
sales of assets outside of the ordinary  course of business),  and (g) any other
non-cash  charges,  and minus,  to the extent  included in the statement of such
Consolidated  Net Income  for such  period,  the surn of (a) any  extraordinary,
unusual or non-recurring  income or gains  (including,  whether or not otherwise
includable as a separate item in the statement of such  Consolidated  Net Income
for such period,  gains on the sales of assets outside of the ordinary course of
business) and (b) any other  non-cash  income (other than income  accrued in the
ordinary course of business), all as determined on a consolidated basis. For the
purposes of calculating  Consolidated EBITDAR for any period of four consecutive
fiscal quarters (each, a "Reference  Period")  pursuant to any  determination of
the Consolidated Leverage Ratio, (i) if at any time during such Reference Period
the Borrower or any  Subsidiary  shall have made any Material  Disposition,  the
Consolidated  EBITDAR for such  Reference  Period  shall be reduced by an amount
equal to the  Consolidated  EBITDAR (if positive)  attributable  to the property
that is the subject of such Material  Disposition  for such Reference  Period or
increased  by  an  amount  equal  to  the  Consolidated  EBITDAR  (if  negative)
attributable  thereto  for  such  Performance  Period  and (ii) if  during  such
Reference  Period  the  Borrower  or any  Subsidiary  shall have made a Material
Acquisition,  Consolidated EBITDAR for such Reference Period shall be calculated
after giving pro forma effect thereto as if such Material  Acquisition  occurred
on the first day of such Reference Period. As used in this definition, "Material
Acquisition" means any acquisition of property or series of related acquisitions
of property that (a) constitutes  assets comprising all, or substantially all of
an operating unit of a business or constitutes all or  substantially  all of the
common stock of a Person and (b) involves  the payment of  consideration  by the
Borrower  and  its   Subsidiaries   in  excess  of  $2,500,000;   and  "Material
Disposition" means any Disposition of property or series of related Dispositions
of  property  that  yields  gross  proceeds  to  the  Borrower  or  any  of  its
Subsidiaries in excess of $2,500,000.

<PAGE>

                                                                               6

          "Consolidated  Fixed Charge Coverage Ratio": for any period, the ratio
of (a) Consolidated  EBITDAR for such period minus Capital Expenditures for such
period to (b) Consolidated Fixed Charges for such period.

          "Consolidated  Fixed  Charges":  for  any  period,  the  sum  (without
duplication)  of  (a)  Consolidated   Interest  Expense  for  such  period,  (b)
Consolidated  Operating Lease Expense for such period and (c) scheduled payments
made during such period on account of principal of  Indebtedness of the Borrower
or any of its Subsidiaries.

          "Consolidated  Interest Expense":  for any period, total cash interest
expense  (including  that  attributable  to Capital  Lease  Obligations)  of the
Borrower and its  Subsidiaries  for such period with respect to all  outstanding
indebtedness of the Borrower and its  Subsidiaries  (including all  commissions,
discounts  and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing and net costs under Hedge Agreements in respect of
interest  rates to the extent  such net costs are  allocable  to such  period in
accordance with GAAP less all interest income and payments  received under Hedge
Agreements in respect of interest  rates  allocable to such period in accordance
with GAAP).

          "Consolidated  Leverage Ratio": as at the last day of any period,  the
ratio of (a) the sum of (i) Consolidated Total Debt on such day and (ii) 800% of
Consolidated Operating Lease Expense for such period to (b) Consolidated EBITDAR

for such period.

          "Consolidated Net Income": for any period, the consolidated net income
(or loss) of the Borrower and its  Subsidiaries,  determined  on a  consolidated
basis in accordance with GAAP;  provided that there shall be excluded (a) except
as otherwise  expressly  provided herein,  the income (or deficit) of any Person
accrued  prior to the date it becomes a Subsidiary  of the Borrower or is merged
into or  consolidated  with the  Borrower  or any of its  Subsidiaries,  (b) the
income (or deficit) of any Person  (other than a Subsidiary  of the Borrower) in
which the Borrower or any of its Subsidiaries has an ownership interest,  except
to the extent that any such income is actually  received by the Borrower or such
Subsidiary  in the  form  of  dividends  or  similar  distributions  and (c) the
undistributed  earnings of any Subsidiary of the Borrower  (other than Strandel,
Inc.  and its  Subsidiaries)  to the extent that the  declaration  or payment of
dividends  or  similar  distributions  by  such  Subsidiary  is not at the  time
permitted by the terms of any Contractual  Obligation (other than under any Loan
Document) or Requirement of Law applicable to such Subsidiary.

<PAGE>

                                                                               7

          "Consolidated  Net Worth":  at any date,  all amounts  that would,  in
conformity  with  GAAP,  be  included  on a  consolidated  balance  sheet of the
Borrower and its Subsidiaries under net stockholders' equity at such date.

          "Consolidated  Operating Lease Expense": for any period, the aggregate
amount  of  fixed  and  contingent  rentals  payable  by the  Borrower  and  its
Subsidiaries  for such  period  with  respect  to  leases  of real and  personal
property  (other than Capital Lease  Obligations),  determined on a consolidated
basis in accordance with GAAP.

          "Consolidated Total Debt": at any date, the aggregate principal amount
of  all   Indebtedness   (other  than  contingent   obligations  in  respect  of
Indebtedness  of the type described in clause (f) of the definition  thereof) of
the Borrower and its  Subsidiaries  at such date,  determined on a  consolidated
basis in accordance with GAAP.

          "Continuing  Directors":  the directors of the Borrower on the Closing
Date and each other director, if, in each case, such other director's nomination
for  election to the board of directors  of the  Borrower is  recommended  by at
least a  majority  of the  then  Continuing  Directors  or such  other  director
receives  the vote of the  Permitted  Investors  in his or her  election  by the
shareholders of the Borrower.

          "Contractual  Obligation":  as to any  Person,  any  provision  of any
security  issued  by  such  Person  or of any  agreement,  instrument  or  other
undertaking  to  which  such  Person  is a party  or by  which  it or any of its

property is bound.

          "Default":  any of the events  specified  in Section 8, whether or not
any requirement  for the giving of notice,  the lapse of time, or both, has been

satisfied.

          "Disposition": with respect to any property, any sale, lease, sale and
leaseback,  assignment (other than for security),  conveyance, transfer or other
disposition  thereof.  The  terms  "Dispose"  and  "Disposed  of  "  shall  have

correlative meanings.

          "Documentary Letter of Credit": any Letter of Credit that is issued in
support of trade obligations of the Borrower or any of its Subsidiaries incurred
in the ordinary course of business and that includes,  as a condition to drawing
thereunder,  the  presentation  to the  Issuing  Lender of  negotiable  bills of
lading,  invoices  and  related  documents  sufficient  to  create  a valid  and
perfected security interest in the goods covered thereby.

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

          "Domestic Subsidiary":  any Subsidiary of the Borrower organized under
the laws of any jurisdiction within the United States.

          "Environmental  Laws": any and all foreign,  Federal,  state, local or
municipal  laws,  rules,  orders,  regulations,   statutes,  ordinances,  codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including  common  law)  regulating,  relating  to  or  imposing  liability  or
standards of conduct  concerning  protection of human health or the environment,
as now at may at any time hereafter be in effect.

          "ERISA":  the Employee  Retirement  Income  Security  Act of 1974,  as
amended from time to time.

<PAGE>

                                                                               8

          "Eurocurrency  Reserve  Requirements":  for  any day as  applied  to a
Eurodollar  Loan,  the  aggregate  (without  duplication)  of the maximum  rates
(expressed as a decimal fraction) of reserve  requirements in effect on such day
(including  basic,  supplemental,  marginal  and  emergency  reserves  under any
regulations of the Board or other  Governmental  Authority  having  jurisdiction
with  respect  thereto)  dealing  with  reserve   requirements   prescribed  for
eurocurrency  funding  (currently  referred to as "Eurocurrency  Liabilities" in
Regulation D of the Board)  maintained  by a member bank of the Federal  Reserve
System.

          "Eurodollar Base Rate":  with respect to each day during each Interest
Period  pertaining to a Eurodollar  Loan,  the rate per annum  determined on the
basis of the rate for  deposits in Dollars for a period  equal to such  Interest
Period  commencing  on the first day of such Interest  Period  appearing on Page
3750 of the Dow Jones Markets screen as of 11:00 A.M., London time, two Business
Days prior to the beginning of such Interest Period. In the event that such rate
does not appear on Page 3750 of the Dow Jones  Markets  screen (or  otherwise on
such  screen),  the  "Eurodollar  Base Rate" shall be determined by reference to
such other comparable publicly available service for displaying eurodollar rates
as may be selected by the Administrative  Agent with the consent of the Borrower
(which consent shall not be unreasonably withheld or delayed) or, in the absence
of such  availability (or Borrower  consent),  by reference to the rate at which
the Administrative  Agent is offered Dollar deposits at or about 11:00 A.M., New
York City time, two Business Days prior to the beginning of such Interest Period
in the interbank eurodollar market where its eurodollar and foreign currency and
exchange  operations  are then being  conducted for delivery on the first day of
such Interest Period for the number of days comprised therein.

          "Eurodollar Loans":  Loans the rate of interest applicable to which is
based upon the Eurodollar Rate.

          "Eurodollar  Rate":  with  respect  to each day during  each  Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for such day
in accordance with the following  formula (rounded upward to the nearest 1/100th
of 1%):

                              Eurodollar Base Rate

                    ----------------------------------------
                    1.00 - Eurocurrency Reserve Requirements

          "Eurodollar Tranche": the collective reference to Eurodollar Loans the
then  current  Interest  Periods  with respect to all of which begin on the same
date and end on the same later date (whether or not such Loans shall  originally
have been made on the same day).

          "Event of Default": any of the events specified in Section 8, provided
that any requirement  for the giving of notice,  the lapse of time, or both, has

been satisfied.

          "Federal Funds Effective  Rate":  for any day, the weighted average of
the rates on overnight  federal funds  transactions  with members of the Federal
Reserve  System  arranged by federal  funds  brokers,  as  published on the next
succeeding  Business Day by the Federal  Reserve  Bank of New York,  or, if such
rate is not so published  for any day that is a Business Day, the average of the
quotations for the day of such transactions received by The Chase Manhattan Bank
from three federal funds brokers of recognized standing selected by it.

          "Foreign  Subsidiary":  any  Subsidiary  of the Borrower that is not a
Domestic Subsidiary.

<PAGE>

                                                                               9

          "Funding Office":  the office of the Administrative Agent specified in
Section 10.2 or such other  office as may be specified  from time to time by the
Administrative Agent as its funding office by written notice to the Borrower and

the Lenders.

          "GAAP":  generally accepted accounting principles in the United States
as in effect from time to time,  except that for purposes of Section  7.1,  GAAP
shall be determined on the basis of such principles in effect on the date hereof
and consistent  with those used in the  preparation  of the  Borrower's  audited
financial  statements  referred  to in  Section  4.1 with  respect to the period
ending December 31, 1998. In the event that any "Accounting  Change" (as defined
below)  shall  occur  and such  change  results  in a change  in the  method  of
calculation of financial covenants,  standards or terms in this Agreement,  then
the Borrower and the  Administrative  Agent agree to enter into  negotiations in
order to amend such provisions of this Agreement so as to equitably reflect such
Accounting  Changes with the desired result that the criteria for evaluating the
Borrower's  financial  condition shall be the same after such Accounting Changes
as if such  Accounting  Changes  had not been  made.  Until such time as such an
amendment  shall  have  been  executed  and  delivered  by  the  Borrower,   the
Administrative   Agent  and  the  Required  Lenders,  all  financial  covenants,
standards  and  terms in this  Agreement  shall  continue  to be  calculated  or
construed as if such Accounting Changes had not occurred.  "Accounting  Changes"
refers to changes in accounting  principles  required by the promulgation of any
rule, regulation, pronouncement or opinion by the Financial Accounting Standards
Board  of  the  American  Institute  of  Certified  Public  Accountants  or,  if
applicable, the SEC.

          "Governmental Authority": any nation or government, any state or other
political subdivision thereof, any agency, authority, insrumentality, regulatory
body,  court,  central bank or other entity exercising  executive,  legislative,
judicial,  taxing,  regulatory or  administrative  functions of or pertaining to
government,  any  securities  exchange  and  any  self-regulatory   organization
(including the National Association of Insurance Commissioners).

          "Guarantee  and  Collateral  Agreement":  the Guarantee and Collateral
Agreement  to be executed and  delivered  by the  Borrower  and each  Subsidiary
Guarantor,  substantially  in the form of Exhibit A, as the same may be amended,

supplemented or otherwise modified from time to time.

          "Guarantee Obligation":  as to any person (the "guaranteeing person"),
any obligation of (a) the guaranteeing  person or (b) another Person  (including
any bank  under  any  letter of  credit)  to induce  the  creation  of which the
guaranteeing  person has  issued a  reimbursement,  counterindemnity  or similar
obligation,   in  either  case  guaranteeing  or  in  effect   guaranteeing  any
Indebtedness (the "primary obligations") of any other third Person (the "primary
obligor")  in  any  manner,  whether  directly  or  indirectly,   including  any
obligation  of  the  guaranteeing  person,  whether  or not  contingent,  (i) to
purchase any such primary  obligation  or any  property  constituting  direct or
indirect security therefor, (ii) to advance or supply funds (1) for the purchase
or payment of any such primary  obligation or (2) to maintain working capital or
equity capital of the primary  obligor or otherwise to maintain the net worth or
solvency  of the primary  obligor,  (iii) to purchase  property,  securities  or
services  primarily  for the purpose of assuring  the owner of any such  primary
obligation of the ability of the primary obligor to make payment of such primary
obligation  or (iv)  otherwise to assure or hold  harmless the owner of any such
primary obligation against loss in respect thereof provided,  however,  that the
term Guarantee  Obligation  shall not include  endorsements  of instruments  for
deposit or  collection  in the ordinary  course of  business.  The amount of any
Guarantee  Obligation of any guaranteeing person shall be deemed to be the lower
of (a) an amount  equal to the  stated  or  determinable  amount of the  primary
obligation  in respect of which such  Guarantee  Obligation  is made and (b) the
maximum amount for which such guaranteeing  person may be liable pursuant to the
terms of the instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount which such  guaranteeing  person may be liable
are not  stated or  determinable,  in which  case the  amount of such  Guarantee
Obligation shall be such guaranteeing  person's maximum  reasonably  anticipated
liability in respect thereof as determined by the Borrower in good faith.

<PAGE>

                                                                              10

          "Hedge Agreements": all interest rate swaps, caps or collar agreements
or similar  arrangements  dealing with interest rates or currency exchange rates
or the  exchange of nominal  interest  obligations,  either  generally  or under
specific contingencies.

          "Indebtedness":  of any Person at any date, without  duplication,  (a)
all  indebtedness of such Person for borrowed money, (b) all obligations of such
Person for the  deferred  purchase  price of property  or  services  (other than
current trade payables incurred in the ordinary course of such Person's business
and  contingent  payments,   earn-outs,   incentive   arrangements  and  similar
obligations  arising  in  connection  with  Permitted  Acquisitions),   (c)  all
obligations  of such  Person  evidenced  by notes,  bonds,  debentures  or other
similar  instruments,   (d)  all  indebtedness  created  or  arising  under  any
conditional  sale or other title  retention  agreement  with respect to property
acquired by such Person  (even  though the rights and  remedies of the seller or
lender under such agreement in the event of default are limited to  repossession
or sale of such property), (e) all Capital Lease Obligations of such Person, (f)
all  obligations  of such Person,  contingent or otherwise,  as an account party
under acceptances,  letters of credit, sure bonds or similar  arrangements,  (g)
the  liquidation  value of all  preferred  Capital  Stock of such Person that is
redeemable  at the  option of the holder  thereof  on or prior to the  Revolving
Termination  Date  (other  than in  connection  with  asset  sales or changes of
control),(h) all Guarantee  Obligations of such Person in respect of obligations
of the kind referred to in clauses (a) through (g) above, (i) all obligations of
the kind  referred to in clauses  (a)  through (h) above  secured by any Lien on
property  (including amounts and contract rights) owned by such Person,  whether
or not such  Person  has  assumed  or  become  liable  for the  payment  of such
obligation,  provided that the amount of such  obligations  deemed  Indebtedness
under this clause (i) shall equal the lesser of the outstanding principal amount
of such  obligations  and the value of the property of such Person securing such
obligations,  and (j) for the  purposes  of  Sections  7.2 and  8(e)  only,  all
obligations of such Person in respect of Hedge  Agreements.  The Indebtedness of
any Person shall include the  Indebtedness  of any other entity  (including  any
partnership in which such Person is a general partner) to the extent such Person
is liable therefor as a result of such Person's  ownership  interest in or other
relationship  with  such  entity,  except  to  the  extent  the  terms  of  such
Indebtedness expressly provide that such Person is not liable therefor.

          "Insolvency":  with respect to any  Multiemployer  Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.

         "Insolvent": pertaining to a condition of Insolvency.

          "Intellectual  Property":  the  collective  reference  to all  rights,
priorities and privileges  relating to  intellectual  property,  whether arising
under  United  States,  multinational  or foreign laws or  otherwise,  including
copyrights,  copyright licenses, patents, patent licenses, trademarks, trademark
licenses, technology, know-how and processes, and all rights to sue at law or in
equity for any infringement or other impairment thereof,  including the right to
receive all proceeds and damages therefrom.

          "Interest  Payment Date": (a) as to any ABR Loan, the last day of each
March, June,  September and December to occur while such Loan is outstanding and
the final maturity date of such Loan,  (b) as to any  Eurodollar  Loan having an
Interest  Period of three months or less, the last day of such Interest  Period,
(c) as to any  Eurodollar  Loan  having an  Interest  Period  longer  than three
months,  each day that is three months, or a whole multiple  thereof,  after the
first day of such Interest  Period and the last day of such Interest  Period and
(d) as to any Loan  (other than any  Revolving  Loan that is an ABR Loan and any
Swingline  Loan),  the  date of any  repayment  or  prepayment  made in  respect
thereof.

<PAGE>

                                                                              11

          "Interest  Period":  as to any Eurodollar  Loan,  (a)  initially,  the
period  commencing on the borrowing or conversion date, as the case may be, with
respect  to such  Eurodollar  Loan and  ending  one,  two,  three or six  months
thereafter,  as selected by the Borrower in its notice of borrowing or notice of
conversion,  as the case may be, given with respect thereto; and (b) thereafter,
each period  commencing on the last day of the next  preceding  Interest  Period
applicable  to such  Eurodollar  Loan and ending one,  two,  three or six months
thereafter,   as  selected  by  the  Borrower  by  irrevocable   notice  to  the
Administrative  Agent not less than three Business Days prior to the last day of
the then current Interest Period with respect thereto; provided that, all of the
foregoing provisions relating to Interest Periods are subject to the following:

                    (i) if any Interest Period would otherwise end on a day that
          is not a Business Day,  such Interest  Period shall be extended to the
          next succeeding 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  immediately  preceding
          Business Day;

                    (ii) the  Borrower  may not select an  Interest  Period that
          would extend beyond the Revolving Termination Date;

                    (iii) any Interest  Period 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 a calendar month; and

                    (iv) the Borrower shall select Interest Periods so as not to
          require a payment  or  prepayment  of any  Eurodollar  Loan  during an
          Interest Period for such Loan.

          "Investments": as defined in Section 7.8.

          "Issuing Lender":  The Chase Manhattan Bank, in its capacity as Issuer
of any  Letter of  Credit,  together  with any other  Lender  designated  by the
Administrative  Agent (with such Lender's consent) to serve as an Issuing Lender
hereunder.  Each reference  herein to "the Issuing Lender" shall, as the context
requires, refer to each Issuing Lender or relevant Issuing Lender.

          "L/C Commitment": $50,000,000.

          "L/C Obligations":  at any time, an amount equal to the sum of (a) the
aggregate then undrawn and unexpired amount of the then  outstanding  Letters of
Credit and (b) the  aggregate  amount of drawings  under  Letters of Credit that
have not then been reimbursed pursuant to Section 3.5.

          "L/C Participants":  the collective reference to all the Lenders other
than the Issuing Lender.

          "Lenders": as defined in the preamble hereto.

          "Letters of Credit": as defined in Section 3.1(a).

          "Lien":  any  mortgage,  pledge,  hypothecation,  assignment,  deposit
arrangement,  encumbrance,  lien (statutory or other),  charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever  (including any conditional sale or
other title retention  agreement and any capital lease having  substantially the
same economic effect as any of the foregoing).

<PAGE>

                                                                              12

          "Loan": any loan made by any Lander pursuant to this Agreement.

          "Loan Documents": this Agreement and the Security Documents.

          "Loan Parties":  the Borrower and each Subsidiary of the Borrower that
is a party to a Loan Document.

          "Material  Adverse  Effect":  a  material  adverse  effect  on (a) the
business,  operations or condition  (financial or otherwise) of the Borrower and
its Subsidiaries  taken as a whole or (b) the validity or enforceability of this
Agreement  or any of the other Loan  Documents  or the rights or remedies of the
Administrative Agent or the Lenders hereunder or thereunder.

          "Materials  of  Environmental  Concern":  any  gasoline  or  petroleum
(including  crude oil or any  fraction  thereof)  or  petroleum  products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including asbestos, polychlorinated biphenyls
and urea-formaldehyde insulation.

          "Material  Subsidiary":  any  Subsidiary  of the  Borrower  whose  (a)
assets,  (b) revenues or (c) earnings before interest,  taxes,  depreciation and
amortization  (excluding  intercompany  receivables  and revenues  that would be
eliminated  upon  consolidation  in  accordance  with  GAAP),  at  the  time  of
determination (determined, in the case of clauses (b) and (c), in respect of the
most recent period of four consecutive fiscal quarters of the Borrower for which
the  relevant  financial  information  is  available),  in any such case  exceed
$2,500,000.

          "Multiemployer  Plan': a Plan that is a multiemployer  plan as defined
in Section 4001(a)(3)of ERISA.

          "Net Cash  Proceeds":  (a) in  connection  with any Asset  Sale or any
Recovery Event,  the proceeds  thereof in the form of cash and Cash  Equivalents
(including  any such proceeds  received by way of deferred  payment of principal
pursuant  to a note or  installment  receivable  or  purchase  price  adjustment
receivable or otherwise,  but only if, as and when  received) of such Asset Sale
or Recovery Event, net of attorneys' fees, accountants' fees, investment banking
fees, amounts required to be applied to the repayment of Indebtedness secured by
a Lien  expressly  permitted  hereunder on any asset that is the subject of such
Asset  Sale or  Recovery  Event  (other  than any Lien  pursuant  to a  Security
Document) and other customary fees and expenses  actually incurred in connection
therewith  and net of taxes  paid or  reasonably  estimated  to be  payable as a
result  thereof  (after  taking  into  account  any  available  tax  credits  or
deductions resulting directly from such Asset Sale or Recovery Event) and (b) in
connection with any incurrence of Indebtedness,  the cash proceeds received from
such incurrence,  net of attorneys' fees, investment banking fees,  accountants'
fees,  underwriting  discounts  and  commissions  and other  customary  fees and
expenses actually incurred in connection therewith.

          "Non-Excluded Taxes", as definedin Section 2.16(a).

          "Non-U.S. Lender: as defined In Section 2.16(d).

<PAGE>

                                                                              13

          "Obligations":  the unpaid  principal  of and  interest on  (including
interest accruing after the maturity of the Loans and Reimbursement  Obligations
and interest  accruing  after the filing of any petition in  bankruptcy,  or the
commencement of any insolvency,  reorganization or like proceeding,  relating to
the Borrower,  whether or not a claim for post-filing or post-petition  interest
is  allowed  in such  proceeding)  the  Loans  and  all  other  obligations  and
liabilities or the Borrower to the Administrative Agent or to any Lender (or, in
the cast of Hedge  Agreements,  any affiliate of any Lender),  whether direct or
indirect,  absolute or  contingent,  due or to become  due,  or now  existing or
hereafter  incurred,  which may arise under, out of, or in connection with, this
Agreement,  any other Loan Document,  the Letters of Credit, any Hedge Agreement
entered  into  with any  Lender  or any  affiliate  of any  Lender  or any other
document made,  delivered or given in connection herewith or therewith,  whether
an account of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses (including all fees, charges and disbursements of counsel to the
Administrative  Agent  or to any  Lender  that  are  required  to be paid by the
Borrower pursuant hereto) or otherwise.

          "Other  Taxes":  any and all  present or future  stamp or  documentary
taxes or any other excise or property  taxes,  charges or similar levies arising
from any payment made hereunder or from the  execution,  delivery or enforcement
of, or otherwise with respect to, this Agreement or any other Loan Document.

          "Participant": as defined in Section 10.6(b).

          "PBGC": the Pension Benefit Guaranty Corporation  established pursuant
to Subtitle A of Title IV of ERISA (or any successor).

          "Permitted Acquisition": any acquisition by the Borrower or any Wholly
Owned  Subsidiary  Guarantor  of  all  of  the  Capital  Stock  of,  or  all  or
substandatly  all of the assets of, or of a business,  unit or division  of, any
Person;  provided that (a) the Borrower shall be in  compliance,  on a pro forma
basis after giving effect to such acquisition,  with the covenants  contained in
Section  7.1, in each case  recomputed  as at the last day of the most  recently
ended  fiscal  quarter of the Borrower  for which the  relevant  information  is
available as if such acquisition, had occurred on the first day of each relevant
period for testing  such  compliance  (as  demonstrated  in a  certificate  of a
Reponsible  Officer  delivered to the  Administrative  Agent not less than three
Business  Days  prior to such  acquisition),  (b) no Default or Event of Default
shall have  occurred and be  continuing,  or would occur after giving  affect to
such acquisition, (c) substantially all of the assets being acquired (or, in the
case of  acquisitions of Capital Stock,  substantially  all of the assets of the
Person being acquired and its  Subsidiaries)  shall be located within the United
States,  (d) in the case of  acquisitions  of Capital  Stock,  the Person  being
acquired  and each of its  Subsidiaries  shall be  organized  in a  jurisdiction
within the United States, (e) the businesses  acquired as a result thereof shall
be Apparel Businesses, and (f) any such acquisition should have been approved by
the Board of Directors or comparable governing body of the relevant Person.

          "Permitted  Investors":  the collective reference to Maurice Marciano,
Paul  Marciano  and  Armand  Marciano,  the  members  of their  families,  their
respective estates,  spouses, heirs, ancestors,  lineal descendants,  spouses of
lineal descendants,  legatees and legal  representatives of any of the foregoing
and any trust of which one or more of the foregoing are the beneficiaries.

          "Person": an individual,  partnership,  corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.

<PAGE>

                                                                              14

          "Plan":  at a  particular  time,  any  employee  benefit  plan that is
covered by ERISA and in respect of which the  Borrower or a Commonly  Controlled
Entity is (or, if such plan were  terminated  at such time,  would under Section
4069 of ERISA be deemed to be) an  "employee"  as  defined  in  Section  3(5) of
ERISA.

          "Pricing Grid: the pricing grid attached hereto as Annex A.

          "Projections": as defined in Section 6.2(c).

          "Properties": as defined in Section 4.17(a).

          "Recovery  Event":  any  settlement  of or  payment  in respect of any
property or casualty insurance claim or any condemnation  proceeding relating to

any asset of the Borrower or any of its Subsidiaries.

          "Refunded Swingline Loans": as defined in Section 2.4.

          "Refunding Date": as defined in Section 2.4.

          "Register": as defined in Section 10.6(d).

          "Regulation  U":  Regulation  U of the Board as in effect from time to
time.

          "Reimbursement   Obligation":   the  obligation  of  the  Borrower  to
reimburse  the Issuing  Lender  pursuant to Section 3.5 for amounts  drawn under

Letters of Credit.

          "Reinvestment Deferred Amount: with respect to any Reinvestment Event,
the  aggregate  Net  Cash  Proceeds  received  by  the  Borrower  or  any of its
Subsidiaries  in  connection  therewith  that  are not  applied  to  reduce  the
Revolving  Credit  Commitments  pursuant  to  Section  2.8(b) as a result of the
delivery of a Reinvestment Notice.

          "Reinvestment  Event":  any Asset Sale or Recovery Event in respect of
which the Borrower has delivered a Reinvestment Notice.

          "Reinvestment  Notice":  a written  notice  executed by a  Responsible
Officer stating that no Event of Default has occurred and is continuing and that
the Borrower (directly or indirectly  through a Subsidiary)  intends and expects
to use all or a specified  portion of the Net Cash  Proceeds of an Asset Sale or
Recovery Event to acquire assets useful in its business.

          "Reinvestment  Prepayment  Amount":  with respect to any  Reinvestment
Event,  the  Reinvestment  Deferred  Amount  relating  thereto  less any  amount
expended prior to the relevant  Reinvestment  Prepayment  Date to acquire assets
useful in the business of the Borrower or any of its Subsidiaries,

          "Reinvestment  Prepayment  Date":  with  respect  to any  Reinvestment
Event,  the earlier of (a) the date  occurring 365 days after such  Reinvestment
Event  and (b) the date on which  the  Borrower  shall  have  determined  not to
acquire assets useful in the business of the Borrower or any of its Subsidiaries
with all or any portion of the relevant Reinvestment Deferred Amount.

<PAGE>

                                                                              15

          "Reorganization":   with  respect  to  any  Multiemployer   Plan,  the
condition that such plan is in reorganization within the meaning of Section 4241

of ERISA.

          "Reportable  Event": any of the events set forth in Section 4043(b) of
ERISA,  other  than those  events as to which the  thirty  day notice  period is
waived under  subsections  .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg.

ss. 4043.

          "Required  Lenders":  at any time, the holders of more than 50% of the
Total Revolving  Credit  Commitments  then in effect or, if the Revolving Credit
Commitments have been terminated,  tho Total Revolving Extentions of Credit then
outstanding.

          "Requirement   of  Law":  as  to  any  Person,   the   Certificate  of
Incorporation and the By-Laws or other  organizational or governing documents of
such Person,  and any law, treaty,  rule or regulation or  deterrnination  of an
arbitrator or a court or other Govenmental Authority, in each case applicable to
or binding  upon such  Person or any of its  property or to which such Person or
any of its property is subject.

          "Responsible Officer": the chief executive officer,  president,  chief
financial officer, treasurer,  assistant treasurer or secretary of the Borrower,
but in any  event,  with  respect  to  financial  matters,  the chief  financial
officer, treasurer or assistant treasurer of the Borrower.

          "Restricted Payments": as defined in Section 7.6.

          "Revolving  Credit  Commitment":  as to any Lender,  the obligation of
such Lender,  if any, to make Revolving Loans and participate in Swingline Loans
and Letters of credit in an aggregate principal and/or face amount not to exceed
the amount set forth under the heading  "Revolving Credit  Commitment"  opposite
such Lender's name on Schedule 1.1 or in the Assignment and Acceptance  pursuant
to which such Lender became a party hereto, as the same may be changed from time
to time pursuant to the terms hereof. The original amount of the Total Revolving
Credit Commitments is $125,000,000.

          "Revolving  Credit Commitment  Period":  the period from and including
the Closing Date to the Revolving Termination Date.

          "Revolving  Extensions  of  Credit":  as to any Leder at any time,  an
amount equal to the sum of (a) the aggregate  principal  amount of all Revolving
Loans  hold by  such  Lender  then  outstanding,  (b)  such  Lender's  Revolving
Percentage  of the  L/C  Obligations  then  outstanding  and (c)  such  Lender's
Revolving  Percentage of the aggregate  principal amount of Swingline Loans then
outstanding.

          "Revolving Loans": as defined in Section 2.1(a).

          "Revolving  Percentage":  as to any Lender at any time, the percentage
which such Lender's  Revolving  Credit  Commitment then constitutes of the Total
Revolving  Credit  Commitments  (or,  at any time  after  the  Revolving  Credit
Commitments shall have expired or terminated, the percentage which the aggregate
principal amount of such Lenders Revolving Loans then outstanding constitutes of
the aggregate principal amount of the Revolving Loans then outstanding).

          "Revolving Termination Date": October 31, 2002.

          "SEC": the Securities and Exchange  Commission,  any successor thereto
and any analogous Governmental Authority.

<PAGE>

                                                                              16

          "Security  Documents":  the collective  reference to the Guarantee and
Collateral Agreement and any other security documents hereafter delivered to the
Administrative Agent granting a Lien on any property of any Person to secure the
obligations and liabilities of any Loan Party under any Loan Document.

          "Senior Subordinated Note Indenture": the Indenture dated as of August
23, 1993, between the Borrower and First Trust National Association, as trustee,
together with all instruments and  supplemented or otherwise  modified from time
to time in accordance with Section 7.9, and any successor Indenture entered into
in  connection  with a  replacement,  refinancing  or  extension  of the  Senior
Subordinated  Notes (so long as the aggregate  outstanding  principal  amount of
Senior Subordinated Notes then outstanding is not increased as a result thereof,
as the same may be amended, supplemented or otherwise modified from time to time
in  accordance  with  Section  7.9,  provided  (i)  that  the  terms of any such
successor  Indenture  shall not be materially less favorable to the interests of
the Lenders than those  contained  in the  Indenture as in effect on the Closing
Date and (ii) the maturity of the  Indebtedness  issued under any such successor
Indenture shall be no earlier than August 15, 2003.

          "Senior  Subordinated  Notes":  the senior  subordinated  notes of the
Borrower issued pursuant to the Senior Subordinated Note Indenture.

          "Single Employer Plan": any Plan that is covered by Title IV of ERISA,
but that is not a Multiemployer Plan.

          "Solvent": when used with respect to any Person, means that, as of any
date of  determination,  (a) the amount of the "present fair saleable  value" of
the  assets of such  Person  will,  as of such  date,  exceed  the amount of all
"liabilities of such Person,  contingent or otherwise", as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing  determinations  of the  insolvency  of debtors,  (b) the present fair
saleable  value of the assets of such Person will,  as of such date,  be greater
than the amount  that will be  required to pay the  probable  liability  of such
Person on its debts as such debts become  absolute and matured,  (c) such Person
will not have,  as of such date,  an  unreasonably  small amount of capital with
which to conduct its business, and (d) such Person will be able to pay its debts
as they mature. For purposes of this definition, (i) "debt" means liability on a
"claim", and (ii) "claim" means any (x) right to payment,  whether or not such a
right is reduced  to  judgment,  liquidated,  unliquidated,  fixed,  contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured
or (y) right to an  equitable  remedy for breach of  performance  if such breach
gives rise to a right to  payment,  whether  or not such  right to an  equitable
remedy  is  reduced  to  judgment,  fixed,  contingent,  matured  or  unmatured,
disputed,  undisputed,  secured or  unsecured.  The amount of any claim shall be
computed as the amount which, in the light of the facts and circumstances at the
applicable time, represents the amount that can reasonably be expected to become
an actual or matured liability.

          "Specified  Change Control":  a "Change in Control" (or any comparable
concept) as defined in the Senior  Subordinated Note Indenture during any period
when the Senior Subordinated Note Indenture is in effect.

          "Standby  L/C Fee Payment  Date":  the last day of each  March,  June,
September  and  December  and the last day of the  Revolving  Credit  Commitment
Period.

          "Standby  Letter  of  Credit":  any  Letter  of  Credit  other  than a
Documentary Letter of Credit.

<PAGE>

                                                                              17

          "Subsidiary":  as to any Person, a corporation,  partnership,  limited
liability  company or other entity of which  shares of stock or other  ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect  a  majority  of  the  board  of  directors  or  other  managers  of  such
corporation,  partnership  or other entity are at the time owned by such Person.
Unless   otherwise   qualified,   all  references  to  a   "Subsidiary"   or  to
"Subsidiaries"  in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Borrower.

          "Subsidiary Guarantor"" each Subsidiary of the Borrower other than any
Foreign Subsidiary.

          "Surviving Letters of Credit"" as defined in Section 5.1(b)

          "Swingline Commitment": the obligation of the Swingline Lender to make
Swingline Loans pursuant to Section 2.3 in an aggregate  principal amount at any
one time outstanding not to exceed $10,000,000.

          "Swingline  Lender":  The Chase Manhattan Bank, in its capacity as the
lender of Swingline Loans.

          "Swingline Loans": as defined in Section 2.3.

          "Swingline Participation Amount": as defined in Section 2.4.

          "Total  Revolving  Credit  Commitments":  at any time,  the  aggregate
amount of the Revolving Credit Commitments then in effect.

          "Total  Revolving  Extensions of Credit":  at any time,  the aggregate
amount of the Revolving  Extensions of Credit of the Lenders outstanding at such
time.

          "Transferee": any Assignee or Participant.

          "Type":  as to any Loan,  its  nature  as an ABR Loan or a  Eurodollar
Loan.

          "United States": the United States of America.

          "Wholly Owned  Subsidiary":  as to any Person, any other Person all of
the Capital Stock of which (other than directors'  qualifying shares required by
law) is  owned  by such  Person  directly  and/or  through  other  Wholly  Owned
Subsidiaries.

          "Wholly Owned Subsidiary Guarantor":  any Subsidiary Guarantor that is
a Wholly Owned Subsidiary of the Borrower.

          1.2 Other  Definitional  Provisions.  (a) Unless  otherwise  specified
therein,  all terms defined in this  Agreement  shall have the defined  meanings
when used in the other Loan Documents or any  certificate or other document made
or delivered pursuant hereto or thereto.

          (b)  As  used  herein  and  in  the  other  Loan  Documents,  and  any
certificate or other document made or delivered pursuant hereto or thereto,  (i)
accounting  terms relating to the Borrower and its  Subsidiaries  not defined in
Section 1.1 and accounting terms partly defined in Section 1.1, to the extent

<PAGE>

                                                                              18

          not defined,  shall have the  respective  meanings given to them under
GAAP, (ii) the words "include", "includes" and "including" shall be deemed to be
followed by the phrase  "without  limitation",  (iii) the word "incur"  shall be
construed to mean incur, create,  issue, assume,  become liable in respect of or
suffer  to  exist  (and  the  words  "incurred"  and  "incurrence"   shall  have
correlative  meanings),  and (iv) the  words  "asset"  and  "property"  shall be
construed  to have  the  same  meaning  and  effect  and to refer to any and all
tangible and intangible  assets and properties,  including  cash,  Capital Sock,
securities, revenues, accounts, leasehold interests and contract rights.

          (c) The words "hereof",  "herein" and "hereunder" and words of similar
import when used in this Agreement  shall refer to this Agreement as a whole and
not to any particular  provision of this  Agreement,  and Section,  Schedule and
Exhibit references are to this Agreement unless otherwise specified.

          (d) The  meanings  given  to terms  defined  herein  shall be  equally
applicable to both the singular and plural forms of such terms. The captions and
headings of the various  Sections and Subsections of this Agreement are provided
for convenience only and shall not affect or modify the meaning thereof.

          SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS

          2.1  Revolving  Credit  Commitments.  (a)  Subject  to the  terms  and
conditions  hereof,  each Lender severally agrees to make revolving credit loans
("Revolving  Loans") to the  Borrower  from time to time  during  the  Revolving
Credit  Commitment  Period  in an  aggregate  principal  amount  at any one time
outstanding  which, when added to such Lender's  Revolving  Percentage of sum of
(i) the L/C Obligations then outstanding and (ii) the aggregate principal amount
of the  Swingline  Loans  then  outstanding,  does not exceed the amount of such
Lender's  Revolving Credit  Commitment.  During the Revolving Credit  Commitment
Period the Borrower  may use the  Revolving  Credit  Commitments  by  borrowing,
prepaying  The  Revolving  Loans in whole or in part,  and  reborrowing,  all in
accordance  with the terms and conditions  hereof.  The Revolving Loans may from
time to time be Eurodollar Loans or ABR Loans, as determined by the Borrower and
notified to the Administrative Agent in accordance with Sections 2.2 and 2.9.

          (b) The Borrower shall repay all  outstanding  Revolving  Loans on the
Revolving Termination Date.

          2.2 Procedure for Revolving  Loan  Borrowing.  The Borrower may borrow
under the Revolving Credit  Commitments  during the Revolving Credit  Commitment
Period  on  any  Business  Day,  provided  that  the  Borrower  shall  give  the
Administrative  Agent  irrevocable  notice (which notice must be received by the
Administrative  Agent (a) prior to 2:00 p.m., New York City time, three Business
Days prior to the requested  Borrowing Date, in the case of Eurodollar Loans, or
(b) prior to 12:00 Noon, New York City time, on the requested Borrowing Date, in
the case of ABR Loans), specifying (i) the amount and Type of Revolving Loans to
be  borrowed,  (ii)  the  requested  Borrowing  Date  and  (iii)  in the case of
Eurodollar  Loans,  the  respective  amounts  of each  such Type of Loan and the
respective lengths of the initial Interest Period therefor.  Any Revolving Loans
made on the Closing Date shall initially be ABR Loans. Each such borrowing shall
be in an amount  equal to (x) in the case of ABR Loans,  $2,5000,000  or a whole
multiple of $1,000,000 in excess  thereof (or, if the then  aggregate  Available
Revolving Credit  Commitments are less than $2,500,000,  such lesser amount) and
(y) in  the  case  of  Eurodollar  Loans,  $5,000,000  or a  whole  multiple  of
$1,000,000 in excess thereof:  provided,  that the Swingline Lender may request,
on behalf of the Borrower,  borrowings  under the Revolving  Credit  Commitments
that are ABR Loans in other amounts pursuant to Section 2.4. Upon receipt of any
such notice from the Borrower, the

<PAGE>

                                                                              19

Administrative Agent shall promptly notify each Lender thereof. Each Lender will
make  the  amount  of its pro  rata  share of each  borrowing  available  to the
Administrative Agent for the account of the Borrower at the Funding Office prior
to 12:00  Noon,  New York City time,  on the  Borrowing  Date  requested  by the
Borrower  in funds  immediately  available  to the  Administrative  Agent.  Such
borrowing  will then be made  available  to the  Borrower by the  Administrative
Agent crediting the account of the Borrower on the books of such office with the
aggregate  of the amounts  made  available  to the  Administrative  Agent by the
Lenders and in like funds as received by the Administrative Agent.

         2.3  Swingline  Commitment.  (a)  Subject  to the terms and  conditions
hereof,  the Swingline  Lender agrees to make a portion of the credit  otherwise
available to the Borrower under the Revolving  Credit  Commitments  from time to
time during the Revolving  Credit  Commitment  Period by making swing line loans
("Swingline  Loans") to the Borrower;  provided that (i) the aggregate principal
amount of Swingline Loans outstanding at any time shall not exceed the Swingline
Commitment then in effect  (notwithstanding that the Swingline Loans outstanding
at any time,  when  aggregated  with the Swingline  Lender's  other  outstanding
Revolving Loans hereunder,  may exceed the Swingline  Commitment then in effect)
and (ii) the Borrower  shall not  request,  and the  Swingline  Lender shall not
make, any Swingline Loan if, after giving effect to the making of such Swingline
Loan, the aggregate amount of the Available  Revolving Credit  Commitments would
be less than zero. During the Revolving Credit Commitment  Period,  the Borrower
may use the Swingline Commitment by borrowing,  repaying and reborrowing, all in
accordance  with the terms and conditions  hereof.  Swingline Loans shall be ABR
Loans only.

         (b) The Borrower  shall repay all  outstanding  Swingline  Loans on the
Revolving Termination Date.

         2.4 Procedure for Swingline  Borrowing:  Refunding of Swingline  Loans.
(a) Whenever the Borrower desires that the Swingline Lender make Swingline Loans
it shall give the  Swingline  Lender  irrevocable  telephonic  notice  confirmed
promptly in writing (which  telephonic  notice must be received by the Swingline
Lender not later than 3:00 P.M.,  New York City time, on the proposed  Borrowing
Date), specifying (i) the amount to be borrowed and (ii) the requested Borrowing
Date  (which  shall be a Business  Day during the  Revolving  Credit  Commitment
Period).  Each borrowing under the Swingline Commitment shall be in amount equal
to $500,000 or a whole  multiple of $100,000 in excess  thereof.  Not later than
4:00 P.M.,  New York City time, on the Borrowing  Date  specified in a notice in
respect of Swingline  Loans,  the Swingline  Lender shall make  available to the
Administrative  Agent at the Funding Office an amount in  immediately  available
funds  equal to the  amount of the  Swingline  Loan to be made by the  Swingline
Lender. The Administrative  Agent shall make the proceeds of such Swingline Loan
available to the Borrower on such Borrowing Date by depositing  such proceeds in
the account of the Borrower with the Administrative Agent on such Borrowing Date
in immediately available funds.

         (b) The Swingline Lender, at any time and from time to time in its sole
and absolute discretion may, on behalf of the Borrower (which hereby irrevocably
directs the Swingline Lender to act on its behalf), on one Business Day's notice
given by the  Swingline  Lender no later  than 12:00  Noon,  New York City time,
request each Lender to make,  and each Lender hereby agrees to make, a Revolving
Loan, in an amount equal to such Lender's Revolving  Percentage of the aggregate
amount of the Swingline Loans (the "Refunded  Swingline  Loans")  outstanding on
the date of such notice, to repay the Swingline  Lender.  Each Lender shall make
the amount of such Revolving Loan available to the  Administrative  Agent at the
Funding Office in immediately  available  funds,  not later than 10:00 A.M., New
York City time, one Business Day after the date of such notice.  The proceeds of
such Revolving Loans shall be immediately  made available by the  Administrative
Agent to the Swingline  Lender for  application  by the Swingline  Lender to the
repayment of the Refunded Swingline Loans. The Borrower

<PAGE>

                                                                              20

unconditionally  agrees to pay to the Swingline Lender on demand any amount that
is not so received from the Lenders.

         (c) If prior to the time a  Revolving  Loan would have  otherwise  been
made  pursuant to Section  2.4(b),  one of the events  described in Section 8(f)
shall have occurred and be continuing with respect to the Borrower or if for any
other reason,  as determined  by the  Swingline  Lender in its sole  discretion,
Revolving Loans may not be made as  contemplated by Section 2.4(b),  each Lender
shall on the date such  Revolving  Loan was to have been  made  pursuant  to the
notice referred to in Section 2.4(b) (the "Refunding  Date"),  purchase for cash
an undivided  participating  interest in the then outstanding Swingline Loans by
paying to the Swingline Lender an amount (the "Swingline  Participation Amount")
equal  to (i)  such  Lender's  Revolving  Percentage  times  (ii) the sum of the
aggregate principal amount of Swingline Loans then outstanding that were to have
been repaid with such Revolving Loans.

         (d) Whenever,  at any time after the Swingline Lender has received from
any Lender such Lender's  Swingline  Participation  Amount, the Swingline Lender
receives any payment on account of the Swingline  Loans,  the  Swingline  Lender
will distribute to such Lender its Swingline Participation Amount (appropriately
adjusted, in the case of interest payments, to reflect the period of time during
which such Lender's  participating  interest was  outstanding and funded and, in
the case of principal and interest  payments,  to reflect such Lender's pro rata
portion of such payment if such payment is not  sufficient  to pay the principal
of and interest on all Swingline Loans then due); provided however,  that in the
event that such  payment  received  by the  Swingline  Lender is  required to be
returned,  such Lender will return to the Swingline  Lender any portion  thereof
previously distributed to it by the Swingline Lender.

         (e) Each Lender's  obligation to make the Loans  referred to in Section
2.4(b) and to purchase participating  interests pursuant to Section 2.4(c) shall
be absolute  and  unconditional  and shall not be affected by any  circumstance,
including (i) any setoff, counterclaim,  recoupment, defense or other right that
such Lender or the Borrower may have against the Swingline Lender,  the Borrower
or  any  other  Person  for  any  reason  whatsoever;  (ii)  the  occurrence  or
continuance of a default or an Event of Default or the failure to satisfy any of
the other  conditions  specified  in Section 5; (iii) any adverse  change in the
condition  (financial or  otherwise)  of the  Borrower;  (iv) any breach of this
Agreement or any other Loan Document by the Borrower, any other Loan Party o any
other  Lender;  or (v) any other  circumstance,  happening or event  whatsoever,
whether or not similar to any of the foregoing.

         2.5   Commitment   Fees  etc.  (a)  The  Borrower   agrees  to  pay  to
Administrative  Agent for the  account of each Lender a  commitment  fee for the
period  from and  including  the Closing  Date to the last day of the  Revolving
Credit  Commitment  Period,  computed at the  Commitment Fee Rate on the average
daily amount of the Available  Revolving Credit Commitment of such Lender during
the period for which payment is made,  payable  quarterly in arrears on the last
day of each March, June, September and December and on the Revolving Termination
Date, commencing on the first of such dates to occur after the date hereof.

         (b) The  Borrower  agrees  to pay to the  Administrative  Agent and the
Issuing Lender the fees in the amounts and on the dates previously  agreed to in
writing by the Borrower, the Administrative Agent and the Issuing Lender.

         2.6  Termination  or  Reduction of Revolving  Credit  Commitments.  The
Borrower shall have the right, upon not less than three Business Days' notice to
the Administrative Agent, to terminate the Revolving Credit Commitments or, form
time to , to reduce the amount of the  Revolving  Credit  Commitments;  provided
that no such termination or reduction of Revolving Credit  Commitments  shall be
permitted  if,  after  giving  effect  thereto  and  to any  prepayments  of the
Revolving Loans and Swingline

<PAGE>

                                                                              21

Loans made on the effective  date  thereof,  the Total  Revolving  Extensions of
Credit would exceed the Total Revolving Credit  Commitments.  Any such reduction
shall be in an amount equal to $5,000,000,  or a whole multiple of $1,000,000 in
excess thereof,  and shall reduce  permanently the Revolving Credit  Commitments
then in effect.

         2.7 Optional Prepayments. The Borrower may at any time and from time to
time prepay the Loans,  in whole or in part,  without  premium or penalty,  upon
irrevocable notice delivered to the Administrative Agent at least Three Business
Days prior thereto in the case of Eurodollar Loans and at least one Business Day
prior  thereto in the case of ABR Loans which notice shall  specify the date and
amount of prepayment  and whether the  prepayment is of Eurodollar  Loans or ABR
Loans; provided,  that if a Eurodollar Loan is prepaid on any day other than the
last day of the Interest Period applicable thereto,  the Borrower shall also pay
any amounts owing pursuant to Section 2.17.  Upon receipt of any such notice the
Administrative  Agent shall promptly notify each relevant Lender thereof. If any
such  notice is given,  the amount  specified  in such  notice  shall be due and
payable  on the date  specified  therein,  together  with(except  in the case of
Revolving Loans that are ABR Loans and Swingline Loans) accrued interest to such
date on the amount prepaid.  Partial  prepayments of Revolving Loans shall be in
an aggregate principal amount of $2,500,000 or a whole multiple of $1,000,000 in
excess thereof.  Partial prepayments of Swingline Loans shall be in an aggregate
principal amount of $100,000 or a whole multiple thereof.

         2.8  Mandatory  Revolving  Credit  Commitment  Reductions.  (a)  If any
Indebtedness  shall  be  incurred  by the  Borrower  or any of its  Subsidiaries
(excluding any Indebtedness  incurred in accordance with Section 7.2), an amount
equal to 100% of the Net Cash  Proceeds  thereof shall be applied on the date of
such incurrence toward the reduction of the Revolving Credit Commitments.

         (b) If on any  date  the  Borrower  or  any of its  Subsidiaries  shall
receive Net Cash Proceeds from any Asset Sale or Recovery  Event then,  unless a
Reinvestment  Notice  shall  be  delivered  in  respect  thereof,  such Net Cash
Proceeds  shall be applied  within five Business Days after such date toward the
reduction of the Revolving Credit Commitments;  provided, that,  notwithstanding
the  foregoing,  (i) the  aggregate Net Cash Proceeds of Asset Sales that may be
excluded from the foregoing  requirement pursuant to a Reinvestment Notice shall
not  exceed  $5,000,000  in any  fiscal  year of the  Borrower  and (ii) on each
Reinvestment  Prepayment  Date, an amount equal to the  Reinvestment  Prepayment
Amount with respect to the relevant  Reinvestment  Event shall be applied toward
the reduction of the Revolving Credit Commitments.

         (c) Any reduction of the Revolving Credit Commitments  pursuant to this
Section 2.8 shall be  accompanied  by prepayment  of the Revolving  Loans and/or
Swingline Loans to the extent,  if any, that the Total  Revolving  Extensions of
Credit  exceed  the  amount  of the Total  Revolving  Credit  Commitments  as so
reduced,  provided that if the aggregate principal amount of Revolving Loans and
Swingline Loans then outstanding is less than the amount of such excess (because
L/C Obligations constitute a portion thereof), the Borrower shall, to the extent
of the balance of such  excess,  replace  outstanding  Letters of Credit  and/or
deposit  an amount in cash in a cash  collateral  account  established  with the
Administrative  Agent for the  benefit of the  Lenders  on terms and  conditions
reasonably  satisfactory  to the  Administrative  Agent.  Amounts  in such  cash
collateral  account  shall be  refunded  to the  Borrower  at any time that such
amounts  exceed such  excess.  The  application  of any  prepayment  pursuant to
Section 2.8 shall be made, first, to ABR Loans and, second, to Eurodollar Loans.
Each prepayment of the Loans under Section 2.8 (except in the case of ABR Loans)
shall be accompanied by accrued  interest to the date of such  prepayment on the
amount prepaid.

         2.9 Conversion  and  Continuation  Options.  (a) The Borrower may elect
from  time to time to  convert  Eurodollar  Loans  to ABR  Loans by  giving  the
Administrative  Agent at least two Business

<PAGE>

                                                                              22

Days'  prior  irrevocable  notice  of such  election,  provided  that  any  such
conversion of  Eurodollar  Loans may only be made on the last day of an Interest
Period with respect thereto. The Borrower may elect from time to time to convert
ABR Loans to Eurodollar Loans by giving the Administrative  Agent at least three
Business  Days' prior  irrevocable  notice of such election  (which notice shall
specify the length of the initial  Interest Period  therefor),  provided that no
ABR Loan may be converted  into a Eurodollar  Loan when any event of Default has
occurred and is continuing and the Administrative  Agent or the Required Lenders
have determined in its or their sole discretion not to permit such conversions.

         (b) Any Eurodollar Loan may be continued as such upon the expiration of
the then current  Interest  Period with respect  thereto by the Borrower  giving
irrevocable  notice  to  the  Administrative   Agent,  in  accordance  with  the
applicable  provisions of the term "Interest Period" set forth in Section 1.1 of
the length of the next Interest Period to be applicable to such Loans,  provided
that no  Eurodollar  Loan may be continued as such when any Event of Default has
occurred  and is  continuing  and the  Administrative  Agent has or the Required
Lenders  have  determined  in its or their sole  discretion  not to permit  such
continuations,  and provided,  further,  that if the Borrower shall fail to give
any required notice as described above in this paragraph or if such continuation
is  not  permitted  pursuant  to the  preceding  proviso  such  Loans  shall  be
automatically  converted  to ABR  Loans on the last  day of such  then  expiring
Interest Period.

         2.10 Limitations on Eurodollar  Tranches.  Notwithstanding  anything to
the contrary in this Agreement, all borrowings, conversions and continuations of
Eurodollar  Loans  hereunder and all  selections of Interest  Periods  hereunder
shall be in such amounts and be made  pursuant to such  elections  so that,  (a)
after giving effect thereto,  the aggregate  principal  amount of the Eurodollar
Loans comprising each Eurodollar Tranche shall be equal to $5,000,000 or a whole
multiple of  $1,000,000 in excess  thereof and (b) no more than five  Eurodollar
Tranches shall be outstanding at any one time.

         2.11 Interest Rates and Payment Dates.  (a) Each  Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto at a
rate per annum equal to the  Eurodollar  Rate  determined  for such day plus the
Applicable Margin.

         (b) Each ABR Loan shall bear  interest at a rate per annum equal to the
ABR plus the Applicable Margin.

         (c) (i) If all or a  portion  of the  principal  amount  of any Loan or
Reimbursement  Obligation  shall not be paid  when due  (whether  at the  stated
maturity, by acceleration or otherwise), such overdue amount shall bear interest
at a rate per annum  equal to (x) in the case of the Loans,  the rate that would
otherwise be applicable  thereto  pursuant to the  foregoing  provisions of this
Section  plus  2% or (y) in the  case of  Reimbursement  Obligations,  the  rate
applicable  to ABR Loans plus 2%,  and (ii) if all or a portion of any  interest
payable on any Loan or  Reimbursement  Obligation or any commitment fee or other
amount  payable  hereunder  shall not be paid when due  (whether  at the  stated
maturity, by acceleration or otherwise), such overdue amount shall bear interest
at a rate per annum equal to the rate then  applicable  to ABR Loans plus 2%, in
each case,  with  respect to clauses (i) and (ii)  above,  from the date of such
non-payment  until  such  amount  is paid in  full  (as  well  after  as  before
judgment).

         (d) Interest shall be payable in arrears on each Interest Payment Date,
provided that interest  accruing pursuant to paragraph (c) of this Section shall
be payable from time to time on demand.

         2.12  Computation  of  Interest  and Fees.  Interest  and fees  payable
pursuant  hereto  shall be  calculated  on the basis of a  360-day  year for the
actual days elapsed, except that, with respect to ABR Loans the rate of interest
on which is  calculated  on the basis of the Prime Rate,  the  interest  thereon
shall

<PAGE>

                                                                              23

be  calculated on the basis of a 365- (or 366-, as the case may be) day year for
the actual days elapsed.  The Administrative  Agent shall as soon as practicable
notify  the  Borrower  and  the  relevant  Lenders  of each  determination  of a
Eurodollar  Rate.  Any change in the interest  rate on a Loan  resulting  from a
change  in  the  ABR or  the  Eurocurrency  Reserve  Requirements  shall  become
effective as of the opening of business on the day on which such change  becomes
effective.  The  Administrative  Agent shall as soon as  practicable  notify the
Borrower  and the  Lenders  of the  effective  date and the  amount of each such
change  in  interest  rate.  Each  determination  of an  interest  rate  by  the
Administrative  Agent  pursuant  to any  provision  of this  Agreement  shall be
conclusive  and  binding  on the  Borrower  and the  lenders  in the  absence of
manifest error.

          2.13  Inability to Determine  Interest Rate. If prior to the first day
of any Interest Period:

         (a) the Administrative Agent shall have determined (which determination
shall  be  conclusive  and  binding  upon  the  Borrower)  that,  by  reason  of
circumstances  affecting the relevant  market,  adequate and reasonable means do
not exist for ascertaining the Eurodollar Rate for such Interest Period, or

         (b) the  Administrative  Agent  shall  have  received  notice  from the
Required  Lenders that the  Eurodollar  Rate  determined or to be determined for
such Interest  Period will not  adequately  and fairly  reflect the cost to such
Lenders (as  conclusively  certified by such  Lenders) of making or  maintaining
their affected Loans during such Interest Period,

the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the Lenders as soon as  practicable  thereafter.  If such notice is
given (x) any  Eurodollar  Loans  requested  to be made on the first day of such
Interest Period shall be made as ABR Loans, (y) any Loans that were to have been
converted on the first day of such Interest Period to Eurodollar  Loans shall be
continued  as ABR  Loans  and (z) any  outstanding  Eurodollar  Loans  shall  be
converted,  on the last day of the then-current  Interest Period,  to ABR Loans.
Until such notice has been  withdrawn by the  Administrative  Agent,  no further
Eurodollar Loans shall be made or continued as such, nor shall the Borrower have
the right to convert Loans to Eurodollar Loans. The  Administrative  Agent shall
withdraw such notice when the circumstances  giving rise to such notice cease to
exist.

         2.14  Pro Rata  Treatment  and  Payments.  (a)  Each  borrowing  by the
Borrower from the Lenders hereunder,  each payment by the Borrower on account of
any commitment fee and any reduction of the Revolving Credit  Commitments of the
Lenders shall be made pro rata according to the respective Revolving Percentages
of the Lenders.

         (b) Each payment (including each prepayment) by the Borrower on account
of  principal  of and  interest  on the  Revolving  Loans shall be made pro rata
according to the respective outstanding principal amounts of the Revolving Loans
then held by the Lenders.

         (c) All  payments  (including  prepayments)  to be made by the Borrower
hereunder,  whether on account of principal,  interest, fees or otherwise, shall
be made without  setoff or  counterclaim  and shall be made prior to 12:00 Noon,
New York City time, on the due date thereof to the Administrative Agent, for the
account of the Lenders,  at the Funding  Office,  in Dollars and in  immediately
available funds. The Administrative  Agent shall distribute such payments to the
Lenders  promptly  upon  receipt  in like  funds  as  received.  If any  payment
hereunder (other than payments on the Eurodollar  Loans) becomes due and payable
on a day other than a Business  Day,  such payment shall be extended to the next
succeeding  Business  Day. If any payment on a  Eurodollar  Loan becomes due and
payable  on a day other than a  Business  Day,  the  maturity  thereof  shall be
extended to the next succeeding Business Day unless

<PAGE>

                                                                              24

the  result of such  extension  would be to extend  such  payment  into  another
calendar  month,  in which event such payment  shall be made on the  immediately
preceding Business Day. In the case of any extension of any payment of principal
pursuant to the preceding two  sentences,  interest  thereon shall be payable at
the then applicable rate during such extension.

         (d) Unless the Administrative Agent shall have been notified in writing
by any Lender  prior to a  borrowing  that such  Lender will not make the amount
that  would   constitute   its  share  of  such   borrowing   available  to  the
Administrative  Agent, the  Administrative  Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such  assumption,  make  available to the Borrower a
corresponding amount. If such amount is not made available to the Administrative
Agent by the required time on the Borrowing Date therefor, such Lender shall pay
to the Administrative  Agent, on demand,  such amount with interest thereon at a
rate equal to the daily  average  Federal  Funds  Effective  Rate for the period
until such Lender makes such amount immediately  available to the Administrative
Agent. A certificate of the  Administrative  Agent  submitted to any Lender with
respect to any amounts  owing under this  paragraph  shall be  conclusive in the
absence of manifest  error. If such Lender's share of such borrowing is not made
available to the Administrative  Agent by such Lender within three Business Days
of such  Borrowing  Date,  the  Administrative  Agent  shall also be entitled to
recover such amount with  interest  thereon at the rate per annum  applicable to
ABR Loans, on demand, from the Borrower.

         (e) Unless the Administrative Agent shall have been notified in writing
by the Borrower  prior to the date of any payment being made  hereunder that the
Borrower  will  not  make  such  payment  to  the   Administrative   Agent,  the
Administrative  Agent may assume that the Borrower is making such  payment,  and
the  Administrative  Agent may, but shall not be required  to, in reliance  upon
such assumption,  make available to the Lenders their respective pro rata shares
of a  corresponding  amount.  If such payment is not made to the  Administrative
Agent by the Borrower  within three  Business  Days of such required  date,  the
Administrative  Agent shall be entitled to recover,  on demand, form each Lender
to which any amount which was made available pursuant to the preceding sentence,
such  amount  with  interest  thereon  at the rate per annum  equal to the daily
average Federal Funds  Effective  Rate.  Nothing herein shall be deemed to limit
the rights of the Administrative Agent or any Lender against the Borrower.

         2.15  Requirements  of Law. (a) If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof or compliance
by any Lender with any request or directive  (whether or not having the force of
law) from any central bank or other  Governmental  Authority made  subsequent to
the date hereof:

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

          (ii) shall impose on such Lender any other condition;

and the result of any of the  foregoing  is to increase the cost to such Lender,
by an amount that such Lender deems to be material, of making,  converting into,
continuing  or  maintaining  Eurodollar  Loans or  issuing or  participating  in
Letters of  Credit,  or to reduce any  amount  receivable  hereunder  in respect
thereof,  then, in any such case,  the Borrower  shall promptly pay such Lender,
upon its demand,  any additional amounts necessary to compensate such Lender for
such increased cost or reduced amount receivable. If any Lender becomes entitled
to claim any additional  amounts  pursuant to this paragraph,  it shall promptly
notify the

<PAGE>

                                                                              25

Borrower  (with a copy to the  Administrative  Agent)  of the event by reason of
which it has become so entitled.

         (b) If any Lender  shall have  determined  that the  adoption of or any
change  in  any  Requirement  of  Law  regarding  capital  adequacy  or  in  the
interpretation  or  application  thereof  or  compliance  by such  Lender or any
corporation  controlling  such Lender with any  request or  directive  regarding
capital adequacy  (whether or not having the force of law) from any Governmental
Authority  made  subsequent to the date hereof shall have the effect of reducing
the  rate  of  return  on  such  Lender's  or such  corporation's  capital  as a
consequence of its obligations hereunder or under or in respect of any Letter of
Credit to a level  below that which such Lender or such  corporation  could have
achieved but for such adoption,  change or compliance (taking into consideration
such Lender's or such  corporation's  policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time to time, after
submission  by such Lender to the  Borrower  (with a copy to the  Administrative
Agent) of a written request therefor, the Borrower shall pay to such Lender such
additional  amount or amounts as will compensate such Lender for such reduction;
provided that the Borrower shall not be required to compensate a Lender pursuant
to this  paragraph  for any amounts  incurred  more than six months prior to the
date that such Lender notifies the Borrower of such Lender's  intention to claim
compensation  therefor;  and provided further that, if the circumstances  giving
rise to such claim have a retroactive  effect,  then such six-month period shall
be extended to include the period of such retroactive effect.

         (c) A certificate as to any additional amounts payable pursuant to this
Section   submitted  by  any  Lender  to  the  Borrower  (with  a  copy  to  the
Administrative  Agent) shall be conclusive in the absence of manifest error. The
obligations  of  the  Borrower  pursuant  to  this  Section  shall  survive  the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.

         (d) Each  Lender  shall  be  entitled  to be  compensated  for  amounts
pursuant to this  Section  2.15 only to the extent  such  Lender  makes the same
demands  for  compensation  from all of its other  customers  facing the same or
similar circumstances.

         2.16 Taxes.  (a) All payments made by the Borrower under this Agreement
shall be made free and clear of, and without  deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties,  charges,  fees,  deductions or withholdings,  nor or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority, excluding
(a) net income taxes and  franchise  taxes  (imposed on a net income basis or in
lieu of net income taxes) imposed by the United States or the jurisdiction under
the laws of which the  Administrative  Agent or any Lender is organized or doing
business or in which its principal  office is located or in which the applicable
lending office of such Lender is located, and (b) any branch profits tax imposed
by the United  States or any similar tax  imposed by any other  jurisdiction  in
which the Lender is located.  If any such non-excluded taxes,  levies,  imposts,
duties,  charges,  fees,  deductions or withholdings  ("Non-Excluded  Taxes") or
Other  Taxes  are  required  to be  withheld  from any  amounts  payable  to the
Administrative Agent or any Lender hereunder, the sum payable shall be increased
as may be  necessary  so  that  after  making  all  of the  required  deductions
(including  deductions  applicable to additional sums payable under this Section
2.16) such Administrative Agent or Lender receives an amount equal to the sum it
would have received had no such deductions been made,  provided,  however,  that
the Borrower  shall not be required to increase any such amounts  payable to any
Lender with respect to any Non-Excluded  Taxes pursuant to paragraph (a) of this
Section  or  make  any  indemnification  payment  related  thereto  pursuant  to
paragraph (c) of this Section (i) that are attributable to such Lender's failure
to comply with the  requirements  of paragraph  (d) of this Section or (ii) that
are United States withholding taxes imposed on amounts payable to such Lender at
the time the Lender becomes a party to this Agreement, except to the extent that
such Lender's  assignor (if

<PAGE>

26

any) was entitled, at the time of assignment, to receive additional amounts from
the Borrower with respect to such Non-Excluded Taxes pursuant to this paragraph.

         (b) In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.

         (c) Whenever any  Non-Excluded  Taxes or Other Taxes are payable by the
Borrower,  as promptly as possible  thereafter  the  Borrower  shall send to the
Administrative  Agent for its own  account or for the  account  of the  relevant
Lender,  as the case may be, a certified  copy of an original  official  receipt
received  by  the  Borrower  showing  payment  thereof  or,  if  not  reasonably
available,  other evidence reasonably  satisfactory to the Administrative Agent.
If the Borrower fails to pay any  Non-Excluded  Taxes or Other Taxes when due to
the appropriate taxing authority or fails to remit to the  Administrative  Agent
the required receipts or other required documentary evidence, the Borrower shall
indemnify the  Administrative  Agent and the Lenders for any incremental  taxes,
interest or penalties that may become payable by the Administrative Agent or any
lender as a result of any such failure.

         (d) Each Lender (or Transferee) that is not a U.S. person as defined in
Section  7701(a)(30)  of the Code (a  "Non-U.S.  Lender")  shall  deliver to the
Borrower and the Administrative Agent (or, in the case of a Participant,  to the
Lender  from which the  related  participation  shall have been  purchased)  two
copies of either  U.S.  Internal  revenue  Service  ("IRS")  Form W-8BEN or Form
W-8ECI,  or,  in the case of a  Non-U.S.  Lender  claiming  exemption  from U.S.
federal  withholding tax under Section 871(h) or 881(c) of the Code with respect
to payments of "portfolio  interest",  a statement  substantially in the form of
Exhibit F and a Form W-8BEN,  or any subsequent  versions  thereof or successors
thereto,  properly completed and duly executed by such Non-U.S.  Lender claiming
complete  exemption from, or a reduced rate of, U.S. federal  withholding tax on
all payments by the Borrower under this Agreement and the other Loan  Documents.
Such forms shall be delivered by each  Non-U.S.  Lender on or before the date it
becomes a party to this  Agreement  (or, in the case of any  Participant,  on or
before  the date such  Participant  purchases  the  related  participation).  In
addition,  each  Non-U.S.  Lender  shall  deliver such forms  promptly  upon the
reasonable request of the Borrower or the obsolescence or invalidity or any form
previously  delivered  by such  Non-U.S.  Lender.  Each  Non-U.S.  Lender  shall
promptly notify the Borrower at any time it determines that it is no longer in a
position to provide any previously delivered certificate to the Borrower (or any
other form of  certification  adopted by the U.S.  taxing  authorities  for such
purpose).  Notwithstanding  any other  provision of this  paragraph,  a Non-U.S.
Lender shall not be required to deliver any form pursuant to this paragraph that
such Non-U.S. Lender is not legally able to deliver.

         (e) A Lender that is  entitled to an  exemption  from or  reduction  of
non-U.S. withholding tax under the law of the jurisdiction in which the Borrower
is located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement  shall deliver to the Borrower (with a copy to the
Administrative  Agent),  at the time or times  prescribed by  applicable  law or
reasonably  requested by the  Borrower,  such  properly  completed  and executed
documentation  prescribed by  applicable  law as will permit such payments to be
made without  withholding  or at a reduced  rate,  provided  that such Lender is
legally entitled to complete, execute and deliver such documentation and in such
Lender's judgment such completion,  execution or submission would not materially
prejudice the legal position of such Lender.

         (f) The  agreements in this Section shall  survive the  termination  of
this  Agreement  and the  payment  of the Loans and all  other  amounts  payable
hereunder.

<PAGE>

                                                                              27

         2.17  Indemnity.  The Borrower  agrees to indemnify  each Lender and to
hold each Lender  harmless from any loss or expense that such Lender may sustain
or incur as a  consequence  of (a) default by the Borrower in making a borrowing
of,  conversion into or continuation of Eurodollar  Loans after the Borrower has
given a notice  requesting  the same in accordance  with the  provisions of this
Agreement, (b) default by the Borrower in making any prepayment of or conversion
from  Eurodollar  Loans  after  the  Borrower  has  given a  notice  thereof  in
accordance  with  the  provisions  of  this  Agreement  or (c) the  making  of a
prepayment of Eurodollar  Loans on a day that is not the last day of an Interest
Period with respect thereto. Such indemnification may include an amount equal to
the excess, if any, of (i) the amount of interest that would have accrued on the
amount so prepaid,  or not so borrowed,  converted or continued,  for the period
from the date of such  prepayment  or of such  failure  to  borrow,  convert  or
continue to the last day of such  Interest  Period (or, in the case of a failure
to borrow, convert or continue, the Interest Period that would have commenced on
the date of such  failure) in each case at the  applicable  rate of interest for
such Loans  provided  for herein  (excluding,  however,  the  Applicable  Margin
included  therein,  if any) over  (ii) the  amount of  interest  (as  reasonably
determined by such Lender) that would have accrued to such Lender on such amount
by placing such amount on deposit for a comparable  period with leading banks in
the  interbank  eurodollar  market.  A  certificate  as to any  amounts  payable
pursuant  to this  Section  submitted  to the  Borrower  by any Lender  shall be
conclusive in the absence of manifest  error.  This  covenant  shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder. Notwithstanding the foregoing provisions of this Section 2.17
or of Section 2.8(c), so long as no Event of Default then exists, if at any time
the mandatory prepayment of Loans pursuant to Section 2.8(c) would result in the
Borrower incurring costs under this Section 2.17 as a result of Eurodollar Loans
being  prepaid  other  than on the last  day of an  Interest  Period  applicable
thereto (the  "Affected  Eurodollar  Loans"),  then the Borrower may in its sole
discretion  initially  deposit  a  portion  (up to  100%)  of the  amounts  that
otherwise would have been paid in respect of the Affected  Eurodollar Loans with
the Administrative  Agent (which deposit,  after giving effect to interest to be
earned on such deposit prior to the last day of the relevant  Interest  Periods,
must be  equal  in  amount  to the  amount  of  Affected  Eurodollar  Loans  not
immediately  prepaid) to be held as security for the obligations of the Borrower
hereunder pursuant to a cash collateral agreement to be entered into in form and
substance  reasonably  satisfactory to the Administrative  Agent, with such cash
collateral to be directly  applied upon the first  occurrence  (or  occurrences)
thereafter  of the last day of an Interest  Period  applicable  to the  relevant
Eurodollar  Loans (or such  earlier  date or dates as shall be  requested by the
Borrower)  to repay an  aggregate  principal  amount of such Loans  equal to the
Affected  Eurodollar  Loans not  initially  repaid  pursuant  to this  sentence.
Notwithstanding  anything to the contrary contained in the immediately preceding
sentence,  all amounts deposited as cash collateral  pursuant to the immediately
preceding sentence shall be held for the sole benefit of the Lenders whose Loans
would otherwise have been immediately repaid with the amounts deposited and upon
the  occurrence  of an Event of  Default,  any amounts  held as cash  collateral
pursuant to this Section 2.17, shall, if so directed by the Administrative Agent
or the Required Lenders, be immediately applied to the relevant Loans.

         2.18  Change of Lending  Office.  Each  Lender  agrees  that,  upon the
occurrence  of any event giving rise to the operation of Section 2.15 or 2.16(a)
with  respect  to such  Lender,  it will,  if  requested  by the  Borrower,  use
reasonable efforts (subject to overall policy  considerations of such Lender) to
designate another lending office or assign its rights and obligations  hereunder
to another of its offices,  branches or  affiliates,  for any Loans  affected by
such event with the object of avoiding the consequences of such event; provided,
that such  designation or assignment is made on terms that, in the sole judgment
of such  Lender,  cause  such  Lender  and its  lending  office(s)  to suffer no
economic, legal or regulatory disadvantage,  and provided, further, that nothing
in this Section shall affect or postpone any of the  obligations of any Borrower
or the rights of any Lender pursuant to Section 2.15 or 2.16(a).

<PAGE>

                                                                              28

         2.19 Replacement of Lenders. The Borrower shall be permitted to replace
any Lender that (a) requests reimbursement for amounts owing pursuant to Section
2.15 or 2.16(a) or (b) defaults in its obligation to make Loans hereunder,  with
a replacement financial institution; provided that (i) such replacement does not
conflict  with any  Requirement  of Law,  (ii) no Event of  Default  shall  have
occurred and be continuing at the time of such  replacement,  (iii) prior to any
such  replacement,  such Lender shall have taken no action under Section 2.18 so
as to eliminate  the  continued  need for payment of amounts  owing  pursuant to
Section  2.15 or  2.16(a),  (iv) the  replacement  financial  institution  shall
purchase,  at par, all Loans and other amounts owing to such replaced  Lender on
or prior to the date of  replacement,  (v) the Borrower  shall be liable to such
replaced Lender under Section 2.17 if any Eurodollar Loan owing to such replaced
Lender  shall be  purchased  other than on the last day of the  interest  Period
relating thereto, (vi) the replacement financial  institution,  if not already a
Lender, shall be reasonably  satisfactory to the Administrative Agent, (vii) the
replaced  Lender shall be obligated to make such  replacement in accordance with
the provisions of Section 10.6 (provided that the Borrower shall be obligated to
pay the registration and processing fee referred to therein),  (viii) until such
time as such  replacement  shall be  consummated,  the  Borrower  shall  pay all
additional amounts (if any) required pursuant to Section 2.15 or 2.16(a), as the
case may be, and (ix) any such replacement shall not be deemed to be a waiver of
any rights that the Borrower, the Administrative Agent or any other Lender shall
have against the replaced Lender.

                          SECTION 3. LETTERS OF CREDIT

         3.1 L/C Commitment. (a) Subject to the terms and conditions hereof, the
Issuing  Lender,  in reliance on the agreement of the other Lenders set forth in
Section 3.4(a),  agrees to issue letters of credit ("Letters of Credit") for the
account  of the  Borrower  on any  Business  Day  during  the  Revolving  Credit
Commitment  Period  in such  form as may be  approved  from  time to time by the
Issuing Lender (which  approval shall not be  unreasonably  withheld);  provided
that the Issuing  Lender shall have no  obligation to issue any Letter of Credit
if, after giving effect to such issuance,  (i) the L/C Obligations  would exceed
the L/C  Commitment  or (ii) the  aggregate  amount of the  Available  Revolving
Credit  Commitments  would be less than zero. Each Letter of Credit shall (i) be
denominated  in Dollars  and (ii)  expire no later  than the  earlier of (x) the
first  anniversary  of its date of issuance  (in the case of Standby  Letters of
Credit)  or 180 days  after  its date of  issuance  (in the case of  Documentary
Letters  of  Credit)  and (y) the date that is five  Business  Days prior to the
Revolving  Termination  Date,  provided that any Standby Letter of Credit with a
one-year  term may  provide  for the renewal  thereof  for  additional  one-year
periods  (which shall in no event extend  beyond the date  referred to in clause
(y) above).

         (B) The Issuing  Lender shall not at any time be obligated to issue any
Letter of Credit  hereunder if such issuance  would  conflict with, or cause the
Issuing  Lender or any L/C  Participant  to exceed  any limits  imposed  by, any
applicable Requirement of Law.

         3.2 Procedure  for Issuance of Letter of Credit.  The Borrower may from
time to time  request  that the  Issuing  Lender  issue a Letter  of  Credit  by
delivering to the Issuing Lender at its address for notices specified herein (or
such other  location as may be designated by the Issuing  Lender) an Application
therefor,  completed to the  satisfaction of the Issuing Lender,  and such other
certificates,  documents and other papers and  information as the Issuing Lender
may reasonably request. Upon receipt of any Application, the Issuing Lender will
process such  Application and the  certificates,  documents and other papers and
information  delivered  to it in  connection  therewith in  accordance  with its
customary  procedures and shall  promptly  issue the Letter of Credit  requested
thereby  (but in no event  shall the  Issuing  Lender be  required  to issue any
Letter of Credit  earlier  than three  Business  Days  after its  receipt of the
Application therefor and all such other certificates, documents and other papers
and  information  relating  thereto) by issuing  the  original of such Letter of
Credit  to the  beneficiary  thereof  or as  otherwise

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                                                                              29

may be agreed to by the Issuing  Lender and the  Borrower.  The  Issuing  Lender
shall make  available a copy of such Letter of Credit to the  Borrower  promptly
following the issuance thereof. The Issuing Lender shall promptly furnish to the
Administrative  Agent notice of the issuance of each Letter of Credit (including
the amount  thereof).  The  Administrative  Agent  shall  furnish to the Lenders
notice of the issuance of Letters of Credit (including the amounts thereof) on a
quarterly basis.

         3.3 Fees and Other  Charges.  (a) The Borrower will pay fees in respect
of the  Letters  of Credit as  follows:  (i) in the case of  Standby  Letters of
Credit,  a fee,  calculated at a per annum rate equal to the  Applicable  Margin
then in effect with respect to Eurodollar  Loans (or, in the case of any Standby
Letter of Credit supporting  documentary  Surviving Letters of Credit, 0.80% per
annum), on the undrawn face amount thereof, payable quarterly in arrears on each
Standby L/C Fee  Payment  Date after the  issuance  date and (ii) in the case of
Documentary  Letters of Credit,  a drawing fee,  calculated  at an absolute rate
equal to the Applicable Documentary L/C Fee Rate, on the amount drawn in respect
of such Letter of Credit,  payable upon  drawing.  Each such fee shall be shared
ratably among the Lenders.  In addition,  the Borrower  shall pay to the Issuing
Lender for its own account a fronting fee in an amount  separately  agreed to by
the Borrower and the Issuing Lender.

         (b) In  addition  to the  foregoing  fees,  the  Borrower  shall pay or
reimburse the Issuing Lender for such normal and customary  administrative costs
and  expenses  as are  incurred  or charged by the  Issuing  Lender in  issuing,
negotiating,  effecting payment under,  amending or otherwise  administering any
Letter of Credit.

         3.4 L/C  Participations.  (a) The Issuing Lender  irrevocably agrees to
grant and  hereby  grants to each L/C  Participant,  and to induce  the  Issuing
Lender to issue Letters of Credit  hereunder,  each L/C Participant  irrevocably
agrees to accept and purchase and hereby  accepts and purchases from the Issuing
Lender,  on  the  terms  and  conditions   hereinafter   stated,  for  such  L/C
Participant's  own  account  and risk an  undivided  interest  equal to such L/C
Participant's  Revolving  Percentage  in the Issuing  Lender's  obligations  and
rights under each Letter of Credit issued hereunder and the amount of each draft
paid by the Issuing Lender thereunder.  Each L/C Participant unconditionally and
irrevocably  agrees with the Issuing  Lender that,  if a draft is paid under any
Letter of Credit for which the Issuing  Lender is not  reimbursed in full by the
Borrower in accordance  with the terms of this  Agreement,  such L/C Participant
shall pay to the Issuing Lender upon demand at the Issuing  Lender's address for
notices  specified  herein an amount equal to such L/C  Participant's  Revolving
Percentage  of the amount of such  draft,  or any part  thereof,  that is not so
reimbursed.

         (b) If any amount  required  to be paid by any L/C  Participant  to the
Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion
of any payment made by the Issuing  Lender under any Letter of Credit is paid to
the Issuing  Lender  within three  Business  Days after the date such payment is
due, such L/C  Participant  shall pay to the Issuing  Lender on demand an amount
equal to the product of (i) such amount,  times (ii) the daily  average  Federal
Funds  Effective Rate during the period from and including the date such payment
is required to the date on which such  payment is  immediately  available to the
Issuing  Lender,  time (iii) a fraction the  numerator of which is the number of
days that elapse during such period and the  denominator of which is 360. If any
such  amount  required  to be paid by any L/C  Participant  pursuant  to Section
3.4(a) is not made  available  to the  Issuing  Lender  by such L/C  Participant
within  three  Business  Days after the date such  payment is due,  the  Issuing
Lender shall be entitled to recover from such L/C Participant,  on demand,  such
amount with interest thereon calculated from such due date at the rate per annum
applicable to ABR Loans. A certificate  of the Issuing  Lender  submitted to any
L/C  Participant  with respect to any amounts  owing under this Section shall be
conclusive in the absence of manifest error.

<PAGE>

                                                                              30

         (c)  Whenever,  at any time after the Issuing  Lender has made  payment
under any Letter of Credit and has  received  from any L/C  Participant  its pro
rata share of such payment in accordance with Section 3.4(a), the Issuing Lender
receives any payment related to such Letter of Credit (whether directly from the
Borrower or otherwise,  including  proceeds of collateral applied thereto by the
Issuing  Lender),  or any payment of interest  on account  thereof,  the Issuing
Lender  will  distribute  to such L/C  Participant  its pro rata share  thereof;
provided,  however,  that in the event  that any such  payment  received  by the
Issuing Lender shall be required to be returned by the Issuing Lender,  such L/C
Participant  shall return to the Issuing Lender the portion  thereof  previously
distributed by the Issuing Lender to it.

         3.5  Reimbursement  Obligation of the Borrower.  The Borrower agrees to
reimburse the Issuing Lender on each date on which the Issuing  Lender  notifies
the  Borrower  of the date and amount of a draft  presented  under any Letter of
Credit and paid by the  Issuing  Lender for the amount of (a) such draft so paid
and (b) any taxes,  fees,  charges or other  costs or  expenses  incurred by the
Issuing Lender in connection with such payment.  Each such payment shall be made
to the Issuing  Lender at its address  for  notices  specified  herein in lawful
money of the United States and in immediately available funds. Interest shall be
payable  on any and all  amounts  remaining  unpaid by the  Borrower  under this
Section from the date such amounts become payable  (whether at stated  maturity,
by acceleration or otherwise) until payment in full at the rate set forth in (i)
until the second  Business Day  following  the date of the  applicable  drawing,
Section 2.11(b) and (ii) thereafter, Section 2.11(c).

         3.6 Obligations Absolute. The Borrower's obligations under this Section
3 shall be  absolute  and  unconditional  under  any and all  circumstances  and
irrespective of any setoff, counterclaim or defense to payment that the Borrower
may have or have had against the Issuing Lender,  any beneficiary of a Letter of
Credit or any other  Person.  The Borrower  also agrees with the Issuing  Lender
that the  Issuing  Lender  shall  not be  responsible  for,  and the  Borrower's
Reimbursement  Obligations  under  Section 3.5 shall not be affected  by,  among
other things,  the validity or genuineness  of documents or of any  endorsements
thereon,  even  though  such  documents  shall  in  fact  prove  to be  invalid,
fraudulent  or forged,  or any  dispute  between or among the  Borrower  and any
beneficiary  of any Letter of Credit or any other  party to which such Letter of
Credit may be transferred or any claims  whatsoever of the Borrower  against any
beneficiary of such Letter of Credit or any such transferee.  The Issuing Lender
shall  not  be  liable  for  any  error,  omission,  interruption  or  delay  in
transmission,   dispatch  or   delivery  of  any  message  or  advice,   however
transmitted,  in  connection  with any  Letter of  Credit,  except for errors or
omissions  found by a final and  nonappealable  decision of a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct of
the Issuing Lender.  The Borrower agrees that any action taken or omitted by the
Issuing  Lender under or in connection  with any Letter of Credit or the related
drafts or  documents,  if done in the  absence  of gross  negligence  or willful
misconduct and in accordance with the standards of care specified in the Uniform
Commercial  Code of the State of New York,  shall be binding on the Borrower and
shall not result in any liability of the Issuing Lender to the Borrower.

         3.7 Letter of Credit  Payments.  If any draft  shall be  presented  for
payment under any Letter of Credit, the Issuing Lender shall promptly notify the
Borrower  of the date and amount  thereof.  The  responsibility  of the  Issuing
Lender to the Borrower in connection  with any draft presented for payment under
any Letter of Credit  shall,  in addition to any  payment  obligation  expressly
provided  for in such  Letter of  Credit,  be limited  to  determining  that the
documents  (including  each  draft)  delivered  under  such  Letter of Credit in
connection  with such  presentment  are  substantially  in conformity  with such
Letter of Credit.

<PAGE>

                                                                              31

         3.8  Applications.  To the extent that any provision of any Application
related  to any Letter of Credit is  inconsistent  with the  provisions  of this
Section 3, the provisions of this Section 3 shall apply.

                    SECTION 4. REPRESENTATIONS AND WARRANTIES

         To induce the  Administrative  Agent and the Lenders to enter into this
Agreement  and to make the Loans  and issue or  participate  in the  Letters  of
Credit, the Borrower hereby represents and warrants to the Administrative  Agent
and each Lender that:

         4.1 Financial Condition. The audited consolidated balance sheets of the
Borrower as at December  31,  1996,  December 31, 1997 and December 31, 1998 and
the related  consolidated  statements of income and of cash flows for the fiscal
years ended on such  dates,  reported on by and  accompanied  by an  unqualified
report from KPMG LLP, present fairly the consolidated financial condition of the
Borrower as at such date, and the consolidated results of its operations and its
consolidated  cash  flows  for the  respective  fiscal  years  then  ended.  The
unaudited  consolidated  balance sheet of the Borrower as at September 25, 1999,
and the related unaudited  consolidated  statements of income and cash flows for
the  nine-month  period  ended on such date,  present  fairly  the  consolidated
financial  condition  of the  Borrower  as at such  date,  and the  consolidated
results of its  operations  and its  consolidated  cash flows for the nine-month
period then ended (subject to normal year-end audit  adjustments and the absence
of footnotes).  All such financial  statements,  including the related schedules
and  notes  thereto,   have  been  prepared  in  accordance  with  GAAP  applied
consistently  throughout  the  periods  involved  (except  as  approved  by  the
aforementioned firm of accountants and disclosed  therein).  Except as set forth
on Schedule 4.1, as of the date hereof, the Borrower and its Subsidiaries do not
have any material Guarantee Obligations,  contingent liabilities and liabilities
for taxes,  or any  material  long-term  leases or unusual  forward or long-term
commitments,  including any interest  rate or foreign  currency swap or exchange
transaction  or  other  obligation  in  respect  of  derivatives,  that  are not
reflected in the most recent financial statements referred to in this paragraph.
Except as set forth on Schedule 4.1, during the period from December 31, 1998 to
and including the date hereof there has been no  Disposition  by the Borrower of
any material part of its business or property.

         4.2 No Change.  Since December 31, 1998,  there has been no development
or event that has had or could reasonably be expected to have a Material Adverse
Effect.

         4.3 Corporate Existence;  Compliance with Law. Each of the Borrower and
its  Subsidiaries  (a) is duly organized,  validly existing and in good standing
under the laws of the  jurisdiction of its  organization,  (b) has the corporate
(or other  appropriate)  power and  authority,  and the legal right,  to own and
operate its property, to lease the property it operates as lessee and to conduct
the business in which it is currently  engaged,  except to the extent failure to
possess such power, authority or legal right could not reasonably be expected to
result  in a  Material  Adverse  Effect,  (c) is  duly  qualified  as a  foreign
corporation and in good standing under the laws of each  jurisdiction  where its
ownership,  lease or  operation  of  property  or the  conduct  of its  business
requires such qualification, except to the extent failure to be so qualified and
in good  standing  could not  reasonably  be  expected  to result in a  Material
Adverse Effect,  and (d) is in compliance with all Requirements of Law except to
the extent that the  failure to comply  therewith  could not, in the  aggregate,
reasonably be expected to have a Material Adverse Effect.

         4.4 Corporate Power; Authorization;  Enforceable Obligations. Each Loan
Party has the  corporate (or other  appropriate)  power and  authority,  and the
legal right,  to make,  deliver and perform the Loan  Documents to which it is a
party and, in the case of the Borrower, to borrow hereunder. Each Loan

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                                                                              32

Party  has taken  all  necessary  corporate  (or  other  appropriate)  action to
authorize the execution, delivery and performance of the Loan Documents to which
it is a party and, in the case of the Borrower,  to authorize the  borrowings on
the terms and  conditions of this  Agreement.  No consent or  authorization  of,
filing  with,  notice  to or other act by or in  respect  of,  any  Governmental
Authority  or any other  Person is required in  connection  with the  borrowings
hereunder   or  with  the   execution,   delivery,   performance,   validity  or
enforceability  of this  Agreement  or any of the  Loan  Documents,  except  the
filings  referred to in Section 4.19.  Each Loan Document has been duly executed
and  delivered  on behalf of each  Loan  Party  party  thereto.  This  Agreement
constitutes,  and each other Loan Document upon  execution  will  constitute,  a
legal valid and binding obligation of each Loan Party party thereto, enforceable
against  each  such  Loan  Party  in  accordance  with  its  terms,   except  as
enforceability   may  be   limited   by   applicable   bankruptcy,   insolvency,
reorganization,   moratorium  or  similar  laws  affecting  the  enforcement  of
creditors'  rights  generally  and  by  general  equitable  principles  (whether
enforcement is sought by proceedings in equity or at law).

         4.5 No Legal Bar.  The  execution,  delivery  and  performance  of this
Agreement and the other Loan Documents,  the issuance of Letters of Credit,  the
borrowings  hereunder  and the use of the proceeds  thereof will not violate any
Requirement of Law or any material Contractual Obligation of the Borrower or any
of its  Subsidiaries  and will not  result  in,  or  require,  the  creation  or
imposition  of any  Lien  on any of  their  respective  properties  or  revenues
pursuant to any Requirement of Law or any such material  Contractual  Obligation
(other than the Liens created by the Security Documents).

         4.6 Litigation. No litigation, investigation or proceeding of or before
any arbitrator or Governmental  Authority is pending or, to the knowledge of the
Borrower,  threatened by or against the Borrower or any of its  Subsidiaries  or
against any of their  respective  properties or revenues (a) with respect to any
of the Loan Documents or any of the transactions contemplated hereby or thereby,
or (b) that could reasonably be expected to have a Material Adverse Effect.

         4.7 No Default.  Neither the Borrower nor any of its Subsidiaries is in
default  under or with  respect  to any of its  Contractual  Obligations  in any
respect that could reasonably be expected to have a Material Adverse Effect.  No
Default or Event of has occurred and is continuing.

         4.8  Ownership  of  Property;  Liens.  Each  of the  Borrower  and  its
Subsidiaries  has title in fee simple to, or a valid leasehold  interest in, all
its real property,  and good title to, or a valid leasehold interest or property
right or license in, all its other  property,  except when  failure to hold such
title, interest,  right or license could not reasonably be expected to result in
a Material  Adverse  Effect,  and none of such  property  is subject to any Lien
except as permitted by Section 7.3.

         4.9  Intellectual  Property.  The Borrower and each of its Subsidiaries
owns, or is licensed to use, all Intellectual Property necessary for the conduct
of its  business as  currently  conducted.  No claim which could  reasonably  be
expected to result in a Material Adverse Effect has been asserted and is pending
by any Person challenging or questioning the use of any Intellectual Property or
the  validity  or  effectiveness  of any  Intellectual  Property,  nor  does the
Borrower  know of any valid  basis for any such claim.  The use of  Intellectual
Property  by the  Borrower  and  its  Subsidiaries  does  not to the  Borrower's
knowledge infringe on the rights of any Person in any material respect.

         4,10 Taxes. Each of the Borrower and each of its Subsidiaries has filed
or caused to be filed all material Federal, state and other tax returns that are
required  to be filed and has paid all taxes shown to be due and payable on said
returns or on any written assessments made against it or any of its property and
all other  material  taxes,  fees or other  charges  imposed on it or any of its
property  by any

<PAGE>

                                                                              33

Governmental Authority (other than any taxes the amount or validity of which are
currently  being  contested in good faith by  appropriate  proceedings  and with
respect to which  reserves  in  conformity  with GAAP have been  provided on the
books of the Borrower or its Subsidiaries,  as the case may be); no material tax
Lien (other than any Lien that is permitted  pursuant to Section 7.3 hereof) has
been filed,  and, to the knowledge of the Borrower,  no claim is being asserted,
with respect to any such tax, fee or other charge.

         4.11 Federal Regulations.  No part of the proceeds of any Loans will be
used for  "buying"  or  "carrying"  any  "margin  stock"  within the  respective
meanings of each of the quoted terms under  Regulation U as now and from time to
time  hereafter in effect or for any purpose that violates the provisions of the
Regulations  of the Board.  If  requested  by any  Lender or the  Administrative
Agent, the Borrower will furnish to the  Administrative  Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form
G-3 or FR Form U-1, as applicable, referred to in Regulation U.

         4.12 Labor Matters.  Except as, in the aggregate,  could not reasonably
be expected to have a Material Adverse Effect: (a) there are no strikes or other
labor disputes  against the Borrower or any of its  Subsidiaries  pending or, to
the knowledge of the Borrower,  threatened; (b) hours worked by and payment made
to employees of the Borrower and its Subsidiaries  have not been in violation of
the Fair Labor Standards Act or any other applicable  Requirement of Law dealing
with such  matters;  and (c) all  payments  due from the  Borrower or any of its
Subsidiaries on account of employee health and welfare  insurance have been paid
or  accrued  as a  liability  on the  books  of  the  Borrower  or the  relevant
Subsidiary.

         4.13 ERISA.  Neither a  Reportable  Event nor an  "accumulated  funding
deficiency"  (within  the  meaning of Section  412 of the Code or Section 302 of
ERISA) has occurred during the five-year  period prior to the date on which this
representation  is made or deemed made with  respect to any Plan,  and each Plan
has complied in all material  respects with the  applicable  provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no Lien
in favor of the PBGC or a Plan has arisen,  during such  five-year  period.  The
present value of all accrued  benefits under each Single Employer Plan (based on
those  assumptions  used to fund  such  Plans)  did not,  as of the last  annual
valuation date prior to the date on which this  representation is made or deemed
made,  exceed the value of the  assets of such Plan  allocable  to such  accrued
benefits by a material amount.  Neither the Borrower nor any Commonly Controlled
Entity has had a complete or partial withdrawal from any Multiemployer Plan that
has resulted or could  reasonably be expected to result in a material  liability
under ERISA, and neither the Borrower nor any Commonly  Controlled  Entity would
become subject to any material liability under ERISA if the Borrower or any such
Commonly  Controlled  Entity were to withdraw  completely from all Multiemployer
Plans as of the  valuation  date most closely  preceding  the date on which this
representation  is  made  or  deemed  made.  No  such  Multiemployer  Plan is in
Reorganization or Insolvent.

         4.14  Investment  Company Act; Other  Regulations.  No Loan Party is an
"investment  company",  or a company  "controlled"  by an "investment  company",
within the meaning of the  Investment  Company Act of 1940, as amended.  No Loan
Party is  subject  to  regulation  under  any  Requirement  of Law  (other  than
Regulation X of the Board) that limits its ability to incur Indebtedness.

         4.15 Subsidiaries.  Except as disclosed to the Administrative  Agent by
the Borrower in writing from time to time after the Closing Date,  Schedule 4.15
sets forth the name and jurisdiction of incorporation of each Subsidiary and, as
to each such Subsidiary,  the percentage of each class of Capital Stock owned by
any Loan Party.

<PAGE>

                                                                              34

         4.16 Use of  Proceeds.  The  proceeds  of the  Revolving  Loans and the
Swingline Loans, and the Letters of Credit,  shall be used for general corporate
purposes, including redemptions of the Senior Subordinated Notes, repurchases of
the  Borrower's  common stock and  Permitted  Acquisitions,  in each case to the
extent permitted hereby.

          4.17  Environmental  Matters.  Except as, in the aggregate,  could not
reasonably be expected to have a material Adverse Effect:

         (a) the  facilities  and  properties  owned,  leased or operated by the
Borrower or any of its Subsidiaries (the "Properties") do not contain,  and have
not previously  contained,  any Materials of Environmental Concern in amounts or
concentrations or under circumstances that constitute or constituted a violation
of, or could give rise to liability under, any Environmental Law;

         (b) neither the Borrower nor any of its Subsidiaries has received or is
aware of any notice of violation, alleged violation,  non-compliance,  liability
or  potential  liability  regarding  environmental  matters or  compliance  with
Environmental Laws with regard to any of the Properties or the business operated
by the  Borrower  or any of its  Subsidiaries  (the  "Business"),  nor  does the
Borrower  have  knowledge  or reason to  believe  that any such  notice  will be
received or is being threatened;

         (c) Materials of  Environmental  Concern have not been  transported  or
disposed of from the Properties in violation of, or in a manner or to a location
that could give rise to liability  under,  any  Environmental  Law, nor have any
materials of Environmental Concern been generated,  treated,  stored or disposed
of at, on or under any of the  Properties  in violation  of, or in a manner that
could give rise to liability under, any applicable Environmental Law;

         (d) no judicial proceeding or governmental or administrative  action is
pending  or,  to  the   knowledge  of  the  Borrower,   threatened,   under  any
Environmental Law to which the Borrower or any Subsidiary is or will be named as
a party  with  respect  to the  Properties  or the  Business,  nor are there any
consent decrees or other decrees, consent orders, administrative orders or other
orders, or other administrative or judicial  requirements  outstanding under any
Environmental Law with respect to the Properties or the Business;

         (e) there has been no  release or threat of  release  of  Materials  of
Environmental  Concern at or from the Properties,  or arising from or related to
the  operations  of the  Borrower  or any  Subsidiary  in  connection  with  the
Properties or otherwise in connection  with the Business,  in violation of or in
amounts or in a manner  that could give rise to  liability  under  Environmental
Laws;

         (f)  the  Properties  and  all  operations  at  the  Properties  are in
compliance,  and  have in the  last  five  years  been in  compliance,  with all
applicable  Environmental Laws, and there is no contamination at, under or about
the  Properties  or  violation  of any  Environmental  Law with  respect  to the
Properties or the Business; and

         (g) neither the  Borrower nor any of its  Subsidiaries  has assumed any
liability  of any other  Person  (other than the  Borrower or its  Subsidiaries)
under Environmental Laws.

         4.18  Accuracy  of  Information,   etc.  No  statement  or  information
contained  in  this  Agreement,   any  other  Loan  Document,  the  Confidential
Information memorandum or any other

<PAGE>

35

document,  certificate or statement  furnished by or on behalf of any Loan Party
to  the  Administrative  Agent  or the  Lenders,  or any  of  them,  for  use in
connection  with the  transactions  contemplated  by this Agreement or the other
Loan Documents  (other than  projections and pro forma  financial  information),
contained as of the date such  statement,  information,  document or certificate
was so furnished (or, in the case of the Confidential Information Memorandum, as
of the date of this  Agreement),  any untrue  statement  of a  material  fact or
omitted to state a material  fact  necessary  to make the  statements  contained
herein or  therein  not  misleading.  The  projections  and pro forma  financial
information  contained  in the  materials  referenced  above are based upon good
faith  estimates  and  assumptions  believed by management of the Borrower to be
reasonable  at the time  made,  it being  recognized  by the  Lenders  that such
financial information as it related to future events is not to be viewed as fact
and that actual results  during the period or periods  covered by such financial
information  may  differ  form the  projected  results  set forth  therein  by a
material amount.  There is no fact known to any Loan Party that could reasonably
be  expected  to have a  Material  Adverse  Effect  that has not been  expressly
disclosed herein, in the other Loan Documents,.  In the Confidential Information
Memorandum or in any other documents,  certificates and statements  furnished to
the  Administrative  Agent  and the  Lenders  for  use in  connection  with  the
transactions contemplated hereby and by the other Loan Documents.

         4.19 Collateral. The Guarantee and Collateral Agreement is effective to
create in favor of the  Administrative  Agent, for the benefit of the Lenders, a
legal,  valid and  enforceable  security  interest in the  Collateral  described
therein and proceeds thereof.  When financing statements in appropriate form are
filed in the offices  specified on Schedule  4.19,  the Guarantee and Collateral
Agreement shall constitute a fully perfected Lien on, and security  interest in,
all right,  title and  interest of the Loan Parties in such  Collateral  and the
proceeds  thereof,  as security for the Obligations (as defined in the Guarantee
and Collateral Agreement), in each case prior and superior in right to any other
Person (except Liens permitted by Section 7.3).

         4.20  Solvency.  The Loan Parties,  taken as a whole,  and after giving
effect to the incurrence of all Indebtedness  and obligations  being incurred in
connection herewith will be and will continue to be, Solvent.

         4.21  Senior   Indebtedness.   The   Obligations   constitute   "Senior
Indebtedness"  (or the comparable  concept) of the Borrower under and as defined
in the Senior Subordinated Note Indenture.

         4.22 Year 2000 Matters. Any reprogramming required to permit the proper
functioning (but only to the extent that such proper functioning would otherwise
be impaired by the  occurrence  of the year 2000) in and following the year 2000
of computer  systems and other  equipment  containing  embedded  microchips,  in
either case owned or operated by the Borrower or any of its Subsidiaries or used
or relied upon in the conduct of their business  (including any such systems and
other  equipment  supplied by others or with which the  computer  systems of the
Borrower  or any of its  Subsidiaries  interface),  and the  testing of all such
systems and other equipment as so reprogrammed,  have been completed.  The costs
to the Borrower and its Subsidiaries for such  reprogramming and testing and for
the  other  reasonably   foreseeable   consequences  to  them  of  any  improper
functioning  of  other  computer  systems  and  equipment   containing  embedded
microchips  due to the  occurrence  of the year  2000  could not  reasonably  be
expected  to result  in a  Default  or Event of  Default  or to have a  Material
Adverse Effect.  The computer  systems of the Borrower and its  Subsidiaries are
and, with ordinary course upgrading and maintenance,  will continue for the term
of this  Agreement  to be,  sufficient  for the  conduct  of their  business  as
currently conducted.

<PAGE>

                                                                              36

                         SECTION 5. CONDITIONS PRECEDENT

         5.1  Conditions to Initial  Extension of Credit.  The agreement of each
Lender to make the initial  extension  of credit  requested  to be made by it is
subject to the  satisfaction,  prior to or concurrently  with the making of such
extension of credit on the Closing Date, of the following conditions precedent:

         (a)  Credit  Agreement;   Guarantee  and  Collateral   Agreement.   The
Administrative  Agent  shall have  received  (i) this  Agreement,  executed  and
delivered by the  Administrative  Agent,  the Borrower and each Person listed on
Schedule  1.1 and (ii) the  Guarantee  and  Collateral  Agreement,  executed and
delivered by the Borrower and each Subsidiary Guarantor.

         (b) Existing Credit  Agreement.  The  commitments  under the Borrower's
existing  credit  agreement and all Liens granted in connection  therewith shall
have been  terminated,  and all amounts owing thereunder shall have been paid in
full, it being understood that certain letters of credit ("Surviving  Letters of
Credit")  outstanding  under such credit  agreement  on the  Closing  Date shall
continue to remain outstanding.

         (c) Approvals.  Any governmental and third party approvals necessary in
connection with the  transactions  contemplated  hereby shall have been obtained
and be in full force and effect.

         (d) Lien  Searches.  The  Administrative  Agent shall have received the
results of a recent lien search in each of the jurisdictions where assets of the
Loan  Parties are  located,  and such search shall reveal no liens on any of the
assets of the Borrower or its Subsidiaries except for liens permitted by Section
7.3 or  discharged  on or prior to the Closing  Date  pursuant to  documentation
satisfactory to the Administrative Agent.

         (e) Fees. The Lenders and the Administrative  Agent shall have received
all fees  required to be paid,  and all  expenses for which  invoices  have been
presented with appropriate  supporting  documentation  (including the reasonable
fees and expenses of legal counsel), on or before the Closing Date.

         (f) Closing Certificate.  The Administrative Agent shall have received,
with a counterpart for each Lender, a certificate of each Loan Party,  dated the
Closing  Date,  substantially  in  the  form  of  Exhibit  C,  with  appropriate
insertions and attachments.

         (g) Legal Opinions.  The  Administrative  Agent shall have received the
following executed legal opinions:

                  (i) the legal opinion of Skadden,  Arps, Slate, Meagher & Flom
LLP,  special New York counsel to the Borrower  and the  Subsidiary  Guarantors,
substantially in the form of Exhibit E-1; and

                  (ii) the legal opinion of Glenn A. Weinman, general counsel of
the Borrower and its Subsidiaries, substantially in the form of Exhibit E-2.

Each  such  legal  opinion  shall  cover  such  other  matters  incident  to the
transactions  contemplated  by this  Agreement as the  Administrative  Agent may
reasonably require.

<PAGE>

                                                                              37

         (h) Filings,  etc. The Uniform  Commercial  Code  financing  statements
referred to in Section  4.19 shall have been  executed and be in proper form for
filing. In addition,  the Administrative Agent shall have received  satisfactory
executed  landlord lien waivers in respect of leased  warehouses  significant to
the businesses of the Borrower and the Subsidiary Guarantors  (determined by the
Borrower based on criteria acceptable to the Administrative Agent).

         5.2  Conditions  to Each  Extension  of Credit.  The  agreement of each
Lender to make any  extension  of credit  requested to be made by it on any date
(including its initial  extension of credit) is subject to the  satisfaction  of
the following conditions precedent:

         (a)  Representations  and Warranties.  Each of the  representations and
warranties  made by any Loan Party in or pursuant to the Loan Documents shall be
true and correct in all  material  respects on and as of such date as if made on
and as of such date  (except  for those  representations  and  warranties  which
expressly related to a specific earlier date).

         (b) No Default.  No Default or Event of Default shall have occurred and
be continuing  on such date or after giving  effect to the  extensions of credit
requested to be made on such date.

Each  borrowing  by and issuance of a Letter of Credit on behalf of the Borrower
hereunder shall constitute a  representation  and warranty by the Borrower as of
the date of such  extension  of credit  that the  conditions  contained  in this
Section 5.2 have been satisfied.

                        SECTION 6. AFFIRMATIVE COVENANTS

         The  Borrower  hereby  agrees  that,  so long as the  Revolving  Credit
Commitments  remain in effect,  any Letter of Credit remains  outstanding or any
Loan or  other  amount  is  owing  to any  Lender  or the  Administrative  Agent
hereunder, the Borrower shall and shall cause each of its Subsidiaries to:

         6.1 Financial Statements.  Furnish to the Administrative Agent and each
Lender:

         (a) as soon as available, but in any event within 90 days after the end
of each fiscal year of the  Borrower,  a copy of the  audited  consolidated  and
unaudited  consolidating  balance  sheet of the  Borrower  and its  consolidated
Subsidiaries as at the end of such year and the related audited consolidated and
unaudited  consolidating  statements  of income and of cash flows for such year,
setting  forth in each case in  comparative  form the figures  for the  previous
year, reported on, in the case of audited financial statements, without a "going
concern" or like qualification or exception, or qualification arising out of the
scope  of  the  audit,  by  KPMG  LLP  or  other  independent  certified  public
accountants of nationally recognized standing; and

         (b) as soon as available, but in any event not later than 45 days after
the end of each of the first three quarterly  periods of each fiscal year of the
Borrower,  the  unaudited  consolidated  balance  sheet of the  Borrower and its
consolidated  Subsidiaries  as at the  end  of  such  quarter  and  the  related
unaudited  consolidated  statements of income and of cash flows for such quarter
and the portion of the fiscal  year  through  the end of such  quarter,  setting
forth in each  case in  comparative  form the  figures  for the  previous  year,
certified  by a  Responsible  Officer  as being  fairly  stated in all  material
respects  (subject  to normal  year-end  audit  adjustments  and the  absence of
footnotes).

All such  financial  statements  shall be complete  and correct in all  material
respects and shall be prepared in reasonable  detail and in accordance with GAAP
applied  consistently  throughout the periods  reflected

<PAGE>

                                                                              38

therein  and with prior  periods  (except as  approved  by such  accountants  or
officer, as the case may be, and disclosed therein).

         6.2  Certificates;  Other  Information.  Furnish to the  Administrative
Agent and each Lender (or, in the case of clause (f), to the relevant Lender):

         (a) concurrently with the delivery of any financial statements pursuant
to Section 6.1, (i) a certificate of a Responsible  Officer stating that, to the
best of each such Responsible  Officer's knowledge,  each Loan Party during such
period has observed or performed all of its covenants and other agreements,  and
satisfied  every  condition,  contained  in this  Agreement  and the other  Loan
Documents to which it is a party to be  observed,  performed or satisfied by it,
and that such  Responsible  Officer has  obtained no knowledge of any Default or
Event of Default except as specified in such certificate and (ii) in the case of
quarterly  or  annual  financial  statements,   (x)  a  Compliance   Certificate
containing all information and calculations necessary for determining compliance
by the Borrower  and its  Subsidiaries  with the  provisions  of this  Agreement
referred  to therein as of the last day of the fiscal  quarter or fiscal year of
the Borrower, as the case may be, and (y) to the extent not previously disclosed
to the Administrative  Agent, a listing of any county or state within the United
States where any Loan Party keeps inventory;

         (b) as soon as available,  and in any event no later than 45 days after
the end of each fiscal year of the Borrower, a detailed  consolidated budget for
the following fiscal year (including (i) a projected  consolidated balance sheet
of the Borrower and its Subsidiaries as of the end of the following fiscal year,
the related consolidated statements of projected cash flow, projected changes in
financial  position and  projected  income and a description  of the  underlying
assumptions  applicable  thereto  and (ii) the  amount of Loans and  Letters  of
Credit projected to be outstanding hereunder on a month-by-month basis), and, as
soon as available, significant revisions, if any, of such budget and projections
with  respect to such  fiscal  year  (collectively,  the  "Projections"),  which
Projections  shall in each case be accompanied by a certificate of a Responsible
Officer  stating  that  such  Projections  are  based on  reasonable  estimates,
information and assumptions and that such  Responsible  Officer has no reason to
believe  that such  Projections  are  incorrect  or  misleading  in any material
respect;

         (c) within 45 days after the end of each fiscal quarter of the Borrower
(or 90 days in the case of the last  fiscal  quarter of the  fiscal  year of the
Borrower),  a narrative  discussion and analysis of the financial  condition and
result of  operations  of the  Borrower  and its  Subsidiaries  for such  fiscal
quarter and for the period from the beginning of the then current fiscal year to
the end of such fiscal  quarter,  as compared to the  comparable  periods of the
previous  year  (which may  consist of a Form 10-Q or 10-K,  as the case may be,
filed with the SEC);

         (d) no later than 10 Business Days prior to the effectiveness  thereof,
copies of  substantially  final  drafts of any proposed  amendment,  supplement,
waiver or other  modification  with  respect  to the  Senior  Subordinated  Note
Indenture;

         (e) within five days after the same are sent,  copies of all  financial
statements  and reports that the  Borrower  sends to the holders of any class of
its debt securities or public equity  securities and, within five days after the
same are filed, copies of all financial statements and reports that the Borrower
may make to, or file with, the SEC,  excluding Form 4 and other filings relating
to shareholdings of directors or officers of the Borrower; and

<PAGE>

                                                                              39

         (f) promptly,  such additional  financial and other  information as any
Lender may from time to time reasonably request.

         6.3 Payment of Obligations.  Pay,  discharge or otherwise satisfy at or
before  maturity or before they become  delinquent,  as the case may be, all its
material  obligations  of whatever  nature,  except where the amount or validity
thereof is currently  being  contested in good faith by appropriate  proceedings
and reserves in conformity  with GAAP with respect thereto have been provided on
the books of the Borrower or its Subsidiaries, as the case may be.

         6.4 Maintenance of Existence;  Compliance.  (a) (i) Preserve, renew and
keep in full  force  and  effect  its  corporate  existence  and  (ii)  take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable  in the  normal  conduct of its  business,  except,  in each case,  as
otherwise permitted by Section 7.4 and except, in the case of clause (ii) above,
to the extent that failure to do so could not  reasonably  be expected to have a
Material  Adverse Effect;  and (b) comply with all  Contractual  Obligations and
Requirements of Law except to the extent that failure to comply  therewith could
not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

         6.5  Maintenance of Property;  Insurance.  (a) Keep all property useful
and necessary in its business in good working order and condition, ordinary wear
and  tear  excepted  and (b)  maintain  with  financially  sound  and  reputable
insurance  companies  insurance on all its property in at least such amounts and
against  at least  such  risks (but  including  in any event  public  liability,
product  liability and business  interruption) as are usually insured against in
the same general area by companies engaged in the same or a similar business.

6.6  Inspection  of Property;  Books and Records;  Discussions.  (a) Keep proper
books of  records  and  account  in which  full,  true and  correct  entries  in
conformity,  in all material  respects,  with GAAP and all  Requirements  of Law
shall be made of all dealings and  transactions  in relation to its business and
activities and (b) permit representatives of any Lender to visit and inspect any
of its  properties  and  examine  and make  abstracts  from any of its books and
records at any  reasonable  time (upon  reasonable  notice)  and as often as may
reasonably be desired (providing that, so long as no Default or Event of Default
has occurred and is  continuing,  such visits (other than by the  Administrative
Agent)  shall not occur more than once  annually)  and to discuss the  business,
operations, properties and financial and other condition of the Borrower and its
Subsidiaries  with officers and  employees of the Borrower and its  Subsidiaries
and, in the case of the  Administrative  Agent,  with its independent  certified
public accountants.

         6.7 Notices.  Promptly give notice to the Administrative Agent and each
Lender of:

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

         (b)  any  (i)  default  or  event  of  default  under  any  Contractual
Obligation  of the  Borrower  or any of its  Subsidiaries  or  (ii)  litigation,
investigation  or proceeding  that may exist at any time between the Borrower or
any of its  Subsidiaries and any  Governmental  Authority,  that in either case,
could reasonably be expected to have a Material Adverse Effect;

         (c) any  litigation or proceeding  affecting the Borrower or any of its
Subsidiaries  in which the amount involved is $2,500,000 or more and not covered
by insurance or in which  injunctive  or similar  relief  imposing a cost to the
Borrower of $2,500,000 or more is sought;

<PAGE>

                                                                              40

         (d) the following  events,  as soon as possible and in any event within
30 days  after  the  Borrower  knows  or has  reason  to know  thereof:  (i) the
occurrence of any  reportable  Event with respect to any Plan, a failure to make
any required  contribution  to a Plan,  the creation of any Lien in favor of the
PBGC or a Plan or any withdrawal  form, or the  termination,  Reorganization  or
Insolvency of, any Multiemployer  Plan or (ii) the institution of proceedings or
the  taking of any  other  action by the PBGC or the  Borrower  or any  Commonly
Controlled Entity or any Multiemployer Plan with respect to the withdrawal from,
or the termination, Reorganization or Insolvency of, any Plan; and

         (e) any  development  or  event  that has had or  could  reasonably  be
expected to have a Material Adverse Effect.

Each notice  pursuant to this Section 6.7 shall be accompanied by a statement of
a responsible  Officer  setting  for6th  details of the  occurrence  referred to
therein and stating what action the Borrower or the relevant Subsidiary proposes
to take with respect thereto.

         6.8  Environmental  Laws.  (a)  Comply  with,  and take all  reasonable
efforts to ensure  compliance by all tenants and subtenants,  if any, with , all
applicable Environmental Laws, and obtain and comply with and maintain, and take
all  reasonable  efforts to ensu5re that all tenants and  subtenants  obtain and
comply  with  and  maintain,  any and all  licenses,  approvals,  notifications,
registrations or permits required by applicable  Environmental Laws, except when
failure  to do so could not  reasonably  be  expected  to  result in a  Material
Adverse Effect.

         (b) Conduct and  complete  all  investigations,  studies,  sampling and
testing,   and  all  remedial,   removal  and  other  actions   required   under
Environmental  Laws and promptly comply with all lawful orders and directives of
all Governmental  Authorities regarding  Environmental Laws, except when failure
to do so could not  reasonably  be  expected  to result  in a  Material  Adverse
Effect.

         6.9  Additional  Collateral,  etc.  (a) With  respect  to any  property
acquired  after the  Closing  Date by the  Borrower  or any of its  Subsidiaries
(other  than  property   acquired  by  any  Foreign   Subsidiary)  of  the  type
contemplated by the Guarantee and Collateral Agreement to constitute  Collateral
and as to which the Administrative  Agent, for the benefit of the Lenders,  does
not have a perfected Lien,  promptly take all actions  necessary or advisable to
grant to the  Administrative  Agent, for the benefit of the Lenders, a perfected
first priority security interest in such property (subject to Liens permitted by
Section  7.3),  including  the  filing  of  Uniform  Commercial  Code  financing
statements  in  such  jurisdictions  as may be  required  by the  Guarantee  and
Collateral  Agreement  or by law or as may be  requested  by the  Administrative
Agent.

         (b)  With  respect  to  any  new  Subsidiary   (other  than  a  Foreign
Subsidiary) created or acquired after the Closing Date by the Borrower or any of
its  Subsidiaries,  promptly  cause such new Subsidiary (i) to become a party to
the Guarantee and Collateral  Agreement,  (ii) to take such actions necessary or
advisable to grant to the Administrative  Agent for the benefit of the Lenders a
perfected first priority security  interest in the Collateral  (subject to Liens
permitted by Section 7.3)  described in the Guarantee and  Collateral  Agreement
with respect to such new Subsidiary,  including the filing of Uniform Commercial
Code  financing  statements  in such  jurisdictions  as may be  required  by the
Guarantee  and  Collateral  Agreement  or by law or as may be  requested  by the
Administrative  Agent  and  (iii)  to  deliver  to the  Administrative  Agent  a
certificate  of such  Subsidiary,  substantially  in the form of Exhibit C, with
appropriate insertions and attachments.

<PAGE>
                                                                              41

                         SECTION 7. NEGATIVE COVENANTS

          The Borrower  hereby  agrees  that,  so long as the  Revolving  Credit
Commitments  remain in effect,  any Letter of Credit remains  outstanding or any
Loan or  other  amount  is  owing  to any  Lender  or the  Administrative  Agent
hereunder,  the Borrower shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly:

          7.1 Financial Condition Covenants.

          (a)  Consolidated  Leverage Ratio.  Permit the  Consolidated  Leverage
Ratio as at the last day of any period of four  consecutive  fiscal  quarters of
the Borrower to be greater than 3.50 to 1.0.

          (b) Consolidated Fixed Charge Coverage Ratio.  Permit the Consolidated
Fixed Charge Coverage Ratio for any period of four  consecutive  fiscal quarters
of the  Borrower  ending  during any period set forth  below to be less than the
ratio set forth below opposite such fiscal quarter:

                                                     Consolidated Fixed Charge
   Fiscal Quarter                                        Coverage Ratio

   Closing Date to and including the last day of          1.25 to 1.0
   the second fiscal quarter of fiscal year 2000
   The first day of the third fiscal quarter of           1.50 to 1.0
   fiscal year 2000 to and including the last day
   of the third fiscal quarter of fiscal year 2000
   The first day of the fourth fiscal quarter of          1.75 to 1.0
   fiscal year 2000 to and including the last day
   of the third fiscal quarter of fiscal year 2001
   The first day of the fourth fiscal quarter of          2.00 to 1.0
         fiscal year 2001 and thereafter

          (c) Consolidated Net Worth.  Permit Consolidated Net Worth at any time
to be less than $100,000,000.

          (d)  Consolidated Net Income.  Permit  Consolidated Net Income for any
period of four  consecutive  fiscal  quarters  of the  Borrower  to be less than
$1.00.

          7.2  Indebtedness.  Create,  issue,  incur,  assume,  become liable in
respect of or suffer to exist any indebtedness, except:

          (a) Indebtedness of any Loan Party pursuant to any Loan Document;

          (b)  Indebtedness  of  the  Borrower  to  any  Subsidiary  and  of any
Subsidiary Guarantor to the Borrower or any other Subsidiary;

          (c) (i)  Guarantee  Obligations  incurred  in the  ordinary  course of
business  by the  Borrower  or any of its  Subsidiaries  of  obligations  of any
Subsidiary Guarantor and (ii) Guarantee  Obligations,  in an aggregate principal
amount not to exceed  $2,000,000,  incurred by the Borrower in  connection  with
obligations of Strandel, Inc. under Indebtedness permitted by Section 7.2(i);
<PAGE>

                                                                              42

          (d) Indebtedness of the Borrower in respect of the Senior Subordinated
Notes in an aggregate principal amount not to exceed $93,000,000;

          (e) other  Indebtedness  outstanding  on the date hereof and listed on
Schedule 7.2(e) and any refinancings, refundings, renewals or extensions thereof
(without  increasing  the principal  amount  thereof or shortening  the maturity
thereof);

          (f)  Indebtedness  (including,   without  limitation,   Capital  Lease
Obligations)  secured  by Liens  permitted  by  Section  7.3(g) in an  aggregate
principal  amount  not to exceed  $10,000,000  (including,  if  applicable,  any
Attributable  Debt  incurred  pursuant  to this  paragraph  (f) at any one  time
outstanding;

          (g) Hedge  Agreements in respect of Indebtedness  otherwise  permitted
hereby,  so  long as  such  agreements  are not  entered  into  for  speculative
purposes;

          (h) the Surviving Letters of Credit;

          (i)  Indebtedness  of  Strandel,  Inc.  and its  Subsidiaries  under a
working  capital  facility  in an  aggregate  principal  amount  not  to  exceed
$22,000,000 at any one time outstanding;

          (j) Indebtedness of any Subsidiary that is not a Subsidiary  Guarantor
to any other Subsidiary that is not a Subsidiary Guarantor;

          (k)  Indebtedness  of  Strandel,  Inc.  and  its  Subsidiaries  to the
Borrower in an aggregate  principal amount not to exceed  $13,500,000 at any one
time outstanding;

          (l)  Indebtedness  of the Borrower and its  Subsidiaries in respect of
tenders for  performance,  performance  bonds, bid bonds,  appeal bonds,  surety
bonds and similar  obligations,  in each case provided in the ordinary course of
business;

          (m)  Indebtedness  arising  from  the  honoring  by a  bank  or  other
financial  institution  of a check,  draft or similar  instrument  drawn against
insufficient  funds in the  ordinary  course  of  business,  provided  that such
Indebtedness is extinguished within five Business Days of its incurrence;

          (n)  Indebtedness  in  respect  of  taxes,  assessments,  governmental
charges or levies,  claims or customs authorities and claims for labor, worker's
compensation,  materials and supplies to the extent that payment  therefor shall
not at the time be  required to be made in  accordance  with the  provisions  of
Section 6.3;

          (o)  Indebtedness  in respect of  judgments or awards to the extent an
Event of Default has not resulted therefrom;

          (p) Guarantee  Obligations incurred in the ordinary course of business
by any Foreign  Subsidiary  with  respect to  obligations  of any other  Foreign
Subsidiary;

<PAGE>

                                                                              43

          (q)  Indebtedness  of a Subsidiary  acquired after the date hereof and
Indebtedness of a Person merged or  consolidated  with or into the Borrower or a
Subsidiary  of the  Borrower  after the date  hereof in an  aggregate  principal
amount not to exceed $10,000,000 at any one time outstanding,  provided that (i)
such  Indebtedness   existed  at  the  time  of  such  acquisition,   merger  or
consolidation  and was not  created in  anticipation  of such  event,  (ii) such
acquisition,  merger  or  consolidation  is a  Permitted  Acquisition  and (iii)
immediately after giving effect to such acquisition, merger or consolidation, no
default or Event of Default shall have occurred and be continuing; and

          (r) additional Indebtedness of the Borrower or any of its Subsidiaries
in an aggregate principal amount (for the Borrower and all Subsidiaries, without
duplication) not to exceed $10,000,000 at any one time outstanding.

          7.3 Liens. Create,  incur, assume or suffer to exist any Lien upon any
of its property (including without limitation any trademark, trade name or other
intellectual  property, or any fixed assets),  whether or now owned or hereafter
acquired except for:

          (a) Liens for  taxes not yet due or that are being  contested  in good
faith by appropriate  proceedings,  provided that adequate reserves with respect
thereto are maintained on the books of the Borrower or its Subsidiaries,  as the
case may be, in conformity with GAAP;

          (b)    carriers',    warehousemen's,    merchanics',    materialmen's,
repairmen's,  landlord's or other like Liens  arising in the ordinary  course of
business  that are not  overdue  for a period  of more  than 60 days or that are
being contested in good faith by appropriate proceedings;

          (c) pledges or  deposits in  connection  with  workers'  compensation,
unemployment insurance and other social security legislation;

          (d) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases,  statutory obligations,  surety,  customer and
appeal bonds,  performance bonds and other obligations of a like nature incurred
in the ordinary course of business;

          (e) easements,  rights-of-way,  restrictions,  title defects and other
similar  encumbrances  incurred in the ordinary  course of business that, in the
aggregate,  are not substantial in amount and that do not in any case materially
detract from the value of the property  subject thereto or materially  interfere
with  the  ordinary  conduct  of  the  business  of the  Borrower  or any of its
Subsidiaries;

          (f) Liens in existence on the date hereof  listed on Schedule  7.3(f),
and  renewals,   extensions  or  replacements  thereof,   securing  Indebtedness
permitted by Section  7.2(e),  provided that no such Lien is spread to cover any
additional  property  after  the  Closing  Date  and  that  the  amount  of  the
indebtedness secured thereby is not increased;

          (g) Liens  securing  Indebtedness  of the  Borrower or any  Subsidiary
incurred  pursuant  to Section  7.2(f) to finance  the  acquisition  of fixed or
capital assets or to refinance such  Indebtedness,  provided that (i) such Liens
shall be created substantially simultaneously with the acquisition of such fixed
or  capital  assets  or such  refinancing,  (ii)  such  Liens do not at any time
encumber any property other than the property  financed by such Indebtedness and
(iii) the amount of Indebtedness secured thereby is not increased;

<PAGE>

                                                                              44

          (h) Liens created pursuant to the Security Documents;

          (i) judgment Liens pursuant to judgments not  constituting an Event of
Default pursuant to Section 8(h); and

          (j) any interest or title of a lessor, sublessor, licensee or licensor
under any lease,  sublease or license  entered into by the Borrower or any other
Subsidiary  in the ordinary  course of its business and covering only the assets
so leased, subleased or subject to such license;

          (k)  Liens in favor of  customs  and  revenue  authorities  to  secure
payment of customs duties in connection with the importation of goods;

          (l) Liens arising from  precautionary UCC financing  statement filings
regarding operating leases;

          (m) rights reserved to or vested in any governmental  agency by law or
regulation  to  control  or  regulate,  or  obligations  or duties  under law or
regulation  to any  governmental  agency  with  respect  to, the use of any real
property  or with  respect to any right,  power,  franchise,  grant,  license or
permit;

          (n)  present or future  zoning  laws or  regulations  or other laws or
regulations restricting the occupancy, use or enjoyment of real property;

          (o)  Liens on the  property  or  assets  of a Person  which  becomes a
Subsidiary as a result of an  acquisition  after the date hereof or which merges
or consolidates  with or into the Borrower or a Subsidiary of the Borrower after
the date hereof,  securing  Indebtedness  permitted by Section 7.2(q),  provided
that  (i)  such  Liens  existed  at the  time  of  the  acquisition,  merger  or
consolidation  and were not created in anticipation of such event, (ii) any such
Lien does not by its  terms  cover any  property  or assets  after the time such
Person  becomes a Subsidiary or the  occurrence of such merger or  consolidation
which  were not  covered  immediately  prior to the time such  Person  becomes a
Subsidiary or the occurrence of such merger or consolidation;

          (p)  Liens  on the  property  or  assets  of  Strandel,  Inc.  and its
Subsidiaries  existing  on the  date  hereof  listed  on  Schedule  7.3(f),  and
renewals,  extensions or  replacements  thereof which do not spread such Lien to
cover any  additional  property after the Closing Date and which do not increase
the amount of Indebtedness secured thereby; and

          (q) Liens not  otherwise  permitted by this Section so long as neither
(i) the  aggregate  outstanding  principal  amount  of the  obligations  secured
thereby nor (ii) the aggregate fair market value (determined as of the date such
Lien is incurred) of the assets subject  thereto exceeds (as to the Borrower and
all   Subsidiaries),   when  added  to  the  aggregate   outstanding  amount  of
Attributable Debt (other than Attributable Debt secured by Liens permitted under
Section 7.3(g)), $10,000,000 at any one time.

          7.4  Fundamental  Changes.  Enter into any  merger,  consolidation  or
amalgamation or liquidate, wind up or dissolve itself (or suffer any liquidation
or  dissolution),  or Dispose of, all or  substantially  all of its  property or
business, except that:

<PAGE>

                                                                              45

          (a) any Subsidiary of the Borrower may be merged or consolidated  with
or into the Borrower  (provided  that the Borrower  shall be the  continuing  or
surviving  corporation) or with or into any Subsidiary Guarantor,  provided that
the  Subsidiary  Guarantor  shall be the  continuing  or  surviving  corporation
(which, in the case of any such merger or consolidation involving a Wholly Owned
Subsidiary Guarantor shall be a Wholly Owned Subsidiary Guarantor);

          (b) any  Subsidiary  of the  Borrower any Dispose of any or all of its
assets  (upon  voluntary  liquidation  or  otherwise)  to  the  Borrower  or any
Subsidiary  Guarantor  (which,  in the case of a  Disposition  by a Wholly Owned
Subsidiary Guarantor, shall be a Wholly Owned Subsidiary Guarantor);

          (c) any Foreign  Subsidiary may be merged or consolidated with or into
another Foreign Subsidiary;

          (d) any  Foreign  Subsidiary  may  Dispose of any or all of its assets
(upon voluntary liquidation or otherwise) to another Foreign Subsidiary;

          (e) any  Person  may be  merged  or  consolidated  with  to  into  the
Borrower, if the Borrower is the surviving or continuing  corporation,  pursuant
to a Permitted Acquisition; and

          (f) any  Person  may be  merged  or  consolidated  with  or  into  any
Subsidiary of the Borrower, pursuant to a Permitted Acquisition.

          7.5 Disposition or Property.  Dispose of any of its property,  whether
now owned or hereafter  acquired,  or, in the case of any  Subsidiary,  issue or
sell any shares of such Subsidiary's Capital Stock to any Person, except:

          (a) the  Disposition of obsolete or worn out property,  or property no
longer  useful in the conduct of the  borrower's or its  Subsidiaries'  business
(and not material in amount), in each case in the ordinary course of business;

          (b) the sale of the inventory in the ordinary course of business;

          (c) Dispositions permitted by Section 7.4;

          (d) the sale or  issuance  of any  Subsidiary's  Capital  Stock to the
Borrower or any Wholly Owned Subsidiary Guarantor;

          (e) the Disposition of any aircraft or art held by the Borrower or its
Subsidiaries;

          (f) the Disposition of manufacturing  equipment in connection with the
relocation  to foreign  countries of certain  operations of the Borrower and its
Domestic  Subsidiaries,  so long as the aggregate Net Cash Proceeds  received in
connection therewith does not exceed $2,500,000;

          (g) the  Disposition  of warehouse  space and related real property of
the Borrower and its Subsidiaries in the ordinary course of business;

          (h) the  Disposition or issuance of any Foreign  Subsidiary's  Capital
Stock to any other Foreign Subsidiary;
<PAGE>

                                                                              46

          (i)  licenses  of  Intellectual  Property  in the  ordinary  course of
business of the Borrower or any of its Subsidiaries;

          (j) the lease or sublease by the  Borrower or any of its  Subsidiaries
of any real property in the ordinary course of business;

          (k) transfers of property or assets  subject to a Recovery Event to or
at  the  direction  of  a  governmental  agency  or  authority  or  insurer,  as
applicable;

          (l) the Disposition of accounts  receivable arising in connection with
the compromise or collection thereof; and

          (m) the  Disposition of other property  having a fair market value not
to exceed $10,000,000 in the aggregate for any fiscal year of the Borrower.

          7.6  Restricted  Payments.  Declare or pay any  dividend  (other  than
dividends payable solely in common stock of the Person making such dividend) on,
or make any  payment on account  of, or set apart  assets for a sinking or other
analogous fund for, the purchase,  redemption,  defeasance,  retirement or other
acquisition of, any Capital Stock of the Borrower or any Subsidiary, whether now
or hereafter  outstanding,  or make any other  distribution in respect  thereof,
either directly or indirectly,  whether in cash or property or in obligations of
the Borrower or any Subsidiary  (collectively,  "Restricted  Payments"),  except
that:

          (a) any Subsidiary may make Restricted Payments to the Borrower or any
Subsidiary Guarantor (which, in the case of Restricted Payments made by a Wholly
Owned Subsidiary Guarantor, shall be a Wholly Owned Subsidiary Guarantor);

          (b) the Borrower may  repurchase its common stock so long as (i) after
giving  effect  thereto,  the Basket Amount shall not be less than zero and (ii)
the  aggregate  amount  expended  in  connection   therewith  shall  not  exceed
$10,000,000 in any fiscal year of the Borrower or $25,000,000 during the term of
this Agreement;

          (c) the Borrower may  purchase the  Borrower's  common stock or common
stock  options from  present or former  officers or employees of the Borrower or
any Subsidiary  upon the death,  disability or termination of employment of such
officer or employee,  provided, that the aggregate amount of payments under this
paragraph (c) after the date hereof shall not exceed $5,000,000; and

          (d) any Foreign  Subsidiary may make Restricted  Payments to any other
Foreign Subsidiary.

          7.7  Capital  Expenditures.  Make any Capital  Expenditure  during any
fiscal year ending on or after December 31, 2000, except Capital expenditures of
the  Borrower  and its  Subsidiaries  in the  ordinary  course of  business  not
exceeding $80,000,000 in the 2000 fiscal year and $85,000,000 in any fiscal year
thereafter;  provided,  that (i) any such amount  referred  to above,  if not so
expended in the fiscal year for which it is permitted and if no Default or Event
of Default has occurred and is continuing at the end of such fiscal year, may be
carried over for expenditure in the next succeeding fiscal year and (ii) Capital
Expenditures  made  pursuant to this Section 7.7 during any fiscal year shall be
deemed  made,  first,  in respect of amounts  permitted  for such fiscal year as
provided above and,  second,  in respect of amounts  carried over form the prior
fiscal year pursuant to subclause (i) above.

<PAGE>

                                                                              47

          7.8 Investments.  Make any advance,  loan, extension of credit (by way
of guaranty or otherwise) or capital contribution to, or purchase of any Capital
Stock,  bonds,  notes,  debentures  or other debt  securities  of, or any assets
constituting  a business  unit of, or make any other  investment  in, any Person
(all of the foregoing, "Investments"), except:

          (a) extensions of trade credit in the ordinary course of business;

          (b) investments in Cash Equivalents;

          (c) Guarantee Obligations permitted by Section 7.2;

          (d) loans and advances to employees of the Borrower or any  Subsidiary
of the  Borrower  in the  ordinary  course of  business  (including  for travel,
entertainment  and relocation  expenses) in an aggregate amount for the Borrower
or any  Subsidiary  of the  Borrower  not to exceed  $1,000,000  at any one time
outstanding;

          (e)   intercompany   investments   by  the  Borrower  or  any  of  its
Subsidiaries in the Borrower or any Person that, prior to such investment,  is a
Subsidiary  Guarantor (or, in the case of any such  Investment by a Wholly Owned
Subsidiary  Guarantor,  in the  Borrower  or any  Person  that,  prior  to  such
investment, is a Wholly Owned Subsidiary Guarantor);

          (f) Permitted  Acquisitions  so long as, after giving effect  thereto,
the Basket Amount shall not be less than zero;

          (g) the  acquisition by the Borrower of the remaining  common stock of
Strandel,  Inc.  not  already  owned by it for a purchase  price which shall not
exceed that calculated in accordance with the Unanimous  Shareholders  Agreement
among the Borrower,  Freemark Entertainment Corporation and Strandel, Inc. dated
July 31, 1999, as in effect on the Closing Date,  provided that (i) the Borrower
shall be in  compliance,  on a pro  forma  basis  after  giving  effect  to such
acquisition,  with  the  covenants  contained  in  Section  7.1,  in  each  case
recomputed as at the last day of the most recently  ended fiscal  quarter of the
Borrower for which the relevant  information is available as if such acquisition
had  occurred  on the  first  day of  each  relevant  period  for  testing  such
compliance (as demonstrated in a certificate of a Responsible  Officer delivered
to the  Administrative  Agent not less than  three  Business  Days prior to such
acquisition)  and (ii) no Default or Event of Default shall have occurred and be
continuing, or would occur after giving effect to such acquisition;

          (h) Investments in equity securities  regularly traded over recognized
national  exchanges in an aggregate amount not to exceed $10,000,000 (net of any
return of capital in respect thereof);

          (i)  Investments  received in connection with  Dispositions  permitted
hereunder;

          (j)  Investments   received  in  connection  with  the  bankruptcy  or
reorganization  of suppliers  and  customers  and in  settlement  of  delinquent
obligations of, and other disputes with,  customers and suppliers arising in the
ordinary course of business;

<PAGE>

                                                                              48

          (k) Investments consisting of loans to vendors of the Borrower and its
Subsidiaries not to exceed  $1,000,000 in aggregate  principal amount at any one
time outstanding;

          (l) deposits to secure payments in the ordinary course of business;

          (m)  redemption  of  the  Senior  Subordinated  Notes  to  the  extent
permitted under Section 7.9;

          (n)  repurchases by the Borrower of its common stock or options to the
extent permitted under Section 7.6;

          (o)  intercompany  Investments  by a Foreign  Subsidiary  in any other
Foreign Subsidiary;

          (p)  Investments  in Foreign  Subsidiaries  or joint  ventures  not to
exceed  $5,000,000  in any fiscal  year (net of any return of capital in respect
thereof);

          (q) Investments permitted pursuant to Section 7.2(k); and

          (r) In addition to Investments  otherwise  expressly permitted by this
Section,  Investments by the Borrower or any of its Subsidiaries in an aggregate
amount  (valued  at  cost)  not to  exceed  $5,000,000  during  the term of this
Agreement.

          7.9 Payments and Modifications of Certain Debt  Instruments.  (a) Make
or  offer  to make any  payment,  prepayment,  repurchase  or  redemption  of or
otherwise defease or segregate funds with respect to the principal amount of the
Senior  Subordinated Notes, other than (i) redemption of the Senior Subordinated
Notes so long as, after giving  effect  thereto,  the Basket Amount shall not be
less than  zero and (ii) in  addition,  redemption's  of  $18,000,000  aggregate
principal amount of the Senior Subordinated Notes,  provided that, in each case,
no Default or Event of Default  shall have  occurred and be  continuing or would
occur after giving effect thereto, (b) amend, modify, waive or otherwise change,
or consent or agree to any amendment,  modification,  waiver or other change to,
any of  the  terms  of the  Senior  Subordinated  Notes  (other  than  any  such
amendment, modification, waiver or other change that (i) would not be materially
adverse to the interests of the Lenders and (ii) does not involve the payment of
a consent fee), or (c) designate any Indebtedness (other than obligations of the
Loan Parties pursuant to the Loan Documents) as "Designated Senior Indebtedness"
(or any  comparable  concept) for the purposes of the Senior  Subordinated  Note
Indenture.

          7.10  Transactions  with  Affiliates.   Enter  into  any  transaction,
including any purchase,  sale,  lease or exchange of property,  the rendering of
any service or the payment of any management, advisory or similar fees, with any
Affiliate  (other  than   transactions  with  the  Borrower  or  any  Subsidiary
transactions  described in the notes to the Borrower's  financial statements for
the period ended  December 31, 1998 and  continuations,  renewals or  extensions
thereof,  and  payment  of  compensation,  fees,  expenses  and  indemnities  to
directors  and  officers  of the  Borrower  and its  Subsidiaries)  unless  such
transaction is (a) otherwise permitted under this Agreement, (b) in the ordinary
course of business of the  Borrower or such  Subsidiary  as the case may be, and
(c) upon fair and  reasonable  terms no less  favorable  to the Borrower or such
Subsidiary,  as the case may be,  than it would  obtain  in a  comparable  arm's
length transaction with a Person that is not an Affiliate.

          7.11 Sales and Leasebacks.  Enter into any arrangement with any Person
providing for the leasing by the Borrower or any  Subsidiary of real or personal
property that has been or is to be sold or  transferred  by the Borrower or such
Subsidiary  to such Person or to any other Person to whom funds have been or are
to be  advanced  by such  Person  on the  security  of such  property  or rental
obligations  of the Borrower or such  Subsidiary  unless,  after  giving  effect
thereto,  the  aggregate  outstanding  amount of  Attributable  Debt (other than
Attributable  Debt secured by Liens permitted under Section 7.3(g)),  when added
to the aggregate  amount utilized  pursuant to Section  7.3(q),  does not exceed
$10,000,000.
<PAGE>

                                                                              49

          7.12 Changes in Fiscal Periods. Permit the fiscal year of the Borrower
to end on a day other  than  December  31 or  change  the  Borrower's  method of
determining  fiscal  quarters,  provided that the Borrower may change its fiscal
year to end on or about the last day of January and the  Borrower may change its
method of determining fiscal quarters  consistent with methods  customarily used
in the retail apparel business.

          7.13 Negative Pledge Clauses.  Enter into or suffer to exist or become
effective any agreement  that prohibits or limits the ability of the Borrower or
any of the Subsidiary Guarantors to create, incur, assume or suffer to exist any
Lien upon any of its  property  or  revenues,  whether  now  owned or  hereafter
acquired, other than (a) this Agreement, the other Loan Documents and the Senior
Subordinated  Note  Indenture,  (b) any agreements  governing any purchase money
Liens or Capital Lease Obligations (or refinancings thereof) otherwise permitted
hereby (in which case, any  prohibition  or limitation,  shall only be effective
against the assets financed thereby) and (c) Hedge Agreements with any Lender or
any  Affiliate  of any  Lender  (so long as the  relevant  restrictions  are not
materially more  restrictive than the comparable  restrictions  contained in the
Loan Documents).

          7.14  Clauses  Restricting  Subsidiary  Distributions.  Enter  into or
suffer to exist or become  effective any consensual  encumbrances or restriction
on the ability of any subsidiary of the Borrower to (a) make Restricted Payments
in  respect  of any  Capital  Stock  of  such  Subsidiary  held  by,  or pay any
Indebtedness owed to, the Borrower or any other Subsidiary of the Borrower,  (b)
make loans or advances  to, or other  Investments  in, the Borrower or any other
Subsidiary  of the Borrower or (c) transfer any of its assets to the Borrower or
any  other  Subsidiary  of  the  Borrower,   except  for  such  encumbrances  or
restrictions  existing under or by reason of (i) any restrictions existing under
the  Loan  Documents  and the  Senior  Subordinated  Note  Indenture,  (ii)  any
restrictions with respect to a Subsidiary  imposed pursuant to an agreement that
has been entered into in connection with the Disposition of all or substantially
all of  the  Capital  Stock  or  assets  of  such  Subsidiary,  (iii)  customary
restrictions  regarding  assignments of leases and licenses,  (iv) provisions in
Indebtedness  of  Foreign  Subsidiaries  permitted  hereunder  (so  long as such
provisions are applicable only to the relevant Foreign Subsidiaries) and (v) any
restrictions  contained in Hedge  Agreements with any Lender or any Affiliate of
any  Lender  that  are not  materially  more  restrictive  than  the  comparable
restrictions contained in the Loan Documents.

          7.15 Lines of Business.  Enter into any business,  either  directly or
through any Subsidiary, except for the Apparel Businesses.

                          SECTION 8. EVENTS OF DEFAULT

          If any of the following events shall occur and be continuing:

          (a)  the  Borrower  shall  fail to pay any  principal  of any  Loan or
Reimbursement  Obligation when due in accordance  with the terms hereof;  or the
Borrower shall fail to pay any interest on any Loan or Reimbursement Obligation,
or any other amount payable  hereunder or under any other Loan Document,  within
five days after any such interest or other amount becomes due in accordance with
the terms hereof; or
<PAGE>

                                                                              50

          (b) any  representation  or  warranty  made or deemed made by any Loan
Party  herein  or in any  other  Loan  Document  or  that  is  contained  in any
certificate,  document or  financial or other  statement  furnished by it at any
time under or in connection  with this Agreement or any such other Loan Document
shall prove to have been inaccurate in any material respect on or as of the date
made or deemed made; or

          (c) any Loan Party shall default in the  observance or  performance of
any agreement contained in clause (i) or (ii) of Section 6.4(a) (with respect to
the Borrower only), Section 6.7(a) or Section 7 of this Agreement or Section 5.5
of the Guarantee and Collateral Agreement; or

          (d) any Loan Party shall default in the  observance or  performance of
any other  agreement  contained  in this  Agreement  or any other Loan  Document
(other than as provided in paragraphs (a) through (c) of this Section), and such
default shall  continue  unremedied  for a period of 30 days after notice to the
Borrower from the Administrative Agent or the Required Lenders; or

          (e) the  Borrower  or any of its  Subsidiaries  shall (i)  default  in
making any payment of any principal of any Indebtedness (including any Guarantee
Obligation,  but excluding the Loans) on the scheduled or original due date with
respect  thereto,  or (ii)  default in making any payment of any interest on any
such Indebtedness beyond the period of grace, if any, provided in the instrument
or agreement under which such Indebtedness was created,  or (iii) default in the
observance or  performance of any other  agreement or condition  relating to any
such  Indebtedness  or contained  in any  instrument  or  agreement  evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the effect of which  default or other  event or  condition  (in the case of this
clause  (iii)  only) is to cause  such  Indebtedness  to become due prior to its
stated  maturity  or (in  the  case  of any  such  Indebtedness  constituting  a
Guarantee  Obligation) to become  payable;  provided,  that a default,  event or
condition  described in clause (i),  (ii), or (iii) of this  paragraph (e) shall
not at any time constitute an Event of Default unless, at such time, one or more
defaults,  events or conditions  of the type  described in clauses (i), (ii) and
(iii) of this  paragraph (e) shall have occurred and be continuing  with respect
to  Indebtedness  the  outstanding  principal  amount  of which  exceeds  in the
aggregate $2,500,000; or

          (f)  (i)  the  Borrower  or  any of its  Material  Subsidiaries  shall
commence any case,  proceeding  or other action (A) under any existing or future
law  of  any  jurisdiction,   domestic  or  foreign,   relating  to  bankruptcy,
insolvency,  reorganization  or relief of debtors,  seeking to have an order for
relief  entered  with respect to it, or seeking to  adjudicate  it a bankrupt or
insolvent,  or  seeking  reorganization,  arrangement,  adjustment,  winding-up,
liquidation,  dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator
or other  similar  official  for it or for all or any  substantial  party of its
assets, or the Borrower or any of its Material Subsidiaries shall make a general
assignment  for the benefit of its  creditors;  or (ii) there shall be commenced
against the Borrower or any of its Material Subsidiaries any case, proceeding or
other action of a nature referred to in clause (i) above that (A) results in the
entry of an order for  relief or any such  adjudication  or  appointment  or (B)
remains undismissed,  undischarged or unbonded for a period of 60 days; or (iii)
there  shall  be  commenced   against  the  Borrower  or  any  of  its  Material
Subsidiaries any case,  proceeding or other action seeking issuance of a warrant
of  attachment,  execution,  distraint  or similar  process  against  all or any
substantial  part of its  assets  that  results in the entry of an order for any
such relief  that shall not have been  vacated,  discharged  or stayed or bonded
pending  appeal within 60 days from the entry  thereof,  or (iv) the Borrower or
any of its Material  Subsidiaries  shall take any action in  furtherance  of, or
indicating its consent to, approval of, or acquiescence  in, any of the acts set
forth in clause (i),  (ii),  or (iii)  above;  or (v) the Borrower or any of its
Material Subsidiaries shall generally not, or shall be unable to, or shall admit
in writing its inability to, pay its debts as they become due; or
<PAGE>

                                                                              51

          (g) (i) any Person shall engage in any  "prohibited  transaction"  (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated  funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan or any Lien in favor
of the PBGC or a Plan shall arise on the assets of the  Borrower or any Commonly
Controlled  Entity,  (iii) a  Reportable  Event shall occur with  respect to, or
proceedings  shall commence to have a trustee  appointed,  or a trustee shall be
appointed,  to administer  or to  terminate,  any Single  Employer  Plan,  which
Reportable  Event or commencement of proceedings or appointment of a trustee is,
in the  reasonable  opinion  of the  Required  Lenders,  likely to result in the
termination  of such Plan for  purposes  of Title IV of ERISA,  (iv) any  Single
Employer  Plan  shall  terminate  for  purposes  of Title IV of  ERISA,  (v) the
Borrower or any Commonly  Controlled Entity shall, or in the reasonable  opinion
of the Required  Lenders is likely to, incur any liability in connection  with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or
(vi) any other event or  condition  shall occur or exist with respect to a Plan;
and in each case in clauses (i) through  (vi)  above,  such event or  condition,
together with all other such events or conditions,  if any, could  reasonably be
expected to have a Material Adverse Effect; or

          (h) one or more  judgements  or decrees  shall be entered  against the
Borrower or any of its Subsidiaries  involving in the aggregate a liability (not
paid or fully  covered by insurance as to which the relevant  insurance  company
has  acknowledged  coverage) of  $2,500,000 or more,  and all such  judgments or
decrees shall not have been vacated, discharged, stayed or bonded pending appeal
within 60 days from the entry thereof, or

          (i)  the  occurrence  of one or more of the  events  or  circumstances
described in Section 4.12 that, in the aggregate,  could  reasonably be expected
to have a Material Adverse Effect; or

          (j)  the  occurrence  of one or more of the  events  or  circumstances
described in Section 4.17 that, in the aggregate,  could  reasonably be expected
to have a Material Adverse Effect; or

          (k) any of the Security  Documents shall cease, for any reason,  to be
in full force and effect,  or any Loan Party or any  Affiliate of any Loan Party
shall so assert,  or any Lien  created by any of the  Security  Documents  shall
cease to be  enforceable  and of the same effect and  priority  purported  to be
created thereby (other than in connection with a transaction expressly permitted
hereunder); or

          (l)  the  guarantee  contained  in  Section  2 of  the  Guarantee  and
Collateral Agreement shall cease, for any reason, to be in full force and effect
or any Loan Party or any Affiliate of any Loan Party shall so assert; or

          (m) (i) any  "person"  or  "group"  (as such terms are used in Section
13(d)  and  14(d) of the  Securities  Exchange  Act of  1934,  as  amended  (the
"Exchange  Act")),  excluding the Permitted  Investor,  shall become,  or obtain
rights  (whether  by means or  warrants,  options  or  otherwise)  to become the
"beneficial  owner" (as defined in Rules  13(d)-3 and 13(d)-5 under the Exchange
Act),  directly or indirectly,  of more than 35% of the outstanding common stock
of the  Borrower;  (ii) the board of directors  of the  Borrower  shall cease to
consist of a majority of Continuing  Directors,  or (iii) a Specified  Change of
Control shall occur; or

<PAGE>

                                                                              52

          (n) the Senior  Subordinated  Notes shall cease, for any reason, to be
validly subordinated to the Obligations,  as provided in the Senior Subordinated
Note  Indenture,  or any Loan Party or any  Affiliate of any Loan Party shall so
assert;

then, and in any such event, (A) if such event is an Event of Default  specified
in clause  (i) or (ii) of  paragraph  (f) above with  respect  to the  Borrower,
automatically the Revolving Credit  Commitments shall immediately  terminate and
the Loans hereunder (with accrued interest thereon) and all other amounts owning
under this Agreement and the other Loan Documents  (including all amounts of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) shall immediately
become due and  payable,  and (B) if such event is any other  Event of  Default,
either or both of the  following  actions may be taken:  (i) with the consent of
the Required Lenders,  the Administrative  Agent may, or upon the request of the
Required  Lenders,  the  Administrative  Agent shall,  by notice to the Borrower
declare the Revolving Credit Commitments to be terminated  forthwith,  whereupon
the Revolving Credit Commitments shall immediately terminate;  and (ii) with the
consent of the  Required  Lenders,  the  Administrative  Agent may,  or upon the
request of the Required Lenders,  the  Administrative  Agent shall, by notice to
the Borrower,  declare the Loans hereunder (with accrued  interest  thereon) and
all other  amounts  owing  under this  Agreement  and the other  Loan  Documents
(including all amounts of L/C Obligations,  whether or not the  beneficiaries of
the then  outstanding  Letters of Credit  shall  have  presented  the  documents
required  thereunder) to be due and payable forthwith,  whereupon the same shall
immediately  become due and payable.  With respect to all Letters of Credit with
respect to which presentment for honor shall not have occurred at the time of an
acceleration  pursuant to this paragraph the Borrower shall at such time deposit
in a cash collateral account opened by the Administrative  Agent an amount equal
to the aggregate  then undrawn and  unexpired  amount of such Letters of Credit.
Amounts  held  in  such  cash  collateral   account  shall  be  applied  by  the
Administrative  Agent to the  payment  of drafts  drawn  under  such  Letters of
Credit,  and the unused  portion  thereof after all such Letters of Credit shall
have expired or been fully drawn upon,  if any,  shall be applied to repay other
obligations of the Borrower hereunder and under the other Loan Documents.  After
all such  Letters of Credit  shall have  expired or been fully drawn  upon,  all
Reimbursement Obligations shall have been satisfied and all other obligations of
the Borrower  hereunder and under the other Loan Documents  shall have been paid
in full, the balance,  if any, in such cash collateral account shall be returned
to the  Borrower  (or such other  Person as may be lawfully  entitled  thereto).
Except as expressly provided above in this Section, presentment, demand, protest
and all other notices of any kind are hereby expressly waived by the Borrower.

                             SECTION 9. THE AGENTS

          9.1  Appointment.   Each  Lender  hereby  irrevocably  designates  and
appoints  the  Administrative  Agent as the  agent  of such  Lender  under  this
Agreement  and the  other  Loan  Documents,  and each  such  Lender  irrevocably
authorizes the  Administrative  Agent, in such capacity,  to take such action on
its behalf under the  provisions of this  Agreement and other Loan Documents and
to exercise  such powers and perform such duties as are  expressly  delegated to
the  Administrative  Agent by the terms of this  Agreement  and the  other  Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding  any provision to the contrary elsewhere in this Agreement,  the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or 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 Administrative Agent.
<PAGE>

                                                                              53

          9.2 Delegation of Duties. The Administrative  Agent may execute any of
the duties  under this  Agreement  and the other  Loan  Documents  by or through
agents  or  attorneys-in-fact  and  shall  be  entitled  to  advice  of  counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not  be  responsible   for  the  negligence  or  misconduct  of  any  agents  or
attorneys-in-fact selected by it with reasonable care.

          9.3  Exculpatory  Provisions.  Neither  any  Agent  nor  any of  their
respective  officers,   directors,   employees,  agents,   attorneys-in-fact  or
affiliates  shall be (i) liable for any action  lawfully  taken or omitted to be
taken by it or such Person  under or in  connection  with this  Agreement or any
other Loan Document (except to the extent that any of the foregoing are found by
a final and nonappealable  decision of a court of competent jurisdiction to have
resulted from its or such Person's own gross  negligence or willful  misconduct)
or (ii)  responsible  in any  manner  to any of the  Lenders  for any  recitals,
statements,  representations or warranties made by the Loan Party or any officer
thereof  contained  in this  Agreement  or any  other  Loan  Document  or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agents under or in  connection  with,  this  Agreement or any
other Loan  Document  or for the value,  validity,  effectiveness,  genuineness,
enforceability  or  sufficiency  of this Agreement or any other Loan Document or
for any  failure of any Loan Party a party  thereto to perform  its  obligations
hereunder or  thereunder.  The Agents shall not 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 Loan Party.

          9.4 Reliance by Administrative  Agent. The Administrative  Agent shall
be  entitled  to rely,  and  shall  be  fully  protected  in  relying,  upon any
instrument,  writing,  resolution,  notice,  consent,  certificate,   affidavit,
letter, telecopy, telex or teletype message,  statement, order 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  Borrower),  independent
accountants  and  other  experts  selected  by  the  Administrative  Agent.  The
Administrative  Agent may deem and treat the payee of any note evidencing  Loans
as the owner  thereof for all purposes  unless a written  notice of  assignment,
negotiation  or transfer  thereof shall have been filed with the  Administrative
Agent. The Administrative  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 (or, if
so specified by this Agreement, all Lenders) as it deems appropriate or it shall
first be  indemnified  to its  satisfaction  by the Lenders  against any and all
liability  and  expense  that may be  incurred  by it by  reason  of  taking  or
continuing to take any such action. The Administrative  Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this Agreement
and the other  Loan  Documents  in  accordance  with a request  of the  Required
Lenders (or, if so specified by this Agreement,  all Lenders),  and such request
and any action  taken or failure to act pursuant  thereto  shall be binding upon
all the Lenders and all future holders of the Loans.

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

                                                                              54

          9.6  Non-Reliance on Agents and Other Lenders.  Each Lender  expressly
acknowledges  that  neither  the  Agents nor any of their  respective  officers,
directors,  employees,  agents,  attorneys-in-fact  or affiliates  have made any
representations  or  warranties  to it and that no act by any Agent  hereinafter
taken, including any review of the affairs of a Loan Party or any affiliate of a
Loan Party,  shall be deemed to constitute any representation or warranty by any
Agent  to any  Lender.  Each  Lender  represents  to the  Agents  that  it  has,
independently and without reliance upon any Agent or any other Lender, and based
on such  documents and  information as it has deemed  appropriate,  made its own
appraisal  of  and  investigation  into  the  business,  operations,   property,
financial and other condition and creditworthiness of the Loan Parties and their
affiliates and made its own decision to make its Loans hereunder enter into this
Agreement.  Each Lender also represents that it will,  independently and without
reliance  upon any Agent or any other  Lender,  and based on such  documents and
information  as it  has  deemed  appropriate,  made  its  own  appraisal  of and
investigation  into the  business,  operations,  property,  financial  and other
condition and creditworthiness of the Loan Parties and their affiliates and made
its own decision to make its Loans hereunder and enter into this Agreement. Each
Lender also represents that it will, independently and without reliance upon any
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  analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents,  and to make such  investigation as it deems necessary
to inform itself as to the business,  operations,  property, financial and other
condition and creditworthiness of the Loan Parties and their affiliates.  Except
for notices,  reports and other documents  expressly required to be furnished to
the Lenders by the  Administrative  Agent hereunder,  the  Administrative  Agent
shall not have any duty or  responsibility to provide any Lender with any credit
or other information concerning the business,  operations,  property,  condition
(financial or otherwise), prospects or creditworthiness of any Loan Party or any
affiliate  of  a  Loan  Party  that  may  come  into  the   possession   of  the
Administrative  Agent  or any of its  officers,  directors,  employees,  agents,
attorneys-in-fact or affiliates.

          9.7 Indemnification.  The Lenders agree to indemnify each Agent in its
capacity  as such (to the extent not  reimbursed  by the  Borrower  and  without
limiting the  obligation of the Borrower to do so),  ratably  according to their
respective  Aggregate  Exposure  Percentages  in  effect  on the  date on  which
indemnification  is sought under this Section (or, if  indemnification is sought
after the date upon which the Revolving Credit Commitments shall have terminated
and the Loans  shall  have been paid in full,  ratably in  accordance  with such
Aggregate Exposure Percentages immediately prior to such date), from and against
any and all  liabilities,  obligations,  losses,  damages,  penalties,  actions,
judgments,  suits, costs,  expenses or disbursements of any kind whatsoever that
may at any time  (whether  before or after the  payment of the Loans) be imposed
on, incurred by or asserted against such Agent in any way relating to or arising
out of the Revolving Credit Commitments,  this Agreement,  any of the other Loan
Documents or any documents  contemplated  by or referred to herein or therein or
the transactions  contemplated  hereby or thereby or any action taken or omitted
by such Agent under or in connection with any of the foregoing; provided that no
Lender  shall be liable  for the  payment of any  portion  of such  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses or disbursements  that are found by a final and nonappealable  decision
of a court of competent  jurisdiction  to have  resulted from such Agent's gross
negligence or willful  misconduct.  The agreements in this Section shall survive
the payment of the Loans and all other amounts payable hereunder.

          9.8 Agent in Its  Individual  Capacity.  Each Agent and its affiliates
may make  loans to  accept  deposits  from and  generally  engage in any kind of
business with any Loan Party as though such Agent was not an Agent. With respect
to its Loans  made or  renewed  by it and with  respect  to any Letter of Credit
issued or  participated  in by it,  each Agent  shall  have the same  rights and
powers under this  Agreement and the other Loan  Documents as any Lender and may
exercise  the same as though it were not an Agent,  and the terms  "Lender"  and
"Lenders" shall include each Agent in its individual capacity.
<PAGE>

                                                                              55

          9.9  Successor  Administrative  Agent.  The  Administrative  Agent may
resign as  Administrative  Agent  upon 30 days'  notice to the  Lenders  and the
Borrower. If the Administrative Agent shall resign as Administrative Agent under
this  Agreement and the other Loan  Documents,  then the Required  Lenders shall
appoint  from  among  the  Lenders a  successor  agent  for the  Lenders,  which
successor  agent shall (unless an Event of Default under Section 8(a) or Section
8(f) with respect to the Borrower  shall have  occurred and be  continuing)  the
subject to approval by the Borrower  (which  approval shall not be  unreasonably
withheld or  delayed),  whereupon  such  successor  agent  shall  succeed to the
rights,   powers  and  duties  of  the   Administrative   Agent,  and  the  term
"Administrative  Agent"  shall mean such  successor  agent  effective  upon such
appointment and approval,  and the former Administrative  Agent's rights, powers
and duties as Administrative  Agent shall be terminated,  without any or further
act or  deed  on the  part of such  former  Administrative  Agent  or any of the
parties to this Agreement or any holders of the Loans. If no successor agent has
accepted  appointment  as  Administrative  Agent  by the  date  that  is 30 days
following a retiring Administrative Agent's notice of resignation,  the retiring
Administrative Agent's resignation shall nevertheless thereupon become effective
and the Lenders shall assume and perform all of the duties of the Administrative
Agent  hereunder  until such time,  if any, as the  Required  Lenders  appoint a
successor agent as provided for above. After any retiring Administrative Agent's
resignation  as  Administrative  Agent,  the  provisions of this Section 9 shall
inure to its benefit as to any actions  taken or omitted to be taken by it while
it was Administrative Agent under this Agreement and the other Loan Documents.

          9.10   Co-Agent.   The   Co-Agent   shall  not  have  any   duties  or
responsibilities hereunder in its capacity as such.

                           SECTION 10. MISCELLANEOUS

          10.1 Amendments and Waivers.  Neither this  Agreement,  any other Loan
Documents,  nor any terms  hereof or thereof  may be  amended,  supplemented  or
modified  except in accordance  with the  provisions  of this Section 10.1.  The
Required  Lenders and each Loan Party party to the relevant  Loan  Document may,
or, with the written consent of the Required Lenders,  the Administrative  Agent
and each Loan Party party to the relevant  Loan Document may, from time to time,
(a) enter into written  amendments,  supplements or modifications  hereto and to
the other  Loan  Documents  for the  purpose of adding  any  provisions  to this
Agreement  or the other Loan  Documents  or changing in any manner the rights of
the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on such
terms and conditions as the Required Lenders or the Administrative Agent, as the
case may be, may specify in such  instrument,  any of the  requirements  of this
Agreement or the other Loan Documents or any Default or Event of Default and its
consequences;  provided,  however,  that no such  waiver and no such  amendment,
supplement or modification  shall (i) forgive the principal amount or extend the
final  scheduled  date of  maturity  of any Loan,  reduce the stated rate of any
interest or fee payable  hereunder or extend the  scheduled  date of any payment
thereof,  or increase the amount or extend the  expiration  date of any Lender's
Revolving  Credit  Commitment,  in each case without the written consent of each
Lender directly affected thereby;  (ii) eliminate or reduce the voting rights of
any Lender under this  Section  10.1 with respect to any matter  covered by this
section  10.1  without  the written  consent of such  Lender,  (iii)  reduce any
percentage  specified  in the  definition  of Required  Lenders,  consent to the
assignment  or  transfer by the  Borrower  of any of its rights and  obligations
under this Agreement and the other Loan Documents,  release all or substantially
all of the  Collateral  or release all or  substantially  all of the  Subsidiary
Guarantors from their obligations under the Guarantee and Collateral  Agreement,
in each case without the written  consent of all Lenders;  (v) amend,  modify or
waive  any   provision  of  Section  9  without  the  written   consent  of  the
Administrative Agent; (v) amend, modify or waive any provision of Section 2.3 or
2.4 without the written consent of the Swingline Lender; or (v) amend, modify or
waive any  provision  of Section 3 without  the  written  consent of the Issuing
Lender. Any such waiver and any such amendment, supplement or modification shall
apply equally to each of the Lenders and shall be binding upon the Loan Parties,
the Lenders,  the  Administrative  Agent and all future holders of the Loans. In
the case of any waiver,  the Loan  Parties,  the Lenders and the  Administrative
Agent shall be restored to their former position and rights  hereunder and under
the other Loan  Documents,  and any Default or Event of Default  waived shall be
deemed to be cured and not  continuing;  but no such waiver  shall extend to any
subsequent or other Default or Event of Default,  or impair any right consequent
thereon.
<PAGE>

                                                                              56

          For the avoidance of doubt,  this Agreement may be amended (or amended
and  restated)  with  the  written   consent  of  the  Required   Lenders,   the
Administrative  Agent and the Borrower (a) to add one or more additional  credit
facilities  to this  Agreement (it being  understood  that a Lender shall not be
required to provide any such additional credit facilities  without such Lender's
consent) and to permit the  extensions  of credit from time to time  outstanding
thereunder and the accrued interest and fees in respect thereof to share ratably
in the  benefits  of this  Agreement  and the  other  Loan  Documents  with  the
Revolving  Extensions  of Credit and the  accrued  interest  and fees in respect
thereof  and (b) to  include  appropriately  the  Lenders  holding  such  credit
facilities in any determination of the Required Lenders.

          10.2  Notices.  All  notices,  requests  and  demands  to or upon  the
respective  parties  thereto to be effective  shall be in writing  (including by
telecopy),  and, unless otherwise  expressly  provided herein shall be deemed to
have been duly given or made when  delivered or three  Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received,   addressed   as  follows  in  the  case  of  the   Borrower  and  the
Administrative  Agent,  and  as set  forth  in an  administrative  questionnaire
delivered to the  Administrative  Agent in the case of the  Lenders,  or to such
other address as may be hereafter notified by the respective parties hereto:

         The Borrower:       Guess?, Inc.
                             1444 South Alameda Street
                             Los Angeles, California  90021
                             Attention:     Maurice Marciano, Chairman
                                            or Brian Fleming, Chief
                                            Financial Officer
                             Telecopy:      213-744-7817
                             Telephone:     213-765-3100

The Administrative Agent:    The Chase Manhattan Bank
                             c/o The Loan and Agency Services Group
                             One Chase Manhattan Plaza, 8th Floor
                             New York, New York  10081
                             Attention:     Jesus Sang
                             Telecopy:      212-552-5650
                             Telephone:     212-552-7916

with a copy to:              The Chase Manhattan Bank
                             270 Park Avenue
                             New York, New York  10018
                             Attention:     Paul Phalen
                             Telecopy:      212-827-4497
                             Telephone:     212-827-4421

provided  that any notice,  request or demand to the or upon the  Administrative
Agent or the Lenders shall not be effective until received.

          10.3 No Waiver;  Cumulative  Remedies.  No failure to exercise  and no
delay in exercising,  on the part of the Administrative Agent or any Lender, any
right,  remedy,  power or privilege  hereunder or under the other Loan Documents
shall operate as a waiver thereof;  nor shall any single or partial  exercise of
any right,  remedy,  power or privilege  hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights,  remedies,  powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.

          10.4 Survival of Representations  and Warranties.  All representations
and warranties made hereunder,  in the other Loan Documents and in any document,
certificate or statement  delivered  pursuant  hereto or in connection  herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans and other extensions of credit hereunder.

          10.5 Payment of Expenses and Taxes.  The Borrower agrees (a) to pay or
reimburse the Administrative  Agent for all its reasonable  out-of-pocket  costs
and  expenses  incurred in  connection  with the  development,  preparation  and
execution of, and any amendment,  supplement or modification  to, this Agreement
and the other Loan  Documents  and any other  documents  prepared in  connection
herewith  or  therewith,   and  the  consummation  and   administration  of  the
transactions contemplated hereby and thereby,  including the reasonable fees and
disbursements  of counsel to the  Administrative  Agent and filing and recording
fees and expenses, with statements with respect to the foregoing to be submitted
to the Borrower  prior to the Closing Date (in the case of amounts to be paid on
the Closing Date) and from time to time  thereafter on a quarterly basis or such
other periodic basis as the Administrative Agent shall deem appropriate,  (b) to
pay or reimburse each Lender and the Administrative  Agent for all its costs and
expenses  incurred in connection  with the  enforcement or  preservation  of any
rights  under  this  Agreement,  the other  Loan  Documents  and any such  other
documents,  including the reasonable  fees and  disbursements  of counsel to the
Administrative  Agent (including any local or special counsel) and not more than
one additional form of counsel to the Lenders,  (c) to pay, indemnify,  and hold
each Lender and the  Administrative  Agent  harmless from, any and all recording
and filing fees and any and all  liabilities  with respect to, or resulting from
any delay in payment, stamp, excise and other taxes, if any, that may be payable
or determined to be payable in connection with the execution and delivery of, or
consummation or  administration  or any of the transactions  contemplated by, or
any amendment,  supplement or modification of, or any waiver or consent under or
in respect  of,  this  Agreement,  the other Loan  Documents  and any of, or any
waiver or  consent  under,  or in respect  of,  this  Agreement,  the other Loan
Documents and any such other documents, and (d) to pay, indemnify, and hold each
Lender and the Administrative  Agent and their respective  officers,  directors,
employees,  affiliates,  agents and controlling  persons (each an  "Indemnitee")
harmless from and against any and all other  liabilities,  obligations,  losses,
damages, penalties,  actions, judgments, suits, costs, expenses or disbursements
of any kind or  nature  whatsoever  with  respect  to the  execution,  delivery,
enforcement,  performance and  administration of this Agreement,  the other Loan
Documents and any such other documents,  including any of the foregoing relating
to the use of proceeds of the Loans or the violation of,  noncompliance  with or
liability  under,  any  Environmental  Law  applicable to the  operations of the
Borrower any of its  subsidiaries  or any of the  Properties  and the reasonable
fees and  expenses  of legal  counsel  in  connection  with  claims,  actions or
proceedings  by any  indemnitee  against any Loan Party under any Loan  Document
(all  the  foregoing  in  the  clause  (d),   collectively,   the   "Indemnified
Liabilities"), provided, that the Borrower shall have no obligation hereunder to
any  Indemnitee  with  respect to  Indemnified  Liabilities  to the extent  such
Indemnified  Liabilities  are found by a final and  nonappealable  decision of a
court of competent  jurisdiction  to have resulted from the gross  negligence or
willful  misconduct  of such  Indemnitee  or breach of any Loan  Document  by an
Indemnitee.  Without  limiting  the  foregoing,  and to the extent  permitted by
applicable law, the Borrower agrees not to assert and to cause its  Subsidiaries
not to assert,  and hereby  waives  and agrees to cause its  Subsidiaries  to so
waive,  all rights for contribution or any other rights of recovery with respect
to all claims, demands,  penalties,  fines, liabilities,  settlements,  damages,
costs and expenses of whatever kind or nature, under or related to Environmental
Laws,  that  any of  them  might  have  by  statute  or  otherwise  against  any
Indemnitee.  All amounts due under this  Section 10.5 shall be payable not later
than 10 days after written demand therefor,  accompanied by appropriate invoices
and supporting  documentation.  Statements  payable by the Borrower  pursuant to
this  Section  10.5  shall  be  submitted  to  Brian  Fleming   (Telephone   No.
213-765-3100)  (Telecopy No.  213-744-7817),  at the address of the Borrower set
forth in Section  10.2,  or to such other  Person or address as may be hereafter
designated by the Borrower in a written notice to the Administrative  Agent. The
agreement  in this  Section  10.5 shall  survive  repayment of the Loans and all
other amounts payable hereunder.
<PAGE>

                                                                              58

          10.6 Successors and Assigns;  Participations and Assignments. (a) This
Agreement  shall be binding upon and inure to the benefit of the  Borrower,  the
Lenders,  the  Administrative  Agent,  all future holders of the Loans and their
respective  successors  and assigns,  except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of each Lender.

          (b) Any Lender may, without the consent of the Borrower, in accordance
with  applicable  law,  at  any  time  sell  to  one or  more  banks,  financial
institutions or other entities (each, a "Participant")  participating  interests
in any Loan owing to such Lender, any Revolving Credit Commitment of such Lender
or any other  interest  of such  Lender  hereunder  and  under  the  other  Loan
Documents. In the event of any such sale by a Lender of a participating interest
to a Participant,  such Lenders'  obligations  under this Agreement to the other
parties to this  Agreement  shall  remain  unchanged,  such Lender  shall remain
solely  responsible  for the performance  thereof,  such Lender shall remain the
holder of any such Loan for all purposes under this Agreement and the other Loan
Documents,  and the Borrower and the Administrative Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. In no event shall
any  Participant  under any such  participation  have any right to  approve  any
amendment or waiver of any provision of any Loan Document, or any consent to any
departure by any Loan Party therefrom, except to the extent that such amendment,
waiver or consent  would reduce the  principal  of, or interest on, the Loans or
any fees payable  hereunder,  or postpone the date of the final  maturity of the
Loans,  in each case to the extent subject to such  participation.  The Borrower
agrees that if amounts outstanding under this Agreement and the Loans are due or
unpaid,  or shall have been  declared or shall have become due and payable  upon
the occurrence of an Event of Default,  each  Participant  shall, to the maximum
extent  permitted  by  applicable  law, be deemed to have the right of setoff in
respect of its  participating  interest in amounts owing under this Agreement to
the same  extent  as if the  amount of its  participating  interest  were  owing
directly to it as a Lender under this  Agreement,  provided  that, in purchasing
such participating  interest, such Participant shall be deemed to have agreed to
share with the Lenders the  proceeds  thereof as provided in Section  10.7(a) as
fully as if it were a Lender  hereunder.  The  Borrower  also  agrees  that each
Participant  shall be entitled to the benefits of Sections  2.15,  2.16 and 2.17
with respect to its  participation in the Revolving  Credit  Commitments and the
Loans outstanding from time to time as if it was a Lender; provided that, in the
case of Section 2.16, such Participant shall have complied with the requirements
of said Section and provided,  further, that no Participant shall be entitled to
receive any greater  amount  pursuant to any such  Section  than the  transferor
Lender  would  have been  entitled  to  receive  in respect of the amount of the
participation  transferred by such transferor  Lender to such Participant had no
such transfer occurred.

<PAGE>

                                                                              59

          (c) Any Lender (an "Assignor") may, in accordance with applicable law,
at any time and from time to time assign to any  Lender,  any  affiliate  of any
Lender or, with the consent of the Borrower and the Administrative Agent (which,
in each case, shall not be unreasonably  withheld or delayed),  to an additional
bank,  financial  institution or other entity (an "Assignee") all or any part of
its rights and  obligations  under this Agreement  pursuant to an Assignment and
Acceptance,  executed by such Assignee, such Assignor and any other Person whose
consent  is  required   pursuant  to  this   paragraph   and  delivered  to  the
Administrative Agent for its acceptance and recording in the Register,  provided
that no such assignment to an Assignee (other than any Lender,  any affiliate of
any Lender) shall be in an aggregate  principal  amount of less than $10,000,000
(other than in the case of an  assignment of all of a Lender's  interests  under
this Agreement),  unless otherwise agreed by the Borrower and the Administrative
Agent. Upon such execution,  delivery,  acceptance and recording, from and after
the effective date determined  pursuant to such  Assignment and Acceptance,  (x)
the Assignee  thereunder  shall be party  hereto and, to the extent  provided in
such  Assignment  and  Acceptance,  have the rights and  obligations of a Lender
hereunder with a Revolving Credit  Commitment and/or Loans as set forth therein,
and (y) the Assignor thereunder shall, to the extent provided in such Assignment
and Acceptance,  be released from its obligations  under this Agreement (and, in
the case of an Assignment  and Acceptance  covering all of an Assignor's  rights
and obligations  under this  Agreement,  such Assignor shall cease to be a party
hereto).  Notwithstanding any provision of this Section 10.6, the consent of the
Borrower shall not be required for any  assignment  that occurs when an Event of
Default  pursuant to Section  8(f) shall have  occurred and be  continuing  with
respect to the Borrower.

          (d) The Administrative Agent shall, on behalf o the Borrower, maintain
at its  address  referred  to in  Section  10.2 a copy  of each  Assignment  and
Acceptance  delivered to it and a register (the  "Register") for the recordation
of the names and  addresses of the Lenders and the revolving  Credit  Commitment
of, and the  principal  amount of the Loans  owing to,  each Lender from time to
time.  The  entries  in the  Register  shall be  conclusive,  in the  absence of
manifest  error,  and the Borrower,  each other Loan Party,  the  Administrative
Agent and the  Lenders  shall  treat each  Person  whose name is recorded in the
Register as the owner of the Loans and any notes  evidencing  the Loans recorded
therein for all purposes of this Agreement.  Any assignment of any Loan, whether
or not evidenced by a note,  shall be effective  only upon  appropriate  entries
with  respect  thereto  being  made in the  Register  (and each such note  shall
expressly  so  provide).  Any  assignment  or  transfer of all or part of a Loan
evidenced by a note shall be registered on the Register only upon  surrender for
registration  of  assignment  or  transfer  of the note  evidencing  such  Loan,
accompanied by a duly executed Assignment and Acceptance,  and thereupon the old
notes will be returned to the  Borrower  marked  "canceled"  and one or more new
notes shall be issued to the designated Assignee.

          (e) Upon its receipt of an Assignment  and  Acceptance  executed by an
Assignor,  an Assignee and any other Person whose consent is required by Section
10.6(c), together with payment to the Administrative Agent of a registration and
processing fee of $4,000,  the  Administrative  Agent shall (i) promptly  accept
such Assignment and Acceptance and (ii) record the information contained therein
in the Register on the effective date determined pursuant thereto.
<PAGE>

                                                                              60

          (f) For avoidance of doubt, the parties to this Agreement  acknowledge
that the provisions of this Section 10.6 concerning  assignments  relate only to
absolute  assignments  and that  such  provisions  do not  prohibit  assignments
creating security interests,  including any pledge or assignments to any Federal
Reserve Bank in accordance with applicable law.

          (g) The  Borrower,  upon  receipt of written  notice from the relevant
Lender,  agrees to issue a note to any  Lender  requiring  a note to  facilitate
transactions of the type described in paragraph (f) above.

          10.7 Adjustments; Set-off. (a) Except to the extent that the Agreement
expressly  provides for payments to be allocated to a particular  Lender, if any
Lender (a  "Benefitted  Lender") shall receive any payment of all or part of the
Obligations  owing to it, or receive any collateral in respect thereof  (whether
voluntarily or involuntarily,  by set-off,  pursuant to events or proceedings of
the nature referred to in Section 8(f), or otherwise),  in a greater  proportion
than any such payment to or collateral  received by any other Lender, if any, in
respect of the Obligations  owing to such other Lender,  such Benefitted  Lender
shall purchase for cash from the other Lenders a participating  interest in such
portion of the  Obligations  owing to each such other  Lender,  or shall provide
such  other  Lenders  with  the  benefits  of any such  collateral,  as shall be
necessary  to cause  such  Benefitted  Lender to share  the  excess  payment  or
benefits of such collateral ratably with each of the Lenders; provided, however,
that if all or any  portion of such excess  payment or  benefits  is  thereafter
recovered from such Benefitted Lender, such purchase shall be rescinded, and the
purchase  price and  benefits  returned,  to the  extent of such  recovery,  but
without interest.

          (b) In addition to any rights and remedies of the Lenders  provided by
law, each Lender shall have the right, without prior notice to the Borrower, any
such notice being  expressly  waived by the Borrower to the extent  permitted by
applicable  law,  upon any  amount  becoming  due and  payable  by the  Borrower
hereunder (whether at the stated maturity, by acceleration or otherwise) and the
occurrence and  continuance of an Event of Default,  to set off and  appropriate
and apply against such amount any and all deposits (general or special,  time or
demand,  provisional  or  final),  in  any  currency,  and  any  other  credits,
indebtedness  or  claims,  in any  currency,  in each  case  whether  direct  or
indirect,  absolute or  contingent,  matured or  unmatured,  at any time held or
owing by such Lender or any branch or agency thereof to or for the credit or the
account of the Borrower.  Each Lender agrees promptly to notify the Borrower and
the  Administrative  Agent  after any such setoff and  application  made by such
Lender,  provided that the -------- failure to give such notice shall not affect
the validity of such setoff and application.

          10.8  Counterparts.  This  Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts, and all of
said counterparts  taken together shall be deemed to constitute one and the same
instrument.  Delivery  of an  executed  signature  page  of  this  Agreement  by
facsimile  transmission  shall be effective  as delivery of a manually  executed
counterpart  hereof.  A set of the  copies of this  Agreement  signed by all the
parties shall be lodged with the Borrower and the Administrative Agent.

          10.9 Severability.  Any provision of this Agreement that is prohibited
or  unenforceable  in  any  jurisdiction  shall,  as to  such  jurisdiction,  be
ineffective  to the  extent  of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable such provision of any other jurisdiction.

          10.10  Integration.  This  Agreement  and  the  other  Loan  Documents
represent  the  agreement  of the  Borrower,  the  Administrative  Agent and the
Lenders with respect to the subject  matter  hereof,  and there are no promises,
undertakings,  representations or warranties by the Administrative  Agent or any
Lender  relative to such matter  hereof not  expressly  set forth or referred to
herein or in the other Loan Documents.
<PAGE>

                                                                              61

          10.11  GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE  PARTIES  UNDER THIS  AGREEMENT  SHALL BE  GOVERNED  BY, AND  CONSTRUED  AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

          10.12  Submission  To  Jurisdiction;   Waivers.  The  Borrower  hereby
irrevocably and unconditionally:

          (a)  submits  for  itself  and its  property  in any  legal  action or
proceeding  relating to this  Agreement and the other Loan Documents to which it
is a party,  or for  recognition  and  enforcement  of any  judgment  in respect
thereof, to the non-exclusive general jurisdiction of the courts of the State of
New York, the courts of the United States of the Southern  District of New York,
and appellate courts from any thereof;

          (b) consents that any such action or proceeding may be brought in such
courts and waives any objection  that it may now or hereafter  have to the venue
of any such  action  or  proceeding  in any such  court or that  such  action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;

          (c) agrees that  service of process in any such  action or  proceeding
may be effected by mailing a copy thereof by  registered  or certified  mail (or
any substantially similar form of mail), postage prepaid, to the Borrower at its
address  set  forth in  Section  10.2 or at such  other  address  of  which  the
Administrative Agent shall have been notified pursuant thereto;

          (d)  agrees  that  nothing  herein  shall  affect  the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and

          (e) waives,  to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal  action or  proceeding  referred to in
this Section any special, exemplary, punitive or consequential damages.

          10.13 Acknowledgements. The Borrower hereby acknowledges that:

          (a) it has been advised by counsel in the  negotiation,  execution and
delivery of this Agreement and the other Loan Documents;

          (b) neither the Administrative  Agent nor any Lender has any fiduciary
relationship  with or duty to the Borrower  arising out of or in connection with
this Agreement or any of the other Loan Documents,  and the relationship between
Administrative  Agent and Lenders,  on one hand, and the Borrower,  on the other
hand, in connection herewith or therewith is solely that of debtor and creditor;
and

          (c) no joint venture is created  hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions  contemplated hereby among the
Lenders or among the Borrower and the Lenders.
<PAGE>

                                                                              62

          10.14 Releases of Guarantees and Liens. (a)  Notwithstanding  anything
to  the  contrary   contained  herein  or  in  any  other  Loan  Document,   the
Administrative  Agent is hereby  irrevocably  authorized by each Lender (without
requirement  of notice to or consent of any Lender except as expressly  required
by Section 10.1) to take any action  required by the Borrower  having the effect
of releasing any Collateral or guarantee obligations (i) to the extent necessary
to permit consummation of any transaction not prohibited by any Loan Document or
that has been  consented  to in  accordance  with Section 10.1 or (ii) under the
circumstances described in paragraph (b) below.

          (b) At such time as the Loans,  the  Reimbursement  of Obligations and
the other  obligations under the Loan Documents (other than obligations under or
in respect of Hedge  Agreements)  shall  have been paid in full,  the  Revolving
Credit  Commitments  have been  terminated  and no  Letters  of Credit  shall be
outstanding (or any outstanding  Letters of Credit have been collateralized in a
manner acceptable to the Administrative Agent), the Collateral shall be released
from the Liens created by the Security Documents, and the Security Documents and
all obligations  (other than those expressly stated to survive such termination)
of the  Administrative  Agent and each Loan Party under the  Security  Documents
shall  terminate,  all without  delivery of any instrument or performance of any
act by any Person.

          10.15  Confidentiality.  Each of the  Administrative  Agent  and  each
Lender agrees to keep confidential all non-public  information provided to it by
any Loan Party  pursuant to this  Agreement;  provided that nothing herein shall
prevent  the  Administrative  Agent  or any  Lender  from  disclosing  any  such
information  (a) to the  Administrative  Agent or any Lender from disclosing any
such  information  (a)  to the  Administrative  Agent,  any  other  Lender,  any
affiliate  of any  Lender  that  agrees to comply  with the  provisions  of this
Section,  (b) to any Transferee or prospective  Transferee that agrees to comply
with the provisions of this Section,  (c) to its employees,  directors,  agents,
attorneys,  accountants and other  professional  advisors or those of any of its
affiliates  solely in connection with the transactions  contemplated  hereunder,
(d) upon the request or demand of any Governmental Authority, (e) in response to
any order of any court or other  Governmental  Authority or as may  otherwise be
required to any  Requirement of Law, (f) if required to do so in connection with
any litigation or similar proceeding,  (g) that has been publicly disclosed, (h)
to  the  National   Association  of  Insurance   Commissioners  or  any  similar
organization or any nationally  recognized rating agency that requires access to
information  about a Lender's  investment  portfolio in connection  with ratings
issued with respect to such Lender,  or (i) in  connection  with the exercise of
any remedy hereunder or under any other Loan Document.

          10.16 WAIVERS OF JURY TRIAL. THE BORROWER,  THE  ADMINISTRATIVE  AGENT
AND THE LENDERS HEREBY  IRREVOCABLY AND  UNCONDITIONALLY  WAIVE TRIAL BY JURY IN
ANY LEGAL  ACTION OR  PROCEEDING  RELATING TO THIS  AGREEMENT  OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly  authorized  officers as of
the day and year first above written.

                            GUESS ?, INC.

                            By:_________________________________________________
                               Name:
                               Title:

                            THE CHASE MANHATTAN BANK,
                            as Administrative Agent, as Issuing Lender and as a
                            Lender

                            By:_________________________________________________
                               Name:
                               Title:

                            SANWA BANK CALIFORNIA,
                            as Co-Agent and as a Lender

                            By:_________________________________________________
                              Name:
                              Title:

<PAGE>
         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly  authorized  officers as of
the day and year first above written.

                            GUESS ?, INC.

                            By:_________________________________________________
                               Name:
                               Title:

                            THE CHASE MANHATTAN BANK,
                            as Administrative Agent, as Issuing Lender and as a
                            Lender

                            By:_________________________________________________
                               Name:
                               Title:

                            SANWA BANK CALIFORNIA,
                            as Co-Agent and as a Lender

                            By:_________________________________________________
                              Name:
                              Title:

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly  authorized  officers as of
the day and year first above written.

                            GUESS ?, INC.

                            By:_________________________________________________
                               Name:
                               Title:

                            THE CHASE MANHATTAN BANK,
                            as Administrative Agent, as Issuing Lender and as a
                            Lender

                            By:_________________________________________________
                              Name:
                              Title:

                            SANWA BANK CALIFORNIA,
                            as Co-Agent and as a Lender

                            By:  /s/ Nicole Earnier
                              --------------------------------------------------
                               Name:   Nicole Earnier
                               Title:  Vice President

<PAGE>

                            GMAC COMMERCIAL CREDIT LLC

                            By:_________________________________________________
                              Name:
                              Title:

                            ISRAEL DISCOUNT BANK OF NEW YORK

                            By:_________________________________________________
                               Name:
                               Title:

                            MERCANTILE BANK NATIONAL ASSOCIATION

                            By:_________________________________________________
                               Name:   Stephen M. Reese
                               Title:  Vice President

                            BANK LEUMI USA

                            By:_________________________________________________
                               Name:
                               Title:
<PAGE>

                            GMAC COMMERCIAL CREDIT LLC

                            By:_________________________________________________
                              Name:
                              Title:

                            ISRAEL DISCOUNT BANK OF NEW YORK

                            By:_________________________________________________
                               Name:
                               Title:

                            MERCANTILE BANK NATIONAL ASSOCIATION

                            By:_________________________________________________
                               Name:
                               Title:

                            BANK LEUMI USA

                            By:_________________________________________________
                               Name:  Richard Silverstein
                               Title: SVP

                            By:_________________________________________________
                               Name:  Phyllis Rosenfeld
                               Title: Vice President

<PAGE>

                            GMAC COMMERCIAL CREDIT LLC

                            By:_________________________________________________
                              Name:
                              Title:

                            ISRAEL DISCOUNT BANK OF NEW YORK

                            By:_________________________________________________
                               Name:  Howard Weinberg
                               Title: First Vie President

                            MERCANTILE BANK NATIONAL ASSOCIATION

                            By:_________________________________________________
                               Name:
                               Title:

                            BANK LEUMI USA

                            By:_________________________________________________
                               Name:
                               Title:
<PAGE>

                            GMAC COMMERCIAL CREDIT LLC

                            By:_________________________________________________
                              Name:
                              Title:

                            ISRAEL DISCOUNT BANK OF NEW YORK

                            By:_________________________________________________
                               Name:  Howard W
                               Title:

                            MERCANTILE BANK NATIONAL ASSOCIATION

                            By:_________________________________________________
                               Name:
                               Title:

                            BANK LEUMI USA

                            By:_________________________________________________
                               Name:
                               Title:
<PAGE>

                            GMAC COMMERCIAL CREDIT LLC

                            By:_________________________________________________
                              Name:
                              Title:

ISRAEL DISCOUNT BANK OF NEW YORK    ISRAEL DISCOUNT BANK OF NEW YORK

By: /s/R. David Kamgruera           By: /s/ Howard Welchberg
   ------------------------------      -----------------------------------------
   Name:  R. David Kamruera            Name:  Howard Welchberg
   Title: Vice President               Title:  First Vice President

                                    MERCANTILE BANK NATIONAL ASSOCIATION

                                    By:_________________________________________
                                       Name:
                                       Title:

                                    BANK LEUMI USA

                                    By:_________________________________________
                                       Name:
                                       Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00005-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00005-of-00352.parquet"}]]