Document:

_

EXHIBIT
4.1

_________________________________________________________________

THE
DIXIE GROUP, INC.,

as
Borrower,

Each of
its Subsidiaries,

as
Guarantors

_________________________________________________________________

_________________________________________________________________

_________________________________________________________________

SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

Dated:
October 24, 2008

$84,586,900.00

_________________________________________________________________

_________________________________________________________________

_________________________________________________________________

THE
FINANCIAL INSTITUTIONS

PARTY
HERETO FROM TIME TO TIME, as Lenders,

BANK
OF AMERICA, N.A., as Agent,

______________________________________________________________

TABLE OF CONTENTS

Page

SECTION
 1.

CREDIT
FACILITIES

-
2 -

1.1.

Revolver Commitment.

- 2 -

1.2.

Term Loan Facility.

- 4 -

1.3.

LC Facility.

- 4 -

SECTION
 2.

INTEREST,
FEES AND CHARGES

-
9 -

2.1.

Interest.

- 9 -

2.2.

Fees.

- 12 -

2.3.

Computation of Interest and Fees.

- 13 -

2.4.

Reimbursement of Obligations.

- 13 -

2.5.

Bank Charges.

- 14 -

2.6.

Illegality.

- 14 -

2.7.

Increased Costs.

- 14 -

2.8.

Capital Adequacy.

- 15 -

2.9.

Funding Losses.

- 16 -

2.10.

Maximum Interest.

- 17 -

SECTION
 3.

LOAN
ADMINISTRATION

-
18 -

3.1.

Manner of Borrowing and Funding Revolver Loans.

- 18 -

3.2.

Defaulting Lender.

- 21 -

3.3.

Special Provisions Governing LIBOR Loans.

- 22 -

3.4.

All Loans to Constitute One Obligation.

- 22 -

SECTION
 4.

PAYMENTS

-
22 -

4.1.

General Repayment Provisions.

- 22 -

4.2.

Repayment of Revolver Loans.

- 23 -

4.3.

Repayment of Term Loan Advances.

- 24 -

4.4.

Payment of Other Obligations.

- 25 -

4.5.

Marshaling; Payments Set Aside.

- 25 -

4.6.

Agent's Allocation of Payments and Collections.

- 25 -

4.7.

Application of Payments and Collections.

- 26 -

4.8.

Loan Accounts; the Register; Account Stated.

- 26 -

4.9.

Gross Up for Taxes.

- 27 -

4.10.

Withholding Tax Exemption.

- 27 -

SECTION
 5.

ORIGINAL
TERM AND TERMINATION OF COMMITMENTS

-
28 -

5.1.

Original Term of Commitments.

- 28 -

5.2.

Termination.

- 28 -

SECTION
 6.

COLLATERAL
SECURITY

-
29 -

6.1.

Grant of Security Interest.

- 29 -

6.2.

Lien on Deposit Accounts.

- 30 -

6.3.

Lien on Real Estate.

- 30 -

6.4.

Other Collateral.

- 30 -

6.5.

No Assumption of Liability.

- 30 -

6.6.

Lien Perfection; Further Assurances.

- 30 -

6.7.

Limitation on Equity Interests.

- 31 -

6.8.

Exclusion for Certain Contracts and Leases.

- 31 -

6.9.

Partial Release of Liens.

- 31 -

6.10.

Release of Lien on Tufting Machine.

- 31 -

SECTION
 7.

COLLATERAL
ADMINISTRATION

-
31 -

7.1.

General Provisions.

- 31 -

7.2.

Administration of Accounts.

- 33 -

7.3.

Administration of Inventory.

- 35 -

7.4.

Administration of Equipment.

- 35 -

7.5.

Borrowing Base Certificates.

- 36 -

SECTION
 8.

REPRESENTATIONS
AND WARRANTIES

-
36 -

8.1.

General Representations and Warranties.

- 36 -

8.2.

Reaffirmation of Representations and Warranties.

- 42 -

8.3.

Survival of Representations and Warranties.

- 43 -

SECTION
 9.

COVENANTS
AND CONTINUING AGREEMENTS

-
43 -

9.1.

Affirmative Covenants.

- 43 -

9.2.

Negative Covenants.

- 46 -

9.3.

Reserved.

- 50 -

SECTION
 10.

CONDITIONS
PRECEDENT

-
50 -

10.1.

Conditions Precedent to Initial Credit Extensions.

- 50 -

10.2.

Conditions Precedent to All Credit Extensions.

- 52 -

10.3.

Inapplicability of Conditions.

- 53 -

10.4.

Limited Waiver of Conditions Precedent.

- 53 -

SECTION
 11.

EVENTS
OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT

-
53 -

11.1.

Events of Default.

- 53 -

11.2.

Acceleration of the Obligations; Termination of Commitments.

- 55 -

11.3.

Other Remedies.

- 56 -

11.4.

Setoff.

- 57 -

11.5.

Remedies Cumulative; No Waiver.

- 58 -

SECTION
 12.

AGENT

-
58 -

12.1.

Appointment, Authority and Duties of Agent.

- 58 -

12.2.

Agreements Regarding Collateral.

- 60 -

12.3.

Reliance By Agent

- 61 -

12.4.

Action Upon Default

- 61 -

12.5.

Ratable Sharing

- 62 -

12.6.

Indemnification of Agent.

- 62 -

12.7.

Limitation on Responsibilities of Agent.

- 63 -

12.8.

Successor Agent and Co-Agents.

- 63 -

12.9.

Consents, Amendments and Waivers; Out-of-Formula Loans.

- 64 -

12.10.

Due Diligence and Non-Reliance.

- 66 -

12.11.

Representations and Warranties of Lenders

- 66 -

12.12.

The Required Lenders

- 66 -

12.13.

Several Obligations.

- 67 -

12.14.

Agent in its Individual Capacity

- 67 -

12.15.

Third Party Beneficiaries

- 67 -

12.16.

Notice of Transfer

- 67 -

12.17.

Replacement of Certain Lenders

- 67 -

12.18.

Remittance of Payments and Collections.

- 68 -

SECTION
 13.

BENEFIT
OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS

-
68 -

13.1.

Successors and Assigns.

- 68 -

13.2.

Participations.

- 69 -

13.3.

Assignments.

- 70 -

13.4.

Tax Treatment.

- 71 -

SECTION
 14.

MISCELLANEOUS

-
71 -

14.1.

Power of Attorney.

- 71 -

14.2.

General Indemnity.

- 72 -

14.3.

Survival of All Indemnities.

- 72 -

14.4.

Modification of Agreement.

- 72 -

14.5.

Severability.

- 72 -

14.6.

Cumulative Effect; Conflict of Terms.

- 72 -

14.7.

Execution in Counterparts.

- 73 -

14.8.

Consent.

- 73 -

14.9.

Notices.

- 73 -

14.10.

Performance of Borrower's Obligations

- 73 -

14.11.

Credit Inquiries.

- 74 -

14.12.

Time of Essence.

- 74 -

14.13.

Indulgences Not Waivers.

- 74 -

14.14.

Entire Agreement; Appendix A, Exhibits and Schedules

- 74 -

14.15.

Interpretation

- 74 -

14.16.

Obligations of Lenders Several.

- 74 -

14.17.

Advertising and Publicity.

- 74 -

14.18.

Confidentiality.

- 74 -

14.19.

Governing Law; Consent to Forum.

- 75 -

14.20.

Waivers by Borrower.

- 75 -

14.21.

Amendment and Restatement.

- 76 -

SECTION
 15.

GUARANTY.

-
76 -

15.1.

Guarantors.

- 76 -

15.2.

Agreement of Guaranty.

- 76 -

SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT (this "Agreement") is made on October 24, 2008, by and
among THE DIXIE GROUP, INC. ("Borrower"), a Tennessee corporation
with its chief executive office and principal place of business at 2208 South
Hamilton Street, Dalton, Georgia 30721; EACH OF THE SUBSIDIARIES OF
BORROWER as guarantors ("Guarantors"); the various financial
institutions listed on the signature pages hereof and their respective
successors and permitted assigns which become "Lenders" as provided
herein; and BANK OF AMERICA, N.A., a national banking association and
successor to Fleet Capital Corporation ("Fleet"), with an office at 300
Galleria Parkway, N.W., Suite 800, Atlanta, Georgia 30339, in its capacity as
collateral and administrative agent for the Lenders pursuant to
Section 12 hereof (together with its successors in such capacity,
"Agent").  Capitalized terms used in this Agreement have the
meanings assigned to them in Appendix A, General Definitions.

R e c i t a l s:

On April 14, 2004, Borrower, the other obligors named therein,
Fleet and the other financial institutions named therein (the "Existing
Lenders") entered into that certain Amended and Restated Loan and Security
Agreement, which agreement amended and restated that certain Loan and Security
Agreement dated May 14, 2002 (as amended, restated, modified or supplemented
from time to time prior to the date hereof, the "Existing Loan
Agreement"), pursuant to which Fleet and the Existing Lenders made certain
revolving credit loans, term loans and letter of credit accommodations to
Borrower.

After the execution of the Existing Loan Agreement, Fleet (i)
assigned all of its interests in the loans under the Existing Loan Agreement to
Bank of America, N.A., (ii) resigned as Agent under the Existing Loan Agreement,
and (iii) Agent was appointed as successor agent by the Existing Lenders party
to the Existing Loan Agreement.

Borrower and Guarantors have requested that Agent and the Existing
Lenders amend and restate the Existing Loan Agreement and continue to make
available revolving credit, letter of credit and term loan facilities to
Borrower, which shall be used by Borrower to finance its business of
manufacturing and supplying carpet and rug products. 

Guarantors have agreed to reaffirm their guarantee of the
obligations of Borrower under the Existing Loan Agreement and to reaffirm and
continue to guarantee the obligations of Borrower under this Agreement and each
of the other Loan Documents.

Agent and the Existing Lenders are willing to amend and restate
the Existing Loan Agreement on the terms set forth herein, and Agent and Lenders
are willing to make available to Borrower the loans and other financial
accommodations described herein, subject to the terms and conditions contained
herein.

NOW, THEREFORE, for Ten Dollars ($10.00) and other good and
valuable consideration, the parties hereto hereby agree as follows:

SECTION  1.

CREDIT FACILITIES

Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lenders severally agree to the extent and in the manner hereinafter
set forth to make their respective Pro Rata shares of the Commitments available
to Borrower, in an aggregate amount up to $84,586,900, as follows:

1.1.

Revolver Commitment.

1.1.1.

Revolver Loans.

  Each Lender agrees, severally to the extent of its
Revolver Commitment and not jointly with the other Lenders, upon the terms and
subject to the conditions set forth herein, to make Revolver Loans to Borrower
on any Business Day during the period from the date hereof through the Business
Day before the last day of the Original Term, not to exceed in aggregate
principal amount outstanding at any time such Lender's Revolver Commitment at
such time, which Revolver Loans may be repaid and reborrowed in accordance with
the provisions of this Agreement; provided, however, that Lenders shall have no
obligation to Borrower whatsoever to make any Revolver Loan on or after the
Commitment Termination Date or if at the time of the proposed funding thereof
the aggregate principal amount of all of the Revolver Loans and Pending Revolver
Loans then outstanding exceeds, or would exceed after the funding of such
Revolver Loan, the lesser of (i) Availability or (ii) Adjusted
Availability.  Each Borrowing of Revolver Loans shall be
funded by Lenders on a Pro Rata basis in accordance with their respective
Revolver Commitments (except for BofA with respect to Settlement Loans).
 The Revolver Loans shall bear interest as set forth in
Section 2.1 hereof.  Each Revolver Loan shall, at the option of
Borrower, be made or continued as, or converted into, part of one or more
Borrowings that, unless specifically provided herein, shall consist entirely of
Base Rate Loans or LIBOR Loans.

1.1.2.

Out-of-Formula Loans.

  If the unpaid balance of Revolver Loans outstanding at
any time should exceed the Borrowing Base at such time (an "Out-of-Formula
Condition"), such Revolver Loans shall nevertheless constitute Obligations
that are secured by the Collateral and entitled to all of the benefits of the
Loan Documents.  In the event that Lenders are willing to, in their sole
and absolute discretion, make Out-of-Formula Loans, such Out-of-Formula Loans
shall be payable on demand and shall bear interest as provided in this
Agreement for Revolver Loans generally.

1.1.3.

Use of Proceeds.

  The proceeds of the Revolver Loans shall be used by
Borrower solely for one or more of the following purposes:  (i)  to
pay the fees and transaction expenses associated with the closing of the
transactions described herein; (ii) to pay any of the Obligations; and
(iii) to make expenditures for other lawful corporate purposes of Borrower
to the extent such expenditures are not prohibited by this Agreement or
Applicable Law.  In no event may any Revolver Loan proceeds be used by
Borrower to make a contribution to the equity of any Subsidiary, to purchase or
to carry, or to reduce, retire or refinance any Debt incurred to purchase
or carry, any Margin Stock or for any related purpose that violates the
provisions of Regulations T, U or X of the Board of Governors.

1.1.4.

Revolver Notes.

  The Revolver Loans made by each Lender and interest
accruing thereon shall be evidenced by the records of Agent and such Lender and
by the Revolver Note payable to such Lender (or the assignee of such Lender),
which shall be executed by Borrower, completed in conformity with this Agreement
and delivered to such Lender.  All outstanding principal amounts and
accrued interest under the Revolver Notes shall be due and payable as set forth
in Section 4.2 hereof.

- 2 -

1.1.5.

Voluntary Reductions of Revolver Commitments.

  Borrower shall have the right to permanently reduce
the amount of the Revolver Commitments in amounts of not less than $5,000,000
and in integral multiples of $1,000,000 in excess thereof, on a Pro Rata basis
for each Lender, at any time and from time to time upon written notice to Agent
of such reduction, which notice shall specify the amount of such reduction,
shall be irrevocable once given, shall be given at least 3 Business Days
prior to the end of the month and shall be effective only upon Agent's
receipt thereof.  Agent shall promptly transmit such notice to each Lender.
 The effective date of any voluntary reduction of the Revolver Commitments
shall be the last day of the month in which such notice is timely received
by Agent.  If, on the effective date of any such reduction in the
Revolver Commitments and after giving effect thereto, an Out-of-Formula
Condition exists, then the provisions of Section 4.2.1(iii) hereof
shall apply, except that such repayment shall be due immediately upon such
effective date without further notice to or demand upon Borrower.  If the
Revolver Commitments are reduced to zero, then such reduction shall be deemed a
termination of the Revolver Commitments by Borrower pursuant to
Section 5.2.2 hereof.  Borrower shall pay all interest and fees
then due on the amount of the Revolver Commitment reduction accrued to the date
of such reduction of the Revolver Commitments to Agent for the Pro Rata benefit
of the Lenders.  The Revolver Commitments once reduced may not be
reinstated without the prior written consent of all Lenders.

1.1.6.

Agent Advances.

  Agent shall be authorized by Borrower and Lenders,
from time to time in Agent's sole and absolute discretion, at any time that
a Default or Event of Default exists or any of the conditions precedent set
forth in Section 10 hereof have not been satisfied, to make Base Rate
Loans to Borrower on behalf of Lenders in an aggregate amount outstanding
at any time not to exceed the lesser of: (a) $2,500,000, or
(b) when added to the Revolver Loans then outstanding, the Borrowing Base
or the aggregate of the Revolver Commitments, and only to the extent that Agent
deems the funding of such Base Rate Loans to be necessary or desirable (i) to
preserve or protect the Collateral or any portion thereof, (ii) to enhance
the likelihood of or the amount of repayment of the Obligations or (iii) to
pay any other amount chargeable to Borrower pursuant to the terms of
this Agreement, including costs, fees and expenses, all of which Base Rate
Loans advanced by Agent shall be deemed part of the Obligations and secured
by the Collateral, shall be treated as Settlement Loans and shall be
settled and paid by Borrower and Lenders as provided herein for Settlement
Loans; provided, however, that the Required Lenders may at any time revoke
Agent's authorization to make any such Base Rate Loans by written notice to
Agent, which shall become effective upon and after Agent's receipt thereof.
 Notwithstanding anything to the contrary contained in this
Section 1.1.6, nothing contained in this Section 1.1.6
shall be construed to limit Agent's right to incur expenses and pay such
expenses after an Event of Default in connection with any of the matters
described in the foregoing clauses (i), (ii) and (iii).

1.1.7.

1995 Bonds.

(a)

1995 Bonds.  Each Lender shall have an indivisible
interest in the 1995 Bonds and the 1995 Bond Documents equal to their Pro Rata
share of the Commitments.  An Availability Reserve in the amount of
$7,000,000 (the "1995 Bond Reserve") shall be established by Agent.
 Each Lender shall be entitled to receive its Pro Rata share of any
payments of principal or interest received with respect to the 1995 Bonds. 

(b)

Agreement Constitutes Guarantor Credit Agreement under 1995
Bonds.  The parties hereby agree that, this Agreement shall constitute
the "Guarantor Credit Agreement" as such term is defined in the Bond Purchase
Agreement and any Event of Default hereunder shall constitute a "Loan Default"
under Section 7.1(e) of the loan agreement executed in connection with the 1995
Bonds.  Without limiting the generality of the foregoing, the references in
the Bond Purchase Agreement to the "Applicable Margin" and "LIBOR" shall have
the meanings set forth herein for "Applicable Margin" and 

- 3 -

"LIBOR Rate" for purposes of the 1995 Bonds, as provided in
Section 6(b) of the Bond Purchase Agreement.  If notwithstanding the
foregoing, the interest payments for any period remitted to Agent as holder of
the 1995 Bonds yield less interest than Borrower would have been required to pay
Lenders if the 1995 Bonds were outstanding as Revolver Loans under this
Agreement, then Borrower shall promptly pay to Agent, for the Pro Rata benefit
of Lenders, the amount of such deficiency.

(c)

Funding of Default under 1995 Bonds; Enforcement.

(i)

Borrower hereby agrees that upon its failure to repay all amounts
outstanding pursuant to the 1995 Bonds in full upon maturity, whether due to
demand, acceleration, put or otherwise, Borrower shall be deemed to have
requested a Base Rate Loan in an amount equal to such defaulted amount payable
to Lenders Pro Rata. 

(ii)

Each Lender hereby designates, makes, constitutes, empowers and
appoints Agent as its attorney-in-fact, with this power being coupled with an
interest, to enforce the 1995 Bond Documents as such Lender's agent and
attorney-in-fact. Agent shall, at the direction of the Required Lenders,
exercise all rights and remedies available to the holders of the 1995 Bonds
under the 1995 Bond Documents.

(iii)

Borrower acknowledges and agrees that: (x) Agent, at the
direction of the Required Lenders, shall have the right to tender the 1995 Bonds
if an Event of Default exists, and (y) if not sooner tendered, the 1995
Bonds shall be due and payable in full on the Commitment Termination Date.
 If no Event of Default exists on the date that the 1995 Bonds are tendered
or otherwise become due and payable, then the 1995 Bond Reserve shall be
released by Agent to pay the 1995 Bonds.  If the amount of the 1995 Bond
Reserve is insufficient to pay the 1995 Bonds in full, then Borrower agrees to
immediately pay the outstanding balance of the 1995 Bonds after application of
the 1995 Bond Reserve.

1.2.

Term Loan Facility.

1.2.1

Term Loan A.

  Each Lender severally made to Borrower a Term
Loan A Advance on the Original Closing Date.  The outstanding principal balance of
Term Loan A as of the date hereof is $14,586,900.  The proceeds of the Term
Loan A Advances were used by Borrower solely for purposes for which the proceeds
of the Revolver Loans are authorized to be used.  The Term Loan A
Commitment of each Lender expired on the funding by such Lender of its Term
Loan A Advance.  Borrower shall not be entitled to reborrow any amounts
repaid with respect to the Term Loan A Advances.

1.2.2

Term Note A.

  Borrower executed and delivered to Agent on behalf of
each Lender a promissory note substantially in the form of Exhibit
B attached hereto and made a part hereof (such promissory note together
with any new notes issued pursuant to Section 13.3.2 upon the assignment
of any portion of any Lender's Term Loan A Advance, being hereinafter referred
to collectively as the "Term Notes A" and each of such promissory notes
being hereinafter referred to individually as a "Term Note A"), to
evidence such Lender's Term Loan A Advance to Borrower, in original principal
amounts equal to the amount of such Lender's Term Loan A Commitment.  Each
Term Note A provides for payment of the Term Loan A Advance evidenced thereby as
specified in Section 4.3 hereof.

1.3.

LC Facility.

- 4 -

1.3.1

Issuance of Letters of Credit.

  Subject to all of the terms and conditions hereof,
Issuing Bank agrees to establish the LC Facility pursuant to which, during the
period from the date hereof to the last day of the Original Term, Issuing Bank
shall issue one or more Letters of Credit on Borrower's request therefor from
time to time, subject to the following terms and conditions:

(i)

Borrower acknowledges that Issuing Bank's willingness to issue any
Letter of Credit is conditioned upon Issuing Bank's receipt of (A) an LC
Application with respect to the requested Letter of Credit and (B) such other
instruments and agreements as Issuing Bank may customarily require for the
issuance of a letter of credit of equivalent type and amount as the requested
Letter of Credit.  Issuing Bank shall have no obligation to issue any
Letter of Credit unless (x) Issuing Bank receives an LC Request and LC
Application at least 3 Business Days prior to the date of issuance of a Letter
of Credit, and (y) each of the LC Conditions is satisfied on the date of Issuing
Bank's receipt of the LC Request and at the time of the requested issuance of a
Letter of Credit.

(ii)

Letters of Credit may be requested by Borrower only if they are to
be used (a) to support obligations of Borrower incurred in the Ordinary Course
of Business of Borrower, or (b) for such other purposes as Agent may approve
from time to time.

(iii)

Borrower shall comply with all of the terms and conditions imposed
on Borrower by Issuing Bank that are contained in any LC Application or
in any other agreement customarily or reasonably required by Issuing
Bank in connection with the issuance of any Letter of Credit.  If Issuing
Bank shall honor any request for payment under a Letter of Credit, Borrower
shall be obligated to pay to Issuing Bank, in Dollars on the same day as the
date on which payment was made by Issuing Bank (the "Reimbursement
Date"), an amount equal to the amount paid by Issuing Bank under such Letter
of Credit (or, if payment thereunder was made by Issuing Bank in a currency
other than Dollars, an amount equal to the dollar equivalent of such
currency, as determined by Issuing Bank, as of the time of Issuing
Bank's payment under such Letter of Credit, in each case), together with
interest at the Default Rate for Revolver Loans constituting Base Rate Loans if
full payment of such amount due Issuing Bank does not occur on the Reimbursement
Date.  Until Issuing Bank has received payment from Borrower, Issuing Bank,
in addition to all of its other rights and remedies under this Agreement and any
LC Application, shall be fully subrogated to the rights and remedies of
each beneficiary under such Letter of Credit whose claims against Borrower
have been discharged with the proceeds of such Letter of Credit.

(iv)

Borrower assumes all risks of the acts, omissions or misuses of
any Letter of Credit by the beneficiary thereof.  The obligation of
Borrower to reimburse Issuing Bank for any payment made by Issuing Bank
under a Letter of Credit shall be absolute, unconditional, irrevocable and shall
be paid without regard to any lack of validity or enforceability of any Letter
of Credit or the existence of any claim, setoff, defense or other right which
Borrower may have at any time against a beneficiary of any Letter of Credit.
 In connection with the issuance of any documentary Letter of Credit, none
of Agent, Issuing Bank or any Lender shall be responsible for the existence,
character, quality, quantity, condition, packing, value or delivery of any goods
purported to be represented by any Documents; any differences or variation in
the character, quality, quantity, condition, packing, value or delivery of any
goods from that expressed in the Documents; the form, validity, sufficiency,
accuracy, genuineness or legal effect of any Documents or of any endorsements
thereon, even if such Documents should in fact prove to be in any or all
respects invalid, insufficient, fraudulent or forged; the time, place, manner or
order in which shipment of goods is made; partial or 

- 5 -

incomplete shipment of, or failure or omission to ship, any or all
of the goods referred to in a documentary Letter of Credit or Documents
applicable thereto; any deviation from instructions, delay, default or fraud by
the shipper and/or any Person in connection with any goods or any shipping or
delivery thereof; any breach of contract between the shipper or vendors and
Borrower; errors, omissions, interruptions or delays in transmission or delivery
of any messages, by mail, cable, telegraph, telex or otherwise, whether or not
they be in cipher, unless such errors, omissions, interruptions or delays are
the result of the gross negligence or willful misconduct of Issuing Bank; errors
in interpretation of technical terms; the misapplication by the beneficiary of
any Letter of Credit of the proceeds of any drawing under such Letter of
Credit; or any consequences arising from causes beyond the control
of Issuing Bank, Agent, or any Lender, including any act or omission (whether
rightful or wrongful) of any present or future Governmental Authority.  The
rights, remedies, powers and privileges of Issuing Bank under this Agreement
with respect to Letters of Credit shall be in addition to, and cumulative with,
all rights, remedies, powers and privileges of Issuing Bank under any of the LC
Documents.  Nothing herein shall be deemed to release Issuing Bank from any
liability or obligation that it may have in respect to any Letter of Credit
arising out of and directly resulting from its own gross negligence or willful
misconduct.

(v)

No Letter of Credit shall be extended or amended in any respect
that is not solely ministerial, unless all of the LC Conditions are met as
though a new Letter of Credit were being requested and issued.  With
respect to any Letter of Credit that contains any "evergreen" or automatic
renewal provision, each Lender shall be deemed to have consented to any such
extension or renewal, unless any such Lender shall have provided to Agent
written notice that it declines to consent to any such extension or renewal
at least 60 days prior to the date on which Issuing Bank is entitled to decline
to extend or renew the Letter of Credit.  If all of the LC Conditions
are met and no Default or Event of Default exists, each Lender shall be deemed
to have consented to any such extension or renewal.

(vi)

Unless otherwise provided in any of the LC Documents, each LC
Application and each Letter of Credit shall be subject to the Uniform Customs
and Practice for Documentary Credits (2007 Revision), International Chamber of
Commerce Publication No. 600, and any amendments or revisions
thereto.

1.3.2

Participations.

(i)

Immediately upon the issuance of any Letter of Credit, each Lender
shall be deemed to have irrevocably and unconditionally purchased and received
from Issuing Bank, without recourse or warranty, an undivided interest and
participation equal to the Pro Rata share of such Lender (a
"Participating Lender") in all LC Obligations arising in connection
with such Letter of Credit, but in no event greater than an amount which, when
added to such Lender's Pro Rata share of all Revolver Loans and LC
Obligations then outstanding, exceeds such Lender's Commitment; provided,
however, that if Issuing Bank shall have received written notice from a
Lender on or before the Business Day immediately prior to the date of Issuing
Bank's issuance of a Letter of Credit that one or more of the conditions set
forth in Section 10 or Section 1.3.1 has not been
satisfied, Issuing Bank shall have no obligation to issue the requested Letter
of Credit or any other Letter of Credit until such notice is withdrawn in
writing by that Lender or until the Required Lenders shall have effectively
waived such condition in accordance with this Agreement.  In no event shall
Issuing Bank be deemed to have notice or knowledge of any existence of any
Default or Event of Default or the failure of any conditions in Sections
10 or 1.3.1 to be satisfied prior to its receipt of such notice from
a Lender.

- 6 -

(ii)

If Issuing Bank makes any payment under a Letter of Credit and
Borrower does not repay or cause to be repaid the amount of such payment on the
Reimbursement Date, Issuing Bank shall promptly notify Agent, which
shall promptly notify each Participating Lender, of such payment and each
Participating Lender shall promptly (and in any event within 1 Business Day
after its receipt of notice from Agent) and unconditionally pay to Agent,
for the account of Issuing Bank, in immediately available funds, the amount
of such Participating Lender's Pro Rata share of such payment, and Agent
shall promptly pay such amounts to Issuing Bank.  If a Participating Lender
does not make its Pro Rata share of the amount of such payment available to
Agent on a timely basis as herein provided, such Participating Lender
agrees to pay to Agent for the account of Issuing Bank, forthwith
on demand, such amount together with interest thereon at the Federal
Funds Rate until paid.  The failure of any Participating Lender
to make available to Agent for the account of Issuing Bank
such Participating Lender's Pro Rata share of the LC Obligations shall not
relieve any other Participating Lender of its obligation hereunder to make
available to Agent its Pro Rata share of the LC Obligations.  No
Participating Lender shall be responsible for the failure of any other
Participating Lender to make available to Agent its Pro Rata share of the LC
Obligations on the date such payment is to be made.

(iii)

Whenever Issuing Bank receives a payment on account of the LC
Obligations, including any interest thereon, as to which Agent has previously
received payments from any Participating Lender for the account of Issuing
Bank, Issuing Bank shall promptly pay to each Participating Lender which has
funded its participating interest therein, in immediately available funds,
an amount equal to such Participating Lender's Pro Rata share thereof.

(iv)

The obligation of each Participating Lender to make payments to
Agent for the account of Issuing Bank in connection with Issuing Bank's payment
under a Letter of Credit shall be absolute, unconditional and irrevocable, not
subject to any counterclaim, setoff, qualification or exception whatsoever, and
shall be made in accordance with the terms and conditions of this Agreement
under all circumstances and irrespective of whether or not Borrower may assert
or have any claim for any lack of validity or unenforceability of this Agreement
or any of the other Loan Documents; the existence of any Default or Event of
Default; any draft, certificate or other document presented under a Letter of
Credit having been determined to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect; the existence of any setoff or defense any Obligor may have with
respect to any of the Obligations; or the termination of
the Commitments.

(v)

Neither Issuing Bank nor any of its officers, directors, employees
or agents shall be liable to any Participating Lender for any action taken
or omitted to be taken under or in connection with any of the LC Documents
except as a result of gross negligence or willful misconduct on the part of
Issuing Bank.  Issuing Bank does not assume any responsibility for any
failure or delay in performance or breach by Borrower or any other Person of its
obligations under any of the LC Documents.  Issuing Bank does not make to
Participating Lenders any express or implied warranty, representation or
guaranty with respect to the Collateral, the LC Documents, or any Obligor.
 Issuing Bank shall not be responsible to any Participating Lender for any
recitals, statements, information, representations or warranties contained in,
or for the execution, validity, genuineness, effectiveness or enforceability of
any of the LC Documents; the validity, genuineness, enforceability,
collectibility, value or sufficiency of any of the Collateral or the perfection
of any Lien therein; or the assets, liabilities, financial condition, results of
operations, business, creditworthiness or legal status of any Obligor or
any Account Debtor.  In connection with its administration of and
enforcement of rights or remedies 

- 7 -

under any of the LC Documents, Issuing Bank shall
be entitled to act, and shall be fully protected in acting upon,
any certification, notice or other communication in whatever form believed
by Issuing Bank, in good faith, to be genuine and correct and to have been
signed, sent or made by a proper Person.  Issuing Bank may consult with and
employ legal counsel, accountants and other experts to advise it concerning its
rights, powers and privileges under the LC Documents and shall be entitled to
act upon, and shall be fully protected in any action taken in good faith
reliance upon, any advice given by such experts.  Issuing Bank may
employ agents and attorneys-in-fact in connection with any matter relating to
the LC Documents and shall not be liable for the negligence, default
or misconduct of any such agents or attorneys-in-fact selected by Issuing Bank
with reasonable care.  Issuing Bank shall not have any liability to
any Participating Lender by reason of Issuing Bank's refraining to take any
action under any of the LC Documents without having first received written
instructions from the Required Lenders to take such action.

(vi)

Upon the request of any Participating Lender, Issuing Bank shall
furnish to such Participating Lender copies (to the extent then available to
Issuing Bank) of each outstanding Letter of Credit and related LC Documents as
may be in the possession of Issuing Bank and reasonably requested from time
to time by such Participating Lender.

1.3.3

Cash Collateral Account.

  If any LC Obligations, whether or not then due or
payable, shall for any reason be outstanding (i) at any time that an Event
of Default exists, (ii) on any date that Availability is less than zero, or
(iii) on or at any time after the Commitment Termination Date, then
Borrower shall, on Issuing Bank's or Agent's request, forthwith pay to Issuing
Bank the amount of any LC Obligations that are then due and payable and shall,
upon the occurrence of any of the events described in clauses (i) and (iii)
hereinabove, provide Cash Collateral in the amount of 105% of all outstanding
Letters of Credit.  If notwithstanding the occurrence of one or more of the
events described in clauses (i) and (iii) in the immediately preceding sentence
Borrower fails to provide Cash Collateral for any outstanding Letters of Credit
on the first Business Day following Agent's or Issuing Bank's demand therefor,
Lenders may (and shall upon direction of Agent) advance such amount as
Revolver Loans (whether or not the Commitment Termination Date has occurred or
an Out-of-Formula Condition is created thereby).  Such cash (together with
any interest accrued thereon) shall be held by Agent in the Cash Collateral
Account and may be invested, in Agent's discretion, in Cash Equivalents.
 Borrower hereby pledges to Agent and grants to Agent a security interest
in, for the benefit of Agent in such capacity and for the benefit of
Secured Parties, all Cash Collateral held in the Cash Collateral
Account from time to time and all proceeds thereof, as security for the payment
of all Obligations (including LC Obligations), whether or not then due or
payable.  From time to time after cash is deposited in the
Cash Collateral Account, Agent may apply Cash Collateral then held in
the Cash Collateral Account to the payment of any amounts, in
such order as Agent may elect, as shall be or shall become due and payable
by Borrower to Issuing Bank, Agent or any Lender with respect to the LC
Obligations.  Neither Borrower nor any other Person claiming by, through or
under or on behalf of Borrower shall have any right to withdraw any of the
Cash Collateral held in the Cash Collateral Account, including any accrued
interest, provided that upon termination or expiration of all Letters of Credit
and the payment and satisfaction of all of the LC Obligations, any Cash
Collateral remaining in the Cash Collateral Account shall be returned to
Borrower unless an Event of Default then exists (in which event Agent may apply
such Cash Collateral to the payment of any other Obligations outstanding in
accordance with the provisions of Section 4.6, with any surplus to be
turned over to Borrower).

1.3.4

Indemnifications.

(i)

In addition to and without limiting any other indemnity which
Borrower may have to any Indemnitees under any of the Loan Documents, Borrower
hereby agrees to 

- 8 -

indemnify and defend each of the Indemnitees and to hold each of
the Indemnitees harmless from and against any and all Claims which any
Indemnitee may suffer, incur or be subject to as a consequence, directly or
indirectly, of (a) the issuance of, payment or failure to pay or any performance
or failure to perform under any Letter of Credit in accordance with its terms,
(b) any suit, investigation or proceeding as to which Agent or
any Lender is or may become a party to as a consequence, directly or
indirectly, of the issuance of any Letter of Credit or the payment or
failure to pay thereunder or (c) Issuing Bank following any instructions of
Borrower with respect to any Letter of Credit or any Document received by
Issuing Bank with reference to any Letter of Credit, other than in each case
with respect to the gross negligence or willful misconduct of such
Indemnitees.

(ii)

Each Participating Lender agrees to indemnify and defend each of
the Issuing Bank Indemnitees (to the extent the Issuing Bank
Indemnitees are not reimbursed by Borrower or any other Obligor, but
without limiting the indemnification obligations of Borrower under this
Agreement), to the extent of such Lender's Pro Rata share of the Commitments,
from and against any and all Claims which may be imposed on, incurred by or
asserted against any of the Issuing Bank Indemnitees in any way related to or
arising out of Issuing Bank's administration or enforcement of rights or
remedies under any of the LC Documents or any of the transactions
contemplated thereby (including costs and expenses which Borrower is obligated
to pay under Section 14.2).

SECTION  2.

INTEREST, FEES AND CHARGES

2.1.

Interest.

2.1.1

Rates of Interest.

  Borrower agrees to pay interest in respect of all
unpaid principal amounts of the Revolver Loans from the respective dates such
principal amounts are advanced until paid (whether at stated maturity, on
acceleration or otherwise) at a rate per annum equal to the applicable rate
indicated below:

(i)

for Revolver Loans made or outstanding as Base Rate Loans,
the Applicable Margin for such Loans plus the Base Rate in effect
from time to time; or

(ii)

for Revolver Loans made or outstanding as LIBOR Loans,
the Applicable Margin for such Loans plus the Adjusted LIBOR Rate
for the applicable Interest Period selected by Borrower in conformity with this
Agreement.

Borrower agrees to pay interest in respect of all unpaid principal
amounts outstanding with respect to Term Loan Advances from the respective dates
such principal amounts are advanced until paid (whether at stated maturity, on
acceleration, or otherwise) at a rate per annum equal to the applicable rate
indicated below:

(i)

for Term Loan Advances made or outstanding in whole or in part as
Base Rate Loans, the Applicable Margin for such Loans plus the Base
Rate in effect from time to time; or

(ii)

for Term Loan Advances made or outstanding in whole or in part as
LIBOR Loans, the Applicable Margin for such Loans plus the Adjusted
LIBOR Rate for the applicable Interest Period selected by Borrower in conformity
with this Agreement.

- 9 -

Upon determining the Adjusted LIBOR Rate for any Interest Period
requested by Borrower, Agent shall promptly notify Borrower thereof by telephone
and, if so requested by Borrower, confirm the same in writing.  Such
determination shall, absent manifest error, be final, conclusive and binding on
all parties and for all purposes.  The applicable rate of interest for
all Loans (or portions thereof) bearing interest based upon the Base Rate shall
be increased or decreased, as the case may be, by an amount equal to any
increase or decrease in the Base Rate, with such adjustments to be effective as
of the opening of business on the day that any such change in the Base Rate
becomes effective.  Interest on each Loan shall accrue from and including
the date on which such Loan is made, converted to a Loan of another Type or
continued as a LIBOR Loan to (but excluding) the date of any repayment thereof;
provided, however, that, if a Loan is repaid on the same day made,
one day's interest shall be paid on such Loan.  The Base Rate on the date
hereof is 4.50% per annum and, therefore, the rate of interest in effect
hereunder on the date hereof, expressed in simple interest terms, is 6.25% per
annum with respect to any portion of the Revolver Loans bearing interest as a
Base Rate Loan and is 6.75% per annum with respect to any portion of the Term
Loan Advances bearing interest as a Base Rate Loan.

2.1.2

Conversions and Continuations.

(i)

Borrower may on any Business Day, subject to the giving of a
proper Notice of Conversion/Continuation as hereinafter described, elect
(A) to continue all or any part of a LIBOR Loan by selecting a new
Interest Period therefor, to commence on the last day of the immediately
preceding Interest Period, or (B) to convert all or any part of a Loan of
one Type into a Loan of another Type; provided, however, that no
outstanding Loans may be converted into or continued as LIBOR Loans when any
Default or Event of Default exists.  Any conversion of a LIBOR Loan
into a Base Rate Loan shall be made on the last day of the Interest Period for
such LIBOR Loan.  Any conversion or continuation made with respect to
less than the entire outstanding balance of the Revolver Loans or the Term
Loan Advances must be allocated among Lenders on a Pro Rata basis, and the
Interest Period for Loans converted into or continued as LIBOR Loans shall be
coterminous for each Lender.

(ii)

Whenever Borrower desires to convert or continue Loans under
Section 2.1.2(i), Borrower shall give Agent written notice (or
telephonic notice promptly confirmed in writing) substantially in the form of
Exhibit C, signed by an authorized officer of Borrower, at least 1
Business Day before the requested conversion date, in the case of a conversion
into Base Rate Loans, and at least 2 Business Days before the requested
conversion or continuation date, in the case of a conversion into or
continuation of LIBOR Loans.  Promptly after receipt of a Notice of
Conversion/Continuation, Agent shall notify each Lender in writing of the
proposed conversion or continuation.  Each such Notice of
Conversion/Continuation shall be irrevocable and shall specify the aggregate
principal amount of the Loans to be converted or continued, the date of such
conversion or continuation (which shall be a Business Day) and whether the Loans
are being converted into or continued as LIBOR Loans (and, if so, the duration
of the Interest Period to be applicable thereto and, in the absence of any
specification by Borrower of the Interest Period, an Interest Period of one
month will be deemed to be specified) or Base Rate Loans.  If, upon the
expiration of any Interest Period in respect of any LIBOR Loans Borrower
shall have failed to deliver the Notice of Conversion/Continuation,
Borrower shall be deemed to have elected to convert such LIBOR Loans to
Base Rate Loans.

2.1.3

Interest Periods.

  In connection with the making or continuation of, or
conversion into, each Borrowing of LIBOR Loans, Borrower shall select an
interest period (each an "Interest Period") to be applicable to such
LIBOR Loan, which interest period shall commence on the date such 

- 10 -

LIBOR Loan is made and shall end on a numerically corresponding
day in the first, second, third or sixth month thereafter; provided, however,
that:

(i)

the initial Interest Period for a LIBOR Loan shall commence on the
date of such Borrowing (including the date of any conversion from a Loan of
another Type) and each Interest Period occurring thereafter in respect of such
Revolver Loan shall commence on the date on which the next preceding Interest
Period expires;

(ii)

if any Interest Period would otherwise expire on a day that is not
a Business Day, such Interest Period shall expire on the next succeeding
Business Day, provided that, if any Interest Period in respect of LIBOR
Loans would otherwise expire on a day which is not a Business Day but is a day
of the month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;

(iii)

any Interest Period that begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period shall expire on the last Business Day of such calendar month; 

(iv)

no Interest Period with respect to any portion of principal of a
Loan shall extend beyond a date on which Borrower is required to make a
scheduled payment of such portion of principal; and

(v)

no Interest Period shall extend beyond the last day of the
Original Term. 

2.1.4

Interest Rate Not Ascertainable.

  If Agent shall determine (which determination shall,
absent manifest error, be final, conclusive and binding upon all parties) that
on any date for determining the Adjusted LIBOR Rate for any Interest
Period, by reason of any changes arising after the date of this Agreement
affecting the London interbank market or any Lender's or Bank's position in such
market, adequate and fair means do not exist for ascertaining the applicable
interest rate on the basis provided for in the definition of Adjusted LIBOR
Rate, then, and in any such event, Agent shall forthwith give notice (by
telephone confirmed in writing) to Borrower of such determination.  Until
the circumstances giving rise to the suspension described herein no longer
exist, the obligation of Lenders to make LIBOR Loans shall be suspended, and
such affected Loans then outstanding shall, at the end of the then applicable
Interest Period or at such earlier time as may be required by Applicable Law,
bear the same interest as Base Rate Loans.

2.1.5

Default Rate of Interest.

  Borrower shall pay interest (before as well as after
entry of judgment thereon, to the extent permitted by Applicable Law) at a rate
per annum equal to the Default Rate (i) with respect to the principal
amount of any portion of the Obligations (and, to the extent permitted by
Applicable Law, all past due interest) that is not paid on the due date thereof
(whether due at stated maturity, on demand, upon acceleration or otherwise)
until paid in full; (ii) with respect to the principal amount of
all of the Obligations (and, to the extent permitted by Applicable Law, all
past due interest) upon the earlier to occur of (x) Borrower's receipt of
notice from Agent of the Required Lenders' election to charge the
Default Rate based upon the existence of any Event of Default (which notice
Agent shall send only with the consent or at the direction of the Required
Lenders), whether or not acceleration or demand for payment of the Obligations
has been made, or (y) the commencement by or against Borrower of an
Insolvency Proceeding whether or not under the circumstances described in
clauses (i) or (ii) hereof Agent elects to accelerate the maturity or
demand payment of any of the Obligations; and (iii) with respect to the
principal amount of any Out-of-Formula Loans, whether or not demand for payment
thereof has been made by Agent.  To the fullest extent permitted by
Applicable Law, the Default 

- 11 -

Rate shall apply and accrue on any judgment entered with respect
to any of the Obligations and to the unpaid principal amount of the Obligations
during any Insolvency Proceeding of Borrower.  Borrower acknowledges that
the costs and expenses to Agent and each Lender attendant upon the occurrence of
an Event of Default are difficult to ascertain or estimate and that the Default
Rate is a fair and reasonable estimate to compensate Agent and Lender for such
added cost and expense.

2.2.

Fees.

  In consideration of Lenders' establishment of the
Commitments in favor of Borrower, and Agent's agreement to serve as collateral
and administrative agent hereunder, Borrower agrees to pay the following fees:
 

2.2.1

Amendment and Restatement Fee.

  In consideration for Agent's willingness to enter into
this Agreement, Borrower shall pay to Agent, for the benefit of Lenders, a
closing fee in the amount of $296,054, in immediately available funds, which fee
shall be paid on the Closing Date.

2.2.2

Unused Line Fee.

  Borrower shall pay to Agent for the Pro Rata benefit
of Lenders a fee equal to the Applicable Margin for the unused line fee divided
by 360 days multiplied by the number of days in the month multiplied by the
amount by which the Average Revolver Loan Balance for any month (or portion
thereof that the Commitments are in effect) is less than the aggregate amount of
the Revolver Commitments, such fee to be paid on the first day of the following
month; but if the Commitments are terminated on a day other than the first day
of a month, then any such fee payable for the month in which termination shall
occur shall be paid on the effective date of such termination.

2.2.3

LC Facility Fees.

  Borrower shall pay: (i) to Agent, for the ratable
account of each Lender for Letters of Credit, the Applicable Margin in effect
for LIBOR Loans that constitute Revolver Loans on a per annum basis (and at any
time an Event of Default exists, the Default Rate) based on the face amount of
all Letters of Credit outstanding, payable monthly, in arrears, on the first
Business Day of the following month, and (ii) to Bank for its own account
all normal and customary charges associated with the issuance, amending,
negotiating, processing and administration of each Letter of Credit.

2.2.4

Audit and Appraisal Fees.

  Borrower shall reimburse Agent and Lenders for all
reasonable costs and expenses incurred by Agent or Lenders in connection with
appraisals and audits of any Collateral as Agent shall deem appropriate and
shall pay to Agent its normal and customary fee per day (currently $850 per day
per examiner) for each day that an employee or agent of Agent shall be engaged
in an examination or review of Borrower's books and records; provided,
however, if Availability is greater than or equal to $10,000,000 and no
Event of Default exists, then Borrower shall not be obligated to reimburse Agent
or its agents or designees for more than one appraisal of Borrower's Inventory
more frequently than once every eighteen months; and provided,
further, however, if Availability is less than $10,000,000
or an Event of Default exists, then Borrower shall be obligated to
reimburse Agent for any and all appraisals of Borrower's Inventory conducted by
Agent or its agents or designees.  On the Closing Date, Borrower shall be
obligated to pay to Agent all out-of-pocket expenses incurred by Agent in
connection with the audit and appraisal of Borrower's business and Properties
prior to the Closing Date.

2.2.5

General Provisions.

  All fees shall be fully earned by the identified
recipient thereof pursuant to the foregoing provisions of this Agreement on the
due date thereof (and, in the case of Letters of Credit, upon each issuance,
renewal or extension of such Letter of Credit) and, except as otherwise set
forth herein or required by Applicable Law, shall not be subject to rebate,
refund or proration.  All fees provided for in Section 2.2 are and
shall be deemed to be compensation for services 

- 12 -

and are not, and shall not be deemed to be, interest or any other
charge for the use, forbearance or detention of money.

2.3.

Computation of Interest and Fees.

  All fees and other charges provided for in this
Agreement that are calculated as a per annum percentage of any amount and all
interest shall be calculated daily and shall be computed on the actual number of
days elapsed over a year of 360 days.  For purposes of computing interest
and other charges hereunder, all Payment Items and other forms of payment
received by Agent shall be deemed applied by Agent on account of the Obligations
(subject to final payment of such items) on the Business Day that Agent
receives such items in immediately available funds in the Payment Account, and
Agent shall be deemed to have received such Payment Item on the date specified
in Section 4.7 hereof.

2.4.

Reimbursement of Obligations.  

2.4.1.

Borrower shall reimburse Agent and, during any period that an
Event of Default exists, each Lender, for all legal, accounting, appraisal and
other fees and expenses incurred by Agent or any Lender in connection with
(i) the negotiation and preparation of any of the Loan Documents,
any amendment or modification thereto, any waiver of any Default or Event
of Default thereunder, or any restructuring or forbearance with respect
thereto; (ii) the administration of the Loan Documents and
the transactions contemplated thereby, to the extent that such fees and
expenses are expressly provided for in this Agreement or any of the other Loan
Documents; (iii) any action taken to perfect or maintain the perfection or
priority of any of Agent's Liens with respect to any of the Collateral;
(iv) any inspection of or audits conducted with respect to Borrower's
books and records or any of the Collateral; (v) any effort to verify,
protect, preserve, or restore any of the Collateral or to collect, sell,
liquidate or otherwise dispose of or realize upon any of the Collateral;
(vi) any litigation, contest, dispute, suit, proceeding or action (whether
instituted by or against Agent, any Lender, any Obligor or any other Person) in
any way arising out of or relating to any of the Collateral (or the validity,
perfection or priority of any of Agent's Liens thereon), any of the
Loan Documents or the validity, allowance or amount of any of the
Obligations; (vii) the protection or enforcement or any rights or remedies
of Agent or any Lender in any Insolvency Proceeding; and (viii) any other
action taken by Agent or any Lender to enforce any of the rights or remedies of
Agent or such Lender against any Obligor or any Account Debtors to enforce
collection of any of the Obligations or payments with respect to any of the
Collateral.  All amounts chargeable to Borrower under this
Section 2.4 shall constitute Obligations that are secured by all of
the Collateral and shall be payable on demand to Agent.  Borrower
shall also reimburse Agent for expenses incurred by Agent in its administration
of any of the Collateral to the extent and in the manner provided in
Section 7 hereof or in any of the other Loan Documents.
 The foregoing shall be in addition to, and shall not be construed to
limit, any other provision of any of the Loan Documents regarding the
reimbursement by Borrower of costs, expenses or liabilities suffered or incurred
by Agent or any Lender.

2.4.2.

If at any time Agent or (with the consent of Agent) any Lender
shall agree to indemnify any Person (including Bank) against losses or damages
that such Person may suffer or incur in its dealings or transactions with
Borrower arising under or in connection with this Agreement or any of the other
Loan Documents, or shall guarantee any liability or obligation of Borrower to
such Person, or otherwise shall provide assurances of Borrower's payment or
performance under any agreement with such Person, including indemnities,
guaranties or other assurances of payment or performance given by Agent or any
Lender with respect to Cash Management Services, Interest Rate Contracts or
Letters of Credit, then the Contingent Obligation of Agent or any Lender
providing any such indemnity, guaranty or other assurance of payment or
performance, together with any payment made or liability incurred by Agent or
any Lender in connection therewith, shall constitute Obligations that are
secured by the Collateral and Borrower shall repay, on demand, any amount
so paid or any liability incurred by Agent or any Lender 

- 13 -

in connection with any such indemnity, guaranty or assurance.
 Nothing herein shall be construed to impose upon Agent or any Lender any
obligation to provide any such indemnity, guaranty or assurance except to the
extent provided in Section 1.3 hereof.  Agent and Lenders shall
use reasonable efforts to give Borrower notice of any such obligation under this
Section 2.4.2 to the extent that Borrower has not expressly requested at
such time that Agent and Lenders provide such indemnification, guarantee or
assurances, but Agent's and Lenders' failure to give Borrower such notice shall
not affect any of Borrower's obligations under this Agreement or any of the
other Loan Documents and shall not impose any liability on Agent or any
Lender.

2.5.

Bank Charges.

  Borrower shall pay to Agent, on demand, any and
all fees, costs or expenses which Agent or any Lender pays to a bank or other
similar institution (including any fees paid by Agent or any Lender to any
Participant) arising out of or in connection with (i) the forwarding to
Borrower or any other Person on behalf of Borrower by Agent or any Lender of
proceeds of Loans made by Lenders to Borrower pursuant to this Agreement and
(ii) the depositing for collection by Agent or any Lender of any Payment
Item received or delivered to Agent or any Lender on account of the Obligations.
 Borrower acknowledges and agrees that Agent may charge such costs, fees
and expenses to Borrower based upon Agent's good faith estimate of such costs,
fees and expenses as they are incurred by Agent or any Lender.

2.6.

Illegality.

  Notwithstanding anything to the contrary contained
elsewhere in this Agreement, if (i) any change in any law or regulation or in
the interpretation thereof by any Governmental Authority charged with the
administration thereof shall make it unlawful for a Lender to make or maintain a
LIBOR Loan or to give effect to its obligations as contemplated hereby with
respect to a LIBOR Loan or (ii) at any time such Lender determines that the
making or continuance of any LIBOR Loan has become impracticable as a result of
a contingency occurring after the date hereof which adversely affects the
London interbank market or the position of such Lender in such market, then
such Lender shall give after such determination Agent and Borrower notice
thereof and may thereafter (1) declare that LIBOR Loans will not thereafter be
made by such Lender, whereupon any request by Borrower for a LIBOR Loan
shall be deemed a request for a Base Rate Loan unless such Lender's
declaration shall be subsequently withdrawn (which declaration shall be
withdrawn promptly after the cessation of the circumstances described in clause
(i) or (ii) above); and (2) require that all outstanding LIBOR Loans made by
such Lender be converted to Base Rate Loans, under the circumstances of clause
(i) or (ii) of this Section 2.6 insofar as such Lender determines the
continuance of LIBOR Loans to be impracticable, in which event all such LIBOR
Loans shall be converted automatically to Base Rate Loans as of the date of
Borrower's receipt of the aforesaid notice from such Lender.

2.7.

Increased Costs.

  If, by reason of (a) the introduction after the date
hereof of or any change (including any change by way of imposition or increase
of Statutory Reserves or other reserve requirements) in or in the interpretation
of any law or regulation, or (b) the compliance with any guideline or request
from any central bank or other Governmental Authority or quasi-Governmental
Authority exercising control over banks or financial institutions generally
(whether or not having the force of law):

(i)

any Lender shall be subject after the date hereof, to any Tax,
duty or other charge with respect to any LIBOR Loan or its obligation to make
LIBOR Loans, or a change shall result in the basis of taxation of payment to any
Lender of the principal of or interest on its LIBOR Loans or its obligation
to make LIBOR Loans (except for changes in the rate of Tax on the overall net
income or gross receipts of such Lender imposed by the jurisdiction in which
such Lender's principal executive office is located); or

- 14 -

(ii)

any reserve (including any imposed by the Board of Governors),
special deposits or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Lender shall be imposed or deemed
applicable or any other condition affecting its LIBOR Loans or its obligation to
make LIBOR Loans shall be imposed on such Lender or the London interbank
market;

and as a result thereof there shall be any increase in the cost to
such Lender of agreeing to make or making, funding or maintaining LIBOR Loans
(except to the extent already included in the determination of
the applicable Adjusted LIBOR Rate for LIBOR Loans), or there shall be a
reduction in the amount received or receivable by such Lender, then such Lender
shall, promptly after determining the existence or amount of any such increased
costs for which such Lender seeks payment hereunder, give Borrower notice
thereof and Borrower shall from time to time, upon written notice from and
demand by such Lender (with a copy of such notice and demand to Agent), pay to
Agent for the account of such Lender, within 5 Business Days after the date
specified in such notice and demand, an additional amount sufficient to
indemnify such Lender against such increased costs.  A certificate as to
the amount of such increased cost, submitted to Borrower by such Lender, shall
be final, conclusive and binding for all purposes, absent manifest error.

If any Lender shall advise Agent at any time that, because of the
circumstances described hereinabove in this Section 2.7 or any other
circumstances arising after the date of this Agreement affecting such Lender or
the London interbank market or such Lender's or Bank's position in such market,
the Adjusted LIBOR Rate, as determined by Agent, will not adequately and fairly
reflect the cost to such Lender of funding LIBOR Loans, then, and in any such
event:

(i)

Agent shall forthwith give notice (by telephone confirmed in
writing) to Borrower and Lenders of such event;

(ii)

Borrower's right to request and such Lender's obligation to make
LIBOR Loans shall be immediately suspended and Borrower's right to continue
a LIBOR Loan as such beyond the then applicable Interest Period shall also be
suspended, until each condition giving rise to such suspension no longer exists;
and

(iii)

such Lender shall make a Base Rate Loan as part of the requested
Borrowing of LIBOR Loans, which Base Rate Loan shall, for all purposes, be
considered part of such Borrowing.

For purposes of this Section 2.7, all references to a
Lender shall be deemed to include any bank holding company or bank parent of
such Lender.

2.8.

Capital Adequacy.

  If any Lender determines that after the date hereof
(a) the adoption of any Applicable Law regarding capital requirements for
banks or bank holding companies or the subsidiaries thereof, (b) any change
in the interpretation or administration of any such Applicable Law by any
Governmental Authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or (c) compliance by such Lender
or its holding company with any request or directive of any such Governmental
Authority, central bank or comparable agency regarding capital adequacy (whether
or not having the force of law), has the effect of reducing the return on such
Lender's capital to a level below that which such Lender could have achieved
(taking into consideration such Lender's and its holding company's policies with
respect to capital adequacy immediately before such adoption, change or
compliance and assuming that such Lender's capital was fully utilized prior to
such adoption, change or compliance) but for such adoption, change or compliance
as a consequence of such 

- 15 -

Lender's commitment to make the Loans pursuant hereto by any
amount deemed by such Lender to be material:

(i)

Agent shall promptly, after its receipt of a certificate from such
Lender setting forth such Lender's determination of such occurrence, give notice
thereof to Borrower and Lenders; and

(ii)

Borrower shall pay to Agent, for the account of such Lender, as an
additional fee from time to time, on demand, such amount as such Lender
certifies to be the amount reasonably calculated to compensate such Lender for
such reduction.

A certificate of such Lender claiming entitlement to compensation
as set forth above will be conclusive in the absence of manifest error.
 Such certificate will set forth the nature of the occurrence giving rise
to such compensation, the additional amount or amounts to be paid to such Lender
(including the basis for such Lender's determination of such amount), and the
method by which such amounts were determined.  In determining such amount,
such Lender may use any reasonable averaging and attribution method.
 For purposes of this Section 2.8 all references to a Lender
shall be deemed to include any bank holding company or bank parent of such
Lender.

2.9.

Funding Losses.

  If for any reason (other than due to a default by a
Lender or as a result of a Lender's refusal to honor a LIBOR Loan request due to
circumstances described in Section 2.6 or 2.7 hereof) a Borrowing
of, or conversion to or continuation of, LIBOR Loans does not occur on the date
specified therefor in a Notice of Borrowing or Notice of Conversion/
Continuation (whether or not withdrawn), or if any repayment (including any
conversions pursuant to Section 2.1.2 hereof) of any of its LIBOR Loans
occurs on a date that is not the last day of an Interest Period applicable
thereto, or if for any reason Borrower defaults in its obligation to repay LIBOR
Loans when required by the terms of this Agreement, then Borrower shall pay to
Agent, for the ratable benefit of the affected Lenders, within 10 days after
Agent's or an affected Lender's demand therefor, an amount (if a positive
number) computed pursuant to the following formula:

L = (R - T) x P x D

            360

where

L = 

amount payable

R = 

interest rate applicable hereunder to the LIBOR Loan unborrowed or
prepaid 

T = 

effective interest rate per annum at which any readily marketable
bond or other obligations of the United States, selected at Agent's sole
discretion, maturing on or nearest the last day of the then applicable or
requested Interest Period for such LIBOR Loan and in approximately the same
amount as such LIBOR Loan, can be purchased by Agent on the day of such payment
of principal or failure to borrow

- 16 -

P =

the amount of principal paid or the amount of the LIBOR Loan
requested or to have been continued or converted

D =

the number of days remaining in the Interest Period as of the date
of such prepayment or the number of days in the requested Interest Period

Borrower shall pay such amount upon presentation by Agent of a
statement setting forth the amount and Agent's calculation thereof pursuant
hereto, which statement shall be deemed true and correct absent manifest error.
 For purposes of this Section 2.9, all references to a Lender shall
be deemed to include any bank holding company or bank parent of such Lender.

2.10.

Maximum Interest.

  Regardless of any provision contained in any of the
Loan Documents, in no contingency or event whatsoever shall the aggregate of all
amounts that are contracted for, charged or received by Agent and Lenders
pursuant to the terms of this Agreement or any of the other Loan Documents and
that are deemed interest under Applicable Law exceed the highest rate
permissible under any Applicable Law.  No agreements, conditions,
provisions or stipulations contained in this Agreement or any of the other
Loan Documents or the exercise by Agent of the right to accelerate the payment
or the maturity of all or any portion of the Obligations, or the exercise of any
option whatsoever contained in any of the Loan Documents, or the prepayment
by Borrower of any of the Obligations, or the occurrence of any contingency
whatsoever, shall entitle Agent or any Lender to charge or receive in any event,
interest or any charges, amounts, premiums or fees deemed interest by Applicable
Law (such interest, charges, amounts, premiums and fees referred to herein
collectively as "Interest") in excess of the Maximum Rate and in no event
shall Borrower be obligated to pay Interest exceeding such Maximum Rate, and all
agreements, conditions or stipulations, if any, which may in any event or
contingency whatsoever operate to bind, obligate or compel Borrower to pay
Interest exceeding the Maximum Rate shall be without binding force or effect, at
law or in equity, to the extent only of the excess of Interest over such Maximum
Rate.  If any Interest is charged or received in excess of the Maximum Rate
("Excess"), Borrower acknowledges and stipulates that any such charge or
receipt shall be the result of an accident and bona fide error, and such Excess,
to the extent received, shall be applied first to reduce the principal
Obligations and the balance, if any, returned to Borrower, it being the intent
of the parties hereto not to enter into a usurious or otherwise
illegal relationship.  The right to accelerate the maturity of any of
the Obligations does not include the right to accelerate any Interest that
has not otherwise accrued on the date of such acceleration, and Agent and
Lenders do not intend to collect any unearned Interest in the event of any such
acceleration.  Borrower recognizes that, with fluctuations in the rates of
interest set forth in Section 2.1.1 of this Agreement or in 
the Notes, and the Maximum Rate, such an unintentional result could
inadvertently occur.  All monies paid to Agent or any Lender hereunder or
under any of the other Loan Documents, whether at maturity or by prepayment,
shall be subject to any rebate of unearned Interest as and to the extent
required by Applicable Law.  By the execution of this Agreement,
Borrower covenants that (i) the credit or return of any Excess shall
constitute the acceptance by Borrower of such Excess, and (ii) Borrower
shall not seek or pursue any other remedy, legal or equitable, against Agent or
any Lender, based in whole or in part upon contracting for, charging or
receiving any Interest in excess of the Maximum Rate.  For the purpose of
determining whether or not any Excess has been contracted for, charged or
received by Agent or any Lender, all Interest at any time contracted for,
charged or received from Borrower in connection with any of the Loan Documents
shall, to the extent permitted by Applicable Law, be amortized, prorated,
allocated and spread in equal parts throughout the full term of the Obligations.
 Borrower, Agent and Lenders shall, to the maximum extent permitted under
Applicable Law, (i) characterize any non-principal payment as an expense, fee or
premium rather than as Interest and (ii) exclude voluntary prepayments and the
effects thereof.  The provisions of this Section 2.10 shall be

- 17 -

deemed to be incorporated into every Loan Document (whether or not
any provision of this Section is referred to therein).  All such Loan
Documents and communications relating to any Interest owed by Borrower and all
figures set forth therein shall, for the sole purpose of computing the extent of
Obligations, be automatically recomputed by Borrower, and by any court
considering the same, to give effect to the adjustments or credits required by
this Section 2.10.

SECTION  3.

LOAN ADMINISTRATION

3.1.

Manner of Borrowing and Funding Revolver Loans.

  Borrowings under the Commitments established pursuant
to Section 1.1 hereof shall be made and funded as follows:

3.1.1

Notice of Borrowing.

(i)

Whenever Borrower desires to make a Borrowing under Section
1.1 of this Agreement (other than a Borrowing resulting from a
conversion or continuation pursuant to Section 2.1.2), Borrower shall
give Agent prior written notice (or telephonic notice promptly confirmed in
writing if requested by Agent) of such Borrowing request (a "Notice of
Borrowing"), which shall be in the form of Exhibit D
annexed hereto and signed by an authorized officer of Borrower.  Such
Notice of Borrowing shall be given by Borrower no later than 12:00 noon at the
office of Agent designated by Agent from time to time (a) on the Business
Day of the requested funding date of such Borrowing, in the case of Base Rate
Loans, and (b) at least 2 Business Days prior to the requested funding date
of such Borrowing, in the case of LIBOR Loans.  Notices received after
12:00 noon shall be deemed received on the next Business Day.  The Revolver
Loans made by each Lender on the Closing Date shall be in excess of $250,000.
 Each Notice of Borrowing (or telephonic notice thereof) shall be
irrevocable and shall specify (a) the principal amount of the Borrowing,
(b) the date of Borrowing (which shall be a Business Day), (c) whether
the Borrowing is to consist of Base Rate Loans or LIBOR Loans, (d) in the
case of LIBOR Loans, the duration of the Interest Period to be applicable
thereto, and (e) the account of Borrower to which the proceeds of such
Borrowing are to be disbursed.  Borrower may not request any LIBOR Loans if
a Default or Event of Default exists.

(ii)

Unless payment is otherwise timely made by Borrower, the becoming
due of any amount required to be paid under this Agreement or any of the other
Loan Documents with respect to the Obligations (whether as principal, accrued
interest, fees or other charges including the repayment of any LC
Obligations) shall be deemed irrevocably to be a request (without
any requirement for the submission of a Notice of Borrowing) for Revolver
Loans on the due date of, and in an aggregate amount required to pay, such
Obligations, and the proceeds of such Revolver Loans may be disbursed by
way of direct payment of the relevant Obligation and shall bear interest as Base
Rate Loans.  Neither Agent nor any Lender shall have any obligation to
Borrower to honor any deemed request for a Revolver Loan after the Commitment
Termination Date, when an Out-of-Formula Condition exists or would result
therefrom or when any condition precedent set forth in Section 10 hereof
is not satisfied, but may do so in their discretion and without regard to the
existence of, and without being deemed to have waived, any Default or Event of
Default and regardless of whether such Revolver Loan is funded after the
Commitment Termination Date.

(iii)

If Borrower elects to establish a Deposit Account (including a
Controlled Disbursement Account) with Bank or any Affiliate of Bank, or Borrower
otherwise incurs Bank Product Debt, then the presentation for payment by Bank of
any check or other item of payment drawn on the Controlled Disbursement Account
or the becoming due of any Bank Product Debt 

- 18 -

at a time when there are insufficient funds in such Deposit
Account to cover such check or Bank Product Debt shall be deemed irrevocably to
be a request (without any requirement for the submission of a Notice of
Borrowing) for Revolver Loans on the date of such presentation or becoming due
of Bank Product Debt and in any amount equal to the aggregate amount of the
items presented for payment or the amount of Bank Product Debt that has become
due, and the proceeds of such Revolver Loans may be disbursed to the Controlled
Disbursement Account or other Deposit Account with Bank or any Affiliate of Bank
and shall bear interest as Base Rate Loans.  Neither Agent nor any Lender
shall have any obligation to honor any deemed request for a Revolver Loan after
the Commitment Termination Date or when an Out-of-Formula Condition exists or
would result therefrom or when any condition precedent in Section 10
hereof is not satisfied, but may do so in its discretion and without regard to
the existence of, and without being deemed to have waived, any Default or Event
of Default and regardless of whether such Revolver Loan is funded after the
Commitment Termination Date.

(iv)

As an accommodation to Borrower, Agent and Lenders may permit
telephonic requests for Borrowings and electronic transmittal of instructions,
authorizations, agreements or reports to Agent by Borrower; provided,
however, that, if requested by Agent, Borrower shall confirm each such
telephonic request for a Borrowing of LIBOR Loans by delivery of the required
Notice of Borrowing to Agent by facsimile transmission promptly, but in no event
later than 5:00 p.m. on the same day.  Neither Agent nor any Lender
shall have any liability to Borrower for any loss or damage suffered by Borrower
as a result of Agent's or any Lender's honoring of any requests, execution of
any instructions, authorizations or agreements or reliance on any reports
communicated to it telephonically or electronically and purporting to have been
sent to Agent or Lenders by Borrower and neither Agent nor any Lender shall have
any duty to verify the origin of any such communication or the identity or
authority of the Person sending it.

3.1.2

Fundings by Lenders.

  Subject to its receipt of notice from Agent of a
Notice of Borrowing as provided in Section 3.1.1(i) (except in the case
of a deemed request by Borrower for a Revolver Loan as provided in Sections
3.1.1(ii) or (iii) or 3.1.3(ii) hereof, in which event no
Notice of Borrowing need be submitted), each Lender shall timely honor its
Revolver Commitment by funding its Pro Rata share of each Borrowing of Revolver
Loans that is properly requested by Borrower and that Borrower is entitled to
receive under this Agreement.  Agent shall endeavor to notify Lenders of
each Notice of Borrowing (or deemed request for a Borrowing pursuant to
Section 3.1.1(ii) or (iii) hereof) by 12:00 noon on the
proposed funding date (in the case of Base Rate Loans) or by 3:00 p.m. at least
2 Business Days before the proposed funding date (in the case of LIBOR
Loans).  Each Lender shall deposit with Agent an amount equal to its Pro
Rata share of the Borrowing requested or deemed requested by Borrower at Agent's
designated bank in immediately available funds not later than 3:00 p.m. on
the date of funding of such Borrowing, unless Agent's notice to Lenders is
received after 12:00 noon on the proposed funding date of a Base Rate Loan, in
which event Lenders shall deposit with Agent their respective Pro Rata shares of
the requested Borrowing on or before 11:00 a.m. of the next Business Day.
 Subject to its receipt of such amounts from Lenders, Agent shall make the
proceeds of the Revolver Loans received by it available to Borrower by
disbursing such proceeds in accordance with Borrower's disbursement instructions
set forth in the applicable Notice of Borrowing.  Neither Agent nor any
Lender shall have any liability on account of any delay by any bank or other
depository institution in treating the proceeds of any Revolver Loan as
collected funds or any delay in receipt, or any loss, of funds that constitute a
Revolver Loan, the wire transfer of which was initiated by Agent in
accordance with wiring instructions provided to Agent.  Unless Agent shall
have been notified in writing by a Lender prior to the proposed time of funding
that such Lender does not intend to deposit with Agent an amount equal such
Lender's Pro Rata share of the requested Borrowing (or deemed request for a
Borrowing pursuant to 

- 19 -

Section 3.1.1(ii) or (iii) hereof), Agent may
assume that such Lender has deposited or promptly will deposit its share with
Agent and Agent may in its discretion disburse a corresponding amount to
Borrower on the applicable funding date.  If a Lender's Pro Rata share of
such Borrowing is not in fact deposited with Agent, then, if Agent has disbursed
to Borrower an amount corresponding to such share, then such Lender agrees to
pay, and in addition Borrower agrees to repay, to Agent forthwith on demand such
corresponding amount, together with interest thereon, for each day from the date
such amount is disbursed by Agent to or for the benefit of Borrower until the
date such amount is paid or repaid to Agent, (a) in the case of Borrower,
at the interest rate applicable to such Borrowing and (b) in the case of
such Lender, at the Federal Funds Rate.  If such Lender repays to
Agent such corresponding amount, such amount so repaid shall constitute a
Revolver Loan, and if both such Lender and Borrower shall have repaid such
corresponding amount, Agent shall promptly return to Borrower such corresponding
amount in same day funds.  A notice from Agent submitted to any Lender with
respect to amounts owing under this Section 3.1.2 shall be conclusive,
absent manifest error.

3.1.3

Settlement and Settlement Loans.

(i)

In order to facilitate the administration of the Revolver Loans
under this Agreement, Lenders agree (which agreement shall be solely between
Lenders and Agent and shall not be for the benefit of or enforceable by
Borrower) that settlement among them with respect to the Revolver Loans may
take place on a periodic basis on dates determined from time to time by Agent
(each a "Settlement Date"), which may occur before or after the
occurrence or during the continuance of a Default or Event of Default and
whether or not all of the conditions set forth in Section 10 of this
Agreement have been met.  On each Settlement Date, payment shall be made by
or to each Lender in the manner provided herein and in accordance with the
Settlement Report delivered by Agent to Lenders with respect to such Settlement
Date so that, as of each Settlement Date and after giving effect to the
transaction to take place on such Settlement Date, each Lender shall hold its
Pro Rata share of all Revolver Loans and participations in LC Obligations then
outstanding.

(ii)

Between Settlement Dates, Agent may request BofA to advance, and
BofA may, but shall in no event be obligated to, advance to Borrower out of
BofA's own funds the entire principal amount of any Borrowing of Revolver Loans
that are Base Rate Loans requested or deemed requested pursuant to this
Agreement (any such Revolver Loan funded exclusively by BofA being referred to
as a "Settlement Loan").  Each Settlement Loan shall constitute a
Revolver Loan hereunder, shall accrue interest as a Base Rate Loan, and shall be
subject to all of the terms, conditions and security applicable to other
Revolver Loans, except that all payments thereon shall be payable to BofA solely
for its own account.  The obligation of Borrower to repay such Settlement
Loans to BofA shall be evidenced by the records of BofA.  Agent shall not
request BofA to make any Settlement Loan if the requested Borrowing would exceed
the amount of Availability on the funding date.  BofA shall not be required
to determine whether the applicable conditions precedent set forth in
Section 10 hereof have been satisfied or the requested Borrowing
would exceed the amount of Availability on the funding date applicable thereto
prior to making, in its sole discretion, any Settlement Loan;
 provided, that if any Lender determines that an Event of
Default exists and as a result thereof, it does not intend to fund its Pro Rata
share of any Settlement Loan, then such Lender shall give written notice to BofA
and Agent at least 1 Business Day prior to the funding of such Settlement Loan.
 On each Settlement Date, or, if earlier, upon demand by Agent for payment
thereof, the then outstanding Settlement Loans shall be immediately due and
payable.  As provided in Section 3.1.1(ii), Borrower shall be
deemed to have requested (without the necessity of submitting any Notice of
Borrowing) Revolver Loans to be made on each Settlement Date in the amount of
all outstanding Settlement 

- 20 -

Loans and to have Agent cause the proceeds of such Revolver Loans
to be applied to the repayment of such Settlement Loans and interest accrued
thereon.  Agent shall notify the Lenders of the outstanding balance of
Revolver Loans prior to 11:00 a.m. on each Settlement Date and each Lender
(other than BofA) shall deposit with Agent (without setoff, counterclaim or
reduction of any kind) an amount equal to its Pro Rata share of the amount of
Revolver Loans deemed requested in immediately available funds not later than
2:00 p.m. on such Settlement Date, and without regard to whether any of the
conditions precedent set forth in Section 10 hereof are satisfied or
the Commitment Termination Date has occurred.  If as the result of the
commencement by or against Borrower of any Insolvency Proceeding or otherwise
any Settlement Loan may not be repaid by the funding by Lenders of Revolver
Loans, then each Lender (other than BofA) shall be deemed to have purchased as a
participating interest in any unpaid Settlement Loan in an amount equal to such
Lender's Pro Rata share of such Settlement Loan and shall transfer to BofA, in
immediately available funds, not later than the second Business Day after BofA's
request therefor, the amount of such Lender's participation.  The proceeds
of Settlement Loans may be used solely for purposes for which Revolver Loans
generally may be used in accordance with Section 1.1.3 hereof.
 If any amounts received by BofA in respect of any Settlement Loans are
later required to be returned or repaid by BofA to Borrower or any other Obligor
or their respective representatives or successors-in-interest, whether by court
order, settlement or otherwise, the other Lenders shall, upon demand by BofA
with notice to Agent, pay to Agent for the account of BofA, an amount equal to
each other Lender's Pro Rata share of all such amounts required to be returned
by BofA.

3.1.4

Disbursement Authorization.

  Borrower hereby irrevocably authorizes Agent to
disburse the proceeds of each Revolver Loan requested by Borrower, or deemed to
be requested pursuant to Section 3.1.1 or Section 3.1.3(ii),
as follows:  (i) the proceeds of each Revolver Loan requested under
Section 3.1.1(i) shall be disbursed by Agent in accordance with the
terms of the written disbursement letter from Borrower in the case of the
initial Borrowing, and, in the case of each subsequent Borrowing, by wire
transfer to such bank account as may be agreed upon by Borrower and Agent from
time to time or elsewhere if pursuant to a written direction from Borrower; and
(ii) the proceeds of each Revolver Loan requested under
Section 3.1.1(ii) or Section 3.1.3(ii) shall be
disbursed by Agent by way of direct payment of the relevant interest or other
Obligation. 

3.2.

Defaulting Lender.

  If any Lender shall, at any time, fail to make any
payment to Agent or BofA that is required hereunder, Agent may, but shall not be
required to, retain payments that would otherwise be made to such defaulting
Lender hereunder and apply such payments to such defaulting Lender's defaulted
obligations hereunder, at such time, and in such order, as Agent may elect in
its sole discretion.  With respect to the payment of any funds from Agent
to a Lender or from a Lender to Agent, the party failing to make the full
payment when due pursuant to the terms hereof shall, upon demand by the other
party, pay such amount together with interest on such amount at the Federal
Funds Rate.  The failure of any Lender to fund its portion of any Revolver
Loan shall not relieve any other Lender of its obligation, if any, to fund its
portion of the Revolver Loan on the date of Borrowing, but no Lender shall be
responsible for the failure of any other Lender to make any Revolver Loan to be
made by such Lender on the date of any Borrowing.  Solely as among the
Lenders and solely for purposes of voting or consenting to matters with respect
to any of the Loan Documents, Collateral or any Obligations and determining
a defaulting Lender's Pro Rata share of payments and proceeds of Collateral
pending such defaulting Lender's cure of its defaults hereunder, a defaulting
Lender shall not be deemed to be a "Lender" and such Lender's Commitment shall
be deemed to be zero (0). The provisions of this Section 3.2
shall be solely for the benefit of Agent and Lenders and may not be enforced by
Borrower.

- 21 -

3.3.

Special Provisions Governing LIBOR Loans.
 

3.3.1

Number of LIBOR Loans.

  In no event may the number of LIBOR Loans outstanding
at any time to any Lender exceed 8.

3.3.2

Minimum Amounts.

  Each Borrowing of LIBOR Loans pursuant to
Section 3.1.1(i), and each continuation of or conversion to LIBOR
Loans pursuant to Section 2.1.2 hereof, shall be in a minimum amount
of $1,000,000 and integral multiples of $100,000 in excess of that amount.

3.3.3

LIBOR Lending Office.

  Each Lender's initial LIBOR Lending Office is set
forth opposite its name on the signature pages hereof.  Each Lender shall
have the right at any time and from time to time to designate a different office
of itself or of any Affiliate as such Lender's LIBOR Lending Office, and to
transfer any outstanding LIBOR Loans to such LIBOR Lending Office.  No such
designation or transfer shall result in any liability on the part of Borrower
for increased costs or expenses resulting solely from such designation or
transfer (except any such transfer that is made by a Lender pursuant to
Section 2.6 or Section 2.7 hereof, or otherwise for the purpose of
complying with Applicable Law).  Increased costs or expenses resulting from
a change in Applicable Law occurring subsequent to any such designation or
transfer shall be deemed not to result solely from such designation or
transfer.

3.3.4

Funding of LIBOR Loans.

  Each Lender may, if it so elects, fulfill its
obligation to make, continue or convert LIBOR Loans hereunder by causing one of
its foreign branches or Affiliates (or an international banking facility
created by such Lender) to make or maintain such LIBOR Loans; provided, however,
that such LIBOR Loans shall nonetheless be deemed to have been made and to be
held by such Lender, and the obligation of Borrower to repay such LIBOR
Loans shall nevertheless be to such Lender for the account of such foreign
branch, Affiliate or international banking facility.  The calculation
of all amounts payable to Lender under Section 2.7 and 2.9 shall
be made as if each Lender had actually funded or committed to fund its LIBOR
Loan through the purchase of an underlying deposit in an amount equal to the
amount of such LIBOR Loan and having a maturity comparable to the relevant
Interest Period  for such LIBOR Loans; provided, however, each Lender may
fund its LIBOR Loans in any manner it deems fit and the foregoing presumption
shall be utilized only for the calculation of amounts payable under Section
2.7 and Section 2.9.

3.4.

All Loans to Constitute One Obligation.

  The Loans shall constitute one general Obligation of
Borrower and (unless otherwise expressly provided in any Security Document)
shall be secured by Agent's Lien upon all of the Collateral; provided, however,
that Agent and each Lender shall be deemed to be a creditor of Borrower and
the holder of a separate claim against Borrower to the extent of any Obligations
owed by Borrower to Agent or such Lender.

SECTION  4.

PAYMENTS

4.1.

General Repayment Provisions.

  All payments (including all prepayments) of principal
of and interest on the Loans, LC Obligations and other Obligations that are
payable to Agent or any Lender shall be made to Agent in Dollars without any
offset or counterclaim and free and clear of (and without deduction for) any
present or future Taxes, and, with respect to payments made other than by
application of balances in the Payment Account, in immediately available funds
not later than 12:00 noon on the due date (and payment made after such time on
the due date to be deemed to have been made on the next succeeding Business
Day).  All payments received by Agent shall be distributed by Agent in
accordance with Section 4.6 hereof, subject to the rights of offset
that Agent may have as to amounts 

- 22 -

otherwise to be remitted to a particular Lender by reason of
amounts due Agent from such Lender under any of the Loan Documents.

4.2.

Repayment of Revolver Loans.

4.2.1

Payment of Principal.

  The outstanding principal amounts with respect to the
Revolver Loans shall be repaid as follows:

(i)

Any portion of the Revolver Loans consisting of the principal
amount of Base Rate Loans shall be paid by Borrower to Agent, for the Pro Rata
benefit of Lenders (or, in the case of Settlement Loans, for the sole benefit of
BofA) unless timely converted to a LIBOR Loan in accordance with this Agreement,
immediately upon (a) each receipt by Agent, any Lender or Borrower of any
proceeds of any of the Accounts or Inventory, to the extent of such proceeds,
(b) the Commitment Termination Date, and (c) in the case of Settlement
Loans, the earlier of BofA's demand for payment or on each Settlement Date with
respect to all Settlement Loans outstanding on such date.

(ii)

Any portion of the Revolver Loans consisting of the principal
amount of LIBOR Loans shall be paid by Borrower to Agent, for the Pro Rata
benefit of Lenders, unless converted to a Base Rate Loan or continued as a LIBOR
Loan in accordance with the terms of this Agreement, immediately upon
(a) the last day of the Interest Period applicable thereto and (b) the
Commitment Termination Date.  In no event shall Borrower be authorized to
make a voluntary prepayment with respect to any Revolver Loan outstanding as a
LIBOR Loan prior to the last day of the Interest Period applicable thereto
unless (x) otherwise agreed in writing by Agent or Borrower is otherwise
expressly authorized or required by any other provision of this Agreement to pay
any LIBOR Loan outstanding on a date other than the last day of the Interest
Period applicable thereto, and (y)  Borrower pays to Agent, for the Pro
Rata benefit of Lenders, concurrently with any prepayment of a LIBOR Loan, any
amount due Agent and Lenders under Section 2.9 hereof as a
consequence of such prepayment.

(iii)

Notwithstanding anything to the contrary contained elsewhere in
this Agreement, if an Out-of-Formula Condition shall exist, Borrower shall, on
the sooner to occur of Agent's demand or the first Business Day after Borrower
has obtained knowledge of such Out-of-Formula Condition, repay the outstanding
Revolver Loans that are Base Rate Loans in an amount sufficient to reduce the
aggregate unpaid principal amount of all Revolver Loans by an amount equal to
such excess; and, if such payment of Base Rate Loans is not sufficient to
eliminate the Out-of-Formula Condition, then Borrower shall immediately either
(a) deposit with Agent, for the Pro Rata benefit of Lenders, for
application to any outstanding Revolver Loans bearing interest as LIBOR Loans as
the same become due and payable (whether at the end of the applicable Interest
Periods or on the Commitment Termination Date) cash in an amount sufficient to
eliminate such Out-of-Formula Condition, to be held by Agent pending
disbursement of same to Lenders, but subject to Agent's Lien thereon and rights
of offset with respect thereto, or (b) pay the Revolver Loans outstanding
as LIBOR Loans to the extent necessary to eliminate such Out-of-Formula
Condition and also pay to Agent for the Pro Rata benefit of Lenders any and all
amounts required by Section 2.9 hereof to be paid by reason of the
prepayment of a LIBOR Loan prior to the last day of the Interest Period
applicable thereto.

4.2.2

Payment of Interest.

  Interest accrued on the Revolver Loans shall be due
and payable on (i) the first calendar day of each month (for the
immediately preceding month), computed through the last calendar day of the
preceding month, with respect to any Revolver Loan (whether a Base 

- 23 -

Rate Loan or LIBOR Loan) and (ii) any unpaid interest on the
last day of the applicable Interest Period in the case of a LIBOR Loan.
 Accrued interest shall also be paid by Borrower on the Commitment
Termination Date.  With respect to any Base Rate Loan converted into a
LIBOR Loan pursuant to Section 2.1.2 on a day when interest would
not otherwise have been payable with respect to such Base Rate Loan, accrued
interest to the date of such conversion on the amount of such Base Rate
Loan so converted shall be paid on the conversion date.

4.3.

Repayment of Term Loan Advances.

4.3.1

Payment of Principal.

  Commencing on November 1, 2008, and on the first of
each month thereafter, the principal amount of Term Loan A shall be paid in
aggregate consecutive monthly installments of $125,500 (which amount shall be
distributed by Agent to each holder of a Term Note A based upon their Pro Rata
shares of such amount) and the final installments of which shall be in an amount
equal to such holder's Pro Rata share of the remaining principal balance of Term
Loan A and shall be payable on the Commitment Termination Date.

4.3.2

Payment of Interest.

  Interest accrued on each Term Loan Advance shall be
due and payable on (i) the first calendar day of each month for the
immediately preceding month, computed through the last calendar day of the
preceding month, whether all or any portion of the Term Loan Advance bears
interest as a Base Rate Loan or a LIBOR Loan, (ii) the last day of the
applicable Interest Period in the case of any portion of such Term Loan
Advance that is a LIBOR Loan and (iii) the date of any prepayment of Term
Loan Advances.  Accrued interest shall also be paid by Borrower as and when
payable in Sections 4.3.3 and 4.3.4 in connection with any
prepayment of Term Loan Advances and on the Commitment Termination Date.
 With respect to any Base Rate Loan converted into a LIBOR Loan pursuant to
Section 2.1.2 on a day when interest would not otherwise have been
payable with respect to such Base Rate Loan, accrued interest to the date of
such conversion on the amount of such Base Rate Loan so converted shall be
paid on the conversion date.

4.3.3

Mandatory Prepayment of Term Loan Advances.

  Borrower shall be obligated to prepay the entire
unpaid principal balance of the Term Loan Advances, and all accrued but unpaid
interest thereon, upon the Commitment Termination Date.  Borrower shall
also be required to prepay the Term Loan Advances from the Net Proceeds of
insurance or condemnation awards paid in respect of any Real Estate or Equipment
unless Borrower is authorized to use such Net Proceeds pursuant to
Section 7.1.2(ii).  Notwithstanding the foregoing, if no Event
of Default exists or would result therefrom, Net Proceeds arising from a
Permitted Asset Disposition shall be applied first to the outstanding principal
amount of the Revolver Loans, second to the outstanding principal amount of the
Term Loans and then to such other Obligations as Agent may determine.

4.3.4

Optional Prepayments of Term Loan Advances.

  Borrower may, at its option, prepay any portion of the
Term Loan Advances in whole at any time or in part from time to time, in amounts
aggregating $200,000 or any greater integral multiple of $50,000, by paying the
principal amount to be prepaid together with interest accrued or unpaid thereon
to the date of prepayment and any applicable prepayment premium set forth below
and any applicable charges pursuant to Section 2.9.  Borrower
shall give written notice (or telephonic notice confirmed in writing) to the
Agent of any intended prepayment not less than 1 Business Day prior to any
prepayment of Base Rate Loans and not less than 2 Business Days prior to any
prepayment of LIBOR Loans.  Such notice, once given, shall be irrevocable
and, upon receipt of any such notice of optional prepayment, Agent shall
promptly notify each Lender of the contents thereof and of such Lender's share
of the prepayment.

- 24 -

4.3.5

Application of Prepayments.

  Each prepayment of Term Loan Advances shall be
remitted by Borrower to Agent to be allocated in accordance with the provisions
of Section 4.6.1 hereof and, to the extent allocable thereunder to
any of the Loans, allocated first to the Term Loans and distributed by Agent to
each Lender on a Pro Rata basis.  Each Lender shall apply its share of
each prepayment, first to accrued but unpaid interest, and the balance to
installments of principal in the inverse order of their maturities, until such
Lender's Term Loan Advance is paid in full; provided, however, that, if
no Event of Default exists at the time of a Lender's receipt of any optional
prepayment made pursuant to Section 4.3.4, such Lender shall apply
the portion of such prepayment remaining after payment of accrued but
unpaid interest to the remaining installments of principal owing with respect to
such Term Loan Advance on a pro rata basis.  Each Lender shall apply
the portion of a prepayment that is to be applied to principal installments
first to outstanding Base Rate Loans and then to any outstanding LIBOR Loans
with the shortest Interest Periods remaining; but if application to any
LIBOR Loans would cause the same to be paid prior to the end of
an applicable Interest Period, then, by prior written notice to Agent,
Borrower may elect as to such LIBOR Loan (i) to deliver cash to Agent
in the amount of the required prepayment, to be held by Agent as
Cash Collateral until the end of the applicable Interest Period, at
which time Agent shall disburse such Cash Collateral to Lenders on
a Pro Rata basis for application to such LIBOR Loans or (ii) to apply
such prepayment to the outstanding principal amount of the Revolver Loans and to
have Agent establish an Availability Reserve in equal amount, which Availability
Reserve will be released and applied to pay such LIBOR Loan at the end of the
applicable Interest Period.

4.4.

Payment of Other Obligations.

  The balance of the Obligations requiring the payment
of money, including the LC Obligations and Extraordinary Expenses incurred by
Agent or any Lender, shall be repaid by Borrower to Agent for allocation
among Agent and Lenders as provided in the Loan Documents, or, if no date
of payment is otherwise specified in the Loan Documents, on demand.

4.5.

Marshaling; Payments Set Aside.

  None of Agent or any Lender shall be under any
obligation to marshal any assets in favor of Borrower or any other Obligor or
against or in payment of any or all of the Obligations.  To the extent that
Borrower makes a payment or payments to Agent or Lenders or any of such Persons
receives payment from the proceeds of any Collateral or exercises its right of
setoff, and such payment or payments or the proceeds of such enforcement or
setoff or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other Person, then to the extent of any loss by Agent or
Lenders, the Obligations or part thereof originally intended to be satisfied,
and all Liens, rights and remedies therefor, shall be revived and continued in
full force and effect as if such payment or proceeds had not been made or
received and any such enforcement or setoff had not occurred.  The
provisions of the immediately preceding sentence of this Section 4.5
shall survive any termination of the Commitments and payment in full of the
Obligations.

4.6.

Agent's Allocation of Payments and
Collections.

4.6.1

Allocation of Payments.

   All monies to be applied to the Obligations,
whether such monies represent voluntary payments by one or more Obligors or are
received pursuant to demand for payment or realized from any disposition of
Collateral, shall be allocated among Agent and such of the Lenders as are
entitled thereto (and, with respect to monies allocated to Lenders, on a Pro
Rata basis unless otherwise provided herein):  (i) first, to Agent to
pay principal and accrued interest on any portion of the Revolver Loans which
Agent may have advanced on behalf of any Lender and for which Agent has not been
reimbursed by such Lender or Borrower; (ii) second, to BofA to pay the
principal and accrued interest on any portion of the Settlement Loans and 1995
Bonds (to the extent due) outstanding, to be shared with Lenders that have
acquired a participating interest in such Settlement Loans and 1995 Bonds;
(iii) third, to the extent that Issuing Bank has not received from
any Participating Lender a payment as 

- 25 -

required by Section 1.3.2 hereof, to Issuing Bank to pay
all amounts owing to Issuing Bank pursuant to Section 1.3.2(ii)
hereof; (iv) fourth, to Agent to pay the amount of Extraordinary Expenses
and amounts owing to Agent pursuant to Section 14.10 hereof that have not
been reimbursed to Agent by Borrower or Lenders, together with interest accrued
thereon at the rate applicable to Revolver Loans that are Base Rate Loans;
(v) fifth, to Agent to pay any Indemnified Amount that has not been paid to
Agent by Obligors or Lenders, together with interest accrued thereon at the rate
applicable to Revolver Loans that are Base Rate Loans; (vi) sixth, to Agent
to pay any fees due and payable solely to Agent; (vii) seventh, to Lenders
for any Indemnified Amount that they have paid to Agent and any Extraordinary
Expenses that they have reimbursed to Agent or themselves incurred, to the
extent that Lenders have not been reimbursed by Obligors therefor;
(viii) eighth, to Issuing Bank to pay principal and interest with respect
to LC Obligations (or to the extent any of the LC Obligations are contingent and
an Event of Default then exists, deposited in the Cash Collateral Account to
provide security for the payment of the LC Obligations), which payment shall be
shared with the Participating Lenders in accordance with
Section 1.3.2(iii) hereof; (ix) ninth, to Lenders in payment of
the unpaid principal and accrued interest in respect of the Loans and in payment
of any other Obligations (other than the Obligations described in
clause (x) below) then outstanding to be shared among Lenders on a Pro Rata
basis or on such other basis as may be agreed upon in writing by Lenders (which
agreement or agreements may be entered into without notice to or the consent or
approval of Borrower); and (x) tenth, to the Secured Parties in payment of
any Bank Product Debt, to be shared among such Secured Parties ratably.
 The allocations set forth in this Section 4.6.1 are solely to
determine the rights and priorities of Agent and Lenders as among themselves and
may be changed by Agent and Lenders without notice to or the consent or approval
of Borrower or any other Person.

4.6.2

Erroneous Allocation.

  Agent shall not be liable for any allocation or
distribution of payments made by it in good faith and, if any such allocation or
distribution is subsequently determined to have been made in error, the sole
recourse of any Lender to whom payment was due but not made shall be to recover
from the other Lenders any payment in excess of the amount to which such other
Lenders are determined to be entitled (and such other Lenders hereby agree to
return to such Lender any such erroneous payments received by them).

4.7.

Application of Payments and Collections.

  All Payment Items received by Agent by 12:00 noon
on any Business Day shall be deemed received on that Business Day.  All
Payment Items received by Agent after 12:00 noon on any Business Day shall be
deemed received on the following Business Day. Except to the extent that the
manner of application to the Obligations of payments or proceeds of Collateral
is expressly governed by other provisions of this Agreement, Borrower
irrevocably waives the right to direct the application of any and all payments
and Collateral proceeds at any time or times hereafter received by Agent or any
Lender from or on behalf of Borrower, and Borrower does hereby irrevocably agree
that Agent shall have the continuing exclusive right to apply and reapply any
and all such payments and Collateral proceeds received at any time or times
hereafter by Agent or its agent against the Obligations, in such manner as Agent
may deem advisable, notwithstanding any entry by Agent upon any of its books and
records.  If as the result of Agent's collection of proceeds of Accounts
and other Collateral as authorized by Section 7.2.6 a credit balance
exists, such credit balance shall not accrue interest in favor of Borrower, but
shall be available to Borrower at any time or times for so long as no Default or
Event of Default exists. Lenders may, at their option, offset such credit
balance against any of the Obligations upon and after the occurrence of an Event
of Default.  If no Event of Default exists, Borrower may request that Agent
and Lenders invest any credit balance in an interest-bearing account but Agent
and Lenders shall have no liability to Borrower arising from such
investments.

4.8.

Loan Accounts; the Register; Account Stated.

- 26 -

4.8.1

Loan Accounts.

  Each Lender shall maintain in accordance with its
usual and customary practices an account or accounts (a "Loan Account")
evidencing the Debt of Borrower to such Lender resulting from each Loan owing to
such Lender from time to time, including the amount of principal and interest
payable to such Lender from time to time hereunder and under each Note payable
to such Lender.  Any failure of a Lender to record in the Loan Account, or
any error in doing so, shall not limit or otherwise affect the obligation of
Borrower hereunder (or under any Note) to pay any amount owing hereunder to
such Lender.

4.8.2

The Register.

  Agent shall maintain a register (the
"Register") which shall include a master account and a subsidiary account
for each Lender and in which accounts (taken together) shall be recorded
(i) the date and amount of each Borrowing made hereunder, the Type of each
Loan comprising such Borrowing and any Interest Period applicable thereto,
(ii) the effective date and amount of each Assignment and Acceptance
delivered to and accepted by it and the parties thereto, (iii) the amount
of any principal or interest due and payable or to become due and payable from
Borrower to each Lender hereunder or under the Notes, and (iv) the amount
of any sum received by Agent from Borrower or any other Obligor and
each Lender's share thereof.  The Register shall be available for
inspection by Borrower or any Lender at the offices of Agent at any reasonable
time and from time to time upon reasonable prior  notice.  Any failure
of Agent to record in the Register, or any error in doing so, shall not limit or
otherwise affect the obligation of Borrower hereunder (or under any Note) to pay
any amount owing with respect to the Loans or provide the basis for any claim
against Agent.

4.8.3

Entries Binding.

  The entries made in the Register and each Loan Account
shall constitute rebuttably presumptive evidence of the information contained
therein; provided, however, that if a copy of information contained in the
Register or any Loan Account is provided to any Person, or any Person inspects
the Register or any Loan Account, at any time or from time to time, then the
information contained in the Register or the Loan Account, as applicable shall
be conclusive and binding on such Person for all purposes absent manifest error,
unless such Person notifies Agent in writing within 30 days after such Person's
receipt of such copy or such Person's inspection of the Register or Loan Account
of its intention to dispute the information contained therein.

4.9.

Gross Up for Taxes.

  If Borrower shall be required by Applicable Law to
withhold or deduct any Taxes from or in respect of any sum payable under this
Agreement or any of the other Loan Documents, (a) Borrower shall make
such withholding or deductions and (b) Borrower shall pay the full amount
withheld or deducted to the relevant taxation authority or other authority in
accordance with Applicable Law.  The sum payable to Agent or such Lender
under this Agreement by Borrower shall not be decreased and Agent or such Lender
(as the case may be) shall receive an amount equal to the sum it would have
received had no such withholding or deductions been made. 

4.10.

Withholding Tax Exemption.

  At least 5 Business Days prior to the first date on
which interest or fees are payable hereunder for the account of any Lender, each
Lender that is not incorporated under the laws of the United States or any state
thereof agrees that it will deliver to Borrower and Agent 2 duly completed
copies of United States Internal Revenue Service Form W-8BEN or W-8ECI,
certifying in either case that such Lender is entitled to receive payment under
this Agreement and its Notes without deduction or withholding of any United
States federal income taxes.  Each Lender which so delivers a
Form W-8BEN or W-8ECI further undertakes to deliver to Borrower and Agent 2
additional copies of such form (or a successor form) on or before the date
that such form expires (currently, 3 successive calendar years for Form
W-8BEN and one calendar year for Form W-8ECI) or becomes obsolete or after
the occurrence of any event requiring a change in the form so delivered by
it, and such amendments thereto or extensions or renewals thereof as may be
reasonably requested by Borrower or Agent, in each case, certifying that such
Lender is entitled to receive payments under this 

- 27 -

Agreement and its Notes without deduction or withholding of any
United States federal income taxes, unless an event (including any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required that renders all such forms inapplicable or
that would prevent such Lender from duly completing and delivering any such form
with respect to it and such Lender advises Borrower and Agent that it is not
capable of receiving payments without any deduction or withholding of United
States federal income taxes.

SECTION  5.

ORIGINAL TERM AND TERMINATION OF COMMITMENTS

5.1.

Original Term of Commitments.

  Subject to each Lender's right to cease making Loans
and other extensions of credit to Borrower when any Default or Event of Default
exists (provided, that each Lender's obligation vis-à-vis Agent shall be
governed by Section 3.1.2 hereof) or upon termination of the
Commitments as provided in Section 5.2 hereof, the Commitments shall
be in effect from the Original Closing Date through the close of business on
May 11, 2013 (the "Original Term").  

5.2.

Termination.

5.2.1

Termination by Agent.

  Agent may (and upon the direction of the Required
Lenders, shall) terminate the Commitments without notice upon or after the
occurrence of an Event of Default; provided, however, that the Commitments shall
automatically terminate (i) as provided in Section 11.2 hereof
and (ii) at the end of the Original Term.

5.2.2

Termination by Borrower.

  Upon at least 90 days prior written notice to Agent,
Borrower may, at its option, terminate the Commitments; provided, however, no
such termination by Borrower shall be effective until Borrower has
satisfied all of the Obligations.  Any notice of termination given by
Borrower shall be irrevocable unless Agent otherwise agrees in writing.
 Borrower may elect to terminate the Commitments in their entirety only;
provided, that nothing contained herein shall affect Borrower's right to reduce
the Commitments as provided in Section 1.1.5 of this Agreement.
 No section of this Agreement, Type of Loan available hereunder or
Commitment may be terminated by Borrower singly.

5.2.3

Reserved.

5.2.4

Effect of Termination.

  On the effective date of termination of the
Commitments by Agent or by Borrower, all of the Obligations shall be immediately
due and payable and Lenders shall have no obligation to make any Loans and
Issuing Bank shall have no obligation to procure any Letters of Credit.
 All undertakings, agreements, covenants, warranties and
representations of Borrower contained in the Loan Documents shall survive
any such termination and Agent shall retain its Liens in the Collateral and all
of its rights and remedies under the Loan Documents notwithstanding such
termination until Borrower has satisfied the Obligations to Agent and Lenders,
in full.   For purposes of this Agreement, the Obligations shall not
be deemed to have been satisfied until all Obligations for the payment of money
have been paid to Agent in same day funds and all Obligations that are at the
time in question contingent (including all LC Outstandings
that exist by virtue of an outstanding Letter of Credit) have been
fully cash collateralized in favor and to the satisfaction of Agent or Agent has
received as beneficiary a direct pay letter of credit in form and from an
issuing bank acceptable to Agent and providing for direct payment to Agent of
all such contingent Obligations at the time they become fixed.
  Notwithstanding the payment in full of the Obligations, Agent shall
not be required to terminate its security interests in any of the Collateral
unless, with respect to any loss or damage Agent may incur as a result of the
dishonor or return of any Payment Items applied to the Obligations, Agent shall
have received either (i) a written agreement, executed by Borrower and any
Person whose loans or other advances to Borrower are used in 

- 28 -

whole or in part to satisfy the Obligations, indemnifying Agent
and Lenders from any such loss or damage; or (ii) such monetary reserves
and Liens on the Collateral for such period of time as Agent, in its reasonable
discretion, may deem necessary to protect Agent from any such loss or damage.
 The provisions of Sections 2.4, 2.7, 2.8, 2.9, 4.5, 4.9 and
this Section 5.2.4. and all obligations of Borrower to indemnify Agent or
any Lender pursuant to this Agreement or any of the other Loan Documents
shall in all events survive any termination of the Commitments.

SECTION  6.

COLLATERAL SECURITY

6.1.

Grant of Security Interest.

  Borrower has granted to Agent, for the benefit of
itself as Agent and for the benefit of the Lenders and the other Secured
Parties, a continuing security interest and Lien upon all of its Property as of
the Original Closing Date pursuant to the Loan and Security Agreement dated May
14, 2002, which was amended and restated pursuant to the Existing Loan
Agreement.  Borrower hereby ratifies and reaffirms such prior grants of
security interests and Liens in its Property and without limiting the foregoing
and to secure the prompt payment and performance of all of the Obligations,
Borrower hereby grants and regrants to Agent, for the benefit of itself as Agent
and for the benefit of the Lenders and the other Secured Parties, a continuing
security interest in and Lien upon all of the following Property and interests
in Property of Borrower, whether now owned or existing or hereafter created,
acquired or arising and wheresoever located:

(i)

All Accounts;

(ii)

All Inventory;

(iii)

All Letter-of-Credit Rights;

(iv)

All Supporting Obligations;

(v)

All Commercial Tort Claims;

(vi)

All Equipment;

(vii)

All Instruments;

(viii)

All Chattel Paper, including Electronic Chattel Paper and Tangible
Chattel Paper;

(ix)

All Documents;

(x)

All General Intangibles, including all Payment Intangibles and all
Software;

(xi)

All Deposit Accounts;

(xii)

All Investment Property (but excluding any portion thereof that
constitutes Margin Stock unless otherwise expressly provided in any
Security Documents);

(xiii)

All monies now or at any time or times hereafter in the possession
or under the control of Agent or a Lender or a bailee or Affiliate of Agent or a
Lender, including any Cash Collateral in the Cash Collateral Account;

- 29 -

(xiv)

All accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (i) through (xiii) above, including
proceeds of and unearned premiums with respect to insurance policies insuring
any of the Collateral and claims against any Person for loss of, damage to or
destruction of any of the Collateral; and

(xv)

All books and records (including customer lists, files,
correspondence, tapes, computer programs, print-outs, and other computer
materials and records) of Borrower pertaining to any of (i) through (xiv)
above.

6.2.

Lien on Deposit Accounts.

  As additional security for the payment and performance
of the Obligations, Borrower hereby grants to Agent, for the benefit of itself
as Agent and for the benefit of the Secured Parties, a continuing security
interest in and Lien upon, and hereby collaterally assigns to Agent, all of
Borrower's right, title and interest in and to each Deposit Account of Borrower
and in and to any deposits or other sums at any time credited to each such
Deposit Account, including any sums in any blocked account or any special
lockbox account and in the accounts in which sums are deposited.
 In connection with the foregoing, Borrower hereby authorizes and
directs each such bank or other depository to pay or deliver to Agent upon its
written demand therefor made at any time upon the occurrence and during the
continuation of an Event of Default and without further notice to Borrower (such
notice being hereby expressly waived), all balances in each Deposit Account
maintained by Borrower with such depository for application to the
Obligations then outstanding, and the rights given Agent in this
Section 6.2 shall be cumulative with and in addition to Agent's
other rights and remedies in regard to the foregoing Property as proceeds
of Collateral.  Borrower hereby irrevocably appoints Agent as Borrower's
attorney-in-fact to collect any and all such balances to the extent any such
payment is not made to Agent by such bank or other depository after demand
thereon is made by Agent pursuant hereto.

6.3.

Lien on Real Estate.

  The due and punctual payment and performance of
the Obligations shall also be secured by the Lien created by the Mortgages upon
Real Estate of Borrower and the other Obligors described therein.  If
requested by Agent, amendments to the Mortgages shall be executed by Borrower
and the other Obligors in favor of Agent on or before the Closing Date and shall
be duly recorded, at Borrower's expense, in each office where such recording is
required to constitute a fully perfected Lien upon the Real Estate covered
thereby.

6.4.

Other Collateral.

  In addition to the items of Property referred to in
Section 6.1 above, the Obligations shall also be secured by the Cash
Collateral to the extent provided herein and all of the other items of Property
from time to time described in any of the Security Documents as security for any
of the Obligations.

6.5.

No Assumption of Liability.

  The security interest granted pursuant to this
Agreement is granted as security only and shall not subject Agent or any Lender
to, or in any way alter or modify, any obligation or liability of Borrower
with respect to or arising out of the Collateral.

6.6.

Lien Perfection; Further Assurances.

  Promptly after Agent's request therefor, Borrower
shall execute or cause to be executed and deliver to Agent such instruments,
assignments, title certificates or other documents as are necessary under the
UCC or other Applicable Law (including any motor vehicle certificates of title
act) to perfect (or continue the perfection of) Agent's Lien upon the
Collateral, and shall take such other action as may be requested by Agent to
give effect to or carry out the intent and purposes of this Agreement.
 Borrower shall give Agent prompt written notice at any time Borrower
commences a Commercial Tort Claim against any Person in excess of $500,000 and
shall execute such documents as are necessary under the UCC to grant to Agent
and perfect Agent's Lien in such Commercial Tort Claim.  Unless prohibited
by Applicable Law, Borrower hereby irrevocably 

- 30 -

authorizes Agent to execute and/or file in any jurisdiction any
financing statement or amendment thereto on Borrower's behalf, including
financing statements that indicate the Collateral (i) as all assets or all
personal property of Borrower or words to similar effect or (ii) as being
of an equal or lesser scope, or with greater or lesser detail, than as set forth
in this Section 6.  Borrower also hereby ratifies its
authorization for Agent to have filed in any jurisdiction any like financing
statements or amendments thereto if filed prior to the date hereof.  The
parties agree that a carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in any
appropriate office in lieu thereof.

6.7.

Limitation on Equity Interests.

  Notwithstanding anything to the contrary set
forth in Section 6.1 above, the types or items of Collateral
described in such Section shall include only sixty-six percent (66%) of the
voting stock of any Foreign Subsidiary.

6.8.

Exclusion for Certain Contracts and Leases.

  Notwithstanding anything to the contrary set forth in
Section 6.1 above, the types or items of Collateral described in such
Section shall not include any rights or interests in any contract, lease,
permit, license, charter or license agreement covering real or personal
Property, as such, if under the terms of such contract, lease, permit, license,
charter or license agreement, or Applicable Law with respect thereto, the valid
grant of a security interest or Lien therein to Agent is prohibited and such
prohibition has not been or is not waived or the consent of the other party to
such contract, lease, permit, license, charter or license agreement has not been
or is not otherwise obtained or under Applicable Law such prohibition cannot be
waived, provided that the foregoing exclusion shall in no way be construed
(a) to apply if any such prohibition is unenforceable under
Sections 9-406, 9-407, 9-408 or 9-409 of the UCC or other Applicable Law or
(b) so as to limit, impair or otherwise affect Agent's unconditional
continuing security interests in and Liens upon any rights or interests of
Borrower in or to monies due or to become due under any such contract, lease,
permit, license, charter or license agreement (including any Accounts).

6.9.

Partial Release of Liens.

  Agent and Lenders agree that Agent shall release its
security interest and Liens on the Real Estate and Equipment upon Borrower's
satisfaction of the Partial Release Conditions, as determined by Agent and
Lenders in their sole discretion.

6.10.

Release of Lien on Tufting Machine.

  Agent agrees that it shall release its security
interest in and Liens upon that certain Tuftco Model 165, 1/10th gauge,
Staggered Needle Graphics Level Loop Cut tufting machine (the "Tufting
Machine"), provided, that, (a) on or before April 24, 2009, (i) Borrower obtains
financing from a Person other than Agent or any Lender, which financing is
secured by only the Tufting Machine and the proceeds of which are remitted to
Agent concurrently with the consummation of such financing for application to
the outstanding Revolver Loans, and (ii) Borrower delivers to Agent true,
correct and complete copies of all documents executed in connection with such
financing, which documents shall be in form and substance satisfactory to Agent,
and (b) no Default or Event of Default exists at the time of or would result
from such financing.

SECTION  7.

COLLATERAL ADMINISTRATION

7.1.

General Provisions.

7.1.1

Location of Collateral.

  All tangible items of Collateral, other than Inventory
in transit, shall at all times be kept by Borrower at one or more of the
business locations of Borrower set forth in Schedule 7.1.1 hereto
and shall not be moved therefrom, without the prior written approval of Agent,
except that in the absence of an Event of Default and acceleration of the
maturity of the Obligations in consequence thereof, Borrower may (a) make
sales or other dispositions of any Collateral 

- 31 -

to the extent authorized by Section 9.2.10 hereof, (b)
have Inventory and Equipment at a location not listed on Schedule 7.1.1,
not to exceed $500,000 in the aggregate, provided, that Borrower
promptly advises Agent of such location, and (c) except as permitted by
subsection (b) above, move Inventory or Equipment or any record relating to
any Collateral to a location in the United States other than those shown on
Schedule 7.1.1 hereto so long as Borrower has given Agent at least
15 Business Days prior written notice of such new location and
prior to moving any Inventory or Equipment to such location there have been
filed any UCC-1 financing statements and any other appropriate documentation
necessary to perfect or continue the perfection of
Agent's first priority Liens with respect to such Inventory or
Equipment.  Notwithstanding anything to the contrary contained in this
Agreement, Borrower shall not be permitted to keep, store or
otherwise maintain any Collateral (except as permitted by subsection
(b) above) at any location (including any location described in
Schedule 7.1.1), unless (i) Borrower is the owner of such
location, (ii) Borrower leases such location and the landlord has executed
in favor of Agent a Landlord Waiver (or Agent has imposed a Rent Reserve), or
(iii) the Collateral consists of Inventory placed with a warehouseman,
bailee or processor, Agent has received from such warehouseman, bailee or
processor an acceptable Lien waiver agreement and an appropriate UCC-1 financing
statement has been filed with the appropriate Governmental Authority in the
jurisdiction where such warehouseman, bailee or processor is located in order to
perfect, or to maintain the uninterrupted perfection of, Agent's security
interest in such Inventory.

7.1.2

Insurance of Collateral; Condemnation Proceeds.  

(i)

Borrower shall maintain and pay for insurance upon all Collateral,
wherever located, covering casualty, hazard, public liability, theft, malicious
mischief, and such other risks in such amounts (subject to current deductibles
of $250,000 unless otherwise consented to by Agent) and with such insurance
companies as are reasonably satisfactory to Agent.
 Schedule 7.1.2 describes all insurance of Borrower in effect
on the date hereof.  All proceeds payable under each such policy shall be
payable to Agent for application to the Obligations.  Borrower shall
deliver the originals or certified copies of such policies to Agent with
lender's loss payable endorsements reasonably satisfactory to Agent, naming
Agent as sole lender's loss payee, mortgagee, assignee or additional insured, as
requested by Agent.  Each policy of insurance or endorsement shall
contain a clause requiring the insurer to give not less than 30 days prior
written notice to Agent in the event of cancellation of the policy for any
reason whatsoever and a clause specifying that the interest of Agent shall not
be impaired or invalidated by any act or neglect of any Borrower or the
owner of the Property or by the occupation of the premises for purposes more
hazardous than are permitted by said policy.  If Borrower fails to provide
and pay for such insurance, Agent may, at its option, but shall not be required
to, procure the same and charge Borrower therefor.  If requested by Agent,
Borrower agrees to deliver to Agent, promptly as rendered, true copies of all
reports made in any reporting forms to insurance companies.  For so long as
no Event of Default exists, Borrower shall have the right to settle, adjust and
compromise any claim with respect to any insurance maintained by Borrower
provided that all proceeds thereof are applied in the manner specified in this
Agreement, and Agent agrees promptly to provide any necessary endorsement to any
checks or drafts issued in payment of any such claim.  At any time that an
Event of Default exists, only Agent shall be authorized to settle, adjust and
compromise such claims, Agent shall have all rights and remedies with respect to
such policies of insurance as are provided for in this Agreement and the other
Loan Documents; provided, that Agent shall use reasonable efforts
to consult with Borrower regarding such settlement, adjustment or compromise but
shall have no liability to Borrower for Agent's failure to do so.

- 32 -

(ii)

Unless otherwise consented to by the Required Lenders in writing,
any proceeds of insurance referred to in this Section 7.1.2 and any
condemnation awards that are paid to Agent in connection with a condemnation of
any of the Collateral shall be paid to Agent and (a) in the case of
proceeds that relate to Inventory, applied first to the payment of the Revolver
Loans and then to any other Obligations outstanding, and (b) in the case of
proceeds of Equipment or Real Estate, applied first to the Term Loan, and then
to any other Obligations outstanding; provided that if requested by Borrower in
writing within 5 days after Agent's receipt of such proceeds and if no
Default or Event of Default exists, Borrower and the other Obligors may apply
such proceeds to repair or replace the damaged or destroyed Equipment or Real
Estate so long as (1) such repair or replacement is promptly undertaken and
concluded, (2) replacements of buildings are constructed on the sites
of the original casualties and are of comparable size, and quality and utility
to the destroyed buildings, (3) the repaired or replaced Property is at all
times free and clear of Liens other than Permitted Liens that are not Purchase
Money Liens, (4) Borrower and such other Obligors comply with such
disbursement procedures for such proceeds as Agent may reasonably impose for
repair or replacement, and (5) the amount of proceeds from any single
casualty affecting Equipment or Real Estate does not exceed
$5,000,000.

7.1.3

Protection of Collateral.

  All expenses of protecting, storing, warehousing,
insuring, handling, maintaining and shipping any Collateral, all Taxes imposed
under any Applicable Law on any of the Collateral or in respect of the sale
thereof, and all other payments required to be made by Agent to any Person
to realize upon any Collateral shall be borne and paid by Borrower.  Agent
shall not be liable or responsible in any way for the safekeeping of any of the
Collateral or for any loss or damage thereto (except for reasonable care in the
custody thereof while any Collateral is in Agent's actual possession) or for any
diminution in the value thereof, or for any act or default of any warehouseman,
carrier, forwarding agency, or other Person whomsoever, but the same shall be at
Borrower's sole risk.

7.1.4

Defense of Title to Collateral.

  Borrower shall at all times defend its title to the
Collateral and Agent's Liens therein against all Persons and all claims and
demands whatsoever other than Permitted Liens.

7.2.

Administration of Accounts.

7.2.1

Records and Schedules of Accounts.

  Borrower shall keep accurate and complete records of
its Accounts and all payments and collections thereon and shall submit to Agent
on such periodic basis as Agent shall request a sales and collections report for
the preceding period, in form satisfactory to Agent.  Borrower shall also
provide to Agent on or before the 20th day of each month a detailed aged trial
balance of all Accounts existing as of the last day of the preceding month,
specifying the names, face value and due dates for each Account Debtor obligated
on an Account so listed ("Schedule of Accounts"), and, upon Agent's
request therefor, customer addresses, dates of invoices, copies of proof of
delivery and a copy of all documents, including repayment histories and present
status reports relating to the Accounts so scheduled and such other matters and
information relating to the status of then existing Accounts as Agent shall
reasonably request.  In addition, if Accounts in an aggregate face amount
in excess of $500,000 cease to be Eligible Accounts in whole or in part,
Borrower shall notify Agent of such occurrence promptly (and in any event within
2 Business Days) after Borrower's having obtained knowledge of such occurrence
and the Borrowing Base shall thereupon be adjusted to reflect such occurrence.
 Borrower shall deliver to Agent copies of invoices or invoice registers
related to all of its Accounts.

- 33 -

7.2.2

Discounts, Disputes and Returns.

  If Borrower grants any discounts, allowances or
credits that are not shown on the face of the invoice for the Account involved,
Borrower shall report such discounts, allowances or credits, as the case may be,
to Agent as part of the next required Schedule of Accounts.  If any amounts
due and owing in excess of $500,000 are in dispute between
Borrower and any Account Debtor, or if any returns are made in excess of
$500,000 with respect to any Accounts owing from an Account Debtor, Borrower
shall provide Agent with written notice thereof at the time of submission of the
next Schedule of Accounts.  At the request of Agent, Borrower will explain
in detail the reason for the dispute or return, all claims related thereto and
the amount in controversy.  Upon and after the occurrence of an Event of
Default, Agent shall have the right to settle or adjust all disputes and claims
directly with the Account Debtor and to compromise the amount or extend the time
for payment of any Accounts comprising a part of the Collateral upon such terms
and conditions as Agent may deem advisable, and to charge the deficiencies,
costs and expenses thereof, including attorneys' fees, to Borrower.

7.2.3

Taxes.

  If an Account of Borrower includes a charge for any
Taxes payable to any governmental taxing authority, Agent is authorized, in its
sole discretion, to pay the amount thereof to the proper taxing authority for
the account of Borrower and to charge Borrower therefor; provided, however, that
neither Agent nor Lenders shall be liable for any Taxes that may be due by
Borrower.

7.2.4

Account Verification.

  Whether or not a Default or an Event of Default
exists, Agent shall have the right at any time, in the name of Agent, any
designee of Agent or Borrower to verify the validity, amount or any other matter
relating to any Accounts of Borrower by mail, telephone, telegraph or otherwise.
 Borrower shall cooperate fully with Agent in an effort to facilitate and
promptly conclude any such verification process.

7.2.5

Maintenance of Dominion Account.

  If an Event of Default exists or Availability at any
time is less than $5,000,000, then Borrower shall maintain a Dominion Account
pursuant to a lockbox or other arrangement acceptable to Agent and, in the case
of such Dominion Account and lockbox arrangement, with such bank as may be
selected by Borrower and be acceptable to Agent.  Borrower shall issue to
each such lockbox bank an irrevocable letter of instruction directing such bank
to deposit all payments or other remittances received in the lockbox to the
Dominion Account.  Borrower shall enter into agreements, in form
satisfactory to Agent, with each bank at which a Dominion Account is maintained
by which such bank shall immediately transfer to the Payment Account all monies
deposited to the Dominion Account.  All funds deposited in each Dominion
Account shall be subject to Agent's Lien.  Borrower shall obtain the
agreement (in favor of and in form and content satisfactory to Agent) by each
bank at which a Dominion Account is maintained to waive any offset rights
against the funds deposited into such Dominion Account, except offset rights in
respect of charges incurred in the administration of such Dominion Account.
 Neither Agent nor Lenders assume any responsibility to Borrower for such
lockbox arrangement or Dominion Account, including any claim of accord and
satisfaction or release with respect to deposits accepted by any bank
thereunder.

7.2.6

Collection of Accounts and Proceeds of Collateral.

  Unless an Event of Default exists or
Availability at any time is less than $5,000,000, Borrower shall have the option
to receive all Payment Items in respect of its Accounts, provided, however, if
Borrower does not deposit such Payment Items in the Dominion Account, the Loans
shall bear interest at the Default Rate until such time as Borrower deposits all
such amounts in the Dominion Account.  Unless an Event of Default exists or
Availability at any time is less than $5,000,000, Borrower may receive all
Payments Items from any Permitted Asset Dispositions, provided, that, any
Payment Items received from any Permitted Asset Disposition shall be applied in
accordance with Section 4.3.3 hereof.  Agent retains the right at
all times after the occurrence of a Default or an Event of Default to notify
Account Debtors of Borrower that 

- 34 -

Accounts have been assigned to Agent and to collect Accounts
directly in its own name and to charge to Borrower the collection costs and
expenses, incurred by Agent or Lenders, including reasonable attorneys'
fees.

7.3.

Administration of Inventory.

7.3.1

Records and Reports of Inventory.

  Borrower shall keep accurate and complete records of
its Inventory and shall furnish Agent and Lenders inventory reports respecting
such Inventory in form and detail satisfactory to Agent and Lenders at such
times as Agent and Lenders may request, but so long as no Default or Event of
Default exists, no more frequently than once each week.  Borrower shall, at
Borrower's expense, conduct periodic cycle counts consistent with Borrower's
historical practices and shall provide to Agent and Lenders a report based on
each such cycle count promptly thereafter, together with such supporting
information as Agent shall request.  Agent may participate in and observe
each count or inventory, which participation shall be at Borrower's expense at
any time that an Event of Default exists.

7.3.2

Returns of Inventory.

  Borrower shall not return any of its Inventory to a
supplier or vendor thereof, or any other Person, whether for cash, credit
against future purchases or then existing payables, or otherwise, unless
(i) such return is in the Ordinary Course of Business of Borrower and
such Person; (ii) no Default or Event of Default exists or would
result therefrom; (iii) the return of such Inventory will not result
in an Out-of-Formula Condition; and (iv) Borrower promptly notifies Agent
thereof if the aggregate Value of all Inventory returned in any month exceeds
$500,000.

7.4.

Administration of Equipment.

7.4.1

Records and Schedules of Equipment.

  Borrower shall keep accurate records itemizing and
describing the kind, type, quality, quantity and cost of its Equipment and all
dispositions made in accordance with Section 7.4.2 hereof, and at
the request of Agent, shall furnish Agent and Lenders with a current schedule
containing the foregoing information.  Promptly after request therefor by
Agent, Borrower shall deliver to Agent and Lenders any and all evidence of
ownership, if any, of any of the Equipment.

7.4.2

Dispositions of Equipment.

  Borrower will not sell, lease or otherwise dispose of
or transfer any of the Equipment or any part thereof without the prior written
consent of Agent; provided, however, that the foregoing restriction shall not
apply, for so long as no Default or Event of Default exists, to
(i) dispositions of Equipment which, in the aggregate during any
consecutive 12-month period, has a fair market value or book value, whichever is
more, of $250,000 or less, provided that all Net Proceeds thereof are remitted
to Agent for application to the Obligations (other than the Term Loans),
(ii) replacements of Equipment that is substantially worn, damaged or
obsolete with Equipment of like kind, function and value, provided that the
replacement Equipment shall be acquired prior to or concurrently with any
disposition of the Equipment that is to be replaced, the replacement Equipment
shall be free and clear of Liens other than Permitted Liens that are not
Purchase Money Liens, and Borrower shall have given Agent at least 5 days
prior written notice of such disposition, (iii) Permitted Asset Dispositions,
provided that all Net Proceeds thereof are remitted to Agent for
application to the Obligations (other than the Term Loans).

7.4.3

Condition of Equipment.

  The Equipment is in good operating condition and
repair, and all necessary replacements of and repairs thereto shall be made so
that the value and operating efficiency of the Equipment shall be maintained and
preserved, reasonable wear and tear excepted.  Borrower will not permit any
of the Equipment to become affixed to any real Property leased to Borrower 

- 35 -

so that an interest arises therein under the real estate laws of
the applicable jurisdiction unless the landlord of such real Property has
executed a Landlord Waiver or leasehold mortgage in favor of and in form
acceptable to Agent, and Borrower will not permit any of the Equipment to become
an accession to any personal Property that is subject to a Lien unless the Lien
is a Permitted Lien.

7.5.

Borrowing Base Certificates.

  On the Closing Date and (i) if Availability is
greater than or equal to $10,000,000 and no Event of Default exists, on or
before the fifth Business Day of each week after the Closing Date, Borrower
shall deliver to Agent a Borrowing Base Certificate prepared as of the close of
business of the previous week, and (ii) if Availability is less than
$10,000,000 or an Event of Default exists, on such days and in such frequency as
Agent shall request in its reasonable discretion, Borrower shall deliver to
Agent a Borrowing Base Certificate prepared as of the close of business of the
previous reporting period.  All calculations of Availability in
connection with any Borrowing Base Certificate shall originally be made by
Borrower and certified by a Senior Officer of Borrower (or his appointee) to
Agent, provided that Agent shall have the right to review and adjust, in the
exercise of its reasonable credit judgment, any such calculation (i) to
reflect its reasonable estimate of declines in value of any of the Collateral
described therein and (ii) to the extent that such calculation is not in
accordance with this Agreement or does not accurately reflect the amount of the
Availability Reserve.  In no event shall the Borrowing Base on any date be
deemed to exceed the amount of the Borrowing Base shown on the Borrowing Base
Certificate last received by Agent prior to such date, as such Borrowing Base
Certificate may be adjusted by Agent as herein authorized.

SECTION  8.

REPRESENTATIONS AND WARRANTIES

8.1.

General Representations and Warranties.

  To induce Agent and Lenders to enter into this
Agreement and to make available the Commitments, Borrower warrants and
represents to Agent and Lenders that:

8.1.1

Organization and Qualification.

  Borrower and each of its Subsidiaries is an entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization.  Borrower and each of its Subsidiaries is
duly qualified and is authorized to do business and is in good standing as a
foreign corporation in each state or jurisdiction listed on
Schedule 8.1.1 hereto and in all other states and jurisdictions in
which the failure of Borrower or any of such Subsidiaries to be so qualified
would have a Material Adverse Effect.

8.1.2

Power and Authority.

  Borrower and each of its Subsidiaries is duly
authorized and empowered to enter into, execute, deliver and perform this
Agree­ment and each of the other Loan Documents to which it is a party.
 The execution, delivery and performance of this Agreement and each of the
other Loan Documents have been duly authorized by all necessary action and do
not and will not (i) require any consent or approval of any of the holders
of the Equity Interests of Borrower or any of its Subsidiaries;
(ii) contravene the Organization Documents of Borrower or any of its
Subsidiaries; (iii) violate, or cause Borrower or any of its Subsidiaries
to be in default under, any provision of any Applicable Law, order, writ,
judgment, injunction, decree, determination or award in effect having
applicability to Borrower or any such Subsidiary; (iv) result in a breach
of or constitute a default under any indenture or loan or credit agreement or
any other agreement, lease or instrument to which Borrower or any of its
Subsidiaries is a party or by which it or its Properties may be bound or
affected; or (v) result in, or require, the creation or imposition of any
Lien (other than Permitted Liens) upon or with respect to any of the
Properties now owned or hereafter acquired by Borrower or any of its
Subsidi­aries.

8.1.3

Legally Enforceable Agreement.

  This Agreement is, and each of the other
Loan Documents when delivered under this Agreement will be, a legal, valid
and binding obligation of 

- 36 -

each Borrower and each of its Subsidiaries signatories
thereto enforceable against them in accor­dance with the respective terms of
such Loan Documents, except as the enforceability thereof maybe limited by
bankruptcy, insolvency or other similar laws of general application affecting
the enforcement of creditors' rights.

8.1.4

Capital Structure.

  As of the date hereof, Schedule 8.1.4
hereto states (i) the correct name of each Subsidiary, its jurisdiction of
incorporation and the percentage of its Equity Interests having voting powers
owned by each Person, (ii) the name of each corporate Affiliate of Borrower
and the nature of the affiliation and (iii) the number of authorized and
issued Equity Interests (and treasury shares) of Borrower and each of its
Subsidiaries.  Borrower has good title to all of the shares it purports to
own of the Equity Interests of each of its Subsidiaries, free and clear in each
case of any Lien other than Permitted Liens.  All such Equity Interests
have been duly issued and are fully paid and non-assessable.  Since the
date of the financial statements of Borrower referred to in
Section 8.1.9 hereof, Borrower has not made, or obligated itself to
make, any Distribution.  Except as disclosed on Schedule 8.1.4
hereto, as of the date hereof, there are no outstanding options to purchase, or
any rights or warrants to subscribe for, or any commitments or agreements to
issue or sell, or any Equity Interests or obligations convertible into, or any
powers of attorney relating to, shares of the capital stock of any Borrower or
any Subsidiary.  Except as set forth on Schedule 8.1.4 hereto,
there are no outstanding agreements or instruments binding upon the holders of
Borrower's Equity Interests relating to the ownership of its Equity
Interests.

8.1.5

Corporate Names.

  During the 5-year period preceding the date of this
Agreement, neither Borrower nor any of its Subsidiaries has been known as or
used any corporate, fictitious or trade names except those listed on Schedule
8.1.5 hereto.  Except as set forth on Schedule 8.1.5,
neither Borrower nor any of its Subsidiaries has been the surviving
corporation of a merger or consolidation or acquired all or substantially all of
the assets of any Person.  Schedule 8.1.5 lists the
organizational identification number assigned to each of Borrower and its
Subsidiaries by the jurisdiction of its organization.

8.1.6

Business Locations; Agent for Process.

  As of the date hereof, the chief executive office and
other places of business of Borrower and each of its Subsidiaries are as listed
on Schedule 7.1.1 hereto.  During the 5-year period preceding
the date of this Agreement, neither Borrower nor any of its Subsidiaries
has had an office, place of business or agent for service of process other than
as listed on Schedule 7.1.1.  Except as shown on
Schedule 7.1.1 on the date hereof, no Inventory of Borrower or any
Subsidiary is stored with a bailee, warehouseman or similar Person, nor is any
Inventory consigned to any Person (except as otherwise permitted by Section
7.1.1(b)).

8.1.7

Title to Properties; Priority of Liens.

  Borrower and each of its Subsidiaries has good and
marketable title to and fee simple ownership of, or valid and subsisting
leasehold interests in, all of its real Property, and good title to all of
its personal Property, including all Property reflected in the financial
statements referred to in Section 8.1.9 or delivered pursuant to
Section 9.1.3, in each case free and clear of all Liens except
Permitted Liens.  Borrower has paid or discharged, and has caused each of
its Subsidiaries to pay and discharge, all lawful claims which, if unpaid, might
become a Lien against any Properties of Borrower or such Subsidiary that is not
a Permitted Lien.  The Liens granted to Agent pursuant to this Agreement
and the other Security Documents are first priority Liens, subject only to those
Permitted Liens which are expressly permitted by the terms of this Agreement to
have priority over the Liens of Agent.

8.1.8

Accounts.

  Agent may rely, in determining which Accounts are
Eligible Accounts, on all statements and representations made by Borrower with
respect to any Account.  Unless 

- 37 -

otherwise indicated in writing to Agent or excluded by Borrower in
their calculation of the Borrowing Base in any Borrowing Base Certificate,
with respect to each Eligible Account, Borrower warrants that:

(i)

It is genuine and in all respects what it purports to be, and it
is not evidenced by a judgment;

(ii)

It arises out of a completed, bona fide sale and delivery
of goods by Borrower in the Ordinary Course of its Business and substantially
in accordance with the terms and conditions of all purchase orders,
contracts or other documents relating thereto and forming a part of the contract
between Borrower and the Account Debtor;

(iii)

It is for a sum certain maturing as stated in the duplicate
invoice covering such sale or rendition of services, a copy of which has been
furnished or is available to Agent on request;

(iv)

Such Account, and Agent's security interest therein, is not, and
will not (by voluntary act or omission of Borrower) be in the future,
subject to any offset, Lien, deduction, defense, dispute, counterclaim or any
other adverse condition except for disputes resulting in returned goods where
the amount in controversy, together with all other claims relating to Accounts
does not exceed the sum of the claims reserve, the warranty reserve and the
disputes reserve deducted from Eligible Accounts, and each such Account is
absolutely owing to Borrower and is not contingent in any respect or for any
reason;

(v)

The contract under which such Account arose does not condition or
restrict Borrower's right to assign to Agent the right to payment thereunder
unless Borrower has obtained the Account Debtor's consent to such collateral
assignment or complied with any conditions to such assignment (regardless of
whether under the UCC or other Applicable Law any such restrictions are
ineffective to prevent the grant of a Lien upon such Account in favor of
Agent);

(vi)

Borrower has not made any agreement with any Account Debtor
thereunder for any extension, compromise, settlement or modification of any such
Account or any deduction therefrom, except discounts or allowances which
are granted by Borrower in the ordinary course of its business for prompt
payment and which are reflected in the calculation of the net amount of each
respective invoice related thereto and are reflected in the Schedules of
Accounts submitted to Agent pursuant to Section 7.2.1 hereof;

(vii)

To the best of Borrower's knowledge, there are no facts, events or
occurrences which are reasonably likely to impair the validity or enforceability
of any of its Accounts or reduce the amount payable thereunder from the face
amount of the invoice and statements delivered to Agent with respect
thereto;

(viii)

To the best of Borrower's knowledge, (1) the Account Debtor
thereunder had the capacity to contract at the time any contract or other
document giving rise to the Account was executed and (2) such Account
Debtor is Solvent; and

(ix)

To the best of Borrower's knowledge, there are no proceedings or
actions which are threatened or pending against any Account Debtor thereunder
and which Borrower believes in good faith will make such Account
uncollectible.

- 38 -

8.1.9

Financial Statements.

  The Consolidated and consolidating balance sheets of
Borrower and such other Persons described therein (including the accounts of all
Subsidiaries of Borrower for the respective periods during which a Subsidiary
relationship existed) as of December 29, 2007 and the related statements of
income, changes in stockholder's equity, and changes in financial position for
the periods ended on such dates, have been prepared in accordance with GAAP, and
present fairly the financial positions of Borrower and such Persons at such
dates and the results of Borrower's operations for such periods.  From
December 29, 2007 to the Closing Date, there has been no material change in the
condition, financial or otherwise, of Borrower and such other Persons as shown
on the Consolidated balance sheet as of such date and no material change in the
aggregate value of Equipment and real Property owned by Borrower or such other
Persons.

8.1.10

Full Disclosure.

  The financial statements referred to in
Section 8.1.9 hereof do not contain any untrue statement of a
material fact and neither this Agreement nor any other written statement
contains or omits any material fact necessary to make the statements
con­tained herein or therein not materially misleading.  There is no
fact or circumstance in existence on the date hereof which Borrower has failed
to disclose to Agent in writing that may reasonably be expected to have a
Material Adverse Effect.

8.1.11

Solvent Financial Condition.

  Borrower and each of its Subsidiaries is now Solvent
and, after giving effect to the Loans to be made hereunder, the Letters of
Credit to be issued in connection herewith and the consummation of the other
transactions described in the Loan Documents, Borrower and each of its
Subsidiaries will be Solvent.

8.1.12

Surety Obligations.

  Except as set forth on Schedule 8.1.12
hereto on the date hereof, neither Borrower nor any of its Subsidiaries is
obligated as surety or indemnitor under any surety or similar bond or other
contract issued or entered into any agreement to assure payment,
perfor­mance or completion of performance of any undertaking or obligation
of any Person.

8.1.13

Taxes.

  The FEIN of Borrower and each of its Subsidiaries is
as shown on Schedule 8.1.13 hereto.  Borrower and each of its
Subsidi­aries has filed all federal, state and local tax returns and other
reports it is required by law to file and has paid, or made provision for the
payment of, all Taxes upon it, its income and Properties as and when such
Taxes are due and payable, except to the extent being Properly Contested.
 The provision for Taxes on the books of Borrower and each of its
Subsidiaries are adequate for all years not closed by applicable statutes, and
for its current Fiscal Year.

8.1.14

Brokers.

  There are no claims against Borrower for brokerage
commissions, finder's fees or investment banking fees in connection with the
transactions contemplated by this Agreement or any of the other Loan
Documents.

8.1.15

Intellectual Property.

  Borrower and each of its Subsidiaries each owns or has
the lawful right to use all Intellectual Property necessary for the present and
planned future conduct of its business without any conflict with the rights of
others; there is no objection to, or pending (or, to Borrower's knowledge,
threatened) Intellectual Property Claim with respect to Borrower's or any
Subsidiary's right to use any such Intellectual Property and Borrower is not
aware of any grounds for challenge or objection thereto; and, except as may be
disclosed on Schedule 8.1.15 hereto, neither Borrower nor any
Subsidiary pays any royalty or other compensation to any Person for the right to
use any Intellectual Property.  All such patents, trademarks, service
marks, trade names, copyrights, licenses and other similar rights are listed on
Schedule 8.1.15 hereto, to the extent they are registered under any
Applicable Law or are otherwise material to Borrower's or any Subsidiary's
business.

- 39 -

8.1.16

Governmental Approvals.

  Borrower and each of its Subsidiaries has, and is in
good standing with respect to, all Governmental Approvals necessary to continue
to conduct its business as heretofore or proposed to be conducted by it and to
own or lease and operate its Properties as now owned or leased by it.

8.1.17

Compliance with Laws.

  Borrower and each of its Subsidiaries has duly
complied with, and its Properties, business operations and leaseholds are in
compliance in all material respects with, the provisions of all Applicable Law
(except to the extent that any such noncompliance with Applicable Law could not
reasonably be expected to have a Material Adverse Effect) and there have been no
citations, notices or orders of noncompliance issued to Borrower or any of the
Subsidi­aries under any such law, rule or regulation which could be
reasonably expected to have a Material Adverse Effect.  No Inventory has
been produced in violation of the FLSA.  With respect to matters arising
under any Environmental Laws, the representations and warranties contained in
the Environmental Agreement are true and correct on the date hereof.

8.1.18

Burdensome Contracts.

  Neither Borrower nor any of the Subsidiaries is a
party or subject to any contract, agreement, or charter or other corporate
restriction, which has or could be reasonably expected to have a Material
Adverse Effect.  Neither Borrower nor any of the Subsidiaries is a party or
subject to any Restrictive Agreement, except as set forth on
Schedule 8.1.18 hereto, none of which prohibit the execution or
delivery of any of the Loan Documents by any Obligor or the performance by any
Obligor of its obligations under any of the Loan Documents to which it is a
party, in accordance with the terms of such Loan Documents.  

8.1.19

Litigation.

  Except as set forth on Schedule 8.1.19 hereto,
there are no actions, suits, proceedings or investigations pending or, to the
knowledge of Borrower, threatened on the date hereof, against or affecting
Borrower or any of the Subsidiaries, or the business, operations, Properties,
prospects, profits or condition of Borrower or any of the Subsidiaries,
(i) which relates to any of the Loan Documents or any of the
transactions contemplated thereby or (ii) which, if determined adversely to
Borrower or any of the Subsidiaries, could reasonably be expected to have a
Material Adverse Effect.  To the knowledge of Borrower, neither Borrower
nor any of the Subsidiaries is in default on the date hereof with respect to any
order, writ, injunction, judgment, decree or rule of any court, Governmental
Authority or arbitration board or tribunal.

8.1.20

No Defaults.

  No event has occurred and no condition exists which
would, upon or after the execution and delivery of this Agreement or Borrower's
performance hereunder, constitute a Default or an Event of Default.
 Neither Borrower nor any of its Subsidiaries is in default, and no event
has occurred and no condition exists which constitutes or which with the passage
of time or the giving of notice or both would constitute a default, under any
Material Contract or in the payment of any Debt of Borrower or a Subsidiary to
any Person for Money Borrowed.

8.1.21

Leases.

  Schedule 8.1.21 hereto is a complete listing of
each capitalized and operating lease of Borrower and each of its Subsidiaries on
the date hereof that constitutes a Material Contract.  Borrower and each of
its Subsidiaries is in substantial compliance with all of the terms of each of
its respective capitalized and operating leases and there is no basis upon which
the lessors under any such leases could terminate same or declare Borrower or
any of its Subsidiaries in default thereunder.

8.1.22

Pension Plans.

  Except as disclosed on Schedule 8.1.22 hereto,
neither Borrower nor any of its Subsidiaries has any Plan on the date
hereof.  Except as disclosed on Schedule 8.1.22 hereto, Borrower and
each of its Subsidiaries is in full compliance with the requirements of
ERISA and the regulations promulgated thereunder with respect to each Plan.
 No fact or situation exists in 

- 40 -

connection with any Plan that is reasonably likely to result in a
Material Adverse Effect.  Neither Borrower nor any of its Subsidiaries has
any withdrawal liability in connection with a Multi-­employer Plan.

8.1.23

Trade Relations.

  There exists no actual or threatened termination,
cancellation or limitation of, or any materially adverse modification or change
in, the business relation­ship between Borrower and any customer or any
group of customers whose purchases individually or in the aggre­gate are
material to the business of Borrower, or with any material supplier or group of
suppliers, and there exists no condition or state of facts or circumstances in
either event which is reasonably likely to have a Material Adverse Effect or
prevent Borrower from conducting such business after the consumma­tion of
the transactions contemplated by this Agreement in substantially the same manner
in which it has heretofore been conducted.

8.1.24

Labor Relations.

  Except as described on Schedule 8.1.24
hereto, neither Borrower nor any of the Subsidiaries is a party to any
collective bargaining agreement on the date hereof.  On the date hereof,
there are no grievances, disputes or controversies with any union or any other
organization of Borrower's or any Subsidiary's employees, or, to Borrower's
knowledge, any threats of strikes, work stoppages or any asserted pending
demands for collective bargaining by any union or organization that would have a
Material Adverse Effect.

8.1.25

Not a Regulated Entity.

  No Obligor is (i) an "investment company" or a
"person directly or indirectly controlled by or acting on behalf of an
investment company" within the meaning  of the Investment Company Act of
1940; (ii) a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935; or (iii) subject to regulation under the Federal Power Act,
the Interstate Commerce Act, any public utilities code or any other Applicable
Law regarding its authority to incur Debt. 

8.1.26

Margin Stock.

  Neither Borrower nor any of its Subsidiaries is
engaged, principally or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any Margin
Stock.

8.1.27

Real Estate.

  The Real Estate constitutes all real Property owned by
Borrower, or in which Borrower has any interest (other than an interest as
lessee), on the Closing Date.

8.1.28

Commercial Transaction.

  All of the Loans and other transactions contemplated
by this Agreement and the other Loan Documents arise out of a commercial
transaction and not a consumer transaction or consumer goods transaction.

8.1.29

Senior Indebtedness.

  After giving effect to each Loan made hereunder or the
issuance of each Letter of Credit as provided herein, the Obligations do not
violate the terms of any of the Subordinated Debt Documents and the Obligations
constitute Senior Indebtedness (as such term is defined in the Indenture and the
other Subordinated Debt Documents).

8.1.30

Anti-Terrorism Laws.

(a)

General.  Borrower represents and warrants to Agent
and Lenders that neither Borrower, nor any Subsidiary or Affiliate of Borrower
is in violation of any Anti-Terrorism Law or engages in or conspires to engage
in any transaction that evades or 

- 41 -

avoids, or has the purpose of evading or avoiding, or attempts to
violate, any of the prohibitions set forth in any Anti-Terrorism Law.

(b)

Executive Order No. 13224. Borrower represents and warrants
to Agent and Lenders that:

(i)

Neither Borrower nor any Subsidiary or Affiliate of Borrower is
any of the following (each a "Blocked Person"):

(1)

a Person that is listed in the annex to, or is otherwise subject
to the provisions of, Executive Order No. 13224;

(2)

a Person owned or controlled by, or acting for or on behalf of,
any Person that is listed in the annex to, or is otherwise subject to the
provisions of, Executive Order No. 13224;

(3)

a Person or entity with which any bank or other financial
institution is prohibited from dealing or otherwise engaging in any transaction
by any Anti-Terrorism Law;

(4)

a Person or entity that commits, threatens or conspires to commit
or supports "terrorism" as defined in Executive Order No. 13224;

(5)

a Person or entity that is named as a "specially designated
national" on the most current list published by the U.S. Treasury Department
Office of Foreign Asset Control at its official website or any replacement
website or other replacement  official publication of such list; or 

(6)

a Person or entity who is affiliated with a Person or entity
listed above.

(ii)

Neither Borrower nor any Subsidiary or Affiliate of Borrower
(i) conducts any business or engages in making or receiving any
contribution of funds, goods or services to or for the benefit of any Blocked
Person or (ii) deals in, or otherwise engages in any transaction relating
to, any property or interests in property blocked pursuant to Executive Order
No. 13224.

8.1.31

Reporting Company.

  None of the proceeds of the Loans will be used
directly or indirectly to fund a personal loan to or for the benefit of a
director or executive officer of a Borrower or Guarantor, or otherwise used for
any purpose that is prohibited by Applicable Law.

8.2.

Reaffirmation of Representations and Warranties.

  Each representation and warranty contained in this
Agreement and the other Loan Documents shall be deemed to be reaffirmed by
Borrower on each day that any Obligations are outstanding or that Borrower
requests or is deemed to have requested an extension of credit hereunder,
except for changes in the nature of Borrower's or, if applicable, any of
its Subsidiaries' business or operations that may occur after the date hereof in
the Ordinary Course of Business so long as (i) Agent has consented in
writing to such changes (or if such changes are material, Agent and Required
Lenders have consented in writing to such changes) or (ii) such changes are
not violative of any provision of this Agreement.  Notwithstanding the
foregoing, 

- 42 -

representations and warranties which by their terms are applicable
only to a specific date shall be deemed made only at and as of such date.

8.3.

Survival of Representations and Warranties.

  All representations and warranties of Borrower
contained in this Agreement or any of the other Loan Documents shall survive the
execution, delivery and acceptance thereof by Agent, Lenders and the parties
thereto and the closing of the transactions described therein or related
thereto.

SECTION  9.

COVENANTS AND CONTINUING AGREEMENTS

9.1.

Affirmative Covenants.

  For so long as there are any Commitments outstanding
and thereafter until payment in full of the Obligations, Borrower covenants
that, unless the Required Lenders have otherwise consented in writing, it shall
and shall cause each Subsidiary to:

9.1.1

Visits and Inspections.

  Permit representatives of Agent, from time to time, as
often as may be reasonably requested, but only during normal business hours and
(except when a Default or Event of Default exists) upon reasonable prior
notice to Borrower, to visit and inspect the Properties of such Borrower
and each of its Subsidiaries, inspect, audit and make extracts from Borrower's
and each Subsidiary's books and records, and discuss with its officers, its
employees and its independent accountants, Borrower's and each Subsidiary's
business, financial condition, business prospects and results of operations.
 Representatives of each Lender shall be authorized to accompany Agent on
each such visit and inspection and to participate with Agent therein, but at
their own expense, unless a Default or Event of Default exists.  Neither
Agent nor any Lender shall have any duty to make any such inspection and shall
not incur any liability by reason of its failure to conduct or delay in
conducting any such inspection.  

9.1.2

Notices.

  Notify Agent and Lenders in writing, promptly after
Borrower's obtaining knowledge thereof, (i) of the commencement of any
litigation affecting any Obligor or any of its Properties, whether or not the
claims asserted in such litigation are considered by Borrower to be covered by
insurance, and of the institution of any administrative proceeding, to the
extent that such litigation or proceeding, if determined adversely to such
Obligor, would reasonably be expected to have a Material Adverse Effect;
(ii) of any material labor dispute to which any Obligor may become a party,
any strikes or walkouts relating to any of its plants or other facilities,
and the expiration of any labor contract to which it is a party or by which it
is bound; (iii) of any material default by any Obligor under or termination
of any Material Contract or any note, indenture, loan agreement, mortgage,
lease, deed, guaranty or other similar agreement relating to any Debt of
such Obligor exceeding $3,000,000; (iv) of the existence of any Default or
Event of Default; (v) of any default by any Person under any note or other
evidence of Debt payable to an Obligor in an amount exceeding $3,000,000;
(vi) of any judgment against any Obligor in an amount exceeding $1,000,000;
(vii) of the assertion by any Person of any Intellectual Property Claim,
the adverse resolution of which could reasonably be expected to have a Material
Adverse Effect; (viii) of any violation or asserted violation by Borrower
of any Applicable Law (including ERISA, OSHA, FLSA or any Environmental Laws),
the adverse resolution of which could reasonably be expected to have a
Material Adverse Effect; (ix) of any Environmental Release by an
Obligor or on any Property owned or occupied by an Obligor which could
reasonably be expected to have a Material Adverse Effect; (x) of the
discharge of Borrower's independent accountants or any withdrawal of resignation
by such independent accountants from their acting in such capacity; (xi) of
any pending or threatened strike, work stoppage, unfair labor practice claim or
other labor dispute affecting Borrower or any of its Subsidiaries in a
manner that could reasonably be expected to have a Material Adverse Effect.
 In addition, Borrower shall give Agent at least 15 Business Days
prior written notice of any Obligor's opening of any new office 

- 43 -

(other than a single employee sales office) or place of business;
and (xii) of the issuance of any payment blockage notice by any Person in
connection with any of the Subordinated Debt Documents.

9.1.3

Financial and Other Reporting.

  Keep adequate records and books of account with
respect to its business activities in which proper entries are made in
accordance with GAAP reflecting all its financial transactions; and cause to be
prepared and to be furnished to Agent and Lenders the following
(all to  be prepared in accordance with GAAP applied on a consistent
basis, unless Borrower's certified public accountants concur in any change
therein, such change is disclosed to Agent and is consistent with GAAP):

(i)

as soon as available, and in any event within 95 days after the
close of each Fiscal Year, unqualified audited balance sheets of Borrower
and its Subsidiaries as of the end of such Fiscal Year and the related
statements of income, shareholders' equity and cash flow, on a Consolidated
basis (and unaudited balance sheets and statements of income on a consolidating
basis), certified without qualification by a firm of independent certified
public accountants of recognized national standing (or a firm approved by all
Lenders) selected by Borrower but reasonably acceptable to Agent (except for a
qualification for a change in accounting principles with which the accountant
concurs), and setting forth in each case in comparative form the corresponding
Consolidated and consolidating figures for the preceding Fiscal Year, together
with a certification of the financial statements by the chief executive officer
or the chief financial officer as required by the SEC;

(ii)

Reserved.

(iii)

as soon as available, and in any event within 30 days after the
end of each month (but within 50 days after the last month in a Fiscal Year),
including the last month of Borrower's Fiscal Year, unaudited balance sheets and
statements of income of Borrower and its Subsidiaries on a consolidating basis
as of the end of such month and the related unaudited Consolidated balance
sheet, statements of income and cash flow for such month and for the portion of
Borrower's Fiscal Year then elapsed, on a Consolidated basis, setting forth in
each case in comparative form, the corresponding figures for the preceding
Fiscal Year and certified by the principal financial officer of Borrower as
prepared in accordance with GAAP and fairly presenting the Consolidated
financial position and results of operations of Borrower and its Subsidiaries
for such month and period subject only to changes from audit and year-end
adjustments and except that such statements need not contain notes;

(iv)

if requested by Agent, not later than 20 days after each month, a
listing of all of Borrower's trade payables as of the last Business Day of such
month, specifying the name of and balance due each trade creditor, and, such
additional information regarding trade payables as Agent may request; and

(v)

promptly after the sending or filing thereof, as the case may be,
copies of any proxy statements, financial statements or reports which Borrower
has made generally available to its shareholders and copies of any regular,
periodic and special reports or registration statements which Borrower files
with the SEC or any Governmental Authority which may be substituted therefor, or
any national securities exchange.

- 44 -

Upon Borrower's receipt, Borrower shall deliver to Agent and
Lenders a copy of the accountants' letter to Borrower's management that is
prepared in connection with the financial statements delivered pursuant to
Section 9.1.3(i).  Concurrently with the delivery of the
financial statements described in clauses (i) and (iii) of this
Section 9.1.3, or more frequently if requested by Agent or any
Lender during any period that a Default or Event of Default exists, Borrower
shall cause to be prepared and furnished to Agent and Lenders a Compliance
Certificate executed by the chief financial officer of Borrower.

Promptly after the sending or filing thereof, Borrower shall also
provide to Agent copies of any annual report to be filed in accordance with
ERISA in connection with each Plan and such other data and information
(financial and otherwise) as Agent, from time to time, may reasonably request
bearing upon or related to the Collateral or Borrower's and each of its
Subsidiaries' financial condition or results of operations.  

9.1.4

Landlord and Storage Agreements.

  Provide Agent with copies of all existing agreements,
and promptly after execution thereof provide Agent with copies of all future
agreements, between Borrower and any landlord, warehouseman or bailee which owns
any premises at which any Collateral may, from time to time, be kept.

9.1.5

Projections.

  By December 31 of each Fiscal Year of Borrower,
deliver to Agent and Lenders the Projections of Borrower for the forthcoming
Fiscal Year, month by month.

9.1.6

Taxes.

  Pay and discharge all Taxes prior to the date on which
such Taxes become delinquent or penalties attach thereto, except and to the
extent only that such Taxes are being Properly Contested.

9.1.7

Compliance with Laws.

  Comply with all Applicable Law, including ERISA, all
Environmental Laws, FLSA, OSHA, the Sarbanes-Oxley Act of 2002, and all laws,
statutes, regulations and ordinances regarding the collection, payment and
deposit of Taxes, and obtain and keep in force any and all Governmental
Approvals necessary to the ownership of its Properties or to the conduct of its
business, to the extent that any such failure to comply, obtain or keep in force
could be reasonably expected to have a Material Adverse Effect.  Without
limiting the generality of the foregoing, if any Environmental Release shall
occur at or on any of the Properties of Borrower or any of its Subsidiaries,
Borrower shall, or shall cause the applicable Subsidiary to, act promptly and
diligently to investigate and report to Agent and all appropriate Governmental
Authorities the extent of, and to make appropriate remedial action to eliminate,
such Environmental Release.

9.1.8

Insurance.

  In addition to the insurance required herein with
respect to the Collateral, maintain, with its current insurers or with other
financially sound and reputable insurers having a rating that is acceptable to
Agent in all respects, (i) insurance with respect to its Properties and
business against such casualties and contingencies of such type (including
product liability, or larceny, embezzlement or other criminal misappropriation
insurance) and in such amounts and with such coverages, limits and deductibles
as is customary in the business of Borrower or such Subsidiary and
(ii) business interruption insurance in an amount not less than
$75,000,000.  

9.1.9

Intellectual Property.

  Promptly after applying for or otherwise acquiring
any Intellectual Property, deliver to Agent in form and substance
acceptable to Agent and in recordable form, all documents necessary for
Agent to perfect its Lien on such Intellectual Property.  

- 45 -

9.1.10

License Agreements.

  Keep each License Agreement in full force and effect
for so long as Borrower has any Inventory, the manufacture, sale or distribution
of which is in any manner governed by or subject to such License
Agreement.

9.1.11

Cash Management.

  Borrower shall  cause all of its concentration
and operating accounts to be maintained with Bank.

9.2.

Negative Covenants.

  For so long as there are any Commitments outstanding
and thereafter until payment in full of the Obligations, Borrower covenants
that, unless the Required Lenders have otherwise consented in writing, it shall
not and shall not permit any of its Subsidiaries to:

9.2.1

Fundamental Changes.

  Merge, reorganize, consolidate or amalgamate with any
Person, or liquidate, wind up its affairs or dissolve itself or fail to maintain
its existence, except for mergers or consolidations of any Subsidiary with
another Subsidiary or Borrower (provided that Borrower is the survivor in any
such transaction involving Borrower); change Borrower's or any of its
Subsidiaries name; or conduct business under any new fictitious name (unless
Borrower has given Agent at least 15 days prior written notice); or change
Borrower's or any of its Subsidiaries' FEIN or organizational identification
numbers or state of organization. 

9.2.2

Loans.

  Make any loans or other advances of money to any
Person other than to an officer or employee of Borrower or a Subsidiary for
salary, travel advances, advances against commissions and other similar advances
in the Ordinary Course of Business. 

9.2.3

Permitted Debt.

  Create, incur, assume, guarantee or suffer to exist
any Debt, except:

(i)

the Obligations;

(ii)

Subordinated Debt existing on the Closing Date and consisting of
the Convertible Debentures; 

(iii)

accounts payable by Borrower or any of its Subsidiaries to trade
creditors that are not aged more than 30 days from the due date, in each case
incurred in the Ordinary Course of Business and paid within such time period,
unless the same are being Properly Contested;

(iv)

obligations to pay Rentals permitted by Section 9.2.14;

(v)

Permitted Purchase Money Debt;

(vi)

Debt for accrued payroll, Taxes, and other operating expenses
(other than for Money Borrowed) incurred in the Ordinary Course of Business of
Borrower or such Subsidiary, including cash management obligations, in each
case, so long as payment thereof is not past due and payable unless, in the case
of Taxes only, such Taxes are being Properly Contested; 

(vii)

Debt for Money Borrowed by Borrower (other than the Obligations),
but only to the extent that such Debt is outstanding on the date of this
Agreement and is listed on Schedule 9.2.3 hereto and is not to be
satisfied on or about the Closing Date from the proceeds of the Loans;

- 46 -

(viii)

 Permitted Contingent Obligations; 

(ix)

Debt that is not included in any of the preceding paragraphs of
this Section 9.2.3, is not secured by a Lien (unless such Lien is a
Permitted Lien) and does not exceed at any time, in the aggregate, the sum of
$2,000,000 as to Borrower and all of its Subsidiaries; and

(x)

a Permitted Fixed Asset Loan.

9.2.4

Affiliate Transactions.

  Enter into, or be a party to, any transaction with any
Affiliate, except: (i) the transactions contemplated by the Loan Documents;
(ii) payment of reasonable compensation to officers and employees for
services actually rendered to Borrower or to its Subsidiaries;
(iii) payment of customary directors' fees and indemnities;
(iv) transactions with Affiliates that were consummated prior to the date
hereof and have been disclosed on Schedule 9.2.4 hereto; and
(v) transactions with Affiliates in the Ordinary Course of Business and
pursuant to the reasonable requirements of Borrower's or such Subsidiary's
business and upon fair and reasonable terms that are fully disclosed in writing
to Agent and are no less favorable to Borrower or such Subsidiary than Borrower
or such Subsidiary would obtain in a comparable arm's length transaction with a
Person not an Affiliate or stockholder of Borrower or such Subsidiary.

9.2.5

Limitation on Liens.

  Create or suffer to exist any Lien upon any of its
Property, income or profits, whether now owned or hereafter acquired, except the
following (collectively,  "Permitted Liens"):

(i)

Liens at any time granted in favor of Agent to secure the
Obligations;

(ii)

Liens for Taxes (excluding any Lien imposed pursuant to any of the
provisions of ERISA) not yet due or being Properly Contested;

(iii)

statutory Liens (excluding any Lien imposed pursuant to any of the
provisions of ERISA) arising in the Ordinary Course of Business of Borrower or a
Subsidiary and which secure obligations (other than Funded Debt) incurred by
Borrower or such Subsidiary in the Ordinary Course of Business of such Person,
but only if and for so long as (x) payment in respect of any such Lien is
not at the time required or the Debt secured by any such Lien is being Properly
Contested and (y) such Liens do not materially detract from the value of
the Property of Borrower or such Subsidiary and do not materially impair the use
thereof in the operation of Borrower's or such Subsidiary's business;

(iv)

Purchase Money Liens securing Permitted Purchase Money Debt;

(v)

Liens securing Debt of a Subsidiary of Borrower to Borrower or to
another Subsidiary;

(vi)

Liens arising by virtue of the rendition, entry or issuance
against Borrower or any of its Subsidiaries, or any Property of Borrower or any
of its Subsidiaries, of any judgment, writ, order, or decree for so long as any
such Lien (a) is in existence for less than 20 consecutive days after it first
arises or is being Properly Contested and (b) is at all times junior in priority
to any Liens in favor of Agent;

(vii)

Liens incurred or deposits made in the Ordinary Course of Business
to secure the performance of tenders, bids, leases, contracts (other than for
the repayment of Money 

- 47 -

Borrowed), statutory obligations and other similar obligations or
arising as a result of progress payments under government contracts, provided
that, to the extent any such Liens attach to any of the Collateral, such Liens
are at all times subordinate and junior to the Liens upon the Collateral in
favor of Agent;

(viii)

easements, rights-of-way, restrictions, covenants or other
agreements of record and other similar charges or encumbrances on real Property
of Borrower or any of its Subsidiaries that do not interfere with the ordinary
conduct of the business of Borrower or such Subsidiary;

(ix)

normal and customary rights of setoff upon deposits of cash in
favor of banks and other depository institutions and Liens of a collection bank
arising under the UCC on Payment Items in the course of collection; 

(x)

Liens in existence immediately prior to the Closing Date that are
satisfied in full and released on the Closing Date as a result of the
application of Borrower's cash on hand at the Closing Date or the proceeds of
Loans to be made on the Closing Date;

(xi)

such other Liens as appear on Schedule 9.2.5 hereto,
to the extent provided therein; 

(xii)

such other Liens as Agent and the Required Lenders in their sole
discretion may hereafter approve in writing; and

(xiii)

a Permitted Fixed Asset Lien.

The foregoing negative pledge shall include the Real Estate and
improvements thereon of Borrower and its Subsidiaries located in Gastonia,
Gaston County, North Carolina and Fayetteville, Cumberland County, North
Carolina.  The foregoing negative pledge shall not apply to any Margin
Stock to the extent that the application of such negative pledge to such Margin
Stock would require filings or other actions by any Lender under such
regulations or otherwise result in a violation of such regulations.  

9.2.6

Subordinated Debt.

  Make any payment of all or any part of any
Subordinated Debt or take any other action or omit to take any other action in
respect of any Subordinated Debt, except in accordance with the subordination
agreement relative thereto or in accordance with the terms of the Convertible
Debentures as in effect on the date hereof; (or, with respect to the Convertible
Debentures, as amended to the extent expressly permitted herein);  or amend
or modify the terms of any agreement applicable to any Subordinated Debt, other
than to extend the time of payment thereof or to reduce the rate of interest
payable in connection therewith other than amendment of the Convertible
Debentures to permit delivery of repurchased debentures to make sinking fund
payments in the order in which such payments become due.  To the extent
that any payment is permitted to be made with respect to any Subordinated Debt
pursuant to the provisions of the subordination agreement relative thereto or in
accordance with the terms of the Convertible Debentures as in effect on the date
hereof, as a condition precedent to Borrower's authorization to make any such
payment, Borrower shall provide to Agent, not less than 5 Business Days prior to
the scheduled payment, a certificate from a Senior Officer of Borrower
stating that no Default or Event of Default is in existence as of the date of
the certificate or will be in existence as of the date of such payment (both
with and without giving effect to the making of such payment), and specifying
the amount of principal and interest to be paid.

- 48 -

9.2.7

Distributions.

  Declare or make any Distributions, except for
(i) Upstream Payments, (ii) so long as each of the Distribution
Conditions is satisfied, payment of dividends and repurchases of Equity
Interests in Borrower (other than Special Distributions) not to exceed
$3,000,000 in the aggregate per Fiscal Year, (iii) payment of dividends and
repurchases of Equity Interests in Borrower (other than Special Distributions)
in excess of $3,000,000 in the aggregate per Fiscal Year so long as each of the
Distribution Conditions is satisfied and Borrower (a) shall have maintained
Average Availability of not less than $5,000,000 for the period consisting of
the 60 days preceding such Distribution, (b) shall have Availability
of not less than $5,000,000 on the date of such Distribution and after giving
pro forma effect to such Distribution, and (c) shall have maintained a
Fixed Charge Coverage Ratio of not less than 1.00 to 1:00 for the twelve month
period ended on the last day of the most recently ended Fiscal Quarter both
prior to such Distribution and after giving pro forma effect to such
Distribution; and (iv) so long as each of the Special Distribution Conditions is
satisfied, Special Distributions. 

9.2.8

Upstream Payments.

  Create or suffer to exist any encumbrance or
restriction on the ability of a Subsidiary to make any Upstream Payment,
except for encumbrances or restrictions (i) pursuant to the Loan Documents,
(ii) existing under Applicable Law and (iii) identified and fully
disclosed in Schedule 9.2.8 hereto.

9.2.9

Reserved.

9.2.10

Disposition of Assets.

  Sell, assign, lease, consign or otherwise dispose of
any of its Properties or any interest therein, including any disposition of
Property as part of a sale and leaseback transaction, to or in favor of any
Person, except (i) sales of Inventory in the Ordinary Course of Business,
(ii) dispositions of Equipment to the extent authorized by
Section 7.4.2 hereof, (iii)  a transfer of Property to Borrower by a
Subsidiary, (iv) Permitted Asset Dispositions, and (v) other
dispositions expressly authorized by other provisions of the Loan
Documents.

9.2.11

Subsidiaries.

  Form or acquire any Subsidiary after the Closing Date
or permit any existing Subsidiary to issue any additional Equity Interests
except director's qualifying shares.

9.2.12

Bill-and-Hold Sales and Consignments.

  Make a sale to any customer on a bill-and-hold,
guaranteed sale, sale and return, sale on approval or consignment basis, or any
sale on a repurchase or return basis (other than sales on consignment not to
exceed $1,000,000 in the aggregate at any time).

9.2.13

Restricted Investments.

  Make or have any Restricted Investment unless
(a) no Event of Default exists prior to or would result therefrom;
(b) Borrower shall have maintained Average Availability of not less than
$5,000,000 for the period consisting of the 60 days immediately preceding
such Restricted Investment; (c) shall have Availability of not less than
$5,000,000 on the date of such Restricted Investment and after giving pro forma
effect to such Restricted Investment; and (d) Borrower shall have
maintained a Fixed Charge Coverage Ratio of not less than 1.0 to 1.0 for the
twelve-month period ended on the last day of the most recently ended Fiscal
Quarter.

9.2.14

Leases.

  Become a lessee under any operating lease (other than
a lease under which Borrower or any of the Subsidiaries is lessor) of Property
if the aggregate Rentals payable during any current or future period of
12 consecutive months under the lease in question and all other leases
under which Borrower or any of the Subsidiaries is then lessee would
exceed $6,000,000.  The term "Rentals" means, as of the date
of determination, all payments which the lessee is required to make by the terms
of any lease.

- 49 -

9.2.15

Tax Consolidation.

  File or consent to the filing of any consolidated
income tax return with any Person other than Borrower and its
Subsidiaries.

9.2.16

Accounting Changes.

  Make any significant change in accounting treatment or
reporting practices, except as may be required by GAAP or which is concurred
with by Borrower's independent accountants, or establish a fiscal year different
from the Fiscal Year.  

9.2.17

Organization Documents.

  Amend, modify or otherwise change any of the terms or
provisions in any of its Organization Documents as in effect on the date hereof,
except for changes that do not affect in any way Borrower's or any of its
Subsidiaries' rights and obligations to enter into and perform the Loan
Documents to which it is a party and to pay all of the Obligations and that do
not otherwise have a Material Adverse Effect.

9.2.18

Restrictive Agreements.

  Enter into or become party to any Restrictive
Agreement other than those disclosed in Schedule 8.1.18 hereto, provided
that none of such disclosed agreements shall be amended without prior notice and
the consent of Agent.  

9.2.19

Conduct of Business.

  Engage in any business other than the business engaged
in by it on the Closing Date and any business or activities which are
substantially similar, related or incidental thereto.

9.2.20

Reserved.

9.2.21

Anti-Terrorism Laws.

  Borrower shall not conduct, deal in or engage in, or
permit any Subsidiary or Affiliate or agent of Borrower to conduct, deal in or
engage in of the following:  (i) conduct any business or engage in any
transaction or dealing with any Blocked Person, including the making or
receiving any contribution of funds, goods or services to or for the benefit of
any Blocked Person; (ii) deal in, or otherwise engage in any transaction
relating to, any property or interests in property blocked pursuant to Executive
Order No. 13224; or (iii) engage in or conspire to engage in any
transaction that evades or avoids, or has the purpose of evading or avoiding, or
attempts to violate, any of the prohibitions set forth in Executive Order No.
13224 or the USA Patriot Act.  Borrower shall deliver to Agent any
certification or other evidence requested from time to time by Agent, in its
sole discretion, confirming Borrower's compliance with this
Section 9.2.21.

9.3.

Reserved.

  

SECTION  10.

CONDITIONS PRECEDENT

10.1.

Conditions Precedent to Initial Credit
Extensions.

  Initial Lenders shall not be required to fund any Loan
requested by Borrower to procure any Letter of Credit or otherwise extend credit
to Borrower, unless, on or before October 31, 2008, each of the following
conditions has been satisfied:

10.1.1

Loan Documents.  Each of the Loan Documents shall have
been duly executed and delivered to Agent by each of the signatories thereto
(and, with the exception of the Notes, in sufficient counterparts for each
Lender) and accepted by Agent and Initial Lenders and each Obligor shall be in
compliance with all of the terms thereof.

10.1.2

Evidence of Perfection and Priority of Liens.  Agent
shall have received copies of all filing receipts or acknowledgments issued by
any Governmental Authority to evidence any filing or recordation necessary to
perfect the Liens of Agent in the Collateral and evidence in form satisfactory
to 

- 50 -

Agent and Initial Lenders that such Liens constitute valid and
perfected security interests and Liens, and that there are no other Liens upon
any Collateral except for Permitted Liens.

10.1.3

Organization Documents.  Agent shall have received
copies of the Organization Documents of each Obligor, and all amendments
thereto, certified by the Secretary of State or other appropriate official of
the jurisdiction of each Obligor's organization.

10.1.4

Good Standing Certificates.  Agent shall have received
good standing certificates for each Obligor, issued by the Secretary of State or
other appropriate official of such Obligor's jurisdiction of organization and
each jurisdiction where the conduct of such Obligor's business activities or
ownership of its Property necessitates qualification.

10.1.5

Opinion Letters.  Agent shall have received a
favorable, written opinion of Miller and Martin, counsel to Borrower and
Guarantors, covering, to Agent's satisfaction, the matters set forth on
Exhibit F attached hereto.

10.1.6

Insurance.  Agent shall have received certified copies
of the property and casualty insurance policies of Borrower with respect to the
Collateral, or certificates of insurance with respect to such policies in
form acceptable to Agent, and loss payable endorsements on Agent's standard form
of loss payee endorsement naming Agent as lenders loss payee and mortgagee
with respect to each such policy and certified copies of Borrower's liability
insurance policies, including product liability policies, together with
endorsements naming Agent as an additional insured, all as required by the Loan
Documents.

10.1.7

Landlord Waivers.  Agent shall have received Landlord
Waivers with respect to all leased or warehouse premises at which any Collateral
may be located, other than leased or warehouse premises at which Collateral with
an aggregate value of less than $500,000 is located.

10.1.8

Solvency Certificates.  Agent and Initial Lenders
shall have received certificates satisfactory to them from one or more
knowledgeable Senior Officers of Borrower that, after giving effect to the
financing under this Agreement and the issuance of the Letters of Credit,
Borrower is Solvent.

10.1.9

No Labor Disputes.  Agent shall have received
assurances satisfactory to it that there are no threats of strikes or work
stoppages by any employees, or organization of employees, of any Obligor which
Agent reasonably determines may have a Material Adverse Effect.

10.1.10

Compliance with Laws and Other Agreements.  Agent
shall have determined or received assurances satisfactory to it that none of the
Loan Documents or any of the transactions contemplated thereby violate any
Applicable Law, court order or agreement binding upon any Obligor.

10.1.11

Financial Statements.  Agent shall have received,
reviewed and found satisfactory drafts of Borrower's audited Consolidated and
consolidating financial statements for Borrower's Fiscal Year ending on or about
December 29, 2007, and Borrower's unaudited Consolidated and consolidating
financial statements for the month ending more than 20 days preceding the
month in which the Closing Date occurs

10.1.12

No Material Adverse Change.  No material adverse
change in the financial condition of any Obligor or in the quality, quantity or
value of any Collateral shall have occurred since December 29, 2007.

- 51 -

10.1.13

Accounts Payable.  Agent shall have reviewed and found
reasonably acceptable Borrower's accounts payable and vendor arrangements.

10.1.14

Payment of Fees.  Borrower shall have paid, or made
provision for the payment on the Closing Date of, all fees and expenses to
be paid hereunder to Agent and Lenders on the Closing Date.

10.1.15

Title Insurance Policies.  Agent shall have received,
had at least 5 days to review, and found acceptable fully paid mortgagee title
insurance policies (or endorsements to existing title insurance policies, to
Agent's satisfaction), in standard ALTA form, issued by a title insurance
company satisfactory to Agent, each in an amount equal to not less than the
fair market value of the real Property or leasehold interest, as the case may
be, subject to the Mortgage, insuring the Mortgage to create a valid Lien on all
real Property and valid Liens on the leasehold interest described therein with
no exceptions which Agent shall not have approved in writing and no survey
exceptions.

10.1.16

Environmental Matters.  Agent shall have received,
reviewed and found satisfactory the representations, warranties and disclosures
in the Environmental Agreement and shall have received updated environmental
audits, in form and substance satisfactory to Agent in all respects, on each
parcel of Real Estate on which Agent has a Mortgage.

10.1.17

Projections.  Agent shall have received, reviewed and
found satisfactory Projections on a month by month basis for Borrower for the
12-month period following the Closing Date.

10.1.18

LC Conditions.  With respect to the procurement of any
Letter of Credit on the Closing Date, each of the LC Conditions is
satisfied.

10.1.19

Appraisals.

Agent shall have received and found acceptable in all respects
appraisals of Borrower's and Guarantors' Inventory, Equipment and Real
Estate.

10.2.

Conditions Precedent to All Credit Extensions.

  Lenders shall not be required to fund any Loans,
procure any Letters of Credit or otherwise extend any credit to or for the
benefit of Borrower, unless and until each of the following conditions has been
and continues to be satisfied:

10.2.1

No Defaults.  No Default or Event of Default exists at
the time, or would result from the funding, of any Loan or other extension of
credit.

10.2.2

Satisfaction of Conditions in Other Loan Documents.
 Each of the conditions precedent set forth in any other Loan Document
shall have been and shall remain satisfied.

10.2.3

No Litigation.  No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain or
prohibit, or to obtain damages in respect of, or which is related to or arises
out of, this Agreement or any of the other Loan Documents or the
consummation of the transactions contemplated hereby or thereby.

10.2.4

Borrowing Base Certificate.  Agent shall have received
each Borrowing Base Certificate required by the terms of this Agreement or
otherwise requested by Agent.

10.2.5

 LC Conditions.  With respect to the procurement
of any Letter of Credit after the Closing Date, each of the LC Conditions
is satisfied.

- 52 -

10.3.

Inapplicability of Conditions.

  None of the conditions precedent set forth in
Sections 10.1 or 10.2 shall be conditions to the obligation
of (i) each Participating Lender to make payments to Issuing Bank pursuant
to Section 1.3.2, (ii) each Lender to deposit with Agent
such Lender's Pro Rata share of a Borrowing in accordance with
Section 3.1.2, (iii) each Lender to fund its Pro Rata share of
a Revolver Loan to repay outstanding Settlement Loans to BofA as provided in
Section  3.1.3(ii), (iv) each Lender to pay any amount payable
to Agent or any other Lender pursuant to this Agreement or (v) Agent to pay
any amount payable to any Lender pursuant to this Agreement.

10.4.

Limited Waiver of Conditions Precedent.

  If Lenders shall make any Loans, procure any Letter of
Credit or otherwise extend any credit to Borrower under this Agreement at a time
when any of the foregoing conditions precedent are not satisfied (regardless of
whether the failure of satisfaction of any such conditions precedent was known
or unknown to Agent or Lenders), the funding of such Loan or procurement of such
Letter of Credit shall not operate as a waiver of the right of Agent and Lenders
to insist upon the satisfaction of all conditions precedent with respect to each
subsequent Borrowing requested by Borrower or a waiver of any Default or Event
of Default as a consequence of the failure of any such conditions to be
satisfied, unless Agent, with the prior written consent of the Required Lenders,
in writing waives the satisfaction of any condition precedent, in which event
such waiver shall only be applicable for the specific instance given and only to
the extent and for the period of time expressly stated in such written
waiver.

SECTION  11.

EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT

11.1.

Events of Default.

  The occurrence or existence of any one or more of the
following events or conditions shall constitute an "Event of Default" (each of
which Events of Default shall be deemed to exist unless and until waived by
Agent and Lenders in accordance with the provisions of Section 12.9
hereof):

11.1.1

Payment of Obligations.

  Borrower shall fail to pay any of the Obligations on
the due date thereof (whether due at stated maturity, on demand, upon
acceleration or otherwise).

11.1.2

Misrepresentations.

  Any representation, warranty or other written
statement to Agent or any Lender by or on behalf of any Obligor, whether made in
or furnished in compliance with or in reference to any of the Loan Documents,
proves to have been false or misleading in any material respect when made or
furnished or when reaffirmed pursuant to Section 8.2 hereof.

11.1.3

Breach of Specific Covenants.

  Borrower shall fail or neglect to perform, keep or
observe any covenant contained in Sections 6.6, 7.1.1, 7.2.4, 7.2.5, 7.2.6,
7.5, 9.1.1, 9.1.3, 9.1.8, or 9.2 hereof on the date that Borrower is
required to perform, keep or observe such covenant.

11.1.4

Breach of Other Covenants.

  Borrower shall fail or neglect to perform, keep or
observe any covenant contained in this Agreement (other than a covenant which is
dealt with specifically elsewhere in Section 11.1 hereof) and the
breach of such other covenant is not cured to Agent's and the Required Lender's
satisfaction within 15 days after the sooner to occur of any Senior Officer's
receipt of notice of such breach from Agent or the date on which such failure or
neglect first becomes known to any Senior Officer; provided, however, that such
notice and opportunity to cure shall not apply in the case of any failure to
perform, keep or observe any covenant which is not capable of being cured at all
or within such 15-day period or which is a willful and knowing breach by
Borrower.

11.1.5

Default Under Security Documents/Other Agreements.

  Borrower or any other Obligor shall default in the due
and punctual observance or performance of any liability or obligation to 

- 53 -

be observed or performed by it under any of the Other Agreements
or Security Documents beyond any applicable cure period.

11.1.6

Other Defaults.

  There shall occur any default or event of default on
the part of Borrower or any Subsidiary under any agreement, document or
instrument to which Borrower or such Subsidiary is a party or by which Borrower
or such Subsidiary or any of their respective Properties is bound, creating or
relating to any Debt (other than the Obligations) in excess of $3,000,000 if the
payment or maturity of such Debt may be accelerated in consequence of such event
of default or demand for payment of such Debt may be made; or (ii) acceleration
of the payment or maturity of any Debt in excess of $1,500,000 owed by Borrower
or any Subsidiary under any agreement, document or instrument to which Borrower
or such Subsidiary is a party or by which Borrower or such Subsidiary or any of
their respective Properties is bound.

11.1.7

Uninsured Losses.

  Any loss, theft, damage or destruction of any of the
Collateral not fully covered (subject to such deductibles as Agent shall have
permitted) by insurance if the amount not covered by insurance exceeds
$3,000,000.

11.1.8

Reserved.

11.1.9

Solvency.

  Any Obligor shall cease to be Solvent.

11.1.10

Insolvency Proceedings.

  Any Insolvency Proceeding shall be commenced by any
Obligor; an Insolvency Proceeding is commenced against any Obligor and any of
the following events occur:  such Obligor consents to or  acquiesces
in the institution of the Insolvency Proceeding against it, the petition
commencing the Insolvency Proceeding is not timely controverted by such Obligor,
the petition commencing the Insolvency Proceeding is not dismissed within 30
days after the date of the filing thereof (provided that, in any event, during
the pendency of any such period, Lenders shall be relieved from
their obligation to make Loans or otherwise extend credit to or for the
benefit of Borrower hereunder), an interim trustee is appointed to take
possession of all or a substantial portion of the Properties of such Obligor or
to operate all or any substantial portion of the business of such Obligor, or an
order for relief shall have been issued or entered in connection with such
Insolvency Proceeding; or any Obligor shall make an offer of settlement
extension or composition to its unsecured creditors generally.

11.1.11

Business Disruption; Condemnation.

  There shall occur a cessation of a substantial part of
the business of any Obligor for a period which may be reasonably expected to
have a Material Adverse Effect; or any Obligor shall suffer the loss or
revocation of any license or permit now held or hereafter acquired by such
Obligor which is necessary to the continued or lawful operation of its business;
or any Obligor shall be enjoined, restrained or in any way prevented by court,
governmental or administrative order from conducting all or any material part of
its business affairs; or any material lease or agreement pursuant to which any
Obligor leases or occupies any premises on which any Collateral is located shall
be canceled or terminated prior to the expiration of its stated term and such
cancellation or termination has a Material Adverse Effect or results in an
Out-of-Formula Condition; or any material part of the Collateral shall be taken
through condemnation or the value of such Property shall be materially impaired
through condemnation.

11.1.12

Change of Control.

  There shall occur a Change of Control.

11.1.13

ERISA.

  The Pension Benefit Guaranty Corporation has provided
notice that a Reportable Event has occurred which constitutes grounds for the
termination of any Plan or for the 

- 54 -

appointment by the appropriate United States district court of a
trustee for any Plan, or if any Plan shall be terminated or any such trustee
shall be requested or appointed, or if Borrower, any Subsidiary or any Obligor
is in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to
payments to a Multiemployer Plan resulting from Borrower's, such Subsidiary's or
such Obligor's complete or partial withdrawal from such Plan.

11.1.14

Challenge to Loan Documents.

  Any Obligor or any of its Affiliates shall challenge
or contest in any action, suit or proceeding the validity or enforceability of
any of the Loan Documents, the legality or enforceability of any of the
Obligations or the perfection or priority of any Lien granted to Agent, or any
of the Loan Documents ceases to be in full force or effect for any reason other
than a full or partial waiver or release by Agent and Lenders in accordance with
the terms thereof.

11.1.15

Judgment.

  One or more judgments or orders for the payment of
money in an amount that exceeds, individually or in the aggregate, $500,000
shall be entered against Borrower or any other Obligor and either
(i) enforcement proceedings shall have been commenced by any creditor upon
such judgment or order or (ii) there shall be any period of 30
consecutive days during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect.

11.1.16

Repudiation of or Default Under Guaranty.

  Any Guarantor shall revoke or attempt to revoke the
Guaranty signed by such Guarantor, shall repudiate such Guarantor's liability
thereunder, or shall be in default under the terms thereof, or shall fail to
confirm in writing, promptly, after receipt of Agent's written request therefor,
such Guarantor's ongoing liability under the Guaranty in accordance with the
terms thereof.

11.1.17

Criminal Forfeiture.

  Any Obligor shall be convicted under any criminal law
that could lead to a forfeiture of any Property of such Obligor.

11.1.18

Reserved.

11.1.19

Subordinated Debt Documents.

  There shall occur a default or event of default under
any of the Subordinated Debt Documents and such default or event of default
shall continue beyond any applicable cure period provided for therein.

11.1.20

Bond Documents.

  There shall occur a default or event of default under
any of the Bond Documents and such default or event of default shall continue
beyond any applicable cure period provided for therein.

11.1.21

    Chroma Systems Real Estate Loan
Documents.  There shall occur a default or event of default under any
of the Chroma Systems Real Estate Loan Documents and such default or event of
default shall continue beyond any applicable cure period provided for therein.

11.1.22

    Refinance of Convertible
Debentures.  The following events shall occur: (i) Borrower shall
fail to refinance the Convertible Debentures no later than one hundred twenty
(120) days prior to their current stated maturity date of May 2012 and their new
maturity date shall not be on or after September 11, 2013, and (ii) the
Debenture Reserve shall be established, and at the time of the establishment of
such Debenture Reserve, the Availability Requirement is not satisfied.

11.2.

Acceleration of the Obligations; Termination of
Commitments.

  Without in any way limiting the right of Agent to
demand payment of any portion of the Obligations payable on demand in accordance
with this Agreement:

- 55 -

11.2.1

Upon or at any time after the occurrence of an Event of Default
(other than pursuant to Section 11.1.10 hereof) and for so long as such
Event of Default shall exist, Agent may in its discretion (and, upon receipt of
written instructions to do so from the Required Lenders, shall) (a) declare
the principal of and any accrued interest on the Loans and all other Obligations
owing under any of the Loan Documents to be, whereupon the same shall become,
without further notice or demand (all of which notice and demand Borrower
expressly waives), forthwith due and payable and Borrower shall forthwith pay to
Agent the entire principal of and accrued and unpaid interest on the Loans and
other Obligations plus reasonable attorneys' fees and expenses if such principal
and interest are collected by or through an attorney-at-law and
(b) terminate the Commitments.

11.2.2

Upon the occurrence of an Event of Default specified in
Section 11.1.10 hereof, all of the Obligations shall become
automatically due and payable without declaration, notice or demand by Agent to
or upon Borrower and the Commitments shall automatically terminate as if
terminated by Agent pursuant to Section 5.2.1 hereof and with the
effects specified in Section 5.2.4 hereof
provided, however, that, if Agent or Lenders shall
continue to make Loans or otherwise extend credit to Borrower pursuant to
this Agreement after an automatic termination of the Commitments by reason
of the commencement of an Insolvency Proceeding by or against
Borrower, such Loans and other credit shall nevertheless be
governed by this Agreement and enforceable against and recoverable from
each Obligor as if such Insolvency Proceeding had never been
instituted.

11.3.

Other Remedies.

  Upon and after the occurrence of an Event of Default
and for so long as such Event of Default shall exist, Agent may in its
discretion (and, upon receipt of written direction of the Required Lenders,
shall) exercise from time to time the following rights and remedies (without
prejudice to the rights of Agent or any Lender to enforce its claim against any
or all Obligors):

11.3.1

All of the rights and remedies of a secured party under the UCC or
under other Applicable Law, and all other legal and equitable rights to which
Agent may be entitled under any of the Loan Documents, all of which rights and
remedies shall be cumulative and shall be in addition to any other rights or
remedies contained in this Agreement or any of the other Loan Documents, and
none of which shall be exclusive.

11.3.2

The right to collect all amounts at any time payable to Borrower
from any Account Debtor or other Person at any time indebted to
Borrower.

11.3.3

The right to take immediate possession of any of the Collateral,
and to (i) require Borrower to assemble the Collateral, at Borrower's
expense, and make it available to Agent at a place designated by Agent which is
reasonably convenient to both parties, and (ii) enter any premises where
any of the Collateral shall be located and to keep and store the Collateral
on said premises until sold (and if said premises be the Property of Borrower,
then Borrower agrees not to charge Agent for storage thereof).

11.3.4

The right to sell or otherwise dispose of all or any Collateral in
its then condition, or after any further manufacturing or processing thereof, at
public or private sale or sales, with such notice as may be required by
Applicable Law, in lots or in bulk, for cash or on credit, all as Agent, in its
sole discretion, may deem advisable.  Borrower agrees that any requirement
of notice to Borrower or any other Obligor of any proposed public or private
sale or other disposition of Collateral by Agent shall be deemed reasonable
notice thereof if given at least 10 days prior thereto, and such sale may be at
such locations as Agent may designate in said notice.  Agent shall have the
right to conduct such sales on Borrower's or any other Obligor's premises,
without charge therefor, and such sales may be adjourned from time to time in
accordance with Applicable Law.  Agent shall have the right to sell, lease
or 

- 56 -

otherwise dispose of the Collateral, or any part thereof, for
cash, credit or any combination thereof, and Agent may purchase all or any part
of the Collateral at public or, if permitted by law, private sale and, in lieu
of actual payment of such purchase price, may set off the amount of such price
against the Obligations.  The proceeds realized from the sale or other
disposition of any Collateral may be applied, after allowing 2 Business Days for
collection, first to any Extraordinary Expenses incurred by Agent, second to
interest accrued with respect to any of the Obligations; and third, to the
principal balance of the Obligations.  If any deficiency shall arise,
Obligors shall remain jointly and severally liable to Agent and Lenders
therefor.

11.3.5

The right to the appointment of a receiver, without notice of any
kind whatsoever, to take possession of all or any portion of the Collateral and
to exercise such rights and powers as the court appointing such receiver shall
confer upon such receiver.

11.3.6

The right to exercise all of Agent's rights and remedies under the
Mortgage with respect to any Real Estate.

11.3.7

The right to require Borrower to deposit with Agent funds equal to
the LC Obligations and, if Borrower fails promptly to make such deposit,
Agent may (and shall upon the direction of the Required Lenders) advance such
amount as a Revolver Loan (whether or not an Out-of-Formula Condition exists or
is created thereby).  At such time as all Letters of Credit have been drawn
upon or expired, any amounts remaining in such reserve shall be applied against
any outstanding Obligations, or, if all Obligations have been indefeasibly paid
in full, returned to Borrower.

Agent is hereby irrevocably granted a license or other right to
use, license or sub-license, without charge, any and all of Borrower's
Intellectual Property and all of Borrower's computer hardware and software,
trade secrets, brochures, customer lists, promotional and advertising materials,
labels, and packaging materials, and any Property of a similar nature, in
advertising for sale, marketing, selling and collecting and in completing the
manufacturing of any Collateral, and Borrower's rights under all licenses and
all franchise agreements shall inure to Agent's benefit.

11.4.

Setoff.

  In addition to any Liens granted under any of the Loan
Documents and any rights now or hereafter available under Applicable Law, Agent
and each Lender (and each of their respective Affiliates) is hereby authorized
by Borrower at any time that an Event of Default exists, without notice to
Borrower or any other Person (any such notice being hereby expressly waived) to
set off and to appropriate and to apply any and all deposits, general or special
(including Debt evidenced by certificates of deposit whether matured or
unmatured (but not including trust accounts)) and any other Debt at any time
held or owing by Agent, such Lender or any of their Affiliates to or for the
credit or the account of Borrower against and on account of the Obligations of
Borrower arising under the Loan Documents to Agent, such Lender or any of their
Affiliates, including all Loans and LC Obligations and all claims of any nature
or description arising out of or in connection with this Agreement, irrespective
of whether or not (i) Agent or such Lender shall have made any demand
hereunder, (ii) Agent, at the request or with the consent of the Required
Lenders shall have declared the principal of and interest on the Loans and other
amounts due hereunder to be due and payable as permitted by this Agreement and
even though such Obligations may be contingent or unmatured or (iii) the
Collateral for the Obligations is adequate.  Notwithstanding the foregoing,
each of Agent and Lenders agree with each other that it shall not, without the
express consent of the Required Lenders, and that it shall (to the extent that
it is lawfully entitled to do so) upon the request of the Required Lenders,
exercise its setoff rights hereunder against any accounts of Borrower now or
hereafter maintained with Agent, such Lender or any Affiliate of any of them,
but Borrower shall not have a claim or cause of action against Agent or any
Lender for any setoff made without the consent of the Required Lenders and the
validity of any such setoff shall not be impaired by 

- 57 -

the absence of such consent.  If any party (or its Affiliate)
exercises the right of setoff provided for hereunder, such party shall be
obligated to share any such setoff in the manner and to the extent required by
Section 12.5.

11.5.

Remedies Cumulative; No Waiver.

11.5.1

All covenants, conditions, provisions, warranties, guaranties,
indemnities, and other undertakings of Borrower contained in this Agreement and
the other Loan Documents, or in any document referred to herein or contained in
any agreement supplementary hereto or in any schedule or in any Guaranty given
to Agent or any Lender or contained in any other agreement between Agent or any
Lender and Borrower, heretofore, concurrently, or hereafter entered into, shall
be deemed cumulative to and not in derogation or substitution of any of the
terms, covenants, conditions, or agreements of Borrower herein contained.
 The rights and remedies of Agent and Lenders under this Agreement and the
other Loan Documents shall be cumulative and not exclusive of any rights or
remedies that Agent or any Lender would otherwise have.

11.5.2

The failure or delay of Agent or any Lender to require strict
performance by Borrower of any provision of any of the Loan Documents or to
exercise or enforce any rights, Liens, powers, or remedies under any of the Loan
Documents or with respect to any Collateral shall not operate as a waiver of
such performance, Liens, rights, powers and remedies, but all such requirements,
Liens, rights, powers, and remedies shall continue in full force and effect
until all Loans and all other Obligations owing or to become owing from Borrower
to Agent and Lenders shall have been fully satisfied.  None of the
undertakings, agreements, warranties, covenants and representations of Borrower
contained in this Agreement or any of the other Loan Documents and no Event of
Default by Borrower under this Agreement or any other Loan Documents shall be
deemed to have been suspended or waived by Agent or any Lender, unless such
suspension or waiver is by an instrument in writing specifying such suspension
or waiver and is signed by a duly authorized representative of Agent or such
Lender and directed to Borrower.

11.5.3

If Agent or any Lender shall accept performance by Borrower, in
whole or in part, of any obligation that Borrower is required by any of the Loan
Documents to perform only when a Default or Event of Default exists, or if Agent
or any Lender shall exercise any right or remedy under any of the Loan Documents
that may not be exercised other than when a Default or Event of Default exists,
Agent's or Lender's acceptance of such performance by Borrower or Agent's or
Lender's exercise of any such right or remedy shall not operate to waive any
such Event of Default or to preclude the exercise by Agent or any Lender of any
other right or remedy, unless otherwise expressly agreed in writing by Agent or
such Lender, as the case may be.

SECTION  12.

AGENT

12.1.

Appointment, Authority and Duties of Agent.

12.1.1.

Each Lender hereby irrevocably appoints and designates BofA as
Agent to act as herein specified.  Agent may, and each Lender by its
acceptance of a Note shall be deemed irrevocably to have authorized Agent to,
enter into all Loan Documents to which Agent is or is intended to be a party and
all amendments hereto and all Security Documents at any time executed by
Borrower, for its benefit and the Pro Rata benefit of Lenders and, except as
otherwise provided in this Section 12, to exercise such rights and
powers under this Agreement and the other Loan Documents as are specifically
delegated to Agent by the terms hereof and thereof, together with such other
rights and powers as are reasonably incidental thereto.  Each Lender agrees
that any action taken by Agent or the Required Lenders in 

- 58 -

accordance with the provisions of this Agreement or the other Loan
Documents, and the exercise by Agent or the Required Lenders of any of the
powers set forth herein or therein, together with such other powers as are
reasonably incidental thereto, shall be authorized and binding upon all Lenders.
 Without limiting the generality of the foregoing, Agent shall have the
sole and exclusive right and authority to (a) act as the disbursing and
collecting agent for Lenders with respect to all payments and collections
arising in connection with this Agreement and the other Loan Documents;
(b) execute and deliver as Agent each Loan Document and accept delivery of
each such agreement delivered by Borrower or any other Obligor; (c) act as
collateral agent for Lenders for purposes of the perfection of all security
interests and Liens created by this Agreement or the Security Documents with
respect to all material items of the Collateral and, subject to the direction of
the Required Lenders, for all other purposes stated therein, provided
that Agent hereby appoints, authorizes and directs each Lender to act as a
collateral sub-agent for Agent and the other Lenders for purposes of the
perfection of all security interests and Liens with respect to Borrower's
Deposit Accounts maintained with, and all cash and Cash Equivalents held by,
such Lender; (d) subject to the direction of the Required Lenders, manage,
supervise or otherwise deal with the Collateral; and (e) except as may be
otherwise specifically restricted by the terms of this Agreement and subject to
the direction of the Required Lenders, exercise all remedies given to Agent with
respect to any of the Collateral under the Loan Documents relating thereto,
Applicable Law or otherwise.  The duties of Agent shall be ministerial and
administrative in nature, and Agent shall not have by reason of this Agreement
or any other Loan Document a fiduciary relationship with any Lender (or
any Lender's participants).  Unless and until its authority to do so
is revoked in writing by Required Lenders, Agent alone shall be authorized to
determine whether any Accounts or Inventory constitute Eligible Accounts or
Eligible Inventory (basing such determination in each case upon the meanings
given to such terms in Appendix A), or whether to impose or release any
reserve, and to exercise its own credit judgment in connection therewith,
which determinations and judgments, if exercised in good faith, shall exonerate
Agent from any liability to Lenders or any other Person for any errors in
judgment.

12.1.2.

Agent (which term, as used in this sentence, shall include
reference to Agent's officers, directors, employees, attorneys, agents and
Affiliates and to the officers, directors, employees, attorneys and agents of
Agent's Affiliates) shall not:  (a) have any duties or
responsibilities except those expressly set forth in this Agreement and the
other Loan Documents or (b)  be required to take, initiate or conduct any
litigation, foreclosure or collection proceedings hereunder or under any of the
other Loan Documents except to the extent directed to do so by the Required
Lenders during the continuance of any Event of Default.  The conferral upon
Agent of any right hereunder shall not imply a duty on Agent's part to exercise
any such right unless instructed to do so by the Required Lenders in accordance
with this Agreement.

12.1.3.

Agent may perform any of its duties by or through its agents and
employees and may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.  Borrower shall
promptly (and in any event, on demand) reimburse Agent for all reasonable
expenses (including all Extraordinary Expenses) incurred by Agent pursuant to
any of the provisions hereof or of any of the other Loan Documents or in the
execution of any of Agent's duties hereby or thereby created or in the exercise
of any right or power herein or therein imposed or conferred upon it or Lenders
(excluding, however, general overhead expenses), and each Lender agrees promptly
to pay to Agent, on demand, such Lender's Pro Rata share of any such
reimbursement for expenses (including Extraordinary Expenses) that is not timely
made by Borrower to Agent.

12.1.4.

The rights, remedies, powers and privileges conferred upon Agent
hereunder and under the other Loan Documents may be exercised by Agent without
the necessity of the joinder of any other parties unless otherwise required by
Applicable Law.  If Agent shall request instructions from the 

- 59 -

Required Lenders with respect to any act or action (including
the failure to act) in connection with this Agreement or any of the other
Loan Documents, Agent  shall be entitled to refrain from such act or taking
such action unless and until Agent shall have received instructions from the
Required Lenders; and Agent shall not incur liability to any Person by reason of
so refraining.  Without limiting the foregoing, no Lender shall have any
right of action whatsoever against Agent as a result of Agent acting or
refraining from acting hereunder or under any of the Loan Documents pursuant to
or in accordance with the instructions of the Required Lenders  except
for Agent's own gross negligence or willful misconduct in connection with
any action taken by it.  Notwithstanding anything to the contrary
contained in this Agreement, Agent shall not be required to take any action
that is in its opinion contrary to Applicable Law or the terms of any of the
Loan Documents or that would in its opinion subject it or any of
its officers, employees or directors to personal liability.

12.1.5.

Agent shall promptly, upon receipt thereof, forward to each Lender
(i) copies of any significant written notices, reports, certificates and
other information received by Agent from any Obligor (but only upon request by
Lender if and to the extent such Obligor is required by the terms of the Loan
Documents to supply such information directly to Lenders) and (ii) copies
of the results of any field audits by Agent with respect to Borrower.
 Agent shall have no liability to any Lender for any errors in or
omissions from any field audit or other examination of Borrower or the
Collateral.

12.2.

Agreements Regarding Collateral.

  

12.2.1.

Lenders hereby irrevocably authorize Agent, at its option and in
its discretion, to release any Lien upon any Collateral (i) upon the
termination of the Commitments and payment or satisfaction of all of the
Obligations or (ii) constituting Equipment sold or disposed of in
accordance with the terms of this Agreement if Borrower certifies to Agent that
the disposition is made in compliance with the terms of this Agreement (and
Agent may rely conclusively on any such certificate, without further inquiry) or
(iii) if approved or ratified by the Required Lenders; provided,
however, that Agent (without the consent of any Lender) shall be
authorized to release any Lien upon any Collateral having a net book value of
less than $500,000 in the aggregate during any 12-month period.
 Agent shall have no obligation whatsoever to any of the Lenders to
assure that any of the Collateral exists or is owned by Borrower or is cared
for, protected or insured or has been encumbered, or that Agent's Liens have
been properly, sufficiently or lawfully created, perfected, protected or
enforced or entitled to any particular priority or to exercise any duty of
care with respect to any of the Collateral.

12.2.2.

Each Lender shall be deemed to have requested that Agent furnish
such Lender, promptly after the same becomes available, a copy of each field
audit or examination report (each a "Report" and collectively,
"Reports") prepared by or on behalf of Agent; agrees that neither BofA
nor Agent makes any representation or warranty as to the accuracy or
completeness of any Report and shall not be liable for any information contained
in or omitted from any such Report; agrees that the Reports are not intended to
be comprehensive audits or examinations, that BofA or Agent or any other Person
performing any audit or examination will inspect only specific information
regarding Borrower or the Collateral and will rely significantly upon Borrower's
books and records as well as upon representations of Borrower's officers and
employees; agrees to keep all Reports confidential and strictly for its internal
use and not to distribute the Reports to any Person (except to its
Participants) or use any Report in any other manner; and, without limiting
the generality of any other indemnification contained herein, agrees to hold
Agent and any other Person preparing a Report harmless from all losses or
liabilities incurred by Agent, such other Person or such Lender as a direct or
indirect result of any action that the indemnifying Lender may take or fail to
take or any conclusion the indemnifying Lender may reach or draw from any Report
in connection with any Loans or other credit accommodations that the
indemnifying Lender has made or may make to Borrower, or the indemnifying
Lender's participation in, or its purchase of, a Loan 

- 60 -

or Loans of Borrower, and to pay and protect, and indemnify,
defend and hold Agent and each other such Person preparing a Report harmless
from and against all claims, actions, proceedings, damages, costs, expenses
and other amounts (including attorneys' fees incurred by Agent and any such
other Person preparing a Report) arising as the direct or indirect result of any
third parties who might obtain all or any part of any Report through the
indemnifying Lender.

12.3.

Reliance By Agent

.  Agent shall be entitled to rely, and shall be fully
protected in so relying, upon any certification, notice or other communication
(including any thereof by telephone, telex, telegram, telecopier message or
cable) believed by it to be genuine and correct and to have been signed, sent or
made by or on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel, independent accountants and other experts selected
by Agent.  As to any matters not expressly provided for by this Agreement
or any of the other Loan Documents, Agent shall in all cases be fully protected
in acting or refraining from acting hereunder and thereunder in accordance with
the instructions of the Required Lenders, and such instructions of the Required
Lenders and any action taken or failure to act pursuant thereto shall be binding
upon Lenders.

12.4.

Action Upon Default

.  Agent shall not be deemed to have knowledge of the
occurrence of a Default or an Event of Default (other than nonpayment when due
of an amount required to be repaid with respect to the Loans) unless it has
received written notice from a Lender or Borrower specifying the occurrence and
nature of such Default or Event of Default.  If Agent shall receive such a
notice of a Default or an Event of Default or shall otherwise acquire actual
knowledge of any Default or Event of Default, Agent shall promptly notify
Lenders in writing and Agent shall take such action and assert such rights under
this Agreement and the other Loan Documents, or shall refrain from taking such
action and asserting such rights, as the Required Lenders shall direct from time
to time.  If any Lender shall receive a notice of a Default or an Event of
Default or shall otherwise acquire actual knowledge of any Default or
Event of Default, such Lender shall promptly notify Agent and the other
Lenders in writing.  As provided in Section 12.3 hereof, Agent
shall not be subject to any liability by reason of acting or refraining to act
pursuant to any request of the Required Lenders except for its own willful
misconduct or gross negligence in connection with any action taken by it.
 Before directing Agent to take or refrain from taking any action or
asserting any rights or remedies under this Agreement and the other Loan
Documents on account of any Event of Default, the Required Lenders shall
consult with and seek the advice of (but without having to obtain the consent
of) each other Lender, and promptly after directing Agent to take or refrain
from taking any such action or asserting any such rights, the Required Lenders
will so advise each other Lender of the action taken or refrained from being
taken and, upon request of any Lender, will supply information concerning
actions taken or not taken.  In no event shall the Required Lenders,
without the prior written consent of each Lender, direct Agent to accelerate and
demand payment of the Loans held by one Lender without accelerating and
demanding payment of all other Loans or to terminate the Commitments of one or
more Lenders without terminating the Commitments of all Lenders.  Each
Lender agrees that, except as otherwise provided in any of the Loan Documents
and without the prior written consent of the Required Lenders, it will not
take any legal action or institute any action or proceeding against any Obligor
with respect to any of the Obligations or Collateral, or accelerate or otherwise
enforce its portion of the Obligations.  Without limiting the generality of
the foregoing, no Lender may exercise any right that it might otherwise
have under Applicable Law to credit bid at foreclosure sales, UCC sales or other
similar sales or dispositions of any of the Collateral except as authorized by
the Required Lenders.  Notwithstanding anything to the contrary set forth
in this Section 12.4 or elsewhere in this Agreement, each Lender
shall be authorized to take such action to preserve or enforce its rights
against any Obligor where a deadline or limitation period is otherwise
applicable and would, absent the taking of specified action, bar the enforcement
of Obligations held by such Lender against such Obligor, including the filing of
proofs of claim in any Insolvency Proceeding.

- 61 -

12.5.

Ratable Sharing

.  If any Lender shall obtain any payment or reduction
(including any amounts received as adequate protection of a bank account
deposit treated as cash collateral under the Bankruptcy Code) of any
Obligation of Borrower hereunder (whether voluntary, involuntary, through the
exercise of any right of set-off or otherwise) in excess of its Pro Rata share
of payments or reductions on account of such Obligations obtained by all of
the Lenders, such Lender shall forthwith (i) notify the other Lenders and
Agent of such receipt and (ii) purchase from the other Lenders such
participations in the affected Obligations as shall be necessary to cause such
purchasing Lender to share the excess payment or reduction, net of costs
incurred in connection therewith, on a Pro Rata basis, provided that if all or
any portion of such excess payment or reduction is thereafter recovered from
such purchasing Lender or additional costs are incurred, the purchase shall be
rescinded and the purchase price restored to the extent of such recovery or such
additional costs, but without interest.  Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this
Section 12.5 may, to the fullest extent permitted by Applicable Law,
exercise all of its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of Borrower in the amount of such participation.

12.6.

Indemnification of Agent.

  Each Lender agrees to indemnify and defend the Agent
Indemnitees (to the extent not reimbursed by Borrower under this Agreement, but
without limiting the indemnification obligation of Borrower under this
Agreement), on a Pro Rata basis, and to hold each of the Agent Indemnitees
harmless from and against, any and all Claims which may be imposed on, incurred
by or asserted against any of the Agent Indemnitees in any way related to or
arising out of this Agreement or any of the other Loan Documents or any other
document contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including the costs and expenses which Borrower
is obligated to pay under Section 14.2 hereof or amounts Agent may
be called upon to pay in connection with any lockbox or Dominion Account
arrangement contemplated hereby) or the enforcement of any of the terms hereof
or thereof or of any such other documents, provided that no Lender shall be
liable to any Agent Indemnitee for any of the foregoing to the extent that they
result from the willful misconduct or gross negligence of such Agent
Indemnitee.

12.6.1.

Without limiting the generality of the foregoing provisions of
this Section 12.6, if Agent should be sued by any receiver, trustee
in bankruptcy, debtor-in-possession or other Person on account of any alleged
preference or fraudulent transfer received or alleged to have been received from
Borrower or any other Obligor as the result of any transaction under the Loan
Documents, then in such event any monies paid by Agent in settlement or
satisfaction of such suit, together with all Extraordinary Expenses incurred by
Agent in the defense of same, shall be promptly reimbursed to Agent by Lenders
to the extent of each Lender's Pro Rata share.

12.6.2.

Without limiting the generality of the foregoing provisions of
this Section 12.6, if at any time (whether prior to or after the
Commitment Termination Date) any action or proceeding shall be brought against
any of the Agent Indemnitees by an Obligor or by any other Person claiming by,
through or under an Obligor, to recover damages for any act taken or omitted by
Agent under any of the Loan Documents or in the performance of any rights,
powers or remedies of Agent against any Obligor, any Account Debtor, the
Collateral or with respect to any Loans, or to obtain any other relief of any
kind on account of any transaction involving any Agent Indemnitees under or in
relation to any of the Loan Documents, each Lender agrees to indemnify, defend
and hold the Agent Indemnitees harmless with respect thereto and to pay to the
Agent Indemnitees such Lender's Pro Rata share of such amount as any of the
Agent Indemnitees shall be required to pay by reason of a judgment, decree, or
other order entered in such action or proceeding or by reason of any compromise
or settlement agreed to by the Agent Indemnitees, including all interest and
costs assessed against any of the Agent Indemnitees in defending or compromising
such action, together with attorneys' fees and other legal expenses paid or
incurred by 

- 62 -

the Agent Indemnitees in connection therewith; provided,
however, that no Lender shall be liable to any Agent Indemnitee for any
of the foregoing to the extent that they arise from the willful misconduct or
gross negligence of such Agent Indemnitee.  In Agent's discretion, Agent
may also reserve for or satisfy any such judgment, decree or order from proceeds
of Collateral prior to any distributions therefrom to or for the account of
Lenders.

12.7.

Limitation on Responsibilities of Agent.

  Agent shall in all cases be fully justified in failing
or refusing to act hereunder unless it shall have received further assurances to
its satisfaction from Lenders of their indemnification obligations under
Section 12.6 hereof against any and all Claims which may be incurred
by Agent by reason of taking or continuing to take any such action.  Agent
shall not be liable to Lenders (or any Lender's participants) for any action
taken or omitted to be taken under or in connection with this Agreement or the
other Loan Documents except as a result of actual gross negligence or willful
misconduct on the part of Agent.  Agent does not assume any responsibility
for any failure or delay in performance or breach by any Obligor or any Lender
of its obligations under this Agreement or any of the other Loan Documents.
 Agent does not make to Lenders, and no Lender makes to Agent or the other
Lenders, any express or implied warranty, representation or guarantee with
respect to the Loans, the Collateral, the Loan Documents or any Obligor.
 Neither Agent nor any of its officers, directors, agents, attorneys or
employees shall be responsible to Lenders, and no Lender nor any of its
officers, directors, employees, attorneys or agents shall be responsible to
Agent or the other Lenders, for:  (i) any recitals, statements,
information, representations or warranties contained in any of the Loan
Documents or in any certificate or other document furnished pursuant to the
terms hereof; (ii) the execution, validity, genuineness, effectiveness or
enforceability of, any of the Loan Documents; (iii) the validity,
genuineness, enforceability, collectibility, value, sufficiency or existence of
any Collateral, or the perfection or priority of any Lien therein; or
(iv) the assets, liabilities, financial condition, results of operations,
business, credit­worthiness or legal status of any Obligor or any Account
Debtor.  Neither Agent nor any of its officers, directors, employees,
attorneys or agents shall have any obligation to any Lender to ascertain or
inquire into the existence of any Default or Event of Default, the observance or
performance by any Obligor of any of the duties or agreements of such Obligor
under any of the Loan Documents or the satisfaction of any conditions precedent
contained in any of the Loan Documents.  Agent may consult with and employ
legal counsel, accountants and other experts and shall be entitled to act upon,
and shall be fully protected in any action taken in good faith reliance upon,
any advice given by such experts.

12.8.

Successor Agent and Co-Agents.

  

12.8.1.

Subject to the appointment and acceptance of a successor Agent as
provided below, Agent may resign at any time by giving at least 30 days written
notice thereof to each Lender and Borrower.  Upon receipt of any notice of
such resignation, the Required Lenders, after prior consultation with (but
without having to obtain consent of) each Lender, shall have the right to
appoint a successor Agent which shall be (i) a Lender, (ii) a United States
based affiliate of a Lender or (iii) a commercial bank or other financial
institution that is organized under the laws of the United States or of any
State thereof and has a combined capital surplus of at least $100,000,000 and,
provided no Default or Event of Default then exists, is reasonably acceptable to
Borrower (and for purposes hereof, any successor to BofA shall be deemed
acceptable to Borrower).  Upon the acceptance by a successor Agent of
an appointment to serve as an Agent hereunder, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent without further act, deed or conveyance, and
the retiring Agent shall be discharged from its duties and obligations
hereunder.  After any retiring Agent's resignation hereunder as Agent, the
provisions of this Section 12 (including the provisions of
Section 12.6 hereof) shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
Agent.  Notwithstanding anything to the contrary contained in this 

- 63 -

Agreement, any successor by merger or acquisition of the stock or
assets of BofA shall continue to be Agent hereunder unless such successor shall
resign in accordance with the provisions hereof. 

12.8.2.

It is the purpose of this Agreement that there shall be no
violation of any Applicable Law denying or restricting the right of financial
institutions to transact business as agent or otherwise in any jurisdiction.
 It is recognized that, in case of litigation under any of the Loan
Documents, or in case Agent deems that by reason of present or future laws of
any jurisdiction Agent might be prohibited from exercising any of the powers,
rights or remedies granted to Agent or Lenders hereunder or under any of the
Loan Documents or from holding title to or a Lien upon any Collateral or
from taking any other action which may be necessary hereunder or under any of
the Loan Documents, Agent may appoint an additional Person as a separate
collateral agent or co-collateral agent which is not so prohibited from taking
any of such actions or exercising any of such powers, rights or remedies.
 If Agent shall appoint an additional Person as a separate collateral agent
or co-collateral agent as provided above, each and every remedy, power, right,
claim, demand or cause of action intended by any of the Loan Documents to be
exercised by or vested in or conveyed to Agent with respect thereto shall be
exercisable by and vested in such separate collateral agent or co-collateral
agent, but only to the extent necessary to enable such separate collateral agent
or co-collateral agent to exercise such powers, rights and remedies, and every
covenant and obligation necessary to the exercise thereof by such separate
collateral agent or co-collateral agent shall run to and be enforceable by
either of them.  Should any instrument from Lenders be required by the
separate collateral agent or co-collateral agent so appointed by Agent in order
more fully and certainly to vest in and confirm to him or it such rights,
powers, duties and obligations, any and all of such instruments shall, on
request, be executed, acknowledged and delivered by Lenders whether or not a
Default or Event of Default then exists.  In case any separate collateral
agent or co-collateral agent, or a successor to either, shall die, become
incapable of acting, resign or be removed, all the estates, properties, rights,
powers, duties and obligations of such separate collateral agent or
co-collateral agent, so far as permitted by Applicable Law, shall vest in and be
exercised by the Agent until the appointment of a new collateral agent or
successor to such separate collateral agent or co-collateral agent.

12.9.

Consents, Amendments and Waivers; Out-of-Formula
Loans.

12.9.1

No amendment or modification of any provision of this Agreement or
any Security Document shall be effective without the prior written agreement of
the Required Lenders and Borrower, and no waiver of any Default or Event of
Default shall be effective without the prior written consent of the Required
Lenders; provided, however, that, (i) without the prior
written consent of Agent, no amendment or waiver shall be effective with respect
to any provision of any of the Loan Documents (including
Section 1.1.7 and this Section 12) to the extent such
provision relates to the rights, remedies, duties or immunities of Agent;
(ii) without the prior written consent of Issuing Bank, no amendment to the
provisions of Section 1.3 shall be effective; (iii) without
the prior written consent of BofA, no amendment to the provisions of
Section 3.1.3 shall be effective; (iv) without the prior
written consent of all Lenders, no waiver of any Default or Event of Default
shall be effective if the Default or Event of Default relates to Borrower's
failure to observe or perform any covenant that may not be amended without the
unanimous written consent of Lenders (and, where so provided hereinafter, the
written consent of Agent) as hereinafter set forth in this Section
12.9.1; and (v) the written agreement of all Lenders (except a
defaulting Lender as provided in Section 3.2 of this Agreement) shall be
required to effectuate any amendment, modification or waiver that would
(a) alter the provisions of Sections 2.2, 2.4, 2.6, 2.7, 2.8, 2.9,
4.6, 4.7, 4.9, 4.10, 5.1, 5.2.3, 6.7, 12, 13, 14.2, 14.3 or
14.14,(b) amend the definitions of "Pro Rata," "Required Lenders,"
"Availability Reserve," "Borrowing Base" (and the other defined terms used in
such definitions), or any provision of this Agreement obligating Agent to take
certain actions at the direction of the Required Lenders or all Lenders, or any
provision of any of the Loan Documents regarding the Pro Rata
treatment or obligations of Lenders, (c) increase or otherwise modify any
of the Commitments (other 

- 64 -

than to reduce proportionately each Lender's Commitment in
connection with any overall reduction in the amount of the Commitments),
(d) alter or amend (other than to increase) the rate of interest payable in
respect of the Loans (except as may be expressly authorized by the Loan
Documents or as may be necessary, in Agent's judgment, to comply with Applicable
Law), (e) waive or agree to defer collection of any interest, fee,
termination charge or other charge provided for under any of the Loan Documents
(except to the extent that the Required Lenders agree after and during the
continuance of any Event of Default to a waiver or deferral of any termination
charge provided for in Section 5.2.3 hereof) or the unused line fee
in Section 2.2.3 hereof, (f) subordinate the payment of
any of the Obligations to any other Debt or the priority of any Liens granted to
Agent under any of the Loan Documents to Liens granted to any other Person,
except as currently provided in or contemplated by the Loan Documents in
connection with Borrower's incurrence of Permitted Purchase Money Debt, and
except for Liens granted by an Obligor to financial institutions with respect to
amounts on deposit with such financial institutions to cover returned items,
processing and analysis charges and other charges in the Ordinary Course of
Business that relate to deposit accounts with such financial institutions,
(g) alter the time or amount of repayment of any of the Loans or waive any
Event of Default resulting from nonpayment of the Loans on the due date thereof
(or within any applicable period of grace), (h) forgive any of the
Obligations, except any portion of the Obligations held by a Lender who consents
in writing to such forgiveness, or (i) release any Obligor from liability
for any of the Obligations.  No Lender shall be authorized to amend or
modify any Note held by it, unless such amendment or modification is consented
to in writing by all Lenders; provided, however, that the
foregoing shall not be construed to prohibit an amendment or modification to any
provision of this Agreement that may be effected pursuant to this
Section 12.9.1 by agreement of Borrower and the Required Lenders even
though such an amendment or modification results in an amendment or modification
of the Notes by virtue of the incorporation by reference in each of the Notes of
this Agreement.  The making of any Loans hereunder by any Lender during the
existence of a Default or Event of Default shall not be deemed to constitute
a waiver of such Default or Event of Default.  Any waiver or
consent granted by Lenders hereunder shall be effective only if in writing and
then only in the specific instance and for the specific purpose for which it was
given.

12.9.2

In connection with any proposed amendment to any of the Loan
Documents or waiver of any of the terms thereof or any Default or Event of
Default thereunder, Borrower shall not solicit, request or negotiate for or with
respect to any such proposed amendment or waiver of any of the provisions of
this Agreement or any of the other Loan Documents unless each Lender shall be
informed thereof by Borrower or Agent (to the extent known by Agent) and shall
be afforded an opportunity of considering the same and supplied by Borrower with
sufficient information to enable it to make an informed decision with respect
thereto.  Borrower will not, directly or indirectly, pay or cause to be
paid any remuneration or other thing of value, whether by way of supplemental or
additional interest, fee or otherwise, to any Lender (in its capacity as a
Lender hereunder) as consideration for or as an inducement to the consent to or
agreement by such Lender with any waiver or amendment of any of the terms and
provisions of this Agreement or any of the other Loan Documents to the extent
that the agreement of all Lenders to any such waiver or amendment is required,
unless such remuneration or thing of value is concurrently paid, on the same
terms, on a Pro Rata basis to all Lenders; provided, however, that Borrower may
contract to pay a fee only to those Lenders who actually vote in writing to
approve any waiver or amendment of the terms and provisions of this Agreement or
any of the other Loan Documents to the extent that such waiver or amendment may
be implemented by vote of the Required Lenders and such waiver or amendment is
in fact approved.

- 65 -

12.9.3

Unless otherwise directed in writing by the Required Lenders,
Agent may require Lenders to honor requests by Borrower for Out-of-Formula Loans
(in which event, and notwithstanding anything to the contrary set forth in
Section 1.1.1 or elsewhere in this Agreement, Lenders shall continue to
make Revolver Loans up to their Pro Rata share of the Commitments) and to
forbear from requiring Borrower to cure an Out-of-Formula Condition, whether or
not an Event of Default exists, if and for so long as (i) such
Out-of-Formula Condition does not continue for a period of more than 15
consecutive days, following which no Out-of-Formula Condition exists for at
least 15 consecutive days before another Out-of-Formula Condition exists, (ii)
the amount of the Revolver Loans (including any Out-of-Formula Loans)
outstanding at any time does not exceed the aggregate of the Commitments at such
time, and (iii) the Out-of-Formula Condition does not exceed $5,000,000.
 In no event shall Borrower or any other Obligor be deemed to be a
beneficiary of this Section 12.9.3 or authorized to enforce any of the
provisions of this Section 12.9.3.

12.10.

Due Diligence and Non-Reliance.

  Each Lender hereby acknowledges and represents that it
has, independently and without reliance upon Agent or the other Lenders, and
based upon such documents, information and analyses as it has deemed
appropriate, made its own credit analysis of each Obligor and its own decision
to enter into this Agreement and to fund the Loans to be made by it hereunder
and to purchase participations in the LC Obligations pursuant to
Section 1.3.2 hereof, and each Lender has made such inquiries
concerning the Loan Documents, the Collateral and each Obligor as such Lender
feels necessary and appropriate, and has taken such care on its own behalf as
would have been the case had it entered into the other Loan Documents without
the intervention or participation of the other Lenders or Agent.
 Each Lender hereby further acknowledges and represents that the other
Lenders and Agent have not made any representations or warranties to it
concerning any Obligor, any of the Collateral or the legality, validity,
sufficiency or enforceability of any of the  Loan Documents.  Each
Lender also hereby acknowledges that it will, independently and without reliance
upon the other Lenders or Agent, and based upon such financial statements,
documents and information as it deems appropriate at the time, continue to make
and rely upon its own credit decisions in making Loans and in taking or
refraining to take any other action under this Agreement or any of the other
Loan Documents.  Except for notices, reports and other information
expressly required to be furnished to Lenders by Agent hereunder, Agent shall
not have any duty or responsibility to provide any Lender with any notices,
reports or certificates furnished to Agent by any Obligor or any credit or other
information concerning the affairs, financial condition, business or Properties
of any Obligor (or any of its Affiliates) which may come into possession of
Agent or any of Agent's Affiliates.

12.11.

Representations and Warranties of Lenders

.  By its execution of this Agreement,
each Lender hereby represents and warrants to Borrower and the other
Lenders that it has the power to enter into and perform its obligations under
this Agreement and the other Loan Documents, and that it has taken all necessary
and appropriate action to authorize its execution and performance of this
Agreement and the other Loan Documents to which it is a party, each of which
will be binding upon it and the obligations imposed upon it herein or therein
will be enforceable against it in accordance with the respective terms of such
documents.

12.12.

The Required Lenders

.  As to any provisions of this Agreement or the other
Loan Documents under which action may or is required to be taken upon direction
or approval of the Required Lenders, the direction or approval of the Required
 Lenders shall be binding upon each Lender to the same extent and with the
same effect as if each Lender had joined therein.  Notwithstanding anything
to the contrary contained in this Agreement, Borrower shall not be deemed to be
a beneficiary of, or be entitled to enforce, sue upon or assert as a defense to
any of the Obligations, any provisions of this Agreement that requires Agent or
any Lender to act, or conditions their authority to act, upon the direction or
consent of the Required Lenders; and any action taken by Agent or any Lender
that requires 

- 66 -

the consent or direction of the Required Lenders as a condition to
taking such action shall, insofar as Borrower is concerned, be presumed to have
been taken with the requisite consent or direction of the Required Lenders.

12.13.

Several Obligations.

  The obligations and commitments of each Lender under
this Agreement and the other Loan Documents are several and neither Agent nor
any Lender shall be responsible for the performance by the other Lenders of its
obligations or commitments hereunder or thereunder.  Notwithstanding any
liability of Lenders stated to be joint and several to third Persons under any
of the Loan Documents, such liability shall be shared, as among Lenders,
Pro Rata according to the respective Commitments of Lenders.

12.14.

Agent in its Individual Capacity

.  With respect to its obligation to lend under this
Agreement, the Loans made by it and each Note issued to it, Agent shall have the
same rights and powers hereunder and under the other Loan Documents as any other
Lender or holder of a Note and may exercise the same as though it were not
performing the duties specified herein; and the terms "Lenders,"
"Required Lenders," or any similar term shall, unless the context clearly
otherwise indicates, include Agent in its capacity as a Lender.  Agent and
its Affiliates may each accept deposits from, maintain deposits or credit
balances for, invest in, lend money to, act as trustee under indentures of,
serve as financial advisor to, and generally engage in any kind of business with
Borrower or any other Obligor, or any affiliate of Borrower or any other
Obligor, as if it were any other bank and without any duty to account therefor
(or for any fees or other consideration received in connection therewith) to the
other Lenders.  BofA or its Affiliates may receive information regarding
Borrower or Borrower's Affiliates and Account Debtors (including information
that may be subject to confidentiality obligations in favor of Borrower or any
of its Affiliates) and Lenders acknowledge that neither Agent nor BofA shall be
under any obligation to provide such information to Lenders to the extent
acquired by BofA in its individual capacity and not as Agent hereunder.

12.15.

Third Party Beneficiaries

.  This Section 12 is not intended to confer
any rights or benefits upon Borrower or any other Person except Lenders and
Agent, and no Person (including Borrower) other than Lenders and Agent shall
have any right to enforce any of the provisions of this Section 12
except as expressly provided in Section 12.17 hereof.  As between
Borrower and Agent, any action that Agent may take or purport to take on
behalf of Lenders under any of the Loan Documents shall be conclusively presumed
to have been authorized and approved by Lenders as herein provided.

12.16.

Notice of Transfer

.  Agent may deem and treat a Lender party to this
Agreement as the owner of such Lender's portion of the Revolver Loans for all
purposes, unless and until a written notice of the assignment or transfer
thereof executed by such Lender has been received by Agent.

12.17.

Replacement of Certain Lenders

.  If a Lender ("Affected Lender") shall have
(i) failed to fund its Pro Rata share of any Revolver Loan requested (or
deemed requested) by Borrower which such Lender is obligated to fund under the
terms of this Agreement and which such failure has not been cured,
(ii) requested compensation from Borrower under Section 2.7 to
recover increased costs incurred by such Lender (or its parent or holding
company) which are not being incurred generally by the other Lenders (or their
respective parents or holding companies), or (iii) delivered a notice
pursuant to Section 2.6 hereof claiming that such Lender is unable
to extend LIBOR Loans to Borrower for reasons not generally applicable to the
other Lenders, then, in any such case and in addition to any other rights and
remedies that Agent, any other Lender or Borrower may have against such
Affected Lender, Borrower or Agent may make written demand on such Affected
Lender (with a copy to Agent in the case of a demand by Borrower and a copy to
Borrower in the case of a demand by Agent) for the Affected Lender to assign,
and such Affected Lender shall assign pursuant to one or more duly executed 

- 67 -

Assignment and Acceptances within 5 Business Days after the date
of such demand, to one or more Lenders willing to accept such assignment or
assignments, or to one or more Eligible Assignees designated by Agent, all of
such Affected Lender's rights and obligations under this Agreement (including
its Commitments and all Loans owing to it) in accordance with
Section 13 hereof.  Agent is hereby irrevocably authorized to
execute one or more Assignment and Acceptances as attorney-in-fact for any
Affected Lender which fails or refuses to execute and deliver the same within
5 Business Days after the date of such demand.  The Affected Lender
shall be entitled to receive, in cash and concurrently with execution and
delivery of each such Assignment and Acceptance, all amounts owed to the
Affected Lender hereunder or under any other Loan Document, including the
aggregate outstanding principal amount of the Revolver Loans owed to such
Lender, together with accrued interest thereon through the date of such
assignment.  Upon the replacement of any Affected Lender pursuant to this
Section 12.17, such Affected Lender shall cease to have any
participation in, entitlement to, or other right to share in the Liens of
Agent in any Collateral and such Affected Lender shall have no further liability
to Agent, any Lender or any other Person under any of the Loan Documents
(except as provided in Section 12.6 hereof as to events or
transactions which occur prior to the replacement of such Affected Lender),
including any commitment to make Loans or purchase participations in LC
Obligations.

12.18.

Remittance of Payments and Collections.

12.8.1

All payments by any Lender to Agent shall be made not later than
the time set forth elsewhere in this Agreement on the Business Day such payment
is due; provided, however, that if such payment is due on demand
by Agent and such demand is made on the paying Lender after 12:00 noon on
such Business Day, then payment shall be made by 12:00 noon on the next Business
Day.  Payment by Agent to any Lender shall be made by wire transfer,
promptly following Agent's receipt of funds for the account of such Lender and
in the type of funds received by Agent; provided, however, that if
Agent receives such funds at or prior to 1:00 p.m., Agent shall pay such funds
to such Lender by 2:00 p.m. on such Business Day, but if Agent receives
such funds after 1:00 p.m., Agent shall pay such funds to such Lender by 2:00
p.m. on the next Business Day.

12.8.2

With respect to the payment of any funds from Agent to a Lender or
from a Lender to Agent, the party failing to make full payment when due pursuant
to the terms hereof shall, on demand by the other party, pay such amount
together with interest thereon at the Federal Funds Rate.  In no event
shall Borrower be entitled to receive any credit for any interest paid by Agent
to any Lender, or by any Lender to Agent, at the Federal Funds Rate as provided
herein.

12.8.3

If Agent pays any amount to a Lender in the belief or expectation
that a related payment has been or will be received by Agent from an Obligor and
such related payment is not received by Agent, then Agent shall be entitled to
recover such amount from each Lender that receives such amount.
 If Agent determines at any time that any amount received by it under
this Agreement or any of the other Loan Documents must be returned to an Obligor
or paid to any other Person pursuant to any Applicable Law, court order or
otherwise, then, notwithstanding any other term or condition of this Agreement
or any of the other Loan Documents, Agent shall not be required to distribute
such amount to any Lender.

SECTION  13.

BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS

13.1.

Successors and Assigns.

  This Agreement shall be binding upon and inure to the
benefit of Borrower, Agent and Lenders and their respective successors and
assigns (which, in the case of Agent, shall include any successor Agent
appointed pursuant to Section 12.8 hereof), except that
(i) Borrower shall not have the right to assign its rights or delegate
performance of any of its obligations 

- 68 -

under any of the Loan Documents and (ii) any assignment by
any Lender must be made in compliance with Section 13.3 hereof.
 Agent may treat the payee of any Note as the owner thereof for all
purposes hereof unless and until such payee complies with
Section 13.3 in the case of an assignment thereof or, in the case of
any other transfer, a written notice of the transfer is filed with Agent.
 Any assignee or transferee of a Note agrees by acceptance thereof to be
bound by all the terms and provisions of the Loan Documents.  Any request,
authority or consent of any Person, who at the time of making such request or
giving such authority or consent is the holder of a Note, shall be conclusive
and binding on any subsequent holder, transferee or assignee of such Note or of
any Note or Notes issued in exchange therefor.

13.2.

Participations.

13.2.1

Permitted Participants; Effect.  Any Lender may, in
the ordinary course of its business and in accordance with Applicable Law,
at any time sell to one or more banks or other financial institutions (each a
"Participant") participating interest in any of the Obligations owing to
such Lender, any Commitment of such Lender or any other interest of such
Lender under any of the Loan Documents.  In the event of any such sale
by a Lender of participating interests to a Participant, such Lender's
obligations under the Loan Documents shall remain unchanged, such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, such Lender shall remain the holder of any Note for all
purposes under the Loan Documents, all amounts payable by Borrower under this
Agreement and any of the Notes shall be determined as if such Lender had not
sold such participating interests, and Borrower and Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under the Loan Documents.  If a Lender sells a participation to
a Person other than an Affiliate of such Lender, then such Lender shall give
prompt written notice thereof to Borrower and the other Lenders.

13.2.2.

Voting Rights.  Each Lender shall retain the sole
right to approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other than an
amendment, modification or waiver with respect to any Loans or Commitment in
which such Participant has an interest which forgives principal, interest or
fees or reduces the stated interest rate or the stated rates at which fees are
payable with respect to any such Loan or Commitment, postpones the Commitment
Termination Date, or any date fixed for any regularly scheduled payment of
interest or fees on such Loan or Commitment, or releases from liability Borrower
or any Guarantor or releases any substantial portion of any of the
Collateral.

13.2.3.

Benefit of Set-Off.  Borrower agrees that each
Participant shall be deemed to have the right of set-off provided in
Section 11.4 hereof in respect of its participating interest in
amounts owing under the Loan Documents to the same extent and subject to the
same requirements under this Agreement (including Section 12.5) as
if the amount of its participating interest were owing directly to it as a
Lender under the Loan Documents, provided that each Lender shall retain the
right of set-off provided in Section 11.4 hereof with respect to the
amount of participating interests sold to each Participant.  Lenders agree
to share with each Participant, and each Participant by exercising the right of
set-off provided in Section 11.4 agrees to share with each Lender,
any amount received pursuant to the exercise of its right of set-off, such
amounts to be shared in accordance with Section 12.5 hereof as if
each Participant were a Lender.

13.2.4.

Notices.  Each Lender shall be solely responsible for
notifying its Participants of any matters relating to the Loan Documents to the
extent that any such notice may be required, and neither Agent nor any other
Lender shall have any obligation, duty or liability to any Participant of any
other Lender.  Without limiting the generality of the foregoing, neither
Agent nor any Lender nor 

- 69 -

Borrower shall have any obligation to give notices or to provide
documents or information to a Participant of another Lender.

13.3.

Assignments.

13.3.1

Permitted Assignments.  Subject to its giving at least
5 Business Days notice to Agent and Borrower, any Lender may, in accordance with
Applicable Law, at any time assign to any Eligible Assignee all or any part
of its rights and obligations under the Loan Documents, so long as (i) each
assignment is of a constant, and not a varying, ratable percentage of all of the
transferor Lender's rights and obligations under the Loan Documents with respect
to the Revolver Loans, LC Obligations, 1995 Bonds and Term Loan and, in the case
of a partial assignment, is in a minimum principal amount of $2,500,000 (unless
otherwise agreed by Agent in its sole discretion) and integral multiples of
$500,000 in excess of that amount; (ii) except in the case of an assignment
in whole of a Lender's rights and obligations under the Loan Documents or an
assignment by one original signatory to this Agreement to another such
signatory, immediately after giving effect to any assignment, the aggregate
amount of the Commitments retained by the transferor Lender shall in no event be
less than $5,000,000 (unless otherwise agreed by Agent in its sole discretion);
and (iii) the parties to each such assignment shall execute and deliver to
Agent, for its acceptance and recording, an Assignment and Acceptance.  The
consent of Agent shall be required prior to an assignment becoming effective
with respect to an Eligible Assignee that is not a Lender or an Affiliate of a
Lender.  Nothing contained herein shall limit in any way the right of
Lenders to assign (i) with the prior written consent of Agent (not to be
unreasonably withheld or delayed) to any Eligible Assignee all of their rights
and obligations under the Loan Documents or (ii) all or any portion of the
Loans owing to it to any Federal Reserve Bank or the United States Treasury as
collateral security pursuant to Regulation A of the Board of Governors and any
Operating Circular issued by such Federal Reserve Bank, provided that in the
case of this clause (ii) any payment in respect of such assigned Loans made
by Borrower to the assigning Lender in accordance with the terms of this
Agreement shall satisfy Borrower's obligations hereunder in respect of such
assigned Loans to the extent of such payment, but no such assignment shall
release the assigning Lender from its obligations hereunder.
 Notwithstanding anything to the contrary contained in this Section
13.3.1, when the consent of Agent is required under this Section
13.3.1 (or pursuant to the definition of "Eligible Assignee"), such consent
of Agent shall not be unreasonably withheld.

13.3.2.

Effect; Effective Date.  Upon (i) delivery to
Agent of a notice of assignment substantially in the form attached as
Exhibit H hereto, together with any consents required by
Section 13.3.1, and (ii) payment of a $5,000 fee to the Agent
for processing any assignment to an Eligible Assignee that is not an Affiliate
of the transferor Lender or an original signatory hereto, such assignment shall
become effective on the effective date specified in such notice of assignment.
 On and after the effective date of such assignment, such
Eligible Assignee shall for all purposes be a Lender party to the Agreement
and any other Loan Document executed by the Lenders and shall have all the
rights and obligations of the Lender under the Loan Documents to the same extent
as if it were an original party thereto, and no further consent or action by
Borrower, Lenders or Agent shall be required to release the transferor Lender
with respect to the Commitment (or portion thereof) of such Lender and
Obligations assigned to such Eligible Assignee.  Upon the consummation of
any assignment to an Eligible Assignee pursuant to this
Section 13.3.2, the transferor Lender, Agent and Borrower shall make
appropriate arrangements so that replacement Notes are issued to such transferor
Lender and new Notes or, as appropriate, replacement Notes, are issued to such
Eligible Assignee, in each case in principal amounts reflecting their
respective Commitments, as adjusted pursuant to such assignment.  If the
transferor Lender shall have assigned all of its interests, rights and
obligations under this Agreement pursuant to Section 13.3.1 hereof,
such transferor Lender shall no longer have any obligation to indemnify
Agent with respect to any transactions, events or occurrences that
transpire after the effective date of such 

- 70 -

assignment, and each Eligible Assignee to which such transferor
shall make an assignment shall be responsible to Agent to indemnify Agent in
accordance with this Agreement with respect to transactions, events and
occurrences transpiring on and after the effective date of such assignment to
it.  

13.3.3.

Dissemination of Information.  Borrower authorizes
each Lender and Agent to disclose to any Participant, any Eligible Assignee or
any other Person acquiring an interest in the Loan Documents by operation of law
(each a "Transferee"), and any prospective Transferee, any and all
information in Agent's or such Lender's possession concerning Borrower, the
Subsidiaries of Borrower or the Collateral, subject to appropriate
confidentiality undertakings on the part of such Transferee.

13.4.

Tax Treatment.

  If any interest in any Loan Document is transferred to
any Transferee that is organized under the laws of any jurisdiction other than
the United States or any State thereof, the transferor Lender shall cause such
Transferee, concurrently with the effectiveness of such transfer, to comply with
the provisions of Section 4.10 hereof.

SECTION  14.

MISCELLANEOUS

14.1.

Power of Attorney.

  Borrower hereby irrevocably designates, makes,
constitutes and appoints Agent (and all Persons designated by Agent) as
Borrower's true and lawful attorney (and agent-in-fact) and Agent, or Agent's
designee, may, without notice to Borrower and in either Borrower's or Agent's
name, but at the cost and expense of Borrower:

14.1.1.

At such time or times as Agent or said designee, in its sole
discretion, may determine, endorse Borrower's name on any Payment Item or
proceeds of the Collateral which come into the possession of Agent or under
Agent's control.

14.1.2.

At any time that an Event of Default exists: (i) demand
payment of the Accounts from the Account Debtors, enforce payment of the
Accounts by legal proceedings or otherwise, and generally exercise all of
Borrower's rights and remedies with respect to the collection of the Accounts;
(ii) settle, adjust, compromise, discharge or release any of the Accounts
or other Collateral or any legal proceedings brought to collect any of the
Accounts or other Collateral; (iii) sell or assign any of the Accounts and
other Collateral upon such terms, for such amounts and at such time or times as
Agent deems advisable; (iv) take control, in any manner, of any item of
payment or proceeds relating to any Collateral; (v) prepare, file and sign
Borrower's name to a proof of claim in bankruptcy or similar document against
any Account Debtor or to any notice of Lien, assignment or satisfaction of Lien
or similar document in connection with any of the Collateral; (vi) receive,
open and dispose of all mail addressed to Borrower and to notify postal
authorities to change the address for delivery thereof to such address as Agent
may designate; (vii) endorse the name of Borrower upon any of the items of
payment or proceeds relating to any Collateral and deposit the same to the
account of Agent on account of the Obligations; (viii) endorse the name of
such Borrower upon any chattel paper, document, instrument, invoice,
freight bill, bill of lading or similar document or agreement relating to
any Accounts or Inventory of any Obligor and any other Collateral; (ix) use
Borrower's stationery and sign the name of Borrower to verifications of the
Accounts and notices thereof to Account Debtors; (x) use the information
recorded on or contained in any data processing equipment and computer hardware
and software relating to the Accounts, Inventory, Equipment or any other
Collateral; (xi) make and adjust claims under policies of insurance;
 (xii) sign the name of such Borrower on any proof of claim in
bankruptcy against Account Debtors and on notices of Liens, claims of mechanic's
Liens or assignments or releases of mechanic's Liens securing any Accounts;
(xiii) take all action as may be necessary to obtain the payment of any
letter of credit or banker's acceptance of which Borrower is a beneficiary; and
(xiv) do all other acts and things necessary, in Agent's determination,
to fulfill Borrower's obligations under this Agreement.

- 71 -

14.2.

General Indemnity.

  Borrower hereby agrees to indemnify and defend the
Indemnitees  against and to hold the Indemnitees harmless from any Claim
ever suffered or incurred by any of the Indemnitees that arises out of or
relates to this Agreement or any of the other Loan Documents, any transactions
entered into pursuant to any of the Loan Documents, Lender's Lien upon the
Collateral, or the performance by Agent or Lenders of their duties or the
exercise of any of their rights or remedies under this Agreement or any of the
other Loan Documents, or that results from Borrower's failure to observe,
perform or discharge any of its duties hereunder.  Without limiting
the generality of the foregoing, this indemnity shall extend to any Claims
asserted against or incurred by any of the Indemnitees by any Person under any
Environmental Laws or similar laws by reason of Borrower's or any other Person's
failure to comply with laws applicable to solid or hazardous waste materials or
other toxic substances.  Additionally, if any Taxes (excluding Taxes
imposed upon or measured solely by the net income of Agent and Lenders, but
including, any intangibles tax, stamp tax, recording tax or franchise tax) shall
be payable by Agent or any Obligor on account of the execution or delivery of
this Agreement, or the execution, delivery, issuance or recording of any of the
other Loan Documents, or the creation or repayment of any of the Obligations
hereunder, by reason of any Applicable Law now or hereafter in effect, Borrower
will pay (or will promptly reimburse Agent and Lenders for the payment of) all
such Taxes, including any interest and penalties thereon, and will indemnify and
hold Indemnitees harmless from and against all liability in connection
therewith.  The foregoing indemnities shall not apply to Claims incurred by
any of the Indemnitees as a direct and proximate result of their own gross
negligence or willful misconduct or that arise out of any disputes arising
solely out of the relationship between Agent and any Lender.

14.3.

Survival of All Indemnities.

  Notwithstanding anything to the contrary in this
Agreement or any of the other Loan Documents, the obligation of Borrower and
each Lender with respect to each indemnity given by it in this Agreement,
whether given by Borrower to Agent Indemnitees, Lender Indemnitees or BofA
Indemnitees or by any Lender to any Agent Indemnitees or Fleet Indemnitees,
shall survive the payment in full of the Obligations and the termination of any
of the Commitments.

14.4.

Modification of Agreement.

  This Agreement may not be modified, altered or
amended, except by an agreement in writing signed by Borrower and Agent and
Lenders (or, where otherwise expressly allowed by Section 12.9.1 hereof,
the Required Lenders in lieu of Agent and Lenders); provided, however, that no
consent, written or otherwise, of Borrower shall be necessary or required in
connection with any amendment of any of the provisions of Sections 1.3.2,
3.1.3, 4.6, or 12 (other than Section 12.17) or any other
provision of this Agreement that affects only the rights, duties and
responsibilities of Lenders and Agent as among themselves so long as no such
amendment imposes any additional obligations on Borrower.

14.5.

Severability.

  Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Agreement shall be prohibited
by or invalid under Applicable Law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.

14.6.

Cumulative Effect; Conflict of Terms.

  The provisions of the Other Agreements and the
Security Documents are hereby made cumulative with the provisions of this
Agreement.  Without limiting the generality of the foregoing, the parties
acknowledge that this Agreement and the other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters and that such limitations, tests and measures are cumulative and
each must be performed, except as may be expressly stated to the contrary in
this Agreement.  Except as otherwise provided in any of the 

- 72 -

other Loan Documents by specific reference to the applicable
provision of this Agreement, if any provision contained in this Agreement is in
direct conflict with, or inconsistent with, any provision in any of the other
Loan Documents, the provision contained in this Agreement shall govern and
control.

14.7.

Execution in Counterparts.

  This Agreement and any amendments hereto may be
executed in any number of counterparts and by different parties hereto in
separate counterparts (including by facsimile transmission), each of which when
so executed and delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same
instrument.

14.8.

Consent.

  Except as otherwise expressly provided herein,
whenever Agent's, Lenders' or Required Lenders' consent is required to be
obtained under this Agreement or any of the other Loan Documents as a condition
to any action, inaction, condition or event, Agent and each Lender shall be
authorized to give or withhold its consent in its sole and absolute discretion
and to condition its consent upon the giving of additional collateral security
for the Obligations, the payment of money or any other matter.

14.9.

Notices.

  All notices, requests and demands to or upon a party
hereto shall be in writing and shall be sent by certified or registered mail,
return receipt requested, personal delivery against receipt or by telecopier or
other facsimile transmission and shall be deemed to have been validly served,
given or delivered when delivered against receipt or, in the case of facsimile
transmission, when received (if on a Business Day and, if not received on a
Business Day, then on the next Business Day after receipt) at the office where
the noticed party's telecopier is located, in each case addressed to the noticed
party at the address shown for such party on the signature page hereof or, in
the case of a Person who becomes a Lender after the date hereof, at the address
shown on the Assignment and Acceptance by which such Person became a Lender.
 Notwithstanding the foregoing, no notice to or upon Agent pursuant to
Sections 1.3, 2.1.2, 3.1 or 5.2.2 shall be effective until after
actually received by the individual to whose attention at Agent such notice is
required to be sent.  Any written notice, request or demand that is not
sent in conformity with the provisions hereof shall nevertheless be effective on
the date that such notice, request or demand is actually received by the
individual to whose attention at the noticed party such notice, request or
demand is required to be sent.

14.10.

Performance of Borrower's Obligations

.  If Borrower shall fail to discharge any covenant,
duty or obligation hereunder or under any of the other Loan Documents, Agent
may, in its sole discretion at any time or from time to time, for Borrower's
account and at Borrower's expense, pay any amount or do any act required of
Borrower hereunder or under any of the other Loan Documents or otherwise
lawfully requested by Agent to enforce any of the Loan Documents or Obligations,
preserve, protect, insure or maintain any of the Collateral, or preserve,
defend, protect or maintain the validity or priority of Agent's Liens in any of
the Collateral, including the payment of any judgment against Borrower, any
insurance premium, any warehouse charge, any finishing or processing charge, any
landlord claim, or any other Lien upon or with respect to any of the Collateral.
 All payments that Agent may make under this Section and all out-of-pocket
costs and expenses (including Extraordinary Expenses) that Agent pays or incurs
in connection with any action taken by it hereunder shall be reimbursed to Agent
by Borrower on demand with interest from the date such payment is made or
such costs or expenses are incurred to the date of payment thereof at the
Default Rate applicable for Revolver Loans that are Base Rate Loans.
Any payment made or other action taken by Agent under this Section shall be
without prejudice to any right to assert, and without waiver of, an Event of
Default hereunder and to proceed thereafter as provided herein or in any of the
other Loan Documents.

- 73 -

14.11.

Credit Inquiries.

  Borrower hereby authorizes and permits Agent and
Lenders (but Agent and Lenders shall have no obligation) to respond to usual and
customary credit inquiries from third parties concerning Borrower or any
Subsidiaries.

14.12.

Time of Essence.

  Time is of the essence of this Agreement, the Other
Agreements and the Security Documents.

14.13.

Indulgences Not Waivers.

  Agent's or any Lender's failure at any time or times
hereafter, to require strict performance by Borrower of any provision of this
Agreement shall not waive, affect or diminish any right of Agent or any Lender
thereafter to demand strict compliance and performance therewith.

14.14.

Entire Agreement; Appendix A, Exhibits and
Schedules

.  This Agreement and the other Loan Documents,
together with all other instruments, agreements and certificates executed by the
parties in connection therewith or with reference thereto, embody the entire
understanding and agreement between the parties hereto and thereto with respect
to the subject matter hereof and thereof and supersede all prior agreements,
understandings and inducements, whether express or implied, oral or written.
 Appendix A, each of the Exhibits and each of the Schedules attached
hereto are incorporated into this Agreement and by this reference made a part
hereof.

14.15.

Interpretation

.  No provision of this Agreement or any of the other
Loan Documents shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or judicial authority by
reason of such party having, or being deemed to have, structured, drafted or
dictated such provision.

14.16.

Obligations of Lenders Several.

  The obligations of each Lender hereunder are several,
and no Lender shall be responsible for the obligations or Commitment of any
other Lender.  Nothing contained in this Agreement and no action taken by
Lenders pursuant hereto shall be deemed to constitute the Lenders to be a
partnership, association, joint venture or any other kind of entity.  The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled, to the extent not otherwise
restricted hereunder, to protect and enforce its rights arising out of this
Agreement and any of the other Loan Documents and it shall not be necessary for
Agent or any other Lender to be joined as an additional party in any proceeding
for such purpose.

14.17.

Advertising and Publicity.

  With the prior consent of Borrower (which shall
not be unreasonably withheld or delayed), Agent, on behalf of Lenders, may issue
and disseminate to the public (by advertisement or otherwise) information
describing the credit accommodations made available by Lenders pursuant to this
Agreement, including the name and address of Borrower, the amount and security
for the credit accommodations and the general nature of Borrower's business,
provided that detail regarding terms (such as interest rate) may be provided
only to industry publications, such as the "LPC Gold Sheets."

14.18.

Confidentiality.

  Each of Agent and Lenders agrees to exercise
reasonable efforts (and, in any event, with at least the same degree of care as
it ordinarily exercises with respect to confidential information of its other
customers) to keep any confidential information that is delivered or made
available by Borrower to it, including information made available to Agent or
any Lender in connection with a visit or investigation by any Person
contemplated in Section 9.1.1 hereof, confidential from any Person other
than their respective Affiliates and individuals employed or retained by Agent
or such Lender who are or are expected to become engaged in evaluating,
approving, structuring, administering or otherwise giving professional advice
with respect to any of 

- 74 -

the Loans or Collateral (including any of their respective
legal counsel, auditors or other professional advisors); provided, however, that
nothing herein shall prevent Agent or any Lender from disclosing such
confidential information (i) to any party to this Agreement from time to
time or any Participant, (ii) pursuant to the order of any court or
administrative agency, (iii) upon the request or demand of any regulatory
agency or authority having jurisdiction over Agent or such Lender,
(iv) which has been publicly disclosed other than by an act or omission of
Agent or any Lender except as permitted herein, (v) to the extent
reasonably required in connection with any litigation (with respect to any of
the Loan Documents or any of the transactions contemplated thereby) to which
Agent, any Lender or their respective Affiliates may be a party, (vi) to
the extent reasonably required in connection with the exercise of any remedies
hereunder, (vii) to any actual or proposed Participant, Assignee or other
Transferee of all or part of a Lender's rights hereunder so long as such
Transferee has agreed in writing to be bound by the provisions of this Section,
and (viii) to the National Association of Insurance Commissioners or any
similar organization or to any nationally recognized rating agency that requires
access to information about a Lender's portfolio in connection with ratings
issued with respect to such Lender.

14.19.

Governing Law; Consent to Forum.

  This Agreement has been negotiated, executed and
delivered at and shall be deemed to have been made in Atlanta, Georgia.
 This Agreement shall be governed by and construed in accordance with the
laws of the State of Georgia; provided, however, that if any of the Collateral
shall be located in any jurisdiction other than Georgia, the laws of such
jurisdiction shall govern the method, manner and procedure for foreclosure of
Agent's Lien upon such Collateral and the enforcement of Agent's other remedies
in respect of such Collateral to the extent that the laws of such jurisdiction
are different from or inconsistent with the laws of the State of Georgia.
 As part of the consideration for new value received, and regardless of any
present or future domicile or principal place of business of Borrower, any
Lender or Agent, Borrower hereby consents and agrees that the Superior Court of
Cobb County, Georgia, or, at Agent's option, the United States District Court
for the Northern District of Georgia, Atlanta Division, shall have jurisdiction
to hear and determine any claims or disputes among any or all of Borrower, Agent
and Lenders pertaining to this Agreement or to any matter arising out of or
related to this Agreement.  Borrower expressly submits and consents in
advance to such jurisdiction in any action or suit commenced in any such
Court, and Borrower hereby waives any objection which Borrower may have
based upon lack of personal jurisdiction, improper venue or forum non
conveniens.  Each Borrower hereby waives personal service of the
summons, complaint and other process issued in any such action or suit and
agrees that service of such summons, complaint and other process may be
made by certified mail addressed to Borrower at the address set forth in this
Agreement and that service so made shall be deemed completed upon the earlier of
Borrower's actual receipt thereof or 3 days after deposit in the U.S. mails,
proper postage prepaid.  Nothing in this Agreement shall be deemed or
operate to affect the right of Agent to serve legal process in any other manner
permitted by law, or to preclude the enforcement by Agent of any judgment
or order obtained in such forum or the taking of any action under this Agreement
to enforce same in any other appropriate forum or jurisdiction.

14.20.

Waivers by Borrower.

  To the fullest extent permitted by Applicable Law,
Borrower waives (i) the right to trial by jury (which Agent and each Lender
hereby also waives) in any action, suit, proceed­ing or counterclaim of any
kind arising out of or related to any of the Loan Documents, the Obligations or
the Collateral; (ii) presentment, demand and protest and notice of
presentment, protest, default, non payment, maturity, release, compromise,
settlement, extension or renewal of any or all commercial paper, accounts,
contract rights, documents, instruments, chattel paper and guaranties at any
time held by Agent on which Borrower may in any way be liable and hereby
ratifies and confirms whatever Agent may do in this regard; (iii) notice
prior to taking 

- 75 -

possession or control of the Collateral or any bond or security
which might be required by any court prior to allowing Agent to exercise any of
Agent's remedies; (iv) the benefit of all valuation, appraisement and
exemption laws; and (v) notice of acceptance hereof.  Borrower
acknowledges that the foregoing waivers are a material inducement to Agent's and
Lender's entering into this Agreement and that Agent and Lenders are relying
upon the foregoing waivers in its future dealings with Borrower.  Borrower
warrants and represents that it has reviewed the foregoing waivers with its
legal counsel and has knowingly and voluntarily waived its jury trial rights
following consultation with legal counsel.  In the event of litigation,
this Agreement may be filed as a written consent to a trial by the
Court.

14.21.

Amendment and Restatement.

  This Agreement amends and restates the Existing Loan
Agreement, and is not intended to be or operate as a novation or an accord and
satisfaction of the Existing Loan Agreement or the Obligations evidenced or
secured thereby or provided for thereunder.

SECTION  15.

GUARANTY.

15.1.

Guarantors.

  Each of the Guarantors joins this Agreement for
the purpose of making the guaranty ("Guaranty") as set forth in
Section 15.2.

15.2.

Agreement of Guaranty.

  

15.2.1.

Each Guarantor hereby ratifies and reaffirms its Guaranty under
the Existing Loan Agreement and without limiting the foregoing and to induce
Agent and Lenders to make loans or otherwise extend credit to Borrower from time
to time as set forth in this Agreement, and for other good and valuable
consideration, each Guarantor hereby unconditionally and absolutely guarantees
to the Guaranteed Parties the due and punctual payment, performance and
discharge (whether upon stated maturity, demand, acceleration or otherwise in
accordance with the terms thereof) of all of the Obligations of Borrower or any
other Obligor now or hereafter existing, whether for principal, interest, fees,
expenses or otherwise, regardless of whether recovery upon any of such
Obligations becomes barred by any statute of limitations, is void or voidable
under any law relating to fraudulent obligations or otherwise, is or becomes
invalid or unenforceable for any other reason, or is unrecoverable in any
Insolvency Proceeding of an Obligor (whether pursuant to 11 U.S.C. § 506 or
otherwise).

15.2.2.

Each Guarantor does hereby waive: notice of acceptance hereof;
notice of the extension of credit from time to time by any Guaranteed Party to
Borrower and the creation, existence or acquisition of any Obligations; notice
of the amount of Obligations outstanding from time to time, subject, however, to
each Guarantor's right to make inquiry of Agent to ascertain the amount of
Obligations at any reasonable time; notice of any adverse change in Borrower's
financial condition or of any other fact which might increase such Guarantor's
risk; notice of presentment for payment, demand, protest and notice thereof as
to any instrument; notice of any Default, Event of Default or acceleration and
all other notices and demands to which Guarantors might otherwise be entitled;
any defense that Borrower may at any time assert based upon the invalidity or
unenforceability of any of the Loan Documents, the statute of limitations, the
statute of frauds, failure of consideration, fraud, bankruptcy, lack of legal
capacity, usury, or accord and satisfaction; and any right to contest the
commercial reasonableness of the disposition of any or all Collateral.
 Each Guarantor further waives any right such Guarantor may have, by
statute or otherwise, to require any of the Guaranteed Parties to institute suit
against Borrower or any other Obligor after notice or demand from Guarantors or
to seek recourse first against Borrower or any other Obligor, or to realize upon
any Collateral, as a condition to enforcing any Guarantor's liability and
obligations hereunder; any defense or claim that any Person purporting to bind
Borrower to the payment of any Obligations did not have actual or apparent
authority to do so; and any 

- 76 -

right to appraisement, valuation, stay of execution, or notice of
election to declare due the amount of any Obligations of Borrower with regard to
Agent's enforcement of any Lien or other interest Agent, for the benefit of the
Guaranteed Parties, may hold in any real or personal property of Borrower. To
the fullest extent permitted by Applicable Law, each Guarantor hereby also
expressly waives any and all rights or defenses arising by reason of
(i) any "one action" or "anti-deficiency" law which would otherwise prevent
any Guaranteed Party from bringing any action, including any claim for a
deficiency, or exercising any other right or remedy (including any right of
setoff) against such Guarantor before or after the Guaranteed Parties'
commencement or completion of any foreclosure action, whether by judicial
action, by exercise of power of sale or otherwise or (ii) any other law
which in any other manner would otherwise require any election of remedies by
any Guaranteed Party.  Except as otherwise prohibited by Applicable Law,
each Guarantor hereby waives any right that it may have to claim or recover in
any litigation respecting this Guaranty any special, exemplary, punitive or
consequential damages or any damages other than, or in addition to, actual
damages. Guarantors shall make all payments hereunder for the benefit of the
Guaranteed Parties, free and clear of, and without deduction or withholding for
or on account of, any setoff, counterclaim, defense, duties, taxes, levies,
imposts, fees, deductions, restrictions or conditions of any kind.

15.2.3.

If Borrower fails to pay any Obligations on the due date thereof
(whether due on demand, at stated maturity, upon acceleration or otherwise) or
any other Event of Default under this Agreement occurs or exists, then, whether
or not any of the Obligations are then due and payable or the maturity thereof
has been accelerated or demand for payment thereof from Borrower or any other
Obligor has been made, all of the Obligations shall, at the election of Agent,
become immediately due and payable hereunder as to Guarantors and Agent shall be
entitled to enforce the obligations of Guarantors hereunder for the benefit of
the Guaranteed Parties.  Each Guarantor agrees to pay all expenses incurred
by the Guaranteed Parties in connection with enforcement of the Guaranteed
Parties' rights under this Guaranty, including court costs, collection charges
and reasonable attorneys' fees.

15.2.4.

Agent shall have, for the benefit of the Guaranteed Parties, a
Lien upon and right of setoff to any and all credits and any and all other
property of each Guarantor, now or at any time whatsoever with or in the
possession of any of the Guaranteed Parties or anyone holding for any Guaranteed
Party as security for any and all Obligations and the indebtedness and
obligations of Guarantors hereunder.

15.2.5.

Each Guarantor consents and agrees that, without notice to or by
such Guarantor and without impairing or otherwise affecting the liability or
obligations of such Guarantor hereunder, the Guaranteed Parties may: compromise
or settle, extend the period of duration or the time for the payment, discharge
or performance of any of the Obligations or increase the amount of the
Obligations; refuse to enforce, or release any Person liable for payment of, any
of the Obligations; increase, decrease or otherwise alter the rate of interest
payable with respect to the Obligations or grant other indulgences to Borrower
in respect thereof; amend or modify in any manner, or terminate or release, any
of the Loan Documents or any other agreements evidencing, securing or otherwise
relating to the Obligations; release, surrender, exchange, modify or impair any
and all Collateral or other property at any time securing (directly or
indirectly) any of the Obligations or on which the Guaranteed Parties at any
time may have a Lien; extend the time of payment of any Collateral consisting of
Accounts or other rights to the payment of money; refuse to enforce its rights,
or make any comprise or settlement or agreement therefor, in respect of any such
Collateral, deposits and property, or with any party to the Obligations, or with
any other Person whatsoever; or release or substitute any Obligor.

15.2.6.

None of the Guaranteed Parties shall be under any obligation to
marshal any assets in favor of Guarantors or against or in payment of any of the
Obligations.  If and to the extent any 

- 77 -

Guaranteed Party receives any payment on account of any of the
Obligations (whether from Borrower or any other Obligor or from the sale or
other disposition of any Collateral) and such payment or any part thereof is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other Person in any
Insolvency Proceeding or under any Applicable Law, then the part of the
Obligations intended to be satisfied shall be revived and continued in full
force and effect as if said payment had not been made. The foregoing provisions
of this paragraph shall survive any termination or revocation of this
Guaranty.

15.2.7.

Any and all present and future debts and obligations of Borrower
to any Guarantor are hereby postponed in favor of and subordinated to the full
and final payment of the Obligations. The provisions of this Guaranty shall be
supplemental to and not in derogation of any rights and remedies of the
Guaranteed Parties or any affiliates of the Guaranteed Parties under any
separate subordination agreement that the Guaranteed Parties or such affiliate
may at any time or from time to time enter into with any Guarantor.

15.2.8.

Each Guarantor represents and warrants to the Guaranteed Parties
that, as of the date of this Guaranty, the fair saleable value of such
Guarantor's assets exceeds its liabilities; such Guarantor is meeting current
liabilities as they mature; the financial statements of such Guarantor furnished
to the Guaranteed Parties pursuant to Section 9.1.3 hereof have been
prepared in accordance with GAAP, except, in the case of interim statements, for
the absence of footnotes and normal year-end adjustments, and fairly present the
financial condition and results of operation as of the dates and for the periods
covered; there are not now pending any undischarged judgments against such
Guarantor and no federal or state tax liens have been filed or threatened
against such Guarantor; and such Guarantor is not in default or claimed default
under any agreement for borrowed money. Each Guarantor shall immediately give
Agent written notice of any material adverse change in such Guarantor's
financial condition, including litigation commenced, tax liens filed, defaults
claimed under its indebtedness for borrowed money or Insolvency Proceedings
commenced by or against such Guarantor.  At such reasonable times as Agent
requests, each Guarantor shall furnish its current financial statements to the
Guaranteed Parties and permit any Guaranteed Party or its representatives to
inspect such Guarantor's financial records and properties and make copies
thereof or extracts therefrom in order to evaluate the financial condition of
such Guarantor, on reasonable notice, at reasonable times and during normal
business hours.

15.2.9.

This Guaranty is a primary, immediate and original obligation of
each Guarantor and is an absolute, unconditional, continuing and irrevocable
guaranty of payment of the Obligations and not of its collectibility only, is
not contingent upon the exercise or enforcement by the Guaranteed Parties of
whatever remedies the Guaranteed Parties may have against Borrower or otherwise
or the enforcement of any Lien or realization upon any Collateral and shall
remain in full force and effect without regard to future changes in conditions,
including change of law or any invalidity or unenforceability of any of the
Obligations or Loan Documents.  This Guaranty shall be in addition to any
other present or future guaranty or other security for any of the Obligations,
shall not be prejudiced or unenforceable by the invalidity of any such other
guaranty or security and is not conditioned upon or subject to the execution by
any other Person of this Guaranty or any other guaranty or suretyship
agreement.

15.2.10.

Agent, for and on behalf of the Guaranteed Parties, shall have the
right to seek recourse against any Guarantor to the full extent provided for
herein and in any other Loan Document and against Borrower and each other
Obligor to the full extent provided for in any of the Loan Documents.  No
election to proceed in one form of action or proceeding, or against any party,
or on any obligation, shall constitute a waiver of the Agent's right to proceed
in any other form of action or proceeding against other parties, unless Agent
has expressly waived such right in writing.  Specifically, but without
limiting 

- 78 -

the generality of the foregoing, no action or proceeding by the
Guaranteed Parties against Borrower or any other Obligor under any Loan Document
shall serve to diminish the liability of Guarantors except to the extent the
Guaranteed Parties realized payment by such action or proceeding.

15.2.11.

Each Guarantor is fully aware of the financial condition and
business of Borrower.  Each Guarantor delivers this Guaranty based solely
upon its own independent investigation and in no part upon any representation or
statement of any of the Guaranteed Parties with respect thereto.  Each
Guarantor is in a position to and hereby assumes full responsibility for
obtaining any additional information concerning Borrower's financial condition
as such Guarantor may deem material to such Guarantor's obligations hereunder
and such Guarantor is not relying upon, nor expecting the Guaranteed Parties to
furnish such Guarantor any information in any Guaranteed Party's possession
concerning Borrower's financial condition, operations or business prospects.
Each Guarantor hereby knowingly accepts the full range of risks encompassed
within a contract of "Guaranty," which risks include, without limitation, the
possibility that Borrower will contract additional Obligations for which such
Guarantor may be liable hereunder after Borrower's financial condition or
ability to pay its lawful debts when they fall due has deteriorated.

15.2.12.

The books and records of Agent, showing the amounts owed to
Guaranteed Parties by Borrower, shall be admissible in evidence in any action or
proceeding against or involving Guarantors as prima facie proof of the
items therein set forth, and the monthly statements of Agent rendered to
Borrower, to the extent to which no written objection is made within 30 days
from the date of sending thereof to Borrower, shall be deemed conclusively
correct and shall constitute an account stated between the Guaranteed Parties
and Borrower and shall be binding on Guarantors.

15.2.13.

Each Guarantor agrees that this Guaranty shall continue in full
force and effect until all of the Obligations have been fully paid and
discharged (or, in the case of Obligations that are Contingent Obligations, cash
collateralized to Agent's satisfaction) and all Commitments of Lenders have been
terminated.  If for any reason Borrower has no legal existence or is under
no legal obligation to discharge any of the Obligations, or if any of the
Obligations have become unrecoverable from Borrower by reason of any Insolvency
Proceeding or by other operation of law or for any other reason, this Guaranty
shall nevertheless be binding upon each Guarantor. If acceleration of the time
for payment of any of the Obligations is stayed as the result of any Insolvency
Proceeding or any other reason, all such amounts otherwise subject to
acceleration under the terms of the Loan Documents shall be immediately due and
payable by Guarantors.

15.2.14.

To the fullest extent permitted by Applicable Law, each Guarantor
hereby waives the right to revoke or terminate this Guaranty prior to payment in
full of the Obligations and termination of the Commitments; but, if the
foregoing waiver shall be ineffective under Applicable Law, then each Guarantor
agrees that any revocation or termination of this Guaranty, to be effective,
must be in a writing signed by such Guarantor specifically referring to this
Guaranty and actually received by an officer of Agent who is familiar with this
Guaranty and Borrower's account with the Guaranteed Parties. Any such
termination or revocation shall not affect the right and power of Agent, for the
benefit of Guaranteed Parties, to enforce the Obligations and other rights
arising, incurred or contracted for prior to Agent's receipt of such written
notice of termination or revocation and this Guaranty shall continue to be
effective with respect to all such Obligations.  If Guaranteed Parties make
loans or other extensions of credit to or for the benefit of Borrower or take
other action after the termination or revocation by any Guarantor, but prior to
Agent's receipt of notice of termination or revocation, then the rights of the
Guaranteed Parties with respect thereto shall be the same as if such termination
or revocation had not occurred.

- 79 -

15.2.15.

All rights, benefits and privileges herein and hereby conferred
upon Agent shall vest in and be enforceable by Agent and its successors and
assigns.  This Guaranty shall be binding upon each Guarantor and upon their
respective successors and assigns.

15.2.16.

To the extent any performance of this Guaranty would violate any
usury statute or other Applicable Law, the obligation to be fulfilled shall be
reduced to the limit legally permitted, so that this Guaranty shall not require
any performance in excess of the limit legally permitted, but such obligations
shall be fulfilled to the limit of the legal validity. The provisions of this
paragraph shall control every other provision of this Guaranty.

15.2.17.

This Guaranty and the rights and obligations of the parties
hereto shall be governed, construed and interpreted according to the internal
laws of the State of Georgia.  As part of the consideration for the
Guaranteed Parties' granting credit to Borrower, each Guarantor hereby agrees
that all actions, suits or proceedings arising directly or indirectly hereunder
may, at the option of Agent, be litigated in courts having situs within the
State of Georgia, and each Guarantor hereby expressly consents to the
jurisdiction of any state or federal court located within said state, and
consents that any service of process in which action or proceedings may be made
by personal service upon such Guarantor wherever such Guarantor may be then
located, or by certified or registered mail directed to such Guarantor at such
Guarantor's last known address.

15.2.18.

This Guaranty expresses the entire understanding of the parties
hereto with respect to the subject matter hereof and may not be changed orally,
and no obligations of any Guarantor can be released or waived by any of the
Guaranteed Parties, except by a writing signed by a duly authorized officer of
Agent.

15.2.19.

Until all of the Obligations have been paid in full and the
Commitments have been terminated, no Guarantor shall have a claim, right or
remedy (whether or not arising in equity, by contract or Applicable Law) against
Borrower or any other Person by reason of such Guarantor's payment or other
performance hereunder. Without limiting the generality of the foregoing, each
Guarantor hereby waives and renounces any and all legal or equitable rights or
claims that such Guarantor may have to reimbursement, subrogation, indemnity and
exoneration and agrees that such Guarantor shall have no recourse to any assets
or property of Borrower (including any Collateral) and no right of recourse
against or contribution from any other Person in any way directly or
contingently liable for any of the Obligations, whether any of such rights arise
under contract, in equity or under Applicable Law, until all of the Obligations
have been paid in full and the Commitments have been terminated.

15.2.20.

Each Guarantor hereby waives any and all rights or defenses based
on, and understands and agrees that such Guarantor's liability as guarantor
shall not be impaired or affected by, an election of remedies by Agent and
Lenders, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has destroyed
such Guarantor's rights of subrogation and reimbursement against the principal
by the operation of Section 580d of the California Code of Civil Procedure or
otherwise, or the foreclosure of any of the security for the Loans, including
without limitation the security described in the Mortgages, or such Guarantor's
right to a fair value hearing under Section 580a of the California Code of Civil
Procedure following the nonjudicial foreclosure of the Mortgages or any other
deed of trust on the Property held by Agent and Lenders, it being intended that
this Guaranty shall survive the realization upon any of the security for the
Loans, including without limitation the security described in the Mortgages,
including without limitation nonjudicial foreclosure notwithstanding any
defense, right, or claim that any such foreclosure satisfied the obligations
secured thereby.  Each Guarantor agrees that the payment of all sums
payable under this Agreement, the Notes or any of the other Loan Documents or
any part thereof or other act which tolls any 

- 80 -

statute of limitations applicable to the Notes or the other Loan
Documents shall similarly operate to toll the statute of limitations applicable
to such Guarantor's liability hereunder.  Without limiting the generality
of the foregoing or any other provision hereof, each Guarantor expressly waives
to the extent permitted by law any and all rights and defenses that such
Guarantor may have because Borrower's debt is secured by real Property.
 This means, among other things:  (1) Agent and Lenders may
collect from each Guarantor without first foreclosing on any security for the
Loans (whether such security is real or personal Property) pledged by Borrower
or any other Obligor; and (2) if Agent and Lenders foreclose on any real
Property security pledged by Borrower or any other Obligor (including without
limitation the real Property described in the Mortgages), (A) the amount of
the Obligations may be reduced only by the price for which that security is sold
at the foreclosure sale, even if the security is worth more than the sale price,
(B) Agent and Lenders may collect from each Guarantor even if Agent and
Lenders, by foreclosing on the real Property security, have destroyed any right
such Guarantor may have to collect from Borrower.  This is an unconditional
and irrevocable waiver of any rights and defenses each Guarantor may have
because Borrower's debt is secured by real Property.  These rights and
defenses include, but are not limited to, any rights or defenses based upon
Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure,
and/or Sections 2787 to 2855, inclusive, 2899 and 3433 of the California Civil
Code, or any of such sections.  

15.2.21.

Notwithstanding any provision herein contained to the contrary,
such Guarantor's liability under this Guaranty shall be limited to an amount not
to exceed as of any date of determination the greater of:

(a)

the net amount of all Loans and other extensions of credit
(including Letters of Credit) advanced under this Agreement and directly or
indirectly re-loaned or otherwise transferred to, or incurred for the benefit
of, such Guarantor, plus interest thereon at the rate specified in this
Agreement; or 

(b)

the amount which could be claimed by the Agent and Lenders from
such Guarantor under this Guaranty without rendering such claim voidable or
avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under
any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent
Conveyance Act or similar statute or common law after taking into account, among
other things, such Guarantor's right of contribution and indemnification from
the Borrower.

15.2.22.

(a)  To the extent that any Guarantor shall make a payment
under this Guaranty of all or any of the Obligations (a "Guarantor
Payment") which, after taking into account all other Guarantor Payments then
previously or concurrently made by the other Guarantors, exceeds the amount
which such Guarantor would otherwise have paid if each Guarantor had paid the
aggregate Obligations satisfied by such Guarantor Payment in the same proportion
that such Guarantor's "Allocable Amount" (as defined below) (in effect
immediately prior to such Guarantor Payment) bore to the aggregate Allocable
Amounts of all of Guarantors in effect immediately prior to the making of such
Guarantor Payment, then, following indefeasible payment in full in cash
of the Obligations and termination of the Commitments, such Guarantor shall be
entitled to receive contribution and indemnification payments from, and be
reimbursed by, each of the other Guarantors for the amount of such excess,
pro rata based upon their respective Allocable Amounts in effect
immediately prior to such Guarantor Payment.

(b)

As of any date of determination, the "Allocable Amount" of
any Guarantor shall be equal to the maximum amount of the claim which could then
be recovered from such Guarantor under this Guaranty without rendering such
claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy
Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform
Fraudulent Conveyance Act or similar statute or common law.

- 81 -

(c)

This Section 15.2.22 is intended only to define the
relative rights of Guarantors and nothing set forth in this Section
15.2.22 is intended to or shall impair the obligations of Guarantors,
jointly and severally, to pay any amounts as and when the same shall become due
and payable in accordance with the terms of this Guaranty.  

(d)

The rights of the parties under this Section 15.2.22 shall
be exercisable upon the full and indefeasible payment of the Obligations and the
termination of this Agreement and the other Loan Documents.

(e)

The parties hereto acknowledge that the rights of contribution and
indemnification hereunder shall constitute assets of any Guarantor to which such
contribution and indemnification is owing.

15.2.23.

Each Guarantor hereby ratifies and reaffirms its grant of a
security interest and Lien in favor of Agent for the benefit of itself as Agent,
the Lenders and the other Secured Parties, in all property of such Guarantor
described in and pursuant to the Guarantor Security Agreements and that certain
Fifth Amendment to Loan and Security Agreement dated June 30, 2003, among
Borrower, Guarantors, Agent and Original Lenders, and the Existing Loan
Agreement, and each Guarantor hereby grants and regrants to Agent, for the
benefit of itself as Agent, the Lenders and the other Secured Parties, a
continuing security interest in and Lien upon all of such Guarantor's assets,
including all of the following Property and interests in Property of such
Guarantor, whether now owned or existing or hereafter created, acquired or
arising and wheresoever located:

(i)

All "accounts" as defined in the UCC, including all of such
Guarantor's now owned or hereafter acquired accounts and all other rights to
payment for goods sold or leased or for services rendered which are not
evidenced by an instrument or chattel paper, whether or not they have been
earned by performance;

(ii)

All "inventory" as defined in the UCC, including all goods
intended for sale or lease by such Guarantor, to be furnished by such Guarantor
under contracts of service, or for display or demonstration; all work in
process; all raw materials and other materials and supplies of every nature and
description used or which might be used in connection with the manufacture,
printing, packing, shipping, advertising, selling, leasing or furnishing of such
goods or otherwise used or consumed in such Guarantor's business; and all
documents evidencing and general intangibles relating to any of the
foregoing, whether now owned or hereafter acquired by such Guarantor;

(iii)

All "letter-of-credit rights" as defined in the UCC;

(iv)

All "supporting obligations" as defined in the UCC;

(v)

All "commercial tort claims" as defined in the UCC;

(vi)

All of such Guarantor's machinery, apparatus, equipment, fittings,
furniture, fixtures, motor vehicles and other tangible personal Property (other
than Inventory) of every kind and description, whether now owned or hereafter
acquired by such  Guarantor and wherever located, and all parts,
accessories and special tools therefor, all accessions thereto, and all
substitutions and replacements thereof;

(vii)

All "instruments" as defined in the UCC;

- 82 -

(viii)

All "chattel paper", including "electronic chattel paper" and
"tangible chattel paper" (as all defined in the UCC);

(ix)

All "documents" as defined in the UCC;

(x)

All general intangibles of such Guarantor, whether now owned or
hereafter created or acquired by such Guarantor, including all choses in action,
causes of action, company or other business records, inventions, blueprints,
designs, patents, patent applications, trademarks, trademark applications, trade
names, trade secrets, service marks, goodwill, brand names, copyrights,
registrations, licenses, franchises, customer lists, permits, tax refund claims,
computer programs, operational manuals, internet addresses and domain names,
insurance refunds and premium rebates, all claims under guaranties, security
interests or other security held by or granted to such Guarantor to secure
payment of any of any of such Guarantor's accounts by an account debtor, and all
rights to indemnification, and  including all "payment intangibles" and all
"software" as defined in the UCC;

(xi)

All "deposit accounts" as defined in the UCC;

(xii)

All "investment property" as defined in the UCC (but excluding any
portion thereof that constitutes Margin Stock unless otherwise expressly
provided in any Security Documents);

(xiii)

All monies now or at any time or times hereafter in the possession
or under the control of Agent or a Lender or a bailee or Affiliate of Agent or a
Lender, including any Cash Collateral in the Cash Collateral Account;

(xiv)

All accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (i) through (xiii) above, including
proceeds of and unearned premiums with respect to insurance policies insuring
any of the Collateral and claims against any Person for loss of, damage to or
destruction of any of the Collateral; and

(xv)

All books and records (including customer lists, files,
correspondence, tapes, computer programs, print-outs, and other computer
materials and records) of such Guarantor pertaining to any of (i) through (xiv)
above.

15.2.24

As used herein, all references to "Guarantors" shall mean
Guarantors and their respective successors and assigns (including any receiver,
trustee or custodian for any Guarantor or any of its assets or any Guarantor in
its capacity as debtor or debtor-in-possession under the United States
Bankruptcy Code).

15.2.25.

Guarantor and Agent each hereby waives the right to a jury
trial in any action, suit, proceeding or counterclaim arising out of or related
to this Guaranty.

[Remainder of page intentionally left blank; signatures begin on
following page]

- 83 -

IN  WITNESS  WHEREOF,  this Agreement has
been duly executed in Atlanta, Georgia, on the day and year specified at the
beginning of this Agreement.

BORROWER:

ATTEST:

THE DIXIE GROUP, INC.

s/ Geoffrey G. Young
          

By:    s/ D. Eugene Lasater
                      

Geoffrey G. Young,

     D. Eugene Lasater, Controller

Assistant Secretary

[CORPORATE SEAL]

By:    s/ Gary A. Harmon
                           

      Gary A.  Harmon,
Vice President and

       Chief Financial
Officer

Address:

2208 South Hamilton Street

Dalton, Georgia 30721

Attention:  President

Telecopier No.:  (706) 625-7869

GUARANTORS:

ATTEST:

FABRICA INTERNATIONAL, INC.,

formerly known as Fabrica International

s/ Geoffrey G. Young
          

By:    s/ Gary A. Harmon
                           

Geoffrey G. Young, Assistant

      Gary A. Harmon, Vice
President

Secretary

[CORPORATE SEAL]

Address:

2208 South Hamilton Street

Dalton, Georgia 30721

Attention:  President

Telecopier No.:  (706) 625-7869

ATTEST:

BRETLIN, INC.

s/ Geoffrey G. Young
          

By:    s/ Gary A. Harmon
                           

Geoffrey G. Young, Assistant

      Gary A. Harmon,
President

Secretary

[CORPORATE SEAL]

Address:

2208 South Hamilton Street

Dalton, Georgia 30721

Attention: President

Telecopier No.: (706) 625-7869

Second Amended and Restated Loan and Security Agreement

ATTEST:

CANDLEWICK YARNS, INC.

s/ Geoffrey G. Young
          

By:    s/ Gary A. Harmon
                           

Geoffrey G. Young, Assistant

      Gary A. Harmon,
President

Secretary

[CORPORATE SEAL]

Address:

2208 South Hamilton Street 

Dalton, Georgia 30721

Attention: President

Telecopier No.: (706) 625-7869

ATTEST:

MASLAND CARPETS, LLC

s/ Geoffrey G. Young
          

By:    s/ Gary A. Harmon
                           

Geoffrey G. Young, Assistant 

     Gary A. Harmon, President and
Chief 

Secretary

Manager

[CORPORATE SEAL]

Address:

2208 South Hamilton Street 

Dalton, Georgia 30721

Attention: President

Telecopier No.: (706) 625-7869

Second Amended and Restated Loan and Security Agreement

LENDER AND AGENT:

BANK OF AMERICA, N.A.,

as sole Lender and as Agent

Revolver Commitment: $70,000,000.00

By: s/ Wes
Manus                                    

Term Loan A Commitment: $14,586,900.00

    Title: Senior Vice
President                 

LIBOR Lending Office:

Suite 800, 300 Galleria Parkway, N.W.

Atlanta, Georgia  30339

Attention:  Loan Administration Manager

Telecopier No.:  (404) 607-3276

Second Amended and Restated Loan and Security Agreement

APPENDIX A

GENERAL  DEFINITIONS

When used in the Second Amended and Restated Loan and Security
Agreement dated October 24, 2008 (as at any time amended, the
"Agreement"), by and among THE DIXIE GROUP, INC., a Tennessee corporation
("Borrower"), each of the Subsidiaries of Borrower, as guarantors
("Guarantors"); each financial institution listed on the signature pages
attached thereto and its successors and assigns which become "Lenders" as
provided therein (such financial institutions and their respective successors
and assigns referred to collectively herein as "Lenders" and individually as a
"Lender"), and BANK OF AMERICA, N.A. (together with its successors and
assigns, "Agent"), in its capacity as collateral and administrative agent for
itself and the Lenders, the following terms shall have the following meanings
(terms defined in the singular to have the same meaning when used in the plural
and vice versa):

Account Debtor - a Person who is or becomes obligated under
or on account of an Account.

Accounts - shall have the meaning ascribed to "account" in
the UCC and shall include all of Borrower's now owned or hereafter acquired
accounts and all other rights to payment for goods sold or leased or for
services rendered which are not evidenced by an Instrument or Chattel Paper,
whether or not they have been earned by performance.

Accounts Formula Amount - on any date of determination
thereof, an amount equal to the lesser of (i) the Revolver Commitments on
such date or (ii) 85% of the net amount of Eligible Accounts on such date.
 As used herein, the phrase "net amount of Eligible Accounts" shall mean
the face amount of such Accounts on any date less any and all returns, rebates,
discounts (which may, at Agent's option, be calculated on shortest terms),
credits, allowances or Taxes (including sales, excise or other taxes) at any
time issued, owing, claimed by Account Debtors, granted, outstanding or payable
in connection with, or any interest accrued on the amount of, such Accounts at
such date.

Adjusted Availability – on any date of determination
thereof, an amount equal to (a) the sum of the Accounts Formula Amount
plus the Inventory Formula Amount minus (b) the sum of the
Availability Reserve  plus the principal amount of Loans then
outstanding plus the Supplemental Reserve Amount.

Adjusted LIBOR Rate - with respect to each Interest Period
for a LIBOR Loan, an interest rate per annum (rounded upwards, to the next
1/16th of 1%) equal to the quotient of (a) the LIBOR Rate in effect for such
Interest Period divided by (b) a percentage (expressed as a decimal) equal to
100% minus Statutory Reserves.

Adjusted Net Earnings - with respect to any fiscal period,
means the net earnings (or loss) for such fiscal period of Borrower, all as
reflected on the financial statement of Borrower supplied to Lender pursuant to
Section 9.1.3 hereof, but excluding: (i) any pre-tax
gain or loss arising from the sale or write-down of capital assets;
(ii) any pre-tax gain or loss arising from any write-up or write-down of
assets or any write-down of goodwill during such period; (iii) pre-tax
earnings of any Subsidiary accrued prior to the date it became a Subsidiary;
(iv) non-cash pre-tax earnings or losses of any Person, substantially all
the assets of which have been acquired in any manner by Borrower, realized by
such Person prior to the date of such acquisition; (v) net pre-tax earnings
of any entity (other than a Subsidiary of Borrower) in which Borrower has an
ownership interest unless such net pre-tax earnings have actually been
received by Borrower in the form of Cash Distributions; (vi) any portion of
the net pre-tax earnings of any Subsidiary which for any reason is unavailable
for payment of Distributions to Borrower; (vii) the pre-tax earnings of any
Person to which any assets of Borrower shall have been sold, transferred or
disposed of, or into which 

Borrower shall have merged, or been a party to any consolidation
or other form of reorganization, prior to the date of such transaction;
(viii) any pre-tax gain arising from the acquisition of any Securities
of Borrower; and (ix) any pre-tax gain arising from extraordinary or
non-recurring items or as otherwise agreed to by Lenders as non-recurring, all
as determined in accordance with GAAP.

Affiliate - a Person (other than a Subsidiary):
 (i) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, another Person;
(ii) which beneficially owns or holds 20% or more of any class of the
Equity Interests of a Person; or (iii) 20% or more of the Equity Interests
with power to vote of which is beneficially owned or held by another Person or a
Subsidiary of another Person.  For purposes hereof, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of any Equity Interest, by contract or otherwise.

Agent Indemnitees - Agent in its capacity as collateral and
administrative agent for the Lenders under the Loan Documents and all of Agent's
present and future officers, directors, employees, agents and attorneys.

Agreement - the Second Amended and Restated Loan and
Security Agreement referred to in the first sentence of
this Appendix A, all Exhibits and Schedules thereto and this
Appendix A.

Anti-Terrorism Laws - any laws relating to terrorism or
money laundering, including Executive Order No. 13224 and the USA Patriot
Act.

Applicable Law - all laws, rules and regulations applicable
to the Person, conduct, transaction, covenant, Loan Document or Material
Contract in question, including all applicable common law and equitable
principles; all provisions of all applicable state, federal and foreign
constitutions, statutes, rules, regulations and orders of governmental bodies;
and orders, judgments and decrees of all courts and arbitrators.

Applicable Margin - a percentage equal to 1.75% with
respect to Revolver Loans that are Base Rate Loans, 2.25% with respect to
Revolver Loans that are LIBOR Loans, 2.25% with respect to each Term Loan
Advance made or outstanding as a Base Rate Loan, 2.75% with respect to each Term
Loan Advance made or outstanding as a LIBOR Loan, and 0.25% with respect to
unused line fees payable to Lenders pursuant to Section 2.2;
provided that, commencing with Agent's receipt of the financial statements
described in Section 9.1.3(iii) of the Agreement for the period
ended September 30, 2008, the Applicable Margin shall be increased or (if no
Default or Event of Default exists) decreased, based upon the Leverage Ratio, as
follows:

							
	
 
	
 
	
Applicable Margin For:

	
Level
	
Leverage Ratio
	
Revolver Loans
	
Term Loan
	
Unused Line 

Fee
             

	
 
	
 
	
Base Rate
	
LIBOR
	
Base Rate
	
LIBOR
	
 

	
I
	
Greater
than 4.0 to 1.0 
	
2.25%
	
2.75%
	
2.75%
	
3.25%
	
0.375%

	
II
	
If
less than or equal to 4.0 to 1.0 but greater than 3.50 to 1.0
	
2.00%
	
2.50%
	
2.50%
	
3.00%
	
0.375%

	
III
	
If
less than or equal to 3.50 to 1.0 but greater than 3.00 to 1.0
	
1.75%
	
2.25%
	
2.25%
	
2.75%
	
0.250%

	
IV
	
If
less than or equal to 3.00 to 1.0
	
1.50%
	
2.00%
	
2.00%
	
2.50%
	
0.250%

The Applicable Margin shall be subject to reduction or increase,
as applicable and as set forth in the table above, on a quarterly basis
according to the performance of Borrower as measured by the Leverage Ratio for
the immediately preceding 4 Fiscal Quarters of Borrower.  Except as set
forth in the last sentence hereof, any such increase or reduction in the
Applicable Margin provided for herein shall be effective 3 Business Days after
receipt by Agent of the applicable financial statements and corresponding
Compliance Certificate. If the financial statements and the Compliance
Certificate of Borrower setting forth the Leverage Ratio are not received by
Agent by the date required pursuant to Section 9.1.3 of the Agreement,
the Applicable Margin shall be determined as if the Leverage Ratio exceeds 4.0
to 1.0 until such time as such financial statements and Compliance Certificate
are received and any Event of Default resulting from a failure timely to deliver
such financial statements or Compliance Certificate is waived in writing by
Agent and Lenders; provided, however, that nothing herein shall be
deemed to prevent Agent and Lenders from charging interest at the Default Rate
at any time that an Event of Default exists.

Assignment and Acceptance - an assignment and acceptance
entered into by a Lender and an Eligible Assignee and accepted by Agent, in the
form of Exhibit G.

Availability - on any date, the amount that Borrower
is entitled to borrow as Revolver Loans on such date, such amount being the
difference derived when the sum of the principal amount of Revolver Loans then
outstanding (including any amounts that Agent or Lenders may have paid for the
account of Borrower pursuant to any of the Loan Documents and that have not been
reimbursed by Borrower and any outstanding Settlement Loans) is subtracted from
the Borrowing Base on such date.  If the amount outstanding is equal to or
greater than the Borrowing Base, Availability is zero.

Availability Requirement – on any date of determination,
(i) Availability or Adjusted Availability is less than $5,000,000, or (ii)
Average Availability or Average Adjusted Availability, based upon the prior
thirty day consecutive period, is less than $5,000,000.

Availability Reserve - on any date of determination
thereof, an amount equal to the sum of the following (without duplication):
 (i) a reserve for general inventory shrinkage, whether as a result of
theft or otherwise, that is determined by Agent from time to time in its
reasonable credit judgment based upon Borrower's historical losses due to such
shrinkage; (ii) all amounts of past due payments, fees  or other
charges owing at such time by any Obligor to any processor, repairman, mechanic
or other Person who is in possession of any Collateral or has asserted any Lien
or claim thereto; (iii) any amounts which any Obligor is obligated to pay
pursuant to the provisions of any of the Loan Documents that Agent or any Lender
elects to pay for the account of such Obligor in accordance with authority
contained in any of the Loan Documents; (iv) the LC Reserve;
(v) any amount received by Agent from the Business Interruption Insurance
Assignment and applied to the Revolver Loans; (vi) the Debenture
Reserve; (vii) Rent Reserve; (viii)  the Bank Product Reserve;
(ix) the Environmental Reserve; (x) the 1995 Bond Reserve; and
(xi) such additional reserves or adjustments to reserves, in such amounts
and with respect to such matters, as Agent in its reasonable credit judgment may
elect to impose from time to time.  

Average Adjusted Availability – for any period, an amount
equal to the sum of Adjusted Availability on each day during such period, as
determined by Agent, divided by the number of days in such period.

Average Availability – for any period, an amount equal to
the sum of Availability on each day during such period, as determined by Agent,
divided by the number of days in such period.

Average Revolver Loan Balance - for any period, the amount
obtained by adding the aggregate of the unpaid balance of Revolver Loans and LC
Obligations at the end of each day for the period in question and by dividing
such sum by the number of days in such period.

Bank - BofA and its successors and assigns.

Bank Product - any of the following products, services or
facilities extended to Borrower or any of its Subsidiaries by BofA
or any Affiliate of BofA:  (a)  Cash Management Services; (b) products
under Hedging Agreements; (c) commercial credit card and merchant card services;
and (d) leases and other banking products or services as may be requested by
Borrower or any of its Subsidiaries, other than Letters of Credit.
  

Bank Product Debt - Debt and other obligations of an
Obligor relating to Bank Products.

Bank Product Reserve - the aggregate amount of reserves
established by Agent from time to time in its discretion in respect of Bank
Product Debt.

Bankruptcy Code - title 11 of the United States Code.

Base Rate - on any date, the greater of (i) the Prime Rate
on such date or (ii) the Federal Funds Rate on such date plus .50%.

Base Rate Loan - a Loan, or portion thereof, during any
period in which it bears interest at a rate based upon the Base Rate.

Board - the Board of Directors of Borrower or a committee
of two or more directors lawfully exercising the relevant powers of the
Board.

Board of Governors - the Board of Governors of the Federal
Reserve System.

BofA – Bank of America, N.A., a national banking
association.

BofA Indemnitees – BofA and all of its present and future
officers, directors and agents.

Bond Documents - collectively, the 1991 Bond Documents, the
1995 Bond Documents and the 2000 Real Estate Transaction Documents.  

Bond Purchase Agreement - shall have the meaning ascribed
to such term in the 1995 Bonds.

1991 Bonds - $2,300,000 The Industrial Development Board of
the City of Atmore (Alabama) Industrial Development Revenue Bonds (Masland
Carpets, Inc. Project), Series 1991.

1995 Bond Reserve - as defined in Section 1.1.7
of the Agreement.

1995 Bonds - State Industrial Development Authority
(Alabama) $7,000,000 Taxable Revenue Bonds, Series 1995 (Masland Carpets, Inc.
Project).

1991 Bond Documents - the 1991 Bonds and any and all
agreements, instruments or documents executed in connection therewith or
pursuant thereto.

1995 Bond Documents - the 1995 Bonds and any and all
agreements, instruments or documents executed in connection therewith or
pursuant thereto.

1995 Bond Obligations - all obligations, indebtedness and
liabilities now or hereafter owing by Borrower under any of the 1995 Bond
Documents.

Borrowing - a borrowing consisting of Loans of one Type
made on the same day by Lenders (or by BofA in the case of a Borrowing funded by
Settlement Loans) or a conversion of a Loan or Loans of one Type from Lenders on
the same day.

Borrowing Base - on any date of determination thereof, an
amount equal to the lesser of:  (a) the aggregate amount of the
Revolver Commitments on such date minus the LC Obligations on such date,
or (b) an amount equal to (i) the sum of the Accounts Formula Amount
plus the Inventory Formula Amount on such date minus (ii) the
Availability Reserve on such date.

Borrowing Base Certificate - a certificate, in the form of
Exhibit K attached hereto or such other form as may be
requested by Agent from time to time, by which Borrower shall certify to Agent
and Lenders, with such frequency as Agent may request, the amount of the
Borrowing Base as of the date of the certificate (which date shall be not more
than three Business Days earlier than the date of submission of such certificate
to Agent) and the calculation of such amount.

Bretlin - Bretlin, Inc., a Georgia corporation with its
chief executive office and principal place of business at 2208 South Hamilton
Street, Dalton, Georgia 30721.

Business Day - any day excluding Saturday, Sunday and any
other day that  is a legal holiday under the laws of the State of Georgia
or is a day on which banking institutions located in such state are closed;
provided, however, that when used with reference to a LIBOR Loan
(including the making, continuing, prepaying or repaying of any LIBOR Loan), the
term "Business Day" shall also exclude any day on which banks are not open for
dealings in Dollar deposits on the London interbank market.

Business Interruption Insurance Assignment - the Collateral
Assignment of Business Interruption Insurance executed by Borrower on or after
the Original Closing Date in favor of Agent, in form and substance satisfactory
to Agent, as security for the payment of the Obligations.

Candlewick - Candlewick Yarns, Inc., a Tennessee
corporation with its chief executive office and principal place of business at
2208 South Hamilton Street, Dalton, Georgia 30721.

Capital Expenditures - expenditures made or liabilities
incurred for the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than one
year, including the total principal portion of Capitalized Lease
Obligations.

Capitalized Lease Obligation - any Debt represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.

Cash Collateral - cash or Cash Equivalents, and any
interest earned thereon, that is deposited with Agent in accordance with the
Agreement for the Pro Rata benefit of Lenders as security for the
Obligations.

Cash Collateral Account - a demand deposit, money market or
other account established by Agent at such financial institution as Agent may
select in its discretion, which account shall be in Agent's name and subject to
Agent's Liens for the Pro Rata benefit of Lenders.

Cash Distributions - an amount equal to the cash received
by Borrower from non-Consolidated entities.

Cash Equivalents - (i) marketable direct obligations
issued or unconditionally guaranteed by the United States government and backed
by the full faith and credit of the United States government having maturities
of not more than 12 months from the date of acquisition; (ii) domestic
certificates of deposit and time deposits having maturities of not more than 12
months from the date of acquisition, bankers' acceptances having maturities of
not more than 12 months from the date of acquisition and overnight bank
deposits, in each case issued by any commercial bank organized under the laws of
the United States, any state thereof or the District of Columbia, which at the
time of acquisition are rated A-1 (or better) by S&P or P-1 (or better) by
Moody's, and (unless issued by a Lender) not subject to offset rights in favor
of such bank arising from any banking relationship with such bank;
(iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clauses (i) and (ii)
entered into with any financial institution meeting the qualifications specified
in clause (ii) above; and (iv) commercial paper having at the time of
investment therein or a contractual commitment to invest therein a rating of A-1
(or better) by S&P or P-1 (or better) by Moody's, and having a maturity
within 9 months after the date of acquisition thereof.

Cash Management Services- any services provided from time
to time by BofA or any of its Affiliates to Borrower or any of its Subsidiaries
in connection with operating, collections, payroll, trust or other depository or
disbursements accounts, including automated clearinghouse, e-payable, electronic
funds transfer, wire transfer, controlled disbursement, overdraft, depository,
information reporting, lockbox and stop payment services. 

CERCLA - the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. § 9601 et seq. and its implementing
regulations.

Change of Control - (i) the Frierson Family shall
cease to have Control of Borrower; (ii) Borrower shall cease to own and
control 100% of the Equity Interests of any of C-Knit, Fabrica, 

Bretlin and Masland; or (iii) Bretlin shall cease to own and
control 100% of the Equity Interests of Candlewick.

Chattel Paper - shall have the meaning given to "chattel
paper" in the UCC.

Chroma - Chroma Technologies, Inc., a California
corporation.

Chroma Systems Real Estate Loan Documents - means a certain
promissory note dated as of March 10, 2003 in the original principal amount of
$7,500,000 by Borrower, as successor to Chroma Systems Partners in favor of
Wells Fargo Bank, National Association, a certain Deed of Trust With Assignment
of Rents dated as of May 12, 1995 by Borrower, as successor to Chroma Systems
Partners in favor of Wells Fargo Bank, National Association and recorded on May
26, 1995 as instrument number 95-0223578 in the Official Records of Orange
County, California, relating to the real property of Borrower, as successor to
Chroma Systems Partners located at 3201 South Susan Street, Santa Ana,
California 92704, as modified, and any and all other agreements, instruments and
documents executed in connection therewith or pursuant thereto.

C-Knit - C-Knit Apparel, Inc., a Tennessee corporation.

Claims - any and all claims, demands, liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, awards,
remedial response costs, expenses or disbursements of any kind or nature
whatsoever (including reasonable attorneys', accountants', consultants' or
paralegals' fees and expenses), whether arising under or in connection with the
Loan Documents, any Applicable Law (including any Environmental Laws) or
otherwise, that may now or hereafter be suffered or incurred by a Person and
whether suffered or incurred in or as a result of any investigation, litigation,
arbitration or other judicial or non-judicial proceeding or any appeals related
thereto.

Closing Date - October 24, 2008.

Collateral - all of the Property and interests in Property
described in Section 6 of the Agreement, all other Property and interests
in Property described in any of the Security Documents as security for the
payment or performance of any of the Obligations; and all other Property and
interests in Property that now or hereafter secure (or are intended to secure)
the payment and performance of any of the Obligations.

Commercial Tort Claim - as defined in the UCC.

Commitment - at any date for any Lender, the aggregate
amount of such Lender's Revolver Commitment and Term Loan Commitment on such
date, and "Commitments" means the aggregate amount of all Revolver
Commitments and Term Loan Commitments.

Commitment Termination Date - the date that is the soonest
to occur of (i) the last day of the Original Term; (ii) the date on
which either Borrower or Agent terminates the Commitments pursuant to
Section 5.2 of the Agreement; or (iii) the date on which the
Commitments are automatically terminated pursuant to Section 11.2 of
the Agreement.

Compliance Certificate - a Compliance Certificate to be
provided by Borrower to Agent in accordance with, and in the form annexed as
Exhibit E to, the Agreement, and the supporting schedules to be
annexed thereto.

Consolidated - the consolidation in accordance with GAAP of
the accounts or other items as to which such term applies.

Contingent Obligation - with respect to any Person, any
obligation of such Person arising from any guaranty, indemnity or other
assurance of payment or performance of any Debt, lease, dividend or other
obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including (i) the
direct or indirect guaranty, endorsement (other than for collection
or deposit in the Ordinary Course of Business), co-making, discounting with
recourse or sale with recourse by such Person of the obligation of a primary
obligor, (ii) the obligation to make take-or-pay or similar payments, if
required, regardless of nonperformance by any other party or parties to an
agreement, (iii) any obligation of such Person, whether or not contingent,
(A) to purchase any such primary obligation or any Property constituting
direct or indirect security therefor, (B) to advance or supply funds
(1) for the purchase or payment of any such primary obligations 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,
(C) 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 (D) otherwise
to assure or hold harmless the holder of such primary obligation against loss in
respect thereof; provided, however, that the term "Contingent
Obligation" shall not include any product warranties extended in the Ordinary
Course of Business.  The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the primary
obligation with respect to which such Contingent Obligation is made (or, if
less, the maximum amount of such primary obligation for which such Person may be
liable pursuant to the terms of the instrument evidencing such Contingent
Obligation) or, if not stated or determinable, the maximum reasonably
anticipated liability with respect thereto (assuming such Person is required to
perform thereunder), as determined by such Person in good faith.

Control or controlled by or under common
control - possession, directly or indirectly, of the power to direct or
cause the direction of management or policies (whether through ownership of
Voting Stock, by contract or otherwise, but not solely by being an officer or
director of that Person); provided, however, that in any event any
Person which beneficially owns, directly or indirectly, 20% or more (in number
of votes) of the Equity Interests having ordinary Voting Power with respect to a
corporation shall be conclusively presumed to control such corporation.

Controlled Disbursement Account - a demand deposit account
maintained by Borrower at Bank and to which proceeds of Loans will be wired from
time to time.

Convertible Debentures - the unsecured 7% Convertible
Subordinated Debentures due 2012 issued pursuant to the Indenture.

Copyright Security Agreement - collectively, (i) that
certain Copyright Security Agreement dated May 14, 2002, from Borrower to
Agent, pursuant to which Borrower has granted to Agent a Lien in its copyrights
as security for the Obligations, and (ii) that certain Copyright Security
Agreement dated June 15, 2003, from Masland to Agent, pursuant to which
Masland has granted to Agent a Lien in its copyrights as security for the
Obligations.

Current Assets - at any date, the amount at which all of
the current assets of a Person would be properly classified as current assets
shown on a balance sheet at such date in accordance with GAAP except that
amounts due from Affiliates and investments in Affiliates shall be excluded
therefrom.

Debenture Reserve - a reserve in an amount equal to the
outstanding principal balance plus accrued interest and fees under the
Convertible Debentures from time to time, which reserve will be 

established if the Convertible Debentures are not refinanced by
Borrower at least one hundred twenty (120) days prior to their current stated
maturity date of May 2012 and their new maturity date is not on or after
September 11, 2013.

Debt -  as applied to a Person means, without
duplication:  (i) all items which in accordance with GAAP would be
included in determining total liabilities as shown on the liability side of a
balance sheet of such Person as of the date as of which Debt is to be
determined, including Capitalized Lease Obligations; (ii) all Contingent
Obligations of such Person; (iii) all reimbursement obligations in
connection with letters of credit or letter of credit guaranties issued for the
account of such Person; (iv) in the case of Borrower, the Obligations; and
(v) sale-leaseback, securitization and similar off-balance sheet
liabilities.  The Debt of a Person shall include any recourse Debt of any
partnership or joint venture in which such Person is a general partner or joint
venturer.

Debt Principal Payments - with respect to any Funded Debt,
any principal repayments made or required to be made on account of Funded Debt;
provided, that any repayment of Revolver Loans shall not be a Debt Principal
Payment unless such principal repayment results in a permanent reduction of the
Revolver Commitments to the extent permitted in the Agreement.

Default - an event or condition the occurrence of which
would, with the lapse of time or the giving of notice, or both, become an Event
of Default.

Default Rate - on any date, a rate per annum that is equal
to (i) in the case of each Loan outstanding on such date, 2.0% in excess of
the rate otherwise applicable to such Loan on such date, (ii) in the case
of LC Obligations, 2.0% in excess of the rate otherwise applicable to Letters of
Credit on such date, and (iii) in the case of any of the other Obligations
outstanding on such date, 2.0% plus the highest Applicable Margin for
Base Rate Loans plus the Base Rate in effect on such date.

Deposit Account Assignment - the Collateral Assignment of
Deposit Accounts executed by Borrower on or before the Original Closing Date in
favor of Agent for itself and the Pro Rata benefit of Lenders as security for
the Obligations and each deposit account control agreement heretofore or
hereafter required by Agent pursuant to this Agreement.

Deposit Accounts - all of a Person's demand, time, savings,
passbook, money market or other depository accounts, and all certificates of
deposit, maintained by such Person with any bank, savings and loan association,
credit union or other depository institution.

Distribution - in respect of any entity, (i) any
payment of any dividends or other distributions on Equity Interests of the
entity (except distributions in such Equity Interests) and (ii) any
purchase, redemption or other acquisition or retirement for value of any Equity
Interests of the entity or any Affiliate of the entity unless made
contemporaneously from the net proceeds of the sale of Equity Interests.

Distribution Conditions - the following conditions, the
satisfaction of each of which shall be a condition to any Distribution under
Section 9.2.7(ii) of the Agreement:

(i)

No Default or Event of Default exists at the time of such payment
or would result therefrom;

(ii)

Borrower is Solvent at the time of and after giving effect to such
payment; and

(iii)

Such redemption would not violate Applicable Law.

Document - shall have the meaning given to" document" in
the UCC.

Dollar Equivalent - with respect to any monetary amount in
any foreign currency at any date for the determination thereof, the amount of
Dollars obtained by converting such foreign currency into Dollars at the spot
rate for the purchase of Dollars with such foreign currency as quoted by Bank at
approximately 12:00 noon (Atlanta, Georgia time) on the date of determination
thereof.

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

Domestic Subsidiary - a Subsidiary of Borrower that is
incorporated under the laws of a state or territory of the United States or the
District of Columbia.

Dominion Account - a special account of Agent
es­tablished by Borrower at a bank selected by Borrower, but acceptable to
Agent and Lenders in their discretion, and over which Agent shall have sole and
exclusive access and control for withdrawal purposes.

EBITDA - for any fiscal period of Borrower, an amount equal
to the sum for such fiscal period of (i) Adjusted Net Earnings, plus
(ii) provision for taxes based on income, plus (iii) Interest
Expense, plus (iv) depreciation, amortization plus other
non-cash charges to the extent deducted in calculating Adjusted Net
Earnings.

Electronic Chattel Paper - shall have the meaning given to
"electronic chattel paper" in the UCC.

Eligible Account - an Account which arises in the Ordinary
Course of Business of an Eligible Obligor's business from the sale of goods, is
payable in Dollars, is subject to Agent's duly perfected Lien, and is deemed by
Agent, in its sole credit judgment, to be an Eligible Account.  Without
limiting the generality of the foregoing, no Account shall be an Eligible
Account if:  (i) it arises out of a sale made by an Eligible Obligor
to a Subsidiary or an Affiliate of such Eligible Obligor or to a Person
controlled by an Affiliate of such Eligible Obligor; (ii) it is unpaid for
more than 60 days after the original due date shown on the invoice;
(iii) it is due or unpaid more than 90 days after the original in­voice
date; (iv) 20% or more of the Accounts from the Account Debtor (other than
Lowe's Companies Inc. and The Home Depot, Inc., for which such percentage shall
be 30%) are not deemed Eligible Accounts hereunder; (v) the total unpaid
Accounts of the Account Debtor exceed 20% of the aggregate amount of all
Eligible Accounts or exceed a credit limit established by Agent for such Account
Debtor, in each case to the extent of such excess; (vi) any covenant,
representation or warranty contained in the Agreement (including
Section 8.1.8) with respect to such Account has been breached;
(vii) the Account Debtor is also an Eligible Obligor's creditor or
supplier, or the Account Debtor has disputed liability with respect to such
Account, or the Account Debtor has made any claim with respect to any other
Account due from such Account Debtor to an Eligible Obligor, or the Account
otherwise is or may become subject to any right of setoff, counterclaim,
recoupment, reserve or chargeback, provided that, the Accounts of such Account
Debtor shall be ineligible only to the extent of such offset, counterclaim,
disputed amount, reserve or chargeback; (viii) an Insolvency Proceeding has
been commenced by or against the Account Debtor or the Account Debtor has
failed, suspended business or ceased to be Solvent; (ix) it arises from a
sale to an Account Debtor with its principal office, assets or place of business
outside the United States or Canada (other than the Province of Quebec), unless
the sale is backed by an irrevocable letter of credit issued or confirmed by a
bank acceptable to Agent and that is in form and substance acceptable to Agent
and payable in the full amount of the Account in freely convertible Dollars at a
place of payment within the United States, and, if requested by Agent, such
letter of credit, or amounts payable thereunder, is assigned to Agent;
(x) it arises from a sale to the Account Debtor on a bill-and-hold,
guaranteed sale, sale-or-return, sale-on-approval, consignment or any other
repurchase or return basis; (xi) the Account Debtor is the United States of
America or any department, agency or instrumentality thereof, unless such
Eligible Obligor is not 

prohibited from assigning the Account and does assign its right to
payment of such Account to Agent, in a manner satisfactory to Agent, so as to
comply with the Assignment of Claims Act of 1940 (31 U.S.C. §3727 and 41
U.S.C. §15), or is a state, county or municipality, or a political subdivision
or agency thereof and Applicable Law disallows or restricts an assignment of
Accounts on which it is the Account Debtor; (xii) the Account Debtor is
located in any state which imposes similar conditions on the right of a creditor
to collect accounts receivable unless such Eligible Obligor has either qualified
to transact business in such state as a foreign entity or filed a Notice of
Business Activities Report or other required report with the appropriate
officials in such state for the then current year; (xiii) the Account
Debtor is located in a state in which such Eligible Obligor is deemed to be
doing business under the laws of such state and which denies creditors access to
its courts in the absence of qualification to transact business in such state or
of the filing of any reports with such state, unless such Eligible Obligor has
qualified as a foreign entity authorized to transact business in such state or
has filed all required reports; (xiv) the Account is subject to a Lien
other than a Permitted Lien; (xv) the goods giving rise to such Account
have not been delivered to and accepted by the Account Debtor or the services
giving rise to such Account have not been performed by such Eligible Obligor and
accepted by the Account Debtor or the Account otherwise does not represent a
final sale; (xvi) the Account is evidenced by Chattel Paper or an
Instrument of any kind, or has been reduced to judgment; (xvii) the Account
represents a progress billing or a retainage; (xviii) such Eligible Obligor
has made any agreement with the Account Debtor for any deduction therefrom,
except for discounts or allowances which are made in the Ordinary Course of
Business for prompt payment and which discounts or allowances are reflected in
the calculation of the face value of each invoice related to such Account;
(xix) such Eligible Obligor has made an agreement with the Account Debtor
to extend the time of payment thereof; (xx) the Account represents, in
whole or in part, a billing for interest, fees or late charges, provided that
such Account shall be ineligible only to the extent of the amount of such
billing; (xxi) it arises out of a sale of Inventory consisting of samples;
(xxii) it arises out of a sale on a cash-on-delivery basis;
 (xxiii) it constitutes unapplied cash, customer support accruals,
customer rebates or accrued advertising; (xxiv) it constitutes a warranty
reserve established by such Eligible Obligor with respect to potential warranty
claims; or (xxv) it constitutes the differential between the lower of the
aging of such Account or the amount of such Account as reflected on the general
ledger of such Eligible Obligor.

Eligible Assignee - a Lender or a U.S. based Affiliate of a
Lender; a commercial bank, commercial finance institution or insurance company
organized under the laws of the United States or any state that has total assets
in excess of $2 billion and that is acceptable to Agent; and any other
Person (except Borrower or a Guarantor, or an Affiliate of either) approved by
Agent and, unless a Default or an Event of Default exists, Borrower (such
approval by Agent or Borrower, when required, not to be unreasonably withheld,
conditioned or delayed and to be deemed given by Borrower if no objection is
received by the assigning Lender and Agent from Borrower within 2 Business Days
after notice of such proposed assignment has been provided by the assigning
Lender as set forth in Section 13.3 of the Agreement).

Eligible Inventory - such Inventory of an Eligible Obligor
(other than samples, packaging materials, labels and supplies) which Agent, in
its sole credit judgment, deems to be Eligible Inventory.  Without limiting
the generality of the foregoing, no Inventory shall be Eligible Inventory
unless: (i) it is raw materials (excluding (a) stockroom inventory
such as bearings, machine parts and fuel , and (b) product supply inventory
such as cones, tubes, stretch wrap and cartons), finished goods, or
work-in-process that is, in Agent's opinion, readily marketable in its current
form; (ii) it is owned by an Eligible Obligor and not held by it on
consignment or other sale or return terms; (iii) it is in good, new and
saleable condition and is not damaged or defective; (iv) it is not
slow-moving, obsolete or unmerchantable and is not goods returned to an Eligible
Obligor by or repossessed from an Account Debtor; (v) it meets all
stan­dards imposed by any Governmental Authority; (vi) it conforms in
all respects to the warranties and representations set forth in the Agreement;
(vii) it is at all times subject to Agent's 

duly perfected, first priority security interest and no other
Lien except a Permitted Lien; (viii) it is in an Eligible Obligor's
possession and control at a location in compliance with the Agreement
(including Section 7.1.1), is not in transit or outside the
continental United States and is not consigned to any Person unless such
Person has executed a landlord waiver or consignment agreement with Agent in
form and substance satisfactory to Agent in all respects; (ix) it is not
the subject of a negotiable warehouse receipt or other negotiable Document;
(x) it is not subject to any License Agreement or other agreement that
limits, conditions or restricts an Eligible Obligor's or Agent's right to sell
or otherwise dispose of such Inventory unless the Licensor has entered into
a Licensor/Lender Agreement with Agent; and (xi) it is not the subject of
an Intellectual Property Claim. 

Eligible Obligor - each of Borrower, Candlewick, Fabrica,
Bretlin and Masland.

Environmental Agreement - the Agreement Regarding
Environmental Matters executed by Borrower in favor of Agent on or about the
Original Closing Date and by which Borrower shall, among other things, indemnify
Agent and Lenders from liability for Borrower's failure to comply with any
Environmental Laws.

Environmental Laws - all federal, state and local laws,
rules, regulations, codes, ordinances, programs, permits, guidance documents
promulgated by regulatory agencies, orders and consent decrees, now or hereafter
in effect and relating to human health and safety or the protection or pollution
of the environment, including CERCLA.

Environmental Release - a release as defined in CERCLA or
under any applicable Environmental Laws.

Environmental Reserve - a reserve that may be established
by Agent from time to time in its reasonable credit judgment in connection with
any actual or potential remediation under any Environmental Laws.

Equipment - all of Borrower's machinery, apparatus,
equipment, fittings, furniture, fixtures, motor vehicles and other tangible
personal Property (other than Inventory) of every kind and description, whether
now owned or hereafter acquired by Borrower and wherever located, and all parts,
accessories and special tools therefor, all accessions thereto, and all
substitutions and replacements thereof.

Equity Interest - the interest of (i) a shareholder in
a corporation, (ii) a partner (whether general or limited) in a partnership
(whether general, limited or limited liability), (iii) a member in a
limited liability company, or (iv) any other Person having any other form
of equity security or ownership interest.

ERISA - the Employee Retirement Income Security Act of
1974, and all rules and regulations from time to time promulgated
thereunder.

Eurocurrency Liabilities - shall have the meaning ascribed
thereto in Regulation D issued by the Board of Governors.

Event of Default - as defined in Section 11 of the
Agreement.

Executive Order No. 13224 - Executive Order No. 13224 on
Terrorist Financing, effective September 24, 2001, as the same has been, or
shall hereafter be, renewed, extended, amended or replaced.

Extraordinary Expenses - all costs, expenses, fees or
advances that Agent or any Lender may suffer or incur, whether prior to or
after the occurrence of an Event of Default, and whether prior to, 

after or during the pendency of an Insolvency Proceeding of an
Obligor, on account of or in connection with (i) the audit, inspection,
repossession, storage, repair, appraisal, insuring, completion of the
manufacture of, preparing for sale, advertising for sale, selling, collecting or
otherwise preserving or realizing upon any Collateral; (ii) the defense of
Agent's Lien upon any Collateral or the priority thereof or any adverse
claim with respect to the Loans, the Loan Documents or the Collateral
asserted by any Obligor, any receiver or trustee for any Obligor or any creditor
or representative of creditors of any Obligor; (iii) the settlement or
satisfaction of any Liens upon any Collateral (whether or not such Liens
are Permitted Liens); (iv) the collection or enforcement of any of the
Obligations; (v) the negotiation, documentation, and closing of any
restructuring or forbearance agreement with respect to the Loan Documents
or Obligations; (vi) amounts advanced by Agent pursuant to
Section 7.1.3 of the Agreement; (vii) the enforcement of any of
the provisions of any of the Loan Documents; or (viii) any payment under a
guaranty, indemnity or other payment agreement provided by Agent or (with
Agent's consent) any Lender, which is reimbursable to Agent or such Lender by
Borrower pursuant to Section 2.4.2 of the Agreement.  Such
costs, expenses and advances may include transfer fees, taxes, storage fees,
insurance costs, permit fees, utility reservation and standby fees, legal fees,
appraisal fees, brokers' fees and commissions, auctioneers' fees and
commissions, accountants' fees, environmental study fees, wages and salaries
paid to employees of Borrower or independent contractors in liquidating
any Collateral, travel expenses, all other fees and expenses payable or
reimbursable by Borrower or any other Obligor under any of the Loan Documents,
and all other fees and expenses associated with the enforcement of rights or
remedies under any of the Loan Documents, but excluding compensation paid to
employees (including inside legal counsel who are employees) of Agent.

Fabrica - Fabrica International, Inc., a California
corporation with its chief executive office and principal place of business at
2801 Pullman Street, Santa Ana, California 92705.

Federal Funds Rate - for any period, a fluctuating interest
rate per annum equal for each date during such period to the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) in
Atlanta, Georgia by the Federal Reserve Bank of Atlanta, or if such rate is not
so published for any day which is a Business Day, the average of the quotations
for such day on such transactions received by Agent from 3 federal funds brokers
of recognized standing selected by Agent.

Fee Letter - the fee letter agreement between Fleet and
Borrower dated March 29, 2002.

FEIN - with respect to any Person, the Federal Employer
Identification Number of such Person.

Fiscal Quarter - each consecutive period of 13 weeks
beginning on the first day of a Fiscal Year (and, in the case of any Fiscal Year
of 53 weeks, the 14-week period occurring at the end thereof).

Fiscal Year - the fiscal year of Borrower and its
Subsidiaries for accounting and tax purposes, which ends on or about December 31
of each year.

Fixed Charge Coverage Ratio - for any period, the ratio of
(i) EBITDA for such period minus Capital Expenditures for such period
(but excluding Capital Expenditures financed with the proceeds of Debt for Money
Borrowed other than Revolver Loans), minus Borrower's cash income taxes
for such period (but excluding the effect of income tax refunds with respect to
prior fiscal periods), minus Distributions (other than Special
Distributions) made during such period, to (ii) regularly scheduled payments of
principal and Interest Expense on Borrower's Funded Debt due during such period.

Fleet - Fleet Capital Corporation, a Rhode Island
corporation, and its successors and assigns.

FLSA - the Fair Labor Standards Act of 1938.

Foreign Subsidiary - a Subsidiary that is not a Domestic
Subsidiary.

Frierson Family - shall mean Daniel K. Frierson, his
brothers and their respective spouses, children and any trusts for the sole
benefit of any of the foregoing Persons.

Funded Debt - collectively, without duplication,
(a) the aggregate principal amount of Debt for Money Borrowed, including
Capitalized Lease Obligations, and all Revolver Loans and (b) all Debt
outstanding under any revolving credit, line of credit or renewals thereof),
notwithstanding that any such Debt is created within one year of
the expiration of such agreement.

Funding Account - an account established by Borrower or any
of them for receipt of proceeds of Loans or such other account as Borrower may
specify in writing.

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

General Intangibles - all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower, including all
choses in action, causes of action, company or other business records,
inventions, blueprints, designs, patents, patent applications, trademarks,
trademark applications, trade names, trade secrets, service marks, goodwill,
brand names, copyrights, registrations, licenses, franchises, customer lists,
permits, tax refund claims, computer programs, operational manuals, internet
addresses and domain names, insurance refunds and premium rebates, all claims
under guaranties, security interests or other security held by or granted to
Borrower to secure payment of any of any of Borrower's Accounts by an Account
Debtor, all rights to indemnification and all other intangible property of
Borrower of every kind and nature (other than Accounts).

Goods - shall have the meaning given to "goods" in the
UCC.

Governmental Approvals - all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with, and
reports to, all Governmental Authorities.

Governmental Authority - any federal, state, municipal,
national, foreign or other governmental department, commission, board, bureau,
court, agency or instrumentality or political subdivision thereof or any entity
or officer exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to any government or any court, in
each case whether associated with a state of the United States, the District of
Columbia or a foreign entity or government.

Guarantor Security Agreement - each security agreement
executed by a Guarantor in favor of Agent, for the benefit of Lenders, as
security for the Obligations.

Guarantors - each Subsidiary of Borrower and each other
Person who guarantees payment or performance of the whole or any part of the
Obligations.

Guaranty - each guaranty agreement now or hereafter
executed by a Guarantor in favor of Agent with respect to any of the
Obligations, including the guaranty contained in Section 15 of the
Agreement.

Hedging Agreement - any agreement relating to any swap,
cap, floor, collar, option, forward, cross right or obligation, or combination
thereof or similar transaction, with respect to interest rate, foreign exchange,
currency, commodity, credit or equity risk. 

Indemnified Amount - in the case of Agent Indemnitees, the
amount of any loss, cost, expenses or damages suffered or incurred by Agent
Indemnitees and against which Lenders or any Obligor have agreed to indemnify
Agent Indemnitees pursuant to the terms of the Agreement or any of the other
Loan Documents; in the case of Lender Indemnitees, the amount of any loss, cost,
expenses or damages suffered or incurred by Lender Indemnitees and against which
Lenders or any Obligor have agreed to indemnify Lender Indemnitees pursuant
to the terms of the Agreement or any of the other Loan Documents; and, in
the case of BofA Indemnitees, the amount of any loss, cost, expenses or damages
suffered or incurred by BofA Indemnitees and against which Lenders or any
Obligor have agreed to indemnify BofA Indemnitees pursuant to the terms of the
Agreement or any of the other Loan Documents.

Indemnitees – the Agent Indemnitees, the Issuing Bank
Indemnitees, the Lender Indemnitees and the BofA Indemnitees.

Indenture - that certain Indenture dated as of May 15,
1987, between Dixie Yarns, Inc. and Morgan Guaranty Trust Company of New York,
as trustee.

Initial Lender - BofA in its capacity as the sole Lender on
the date hereof.

Insolvency Proceeding - any action, case or proceeding
commenced by or against a Person, or any agreement of such Person, for
(i) the entry of an order for relief under any chapter of the Bankruptcy
Code or other insolvency or debt adjustment law (whether state, federal or
foreign), (ii) the appointment of a receiver, trustee, liquidator or other
custodian for such Person or any part of its Property, (iii) an assignment
or trust mortgage for the benefit of creditors of such Person, or (iv) the
liquidation, dissolution or winding up of the affairs of such Person.

Instrument - shall have the meaning ascribed to the term
"instrument" in the UCC.

Intellectual Property - Property constituting under any
Applicable Law a patent, patent application, copyright, trademark, service mark,
trade name, mask work, trade secret or license or other right to use any of the
foregoing.

Intellectual Property Claim - the assertion by any Person
of a claim (whether asserted in writing, by action, suit or proceeding or
otherwise) that Borrower's ownership, use, marketing, sale or distribution of
any Inventory, Equipment, Intellectual Property or other Property is violative
of any ownership or other right to use any Intellectual Property of such
Person.

Interest Expense - with respect to any Person for any
fiscal period, the sum of interest expense (whether cash or non-cash) of such
Person determined in accordance with GAAP for the relevant period ended on such
date, including (i) amortization of original issue discount on any
Indebtedness and of all fees payable in connection with the incurrence of such
Indebtedness (to the extent included in interest expense); (ii) the
interest portion of any deferred payment obligation; and (iii) the interest
component of any Capitalized Lease Obligation.

Interest Period - shall have the meaning ascribed to it in
Section 2.1.3 of the Agreement.

Interest Rate Contract - any interest rate agreement,
interest rate collar agreement, interest rate swap agreement, or other agreement
or arrangement at any time entered into by a Borrower with a Lender or Bank
that is designed to protect against fluctuations in interest rates.

Inventory - shall have the meaning given to "inventory" in
the UCC and shall include all goods intended for sale or lease by Borrower,
to be furnished by Borrower under contracts of service, or for display or
demonstration; all work in process; all raw materials and other materials and
supplies of every nature and description used or which might be used in
connection with the manufacture, printing, packing, shipping, advertising,
selling, leasing or furnishing of such goods or otherwise used or consumed in
Borrower's business; and all Documents evidencing and General Intangibles
relating to any of the foregoing, whether now owned or hereafter acquired by
Borrower.

Inventory Formula Amount - on any date of determination
thereof, an amount equal to the lesser of (a) $70,000,000 or (b) 85%
multiplied by the sum of (w) the NOLV Percentage of the Value of Eligible
Inventory on such date consisting of finished goods, plus (x) the
NOLV Percentage of the Value of Eligible Inventory on such date consisting of
work-in-process, plus (y) the NOLV Percentage of the Value of
Eligible Inventory on such date consisting of raw materials. The percentages
referenced above shall be subject to increase or decrease from time to time, in
Agent's reasonable credit judgment, upon Agent's receipt and review of the most
recent Net Orderly Liquidation Value Appraisal; provided, that any
increase in such percentages shall require the written consent of the Agent and
the Lenders. 

Investment Property - shall have the meaning given to
"investment property" in the UCC and shall include all Securities (whether
certificated or uncertificated), security entitlements, securities accounts,
commodity contracts and commodity accounts.

Issuing Bank – BofA or an Affiliate of BofA, including
Fleet National Bank as issuer of any letters of credit under the LC Facility
prior to July 27, 2005.

Issuing Bank Indemnitees – Issuing Bank and all of its
present and future officers, directors, employees, agents and attorneys.

Landlord Waiver - an agreement duly executed in favor of
Agent, in form and content acceptable to Agent, by which an owner or mortgagee
of premises upon which any Property of an Obligor is located agrees to
waive or subordinate any Lien it may have with respect to such Property in
favor of Agent's Lien therein and to permit Agent to enter upon such premises
and to remove such Property or to use such premises to store or dispose of
such Property.

LC Application – an application by Borrower to Issuing
Bank, pursuant to a form approved by Issuing Bank, for the issuance of a Letter
of Credit, that is submitted to Issuing Bank at least 2 Business Days prior to
the requested issuance of such Letter of Credit.

LC Conditions – the following conditions, the satisfaction
of each of which is required before Issuing Bank shall be obligated to issue a
Letter of Credit: (i) each of the conditions set forth in
Section 10 of the Agreement has been and continues to be satisfied,
including the absence of any Default or Event of Default; (ii) after giving
effect to the issuance of the requested Letter of Credit and all other unissued
Letters of Credit for which an LC Application has been signed by Borrower,
the LC Obligations would not exceed $10,000,000 and no Out-of-Formula
Condition would exist, and, if no Revolver Loans are outstanding, the
LC Obligations do not, and would not upon the issuance of the requested
Letter of Credit, exceed the lesser of Availability and Adjusted Availability;
(iii) such Letter of Credit has an expiration date not later than 365 days
from the date of issuance in the case of standby letters of credit and 150 days
from the date of issuance in the case of documentary letters of credit; and
(iv) the currency in which payment is to be made under the Letter of Credit is
Dollars.

LC Documents – any and all agreements, instruments and
documents (other than an LC Application) required by Issuing Bank to be executed
by Borrower or any other Person and delivered to Issuing Bank for the issuance
of a Letter of Credit.

LC Facility - a subfacility of the Revolver Facility
established pursuant to Section 1.3 of the Agreement.

LC Obligations – on any date, an amount (in Dollars) equal
to the sum of (without duplication) (i) all amounts then due and payable by any
Obligor on such date by reason of any payment that is made by Issuing Bank under
a Letter of Credit and that has not been repaid to Issuing Bank, plus
(ii) the aggregate undrawn amount of all Letters of Credit which are then
outstanding or for which an LC Application has been delivered to and accepted by
Issuing Bank.

LC Request – a Letter of Credit Request from Borrower to
Issuing Bank in the form of Exhibit I annexed hereto.

LC Reserve - at any date, the aggregate of all LC
Obligations outstanding on such date, other than LC Obligations that are fully
secured by Cash Collateral.

Lender Indemnitee - a Lender in its capacity as a lender
under the Agreement and its present and future officers, directors, employees,
agents and attorneys.

Lenders - BofA (whether in its capacity as a provider of
Loans under Section 1 of the Agreement, as the provider of Settlement
Loans under Section 3.1.3 of the Agreement or as the procurer of
Letters of Credit under Section 1.3 of the Agreement) and any other
Person who may from time to time become a "Lender" under the Agreement, and
their respective successors and permitted assigns.

Letter of Credit – any standby or documentary letter of
credit issued by Issuing Bank for the account of Borrower under the LC
Facility.

Letter-of-Credit Right - shall have the meaning ascribed to
the term "letter-of-credit rights" in the UCC.

Leverage Ratio - with respect to any fiscal period of
Borrower, the ratio of (i) total Funded Debt and LC Obligations as of the
last day of such period to (ii) EBITDA for such period.

LIBOR Lending Office - with respect to a Lender, the office
designated as a LIBOR Lending Office for such Lender on the signature page
hereof (or on any Assignment and Acceptance, in the case of an assignee) and
such other office of such Lender or any of its Affiliates that is hereafter
designated by written notice to Agent.

LIBOR Loan - a Loan, or portion thereof, during any period
in which it bears interest at a rate based upon the applicable Adjusted LIBOR
Rate.

LIBOR Rate - with respect to an Interest Period, the rate
per annum reported to Agent by Bank as the rate at which deposits of U.S.
Dollars approximately equal in principal amount to or comparable to the amount
of the LIBOR Loan to which such Interest Period relates and for a term
comparable to such Interest Period are offered to Bank by prime banks in the
London interbank foreign currency deposits market at approximately 11:00 a.m.,
London time, 2 Business Days prior to the commencement of such
Interest Period.  Each determination by Agent of any LIBOR Rate shall, in
the absence of any manifest error, be conclusive.

License Agreement - any agreement between Borrower and a
Licensor pursuant to which Borrower is authorized to use any Intellectual
Property in connection with the manufacturing, marketing, sale or other
distribution of any Inventory of Borrower.

Licensor - any Person from whom Borrower obtains the right
to use (whether on an exclusive or non-exclusive basis) any Intellectual
Property in connection with Borrower's manufacture, marketing, sale or other
distribution of any Inventory.

Licensor/Lender Agreement - an agreement between Agent and
a Licensor by which Agent is given the unqualified right, vis-a-vis such
Licensor, to enforce Agent's Liens with respect to and to dispose of Borrower's
Inventory with the benefit of any Intellectual Property applicable thereto,
irrespective of Borrower's default under any License Agreement with such
Licensor and which is otherwise in form and substance satisfactory to Agent.

Lien - any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether
such interest is based on common law, statute or contract.  The term "Lien"
shall also include reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting Property.  For the purpose of the
Agreement, Borrower shall be deemed to be the owner of any Property which it has
acquired or holds subject to a conditional sale agreement or other arrangement
pursuant to which title to the Property has been retained by or vested in
some other Person for security purposes.

Loan - a Revolver Loan or a Term Loan Advance (and each
Base Rate Loan and LIBOR Loan comprising such Loan).

Loan Account - the loan account established by each Lender
on its books pursuant to Section 4.8 of the Agreement.

Loan Documents - the Agreement, the 1995 Bond Documents,
the Other Agreements and the Security Documents.

Loan Year - a period commencing each calendar year on the
same month and day as the date of the Agreement and ending on the same month and
day in the immediately succeeding calendar year, with the first such period
(i.e. the first Loan Year) to commence on the date of the Agreement.

Margin Stock - shall have the meaning ascribed to it in
Regulation U of the Board of Governors.

Masland - Masland Carpets, LLC, a Georgia limited liability
company with its chief executive office and principal place of business at 2208
South Hamilton Street, Dalton, Georgia 30271.

Material Adverse Effect - the effect of any event or
condition which, alone or when taken together with other events or conditions
occurring or existing concurrently therewith, (i) has a material adverse
effect upon the business, operations, prospects, Properties or condition
(financial or otherwise) of any Obligor; (ii) has or may be reasonably
expected to have any material adverse effect whatsoever upon the validity or
enforceability of the Agreement or any of the other Loan Documents;
(iii) has any material adverse effect upon the value of the whole or any
material part of the Collateral, the Liens of Agent with respect to the
Collateral or the priority of any such Liens; (iv) materially impairs the
ability of any Obligor to perform its obligations under this Agreement or any of
the other Loan Documents, including repayment of any of the Obligations when
due; or (v) materially impairs the ability of Agent or any Lender to
enforce or collect the Obligations or realize upon any of the Collateral in
accordance with the Loan Documents and Applicable Law.  As used in this
definition, the determination whether any fact, 

event or condition is "material" or has a "material adverse
effect" is dependent upon the relevant facts and circumstances; provided,
however in no event shall such fact, event or condition be "material" or have a
"material adverse effect" unless its adverse economic impact upon the Borrower
is at least $1,000,000.

Material Contract - an agreement to which an Obligor is a
party (other than the Loan Documents) if (i) such agreement is deemed
to be a material contract as provided in Regulation S-K promulgated by the
SEC under the Securities Act of 1933 or (ii) the breach, termination,
cancellation or nonperformance of or failure to renew such agreement could
reasonably be expected to have a Material Adverse Effect.

Maximum Rate - the maximum non-usurious rate of interest
permitted by Applicable Law that at any time, or from time to time, may be
contracted for, taken, reserved, charged or received on the Debt in question or,
to the extent that at any time Applicable Law may thereafter permit a higher
maximum non-usurious rate of interest, then such higher rate.
 Notwithstan­ding any other provision hereof, the Maximum Rate shall be
calculated on a daily basis (computed on the actual number of days elapsed over
a year of 365 or 366 days, as the case may be).

Money Borrowed - as applied to any Person, (i) Debt
arising from the lending of money by any other Person to such Person;
(ii) Debt, whether or not in any such case arising from the lending of
money by another Person to such Person, (A) which is represented by notes
payable or drafts accepted that evidence extensions of credit, (B) which
constitutes obligations evidenced by bonds, debentures, notes or similar
instruments, or (C) upon which interest charges are customarily paid (other
than accounts payable) or that was issued or assumed as full or partial payment
for Property; (iii) Debt that constitutes a Capitalized Lease Obligation;
(iv) reimbursement obligations with respect to letters of credit or
guaranties of letters of credit and (v) Debt of such Person under any
guaranty of obligations that would constitute Debt for Money Borrowed under
clauses (i) through (iii) hereof, if owed directly by such Person; and
(vi) similar off-balance sheet obligations.

Moody's - Moody's Investors Services, Inc.

Mortgage - collectively, the mortgages, deeds of trust or
deeds to secure debt executed by Borrower and the other Obligors, as applicable,
on or before the Original Closing Date or thereafter in favor of Agent and by
which Borrower or such other Obligor granted and conveyed or shall grant and
convey to Agent, for its benefit as Agent and for the Pro Rata benefit of
Lenders, Liens upon the Real Estate, as security for the payment of
the Obligations.

Multiemployer Plan - has the meaning set forth in Section
4001(a)(3) of ERISA.

Net Orderly Liquidation Value - with respect to any
Inventory means, as determined by an appraisal conducted by Hilco Appraisal and
Valuation Services, LLC or such other appraisal company of similar
qualifications and standing acceptable to Agent (and Required Lenders if other
than Hilco), an expected net percentage of cost to be realized, after expenses,
at an orderly negotiated sale of such Inventory held within a reasonable period
of time as of the date of such opinion.

Net Orderly Liquidation Value Appraisal - an appraisal, in
form and substance satisfactory to Agent, conducted by Hilco Appraisal and
Valuation Services, LLC or such other appraisal company of similar
qualifications and standing acceptable to Agent (and Required Lenders if other
than Hilco) pursuant to which such appraisal company determines the Net Orderly
Liquidation Value of Inventory.

Net Proceeds -with respect to a disposition of any
Collateral, proceeds (including cash receivable (when received) by way of
deferred payment) received by Borrower from the sale, lease, transfer or
other disposition of any Property, including insurance proceeds and awards of
compensation received with 

respect to the destruction or condemnation of all or part of such
Property, net of: (i) the reasonable and customary costs of such sale,
lease, transfer or other disposition (including legal fees and sales
commissions); (ii) amounts applied to repayment of Debt (other than the
Obligations) secured by a Permitted Lien on the Collateral disposed of that is
senior to Agent's Liens with respect to such Collateral; and (iii) income taxes
attributable to such disposition if consented to by the Required Lenders in
writing.

NOLV Percentages - with respect to Eligible Inventory, the
inventory percentages referenced on Exhibit J attached
hereto, which percentages may be revised from time to time in Agent's reasonable
credit judgment based upon Agent's receipt and review of the most recent Orderly
Liquidation Value Appraisal, subject to Agent's and Required Lenders' approval
of any increase in such percentages.

Notes - each Revolver Note, each Term Note and any other
promissory note executed by Borrower at Agent's request to evidence any of the
Obligations.

Notice of Borrowing - as defined in Section 3.1.1(i)
of the Agreement.

Notice of Conversion/Continuation - as defined in
Section 2.1.2(ii) of the Agreement.

Obligations - in each case, whether now in existence or
hereafter arising, (i) the principal of, and interest and premium, if any, on,
the Loans; (ii) all LC Obligations and all other obligations of any Obligor to
Agent, BofA or an Affiliate of BofA arising in connection with the issuance of
any Letter of Credit; (iii) the 1995 Bond Obligations; and (iv)
all other Debts, covenants, duties and obligations (including
Contingent Obligations) now or at any time or times hereafter owing by any
Obligor to Agent or any Lender under or pursuant to the Agreement or any of
the other Loan Documents or owing by any Obligor to Agent or any Lender (or
any Affiliate of a Lender) with respect to the Bank Product Debt whether
evidenced by any note or other writing, whether arising from any extension
of credit, opening of a letter of credit, acceptance, loan, guaranty,
indemnification or otherwise and whether direct or indirect, absolute or
contingent, due or to become due, primary or secondary, or joint or several,
including all interest, charges, expenses, fees or other sums (including
Extraordinary Expenses) chargeable to any or all Obligors under the
Agreement or under any of the other Loan Documents.

Obligor - Borrower and each Guarantor, and any other Person
that is at any time liable for the payment of the whole or any part of the
Obligations or that has granted in favor of Agent a Lien upon any of any of
such Person's assets to secure payment of any of the Obligations.

Original Closing Date - May 14, 2002.

Original Term - as defined in Section 5.1 of the
Agreement. 

Ordinary Course of Business - with respect to any
transaction involving any Person, the ordinary course of such Person's
business, as conducted by such Person in accordance with past practices and
undertaken by such Person in good faith and not for the purpose of evading
any covenant or restriction in any Loan Document.

Organization Documents - with respect to any Person, its
charter, certificate or articles of incorporation, bylaws, articles of
organization, operating agreement, members agreement, partnership agreement,
voting trust, or similar agreement or instrument governing the formation or
operation of such Person.

Original Term - as defined in Section 5.1 of the
Agreement.

OSHA - the Occupational Safety and Hazard Act of 1970.

Other Agreements - the Notes, the Environmental Agreement,
each Interest Rate Contract with BofA or with Bank and subject to credit
enhancement from BofA, and any and all agreements, instruments and documents
(other than the Agreement and the Security Documents), heretofore, now or
hereafter executed by Borrower, any other Obligor or any other Person and
delivered to Agent or any Lender in respect of the trans­actions
contemplated by the Agreement.

Out-of-Formula Condition - as defined in Section
1.1.2 of the Agreement.

Out-of-Formula Loan - a Revolver Loan made when an
Out-of-Formula Condition exists or the amount of any Revolver Loan which, when
funded, results in an Out-of-Formula Condition.

Partial Release Conditions – the following conditions, the
satisfaction of each of which is required before Agent shall be obligated to
release its Liens on the Real Estate and the Equipment:  (i) the Term
Loans are paid in full, and (ii) no Default or Event of Default exists or
would result therefrom.

Participant - as defined in Section 13.2.1 of the
Agreement.

Participating Lender - as defined in Section
1.3.2(i) of the Agreement.

Patent Assignment - each Patent Collateral Assignment and
Security Agreement executed by Borrower in favor of Agent and by which Borrower
shall assign to Agent, for its benefit as Agent and for the Pro Rata benefit of
Lenders, as security for the Obligations, all of Borrower's right, title and
interest in and to the patents described therein.

Payment Account - an account maintained by Agent to which
all monies from time to time deposited to a Dominion Account shall be
transferred and all other payments shall be sent in immediately available
federal funds.

Payment Intangible - shall have the meaning given to
"payment intangible" in the UCC.

Payment Items - all checks, drafts, or other items of
payment payable to Borrower, including proceeds of any of the Collateral.

Pending Revolver Loans - at any date, the aggregate
principal amount of all Revolver Loans which have been requested in any Notice
of Borrowing received by Agent but which have not theretofore been advanced by
Agent or Lenders.

Permitted Asset Dispositions - a disposition of Real Estate
or Equipment by Borrower or any other Obligor that has been approved by the
Required Lenders in writing at the time of any such proposed disposition.

Permitted Contingent Obligations - Contingent Obligations
arising from endorsements for collection or deposit in the Ordinary Course of
Business; Contingent Obligations arising from Interest Rate Contracts entered
into in the Ordinary Course of Business pursuant to the Agreement or with
Agent's prior written consent; Contingent Obligations of Borrower and its
Subsidiaries existing as of the Closing Date and disclosed on Schedule
9.2.3 hereto, including extensions and renewals thereof that do not increase
the amount of such Contingent Obligations as of the date of such extension
or renewal; Contingent Obligations incurred in the Ordinary Course of
Business with respect to surety bonds, appeal bonds, performance bonds and other
similar obligations; Contingent Obligations arising under indemnity 

agreements to title insurers to cause such title insurers to issue
to Agent title insurance policies; Contingent Obligations with respect to
customary indemnification obligations in favor of purchasers in connection
with dispositions of Equipment permitted under Section 7.4.2 of the
Agreement; and other Contingent Obligations not to exceed $5,000,000 in the
aggregate at any time.

Permitted Fixed Asset Lien - after the satisfaction of the
Partial Release Conditions, a Lien in Real Estate and Equipment (and not in any
other Property of Borrower or any other Obligor) in favor of a Person other than
Agent that secures a Permitted Fixed Asset Loan and which Person has executed a
mortgagee waiver in favor of Agent, in form and substance satisfactory to
Agent.

Permitted Fixed Asset Loan - after the satisfaction of the
Partial Release Conditions, Debt for Money Borrowed incurred by Borrower to a
Person other than Agent and Lenders that is secured by a Permitted Fixed Asset
Lien only.

Permitted Lien - a Lien of a kind specified in Section
9.2.5 of the Agreement.

Permitted Purchase Money Debt - Purchase Money Debt of
Borrower and its Subsidiaries and which is secured by no Lien or only by
a Purchase Money Lien, provided that the aggregate amount of Purchase Money
Debt outstanding at any time does not exceed $20,000,000 and the incurrence of
such Purchase Money Debt does not violate any limitation in the Loan Documents
regarding Capital Expenditures.  For the purposes of this definition, the
principal amount of any Purchase Money Debt consisting of capitalized leases
shall be computed as a Capitalized Lease Obligation.

Person - an individual, partnership, corporation, limited
liability company, limited liability partnership, joint stock company, land
trust, business trust, or unincorporated organization, or a Governmental
Authority.

Plan - an employee benefit plan now or hereafter maintained
for employees of Borrower that is covered by Title IV of ERISA.

Prime Rate - the rate of interest announced or quoted by
Bank from time to time as its prime rate.  The prime rate announced by Bank
is a reference rate and does not necessarily represent the lowest or best rate
charged by Bank.  Bank may make loans or other extensions of credit at,
above or below its announced prime rate.  If the prime rate is discontinued
by Bank as a standard, a comparable reference rate designated by Bank as a
substitute therefor shall be the Base Rate.

Pro Rata - a share of or in all Loans, participations in LC
Obligations, liabilities, payments, proceeds, collections, Collateral and
Extraordinary Expenses, which share for any Lender on any date shall be a
percentage (expressed as a decimal, rounded to the ninth decimal place) arrived
at by dividing the amount of the Commitment of such Lender on such date by the
aggregate amount of the Commitments of all Lenders on such date.

Projections - Borrower's forecasted (a) Consolidated
and consolidating balance sheets, profit and loss statements, cash flow
statements, and capitalization statements, all prepared on a consistent
basis with Borrower's historical financial statements, together with
(b) appropriate supporting details and a statement of underlying
assumptions, a projection of the Borrowing Base and Availability.

Properly Contested - in the case of any Debt of an Obligor
(including any Taxes) that is not paid as and when due or payable by reason of
such Obligor's bona fide dispute concerning its liability to pay same or
concerning the amount thereof, (i) such Debt is being properly contested in
good faith by appropriate proceedings promptly instituted and diligently
conducted; (ii) such Obligor has established 

appropriate reserves as shall be required in conformity with GAAP,
(iii) the non-payment of such Debt will not have a Material Adverse Effect
and will not result in a forfeiture of any assets of such Obligor; (iv) no
Lien is imposed upon any of such Obligor's assets with respect to such Debt
unless such Lien is at all times junior and subordinate in priority to the Liens
in favor of Agent (except only with respect to property taxes that have priority
as a matter of applicable state law) and enforcement of such Lien is stayed
during the period prior to the final resolution or disposition of such dispute;
(v) if the Debt results from, or is determined by the entry, rendition or
issuance against an Obligor or any of its assets of a judgment, writ, order or
decree, enforcement of such judgment, writ, order or decree is stayed pending a
timely appeal or other judicial review; and (vi) if such contest is
abandoned, settled or determined adversely (in whole or in part) to such
Obligor, such Obligor forthwith pays such Debt and all penalties, interest and
other amounts due in connection therewith.

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

Purchase Money Debt - means and includes (i) Debt
(other than the Obligations) for the payment of all or any part of the purchase
price of any fixed assets, (ii) any Debt (other than the Obligations)
incurred at the time of or within 10 days prior to or after the acquisition of
any fixed assets for the purpose of financing all or any part of the purchase
price thereof, and (iii) any renewals, extensions or refinancings (but not
any increases in the principal amounts) thereof outstanding at the time.

Purchase Money Lien - a Lien upon fixed assets which
secures Purchase Money Debt, but only if such Lien shall at all times be
confined solely to the fixed assets acquired through the incurrence of the
Purchase Money Debt secured by such Lien and such Lien constitutes a purchase
money security interest under the UCC.

2000 Real Estate Transaction Documents -  agreements,
instruments or documents executed in connection with the 2000 Industrial
Development Board of the City of Atmore, Alabama real estate transaction with
Borrower.

Real Estate - all parcels and tracts of real Property and
the improvements thereon of each Obligor, wherever located, and whether now
existing or hereafter acquired, including, without limitation, all real Property
and improvements thereon of each Obligor located in Alabama and Tennessee (but
excluding the real Property of Borrower and its Subsidiaries located in
Gastonia, Gaston County, North Carolina and to the extent that the Chroma
Systems Real Estate Loan Documents have not been terminated, Orange County,
Santa Ana, California.

Regulation D - Regulation D of the Board of Governors.

Register - the register maintained by Agent in accordance
with Section 4.8.2 of the Agreement.

Reimbursement Date - as defined in
Section 1.3.1(iii) of the Agreement.

Rent Reserve - an amount equal to 3 months of all rent,
fees  or other charges with respect to any leased or warehouse premises of
Borrower where any of the Collateral is located, other than those with respect
to which Agent has received a Landlord Waiver.

Rentals - as defined in Section 9.2.13 of the
Agreement.

Reportable Event - any of the events set forth in Section
4043(b) of ERISA.

Required Lenders - at any date of determination thereof,
Lenders having Commitments representing at least 66-2/3% of the aggregate
Commitments at such time; provided, however, that if any Lender
shall be in breach of any of its obligations hereunder to Borrower or Agent,
including any breach resulting from its failure to honor its Commitment in
accordance with the terms of the Agreement, then, for so long as such breach
continues, the term "Required Lenders" shall mean Lenders (excluding each Lender
that is in breach of its obligations under the Agreement) having Commitments
representing at least 66-2/3% of the aggregate Commitments at such time of such
non-breaching Lenders; provided further, however, that if
the Commitments have been terminated, the term "Required Lenders" shall mean
Lenders (excluding each Lender that is in breach of its obligations hereunder)
holding Loans (including Settlement Loans) representing at least 66-2/3% of the
aggregate principal amount of Loans of such non-breaching Lenders (including
Settlement Loans) outstanding at such time.

Restricted Investment - any acquisition of Property by
Borrower or any of its Subsidiaries in exchange for cash or other Property,
whether in the form of an acquisition of Equity Interests or Debt, or the
purchase or acquisition by Borrower or any Subsidiary of any other Property, or
a loan, advance, capital contribution or subscription, except acquisitions of
the following: (i) fixed assets to be used in the Ordinary Course of
Business of Borrower or any Subsidiary so long as the acquisition costs thereof
constitute Capital Expenditures permitted hereunder; (ii) goods held for
sale or lease or to be used in the manufacture of goods or the provision of
services by Borrower or any Subsidiary in the Ordinary Course of Business; (iii)
Current Assets arising from the sale or lease of goods or the rendition of
services in the Ordinary Course of Business of Borrower or any if its
Subsidiaries; (iv) except in de minimis amounts, investments in
Subsidiaries to the extent existing on the Closing Date; (v) Cash
Equivalents to the extent they are not subject to rights of offset in favor
of any Person other than Agent or a Lender; and (vi) loans and other
advances of money to the extent not prohibited by
Section 9.2.2. 

Restrictive Agreement - an agreement (other than any of the
Loan Documents) that, if and for so long as an Obligor or any Subsidiary of such
Obligor is a party thereto, would prohibit, condition or restrict such Obligor's
or Subsidiary's right to incur or repay Debt for Money Borrowed (including any
of the Obligations); grant Liens upon any of such Obligor's or Subsidiary's
assets (including Liens granted in favor of Agent pursuant to the Loan
Documents); declare or make Distributions; amend, modify, extend or renew any
agreement evidencing Debt for Money Borrowed (including any of the Loan
Documents); or repay any Debt owed to any Obligor.

Revolver Commitment - at any date for any Lender, the
obligation of such Lender to make Revolver Loans and to purchase participations
in LC Obligations pursuant to the terms and conditions of the Agreement, which
shall not exceed the principal amount set forth opposite such Lender's name
under the heading "Revolver Commitment" on the signature pages of the Agreement
or the signature page of the Assignment and Acceptance by which it became a
Lender, as modified from time to time pursuant to the terms of the Agreement or
to give effect to any applicable Assignment and Acceptance; and "Revolver
Commitments" means the aggregate principal amount of the Revolver
Commitments of all Lenders, the maximum amount of which shall be
$70,000,000.

Revolver Loan - a Loan made by Lenders as provided in
Section 1.1 of the Agreement (including any Out-of-Formula Loan) or a
Settlement Loan funded solely by BofA.

Revolver Note - a Revolver Note executed by Borrower in
favor of each Lender in the form of Exhibit A attached hereto,
which shall be in the face amount of such Lender's Revolver Commitment and which
shall evidence all Revolver Loans made by such Lender to Borrower pursuant to
the Agreement.

S&P - Standard & Poor's Ratings Group, a division
of McGraw-Hill, Inc.

Schedule of Accounts - as defined in Section
7.2.1 of the Agreement.

SEC - Securities and Exchange Commission.

Secured Parties - Agent, Issuing Bank, Lenders (including
BofA as the provider of Settlement Loans) and BofA (and any Affiliate of BofA)
as the provider of any Bank Product Debt.

Security - shall have the same meaning as in Section 2(1)
of the Securities Act of 1933.

Security Documents - the Patent Assignment, each Guaranty,
the Trademark Security Agreement, the Copyright Security Agreement, the Deposit
Account Assignment, the Business Interruption Insurance Assignment, the
Mortgages and all other instruments and agreements now or at any time hereafter
securing the whole or any part of the Obligations.

Senior Officer - the chairman of the board of directors,
the president, the chief financial officer or the controller of, or in-house
legal counsel to Borrower.

Settlement Date - as defined in Section 3.1.3(i) of
the Agreement.

Settlement Loan - as defined in Section 3.1.3(ii) of
the Agreement.

Settlement Report - a report delivered by Agent to Lenders
summarizing the amount of the outstanding Revolver Loans as of the Settlement
Date and the calculation of the Borrowing Base as of such Settlement Date.

Software - shall have the meaning given to "software" in
the UCC.

Solvent - as to any Person, such Person (i) owns Property
whose fair saleable value is greater than the amount required to pay all of such
Person's Debts (including contingent Debts), (ii) is able to pay all of its
Debts as such Debts mature, (iii) has capital sufficient to carry on its
business and transactions and all business and transactions in which it is about
to engage; and (iv) is not "insolvent" within the meaning of Section 101(32) of
the Bankruptcy Code.

Special Distribution Certificate - a Certificate prepared
by Borrower and delivered to Agent prior to the commencement of a Special
Distribution Period, which sets forth the maximum amount of Special
Distributions that may be made by Borrower during such Special Distribution
Period based on the Special Distribution Conditions and incorporates a
calculation of each of the Special Distribution Conditions.  The Special
Distribution Certificate shall also set forth the aggregate of all Special
Distributions and Distributions disbursed since October 22, 2007.

Special Distribution Conditions - the following conditions,
the satisfaction of each of which shall be a condition to each Special
Distribution under Section 9.2.7(iv) of this Agreement:

(i)

Each of the Distribution Conditions is satisfied;

(ii)

Borrower shall have maintained Availability of not less than
$12,000,000 on each Business Day during the 60-day period preceding delivery of
each Special Distribution Certificate after giving pro forma effect to such
Special Distribution;

(iii)

Borrower shall have Availability of not less than $12,000,000 on
the date of such Special Distribution and after giving pro forma effect to such
Special Distribution;

(iv)

Borrower shall have a Debt to EBITDA ratio equal to or less than
3.75 to 1.00 (after giving pro forma effect to such Special Distribution) as of
the most recent fiscal month for the 12 fiscal months prior to the delivery of
the Special Distribution Certificate; and 

(v)

Borrower shall have a Fixed Charge Coverage Ratio of not less than
1.00 to 1.00 (exclusive of any Special Distribution) as of the most recent
fiscal month for the 12 fiscal months prior to delivery of the Special
Distribution Certificate.

Special Distribution Period - the 40-day period beginning
on the date a Special Distribution Certificate is delivered to the Lender by the
Borrower.

Special Distributions - so long as each of the Special
Distribution Conditions is satisfied, payment of dividends and repurchases of
Equity Interests in Borrower not to exceed $10,000,000 in the aggregate made by
Borrower on or before December 31, 2008.  All such Special Distributions
shall be made during Special Distribution Periods, as defined herein, and shall
be made in amounts not to exceed the amounts determined by, and set forth in, a
Special Distribution Certificate, as defined herein.  

Statutory Reserves - on any date, the percentage (expressed
as a decimal) established by the Board of Governors which is the then stated
maximum rate for all reserves (including any emergency, supplemental or
other marginal reserve requirements) applicable to any member bank of the
Federal Reserve System in respect to Eurocurrency Liabilities (or any
successor category of liabilities under Regulation D).  Such reserve
percentage shall include those imposed pursuant to Regulation D.  The
Statutory Reserve shall be adjusted automatically on and as of the
effective date of any change in such percentage. 

Subordinated Debt - Debt of Borrower that is fully and
absolutely subordinated in right of payment to the Obligations in a manner
satisfactory to Agent, including, the Convertible Debentures.

Subordinated Debt Documents - collectively and
individually, (i) the Indenture, (ii) the Convertible Debentures, and
(iii) any and all other agreements, instruments or documents issued in
connection with any of the foregoing or in connection with any other
Subordinated Debt.

Subsidiary - any Person in which more than 20% of its
outstanding Voting Stock or more than 20% of all Equity Interests is owned
directly or indirectly by Borrower, by one or more other Subsidiaries of
Borrower or by Borrower and one or more other Subsidiaries, including
C-Knit.

Supplemental Reserve Amount – an amount equal to
$11,000,000.

Supporting Obligation - shall have the meaning ascribed to
the term "supporting obligation" in the UCC.

Tangible Chattel Paper - shall have the meaning given to
"tangible chattel paper" in the UCC.

Taxes - any present or future taxes, levies, imposts,
duties, fees, assessments, deductions, withholdings or other charges of whatever
nature, including income, receipts, excise, property, sales, use, transfer,
license, payroll, withholding, social security and franchise taxes now or
hereafter imposed or levied by the United States or any other Governmental
Authority and all interest, penalties, additions to tax and similar liabilities
with respect thereto, but excluding, in the case of each Lender, taxes imposed
on or measured by the net income or overall gross receipts of
such Lender.

Term Loan A - the aggregate of the Term Loan A Advances
made by Lenders to Borrower pursuant to Section 1.2.1 of the
Agreement.

Term Loan A Advance - each Lender's portion of Term Loan
A.

Term Loan A Commitment - at any date for any Lender, the
obligation of such Lender to make Term Loan A Advances pursuant to the terms and
conditions of the Agreement, which shall not exceed the principal amount set
forth opposite such Lender's name under the heading "Term Loan A Commitment" on
the signature pages hereof (or any amendment to the Agreement) or the signature
page of any Assignment and Acceptance by which it became a Lender, as modified
from time to time pursuant to the terms of the Agreement or to give effect to
any applicable Assignment and Acceptance; and the term "Term Loan A
Commitments" means the aggregate principal amount of the Term Loan A
Commitments of all Lenders, the maximum amount of which shall be $14,586,900.

Term Loan Advance – means, collectively, each Term
Loan A  Advance.

Term Loan Commitments – means, collectively, the Term
Loan A Commitments. 

Term Loan – means Term Loan A.

Term Note A - shall have the meaning ascribed to it in
Section 1.2.3 of the Agreement.

Term Notes – means, collectively, each Term
Note A.

Trademark Security Agreement - the Trademark Security
Agreement executed by Borrower in favor of Agent on or before the Original
Closing Date and by which Borrower assigned to Agent, for its benefit as Agent
and for the Pro Rata benefit of Lenders, as security for the Obligations, all of
Borrower's right, title and interest in and to all of its trademarks.

Transferee - as defined in Section 13.3.3 of the
Agreement.

Type - any type of a Loan determined with respect to the
interest option applicable thereto, which shall be either a LIBOR Loan or a Base
Rate Loan.

UCC - the Uniform Commercial Code (or any successor
statute) as adopted and in force in the State of Georgia or, when the laws of
any other state govern the method or manner of the perfection or enforcement of
any security interest in any of the Collateral, the Uniform Commercial Code (or
any successor statute) of such state.

Undrawn Amount – on any date with respect to a particular
Letter of Credit, the total amount then available to be drawn under such Letter
of Credit in Dollars.

Upstream Payment - a payment or distribution of cash or
other Property by a Subsidiary to Borrower, whether in repayment of Debt owed by
such Subsidiary to Borrower, to pay dividends on account of Borrower's ownership
of Equity Interests or otherwise.

USA Patriot Act - the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
1001, Pub. L. No. 107-56, 115 Stat. 272 (2001), as the same has been, or shall
hereafter be, renewed, extended, amended or replaced.

Value - with reference to the value of Eligible Inventory,
value determined on the basis of the lower of cost or market of such Eligible
Inventory, with the cost thereof calculated on a first-in, first-out basis,
determined in accordance with GAAP.

Voting Power - with respect to any Person, the power
ordinarily (without the occurrence of a contingency) to elect the members of the
board of directors (or Persons performing similar functions) of such Person.

Voting Stock - Equity Interests of any class or classes of
a corporation or other entity the holders of which are ordinarily, in the
absence of contingencies, entitled to elect a majority of the corporate
directors or Persons performing similar functions.

Accounting Terms.  Unless otherwise specified
herein, all terms of an accounting character used in the Agreement shall be
interpreted, all accounting determinations under the Agreement shall be made,
and all financial statements required to be delivered under the Agreement shall
be prepared in accordance with GAAP, applied on a basis consistent with the most
recent audited Consolidated financial statements of Borrower and the
Subsidiaries heretofore delivered to Agent and Lenders and using the
same method for inventory valuation as used in such audited financial
statements, except for any change required by GAAP; provided,
however, that all accounting terms shall be interpreted and all
accounting determinations shall be made in accordance with GAAP as in effect on
the date of the Agreement and applied on a basis consistent with the
application used in the financial statements referred to in Section 8.1.9
of the Agreement unless (i) Borrower shall have objected to determining
such compliance on such basis at the time of delivery of such financial
statements or (ii) Agent or any Lender shall so object in writing within 30
days after the delivery of such financial statements, in either of which events
such calculations shall be made on a basis consistent with those used in the
preparation of the latest financial statements as to which such objection shall
not have been made.  In the event of any change in GAAP that occurs after
the date of the Agreement and that is material to Borrower, Agent and Lenders
(but not Borrower) shall have the right to require either that conforming
adjustments be made to any financial covenants set forth in the Agreement, or
the components thereof, that are affected by such change or that Borrower report
its financial condition based on GAAP as in effect immediately prior to the
occurrence of such change.

Other Terms.  All other terms contained in the
Agreement shall have, when the context so indicates, the meanings provided for
by the UCC to the extent the same are used or defined therein.

Certain Matters of Construction.  The terms
"herein," "hereof" and "hereunder" and other words of similar import refer to
the Agreement as a whole and not to any particular section, paragraph or
subdivision.  Any pronoun used shall be deemed to cover all genders.
 In the computation of periods of time from a specified date to a later
specified date, the word "from" means "from and including" and the words "to"
and "until" each means "to but excluding."  The section titles, table of
contents and list of exhibits appear as a matter of convenience only and shall
not affect the interpretation of the Agreement.  All references to statutes
and related regulations shall include any amendments of same and any successor
 statutes  and regulations; to any of the  Loan Documents shall
include any and all modifications thereto 

and any and all restatements, extensions or renewals thereof; to
any Person shall mean and include the successors and permitted assigns of such
Person; to "including" and "include" shall be understood to mean
"including, without limitation" (and, for purposes of the Agreement and each
other Loan Document, the parties agree that the rule of ejusdem generis
shall not be applicable to limit a general statement, which is followed by or
referable to an enumeration of specific matters to matters similar to the
matters specifically mentioned); or to the time of day shall mean the time of
day on the day in question in Atlanta, Georgia, unless otherwise expressly
provided in the Agreement.  A Default or an Event of Default
shall be deemed to exist at all times during the period commencing on the date
that such Default or Event of Default occurs to the date on which such Default
or Event of Default is waived in writing by Agent pursuant to the Agreement or,
in the case of a Default,  is cured within any period of cure expressly
provided in this Agreement; and an Event of Default shall "continue" or be
"continuing" until such Event of Default has been waived in writing by
Agent.  Whenever the phrase "to the best of Borrower's knowledge" or
words of similar import relating to the knowledge or the awareness of Borrower
is used herein, such phrase shall mean and refer to (i) the actual
knowledge of a Senior Officer of Borrower or (ii) the knowledge that a
Senior Officer would have obtained if they had engaged in good faith and
diligent performance of his duties, including the making of such reasonably
specific inquiries as may be necessary of the employees or agents of Borrower
and a good faith attempt to ascertain the existence or accuracy of
the matter to which such phrase relates.

IN WITNESS WHEREOF, this Appendix has been duly executed on the
date first above written.

BORROWER:

ATTEST:

THE DIXIE GROUP, INC.

s/ Geoffrey G.
Young               

By:    s/ D. Eugene
Lasaer                           

Geoffrey G. Young, Assistant

      D. Eugene Lasater,
Controller 

Secretary

[CORPORATE SEAL]

By:    s/ Gary A. Harmon
                           

      Gary A. Harmon, Vice
President and

      Chief Financial Officer

GUARANTORS:

ATTEST:

FABRICA INTERNATIONAL, INC.

s/ Geoffrey G.
Young               

By:    s/ Gary A. Harmon
                           

Geoffrey G. Young, Assistant

     Gary A.  Harmon, Vice
President

Secretary

[CORPORATE SEAL]

ATTEST:

BRETLIN, INC.

s/ Geoffrey G.
Young               

By:    s/ Gary A. Harmon
                           

Geoffrey G. Young, Assistant

     Gary A.  Harmon,
President

Secretary

[CORPORATE SEAL]

ATTEST:

CANDLEWICK YARNS, INC.

s/ Geoffrey G.
Young               

By:    s/ Gary A. Harmon
                           

Geoffrey G. Young, Assistant

     Gary A.  Harmon,
President

Secretary

[CORPORATE SEAL]

ATTEST:

MASLAND CARPETS, LLC

s/ Geoffrey G.
Young               

By:    s/ Gary A. Harmon
                           

Geoffrey G. Young, Assistant 

     Gary A. Harmon, President and
Chief 

Secretary

Manager

[CORPORATE SEAL]

LENDER AND AGENT:

BANK OF AMERICA, N.A., as

Lender and Agent

By:   s/ Wes
Manus                            

    Title: Senior Vice
Presidentex10k.htm

    PURCHASE
AND SALE AGREEMENT

     

    This
AGREEMENT is made as of
this 25th day of August, 2008, by and between 1st Source
Corporation Investment Advisors, Inc., an Indiana corporation with a principal
place of business at 100 North Michigan Street, South Bend, Indiana 46601
(“Seller”) and
WA Holdings, Inc., a Utah corporation with a principal place of business at
150 Social Hall Avenue, 4th Floor, Salt Lake City, Utah 84111 (“Buyer”).

     

    WHEREAS, Seller acts as
investment adviser and sponsor to the 1st Source
Monogram Income Equity Fund (the “Current Income Equity Fund”),
the 1st Source
Monogram Long/Short Fund (the “Current Long/Short Fund”) and
the 1st Source
Monogram Income Fund (the “Current Income Fund”) (in such
capacity to the Current Income Equity Fund, Current Long/Short Fund and Current
Income Fund, the “Business”) (each of the
Current Income Equity Fund, the Current Long/Short Fund and the Current Income
Fund is a “Seller Fund”
and, collectively, the “Seller
Funds”), each a series of the Coventry Group (the “Trust”), a Massachusetts
business trust that is registered with the Securities and Exchange Commission
(the “SEC”) as an
open-end investment company under the Investment Company Act of 1940, as amended
(the “1940 Act”);
and

     

    WHEREAS, Wasatch Advisors,
Inc. (“Wasatch”), a
wholly-owned subsidiary of Buyer, acts as investment adviser and sponsor to the
Wasatch Funds, Inc. (the “Wasatch Funds”), a Minnesota
corporation that is registered with the SEC as an open-end investment company
under the 1940 Act; and

     

    WHEREAS, the parties intend to
transfer the Business Assets to Buyer under the terms specified in this
Agreement in the following manner:  The Wasatch Funds will establish
three new funds and file an amendment (the “Amendment”) to its existing
Registration Statement on Form N-1A (the “Registration Statement”) with
the SEC for the purpose of registering shares of the three new funds (the “Shell Funds”) corresponding to
the three Seller Funds (each such respective new fund, or any successor thereto,
including by reorganization, asset transfer, merger or otherwise, the “New Income Equity Fund”, the
“New Long/Short Fund”
and the “New Income
Fund” and, collectively following the Closing, the “New
Funds”).  Wasatch Advisors will act as the investment adviser
to the New Income Equity Fund, New Long/Short Fund and the New Income Fund, and
Seller will act as the subadvisor to the New Income Fund. The Wasatch Funds,
acting on behalf of the Shell Funds, and the Trust, acting on behalf of the
Seller Funds, will enter into an Agreement and Plan of
Reorganization in the form and substance of Exhibit A hereto
(the “Reorganization
Agreement”) pursuant to which the respective Shell Funds will agree to
acquire all of the assets and liabilities of their counterpart Seller Funds in
exchange for Shell Fund shares, which in turn will be distributed pro rata to
the former shareholders of the Seller Funds in a transaction intended to qualify
as a “reorganization” as defined in Section 368(a) of the Internal Revenue
Code of 1986, as amended (the “Reorganization”).  Shareholders
of the Seller Funds will be solicited to approve the Reorganization by means of
a prospectus/proxy statement (the “Prospectus/Proxy Statement”)
of the New Funds filed with the SEC and mailed to the shareholders of the Seller
Funds in connection with a special meeting to be held for such purpose;
and

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    WHEREAS,
on the date hereof and in connection herewith the following agreements ancillary
hereto have been entered into:

     

    1. Research
and Consulting Agreement by and between Wasatch and Seller (the “Research and Consulting
Agreement”);

     

    2. Separation
Agreement by and between Ralph C. Shive (“Shive”) and Seller (the “Shive Separation
Agreement”);

     

    3. Separation
Agreement by and between Michael L. Shinnick (“Shinnick”) and Seller (the
“Shinnick Separation
Agreement”);

     

    4. Employment
Agreement by and between Shive and Buyer (the “Shive Employment Agreement”);
and

     

    5. Employment
Agreement by and between Shinnick and Buyer (the “Shinnick Employment
Agreement”).

     

    NOW, THEREFORE, in
consideration of the premises and mutual covenants contained herein and further
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:

     

    SECTION I.

     

    OFFER
AND SALE OF THE BUSINESS; CLOSING

     

    A. Sale of Business
Assets.  Subject to the terms and conditions contained in this
Agreement, upon the Closing, Seller will assign, transfer and sell the Business
Assets to Buyer and Buyer will purchase and accept the Business Assets from
Seller in consideration of the purchase price set forth in subsection D
below (the “Purchase
Price”).  The term “Business Assets” means all
right, title and interest that Seller possesses and has the right to transfer in
and to (i) the goodwill of the Business and (ii) the performance
record and related records of the Business.  Other than the Business
Assets, Seller is not assigning, transferring or selling any assets of Seller to
Buyer.

     

    B. Liabilities.  Seller
agrees to retain all pre-Closing liabilities associated with the
Business.  Buyer is not assuming any liabilities from Seller as part
of the transactions contemplated by this Agreement.

     

    C. Closing Date and
Place.  Subject to the terms and conditions of Section IV
hereof (the “Closing
Conditions”), the consummation of the transactions referred to in this
Agreement (the “Closing”) shall take place
promptly following the satisfaction or waiver of the condition precedents in
Section IV below, or on such other date as may be agreed upon by the
parties (the “Closing
Date”), and in any event shall take place simultaneously with the closing
of the transactions contemplated by the Reorganization Agreement. The Closing shall take
place at the offices of Vedder Price P.C., 222 North LaSalle Street,
Chicago, Illinois 60601-1003, or such other place as the parties mutually
agree.  The parties agree that the Closing may occur by the electronic
transmission or courier delivery of any documents required in connection with
the 

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    Closing
and that neither party will be required to have a representative physically
present at the Closing.

     

    D. Purchase Price.  The
Purchase Price shall equal the sum of all amounts due under the Initial Payment,
Earn-Out Fees and Aggregate IE Value Earn-Out Fees as described in
subsections 1, 2 and 3 below.

     

    1. Thirteen
Million Dollars ($13,000,000) to be paid at Closing (the “Initial
Payment”).

     

    2. Buyer
shall pay Seller a purchase price earn-out fee (“Earn-Out Fee”) for each of the
New Income Equity Fund and the New Long/Short Fund (calculated as set forth in
(a) through (c) below) monthly for each month (or portion thereof) beginning
with the month in which the Closing occurs and ending with the month during
which falls the tenth anniversary of the Closing (the “Earn-Out Fee
Term”).  Each Earn-Out Fee payment shall equal the sum of the
Daily Earn-Out Fees for each Fund for each month (or portion thereof), and shall
be paid within ten days following the end of the calendar month, with the first
Earn-Out Fee payment due within ten days following the end of the calendar month
in which the Closing occurs.  Exhibit B
attached hereto sets forth an example of the calculation of the Earn-Out Fees
using actual data for the time period set forth thereon.  Each
Earn-Out Fee shall be calculated in accordance with the terms hereof, including
as set forth on Exhibit B.  With
each monthly Earn-Out Fee payment, Buyer shall provide Seller with a spreadsheet
in the form of Exhibit B hereto
showing its calculation of the amount due and then being paid and such
spreadsheet shall be certified as true, accurate and correct by the Buyer’s
chief financial officer.

     

    (a). For each
day in the period (the month or partial month), the Daily Earn-Out Fee for the
New Income Equity Fund shall be an amount equal to (i) 0.0015/365,
multiplied by (ii) an amount (“IE Net New Assets”) equal to
the excess, if any, of (A) the total ending assets in the New Income Equity
Fund as of the close of business (the “IE Aggregate Market Value”),
over (B) (i) Six Hundred and Twenty-Seven Million Eight Hundred
Sixty-Three Thousand Five Hundred Ninety-Six Dollars and Thirty-Two Cents
($627,863,596.32) multiplied by (ii) one plus the fund’s Cumulative Fund
Return from June 15, 2008 through the day of the calculation (the “IE Adjusted Base
Assets”).  The Daily Earn-Out Fee for each day that is not a
business day shall equal the Daily Earn-Out Fee, if any, for the preceding
business day.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    (b). For each
day in the period (the month or partial month), the Daily Earn-Out Fee for the
New Long/Short Fund shall be an amount equal to (i) 0.0015/365, multiplied
by (ii) an amount (“LS Net
New Assets”) equal to the excess, if any, of (A) the total ending
assets in the New Long/Short Fund as of the close of business (the “LS Aggregate Market Value”),
over (B) (i) Ninety-Nine Million Nine Hundred Thirty-Three Thousand
Nine Hundred Ninety-Four Dollars and Forty-Four Cents ($99,933,994.44)
multiplied by (ii) one plus the fund’s Cumulative Fund Return from
June 15, 2008 through the day of the calculation (the “LS Adjusted Base
Assets”).  The Daily Earn-Out Fee for each day that is not a
business day shall equal the Daily Earn-Out Fee, if any, for the preceding
business day.

     

    (c). Definitions
and special rules:

     

    (i) “Base NAV” means, for the New
Income Equity Fund, $14.920 per share, and for the New Long/Short Fund, $11.770
per share.

     

    (ii) “Cumulative Fund Return” means,
for each of the New Income Equity Fund and New Long/Short Fund, the quotient
obtained by dividing (A) the sum of (i) the Daily NAV Changes
(positive or negative) for such fund (or its predecessor) for each day beginning
on [June 16, 2008] and continuing through the
computation date, plus (ii) the cumulative per-share distributions
expressed as a positive number (whether dividend, capital gains, or otherwise)
made by such fund (or its predecessor) for all periods beginning on [June 16, 2008] and continuing through the
computation date, by (B) the Base NAV with respect to such
fund.

     

    (iii) “Daily NAV Change” means, for
each of the New Income Equity Fund and New Long/Short Fund, the per-share net
asset value (NAV) as of the close of business on such day, minus the per-share
NAV of such fund (or its predecessor) as of the close of business the prior
business day, in each case computed in accordance with generally accepted
accounting principals consistent with past practice of each such
fund.

     

    (iv) In the
event of a split, combination, subdivision or other similar adjustment to the
number of shares in the New Income Equity Fund or the New Long/Short Fund, the
calculations of the amounts due shall be appropriately adjusted.

     

    (d). Each
Earn-Out Fee payment under this Section I.D.2. will be subject to a
discount of ten percent (10%) (the “Earn-Out Fee Discount”) so
long as each of the following conditions remain true and correct (the “Discount
Conditions”):

     

    (i) Shive and
Shinnick are employed by Buyer or an affiliate of Buyer and Shive is acting as
portfolio manager to the New Income Equity Fund and Shinnick is acting as
portfolio manager to the New Long/Short Fund;

     

    (ii) Buyer is
not in breach of any of the terms of the Research and Consulting Agreement
(including such provisions contained in such agreement with respect to Shive and
Shinnick  performing the consulting services called for in such
agreement in accordance with the terms thereof); and

     

    (iii) Buyer is
not in breach of any of the terms hereof, including, without limitation,
Article VII hereof and Shive and Shinnick are not in violation of the
restrictive covenants referenced in Section VII.B. hereof (assuming for the
purposes hereof that Shive and Shinnick were in direct privity with Seller with
respect to such restrictive covenants).

     

    Upon any
of the Discount Conditions becoming unsatisfied for any reason, the Earn-Out Fee
Discount shall no longer be applicable to any Earn-Out Fee payment.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    3. In
addition to the Earn-Out Fees set forth above, Buyer shall pay Seller an
additional fee (“Aggregate IE
Value Earn-Out Fee”) which shall accrue daily beginning the day after the
Closing Date and continuing through the five (5) year anniversary of the Closing
Date, in a daily amount equal to (i) the Incremental IE Management Fee
divided by 365, multiplied by (ii) the IE Aggregate Market Value as of the
close of business on each such day.  The “Incremental IE Management
Fee” means 90% of the amount by which the gross investment management fee
payable by the New Income Equity Fund exceeds eighty (80) basis points of assets
annually; provided that the Incremental IE Management Fee shall not exceed nine
(9) basis points.  The Aggregate IE Value Earn-Out Fee will be paid
monthly for five years following Closing.  Each Aggregate IE Value
Earn-Out Fee that is due will be paid within ten days of the end of the calendar
month, with the first Aggregate IE Value Earn-Out Fee payment due within ten
days of the end of the calendar month in which Closing occurs.  Exhibit B
attached hereto sets forth an example of the calculations of the Aggregate IE
Value Earn-Out Fee using actual data for the time period set forth
thereon.  Each Aggregate IE Value Earn-Out Fee shall be calculated in
accordance with the  terms hereof, including as set forth on Exhibit B.  With
each monthly Aggregate IE Value Earn-Out Fee payment, Buyer shall provide Seller
with a spreadsheet in the form of Exhibit B hereto
showing its calculation of the amount then due and being paid and such
spreadsheet shall be certified as true, accurate and correct by the chief
financial officer of Buyer.

     

    4. With
respect to the determination of the Earn-Out Fee or the Aggregate IE Value
Earn-Out Fee, Buyer and Seller hereby agree that:

     

    (a). Buyer
shall deliver or make available to Seller and/or its representatives promptly
and, in any event, within two (2) business days after any written request, any
and all work papers or other information of Buyer or any third party (including
each transfer agent) related to monthly spreadsheet and the determination,
preparation or calculation of the Earn-Out Fee and the Aggregate IE Value
Earn-Out Fee, including, without limitation, the number of units outstanding and
the aggregate value of each New Fund on a daily basis. If Seller does not
object, or otherwise fails to respond, to the determination of the Earn-Out Fee
or the Aggregate IE Value Earn-Out Fee as set forth by Buyer within thirty (30)
days after delivery of such monthly spreadsheet to Seller (such period of time
to be reasonably extended in the event that Buyer fails to promptly provide such
work papers or other information in accordance with the immediately preceding
sentence), then such determination of the Earn-Out Fee or the Aggregate IE Value
Earn-Out Fee, as the case may be, specified therein shall automatically become
final and conclusive.  In the event that Seller objects to the
determination of the Earn-Out Fee or the Aggregate IE Value Earn-Out Fee as set
forth by Buyer within such thirty (30) day period (as may be extended pursuant
to the immediately preceding sentence), Seller and Buyer shall promptly meet and
endeavor to reach agreement as to the determination of the Earn-Out Fee or the
Aggregate IE Value Earn-Out Fee, as the case may be.  If Seller and
Buyer agree on the determination of the Earn-Out Fee or the Aggregate IE Value
Earn-Out Fee, as the case may be (as revised pursuant to any agreement between
Buyer and Seller), then the specified determination therein shall become final
and conclusive.  If Seller and Buyer are unable to reach agreement
within twenty-one (21) days after the delivery of such objection to the
determination of the Earn-Out Fee or the Aggregate IE Value Earn-Out Fee, as the
case may be, then Grant Thornton LLP (the 

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    “Independent Accountants”)
shall promptly be retained to undertake a determination of the Earn-Out Fee or
the Aggregate IE Value Earn-Out Fee, as the case may be.  Only
disputed item(s) shall be submitted to the Independent Accountants for
review.  In resolving any disputed item, the Independent Accountants
may not assign a value to such item greater than the greatest value for such
item claimed by either party or less than the lowest value for such item claimed
by either party, in each case as presented to the Independent
Accountants.  The determination of the Independent Accountants as to
any item in dispute shall be based solely on presentations by Seller and Buyer
(i.e., not on
independent review), and on the definitions set forth and other provisions
contained in this Agreement.  Such determination of the Independent
Accountants shall be final and binding on Seller and Buyer.

     

    (b). Within
five (5) business days of the final determination of the Earn-Out Fee or
Aggregate IE Value Earn-Out Fee, pursuant to this Section 4, Buyer or
Seller, as the case may be, shall pay or cause to be paid to the other an amount
equal to (i) the amount by which the final Earn-Out Fee or Aggregate IE
Value Earn-Out Fee is greater or less than the original Earn-Out Fee or
Aggregate IE Value Earn-Out Fee set forth and paid by Buyer to Seller, and
(ii) interest on such amount at a rate equal to the lower of (x) ten
percent (10%) per annum or (y) the highest rate permitted by law thereon,
from the date of such original payment of the Earn-Out Fee or Aggregate IE Value
Earn-Out Fee to the date of payment of the final determined Earn-Out Fee or
Aggregate IE Value Earn-Out Fee pursuant to this Section 4, as the case may
be (such difference and interest thereon being the “Fee Reconciliation
Amount”).  If the Fee Reconciliation Amount results in the
payment of additional funds to Seller, Buyer shall promptly pay such Fee
Reconciliation Amount to Seller and pay all expenses and fees of the Independent
Accountants with respect to such final determination.  If the Fee
Reconciliation Amount does not result in the payment of additional funds to
Seller, Seller shall promptly pay or cause to be paid all expenses and fees of
the Independent Accountants with respect to such final
determination.  Final determination and payment of the Fee
Reconciliation Amount shall be made without regard to any claims or offsets that
either Seller or Buyer may have asserted against one another.

     

    5. Any
Earn-Out Fee or Aggregate IE Value Earn-Out Fee payment which is not paid when
due shall accrue interest at a rate equal to the lower of (x) ten percent
(10%) per annum or (y) the highest rate permitted by law, from the due date
of such payment until the date such payment (including all accrued interest) is
paid in full.

     

    E. Income
Fund.  Wasatch will promptly recommend to the Wasatch Funds
Board of Directors (the “Wasatch Board”) that Seller
become the investment subadvisor to the New Income Fund and the Investment
Subadvisory Agreement with respect to such Income Fund shall be as set forth in
Exhibit C hereto (the “New
Investment Subadvisory Agreement”).  The investment management
fee of the New Income Fund will continue at 0.55% of average daily net assets
annually, and 0.52% of average daily net assets will be paid to Seller pursuant
to the Income Fund New Investment Subadvisory Agreement.  Subject to
its fiduciary duties, Buyer will use its reasonable best efforts to cause the
Wasatch Board to not terminate or fail to renew Seller as the subadvisor to the
New Income Fund on substantially the terms, and with respect to 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    the
subadvisory fees, on terms not less favorable than, as set forth in the New
Investment Subadvisory Agreement.

     

    F. Making of
Payments.  Buyer shall make all payments of the Purchase Price
in immediately available funds by wire transfer to the account or accounts
designated by Seller.

     

    G. Allocation of Purchase
Price.  The Purchase Price shall be allocated among the
Business Assets as mutually agreed between Buyer and Seller prior to the Closing
Date.  The parties agree that such allocation shall be used by them
and respected for all purposes, including income tax purposes, and that the
parties shall follow such allocation for all reporting purposes.

     

    H. Closing
Deliveries.  At the Closing, (i) the Seller will execute
and deliver the certificate referenced in Section IV.B.4.; (ii) the
Buyer will execute and deliver the certificate referenced in
Section IV.A.3; (iii) the Seller will execute and deliver to Buyer a
bill of sale (the “Bill of
Sale”); and (iv) Buyer will deliver to Seller the Initial Payment as
specified in Section I.D.1.

     

    SECTION II.

     

    REPRESENTATIONS,
WARRANTIES AND COVENANTS OF SELLER

     

    Except as
otherwise disclosed to Buyer in the Seller’s disclosure schedules to this
Agreement (“Seller’s Disclosure
Schedules”), Seller hereby represents and warrants to Buyer as of the
date hereof the matters set forth in Sections II.A, B, C, D and E below and
covenants with Buyer the matters set forth in Section II.F below as
follows:

     

    A. Authority to Execute and Perform
Agreements; Enforceability.

     

    1. Seller
has the full legal right and power and all authority and approval required to
enter into, execute and deliver this Agreement and to perform its obligations
hereunder; and

     

    2. This
Agreement has been duly authorized, executed and delivered and is a valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms, subject only to qualifications relating to the enforcement of rights and
remedies created under bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting the rights and remedies of creditors
and general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).

     

    3. Subject
to approval of the Reorganization Agreement by the Board of Trustees of the
Trust, the Trust, on behalf of each of the Seller Funds, has the full legal
right and power and all authority and approval required to enter into, execute
and deliver the Reorganization Agreement and to perform its obligations
thereunder; and

     

    4. The
Reorganization Agreement is fully enforceable against the Seller Funds in
accordance with its terms, subject only to qualifications relating to the
enforcement of rights and remedies created under bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting the
rights and remedies of creditors and general principles 

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law).

     

    B. Non-Contravention;
Compliance.

     

    1. The
execution, delivery and performance of this Agreement by Seller, and the
consummation of the transactions contemplated hereby on the terms and conditions
stated herein, will not violate any provision of Federal or state law, statute,
ordinance or regulation or the rules of self-regulatory organizations (“Laws”) applicable to Seller
and will not conflict with, or result in the breach or termination of any
provision of, or constitute a default under, any material contract, other
instrument or agreement by which Seller is bound;

     

    2. Seller,
and 1st Source Bank, and, to Seller’s knowledge, the Seller Funds have at all
times conducted their respective businesses and all operations in material
compliance with, and each of them is in material compliance with, all Laws
applicable to each such entity and their respective businesses;

     

    3. To the
Seller’s knowledge, the execution, delivery and performance of the
Reorganization Agreement by the Trust on behalf of the Seller Funds and the
consummation of the transactions contemplated thereby on the terms and
conditions stated therein, will not violate any provision of Law applicable to
the Seller Funds or the Trust and will not conflict with, or result in the
breach or termination of any provision of, or constitute a default under, any
material contract, other instrument or agreement by which any of the Seller
Funds or the Trust or their respective assets are bound; and

     

    4. Seller is
registered under the Investment Advisers Act of 1940, as amended (“Advisers Act”) as an
investment adviser with the SEC.

     

    C. Litigation.  There
is no litigation, proceeding or, to Seller’s knowledge, investigation, pending
or threatened before any court or governmental or regulatory agency against
Seller or, to Seller’s knowledge, any of the Seller Funds that involves or could
be reasonably expected to adversely affect, the Business, the Seller Funds, the
transactions contemplated by this Agreement or the Reorganization Agreement, or
the Business Assets to be acquired by Buyer pursuant to this
Agreement.

     

    D. Insolvency.  Seller
is not insolvent, and no proceedings, in a court having jurisdiction, under any
state or federal bankruptcy or insolvency law or under laws for relief of
debtors, by or against Seller have been made.

     

    E. Disclosure
Matters.  All information supplied in writing to Buyer or its
counsel by Seller for inclusion in the Prospectus/Proxy Statement, the
Registration Statement and the Amendment relating to Seller, the Seller Funds,
and their respective affiliates (as such term is defined under the 1940 Act) and
their respective officers, directors, and trustees and to Seller’s knowledge, by
service providers to the Seller Funds (excluding Seller) (collectively, “Seller Information”), will be
true and correct in all material respects at the time indicated, as the case may
be, and shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading to a 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    shareholder
of the Seller Funds evaluating the transactions described in the
Prospectus/Proxy Statement.

     

    F. Covenants Pending the
Closing.  Except as otherwise provided herein, from and after
the date hereof and until the Closing Date:

     

    1. Seller
will permit Buyer and its representatives (including its counsel and auditors),
at reasonable times during normal business hours and in a manner which will not
materially disrupt the Business, to have free and full access to examine and
make copies of all Seller’s books and records pertaining to the Business,
whether or not delivered to Buyer pursuant hereto (including, but not limited
to, correspondence, corporate minutes and record books, memoranda, books of
account, accountants’ work papers and the like), in order that Buyer may have
full opportunity to make such investigation as it shall desire of the Business
and the Seller Funds.  Such access shall be subject to any and all
confidentiality obligations of Seller thereto and any attorney-client privilege
of Seller thereto. Seller will use its
reasonable best efforts to allow Buyer access to the books and records of the
Seller Funds’ service providers and the books and records of the Seller
Funds.  All information obtained by Buyer during such investigations
shall be kept in confidence and shall be used and held as confidential and
proprietary information pursuant to the terms and conditions of that certain
Non-Disclosure & Non-Solicitation Agreement by and between Buyer and Seller,
dated as of March 3, 2008.

     

    2. Seller
will continue to operate the Business in material compliance with applicable
Laws and consistent with past practices and shall not take any action, or fail
to take any action, which could be reasonably expected to have a material
adverse effect on the Business or the Seller Funds.

     

    3. Seller
will not, directly or indirectly, solicit, encourage or facilitate the making or
submission of any Acquisition Proposal or take any action that could reasonably
be expected to lead to an Acquisition Proposal, including engaging in
discussions or negotiations with any person with respect to any acquisition
proposal or that could reasonably be expected to lead to an acquisition
proposal.  For purposes of this subsection, an “Acquisition Proposal” means
any offer, proposal, inquiry or indication of interest regarding an acquisition,
merger or other similar transaction with the Seller Funds.

     

    4. Seller
will use its reasonable best efforts to cause the conditions set forth in
Section IV to be satisfied and to consummate the transactions contemplated
by this Agreement as soon as reasonably possible and in any event prior to the
Closing Date.

     

    SECTION III.

     

    REPRESENTATIONS,
WARRANTIES AND COVENANTS OF BUYER

     

    Buyer
represents and warrants  to Seller as of the date hereof the matters
set forth in Sections III.A, B, C, D and E below and covenants with Seller
the matters set forth in Sections III.F. and G. below as
follows:

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    A. Authority to Execute and Perform
Agreements; Enforceability.

     

    1. Buyer has
the full legal right and power and all authority and approval required to enter
into, execute and deliver this Agreement and to perform its obligations
hereunder;

     

    2. This
Agreement has been duly authorized, executed and delivered and is a valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms, subject only to qualifications relating to the enforcement of rights and
remedies created under bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting the rights and remedies of creditors
and general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law);

     

    3. Subject
to approval of the Reorganization Agreement by the Board of Directors of the
Wasatch Funds, the Wasatch Funds, on behalf of each of the Shell Funds, has the
full legal right and power and all authority and approval required to enter
into, execute and deliver the Reorganization Agreement and to perform its
obligations thereunder;

     

    4. The
Reorganization Agreement is fully enforceable against the Shell Funds in
accordance with its terms, subject only to qualifications relating to the
enforcement of rights and remedies created under bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting the
rights and remedies of creditors and general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law);
and

     

    5. Buyer has
the financial capacity to pay the Initial Payment and to consummate this
Agreement and transactions contemplated herein.

     

    B. Non-Contravention;
Compliance.

     

    1. The
execution, delivery and performance of this Agreement by Buyer, and the
consummation of the transactions contemplated hereby on the terms and conditions
stated herein, will not violate any Laws applicable to Buyer or Wasatch and will
not conflict with, or result in the breach or termination of any provision of,
or constitute a default under, any material contract, other instrument or
agreement by which Buyer, Wasatch or their respective assets are
bound;

     

    2. To
Buyer’s knowledge, the execution, delivery and performance of the Reorganization
Agreement by Wasatch Funds on behalf of the Shell Funds, and the consummation of
the transactions contemplated thereby on the terms and conditions stated
therein, will not violate any provision of Law applicable to Wasatch Funds and
will not conflict with, or result in the breach or termination of any provision
of, or constitute a default under, any material contract, other instrument or
agreement by which any of the Wasatch Funds or their respective assets are
bound;

     

    3. The
Wasatch Funds, Buyer and Wasatch have at all times conducted their respective
businesses and all operations in material compliance with, and each of them is
in material compliance with, all Laws applicable to them and their respective
businesses; and

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    4. Wasatch
is registered under the Advisers Act as an investment adviser with the
SEC.

     

    C. Litigation.  There
is no litigation, proceeding or, to Buyer’s knowledge, investigation pending or
threatened before any court or governmental or regulatory agency against Wasatch
Funds, Buyer or Wasatch that involves or could be reasonably expected to
adversely affect any of them or the transactions contemplated by this Agreement
or the Reorganization Agreement.

     

    D. Insolvency.  Neither
Buyer nor Wasatch is insolvent, and no proceedings, in a court having
jurisdiction, under any state or federal bankruptcy or insolvency law or under
laws for relief of debtors, by or against Buyer or Wasatch have been
made.

     

    E. Disclosure
Matters.  All information contained in the Registration
Statement, the Amendment and the Prospectus/Proxy Statement (other than Seller
Information) (collectively, “Wasatch Information”), will be
true and correct in all material respects at the time indicated, as the case may
be; and neither the Registration Statement, the Amendment or the
Prospectus/Proxy Statement, when they shall be authorized for use, will, with
respect to any Wasatch Information, include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading.

     

    F. Office.  Prior to
Closing, Buyer will establish an office in the South Bend area in a building
whose principal tenant is not a financial institution which competes with
Seller’s Bank.

     

    G. Certain Covenants of
Buyer.  Buyer will, and will cause its affiliates, including,
without limitation, Wasatch, to use its reasonable best efforts to promptly
cause the establishment of the Shell Funds, the Amendment to be filed with and
declared effective by the SEC in an expeditious manner, to cause the Board of
Trustees of the Wasatch Funds to approve the Reorganization Agreement and the
transactions contemplated thereby with the fee schedules agreed to by Buyer and
Seller, and to cause the transactions contemplated by this Agreement to be
completed.  In connection therewith, Buyer will, and will cause
Wasatch to provide Seller with a draft of any written presentation to be
provided to the Wasatch Board in connection with this Agreement and the
Reorganization (“Board
materials”) and allow Seller to provide comments on the
same.  Buyer will, and will cause Wasatch to provide Seller with final
Board materials.

     

    SECTION IV.

     

    CLOSING
CONDITIONS

     

    A. Conditions to Closing Obligations of
Seller.  The obligations of Seller to consummate the
transactions by it in connection with the Closing are subject to the
satisfaction or the waiver by Seller of the following conditions on or prior to
the Closing Date:

     

    1. All of
the covenants and agreements herein on the part of Buyer to be complied with or
performed on or before the Closing Date shall have been fully complied with and
performed;

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    2. All of
the representations and warranties on the part of Buyer made in this Agreement
shall be true and correct on the Closing Date to the same extent as if made at
and as of such date;

     

    3. Buyer
shall have delivered a certificate, executed by an authorized officer, attesting
to the satisfaction of conditions IV.A.1 and 2 above; and

     

    B. Conditions to Closing Obligations of
Buyer.  The obligations of Buyer to consummate the transactions
by it in connection with the Closing are subject to the satisfaction or the
waiver by Buyer of the following conditions on or prior to the Closing
Date:

     

    1. All of
the covenants, agreements and conditions herein on the part of Seller to be
complied with or performed on or before the Closing Date shall have been fully
complied with and performed;

     

    2. All of
the representations and warranties of Seller made in this Agreement shall be
true and correct on the Closing Date as though made at and as of such
date;

     

    3. There
shall have been no event, occurrence or circumstance which could be reasonably
expected to have a material adverse effect on the Business or the Seller Funds,
other than events, occurrences or circumstances that impact similar businesses
and/or funds in a similar manner; provided, that unfavorable investment
performance by the Seller Funds shall in no event be deemed to be such an event,
occurrence or circumstance; and

     

    4. Seller
shall have delivered a certificate, executed by an authorized officer, attesting
to the satisfaction of conditions IV.B.1, 2 and 3 above.

     

    C. Conditions to Closing Obligations of
Both Parties.  The obligations of each party to this Agreement
to consummate the transactions by it in connection with the Closing are subject
to the satisfaction of the following conditions on or prior to the Closing
Date:

     

    1. Citi Fund
Services (“Citi”) shall
have provided notice of termination on behalf of the Seller Funds to Citi,
Foreside Distribution Services L.P. and Fifth Third Bank with respect to the
agreements between the Seller Funds and such parties.

     

    2. The
Prospectus/Proxy Statement and Amendment shall each have been declared effective
by the SEC; no stop order suspending such effectiveness shall have been entered;
and no proceedings to obtain such a stop order shall have been instituted or, to
the knowledge of any of the parties to this Agreement, shall have been
threatened by the SEC;

     

    3. The
Wasatch Board shall have approved the Reorganization Agreement, the investment
advisory agreement between Wasatch and the Shell Funds (the “New Advisory Agreement”) and
the New Investment Subadvisory Agreement, the Coventry Board shall have approved
the Reorganization Agreement and the shareholders of each Seller Fund shall have
approved the Reorganization Agreement by the requisite vote (the approval of the
Wasatch Board, Coventry Board and shareholders of the Seller Funds shall be on
the economic terms agreed to between Seller and Buyer, including, but not
limited to, the management fee of the New Income Equity Fund, New Long/Short
Fund and New Income Fund being .90%, 1.10% and 

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    .55% and
the subadvisory fee of the New Income Fund being .52% of the respective fund’s
average daily net assets without breakpoints in the management fees), Wasatch
shall have entered into the New Advisory Agreement with Wasatch Funds and Seller
shall have entered into the New Investment Subadvisory Agreement with Wasatch to
subadvise the New Income Fund and the transactions contemplated by the
Reorganization Agreement shall have been completed with respect to each Seller
Fund simultaneously with the Closing of the transactions contemplated by this
Agreement.

     

    D. Waiver of Certain Conditions to
Closing.  Anything in this Agreement to the contrary
notwithstanding, if any one or more of the conditions specified in paragraphs A
through C above shall not have been satisfied, the party or parties entitled to
the benefit of such condition may waive such condition and nevertheless proceed
with the transactions contemplated hereby.  In the event of any such
waiver, the party granting such waiver shall not thereafter have the right to
proceed against the other party for damages resulting from the failure of the
condition waived to have been satisfied.

     

    SECTION V.

     

    INDEMNIFICATION

     

    A. Indemnification by
Buyer.  Buyer agrees, subject to subsections C and D below, to
indemnify and hold harmless Seller and the Seller Funds, and their respective
directors, trustees, officers, employees, agents, affiliates and managers
(“Seller Indemnitees”),
from and against all demands, claims, actions or causes of action, assessments,
damages, liabilities, costs and further expenses, including, without limitation,
interest, penalties and attorneys’ and professionals’ and experts’ fees and
expenses (collectively, “Seller
Losses”), asserted against, resulting to, imposed upon or incurred by any
Seller Indemnitee, directly or indirectly, by reason of or resulting
from:

     

    1. a breach,
misrepresentation or inaccuracy of any representation, warranty, covenant or
agreement of Buyer contained in this Agreement or in any certificate delivered
pursuant hereto;

     

    2. any
misstatement or omission in the Wasatch Information referred to in
Section III.E; and

     

    3. any
liabilities relating to or arising out of the operation of the Business by Buyer
from and after the Closing.

     

    B. Indemnification by
Seller.  Seller agrees, subject to subsections C, D and E
below, to indemnify and hold harmless Buyer, Wasatch and the Wasatch Funds and
their respective directors, trustees, officers, employees, agents, affiliates
and managers (the “Buyer
Indemnitees”), from and against all demands, claims, actions or causes of
action, assessments, damages, liabilities, costs and further expenses,
including, without limitation, interest, penalties and attorneys’ and
professionals’ and experts’ fees and expenses (collectively, “Buyer Losses”), asserted
against, resulting to, imposed upon or incurred by Buyer Indemnitee, directly or
indirectly, by reason of or resulting from:

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    1. a breach,
misrepresentation or inaccuracy of any representation, warranty, covenant or
agreement of Seller contained in this Agreement or any certificate delivered
pursuant hereto;

     

    2. any
misstatement or omission in the Seller Information referred to in
Section II.E; and

     

    3. any
liabilities relating to or arising out of the operation of the Business by
Seller prior to the Closing.

     

    C. Procedures for
Indemnification.  Any party seeking indemnification hereunder
(an “Indemnitee”) shall
give prompt written notice to the party against which indemnification is sought
(the “Indemnitor”) of
any claims against the Indemnitee as to which a claim for indemnification is to
be made hereunder, which notice shall specify the nature of such claim; provided, however, that the failure to
provide such prompt written notice shall not affect the indemnification
obligations hereunder, except to the extent that the Indemnitor is harmed by
such failure or delay.  The Indemnitor shall have the right to
participate, at its own expense, in the defense of any such claim or its
settlement, and the Indemnitee shall permit the Indemnitor to take over the
investigation, defense and settlement of any such claim with counsel reasonably
satisfactory to the Indemnitee, provided that the Indemnitor bears the fees and
expenses of such counsel.  Notwithstanding the preceding sentence,
(i) the Indemnitor shall not settle any action without the consent of the
Indemnitee unless the settlement has no monetary consequences to the Indemnitee
and the terms of the settlement have no material impact on the conduct of the
Indemnitee’s or its affiliates’ conduct of their business, and (ii) if the
Indemnitee reasonably believes that it has defenses which conflict with or are
in addition to those which may be asserted by the Indemnitor, the Indemnitee
may, at the expense of the Indemnitor, retain separate
counsel.  Notwithstanding the foregoing, no Indemnitor shall be
obligated to indemnify any Indemnitee unless written notice of the claim with
respect to which indemnification is sought was provided to such Indemnitor as
provided in the first sentence of this paragraph within the two-year period
following the Closing Date.

     

    D. Survival of Representations and
Warranties.  All representations and warranties made by any
party in this Agreement shall survive the execution and delivery of this
Agreement and the Closing for a period of two years following the Closing
Date.  All covenants and agreements made by any party in this
Agreement shall survive the execution and delivery of this Agreement and the
Closing until fully performed or discharged.

     

    E. Limitations on Indemnification
Obligations of Seller.  The rights of the Buyer Indemnitees to
indemnification pursuant to the provisions of Section V.B are subject to
the following limitations:

     

    1. the
amount of any and all Buyer Losses will be determined net of (i) any
amounts recovered by the Buyer Indemnitees under insurance policies or other
collateral sources (such as contractual indemnities of any person that are
contained outside of this Agreement) with respect to such Buyer Losses (and that
the Buyer Indemnitees agree to use commercially reasonable efforts to cover all
possible amounts from such sources) and (ii) any tax benefits actually
realized with respect to such Buyer Losses;

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    2. the Buyer
Indemnitees will not be entitled to recover Buyer Losses pursuant to
Section V.B until the total amount that the Buyer Indemnitees would recover
under Section V.B, exceeds $50,000 (the “Basket”), provided that once
the Basket amount is reached the Buyer Indemnitees will be entitled to receive
the entire amount of Buyer Losses; and

     

    3. the Buyer
Indemnitees will not be entitled to recover Buyer Losses if the aggregate claims
actually paid by Seller on account thereof exceed the Initial Payment (the
“Cap”).

     

    F. Limitations on Indemnification
Obligations of Buyer.  The rights of the Seller Indemnitees to
indemnification pursuant to the provisions of Section V.A are subject to
the following limitations (which limitations shall not apply to any breach by
Buyer of its covenants to pay the Purchase Price):

     

    1. the
amount of any and all Seller Losses will be determined net of (i) any
amounts recovered by the Seller Indemnitees under insurance policies or other
collateral sources (such as contractual indemnities of any person that are
contained outside of this Agreement) with respect to such Seller Losses (and
that the Seller Indemnitees agree to use commercially reasonable efforts to
cover all possible amounts from such sources and (ii) any tax benefits
actually realized with respect to such Seller Losses);

     

    2. the
Seller Indemnitees will not be entitled to recover Seller Losses pursuant to
Section V.A until the total amount that the Seller Indemnitees would
recover under Section V.A, exceeds $50,000 (the “Basket”), provided that once
the Basket amount is reached the Seller Indemnitees will be entitled to receive
the entire amount of Seller Losses; and

     

    3. the
Seller Indemnitees will not be entitled to recover Seller Losses if the
aggregate claims actually paid by Buyer on account thereof exceed the Initial
Payment (the “Cap”).

     

    SECTION VI.

     

    TERMINATION

     

    Notwithstanding
anything to the contrary contained herein, this Agreement and the transactions
contemplated hereby with respect to an affected party may be terminated
(a) by either party upon written notice to the other party if the Closing
has not occurred on or before February 28, 2009; (b) if a party is in
material breach of its obligations hereunder and has not cured such breach
within 10 days following written notice thereof provided to it by the other
party, upon written notice by the non-breaching party to the breaching party; or
(c) by mutual written agreement of both parties.  In the event of
termination of this Agreement as provided above, this Agreement shall forthwith
become void, and there shall be no liability on the part of Seller or Buyer,
except for willful breaches of this Agreement prior to the time of such
termination, provided,
however, the obligations of Buyer, Seller and their respective affiliates
under that certain Non-Disclosure & Non-Solicitation Agreement, dated as of
March 3, 2008, shall survive.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    SECTION VII.

     

    POST-CLOSING
COVENANTS

     

    A. During
the Earn-Out Fee Term, Buyer and its employees and affiliates will not
pro-actively solicit separate account clients or compete with Seller and its
affiliates to provide asset management or investment advisory services for any
separate account clients within the Covered Counties; provided, however, that
Buyer may reactively accept and follow up on any potential clients introduced to
Buyer through any third party not affiliated with Buyer, including a consultant
or pension advisory firm to which Wasatch has furnished data and/or has an
ongoing relationship.  Furthermore, this Subsection A does not
apply to wrap programs of national brokerage platforms that extend into the
Covered Counties.  The term “Covered Counties” shall mean
the following counties:  (i) Berrien, Cass and Kalamazoo counties
in the State of Michigan, and (ii) Allen, Elkhart, Fulton, Huntington,
Kosciusko, La Porte, Marshall, Porter, Pulaski, St. Joseph, Starke,
Wells and Whitley counties in the State of Indiana.

     

    B.   1. Without the prior written consent of Seller,
while employed by Buyer or an affiliate of Buyer, and for a period of twelve
(12) months thereafter (the “One Year Tail Period”) (the
last day of such employment, the “Termination Date”), Buyer will
use its best efforts to cause each of Shive and
Shinnick to not directly or indirectly (either alone or in concert with others)
provide any asset management or investment advisory services to clients or
prospects of Seller with whom Shive or Shinnick had a professional relationship
while Shive or Shinnick was employed by Seller or Buyer.

     

    2. Buyer
will include the foregoing restrictive covenant provisions in the Shive
Employment Agreement and Shinnick Employment Agreement, will not amend such
employment agreements to remove such provisions, will include Seller as a third
party beneficiary of such covenants and will enforce such provisions against
Shive and Shinnick to the best of its ability, including through litigation, if
necessary.

     

    C. Buyer
acknowledges that the restrictions contained in this Section VII are
reasonable and necessary to protect the legitimate interests of Seller and do
not cause Buyer undue hardship.  Buyer acknowledges that any violation
of this Section VII could cause irreparable harm to Seller, that damages
for such harm may be incapable of precise measurement and that, as a result,
Seller may not have an adequate remedy at law to redress the harm caused by such
violations.  Therefore, in the event of an alleged violation of this
Section VII by Buyer or any of its affiliates, Buyer agrees that, in
addition to its other remedies, Seller shall be entitled to seek injunctive
relief and other equitable remedies, including, but not limited to, immediate
temporary injunction, temporary restraining order and/or preliminary or
permanent injunction to restrain or enjoin any such violation.  Buyer
hereby agrees to waive any requirement for the securing or posting of any bond
in connection with such remedy.

     

    D. If a
court of competent jurisdiction construes the covenants in this Section VII
or any part hereto, to be unenforceable because of its duration or the
geographical area covered hereby, the court shall modify such unenforceable
provision to the extent necessary so that the provision, as modified, shall then
be enforceable.  The parties hereto intend that the provisions of
Section VII shall be deemed to be a series of separate covenants, one for
each and every county of each and every state of the United States of America
within the Covered Counties.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    E. Buyer
will, and will cause Wasatch to, use its reasonable best efforts to ensure that
the New Income Equity Fund remains open for new investment by new and existing
shareholders, and that the New Income Equity Fund is not merged into any other
fund.

     

    F. Buyer
will, and will cause Wasatch to, use its reasonable best efforts to ensure that
the New Long/Short Fund remains open for new investment by new and existing
shareholders so long as its assets under management are not in excess of One
Billion Dollars and that the New Long/Short Fund is not merged with any other
fund.

     

    G. For a
period of seven (7) years following the Closing, Buyer shall provide Seller
herewith access to any records which constitute a portion of the Business Assets
for any reasonable purpose.

     

    H. Unless
otherwise agreed to in writing by Seller, until January 1, 2011, Seller
will, and will cause Wasatch to, use its reasonable best efforts to ensure that
the names of the New Funds will not be changed and that the term “1st Source”
will continue to be included in such names.

     

    I. Buyer and
Seller each acknowledges that the Reorganization contemplated by this Agreement
is intended to comply with the requirements of Section 15(f) of the 1940
Act.  In that regard:

     

    1. Buyer
shall cause Wasatch to use its reasonable best efforts to conduct its business
so as to assure that, insofar as within the control of Buyer and Seller or
Wasatch, for a period of two years after the Closing Date as specified in the
Reorganization Agreement, no change in fees or addition of expenses to the New
Funds or implementation of other arrangements will occur which would result in
an “unfair burden” (as that term is used in Section 15(f) of the 1940 Act) to
the New Funds; and

     

    2. Buyer
agrees that it shall cause Wasatch to use its reasonable best efforts to cause
the directors of Wasatch Funds to take, or refrain from taking, such actions to
ensure that, insofar as within the control of Buyer or Wasatch, for a period of
three years after the Closing Date as specified in the Reorganization Agreement,
at least 75% of the members of the board of directors of Wasatch Funds,
including any successors thereto, shall not be “interested persons” (as that
term is defined in the 1940 Act) of the Buyer, Seller or Wasatch.

     

    SECTION VIII.

     

    MISCELLANEOUS

     

    A. Notices.  All
notices hereunder shall be deemed to have been given when delivered in person
or, five (5) days thereafter if mailed, by registered or certified mail, postage
prepaid, addressed to any party at its address set forth below or at any other
address identified in writing to the other parties hereto:

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    If to
Seller:

     

    c/o 1st
Source Bank

     

    Attention:  Chief
Executive Officer

     

    100 North
Michigan Street, P. O. Box 1602

     

    South
Bend, IN   46634

     

    With a
copy to:

     

    Vedder
Price P.C.

     

    222 North
LaSalle Street, Suite 2600

     

    Chicago,
Illinois  60601

     

    Attention:                                William
J. Bettman, Esq.

     

    If to
Buyer:

     

    Wasatch
Advisors, Inc.

    150
Social Hall Avenue

    4th
Floor

    Salt Lake
City, UT  84111

     

    With a
copy to:

     

    Alan
Bell

    Dorsey &
Whitney LLP

    136 South
Main, Suite 1000

    Salt Lake
City, UT  84101

     

    B. Captions.  The
captions hereunder are for the convenience of the parties and shall not control
or affect the interpretation or construction of this Agreement.

     

    C. Controlling Law; Consent to
Jurisdiction.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana.  Seller
and Buyer hereby consent to service of process and exclusive jurisdiction in the
State of Indiana with respect to any disputes arising under or in relation to
this Agreement.

     

    D. Entire
Agreement.  This Agreement and the agreements, documents,
schedules and exhibits referred to herein constitute the entire agreement of the
parties with respect to the transactions contemplated hereby and supersede all
other agreements between the parties, whether written or oral which survives the
execution and delivery hereof.  This Agreement may not be amended,
except in a writing signed by each of the parties hereto.

     

    E. Binding
Effect.  This Agreement shall inure to the benefit of and bind
the parties hereto and their respective successors and assigns.

     

    F. No Assignment or
Amendment.  Neither this Agreement nor any rights of any party
hereunder may be assigned without obtaining the prior written consent of the
other party hereto, which consent shall not be unreasonably withheld; provided,
however, after the Closing 

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    Seller
may assign its rights to receive payment of the Purchase Price to any party
without the prior consent of Buyer.  Subject to the preceding
sentence, this Agreement will be binding upon and inure to the benefit of the
successors and permitted assigns of the parties.  This Agreement may
not be amended and the terms hereof shall not otherwise be modified except by an
instrument in writing signed by the parties hereto.

     

    G. Expenses and
Fees.  Each party shall pay its respective costs, expenses and
legal fees in connection with this Agreement and the transactions contemplated
hereby.  However, all costs relating to the solicitation of the
shareholders of Seller Funds (inclusive of legal fees and expenses, printing,
mailing the proxy statement and soliciting proxies) will be paid by
Buyer.

     

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

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

    
      
        
           

        

         

      

      
        19

        
          

        

      

      
         

      

    

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

     

    
      	 
      	
              WA
      HOLDINGS, INC.

               

              By:                                                                

              Title:                                                              

               

            
	 
      	
              1ST SOURCE
      CORPORATION INVESTMENT ADVISORS, INC.

               

              By:                                                                

              Title:                                                              

            

    

    

    
      
        
          
            	 
      	
                     

                  	 
      

          

           

        

         

      

      
        20

        
          

        

      

      
         

      

    

    EXHIBIT LIST

     

    Exhibit A                                Agreement
and Plan of Reorganization

     

    
      	
              Exhibit B

            	
              Earn-Out
      Fee Calculation Spreadsheet

            

    

     

    
      	
               
      

            	
              and

            

    

     

    
      	
               
      

            	
              Aggregate
      IE Value Earn-Out Fee Calculation
Spreadsheet

            

    

     

    Exhibit C                                Income
Fund New Investment Subadvisory Agreement

     

    
      
        
          
            	 
      	
                     

                  	 
      

          

           

        

         

      

      
        21

        
          

        

      

      
         

      

    

    EXHIBIT A

     

    Agreement
and Plan of Reorganization

     

    
      
        
          
            	 
      	
                    A-1

                  	 
      

          

           

        

         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT B

     

    Example
Earn-Out Fee Calculation

     

    and

     

    Example
Aggregate IE Value Earn-Out Fee Calculation

     

    
      
        
          
            	 
      	
                    C-1

                  	 
      

          

           

        

         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT C

     

    INCOME
FUND NEW INVESTMENT SUBADVISORY AGREEMENT

     

    

    
      
        
          
            	 
      	
                    E-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00148-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00148-of-00352.parquet"}]]