BONTEX INC
EXHIBIT 10 (XIII)
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>btx8kex602.txt
<DESCRIPTION>EXHIBIT 10 (XIII)
<TEXT>
                                                               Exhibit 10 (xiii)

                      THIRD AMENDMENT TO LOAN MODIFICATION,
                     REAFFIRMATION AND FORBEARANCE AGREEMENT


         This Third Amendment ("AGREEMENT") is made as of June 10, 2002, by and
between Bontex, Inc., a Virginia corporation having its principal place of
business at One Bontex Drive, Buena Vista, VA 24416 ( "BORROWER) and Congress
Financial Corporation, a Delaware corporation ("LENDER").

                                   BACKGROUND

A.       The Facilities

         1. Borrower and Lender entered into a certain Loan and Security
Agreement dated January 26, 2000 (together with all amendments, modifications,
addenda and supplements, the "Loan Agreement") and related documents, evidencing
certain financing arrangements between Lender and Borrower as more particularly
described therein including, without limitation, a certain Term Promissory Note
in the principal face amount of $1,000,000 dated January 27, 2000 (the "Note").
Borrower and Lender entered into an Amendment to Loan and Security Agreement on
November 13, 2000, a Second Amendment to Loan and Security Agreement on
September 12, 2001, a Third Amendment to Loan and Security Agreement on January
22, 2002, a Fourth Amendment to Loan and Security Agreement on February 26,
2002, a Loan Modification, Reaffirmation and Forbearance Agreement dated as of
March 11, 2002 (the "Forbearance Agreement"), an Amendment to the Forbearance
Agreement dated April 10, 2002, and a Second Amendment to the Forbearance
Agreement dated as of May 10, 2002.

         2. All agreements and documents described or referred to in this
Section A, as amended, this Agreement, all "Financing Agreements" (as that term
is defined in the Loan Agreement) and all instruments, documents, and agreements
related thereto or executed in connection therewith, are sometime referred to
herein collectively as the "EXISTING LOAN DOCUMENTS." All capitalized terms used
herein and not defined herein shall have the meaning ascribed to such term in
the Existing Loan Documents.

B.       Existing Default

         1. As of the date hereof, Borrower is and remains in default under the
terms and conditions of the Existing Loan Documents by its failure to repay all
Obligations on the maturity date thereof which coincides with the date of this
Agreement ("Existing Default").

         2. Notwithstanding such Existing Default, Borrower has requested that
Lender agree, in consideration of the undertakings and obligations of Borrower
and Guarantor set forth herein, to further extend the period within which Lender
has agreed to forbear from the exercise of Lender's rights and remedies under
the Existing Loan Documents. Lender has agreed to make such accommodations as
and only to the extent set forth herein, and without waiving any of Lender's
rights and remedies.




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         3. By reason of the Existing Default and by the scheduled maturity of
all Obligations under the Existing Loan Documents, Borrower has acknowledged
that all Obligations under the Existing Loan Documents are and continue to be
immediately due and payable and Lender has the full legal right to exercise its
rights and remedies under the Existing Loan Documents, including, but not
limited to, the right to foreclose under any mortgages or deeds of trust, to
enforce its remedies under the Uniform Commercial Code and other applicable
laws, and take possession of and sell any Collateral described in the Existing
Loan Documents.

         NOW THEREFORE, with the foregoing Background deemed incorporated by
reference and for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound, covenant and agree as follows:

         SECTION 1.  ACKNOWLEDGMENT OF INDEBTEDNESS.  Borrower confirms and
acknowledges that as of the close of business on June 1, 2002, it is indebted to
Lender under the Loan Documents without any deduction, defense, setoff, claim or
counterclaim, of any nature, in the aggregate principal amount of $ 1,477,422,
comprised of: (a) $ 984,122 outstanding with respect to the Revolving Loans, and
(b) $ 493,300 outstanding with respect to the Term Loan, plus any accrued and
unpaid interest and all fees, costs and expenses (including attorneys' fees)
incurred to date in connection with the Existing Loan Documents.

         SECTION 2.  FORBEARANCE.  Section 2.1. of the Forbearance Agreement is
hereby amended by deleting the term "June 10, 2002", and, in lieu thereof,
substituting the term: "August 9, 2002."

         SECTION 3. EFFECTIVENESS CONDITIONS. Lender's undertakings hereunder
are subject to satisfactory completion and performance, as determined by Lender
in its sole discretion, (all documents to be in form and substance satisfactory
to Lender and its counsel) of the following conditions ("EFFECTIVENESS
CONDITIONS"):

                  (a) Borrower's execution and delivery of this Agreement; and

                  (b) Borrower shall have delivered to Lender a supplemental
closing fee of Ten Thousand Dollars ($10,000) in immediately available funds,
which fee shall be fully earned and payable as of the date hereof. Borrower
authorizes Lender to advance said fee as a Revolving Loan under the Loan
Agreement.

         SECTION 4. REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants to, and covenants with, Lender as follows, which representations,
warranties and covenants are continuing and shall survive the execution and
delivery hereof, and the truth and accuracy of, or compliance with each,
together with the representations, warranties and covenants in the other
Financing Agreements, being a continuing condition of the making of Loans by
Lender to Borrower:

                  (a) This Amendment has been duly executed and delivered by
Borrower and is in full force and effect as of the date hereof and the
agreements and obligations of Borrower


                                       2

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contained herein constitute legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective terms;

                  (b) Borrower has taken all necessary corporate action to
authorize the execution, delivery and performance of this Amendment;

                  (c) This Amendment is, or when executed by Borrower and
delivered to Lender, will be, duly executed and constitute a valid and legally
binding obligation of Borrower, enforceable against Borrower in accordance with
its terms; and

                  (d) The execution by Borrower and delivery to Lender of this
Amendment is not and will not be in contravention of any order of any court or
other agency of government, law or any other indenture or agreement to which
wither Borrower is bound or the Articles of Incorporation or bylaws of Borrower
to be in conflict with, or result in a breach of, or constitute (with due notice
and/or passage of time) a default under any such indenture, agreement or
undertaking or result in the imposition of any lien, charge, encumbrance of any
nature on any property of Borrower.

         SECTION 5.  NET WORTH COVENANT.  Section 9.14 of the Loan Agreement is
hereby amended, as of June 10, 2002, to read as follows:

               "9.14.   Adjusted Tangible Net Worth.  Borrower
                        (excluding, for purposes of this covenant,
                        foreign subsidiaries and affiliates) shall
                        continuously maintain Adjusted Tangible Net Worth of
                        not less than Five Million, One Hundred Thirty
                        Thousand ($5,130,000) from and including May 31, 2002
                        through and including June 29, 2002; not less than
                        Five Million, One Hundred Eighty Thousand
                        ($5,180,000) from and including June 30, 2002 through
                        and including July 30, 2002; and not less than Four
                        Million, Nine Hundred Eighty Thousand ($4,980,000)
                        from and including July 31, 2002 and at all times
                        thereafter."

         SECTION 6. REAFFIRMATION. Except as expressly amended herein, all of
the terms, provisions and conditions of the Loan Agreement (as previously
amended), the Note (as previously amended), and the Forbearance Agreement are
hereby reaffirmed and ratified in all respects, and remain in full force and
effect. Borrower reaffirms each of the representations and warranties under the
Loan Agreement and the Forbearance made by it, as if said representations and
warranties were made and given on and as of the date hereof.

         SECTION 7.  MISCELLANEOUS

         7.1.     Counterparts.  This Agreement may be executed in any number
of counterparts, each of which will constitute an original and all of which
together shall constitute one instrument. Signature by facsimile shall bind the
parties hereto.

         7.2.     Third-Party Rights.  No rights are intended to be created
hereunder for the benefit of any third- party donee, creditor, or incidental
beneficiary.


                                       3

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         7.3.     Modifications.  No modification hereof or any agreement
referred to herein shall be binding or enforceable unless in writing and signed
on behalf of the party against whom enforcement is sought.

         7.4.     Indemnity. Borrower hereby agrees to indemnify Lender from and
against all losses, costs, expense, demands and damages whatsoever which Lender
may suffer or incur in respect of any claims which have or may be brought by any
third party relating to this Agreement, the Existing Loan Documents or the
transactions contemplated hereby or thereby. This indemnity shall continue in
full force and effect after the Termination Date and notwithstanding the
completion of the other matters referred to in this Agreement. This
indemnification is in addition to and shall not limit any other indemnification
agreement between Borrower and Lender, and shall be included within the
Obligations.

         7.5.     Integrated Agreement. This Agreement shall be deemed
incorporated into and made a part of the Existing Loan Documents. Except as
expressly set forth herein, all of the terms, conditions and agreements of the
Existing Loan Documents are ratified and confirmed. The Existing Loan Documents
and this Agreement shall be construed as integrated and complementary of each
other, and as augmenting and not restricting Lender's rights, remedies and
security. If, after applying the foregoing, an inconsistency still exists, the
provisions of this Agreement shall control.

         7.6.     Non-Waiver. No omission or delay by Lender in exercising any
right or power under this Agreement, or the Existing Loan Documents or any
related agreement will impair such right or power or be construed to be a waiver
of any default or Event of Default or an acquiescence therein, and any single or
partial exercise of any such right or power will not preclude other or further
exercise thereof or the exercise of any other right, and no waiver will be valid
unless in writing and then only to the extent specified. Lender's rights and
remedies are cumulative and concurrent and may be pursued singly, successively
or together.

         7.7.     Headings.  The headings of any paragraph of this Agreement
are for convenience only and shall not be used to interpret any provision of
this Agreement.

         7.8.     Survival. All warranties, representations and covenants made
by Borrower herein, or in any agreement referred to herein or on any
certificate, document or other instrument delivered by them or on their behalf
under this Agreement, shall be considered to have been relied upon by Lender.
All statements in any such certificate or other instrument shall constitute
warranties and representations by Borrower hereunder. All warranties,
representations, indemnities and covenants made by Borrower hereunder or under
any other agreement or instrument shall be deemed continuing until the
Obligations are indefeasibly paid and satisfied in full.

         7.9.     Successors and Assigns.  This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto. No delegation by Borrower of any duty or obligation of performance may
be made or is intended to be made to Lender. No rights are intended to be
created hereunder or under any related instruments,


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documents or agreements for the benefit of any third party donee, creditor,
incidental beneficiary or affiliate of Borrower.

         7.10.    Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York. The provisions
of this Agreement are to be deemed severable, and the invalidity or
unenforceability of any provision shall not affect or impair the remaining
provisions which shall continue in full force and effect.





         IN WITNESS WHEREOF, the undersigned parties have executed this
Agreement the day and year first above written.


LENDER                                      CONGRESS FINANCIAL CORPORATION


                                            By: /s/ E. Stroz
                                                  Assistant Vice President



BORROWER                                    BONTEX, INC.


                                            By: /s/ James C. Kostelni
                                                  C.E.O.





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                              CONSENT OF GUARANTOR

         The undersigned guarantor hereby consents to the provisions of the
foregoing Agreement and agrees that the undersigned's obligations under the
Limited Guaranty shall be unimpaired by the said Agreement and that the
undersigned has no defenses or set offs against Lender, its officers, directors,
employees, agents or attorneys, with respect to the Limited Guaranty, and that
all of the terms, conditions and covenants in the Limited Guaranty remain
unaltered and in full force and effect and are hereby ratified and confirmed.
The undersigned hereby certifies that the representations and warranties made in
the Limited Guaranty are true and correct. THE UNDERSIGNED HEREBY RATIFIES AND
CONFIRMS THE WAIVER OF JURY TRIAL PROVISION CONTAINED IN THE LIMITED GUARANTY.

         WITNESS the due execution hereof as a document under seal, as of June
10, 2002, intending to be legally bound hereby.



                                             /s/ James C. Kostelni (Seal)
                                             ----------------------
                                                 James C. Kostelni


                                       6

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                            CORPORATE ACKNOWLEDGMENT



STATE OF VIRGINIA          :
                           :        ss
COUNTY OF ROCKBRIDGE       :


     On this, the 11 day of June, 2002, before me, the undersigned Notary
Public, personally appeared James C. Kostelni, known to me (or satisfactorily
proven) and says that he is the President, C.E.O. of Bontex, Inc., whose name is
subscribed to the within instrument and who acknowledged that he executed the
same for the purposes therein contained.

     WITNESS my hand and seal the day and year aforesaid.

/s/ James C. Kostelni                            /s/ Charles C. Armstrong
---------------------                            ------------------
                                                    Notary Public

                                                 My Commission Expires:

                                                   March 31, 2003



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