HEADWATERS INC
LOAN AGREEMENT WITH ALLIED CAPITAL  CORPORATION
<DOCUMENT>
<TYPE>EX-10.77
<SEQUENCE>5
<FILENAME>ex1077form8k091902.txt
<DESCRIPTION>LOAN AGREEMENT WITH ALLIED CAPITAL  CORPORATION
<TEXT>
Exhibit 10.77

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                                 LOAN AGREEMENT



                                 by and between



                             HEADWATERS INCORPORATED

                                       and

                           ALLIED CAPITAL CORPORATION



                               September 19, 2002

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                   $20,000,000 Senior Subordinated Debentures
                             due September 16, 2007


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                                TABLE OF CONTENTS

                                                                            Page


ARTICLE I. - DEFINITIONS.......................................................1

   SECTION 1.1        DEFINED TERMS............................................1
   SECTION 1.2        TERMS GENERALLY.........................................15

ARTICLE II. - THE INVESTMENT..................................................15

   SECTION 2.1        FUNDING.................................................15
   SECTION 2.2        SENIOR DEBT.............................................15
   SECTION 2.3        REPAYMENT OF DEBENTURES.................................15
   SECTION 2.4        INTEREST ON DEBENTURES..................................15
   SECTION 2.5        DEFAULT INTEREST........................................15
   SECTION 2.6        PREPAYMENT..............................................15
   SECTION 2.7        MANDATORY PREPAYMENT OF THE DEBENTURES..................16
   SECTION 2.8        PAYMENTS................................................16
   SECTION 2.9        TAXES...................................................17
   SECTION 2.10       USE OF PROCEEDS.........................................19

ARTICLE III. - CONDITIONS.....................................................19

   SECTION 3.1        CONDITIONS TO CLOSING...................................19

ARTICLE IV. - REPRESENTATIONS AND WARRANTIES..................................20



ARTICLE V. - INVESTOR REPRESENTATIONS.........................................21

   SECTION 5.1        INVESTMENT..............................................21
   SECTION 5.2        AUTHORITY...............................................21
   SECTION 5.3        ACCREDITED INVESTOR.....................................21

ARTICLE VI. - AFFIRMATIVE COVENANTS...........................................21

   SECTION 6.1        EXISTENCE; BUSINESS AND PROPERTIES......................21
   SECTION 6.2        INSURANCE...............................................22
   SECTION 6.3        OBLIGATIONS AND TAXES...................................24
   SECTION 6.4        FINANCIAL STATEMENTS; REPORTS, ETC......................24
   SECTION 6.5        LITIGATION AND OTHER NOTICES............................25
   SECTION 6.6        EMPLOYEE BENEFITS.......................................26
   SECTION 6.7        MAINTAINING RECORDS; ACCESS TO PROPERTIES
                        AND INSPECTIONS.......................................26
   SECTION 6.8        COMPLIANCE WITH LAWS....................................26
   SECTION 6.9        PREPARATION IF ENVIRONMENTAL REPORTS....................26
   SECTION 6.10       FURTHER ASSURANCES......................................27
   SECTION 6.11       MAINTENANCE OF OFFICE OR AGENCY.........................27
   SECTION 6.12       FINANCIAL RATIOS AND COVENANTS..........................27
   SECTION 6.14       OBSERVATION RIGHTS......................................28
   SECTION 6.17       USE OF PROCEEDS.........................................28

ARTICLE VII. - NEGATIVE COVENANTS.............................................29

   SECTION 7.1        INDEBTEDNESS............................................29
   SECTION 7.2        LIENS...................................................30
   SECTION 7.3        AMENDMENT OF SENIOR CREDIT FACILITY.....................32
   SECTION 7.4        INVESTMENTS.............................................32
   SECTION 7.5        MERGERS, CONSOLIDATIONS, SALES OF ASSETS,
                        ACT OF DISSOLUTION....................................33
   SECTION 7.6        DIVIDENDS AND DISTRIBUTIONS; RESTRICTIONS ON
                        ABILITY OF SUBSIDIARIES TO PAY DIVIDENDS..............34

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   SECTION 7.7        TRANSACTIONS WITH AFFILIATES............................34
   SECTION 7.8        BUSINESS OF CREDIT PARTIES AND SUBSIDIARIES.............34
   SECTION 7.9        INVESTMENT COMPANY ACT..................................34
   SECTION 7.10       ACQUISITIONS............................................34
   SECTION 7.12       PREPAYMENTS.............................................36
   SECTION 7.13       ADDITIONAL NEGATIVE PLEDGES.............................36
   SECTION 7.14       FISCAL YEARS............................................36
   SECTION 7.15       STAY, EXTENSION AND USURY LAWS..........................36
   SECTION 7.15       INTENTIONALLY DELETED
   SECTION 7.16       INCONSISTENT AGREEMENTS; CHARTER AMENDMENTS.............36
   SECTION 7.17       MANDATORY EXCESS CASH FLOW SWEEP........................37
   SECTION 7.18       CAPITAL EXPENDITURES....................................37

ARTICLE VIII. - EVENTS OF DEFAULT AND REMEDIES................................37

   SECTION 8.1        EVENTS OF DEFAULT.......................................37
   SECTION 8.2        WAIVERS.................................................39
   SECTION 8.3        ENFORCEMENT ACTIONS.....................................39
   SECTION 8.4        COSTS...................................................39
   SECTION 8.5        SET-OFF.................................................39
   SECTION 8.6        REMEDIES NON-EXCLUSIVE..................................39

ARTICLE IX. - MISCELLANEOUS...................................................40

   SECTION 9.1        NOTICES.................................................40
   SECTION 9.2        SURVIVAL OF AGREEMENT...................................40
   SECTION 9.3        BINDING EFFECT..........................................40
   SECTION 9.4        SUCCESSORS AND ASSIGNS..................................40
   SECTION 9.5        EXPENSES; INDEMNITY.....................................41
   SECTION 9.6        WAIVER OF CONSEQUENTIAL AND PUNITIVE DAMAGES............42
   SECTION 9.7        APPLICABLE LAW..........................................42
   SECTION 9.8        WAIVERS; AMENDMENTS.....................................42
   SECTION 9.9        INTEREST RATE LIMITATION................................43
   SECTION 9.10       ENTIRE AGREEMENT........................................43
   SECTION 9.11       WAIVER OF JURY TRIAL....................................43
   SECTION 9.12       SEVERABILITY............................................43
   SECTION 9.13       COUNTERPARTS............................................44
   SECTION 9.14       HEADING.................................................44
   SECTION 9.15       JURISDICTION; CONSENT TO SERVICE OF PROCESS.............44
   SECTION 9.16       CONSENTS AND APPROVALS; DEFAULTS........................45
   SECTION 9.17       RELATIONSHIP OF THE PARTIES; ADVICE OF COUNSEL..........45
   SECTION 9.18       CONFIDENTIALITY.........................................46
   SECTION 9.19       REGISTRATION AND TRANSFER OF DEBENTURES.................46

Exhibits and Schedules

         [see attached]

                                       ii
<PAGE>

                                 LOAN AGREEMENT


         THIS LOAN AGREEMENT (this "Agreement") is made as of September 19, 2002
by  and  among:  (i)  Headwaters  Incorporated,   a  Delaware  corporation  (the
"Borrower") and (ii) Allied Capital Corporation, a Maryland corporation ("Allied
Capital").


                                    RECITALS:

         A.  Pursuant  to a Merger  Agreement  dated as of July 15, 2002 (and as
from  time  to  time  amended,  the  "Merger  Agreement")  among  the  Borrower,
Headwaters  Olysub   Corporation,   a  Delaware   corporation  and  wholly-owned
subsidiary  of the Borrower  (the "Sub"),  Industrial  Services  Group,  Inc., a
Delaware  corporation  (the  "Company"),   and  ISG  Resources,   Inc.,  a  Utah
corporation and  wholly-owned  subsidiary of the Company (the "Public Sub"), the
parties to the Merger  Agreement  agreed that the  Company  would merge with and
into the Sub, and the Sub would be the surviving corporation (the "Merger").

         B.  The  Borrower  has   requested   that,   simultaneously   with  the
consummation of the Merger,  Allied Capital invest in the Borrower the aggregate
sum of Twenty  Million  Dollars  ($20,000,000)  in exchange for the  Debentures.
Allied  Capital is willing to make such  investment in the Borrower on the terms
and conditions set forth herein.

         C. The  parties  wish to set  forth  herein  their  understandings  and
agreements pertaining to this transaction.

         NOW,  THEREFORE,  in  consideration  of the foregoing  Recitals and the
mutual covenants  contained herein,  and other good and valuable  consideration,
the receipt and sufficiency of which are hereby acknowledged, Allied Capital and
its  successors  and assigns  with respect to its interest in all or any part of
any of the Debentures (individually, a "Holder" and collectively, the "Holders")
and the Borrower hereby agree as follows: Article I.

                                   Definitions

         SECTION 1.1 Defined  Terms.  As used in this  Agreement,  the following
terms have the meanings specified below:

         "Acquisition"  means the consummation of the transactions  contemplated
by the Acquisition Documents.

         "Acquisition Documents" mean,  collectively,  the Merger Agreement, the
Offer  to  Purchase  and  Consent  to  Solicitation   Statement  and  all  other
instruments  and  documents  executed  and  delivered  in  connection  with  the
transactions contemplated thereby.

<PAGE>

         "Act of  Bankruptcy,"  when used in reference to any Person,  means the
occurrence of any of the following with respect to such Person:  (i) such Person
shall have made an assignment for the benefit of his or its creditors; (ii) such
Person  shall have  admitted in writing his or its  inability  to pay his or its
debts as they  become  due;  (iii) such  Person  shall  have  filed a  voluntary
petition in bankruptcy;  (iv) such Person shall have been adjudicated a bankrupt
or  insolvent;  (v) such Person shall have filed any petition or answer  seeking
for   himself   or  itself   any   reorganization,   arrangement,   composition,
readjustment,  liquidation,  dissolution  or similar relief under any present or
future  Applicable Law pertinent to such  circumstances;  (vi) such Person shall
have filed or shall file any answer  admitting  or not  contesting  the material
allegations of a bankruptcy,  insolvency or similar  petition filed against such
Person;  (vii) such Person shall have sought or consented to, or acquiesced  in,
the appointment of any trustee, receiver, or liquidator of such Person or of all
or any substantial  part of the properties of such Person;  (viii) 60 days shall
have elapsed after the  commencement  of an action  against such Person  seeking
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or future Applicable Law without such action
having been dismissed or without all orders or proceedings  thereunder affecting
the  operations or the business of such Person having been stayed,  or if a stay
of any such order or  proceedings  shall  thereafter be set aside and the action
setting  it aside  shall  not be timely  appealed;  or (ix) 60 days  shall  have
expired  after the  appointment,  without  the consent or  acquiescence  of such
Person of any trustee,  receiver or  liquidator  of such Person or of all or any
substantial  part of the assets  and  properties  of such  Person  without  such
appointment having been vacated.

         "Act of Dissolution,"  when used in reference to any Person (other than
an individual), shall mean the occurrence of any action initiating, or any event
that results in, the dissolution, liquidation, winding-up or termination of such
Person.

         "Administrative  Agent" has the meaning  given it in the Senior  Credit
Facility.

         "Affiliate"  means,  when  used with  respect  to a  specified  Person,
another Person that directly,  or indirectly through one or more intermediaries,
Controls  or is  Controlled  by or is  under  common  Control  with  the  Person
specified.  "Affiliate"  shall also mean any  beneficial  owner of Capital Stock
representing  10% or more of the total voting power of the voting  Capital Stock
(on a fully diluted basis) of the Borrower or any of its  Subsidiaries  (whether
or not currently  exercisable)  and any Person who would be an Affiliate of such
beneficial owner pursuant to the first sentence hereof.

         "Applicable  Law(s)"  when  used  in  the  singular,   shall  mean  any
applicable Federal, state or local law, ordinance,  order,  regulation,  rule or
requirement of any governmental or quasi-governmental  agency,  instrumentality,
board, commission, bureau or other authority having jurisdiction, and, when used
in the plural,  shall mean all such  applicable  Federal,  state and local laws,
ordinances, orders, regulations, rules and requirements.

         "Approval" has the meaning specified in Section 9.16(a).

         "Asset   Disposition"   means  any  sale,  lease,   transfer  or  other
disposition (or series of related sales,  leases,  transfers or dispositions) by
the Borrower or any of its Restricted  Subsidiaries or grant any option or other
right to purchase,  lease or otherwise acquire any asset,  except:  (i) sales of
Inventory in the ordinary  course of its business and the granting of any option

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or other  right to  purchase,  lease,  or  otherwise  acquire  Inventory  in the
ordinary  course  of  its  business;  (ii)  sale  or  grants  of  exclusive  and
non-exclusive  licenses of  intellectual  property  entered into in the ordinary
course of business;  (iii) (A) sales,  transfers or other dispositions of assets
among the Credit Parties  (including,  without limitation,  sales,  transfers or
other  dispositions,  with or without  consideration,  of intellectual  property
among the  Credit  Parties  and (B)  transfer  of assets  set forth on  Schedule
7.05(d) to Flexcrete LLC; (iv) sales,  transfers or other dispositions of assets
for cash and for fair value in an  aggregate  amount  not to exceed $76  million
(including,  without limitation,  equity interests in Subsidiaries but excluding
any original  issuances of stock of any  Subsidiary)  so long as (x) no Event of
Default shall have occurred and be continuing or would result from such sale and
(y) the proceeds of such  Transfer are used to replace or upgrade such assets or
to  repay  Senior  Debt or the  Obligations;  and (v)  sale of  assets  for cash
proceeds in an aggregate  amount of  $1,200,000  annually so long as no Event of
Default shall have occurred and be continuing or would result from such sale.

         "Borrower's Business" means the business engaged in by the Borrower and
its  Subsidiaries  as of the  Closing  Date  and  as  currently  proposed  to be
conducted as more fully described in the Information Memorandum.

         "Business  Day" means any day other than a  Saturday,  Sunday or day on
which banks in Washington, D.C. are authorized or required by law to close.

         "Capital Expenditures" means for any Person for any period, the sum of,
without duplication,  (a) all expenditures made, directly or indirectly, by such
Person or any of its  Subsidiaries  during  such  period  for  equipment,  fixed
assets,  real property or  improvements,  or for  replacements or  substitutions
therefor or additions  thereto,  that have been or should be, in accordance with
GAAP,  reflected as additions to property,  plant or equipment on a Consolidated
balance  sheet of such  Person or have a useful  life of more than one year plus
(b) the aggregate principal amount of all Indebtedness  (including Capital Lease
Obligations)  assumed or incurred in connection with any such expenditures.  For
purposes of this  definition,  the purchase price of equipment that is purchased
simultaneously  with  the  trade  in of  existing  equipment  or with  insurance
proceeds  shall be  included in Capital  Expenditures  only to the extent of the
excess  of (i) the gross  amount of such  purchase  price  over (ii) the  credit
granted by the seller of such  equipment  for the  equipment  being traded in at
such time or the amount of such proceeds, as the case may be.

         "Capital Lease" means any lease of (or other arrangement  conveying the
right  to  use)  real  or  personal  property,  or  a  combination  thereof  the
obligations  of the lessee in respect of which are required in  accordance  with
GAAP to be capitalized on the balance sheet of the lessee.

         "Capital Lease Obligations" of any Person means the obligations of such
Person to pay rent or other  amounts  under all  Capital  Leases of such  Person
under GAAP, and the amount of such obligations is the capitalized amount thereof
determined in accordance with GAAP.

         "Capital  Stock" of any  Person  means any and all  shares,  interests,
participation or other equivalents (however designated) of Capital Stock of such
Person  (if such  Person is a  corporation),  any and all  equivalent  ownership
interests  in such  Person  (if such  Person is other than a  corporation),  any
securities convertible into or exchangeable for any of the foregoing and any and
all warrants or options to purchase any of the foregoing.

                                       3
<PAGE>

         "Cash Equivalents"  means any of the following,  to the extent owned by
the Borrower or any of its  Subsidiaries  free and clear of all Liens other than
Permitted Liens and having a maturity of not greater than 360 days from the date
of  acquisition  thereof:  (a)  readily  marketable  direct  obligations  of the
Government  of the  United  States or any agency or  instrumentality  thereof or
obligations  unconditionally  guaranteed  by the full  faith  and  credit of the
Government of the United States, (b) insured  certificates of deposit of or time
deposits  with any  commercial  bank  that is a Lender  Party  (as such  term is
defined  under the Senior  Credit  Facility) or a member of the Federal  Reserve
System,  which issues (or the parent of which issues)  commercial paper rated as
described in clause (c) below,  is organized under the laws of the United States
or any State thereof and has combined capital and surplus of at least $1 billion
or (c) commercial  paper in an aggregate  amount of no more than  $1,000,000 per
issuer  outstanding at any time,  issued by any corporation  organized under the
laws of any State of the United States and rated at least "Prime-2" (or the then
equivalent  grade) by  Moody's  Investors  Service,  Inc.  or "A-2" (or the then
equivalent grade) by Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. or (d) Investments, classified in accordance with GAAP as current assets of
the Borrower or any of its  Subsidiaries,  in money market  investment  programs
registered  under the  Investment  Company Act of 1940,  as  amended,  which are
administered by financial  institutions  that have the highest rating obtainable
from either  Moody's or S&P, and the  portfolios of which are limited  solely to
Investments of the character, quality and maturity described in clauses (a), (b)
and (c) of this definition.

         "CERCLA" means the Comprehensive  Environmental Response,  Compensation
and Liability Act of 1980, as amended from time to time.

         "Change of Control"  means one or more  transactions  resulting in: (a)
any  Person  or two or more  Persons  acting  in  concert  shall  have  acquired
beneficial  ownership  (within the meaning of Rule 13d-3 of the  Securities  and
Exchange  Commission  under the  Securities  Exchange Act of 1934),  directly or
indirectly, of Voting Interests of the Borrower (or other securities convertible
into such Voting  Interests)  representing  35% or more of the  combined  voting
power of all Voting Interests of the Borrower; (b) during any period of up to 24
consecutive months, commencing after the date of this Agreement, individuals who
at the  beginning  of such  24-month  period were  Continuing  Directors  of the
Borrower  shall  cease for any reason to  constitute  a majority of the board of
directors of the Borrower;  and (c) any Person or two or more Persons  acting in
concert shall have acquired by contract or otherwise, or shall have entered into
a contract or arrangement that, upon  consummation,  will result in its or their
acquisition  of the power to exercise,  directly or  indirectly,  a  controlling
influence over the management or policies of the Borrower.

         "Charges" has the meaning specified in Section 9.9.

         "Closing" means the consummation of the Transaction.

         "Closing Date" means the date of this Agreement.

         "Code"  means the  Internal  Revenue  Code of 1986 and the  regulations
thereunder, as amended or otherwise modified from time to time.

         "Common  Stock"  means any and all (as the context may  require) of the
shares of the authorized common stock of the Borrower.

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<PAGE>

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

         "Control"  means,  without  limitation,  the  possession,  directly  or
indirectly,  of the power to direct or cause the direction of the  management or
policies of a Person,  whether  through the ownership of voting  securities,  by
contract  or  otherwise,  and the  terms  "Controlling"  and  "Controlled"  have
meanings correlative thereto.

         "Continuing  Directors"  means (a) members of the board of directors of
the Borrower on the Closing Date and (b) other  persons  nominated or elected to
the board of directors  of the  Borrower  with the approval of a majority of the
directors  who  were  members  of the  board  of  directors  at the time of such
election or nomination.

         "Credit Parties" means, collectively,  the Borrower and the Guarantors;
and "Credit Party" means either the Borrower or a Guarantor.

         "Debentures" means the senior  subordinated  debentures dated September
19, 2002 in the aggregate principal amount of $20,000,000 from the Borrower made
payable  severally  to the  Holders  and  evidencing  the  Borrower's  repayment
obligation  for the  investment  by the  Holders in the  Borrower  described  in
Section 2.1,  together with all other  debentures  accepted from time to time in
substitution,  renewal  or  replacement  for all or any part  thereof  including
pursuant to Section 9.19.

         "Default" means any event or condition that upon notice,  lapse of time
or both would constitute an Event of Default.

         "Disqualified  Stock"  means,  with respect to any Person,  any Capital
Stock  which by its  terms  (or by the terms of any  security  into  which it is
convertible or for which it is  exchangeable) or upon the happening of any event
(i) matures or is mandatorily  redeemable  pursuant to a sinking fund obligation
or  otherwise,   (ii)  is  convertible  or  exchangeable   for  Indebtedness  or
Disqualified  Stock or (iii) is redeemable at the option of the holder  thereof,
in whole or in part,  in each case on or prior to the first  anniversary  of the
stated maturity of the Debentures.

         "Dollars" or "$" means lawful money of the United States of America.

         "Dow  Contract"  means that certain  sales  contract,  dated January 1,
1998, by and between The Dow Chemical Company and Headwaters Incorporated (f/k/a
Covol  Technologies,  Inc.), which was assigned to Reichhold Specialty Latex LLC
pursuant to that certain letter agreement, dated December 20, 2001.

         "EBITDA" means, at any date of  determination,  the sum,  determined in
accordance with GAAP on a Consolidated basis and without duplication, of (a) net
income  (or net loss),  (b)  interest  expense,  (c)  income  tax  expense,  (d)
depreciation expense and (e) amortization  expense, in each case of the Borrower
and its Restricted Subsidiaries, determined in accordance with GAAP for the most
recently completed Measurement Period.

         For  purposes of  calculating  EBITDA with  respect to any  Measurement
Period,  (A) acquisitions  that have been made by the Borrower or its Restricted
Subsidiaries,  including  through  mergers or  consolidations  and including any
related financing  transactions,  during the reference period shall be deemed to

                                       5
<PAGE>

have occurred on the first day of the reference period; provided,  however, that
only the actual  historical  results of  operations  of the Persons so acquired,
without adjustment for pro forma expense savings or revenue increases,  shall be
used for such calculation;  and (B) for purposes of calculating  Funded Leverage
Ratio  only,  the  EBITDA  of  the  Borrower  or  its  Restricted   Subsidiaries
attributable to discontinued operations,  as determined in accordance with GAAP,
and  operations  or  businesses  disposed of prior to the end of such  reference
period, shall be excluded.

         For the  purposes of each of the fiscal  quarters  ended March 2002 and
June 2002, EBITDA of the Borrower shall be as set forth on Schedule III hereto.

         "Eligible Assignee" means any commercial bank or financial  institution
organized under the laws of the United States, or any State thereof,  and having
a combined  capital and surplus of at least  $250,000,000 (as established in its
most recent report of conditions  to its primary  regulator)  and, so long as no
Event of Default has  occurred  and is  continuing,  as approved by the Borrower
(which approval shall not be unreasonably  withheld);  provided,  however,  that
neither any Credit Party nor any  Subsidiary  of a Credit Party shall qualify as
an Eligible Assignee under this definition.

         "Environmental  Claim" means any action,  suit, demand,  demand letter,
claim,  notice of non-compliance or violation,  notice of liability or potential
liability,  investigation,   proceeding,  consent  order  or  consent  agreement
relating  in any way to any  Environmental  Law,  any  Environmental  Permit  or
Hazardous Material or arising from alleged injury or threat to health, safety or
the  environment,  including,  without  limitation,  (a) by any  governmental or
regulatory authority for enforcement,  cleanup, removal,  response,  remedial or
other actions or damages and (b) by any governmental or regulatory  authority or
third  party  for  damages,   contribution,   indemnification,   cost  recovery,
compensation or injunctive relief.

         "Environmental Law" means any Federal, state, local or foreign statute,
law,  ordinance,  rule,  regulation,  code, order, writ,  judgment,  injunction,
decree or judicial  or agency  interpretation,  policy or  guidance  relating to
pollution or protection of the environment,  health,  safety, natural resources,
including,   without   limitation,   those   relating  to  the  use,   handling,
transportation,  treatment, storage, disposal, release or discharge of Hazardous
Materials.

         "Environmental  Permit"  means  any  permit,  approval,  identification
number, license or other authorization required under any Environmental Law.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
the same may be amended from time to time, and the  regulations  promulgated and
rulings issued thereunder.

         "ERISA  Affiliate"  means any Person  that for  purposes of Title IV of
ERISA is a member of the controlled  group of any Credit Party,  or under common
control with any Credit Party, within the meaning of Section 414 of the Internal
Revenue Code.

         "ERISA Event" means (a)(i) the occurrence of a reportable event, within
the meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day
notice  requirement  with  respect to such event has been  waived by the PBGC or
(ii) the  requirements  of  Section  4043(b) of ERISA  apply  with  respect to a
contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and

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<PAGE>

an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c)
of ERISA is  reasonably  expected to occur with  respect to such Plan within the
following 30 days; (b) the application for a minimum funding waiver with respect
to a Plan;  (c) the  provision by the  administrator  of any Plan of a notice of
intent  to  terminate  such  Plan,  pursuant  to  Section  4041(a)(2)  of  ERISA
(including  any such  notice  with  respect to a plan  amendment  referred to in
Section 4041(e) of ERISA);  (d) the cessation of operations at a facility of any
Credit Party or any ERISA  Affiliate in the  circumstances  described in Section
4062(e) of ERISA;  (e) the withdrawal by any Credit Party or any ERISA Affiliate
from a Multiple  Employer Plan during a plan year for which it was a substantial
employer,  as defined in Section  4001(a)(2) of ERISA;  (f) the  conditions  for
imposition  of a lien  under  Section  302(f) of ERISA  shall have been met with
respect to any Plan;  (g) the adoption of an amendment to a Plan  requiring  the
provision of security to such Plan pursuant to Section 307 of ERISA;  or (h) the
institution  by the PBGC of  proceedings to terminate a Plan pursuant to Section
4042 of ERISA, or the occurrence of any event or condition  described in Section
4042  of  ERISA  that  constitutes  grounds  for  the  termination  of,  or  the
appointment of a trustee to administer, such Plan.

         "Events of Default" has the meaning specified in Article VIII.

         "Financial  Officer" of any corporation or other entity means the chief
financial officer, treasurer or principal accounting officer of such corporation
or entity.

         "Foreign  Subsidiary"  means a Subsidiary  that is organized  under the
laws of a jurisdiction  other than the United States or any State thereof or the
District of Columbia.

         "Funded  Indebtedness" means, with respect to any Person as of any date
of  determination,  the sum of the following of such Person and its Subsidiaries
(in each case  determined in accordance  with GAAP on a  Consolidated  basis and
without  duplication)  the total  amount of  Indebtedness  of such Person or its
Subsidiaries which in accordance with GAAP should be classified upon the balance
sheet of such Person or its Subsidiaries as indebtedness.

         "Funded  Leverage Ratio" means, at any date of  determination  thereof,
the  ratio  of (i)  Funded  Indebtedness  of the  Borrower  and  the  Restricted
Subsidiaries outstanding as at such date of determination, to (ii) EBITDA of the
Borrower and the Restricted  Subsidiaries for the Measurement  Period ending on,
or most recently ended prior to, such date of determination.

         "GAAP" means generally accepted accounting principles applicable in the
United  States  of  America  as of the  Closing  Date  (and  without  regard  to
subsequent changes therein) and consistent with those applied in the preparation
of the financial statements referred to in Article IV.

         "Governmental   Authority(ies)"   means  any  Federal,   state,  local,
quasi-governmental  instrumentality  or foreign court, or  governmental  agency,
authority, instrumentality, agency, bureau, commission, department or regulatory
body.

         "Guarantor"  means the each entity that  becomes a Guarantor  under the
Subsidiary Guaranty Agreement.

         "Guarantee  Obligation"  of or by  any  Person  means  any  obligation,
contingent  or  otherwise,  of such Person  guaranteeing  or having the economic
effect of  guaranteeing  any  Indebtedness  of any other  Person  (the  "primary
obligor") in any manner,  whether  directly or  indirectly,  and  including  any

                                       7
<PAGE>

obligation  of such  Person,  direct or  indirect,  (a) to  purchase  or pay (or
advance or supply funds for the purchase or payment of) such  Indebtedness or to
purchase  (or advance or supply  funds for the purchase of) any security for the
payment of such Indebtedness,  (b) to purchase or lease property,  securities or
services  for the  purpose of  assuring  the owner of such  Indebtedness  of the
payment of such Indebtedness or (c) to maintain working capital,  equity capital
or any other financial  statement  condition or liquidity of the primary obligor
so as to enable the primary obligor to pay such Indebtedness;  provided that the
term "Guarantee  Obligation"  shall not include  endorsements  for collection or
deposit in the ordinary course of business.  The word "Guarantee" when used as a
verb shall have the correlative meaning. It is agreed that Guarantee Obligations
of any Credit  Party shall not include any  obligation  or  arrangement  of such
Credit  Party to guarantee  or intended to  guarantee  any leases,  dividends or
other payment obligations of any other Credit Party. The amount of any Guarantee
Obligation  shall be deemed to be an amount equal to the stated or  determinable
amount of the primary  obligation in respect of which such Guarantee  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  Guarantee  Obligation)  or, if not  stated or  determinable,  the  maximum
reasonably  anticipated  liability in respect  thereof  (assuming such Person is
required to perform thereunder), as determined by such Person in good faith.

         "Hazardous  Materials"  means  (a)  petroleum  or  petroleum  products,
by-products or breakdown products,  radioactive  materials,  asbestos-containing
materials,  polychlorinated biphenyls and radon gas and (b) any other chemicals,
materials  or  substances  designated,  classified  or regulated as hazardous or
toxic or as a pollutant or contaminant under any Environmental Law.

         "Holder"  and  "Holders"  have the  meaning  provided  in the  Recitals
hereto.

         "Indebtedness"   of  any  Person  means,   without   duplication,   all
obligations,  contingent or otherwise,  of such Person which in accordance  with
GAAP should be classified upon the balance sheet of such Person as indebtedness,
but in any event  including:  (a) all  obligations  of such Person for  borrowed
money; (b) all obligations of such Person evidenced by bonds, debentures,  notes
or similar  instruments;  (c) all  obligations of such Person under  conditional
sale or  other  title  retention  agreements  relating  to  property  or  assets
purchased by such Person;  (d) all  obligations of such Person issued or assumed
as the deferred  and unpaid  purchase  price of property or services  (excluding
trade accounts  payable incurred in the ordinary course of business that are not
past due by more than 120 days);  (e) all  obligations  of others secured by (or
having an existing right, contingent or otherwise, to be secured by) any Lien on
property  owned or  acquired  by such  Person,  whether  or not the  obligations
secured thereby have been assumed; (f) all Guarantee  Obligations by such Person
of Indebtedness of others; (g) all Capital Lease Obligations of such Person; (h)
all Off-Balance Sheet Liabilities; (i) all obligations of such Person in respect
of interest rate protection agreements,  foreign currency exchange agreements or
other  interest or exchange rate hedging  arrangements,  valued at the Agreement
Value thereof; (j) all obligations of such Person to purchase,  redeem,  retire,
defease or  otherwise  make any payment in respect of any Capital  Stock in such
Person or any other Person;  and (k) all  obligations of such Person,  actual or
contingent,  as an  account  party in  respect  of  letters of credit or similar
facilities  and  bankers'  acceptances.  "Indebtedness"  shall not  include  (x)
liabilities under deferred compensation plans, (y) liabilities that may arise in

                                       8
<PAGE>

connection with indemnification  provisions contained in agreements entered into
in the ordinary  course of business or contained in  agreements  entered into in
connection  with  the  acquisition  or  disposition  of  assets,  stock or other
property,  in each case to the extent  permitted in the Loan Documents,  and (z)
liabilities under operating leases.

         "Indemnitee" has the meaning in Section 9.5(b).

         "Information  Memorandum" means the information  memorandum dated July,
2002 used by the Administrative  Agent in connection with the syndication of the
Senior Credit Facility.

         "Interest"  means any  ownership or profit  sharing  interest  (however
designated)  in any general or limited  partnership,  trust,  limited  liability
company,  private company or joint venture, and all agreements,  instruments and
documents  convertible,  in  whole  or in  part,  into  any  one or  more of the
foregoing.

         "Interest Coverage Ratio" means, at any date of determination  thereof,
the ratio of (a) EBITDA of the Borrower and the Restricted Subsidiaries for such
Measurement  Period  ending on, or most  recently  ended  prior to, such date of
determination  to (b) cash interest  payable on all Funded  Indebtedness  of the
Borrower  and  the  Restricted  Subsidiaries  outstanding  as at  such  date  of
determination.

         "Interest  Rate"  means a  fixed  rate of  interest  of 18% per  annum,
payable in accordance with the terms of the Debentures.

         "Inventory"  means  "inventory"  as  defined  in  Article 9 of the UCC,
including all raw materials,  work in process,  parts,  components,  assemblies,
supplies and materials used or consumed in the Borrower's  Business,  all goods,
wares and merchandise,  finished or unfinished, held for sale or lease or leased
or furnished or to be furnished under contracts of service or hire.

         "Investment  Documents" means,  collectively,  the Loan Documents,  the
Acquisition  Documents  and all other  instruments  and  documents  executed and
delivered in connection with the Transaction.

         "Investments"  means,  collectively,  (a)  ownership or purchase of any
Capital  Stock or evidence  of  Indebtedness,  Interest in or other  security of
another Person;  (b) any loan,  advance,  contribution to capital,  extension of
credit (except for current trade and customer accounts  receivable for Inventory
sold or services  rendered  in the  ordinary  course of business  and payable in
accordance with customary trade terms) to another Person; (c) any joint venture;
(d)  any  interest  rate  hedge  agreement  or  similar  agreement;  or (e)  any
acquisition  after  Closing of any business or business  unit of another  Person
(whether  acquired by purchase of assets or  Interests),  or any  commitment  or
option to acquire any of the foregoing items (a) through (e).

         "ISG" means Industrial Services Group, Inc., a Delaware corporation.

         "Licenses" shall mean, collectively,  all rights, licenses, permits and
authorizations now or hereafter issued by any Governmental  Authority reasonably
necessary  in  connection  with  the  operation  or  conduct  of the  Borrower's
Business.

                                       9
<PAGE>

         "Lien" means any lien, security interest or other charge or encumbrance
of any kind, or any other type of preferential arrangement,  including,  without
limitation,  the lien or retained security title of a conditional vendor and any
easement, right of way or other encumbrance on title to real property.

         "Loan Documents" means,  collectively,  this Agreement, the Debentures,
the  Subsidiary  Guaranty  Agreement  and all other  instruments  and  documents
executed and delivered in connection therewith.

         "Material  Adverse  Change"  means any material  adverse  change in the
business,  condition  (financial  or  otherwise),  operations,  performance,  or
properties  of the  Borrower  and  its  Subsidiaries  taken  as a  whole,  since
September 30, 2001.

         "Material  Adverse  Effect" means a material  adverse effect on (a) the
business,  condition  (financial  or  otherwise),   operations,  performance  or
properties  of the  Borrower  and its  Subsidiaries,  taken as a whole,  (b) the
rights and remedies of the Holders under any Investment  Document or Acquisition
Document or (c) the ability of any Credit Party to perform its Obligations under
any  Investment  Document or  Acquisition  Document to which it is or is to be a
party.

         "Material Contract" means the Dow Contract.

         "Maturity Date" means September 16, 2007.

         "Maximum Rate" has the meaning specified in Section 9.9(e).

         "Measurement  Period"  means,  at any date of  determination,  the most
recently completed four consecutive fiscal quarters of the Borrower ending on or
prior to such  date or, if less than four  consecutive  fiscal  quarters  of the
Borrower have been  completed  since the Closing,  those fiscal  quarters of the
Borrower that have been completed since the Closing. For purposes of determining
an amount of any item included in the  calculation of any financial ratio (other
than EBITDA) or any financial  covenant for the fiscal  quarter  ended  December
2002,  such amount for the  Measurement  Period then ended shall equal such item
for such fiscal  quarter  multiplied  by four;  for purposes of  determining  an
amount of any item included in the  calculation  of any  financial  ratio (other
than EBITDA) or any financial  covenant for the fiscal quarter ended March 2003,
such amount for the Measurement  Period then ended shall equal such item for the
two  fiscal  quarters  then  ended  multiplied  by  two;  and  for  purposes  of
determining  an amount of any item included in the  calculation of any financial
ratio (other than EBITDA) or any financial covenant for the fiscal quarter ended
June 2003,  such amount for the  Measurement  Period then ended shall equal such
item for the three fiscal quarters then ended multiplied by 4/3.

         "Multiple  Employer  Plan" means a single  employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Credit
Party or any ERISA Affiliate and at least one Person other than the Loan Parties
and the ERISA  Affiliates or (b) was so  maintained  and in respect of which any
Credit Party or any ERISA  Affiliate  could have liability under Section 4064 or
4069 of ERISA in the event such plan has been or were to be terminated.

         "New Lending Office" has the meaning specified in Section 2.9(e).

                                       10
<PAGE>

         "Non-U.S. Investor" has the meaning specified in Section 2.9(e).

         "Obligations"  means  all  indebtedness,   advances  pursuant  to  this
Agreement or otherwise, debts, liabilities and obligations,  for the performance
of covenants, tasks or duties or for payment of monetary amounts (whether or not
such performance is then required or contingent,  or such amounts are liquidated
or determinable)  owing by the Credit Parties to the Holders,  and all covenants
and duties  regarding  such amounts,  of any kind or nature,  present or future,
whether or not  evidenced by any note,  agreement or other  instrument,  arising
under this Agreement or any of the other Investment Documents. The term includes
all  principal,   interest  (including  all  interest  that  accrues  after  the
commencement of any case or proceeding in bankruptcy after the insolvency of, or
for the  reorganization  of any Credit  Party,  whether  or not  allowed in such
proceeding),  any premiums,  penalties or charges imposed in connection with the
prepayment of the Debentures, fees, charges, expenses,  attorneys' fees, and any
other sum  chargeable to the Credit  Parties  under this  Agreement or any other
Investment Document.

         "Off-Balance Sheet Liabilities"  means, with respect to any Person, any
Obligation  of such Person  under a synthetic  lease,  tax  retention  operating
lease,  off-balance sheet loan or similar off-balance sheet financing classified
as an operating lease in accordance with GAAP, if such obligations would or will
give rise to a claim against such Person in an Act of Bankruptcy.

         "Offer"  means the offer of the Public Sub to purchase its  outstanding
Subordinated Notes.

         "Offer to Purchase  and Consent to  Solicitation  Statement"  means the
Offer to Purchase  and Consent to  Solicitation  Statement  of the Public Sub in
connection with the Offer.

         "Other Taxes" has the meaning specified in Section 2.9(b).

         "Permitted Acquisition" has the meaning specified in Section 7.10.

         "Permitted Indebtedness" has the meaning specified in Section 7.1.

         "Permitted Lien" has the meaning specified in Section 7.2.

         "Person" means any natural person, corporation, business trust, limited
liability  company,  joint  venture,   association,   company,   partnership  or
government, or any agency or political subdivision thereof.

         "PIK Amount" has the meaning set forth in the Debentures.

         "PIK  Interest"  means,  with  respect  to  any  Indebtedness,  accrued
interest  on such  Indebtedness  that is not payable in cash but is added to the
principal balance and due at maturity of such Indebtedness.

         "Plan" means a Single Employer Plan or a Multiple Employer Plan.

         "Preferred Stock" as applied to the Capital Stock of any Person,  means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of  dividends  or  distributions,  or as to the  distribution  of
assets upon any voluntary or  involuntary  liquidation  or  dissolution  of such
Person, over shares of Capital Stock of any other class of such Person.

                                       11
<PAGE>

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

         "Public Sub" means ISG Resources, Inc., a Utah corporation.

         "Real  Property"  means,  collectively,  all real property owned by the
Borrower or its  Subsidiaries or in which the Borrower or its Subsidiaries has a
leasehold  interest and all real property  hereafter acquired by the Borrower or
its Subsidiaries in fee or by means of a leasehold interest,  including all real
property  on  which  the  Borrower's  Business  is now or  hereafter  conducted,
together with all goods located on any such real property that are or may become
"fixtures"  under the law of the  jurisdiction  in which such real  property  is
located.

         "Receiver"  means any  receiver,  trustee,  custodian,  liquidator,  or
similar fiduciary.

         "Repayment  Charge" means the amount  payable as a repayment  charge if
any collateral in accordance with Section 2.6 of this Agreement.

         "Required Holders" means, at any time, Holders owed or holding at least
a majority in interest of the aggregate principal amount under the Debentures.

         "Responsible  Officer" means the Chief  Executive  Officer or the Chief
Financial Officer of the Borrower.

         "Restricted  Payment" means; (i) any dividend or other  distribution of
any nature,  direct or indirect, on account of any class of equity securities of
the Borrower or any of its Subsidiaries,  now or hereafter outstanding; (ii) any
redemption,  retirement,  sinking  fund or similar  payment,  purchase  or other
acquisition for value, direct or indirect,  of any class of equity securities of
the Borrower or any of its Subsidiaries, now or hereafter outstanding; (iii) any
payment made to retire, or to obtain the surrender of, any outstanding warrants,
options  or other  rights  to  acquire  any class of  equity  securities  of the
Borrower or any of its Subsidiaries,  now or hereafter outstanding; and (iv) any
loan, advance, tax sharing payment or indemnification  payment to, or investment
in, any Affiliate of the Borrower (other than Subsidiary Guarantors).

         "Restricted Subsidiary" means each direct or indirect Subsidiary of the
Borrower in existence on the date hereof (other than any Foreign  Subsidiary and
Flexcrete  LLC),  or created or acquired  after the date hereof  (except for any
Foreign  Subsidiary and any other  Subsidiary  which the Borrower  designates an
Unrestricted  Subsidiary  at the  time  of its  creation  or  acquisition).  Any
Subsidiary that is a Restricted Subsidiary (including any Subsidiary that is not
designated  an   Unrestricted   Subsidiary  at  the  time  of  its  creation  or
acquisition) shall be a Restricted Subsidiary for the term of this Agreement and
shall be a Subsidiary Guarantor.

         "Senior Credit  Facility"  means the Credit  Agreement  dated as of the
date hereof, by and among the Credit Parties and the lender parties thereto,  as
the same may be amended,  supplemented  or otherwise  modified from time to time
and any agreement refinancing all or any of the debt or commitments  thereunder,
but only in each case to the extent the  Indebtedness  thereunder  continues  to
constitute Senior Debt as provided in the definition thereof.

         "Senior Debt" means all of the following:  (a) the aggregate  principal
indebtedness advanced from time to time under the Senior Credit Facility up to a
maximum aggregate  principal  indebtedness that shall not exceed $175,000,000 as

                                       12
<PAGE>

reduced  from  time  to  time  by all  payments  and  prepayments  of  principal
outstanding thereunder (other than payments with respect to the revolving credit
component thereof in aggregate principal amount not to exceed $20,000,000);  (b)
all interest accrued and accruing on the aggregate  principal  outstanding under
the Senior Credit  Facility from time to time; (c) all other  reasonable fees or
monetary  obligations  owed  under  the  Senior  Credit  Facility;  and  (d) all
reasonable costs incurred by the Senior Lenders under the Senior Credit Facility
in commencing or pursuing any enforcement  action(s) with respect to the amounts
described  in  clauses  (a)  through   (c),   including   attorneys'   fees  and
disbursements. Senior Debt shall also include all amendments,  modifications and
refinancings of the foregoing that do not cause the aggregate  principal  amount
to exceed the maximum amount described above.

         "Senior Lenders" means the lenders  providing the Senior Debt under the
Senior Credit Facility.

         "Single  Employer  Plan" means a single  employer  plan,  as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Credit
Party or any ERISA  Affiliate  and no Person other than the Loan Parties and the
ERISA  Affiliates  or (b) was so  maintained  and in respect of which any Credit
Party or any ERISA Affiliate could have liability under Section 4069 of ERISA in
the event such plan has been or were to be terminated.

         "Solvent"  and  "Solvency"  mean  with  respect  to  any  Person  on  a
particular  date,  that on such date (a) the fair value of the  property of such
Person is  greater  than the total  amount of  liabilities,  including,  without
limitation, contingent liabilities, of such Person, (b) the present fair salable
value of the  assets of such  Person is not less  than the  amount  that will be
required  to pay the  probable  liability  of such  Person  on its debts as they
become  absolute and  matured,  (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay such debts and liabilities as they mature and (d) such Person is not engaged
in  business  or a  transaction,  and is not about to engage  in  business  or a
transaction,  for which such Person's  property would constitute an unreasonably
small  capital.  The  amount  of  contingent  liabilities  at any time  shall be
computed  as the amount  that,  in the light of all the facts and  circumstances
existing at such time,  represents the amount that can reasonably be expected to
become an actual or matured liability.

         "Subordination  Agreement" means that certain Subordination  Agreement,
dated as of the date hereof,  by and among the Borrower,  Allied Capital and the
Administrative Agent on behalf of the Senior Lenders.

         "Sub" means Headwaters Olysub Corporation, a Delaware corporation.

         "Subordinated  Debt"  means any  Indebtedness  of the  Borrower  or any
Subsidiary  thereof that is expressly  subordinated and made junior in right and
time of payment to the Senior  Debt and the  Debentures,  in form and  substance
satisfactory to the Holders.

         "Subsidiary" of any Person means any  corporation,  partnership,  joint
venture,  limited liability company, trust or estate of which (or in which) more
than 50% of (a) the issued and outstanding  capital stock having ordinary voting
power  to  elect a  majority  of the  Board  of  Directors  of such  corporation
(irrespective of whether at the time capital stock of any other class or classes

                                       13
<PAGE>

of such corporation  shall or might have voting power upon the occurrence of any
contingency),  (b) the  interest in the capital or profits of such  partnership,
joint venture or limited  liability  company or (c) the  beneficial  interest in
such trust or estate is at the time directly or  indirectly  owned or controlled
by such Person,  by such Person and one or more of its other  Subsidiaries or by
one or more of such Person's other Subsidiaries.

         "Subsidiary  Guaranty  Agreement" means the Guaranty  Agreement of even
date herewith among  Subsidiaries of the Borrower which are, or may from time to
time become,  parties thereto, in favor of the Holders, as amended,  modified or
otherwise supplemented from time to time.

         "Subsidiary   Guarantor"   means  a  Guarantor  that  is  a  Restricted
Subsidiary.

         "Surviving  Debt" means the  Indebtedness  of each Credit Party and its
Subsidiaries  outstanding  immediately  before  and after  giving  effect to the
Closing and the transactions  contemplated thereby, as set forth on a disclosure
schedule incorporated in Article IV.

         "Taxes" has the meaning specified in Section 2.9(a).

         "Transaction"  means the  execution,  delivery and  performance  by the
Credit  Parties  and  each  of  their  respective  Subsidiaries  of  each of the
Investment Documents to which such Credit Party or any of its Subsidiaries is or
is to become a party and the obligations hereunder and thereunder.

         "Transfer" means the sale,  assignment,  lease,  transfer,  mortgaging,
encumbering or other disposition,  whether voluntary or involuntary, and whether
or not consideration is received therefor.

         "Unrestricted  Subsidiary" means any Subsidiary of the Borrower created
or acquired  after the date hereof that Borrower  designates as an  Unrestricted
Subsidiary in accordance with Section 7.10. Any Subsidiary that is designated an
Unrestricted  Subsidiary at the time of its creation or acquisition  shall be an
Unrestricted  Subsidiary  for the term of this  Agreement.  For purposes of this
Agreement and the other Loan  Documents,  Flexcrete LLC shall be an Unrestricted
Subsidiary.

         "Voting   Interests"   means  shares  of  capital  stock  issued  by  a
corporation,  or equivalent  Capital  Stock in any other Person,  the holders of
which are ordinarily, in the absence of contingencies,  entitled to vote for the
election of directors (or persons  performing similar functions) of such Person,
even if the  right so to vote  has been  suspended  by the  happening  of such a
contingency.

         "Wholly-Owned  Subsidiary"  of any Person  means a  Subsidiary  of such
Person of which securities  (except for directors'  qualifying  shares) or other
ownership  interests  representing  100% of the  equity or 100% of the  ordinary
voting power or 100% of the general  partnership  interests are, at the time any
determination is being made, owned,  controlled or held by such Person or one or
more wholly owned  subsidiaries of such Person or by such Person and one or more
wholly owned subsidiaries of such Person.

                                       14
<PAGE>

         "Withdrawal  Liability"  means liability to a  Multiemployer  Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are  defined  in Part 1 of  Subtitle E of Title IV of ERISA.  SECTION  1.2
Terms  Generally.  The  definitions  in  Section  1.1 apply  equally to both the
singular  and  plural  forms of the terms  defined.  Whenever  the  context  may
require, any pronoun includes the corresponding  masculine,  feminine and neuter
forms. The words "include," "includes" and "including" are deemed to be followed
by the phrase "without limitation." All references herein to Articles, Sections,
Exhibits and  Schedules  are deemed  references to Articles and Sections of, and
Exhibits and Schedules  to, this  Agreement  unless the context shall  otherwise
require.  Except as otherwise  expressly  provided herein,  (a) any reference in
this  Agreement  to any  Investment  Document  means such  document  as amended,
restated, supplemented or otherwise modified from time to time and (b) all terms
of an accounting or financial nature are construed in accordance with GAAP.

                                  Article II.
                                 The investment

         SECTION  2.1  Funding.   At  the  closing  under  this  Agreement  (the
"Closing"),  the  Borrower  will  borrow,  and Allied  Capital  will lend to the
Borrower,  the  aggregate sum of  $20,000,000.  All such  indebtedness  shall be
evidenced  by,  and is to be  repaid  according  to the  terms  of,  one or more
Debentures. The entire principal sum will be advanced at Closing.

         SECTION 2.2 Senior Debt.  The Holders'  rights under the Debentures and
this  Agreement are  subordinate  as to right of payment only to the Senior Debt
pursuant to the Subordination Agreement.

         SECTION 2.3  Repayment of  Debentures.  Subject to the terms of Section
2.7 and the  Subordination  Agreement,  all unpaid principal amounts and accrued
and unpaid  interest  under the  Debentures,  and all other  obligations  of the
Borrower to the Holders due and owing  hereunder shall be paid upon the earliest
of (i) the date of acceleration of the Debentures pursuant to Article VIII, (ii)
the date of  redemption  pursuant to Section  2.6 or 2.7 and (iii) the  Maturity
Date,  in  immediately   available   Dollars,   without   set-off,   defense  or
counterclaim.

         SECTION 2.4 Interest on the  Debentures.  Subject to the  provisions of
Section 2.5, the  Debentures  shall bear interest  (calculated on the basis of a
360-day  year and  computed for each  payment  period on the  principal  balance
assuming 12 equal 30 day months) at the  Interest  Rate,  payable in  accordance
with the Debentures.

         SECTION 2.5 Default Interest.  If any Event of Default exists,  whether
or not such default is declared,  the Borrower shall pay interest, to the extent
permitted by law, on amounts due under the  Debentures  so long as such Event of
Default is  continuing  (after as well as before  judgment) at the Interest Rate
plus 2%.

         SECTION 2.6 Prepayment.

         (a) The  Borrower  may at any  time and from  time to time  prepay  the
Debentures,  in whole or in part, upon at least 10 days but no more than 60 days
prior written or facsimile  notice (or telephone  notice  promptly  confirmed by

                                       15
<PAGE>

written or facsimile  notice) to the Holders before 2:00 p.m,  Washington,  D.C.
time,  subject to the  Borrower's  obligation  to pay a  repayment  charge  (the
"Repayment  Charge") of

                  (i) 5% of any  principal  prepaid  prior to and  including the
         first anniversary of the Closing Date;

                  (ii) 4% of any principal  prepaid after the first  anniversary
         of the Closing Date but prior to and including  the second  anniversary
         of the Closing Date;

                  (iii) 3% of any principal prepaid after the second anniversary
         of the Closing Date but prior to and including the third anniversary of
         the Closing Date;

                  (iv) 2% of any principal  prepaid after the third  anniversary
         of the Closing Date but prior to and including  the fourth  anniversary
         of the Closing Date;

                  (v) 1% of any principal  prepaid after the fourth  anniversary
         of the Closing Date but prior to the fifth  anniversary  of the Closing
         Date.

         (b) Any partial prepayments shall be made in increments of $500,000 and
shall  be  applied  pro  rata  to  amounts  outstanding  under  the  Debentures.
Notwithstanding  any provision to the contrary,  the Repayment  Charges shall be
due and payable upon any voluntary or mandatory  prepayment of the Debentures in
whole or in part.  On the date of  prepayment,  the  Borrower  shall  pay to the
holders of the  Debentures  being prepaid  pursuant to this  Section,  the price
specified  above, by wire transfer of immediately  available funds to an account
designated  by such Holder.  Concurrently  therewith,  each Holder of Debentures
being  prepaid  shall deliver to the Borrower the original copy of its Debenture
or an affidavit of loss thereof in a form that is reasonably satisfactory to the
Borrower. Any notice given by the Borrower pursuant to this Section 2.6 shall be
irrevocable so long as the specified conditions are met.

         SECTION 2.7 Mandatory  Prepayment  of the  Debentures.  The  Borrower's
obligations  under the Debentures  and this Agreement are not assumable;  upon a
Change of Control,  each Holder shall have the right (but not the obligation) to
require  the  Borrower to (a) prepay the  Debentures  held by such Holder for an
amount equal to the then outstanding  principal balance,  all accrued but unpaid
interest  thereon,  plus all PIK Amounts (as defined in the  Debentures) and all
applicable  Repayment  Charges due under Section 2.6 above,  and (b) pay in full
all of the  other  Obligations  owing  to such  Holder,  which  amount  shall be
calculated on the date of prepayment and be payable in cash on such date. On the
date of  prepayment,  the  Borrower  shall pay to the holders of the  Debentures
being  prepaid  pursuant to this Section,  the price  specified  above,  by wire
transfer of immediately available funds to an account designated by such Holder.
Concurrently therewith, each Holder of Debentures being prepaid shall deliver to
the Borrower the original  copy of its Debenture or an affidavit of loss thereof
in a form that is reasonably satisfactory to the Borrower.

         SECTION 2.8 Payments.

         (a) The  Borrower  shall make each payment  (including  principal of or
interest  on the  Debentures  or other  amounts)  hereunder  and under any other
Investment Document not later than 2:00 P.M., Washington, D.C. time, on the date

                                       16
<PAGE>

when  due  in  immediately  available  Dollars,   without  setoff,   defense  or
counterclaim. Each such payment shall be made to each Holder pursuant to written
instructions  from  such  Holder to the  Borrower,  including  pursuant  to wire
transfer  instructions.  (b)  Whenever  any payment  (including  principal of or
interest or Repayment  Charge on the  Debenture or other  amounts)  hereunder or
under any other Loan Document shall become due, or otherwise  would occur,  on a
day that is not a Business Day, such payment may be made on the next  succeeding
Business  Day, and such  extension of time shall in such case be included in the
computation of interest.

         SECTION 2.9 Taxes.

         (a) Any and all payments by or on behalf of the Borrower  hereunder and
under any  Investment  Document  shall be made, in accordance  with Section 2.8,
free and clear of and without deduction for any and all current or future taxes,
levies, imposts, deductions,  charges or withholdings,  and all liabilities with
respect  thereto,  excluding  (i)  income  taxes  imposed on the net income of a
Holder and (ii) franchise  taxes imposed on the net income of a Holder,  in each
case by the  jurisdiction  under the laws of which such Holder is  organized  or
qualified to do business or a jurisdiction or any political  subdivision thereof
in which the Holder  engages in business  activity  other than activity  arising
solely from the Holder  having  executed this  Agreement and having  enjoyed its
rights and  performed its  obligations  under this  Agreement or any  Investment
Document or any  political  subdivision  thereof  (all such  nonexcluded  taxes,
levies, imposts, deductions, charges, withholdings and liabilities, collectively
or individually,  being called  "Taxes").  If the Borrower must deduct any Taxes
from or in respect of any sum payable  hereunder  or under any other  Investment
Document to a Holder,  (i) the sum payable  shall be increased by the amount (an
"additional  amount")  necessary so that after  making all  required  deductions
(including  deductions  applicable to additional sums payable under this Section
2.9) such Holder shall receive an amount equal to the sum it would have received
had no such  deductions  been made, (ii) the Borrower shall make such deductions
and (iii) the Borrower  shall pay the full amount  deducted to the  Governmental
Authority in accordance with applicable law.

         (b) In  addition,  the Borrower  will pay to the relevant  Governmental
Authority  in  accordance  with  applicable  law any current or future  stamp or
documentary  taxes or any other  excise or  property  taxes,  charges or similar
levies  that arise  from any  payment  made  hereunder  or under any  Investment
Document, or from the execution,  delivery or registration of, or otherwise with
respect to, this Agreement or any Investment Document ("Other Taxes").

         (c) Subject to Section 2.9(f) below,  the Borrower  agrees to indemnify
each Holder for the full amount of Taxes and Other Taxes paid by such Holder and
any liability (including penalties,  interest and expenses (including reasonable
attorney's  fees and  expenses))  arising  therefrom  or with  respect  thereto,
whether or not such Taxes or Other Taxes were  correctly or legally  asserted by
the relevant  Governmental  Authority.  A  certificate  as to the amount of such
payment or liability  prepared by such Holder absent  manifest  error,  shall be
final  conclusive and binding for all purposes.  Such  indemnification  shall be
made within 30 days after the date such Holder makes  written  demand  therefor.
The  Borrower  shall have the right to receive that portion of any refund of any
Taxes and Other Taxes received by a Holder for which the Borrower has previously
paid any  additional  amount or  indemnified  such  Holder and which  leaves the

                                       17
<PAGE>

Holder,  after the Borrower's  receipt thereof,  in no better or worse financial
position  than if no such Taxes or Other  Taxes had been  imposed or  additional
amounts  or  indemnification  paid to the  Holder.  The  Holder  shall have sole
discretion  as to whether (and shall in no event be  obligated) to make any such
claim for any refund of any Taxes or Other Taxes.

         (d) As soon as practicable  (and in any event within 60 days) after the
date of any  payment of Taxes or Other  Taxes by the  Borrower  to the  relevant
Governmental  Authority,  the Borrower will deliver to each Holder, the original
or  a  certified  copy  of a  receipt  issued  by  such  Governmental  Authority
evidencing payment thereof.

         (e) Any transferee of the Holders,  with respect to the investment,  if
organized  under the laws of a jurisdiction  other than the United  States,  any
State thereof or the District of Columbia (a "Non-U.S. Investor") shall deliver,
to the extent legally able to do so, to the Borrower two copies of either United
States Internal  Revenue Service Form W-8BEN or Form W-8ECI or other  applicable
form,  or,  in the case of a  Non-U.S.  Investor  claiming  exemption  from U.S.
Federal  withholding tax under Section 871(h) or 881(c) of the Code with respect
to payments of  "portfolio  interest",  a Form W-8, or any  subsequent  versions
thereof or successors  thereto (and, if such Non-U.S.  Investor  delivers a Form
W-8, a certificate  representing  that such Non-U.S.  Investor is not a bank for
purposes of Section  881(c) of the Code,  is not a 10%  shareholder  (within the
meaning  of  Section  871(h)(3)(B)  of the  Code) of the  Borrower  and is not a
controlled foreign corporation  receiving interest from a related person (within
the meaning of Section  864(d)(4)  of the Code)),  properly  completed  and duly
executed  by  such  Non-U.S.  Investor  claiming  exemption  from  U.S.  Federal
withholding  tax on  payments  by the  Borrower  under  this  Agreement  and the
Investment Documents. Such forms shall be delivered by each Non-U.S. Investor on
or before  the date it  becomes a party to this  Agreement  and on or before the
date, if any, such Non-U.S.  Investor  changes its applicable  lending office by
designating a different  lending office (a "New Lending  Office").  In addition,
each Non-U.S.  Investor shall deliver such forms promptly upon the  obsolescence
or  invalidity  of any form  previously  delivered  by such  Non-U.S.  Investor.
Notwithstanding the foregoing, no Non-U.S. Investor shall be required to deliver
any form  pursuant  to this  paragraph  (e) that such  Non-U.S.  Investor is not
legally able to deliver.

         (f) The  Borrower  shall not be  required  to  indemnify  any  Non-U.S.
Investor or to pay any additional amounts to any Non-U.S.  Investor,  in respect
of United States Federal  withholding tax pursuant to paragraph (a) or (c) above
to the extent that (i) the obligation to withhold amounts with respect to United
States Federal withholding tax existed on the date such Non-U.S. Investor became
a party to this Agreement or, with respect to payments to a New Lending  Office,
the date such Non-U.S.  Investor designated such New Lending Office with respect
to the Debentures; provided, however, that this paragraph (f) shall not apply to
(x) any Non-U.S. Investor as a result of an assignment,  participation, transfer
or  designation  made at the request of the  Borrower  and (y) to the extent the
indemnity payment or additional  amounts any Holder would be entitled to receive
(without  regard to this paragraph  (f)) do not exceed the indemnity  payment or
additional  amounts  that the Person  making the  assignment,  participation  or
transfer  to such Holder  would have been  entitled to receive in the absence of
such assignment,  participation, transfer or designation, or (ii) the obligation
to pay such  additional  amounts would not have arisen but for a failure by such
Non-U.S.  Investor to comply with the provisions of paragraph (e) above or (iii)
such Non-U.S.  Investor is treated as a "conduit  entity"  within the meaning of
U.S. Treasury Regulations Section 1.881-3 or any successor provision.

                                       18
<PAGE>

         (g) Nothing  contained  in this  Section 2.9 shall  require a Holder to
make  available  any of its  tax  returns  (or  any  other  information  that it
reasonably deems to be confidential or proprietary).

         SECTION  2.10 Use of  Proceeds.  The  proceeds  of the  loan by  Allied
Capital  shall  be  used to  consummate  the  Acquisition,  with  the  remainder
available to pay certain  transaction  expenses and for working capital purposes
for the Borrower and its Subsidiaries.

                                  Article III.
                                   Conditions

         SECTION 3.1 Conditions to Closing. The obligations of Allied Capital to
enter into this Agreement and to perform its obligations hereunder is subject to
the satisfaction of the following conditions on or prior to the Closing Date:

         (a) The  representations  and warranties set forth in Article IV hereof
shall be true and correct on and as of the Closing Date.

         (b) The Credit  Parties shall be in  compliance  with all the terms and
provisions set forth herein and in each other Investment  Document on their part
to be  observed  or  performed,  and at the time of and  immediately  after  the
Transaction,  no  Event  of  Default  or  Default  shall  have  occurred  and be
continuing.

         (c) Allied Capital shall have received the following items:

                  (i)  favorable  written  opinions  of  counsel  to the  Credit
         Parties (A) dated the Closing Date, (B) addressed to Allied Capital and
         (C) covering such matters relating to the Investment  Documents and the
         Transaction as Allied Capital shall reasonably request,  and the Credit
         Parties hereby request such counsel to deliver such opinion;

                  (ii) the Debentures, duly executed by the Borrower and each of
         the other Investment Documents, executed by each of the parties thereto
         (other than Allied Capital);

                  (iii) for each Credit Party:  (A) a copy of the certificate or
         articles of incorporation,  including all amendments  thereto,  of such
         Credit  Party,  certified as of a recent date by the Secretary of State
         of the  jurisdiction of its  organization,  and a certificate as to the
         good  standing  of such  Credit  Party as of a recent  date,  from such
         Secretary of State;  (B) a  certificate  of the  Secretary or Assistant
         Secretary of such Credit  Party dated the Closing  Date and  certifying
         (1) that attached thereto is a true and complete copy of the by-laws of
         such  Credit  Party as in effect on the  Closing  Date and at all times
         since a date prior to the date of the  resolutions  described in clause
         (2) below,  (2) that  attached  thereto is a true and complete  copy of
         resolutions duly adopted by the Board of Directors of such Credit Party
         authorizing  the execution,  delivery and performance of the Investment
         Documents  to which  such  Person is a party and that such  resolutions
         have not been modified,  rescinded or amended and are in full force and
         effect,  (3) that the certificate or articles of  incorporation of such

                                       19
<PAGE>

         Credit Party have not been amended since the date of the last amendment
         thereto shown on the certificate of good standing furnished pursuant to
         clause (A) above,  and (4) as to the incumbency and specimen  signature
         of each officer executing any Investment Document or any other document
         delivered in connection  herewith on behalf of such Credit  Party;  and
         (C) a certificate of another  officer as to the incumbency and specimen
         signature of the Secretary or Assistant  Secretary of such Credit Party
         executing the certificate pursuant to (B) above;

                  (iv) all  amounts  due and  payable on or prior to the Closing
         Date,  including,  to the extent invoiced,  reimbursement or payment of
         all  out-of-pocket  expenses  required to be  reimbursed or paid by the
         Borrower hereunder or under any other Investment Document;

                  (v) the financial statements as described in Article IV; and

                  (vi) the Subsidiary Guaranty Agreement,  in form and substance
         satisfactory to Allied Capital, duly executed by each of the Subsidiary
         Guarantors.

         (d) The Borrower shall have entered into the transaction documents with
respect to the Senior  Credit  Facility and Allied  Capital  shall be provided a
copy of the documentation relating thereto;

  (e) After giving  effect to the  transactions
contemplated  hereby,  the Borrower and their respective  Subsidiaries shall not
have  outstanding  any  Indebtedness  other than (i) the Senior  Debt,  (ii) the
extension of credit  under this  Agreement  and (iii) the  Surviving  Debt.

         (f) Allied Capital shall have received fully executed  conformed copies
of the Acquisition Documents and each of the other material documents related to
the  Acquisition  Documents,  certified as true and correct  copies thereof by a
duly  authorized  officer of the Borrower,  each of which shall be in full force
and effect and in form and substance satisfactory to Allied Capital. On or prior
to the Closing Date, the Acquisition shall have been consummated in all material
respects in accordance with the terms of the Acquisition Documents.

         (g) No  event  that  has or  reasonably  would  be  expected  to have a
Material Adverse Change shall have occurred since December 31, 2001.

         (h)  Allied  Capital  shall  have  received  all  necessary   corporate
approvals of the  Transaction,  and all  regulatory  requirements  applicable to
Allied Capital shall have been satisfied.

         (i)  Allied   Capital  shall  have   received  such  other   documents,
instruments and information as Allied Capital may reasonably request.

                                  Article IV.
                         Representations and Warranties

         In order to induce Allied  Capital to enter into the  Transaction,  the
Borrower   hereby   makes  to  Allied   Capital  on  the  Closing   Date  (which
representations  and warranties shall survive the execution and delivery of this
Agreement)  the  representations  and  warranties  set  forth in  Senior  Credit

                                       20
<PAGE>

Facility, and such representations and warranties, together with all definitions
referenced   therein  and  any  disclosure   schedules   related  thereto,   are
incorporated  herein by reference  and made a part  hereof.  For the purposed of
this Article IV only,  terms not defined herein shall have the meanings given in
the Senior Credit Facility, provided that each reference in such representations
and warranties to a "Loan Party" shall mean and be a reference to a Credit Party
hereunder;  each  reference  to a  "Transaction  Document"  shall  mean and be a
reference  to an  Investment  Document  hereunder;  each  reference to a "Lender
Party" shall mean and be a reference to a Holder hereunder and each reference to
"Equity Interests" shall mean and be a reference to Capital Stock hereunder.

                                   Article V.
                            INVESTOR REPRESENTATIONS

         Allied Capital represents and warrants to the Borrower as follows:

         SECTION 5.1  Investment.  It is acquiring  the  Debentures  for its own
account for investment  and not with a view to, or for sale in connection  with,
any  distribution  thereof,  nor with any present  intention of  distributing or
selling the same; and it has no present or contemplated agreement,  undertaking,
arrangement,   obligation,   indebtedness   or  commitment   providing  for  the
disposition thereof.

         SECTION 5.2  Authority.  It has full power and  authority to enter into
and to perform this Agreement in accordance  with its terms.  It represents that
it has not been organized,  reorganized or  recapitalized  specifically  for the
purpose of investing in the Debentures.  SECTION 5.3 Accredited Investor.  It is
an "Accredited  Investor"  within the definition set forth in Rule 501(a) of the
Securities Act.

                                  Article VI.
                              Affirmative Covenants

         Until the  Debentures  and all expenses or other amounts  payable under
the Loan  Documents  are repaid in full,  unless  the  Holders  shall  otherwise
consent in writing,  the Borrowers jointly and severally covenant and agree with
the Holders to do (and to cause its Subsidiaries to do) all of the following:

         SECTION 6.1 Existence; Businesses and Properties.

         (a) Each of the Credit  Parties  will do or cause to be done all things
necessary to preserve and maintain its and its Subsidiaries' legal existence and
to maintain  such Credit  Party's right to do business in each  jurisdiction  in
which such Credit Party currently conducts business; provided, however, that the
Borrower  may  consummate  the  Acquisition;  provided  further that neither the
Borrower  nor any of its  Subsidiaries  shall be required to preserve any right,
permit, license,  approval,  privilege or franchise if the Board of Directors of
the Borrower or such Subsidiary shall determine that the preservation thereof is
no longer  desirable  in the  conduct of the  business  of the  Borrower or such
Subsidiary, as the case may be, and that the loss thereof is not disadvantageous
in any material respect to the Borrower, such Subsidiary or Allied Capital.

                                       21
<PAGE>

         (b)  Each of the  Credit  Parties  will,  and  will  cause  each of its
Subsidiaries  to,  do or  cause  to be done  all  things  necessary  to  obtain,
preserve,  renew, extend and keep in full force and effect the rights, licenses,
permits, franchises,  authorizations,  patents, copyrights, trademarks and trade
names material to the conduct of its and such Subsidiaries' business;  provided,
however, that the Borrower may consummate the Acquisition; provided further that
neither the Borrower nor any of its  Subsidiaries  shall be required to preserve
any right,  permit,  license,  approval,  privilege or franchise if the Board of
Directors  of  the  Borrower  or  such  Subsidiary   shall  determine  that  the
preservation  thereof is no longer  desirable  in the conduct of the business of
the Borrower or such  Subsidiary,  as the case may be, and that the loss thereof
is not disadvantageous in any material respect to the Borrower,  such Subsidiary
or Allied  Capital;  comply with all applicable  laws,  rules,  regulations  and
decrees  and  orders of any  Governmental  Authority,  whether  now in effect or
hereafter  enacted,  except where the failure to do so,  individually  or in the
aggregate,  could not  reasonably  be expected  to result in a Material  Adverse
Effect;  and at all times  maintain and  preserve  all Property  material to the
conduct of such  business and keep such  Property in good repair,  working order
and condition  (ordinary  wear and tear excepted) and from time to time make, or
cause  to  be  made,  all  needful  and  proper  repairs,  renewals,  additions,
improvements  and  replacements  thereto  necessary  in order that the  business
carried on in  connection  therewith  may be  properly  conducted  at all times,
except in those  circumstances  where in the reasonable business judgment of the
Borrower such  properties need not be so maintained or preserved and any failure
to maintain such properties  shall not have a material  adverse impact on Allied
Capital.

         SECTION 6.2 Insurance. (a) Coverage.  Without limiting any of the other
obligations or liabilities  of the Borrower under this  Agreement,  the Borrower
shall,  during  the  term of this  Agreement,  carry  and  maintain,  at its own
expense,  at least the minimum insurance coverage set forth in this Section 6.2.
All  insurance  carried  pursuant to this  Section 6.2 shall be placed with such
insurers  having a  minimum  A.M.  Best  rating of A:X,  or as may be  otherwise
acceptable to the Holders.  Such  insurance  shall be in such form,  with terms,
conditions,  limits and  deductibles  as shall be  reasonably  acceptable to the
Holders.

                  (i) All Risk Property  Insurance.  The Borrower shall maintain
         all risk property  insurance  covering against physical loss or damage,
         including  but not  limited to fire and  extended  coverage,  collapse,
         flood,  earth movement and comprehensive  boiler and machinery coverage
         (including electrical malfunction and mechanical  breakdown).  Coverage
         shall be written on a replacement  cost basis.  Such  insurance  policy
         shall  contain an agreed  amount  endorsement  waiving any  coinsurance
         penalty and shall include expediting expense coverage; and

                  (ii)  Commercial  General  Liability  Insurance.  The Borrower
         shall maintain  commercial  general  liability  insurance written on an
         occurrence  basis  with a  limit  of not  less  than  $1,000,000.  Such
         coverage  shall  include,  but not be limited to,  premises/operations,
         explosion,   collapse,   underground  hazards,  contractual  liability,
         independent contractors, products/completed operations, property damage
         and personal  injury  liability.  Such  insurance  shall not contain an
         exclusion for punitive or exemplary damages where insurable by law; and

                                       22
<PAGE>

                  (iii) Workers' Compensation/Employer's Liability. The Borrower
         shall  maintain  Workers'  Compensation  insurance in  accordance  with
         statutory provisions covering accidental injury, illness or death of an
         employee  of  the  Borrower  while  at  work  or in  the  scope  of his
         employment with the Borrower and employer's  liability  insurance in an
         amount not less than  $1,000,000.  Such coverage  shall not contain any
         occupational disease exclusions; and

                  (iv)  Automobile   Liability.   The  Borrower  shall  maintain
         automobile liability insurance covering owned, non-owned, leased, hired
         or borrowed  vehicles  against bodily injury or property  damage.  Such
         coverage shall have a limit of not less than $1,000,000;

                  (v)  Excess/Umbrella  Liability.  The Borrower  shall maintain
         excess or  umbrella  liability  insurance  in an  amount  not less than
         $10,000,000  and shall cause Public Sub to maintain  excess or umbrella
         liability  insurance in an amount not less than $50,000,000  written on
         an occurrence  basis providing  coverage limits excess of the insurance
         limits required under paragraphs (a)(ii), (a)(iii) employer's liability
         only, and (a)(iv) of this Section. Such insurance shall follow from the
         primary  insurances  and drop down in case of  exhaustion of underlying
         limits and/or aggregates. Such insurance shall not contain an exclusion
         for punitive or exemplary damages where insurable under law.

         (b)  Certifications.  On the Closing Date, and at each policy  renewal,
but not less than  annually,  Borrower  shall  provide to the  Holders  approved
certification  from each  insurer  or by an  authorized  representative  of each
insurer.  Such  certification  shall  identify  the  underwriters,  the  type of
insurance, the limits, deductibles,  and term thereof for the insurance required
by this Section 6.2.

         (c)  Insurance   Report.   Concurrently  with  the  furnishing  of  all
certificates referred to in this Section 6.2, Borrower shall furnish the Holders
with an opinion from an independent  insurance broker, in form acceptable to the
broker  and the  Holders,  stating  that as of the date of the  opinion  (i) the
insurance  policies  listed  with the  broker's  opinion  are in full  force and
effect;  (ii)  the  broker  has not  received  any  notice  of  cancellation  or
non-renewal  with  respect  to the  listed  policies  and is  not  aware  of any
circumstances which would make the giving of such a notice by an insurer likely;
(iii) in the  broker's  view,  based  upon the  broker's  understanding  of this
Section 6.2, the policies  listed with the broker's  opinion are consistent with
the minimum  requirements  of this Section 6.2; and (iv) based upon the broker's
experience,  the coverages  provided by the policies listed with the opinion are
consistent with those normally provided to companies  similarly  situated to the
Borrower.

         (d) General.  The Holders shall be entitled,  upon  reasonable  advance
notice,  to review the  Borrower's  books and records  regarding  all  insurance
policies carried and maintained with respect to the Borrower's obligations under
this Section 6.2.  Upon  request,  the Borrower  shall  furnish the Holders with
copies of all insurance policies,  binders, and cover notes or other evidence of
such insurance. Notwithstanding anything to the contrary herein, no provision of
this Section 6.2 or any provision of this Agreement  shall impose on the Holders
any duty or  obligation  to verify the  existence  or adequacy of the  insurance
coverage  maintained by the Borrower,  nor shall the Holders be responsible  for
any  representations  or warranties  made by or on behalf of the Borrower to any
insurance broker,  company or underwriter.  The Holders, at its sole option, may
obtain such  insurance if not  provided by the  Borrower and in such event,  the
Borrower shall  reimburse the Holders upon demand for the cost thereof  together
with interest.

                                       23
<PAGE>

         SECTION 6.3 Obligations and Taxes. Each of the Credit Parties will pay,
and cause its Subsidiaries to pay, its material  Indebtedness and other material
obligations promptly and in accordance with their terms and to pay and discharge
promptly  when due all taxes,  assessments  and  governmental  charges or levies
imposed  upon it or upon its income or  profits  or in respect of its  property,
before the same shall  become  delinquent  or in default,  as well as all lawful
claims for labor,  materials and supplies or otherwise  that,  if unpaid,  might
give rise to a Lien upon such properties or any part thereof, provided, however,
that such payment and  discharge  shall not be required with respect to any such
tax,  assessment charge, levy or claim so long as the validity or amount thereof
shall be  contested  in good  faith by  appropriate  proceedings  and any Credit
Parties and its Subsidiaries,  as applicable,  shall have set aside on its books
adequate  reserves with respect thereto in accordance with GAAP and such contest
operates to suspend collection of the contested  obligation,  tax, assessment or
charge and enforcement of a Lien.

         SECTION 6.4  Financial  Statements,  Reports,  etc. The  Borrower  will
furnish to the Holders:

         (a) within 90 days after the end of each fiscal year, the  Consolidated
and  consolidating   balance  sheets  and  related   statements  of  operations,
stockholders'  equity and cash flows,  showing the  financial  condition  of the
Borrower  and its  Subsidiaries,  as of the  close of such  fiscal  year and the
results of its  operations  during such year,  such  financial  statements to be
audited by  PriceWaterhouseCoopers  or another  independent public accountant of
recognized national or regional standing  reasonably  acceptable to the Holders,
and  accompanied  by  an  unqualified  opinion  of  such  accountant  reasonably
acceptable  to the holders,  and provided  that all  financial  statements to be
delivered  under this Section  6.4(a) shall  distinguish  between the Restricted
Subsidiaries and Unrestricted Subsidiaries of the Borrower;

         (b) within 45 days after the end of each fiscal  quarter of each fiscal
year, its Consolidated and consolidating balance sheet and related statements of
operations,  stockholders' equity and cash flows showing the financial condition
of the Borrower and its Subsidiaries, as of the close of such fiscal quarter and
the results of its  operations  during such fiscal  quarter and the then elapsed
portion of the fiscal year,  all  certified by its  Financial  Officer as fairly
presenting  in all material  respects  the  financial  condition  and results of
operations  of the  Borrower and its  Subsidiaries  on a  Consolidated  basis in
accordance  with GAAP (but without  footnotes  and provided  that all  financial
statements to be delivered under this Section 6.4(b) shall  distinguish  between
the Restricted  Subsidiaries  and  Unrestricted  Subsidiaries  of the Borrower),
subject to normal year-end audit adjustments;

         (c)  concurrently  with any  delivery  of  financial  statements  under
sub-paragraph  (a)  or (b)  above,  a  certificate  of the  accounting  firm  or
Financial  Officer of the  Borrower  opining on or  certifying  such  statements
(which  certificate,  when  furnished by an accounting  firm,  may be limited to
accounting  matters  and  disclaim  responsibility  for  legal  interpretations)
containing  a detailed  calculation  of the  relevant  items  used to  calculate
compliance with the financial covenants set forth in Section 6.12, provided that
in the event of any change in generally accepted  accounting  principles used in
the preparation of such financial  statements,  the Borrower shall also provide,
if necessary for the  determination of compliance with Section 6.12, a statement
of reconciliation  conforming such financial  statements to GAAP, and certifying
that no Event of Default or Default has occurred or, if such an Event of Default
or Default  has  occurred,  specifying  the nature  and extent  thereof  and any
corrective action taken or proposed to be taken with respect thereto;

                                       24
<PAGE>

         (d) to the extent that any Credit  Party is or becomes  subject to such
reporting  requirements,  promptly  after the same  become  publicly  available,
copies of all final  periodic  and other  reports,  proxy  statements  and other
materials  filed by such  Credit  Party with the U.S.  Securities  and  Exchange
Commission (the "SEC"), or any Governmental  Authority  succeeding to any or all
of the functions of said Commission,  or with any national securities  exchange,
or distributed to its shareholders  (exclusive of proprietary information unless
(i) the  Person  that is the  source  of the  information  or report is a public
company  and (ii) such Person  would then be  required to file such  proprietary
information with the SEC), as the case may be;

         (e) promptly upon the filing thereof,  copies of all material documents
filed  by  the  Borrower  or  any  of its  Subsidiaries  with  any  Governmental
Authority, including, without limitation, the U.S. Internal Revenue Service, the
U.S.  Environmental  Protection  Agency  (and any  state  equivalent),  the U.S.
Occupational Safety & Health Administration and the SEC.

         (f) promptly upon the receipt  thereof,  copies of all material notices
received by the Borrower or any of its Restricted Subsidiaries under or pursuant
to any Investment Document or Material Contract or instrument,  indenture,  loan
or similar agreement;

         (g) as soon as  practicable,  and in any event  not later  than 15 days
prior to  commencement  of each fiscal  year,  a copy of the  Borrower's  annual
budget  (detailed  on a  quarterly  basis)  for  such  fiscal  year,  in a  form
consistent with past practices;

         (h) promptly after entering into the same,  copies of all  shareholders
agreements,  material employment agreements and other material agreements of the
Borrower or its Subsidiaries; and

         (i) promptly,  from time to time, such other information  regarding the
operations,  business affairs and financial  condition of the Borrower or any of
its Subsidiaries,  or compliance with the terms of any Investment  Document,  as
any Holder may reasonably request.

         SECTION 6.5 Litigation and Other Notices.  The Borrower will furnish to
the Holders prompt written notice of the following:

         (a) any Event of Default or Default,  specifying  the nature and extent
thereof  and the  corrective  action (if any) taken or proposed to be taken with
respect thereto;

         (b) the filing or  commencement  of or any written  threat or notice of
intention of any Person to file or  commence,  any action,  suit or  proceeding,
whether at law or in equity or by or before any  Governmental  Authority,  by or
against the Borrower, any of their Subsidiaries or any Affiliate thereof;

         (c) at least  15 days  and no more  than 60 days  prior  notice  of any
Change of Control; and

         (d) any  development  that has  resulted  in,  or would  reasonably  be
expected to result in, a Material Adverse Effect (including, without limitation,
notice of any Environmental  Claim against or of any noncompliance by any Credit
Party with any Environmental  Law or Environmental  Permit that could reasonably
be expected to result in a Material Adverse Effect).

                                       25
<PAGE>

         SECTION 6.6 Employee  Benefits.  Each Credit Party will, and will cause
its  Subsidiaries  to, (a) comply in all material  respects with the  applicable
provisions  of ERISA  and the Code and (b)  furnish  to the  Holders  as soon as
possible after, and in any event within 10 days after any Responsible Officer of
such Credit  Party or  Subsidiary  thereof or any ERISA  Affiliate  knows or has
reason to know that any ERISA Event has occurred that alone or together with any
other ERISA Event could  reasonably  be expected to result in  liability of such
Credit Party or Subsidiary thereof in an aggregate amount exceeding $500,000,  a
statement of a Financial  Officer of such Credit Party  setting forth details as
to such ERISA Event and the action,  if any, that such Credit Party  proposes to
take with respect thereto.

         SECTION 6.7 Maintaining Records;  Access to Properties and Inspections.
Each Credit Party will keep,  and will cause its  Subsidiaries  to keep,  proper
books of record and account in which full and correct entries in conformity with
generally accepted accounting principles in effect from time to time are made of
all dealings and transactions in relation to its business and activities. At any
reasonable  time  during  ordinary  business  hours  and from  time to time upon
reasonable  prior  notice,   permit  any  of  the  Holders,  or  any  agents  or
representatives  thereof,  to examine and make copies of and abstracts  from the
records and books of account of, and visit the  properties  of, the Borrower and
any of its  Subsidiaries,  and to discuss the affairs,  finances and accounts of
the Borrower and any of its Subsidiaries with any of their officers or directors
and with their  independent  certified public  accountants;  provided,  however,
that, in connection with any such visitation or inspection, the Holders agree to
comply with and adhere to all applicable laws,  rules and regulations  governing
site  visitations and inspections  (including,  without  limitation,  applicable
health and safety  regulations  and visitation and inspection  rules mandated by
the owner or operator of applicable property).

         SECTION 6.8 Compliance  with Laws.  Each Credit Party will comply,  and
cause its Subsidiaries to comply with all Federal, state, local and foreign laws
and  regulations  applicable  to  them,  except  where  the  failure  to do  so,
individually or in the aggregate,  could not reasonably be expected to result in
a Material Adverse Effect.

         SECTION 6.9 Preparation of Environmental Reports. At the request of the
Holders at any time that the Holders, in their reasonable judgment, believe that
the prospect of payment of the  Obligations of the Credit Parties under the Loan
Documents  in the normal  course is impaired  (but in no event more than once in
any two year period, unless an Event of Default has occurred and is continuing),
the Borrower will provide to the Holders within 120 days after such request,  at
the expense of the Borrower,  an environmental site assessment report for any of
its or its Subsidiaries' owned properties described in such request, prepared by
an  environmental   consulting  firm  reasonably   acceptable  to  the  Holders,
indicating the presence or absence of Hazardous Materials;  without limiting the
generality  of the  foregoing,  if the  Holders  determine  at any  time  that a
material  risk exists that any such report will not be provided  within the time
referred to above,  the Holders may retain an  environmental  consulting firm to
prepare  such report at the expense of the  Borrower,  and the  Borrower  hereby
grants and agrees to cause any  Subsidiary  that owns any property  described in
such request to grant at the time of such request to the Holders,  such firm and
any agents or  representatives  thereof an  irrevocable  non-exclusive  license,
subject to the rights of tenants,  to enter onto their respective  properties to
undertake such an assessment.

                                       26
<PAGE>

         SECTION 6.10 Further  Assurances.  Each Credit Party will execute,  and
will  cause  its  Subsidiaries  to  execute,  any  and  all  further  documents,
agreements  and  instruments,  and take all further  action that may be required
under  applicable law, or that the Holders may reasonably  request,  in order to
effectuate the transactions contemplated by the Investment Documents. The Credit
Parties  shall  deliver  or  cause  to be  delivered  to the  Holders  all  such
instruments  and  documents  (including  legal  opinions)  as  the  Holders  may
reasonably request to evidence compliance with this Section.

         SECTION  6.11  Maintenance  of Office or  Agency.  The  Borrower  shall
maintain  an office or agency  (i) where the  Debentures  may be  presented  for
payment,  or for  registration and transfer and for exchange as provided in this
Agreement; and (ii) where notices and demands to or upon the Borrower in respect
of the Debentures may be served. The location of such office or agency initially
shall be the  principal  office  of the  Borrower  as set forth in  Section  9.1
hereof.  The  Borrower  shall give the Holders  written  notice of any change of
location thereof.

         SECTION 6.12 Financial  Ratios and Covenants.  The Credit  Parties,  in
each case on a Consolidated  basis,  shall with respect to each period set forth
below have complied or comply with and maintain each of the following  financial
ratios and financial covenants, using the information set forth in the financial
statements provided by the Credit Parties in accordance with Section 6.4 above:

         (a) Funded  Leverage  Ratio. A Funded Leverage Ratio as of the last day
of each  fiscal  quarter  of not more than the  ratio  set  forth  below for the
Measurement Period then ended:

              Quarter Ending                                  Ratio
              --------------                                  -----
         September 30, 2002                                3.25 to 1.0
         December 31, 2002                                 3.00 to 1.0
         March 31, 2003                                    3.00 to 1.0
         June 30, 2003                                     2.75 to 1.0
         September 30, 2003                                2.75 to 1.0
         December 31, 2003                                 2.50 to 1.0
         March 31, 2004                                    2.50 to 1.0
         June 30, 2004 and thereafter                      2.25 to 1.0


         (b) Interest  Coverage Ratio. A Interest  Coverage Ratio as of the last
day of each  fiscal  quarter of not less than the ratio set forth  below for the
Measurement Period the ended:

              Quarter Ending                                  Ratio
              --------------                                  -----
         September 30, 2002                                3.50 to 1.0
         December 31, 2002                                 3.75 to 1.0
         March 31, 2003                                    3.75 to 1.0
         June 30, 2003                                     3.75 to 1.0
         September 30, 2003                                3.75 to 1.0
         December 31, 2003 and thereafter                  4.75 to 1.0

                                       27
<PAGE>

         SECTION 6.13 Observation Rights.

         (a) The board of directors of the Borrower (the  "Board")  shall hold a
general  meeting (which may be held by conference  call) or propose  adoption of
resolutions by written  consent of the board of directors at least quarterly for
the purpose of  discussing  the business and  operations of the Borrower and its
Subsidiaries. The Borrower shall notify Allied Capital or another representative
of the Holders (the  "Representative")  in writing of the date and time for each
general or special meeting of the Board or any executive committee thereof or of
the adoption of any  resolutions  by written  consent  (describing in reasonable
detail the nature and  substance  of such action) at least one week prior to any
general  meeting for which notice is not required to be provided and at the time
notice is provided to the directors of the Borrower of any other general meeting
or any  special  meeting  and  concurrently  deliver to the  Representative  any
materials  delivered  to  directors  of the  Borrower,  including a draft of any
resolutions  proposed to be adopted by written consent. The Representative shall
be free during such one week period to contact the directors of the Borrower and
discuss the pending actions to be taken.

         (b) The Borrower shall permit one authorized  representative  of Allied
Capital and its successors (the "Board  Participant")  to attend and participate
in all meetings of the Board and any  executive  committee  thereof,  whether in
person, by telephone or otherwise,  and shall provide such  representative  with
such notice and other information with respect to such meetings as are delivered
to the directors of the Borrower,  provided,  however, that the Borrower's Chief
Executive  Officer or  President or a majority of the Board shall have the right
to exclude  Board  Participant  from all or portions of meetings of the Board or
omit to provide Board Participant or the Holder with certain  information if the
President or Chief Executive or such members of the Board believes in good faith
that such  exclusion  or  omission is  necessary  in order to (i)  preserve  the
attorney-client  privilege,  or (ii)  fulfill the  Borrower's  obligations  with
respect to  confidential or proprietary  information of third parties  (provided
however,  that the Board  Participant  shall not be so excluded unless all other
persons whose receipt of such materials or presence at a meeting would result in
a violation of such third party confidentiality are also excluded). In addition,
a majority  of the  Borrower's  directors  on the Board  shall have the right to
exclude the Board  Participant  from all or portions of meetings of the Board or
omit to provide Board Participant or any Holder with certain information if such
meeting or  information  involves  information  or  analysis  which would pose a
material  conflict of interest for  Borrower  and such Holder.  No more than one
time per year, the Borrower shall pay such  representative's  reasonable  travel
expenses (including, without limitation, the cost of airfare, meals and lodging)
in connection with the attendance of such meetings.

         SECTION 6.14 Use of Proceeds. The Borrower will use the proceeds of the
investment only for the purposes specified in Article II.

         SECTION 6.15  Performance  of Material  Contract.  The  Borrower  shall
perform and observe all the terms and provisions of the Material  Contract to be
performed or observed by it,  maintain  the Material  Contract in full force and

                                       28
<PAGE>

effect, enforce the Material Contract in accordance with its terms and, upon the
reasonable  request of the  Required  Holders,  make to each other  party to the
Material  Contract such demands and requests for  information and reports or for
action as any Credit Party or any of its  Subsidiaries is entitled to make under
the Material  Contract,  and cause each of its Subsidiaries to do so, except, in
any case,  where the failure to do so, either  individually or in the aggregate,
could  would  not be  reasonably  likely  to  have a  Material  Adverse  Effect;
provided,  however,  that a  termination  of the  Material  Contract  shall  not
constitute  a breach of this  Section  6.15 unless the  Borrower  shall not have
entered into a substitute contract with a third party acceptable to the Required
Holders within 60 days of such termination.

                                  Article VII.
                               Negative Covenants

         Until the  Debentures  and all expenses or other amounts  payable under
the Loan  Documents  are repaid in full,  unless  the  Holders  shall  otherwise
consent in writing,  the Credit Parties jointly and severally covenant and agree
not to do any of the following without the prior written consent of the Holders:

         SECTION 7.1 Indebtedness.

         (a) No Credit  Party  shall,  nor will it permit any of its  Restricted
Subsidiaries to, directly or indirectly incur, create, assume or permit to exist
any   Indebtedness   other  than  the  following   (together,   the   "Permitted
Indebtedness"):

                  (i) the Senior Debt;

                  (ii) Surviving Debt;

                  (iii)  Indebtedness  created  hereunder  and  under  the other
         Investment Documents;  (iv) Indebtedness of any Credit Party to another
         Credit Party on terms  acceptable to the Holders;  (v)  Indebtedness in
         respect of performance bonds, bid bonds, appeal bonds, surety bonds and
         similar  obligations,  in each case provided in the ordinary  course of
         business;

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

                  (vii)   Indebtedness   in  respect   of  taxes,   assessments,
         governmental  charges or  levies,  claims of  customs  authorities  and
         claims for labor, worker's compensation,  materials and supplies to the
         extent that  payment  therefor  shall not at the time be required to be
         made in accordance with the provisions of Section 7.2;

                                       29
<PAGE>

                  (viii)  Indebtedness  in respect of  judgments  or awards that
         have been in force for less than the  applicable  period  for taking an
         appeal so long as execution is not levied  thereunder  or in respect of
         which the Borrower or the  applicable  Subsidiary  shall at the time in
         good faith be prosecuting  an appeal or  proceedings  for review and in
         respect of which a stay of execution  shall have been obtained  pending
         such appeal or review;

                  (ix)  endorsements for collection,  deposit or negotiation and
         warranties  of  products  or  services,  in each case  incurred  in the
         ordinary course of business;

                  (x)  Indebtedness  of  a  Subsidiary   acquired   pursuant  to
         Permitted  Acquisitions under the terms of Section 7.10 in an aggregate
         amount not greater than  $26,000,000,  provided that such  Indebtedness
         was in  existence  at the time of  acquisition  and was not incurred in
         connection with such acquisition;

                  (xi)  Indebtedness  under Capital  Leases not to exceed in the
         aggregate, on a Consolidated basis, $6,000,000 at any time outstanding;

                  (xii) unsecured  Indebtedness  incurred in the ordinary course
         of business  for the deferred  purchase  price of property or services,
         aggregating,  on a Consolidated  basis, not more than $6,000,000 at any
         one time outstanding;

                  (xiii)  Indebtedness  secured  by Liens  permitted  by Section
         7.2(i)  not  to  exceed  in the  aggregate,  on a  Consolidated  basis,
         $6,000,000 at any time outstanding;

                  (xiv) any  Indebtedness  that is expressly  subordinate to the
         Debentures  pursuant to a written  subordination  agreement in form and
         substance reasonably acceptable to the Holders; and

                  (xv) in the case of the Borrower,  any Indebtedness in respect
         of interest  rate  protection  agreements  entered into in the ordinary
         course of business consistent with reasonable business practice; and

                  (xvi) any  Indebtedness  in respect  of take or pay  contracts
         entered  into by the Borrower and its  Restricted  Subsidiaries  in the
         ordinary course of business and consistent with past practices.

         (b) Notwithstanding  any provision to the contrary,  the Credit Parties
shall  not,  nor  permit  any of  its  Restricted  Subsidiaries  to,  incur  any
Indebtedness  that is  subordinate  or junior in right of  payment to any Senior
Debt unless such Indebtedness by its terms is subordinated to the Debentures and
the  guarantee of the Borrower or such  Subsidiary,  as the case may be, in each
case on terms acceptable to the Holders.

         SECTION 7.2 Liens. No Credit Party shall, nor will it permit any of its
Restricted Subsidiaries to, create, incur, assume or permit to exist any Lien on
any  property  or assets  (including  stock or other  securities  of any Person,
including any Subsidiary) now owned or hereafter acquired by it or on any income
or  revenues  or rights in respect of any  thereof  except  the  following  (the
"Permitted Liens"):

                                       30
<PAGE>

         (a) Liens securing the Senior Debt;

         (b)  Liens  on  Property  of  such  Credit  Party  or  its   Restricted
Subsidiaries  existing on the date hereof and set forth in Schedule 7.2, and any
replacement,  extension or renewal of any such Liens;  provided  that such Liens
shall secure only those  obligations that they secure on the date hereof and the
amount of Indebtedness secured thereby shall not be increased;

         (c) Liens for taxes, assessments or governmental charges not yet due or
which are being contested in compliance with Section 6.3;

         (d) carriers', warehousemen's,  mechanics', materialmen's,  repairmen's
or other like Liens  arising in the  ordinary  course of business  and  securing
obligations  that are  overdue  for a period  of more  than 60 days or which are
being contested in good faith;

         (e) pledges and  deposits  made in the  ordinary  course of business to
secure obligations under workers' compensation, unemployment insurance and other
social   security  laws  or   regulations  or  to  secure  public  or  statutory
obligations;

         (f)  Liens  to  secure  the  performance  of  bids,   trade  contracts,
government contracts,  leases,  statutory obligations,  surety and appeal bonds,
performance  bonds and other obligations of a like nature, in each case incurred
in the ordinary  course of business  (exclusive  of  obligations  for payment of
borrowed money);

         (g) zoning restrictions, easements, rights-of-way,  restrictions on use
of real property and other similar encumbrances  incurred in the ordinary course
of business  which,  in the aggregate,  are not substantial in amount and do not
materially  detract from the value of the property subject thereto or materially
adversely interfere with the use of such property for its present purposes;

         (h) Liens arising in connection  with Capital  Leases  permitted  under
Section  7.1(a)(xi);  provided,  however,  that no such Lien shall  extend to or
cover any property other than the property subject to such Capital Lease;

         (i) purchase money Liens upon or in real property or equipment acquired
or held by the Borrower or any of its  Restricted  Subsidiaries  in the ordinary
course of business to secure the purchase price of such property or equipment or
to  secure  Indebtedness  incurred  solely  for the  purpose  of  financing  the
acquisition, construction or improvement of any such property or equipment to be
subject to such Liens,  or Liens  existing on any such  property or equipment at
the time of acquisition  (other than any such Liens created in  contemplation of
such acquisition that do not secure the purchase price), or extensions, renewals
or  replacements  of any of the  foregoing  for  the  same or a  lesser  amount;
provided, however, that no such Lien shall extend to or cover any property other
than the property or equipment being acquired,  constructed or improved,  and no
such extension, renewal or replacement shall extend to or cover any property not
theretofore  subject  to the Lien  being  extended,  renewed  or  replaced;  and
provided further that the aggregate principal amount of all Indebtedness secured
by Liens  permitted  by this  clause (i) shall not  exceed the amount  permitted
under Section 7.1(a)(xiii);

         (j) Liens arising  solely by virtue of any  contractual or statutory or
common law provisions  relating to banker's liens,  rights to set-off or similar

                                       31
<PAGE>

rights and  remedies as to deposit  accounts or other  funds  maintained  with a
creditor depository  institution provided that (i) such deposit account is not a
dedicated cash  collateral  account and is not subject to  restrictions  against
access by the  Credit  Party or any  Subsidiary  in excess of those set forth by
regulations  promulgated by the Board of Governors of the Federal Reserve System
and (ii) such  deposit  account  is not  intended  by the  Credit  Party or such
Subsidiary to provide collateral to the depositary institution;

         (k) judgment Liens not giving rise to an Event of Default;

         (l) any Lien  existing  on any  asset of any  Person  at the time  such
Person  becomes a Subsidiary of the Credit Party in connection  with a Permitted
Acquisition; provided that the Lien (A) shall be less than the fair market value
of  the  asset  secured  thereby,  (B)  shall  not  have  been  not  created  in
contemplation  of such event,  (C) such Lien does not at any time  encumber  any
property  other than the  property  financed  by such  Indebtedness  and (D) the
amount of Indebtedness secured thereby is not increased;

         (m) any interest or title of a lessor under any lease permitted by this
Agreement;

         (n) Liens in favor of  customs  and  revenue  authorities  arising as a
matter  of law to secure  payment  of  customs  duties  in  connection  with the
importation of goods; and

         (o) licenses of intellectual property granted in the ordinary course of
business.

         SECTION 7.3 Amendment of Senior Credit Facility. The Borrower shall not
amend or modify the Senior Credit Facility in any manner which has the effect of
(a) increasing  the interest rate payable on any component  thereof by more than
2% over the interest rate  applicable  thereto on the date hereof,  (b) changing
the maturity date of any component  thereof to an earlier date (c) extending the
final  maturity of the Senior  Debt beyond the  Maturity  Date,  (d)  increasing
principal  amortization payments or (e) including additional financial covenants
or  amending  any of the  financial  covenants  set forth in the  Senior  Credit
Facility to render such covenants more restrictive.

         SECTION 7.4 . Investments.  No Credit Party shall, nor will they permit
any of its Restricted Subsidiaries to, make any Investments except:

         (a) Investments existing on the date hereof;

         (b) Cash Equivalents;

         (c)  Investments  in respect of  interest  rate  protection  agreements
permitted under Section 7.1(a)(xv);

         (d) the Acquisition;

         (e)  Investments  consisting  of  extensions  of  trade  credit  in the
ordinary course of the Borrowers' Business; and

                                       32
<PAGE>

         (f) loans and  advances  to  employees  in the  ordinary  course of the
business of such Person, as presently conducted,  in the aggregate amount of all
such Investments  under this clause (f) not to exceed $1,200,000 at any one time
outstanding;

         (g)  (i)  equity   Investments  by  the  Borrower  and  its  Restricted
Subsidiaries  in  their  Subsidiaries  outstanding  on  the  date  hereof,  (ii)
additional equity  Investments in Credit Parties and (iii) Investments in wholly
owned  Subsidiaries  that are not Credit Parties in an aggregate amount invested
(together  with the aggregate  amount  invested  pursuant to Section 7.10 below)
from the date hereof not to exceed the sum of (x) $10,000,000, (y) the aggregate
amount  of  cash  received  (up  to  the  aggregate  amount  of  Investments  in
Unrestricted  Subsidiaries  made by the  Credit  Parties  prior  to the  date of
receipt of such cash) by the Credit Parties from Unrestricted  Subsidiaries from
the  repayment  or  prepayment  of  any  Indebtedness  owed  by an  Unrestricted
Subsidiary or as a dividend or  distribution  in respect of the Capital Stock of
an Unrestricted  Subsidiary and (z) the aggregate amount of Excess Cash Flow (as
defined in the Senior  Credit  Facility)  not required to prepay the Senior Debt
pursuant to the Senior Credit  Facility  (provided that such  $10,000,000  limit
shall not  include  contributions  by the  Borrower  of its common  stock to any
wholly owned Subsidiary that is not a Credit Party);

         (h) Investments  constituting  Capital Expenditures which do not exceed
the limits set forth in Section 7.17;

         (i) Permitted Acquisitions;

         (j)  Investment  consisting  of  Indebtedness  permitted  under Section
7.1(a)(iv); and

         (k) other investment instruments approved in writing by Holders.

         SECTION  7.5  Mergers,   Consolidations,   Sales  of  Assets,   Act  of
Dissolution.

         (a) No Credit  Party  shall,  nor will it permit any of its  Restricted
Subsidiaries to, merge or consolidate or enter into any analogous reorganization
or  transaction  with any  Person;  provided  that (i) the  Credit  Parties  may
consummate  the Merger,  (ii) any Credit Party or Subsidiary  may be merged with
the Borrower or any  Restricted  Subsidiary  of the Borrower (if the Borrower or
such  Restricted  Subsidiary  is the  surviving or successor  entity),  (iii) in
connection  with any  acquisition  permitted  under Section 7.10, any Restricted
Subsidiary of the Borrower may merge into or  consolidate  with any other Person
or permit any other Person to merge into or consolidate  with it;  provided that
the person surviving such merger shall be a wholly owned  Restricted  Subsidiary
of the  Borrower,  provided  further  that,  in the case of any such  merger  or
consolidation  to which a Guarantor is a party, the Person formed by such merger
or consolidation shall be a Guarantor,  and (iv) any Credit Party may merge into
the Borrower;  provided that in each case,  immediately  before and after giving
effect  thereto,  no Event of Default shall have occurred and be continuing and,
in the case of any such merger to which the Borrower is a party, the Borrower is
the surviving corporation.

         (b)  No  Credit  Party  shall,   nor  permit  any  of  its   Restricted
Subsidiaries to, consummate any Asset Disposition.

                                       33
<PAGE>

         SECTION 7.6 Dividends  and  Distributions;  Restrictions  on Ability of
Subsidiaries to Pay Dividends.

         (a)  No  Credit  Party  shall,   nor  permit  any  of  its   Restricted
Subsidiaries  to, declare or pay any Restricted  Payments (other than a dividend
or distribution of any shares of its common stock); provided,  however, that any
Subsidiary may declare and pay a Restricted Payment to the Borrower.

         (b)  The  Borrower   shall  not,  nor  permit  any  of  its  Restricted
Subsidiaries to, directly or indirectly,  create or otherwise cause or suffer to
exist or become  effective any  encumbrance or restriction on the ability of the
Borrower  or any such  Subsidiary  to (i) pay any  dividends  or make any  other
distributions  on its Capital  Stock or (ii) make or repay any loans or advances
to the Borrower or the parent of such  Subsidiary,  except for any  agreement or
instrument evidencing the Senior Debt or the Surviving Debt.

         SECTION 7.7 Transactions with Affiliates. Except as otherwise expressly
provided  herein or as set forth on Schedule  7.7, no Credit  Party  shall,  nor
permit any of its Restricted  Subsidiaries to, sell or transfer any Property to,
or purchase or acquire  any  Property  from,  or  otherwise  engage in any other
transactions with, any of its officers, directors, employees or Affiliates other
than  another  Credit  Party,  except  that  the  Borrower  and  its  Restricted
Subsidiaries  may  engage  in the  foregoing  transactions  with  its  officers,
directors,  employees or Affiliates on terms that are fair and reasonable and no
less favorable to such Credit Party or such Subsidiary than it would obtain in a
comparable  arm's-length  transaction  with a Person not an  officer,  director,
employee or Affiliate.

         SECTION 7.8 Business of Credit Parties and Subsidiaries.

         (a)  No  Credit  Party  shall,   nor  permit  any  of  its   Restricted
Subsidiaries to, make any material change in the Borrower's Business.  Except as
permitted  under  Section  7.4(g) or Section  7.10,  no Credit Party shall,  nor
permit  any of its  Restricted  Subsidiaries  to,  acquire  or  create  any  new
Subsidiary.

         (b) No  Credit  Party  shall,  nor  permit  any of its  Affiliates  to,
directly or indirectly  purchase or otherwise  acquire,  or offer to purchase or
otherwise  acquire,  any  outstanding  Debentures  except by way of  payment  or
prepayment in accordance with the provisions hereof.

         SECTION 7.9 Investment  Company Act. No Credit Party shall, nor will it
permit its Restricted  Subsidiaries to, become an investment  company subject to
registration under the Investment Company Act of 1940, as amended.

         SECTION  7.10  Acquisitions.  No Credit  Party  shall,  nor  permit its
Restricted Subsidiaries to, acquire all of Capital Stock or all or substantially
all of the assets of any Person or any business or business  unit of such Person
other than a purchase or acquisition  that complies with the following  (each, a
"Permitted Acquisition"):

                                       34
<PAGE>


         (a) the lines of  business  of the  Person to be (or the  property  and
assets  of  which  are  to be) so  purchased  or  otherwise  acquired  shall  be
substantially  the  same  lines  of  business  as one or more  of the  principal
businesses  of the  Borrower  and its  Subsidiaries  in the  ordinary  course or
reasonably related thereto;

         (b) such purchase or other  acquisition  shall not include or result in
any contingent  liabilities  that could reasonably be expected to be material to
the business,  financial condition,  operations or prospects of the Borrower and
its  Restricted  Subsidiaries,  taken as a whole (as determined in good faith by
the Board);

         (c) the  total  cash  and  noncash  consideration  (including,  without
limitation,  the fair market value of all Capital Stock issued or transferred to
the sellers thereof (other than consideration  consisting of common stock of the
Borrower in connection with an Investment  made by an Unrestricted  Subsidiary),
all indemnities,  earnouts and other contingent payment  obligations to, and the
aggregate  amounts  paid or to be paid under  noncompete,  consulting  and other
affiliated agreements with, the sellers thereof, all write-downs of property and
assets and reserves for liabilities  with respect thereto and all assumptions of
debt,  liabilities and other obligations in connection  therewith) paid by or on
behalf of the Borrower and its Restricted  Subsidiaries for any such purchase or
other acquisition, when aggregated with the total cash and noncash consideration
paid by or on behalf of the Borrower  and its  Restricted  Subsidiaries  for all
other purchases and other  acquisitions  made by the Borrower and its Restricted
Subsidiaries  pursuant to this Section 7.10 (together with the aggregate  amount
invested  under  Section  7.04(g)(iii)),   shall  not  exceed  the  sum  of  (i)
$10,000,000,  (ii) the  aggregate  amount of cash  received (up to the aggregate
amount of Investments in  Unrestricted  Subsidiaries  made by the Credit Parties
prior  to the  date  of  receipt  of  such  cash)  by the  Credit  Parties  from
Unrestricted  Subsidiaries  from the repayment or prepayment of any Indebtedness
owed by an Unrestricted Subsidiary or as a divided or distribution in respect of
the Capital Stock of an Unrestricted  Subsidiary and (iii) the aggregate  amount
of Excess Cash Flow (as defined in the Senior  Credit  Facility) not required to
prepay the Senior Debt (provided that such  $10,000,000  limit shall not include
contributions by the Borrower of its common stock to any wholly owned Subsidiary
that is not a Credit Party);

         (d) (1)  immediately  before such purchase or  acquisition,  the entity
being purchased or acquired shall be EBITDA positive; (2) immediately before and
immediately  after  giving  pro  forma  effect  to any  such  purchase  or other
acquisition,  no Event of Default  shall have  occurred and be  continuing,  (3)
immediately  after  giving  effect to such  purchase or other  acquisition,  the
Borrower and its Restricted  Subsidiaries  shall be in pro forma compliance with
all of the covenants set forth in Section 6.12, such compliance to be determined
on the basis of the financial  statements  most recently  delivered  pursuant to
Section 6.04 most  recently  delivered to the Holders as though such purchase or
other  acquisition had been consummated as of the first day of the fiscal period
covered  thereby,  (4)  the  Funded  Leverage  Ratio  of the  Borrower  and  its
Restricted  Subsidiaries,  taken as a whole, will be reduced as a result of such
purchase or  acquisition;  and (5) any  Indebtedness  assumed in connection with
such purchase or acquisition  shall be  subordinated to the Debentures and, when
aggregated  with the total  Indebtedness  assumed by the Borrower in  connection
with  all  other  purchases  and  acquisitions  made  by the  Borrower  and  its
Restricted  Subsidiaries  pursuant  to  this  Section  7.10,  shall  not  exceed
$25,000,000; and

                                       35
<PAGE>


         (e) the  Borrower  shall have  delivered  to the  Holders at least five
Business Days prior to the date on which any such purchase or other  acquisition
is to be  consummated,  a  certificate  of a  Responsible  Officer,  in form and
substance reasonably satisfactory to the Representative,  certifying that all of
the  requirements  set forth in this Section 7.10 have been satisfied or will be
satisfied on or prior to the consummation of such purchase or other acquisition.

         SECTION 7.11  Prepayments.  Except for the Senior Debt,  the Debentures
or,  Indebtedness owed to the Borrower from a Subsidiary or required  repayments
or  redemptions  of Surviving  Debt,  neither the Credit  Parties nor any of its
Restricted Subsidiaries shall prepay any Indebtedness for borrowed money.

         SECTION 7.12 Additional  Negative  Pledges.  No Credit Party shall, nor
permit any of its  Restricted  Subsidiaries  to,  enter  into,  assume or become
subject to any agreement  prohibiting or otherwise  restricting  the creation or
assumption  of any Lien upon its  properties  or  assets,  whether  now owned or
hereafter acquired,  or requiring the grant of any security for an obligation if
security  is given for some  other  obligation,  except  (i) the  Senior  Credit
Facility or (ii) in  connection  with (A) any Surviving  Debt,  (B) any purchase
money  Indebtedness  permitted  by Section  7.1  solely to the  extent  that the
agreement or  instrument  governing  such  Indebtedness  prohibits a Lien on the
property  acquired  with the  proceeds of such  Indebtedness  or (C) any Capital
Lease  permitted  by Section  7.1 solely to the extent that such  Capital  Lease
prohibits  a Lien on the  property  subject  thereto,  or (D)  any  Indebtedness
outstanding on the date any Restricted Subsidiary of the Borrower becomes such a
Restricted  Subsidiary (so long as such agreement was not entered into solely in
contemplation of such Restricted  Subsidiary becoming a Restricted Subsidiary of
the Borrower).

         SECTION 7.13 Accounting  Changes. No Credit Party shall, nor permit any
of its Restricted  Subsidiaries  to, make any  significant  change in accounting
treatment or reporting  practices,  except as required or permitted by generally
accepted accounting principles as in effect in the United States of America from
time to time, or change its fiscal year from its current fiscal year.

         SECTION 7.14 Stay,  Extension and Usury Laws.  To the extent  permitted
under applicable law, each of the Credit Parties  covenants and agrees that they
will not at any time insist upon,  plead, or in any manner  whatsoever  claim or
take the benefit or advantage  of, and will use their best efforts to resist any
attempts  to claim or take the  benefit  of,  any stay,  extension  or usury law
wherever  enacted,  now or at any time hereafter in force,  which may affect the
covenants or the  performance of their  obligations  under this Agreement or the
Debentures.  To the extent  permitted  under  applicable law, each of the Credit
Parties  hereby  expressly  waives all benefit or advantage of any such law, and
covenants that it will not, by resort to any such law,  hinder,  delay or impede
the  execution of any power herein  granted to the Holders,  but will suffer and
permit the execution of every such power as though no such law has been enacted.

         SECTION 7.15 Inconsistent  Agreements;  Charter  Amendments.  No Credit
Party shall (i) enter into any agreement or arrangement  which would restrict in
any material respect the ability of such Credit Party to fulfill its Obligations
under the Investment  Documents,  or (ii) supplement,  amend or otherwise modify
the terms of their articles of  incorporation or bylaws or any of the Investment
Documents if the effect thereof would  reasonably be expected to have a Material
Adverse Effect.

                                       36
<PAGE>


         SECTION 7.16 Mandatory  Excess Cash Flow Sweep.  The Borrower shall not
supplement,  amend, in any way modify,  fail to comply with or request or accept
any waiver of, the terms of Section  2.05(b) of the Senior Credit Facility as in
effect on the date hereof.

         SECTION 7.17 Capital  Expenditures.  The Credit Parties shall not make,
on a Consolidated basis and measured as of the last day of any fiscal quarter of
the Borrower,  Capital  Expenditures  in excess of $15,000,000 for the period of
four consecutive fiscal quarters of the Borrower then ended.

                                 Article VIII.
                         Events of Default and remedies

         SECTION 8.1 Events of Default.  If any of the following events ("Events
of Default") occur:

         (a)  any  representation  or  warranty  made  or  deemed  made in or in
connection  with  any  Investment  Document  hereunder  or  any  representation,
warranty  or  certification  contained  in any  report,  certificate,  financial
statement or other  instrument  furnished in connection  with or pursuant to any
Investment  Document,  proves to have been  materially  incorrect  when so made,
deemed made or furnished;

         (b)  default is made in the payment of any  principal  of or premium on
the Debentures when and as the same shall become due and payable, whether at the
due date thereof or at a date fixed for  prepayment  thereof or by  acceleration
thereof or otherwise;

         (c) default is made in the payment of any interest on the Debentures or
any other amount  (other than an amount  referred to in (b) above) due under any
Investment  Document,  when and as the same  becomes due and  payable,  and such
default continues unremedied for a period of five Business Days;

         (d) default is made in the due  observance or performance by any Credit
Party  or any of its  Restricted  Subsidiaries  of any  covenant,  condition  or
agreement contained in Section 6.12 or in Article VII (other than Section 7.7);

         (e) default is made in the due  observance or performance by any Credit
Party  or any of its  Restricted  Subsidiaries  of any  covenant,  condition  or
agreement  contained in any Investment  Document  (other than those specified in
(b), (c) or (d) above) and such default continues unremedied for a period ending
the earlier of (i) a period of 30 days from the date a Responsible  Officer knew
of the  occurrence  of such  default and (ii) a period of 30 days after  written
notice thereof from the Holders to the Borrower;

         (f) any default is declared or otherwise occurs (after giving effect to
any  applicable  notice or grace periods) under the Senior Debt either (i) which
is in the payment of any amount due thereunder  when and as the same becomes due
and payable or (ii) pursuant to which the Senior  Lenders have  accelerated  the
maturity thereof;

                                       37
<PAGE>

         (g) any default is declared or otherwise occurs (after giving effect to
any  applicable  notice or grace periods)  under any other  Indebtedness  of the
Credit Parties or any of its  Restricted  Subsidiaries  the principal  amount of
which is in excess of $4,000,000  (individually or in the aggregate)  either (i)
which  is in the  payment  of any  amount  due  thereunder  when and as the same
becomes  due  and  payable  or  (ii)  pursuant  to  which  the  holder  of  such
Indebtedness has accelerated the maturity thereof;

         (h) an Act of Bankruptcy or Act of Dissolution shall have occurred with
respect to any Credit Party or any of its Restricted Subsidiaries;

         (i) one or more final non-appealable judgments for the payment of money
in excess of $4,000,000  to the extent not fully paid or  discharged  (excluding
any portion thereof that is covered by a insurance policy issued by an insurance
company of recognized  standing and  creditworthiness)  is rendered  against any
Credit Party or any of its  Restricted  Subsidiaries,  and the same shall remain
undischarged  for a period of 20 consecutive  days during which execution is not
effectively  stayed,  or any action is legally  taken by a judgment  creditor to
levy  upon  assets  or  properties  of  any  Credit  Party  or  its   Restricted
Subsidiaries to enforce any such judgment;

         (j) any  non-monetary  judgment or order shall be rendered  against any
Credit  Parties or any of its Restricted  Subsidiaries  that could be reasonably
likely to have a Material  Adverse  Effect,  and there shall be any period of 10
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;

         (k) an ERISA  Event  occurs that in the  opinion of the  Holders,  when
taken together with all other such ERISA Events, could reasonably be expected to
result in liability of any Credit Party and its ERISA Affiliates in an aggregate
amount exceeding $3,000,000; or

         (l) any Guarantor shall repudiate or purport to revoke its guaranty, or
any guaranty of the  Obligations  hereunder  for any reason shall cease to be in
full force and effect as to such Guarantor or shall be judicially  declared null
and void as to such Guarantor;

then,  and in every such  event,  (other than an Event of Default  described  in
paragraph (h) above) and at any time  thereafter  during the continuance of such
event, the Required  Holders,  acting  together,  may by notice to the Borrower,
take either or both of the following  actions,  at the same or different  times:
(i) declare the principal  amount then  outstanding  under the  Debentures to be
forthwith due and payable in whole or in part, whereupon the principal amount so
declared to be due and payable, together with the Repayment Charge calculated as
if the  Debentures  were  prepaid on the date of the  Default,  if any,  all PIK
Amounts and accrued interest  thereon and all other  liabilities of the Borrower
accrued  hereunder  and  under  any  other  Investment  Document,  shall  become
forthwith  due and payable,  without  presentment  demand,  protest or any other
notice of any kind,  all of which are hereby  expressly  waived by the Borrower,
anything  contained herein or in any other  Investment  Document to the contrary
notwithstanding;  and (ii) in any  event  with  respect  to an Event of  Default
described  in  paragraph  (h)  above,  the  principal  of  the  Debentures  then
outstanding,  together with the Repayment Charge calculated as if the Debentures
were  prepaid on the date of the  Default,  if any,  all PIK Amounts and accrued
interest thereon and all other liabilities of the Borrower accrued hereunder and
under any other Investment Document, shall automatically become due and payable,
without  presentment  demand,  protest or any other  notice of any kind,  all of
which are hereby expressly waived by the Borrower,  anything contained herein or
in any other Investment  Document to the contrary  notwithstanding.

                                       38
<PAGE>

         SECTION 8.2 Waivers.  The Credit  Parties  waive  presentment,  demand,
notice of dishonor, and protest, and all demands and notices of any action taken
by the Required  Holders  under this  Agreement,  except as  otherwise  provided
herein.

         SECTION 8.3  Enforcement  Actions.  The Required  Holders may, at their
option and acting  together,  collect all or any portion of the  Obligations  or
enforce against the Credit Parties any of their  respective  rights and remedies
with respect to the Obligations including, but not limited to: (i) commencing or
pursuing  legal  proceedings  to collect any amounts  owed with respect to or to
otherwise   enforce  the  Obligations  or  (ii)  executing  upon,  or  otherwise
enforcing,  any judgment  obtained with respect to the payment or performance of
the Obligations.

         SECTION 8.4 Costs. The Credit Parties shall pay all reasonable expenses
of any nature,  whether incurred in or out of court, and whether incurred before
or after the  Debentures  shall become due at their  maturity  date or otherwise
(including,  but not limited to, reasonable attorneys' fees and costs) which the
Required Holders,  acting together,  may reasonably incur in connection with the
collection  or  enforcement  of any of the  Obligations.  The Required  Holders,
acting together,  are authorized to pay at any time and from time to time any or
all of such  expenses,  to add the  amount  of such  payment  to the  amount  of
principal  outstanding  under the Debentures,  and to charge interest thereon at
the rate specified in the Debentures.

         SECTION 8.5 Set-off.  Upon the occurrence and during the continuance of
any Event of Default, each Holder is hereby authorized at any time and from time
to time  without  notice to any Credit  Party (any such notice  being  expressly
waived by such Credit Party) and, to the fullest extent permitted by law, to set
off and to apply any and all balances,  credits,  deposits  (general or special,
time or demand,  provisional or final),  accounts or moneys at any time held and
other  indebtedness  at any time owing by such  Holder to or for the  account of
such Credit Party against any and all of the  obligations  of the Credit Parties
now or  hereafter  existing  under  this  Agreement  or any other  agreement  or
instrument  delivered  by  such  Credit  Party  to  such  Holder  in  connection
therewith,  whether or not such Holder  shall have made any demand  hereunder or
thereunder  and although such  obligations  may be contingent or unmatured.  The
rights of the Holders  under this  Section  are in addition to other  rights and
remedies (including, without limitation, other rights of set-off) which they may
have. A Holder shall give the Credit Party notice of any set-off hereunder after
such set-off has  occurred.  Any and all rights of set-off that may be exercised
by any  Holder  pursuant  to this  Section  8.5 are and will be  subject  to the
Subordination Agreement.

         SECTION  8.6  Remedies  Non-Exclusive.  None of the  rights,  remedies,
privileges or powers of the Holders expressly provided for herein are exclusive,
but each of them is  cumulative  with,  and in addition  to,  every other right,
remedy,  privilege  and power now or hereafter  existing in favor of each of the
Holders,  whether  pursuant  to the  other  Investment  Documents,  at law or in
equity, by statute or otherwise.

                                       39
<PAGE>

                                  Article IX.
                                  Miscellaneous

         SECTION 9.1  Notices.  Notices and other  communications  provided  for
herein shall be in writing and shall be  delivered by hand or overnight  courier
service,  mailed  by  certified  or  registered  mail or sent by  facsimile,  as
follows:

         (a) if to the Borrower,  at its offices at 11778 South  Election  Road,
Suite 210, Draper, Utah, 84020, Attention:  Chief Financial Officer; with a copy
to (which shall not constitute  notice hereunder)  Pillsbury  Winthrop LLP, P.O.
Box 7880,  San  Francisco,  CA 94120-7880,  Attention:  Linda C. Williams,  Esq.
(Facsimile 415-983-1200); and

         (b) if to Allied Capital,  at its offices at 1919 Pennsylvania  Avenue,
N.W., Washington,  D.C. 20006-3434,  Attention:  Thomas Westbrook (Facsimile No.
202-659-2053);  with a copy to (which  shall not  constitute  notice  hereunder)
Piper  Rudnick LLP,  1200  Nineteenth  Street,  N.W.,  Washington,  D.C.  20036,
Attention Anthony H. Rickert, Esq. (Facsimile No. 202-223-2085).

All notices and other  communications  given to any party  hereto in  accordance
with the provisions of this Agreement shall be deemed to have been given (i) two
business days after being sent by registered or certified  mail,  return receipt
requested,  postage  prepaid  or (ii) one  business  day after  being sent via a
reputable  nationwide  overnight courier service  guaranteeing next business day
delivery or (iii) on the date on which it is sent by facsimile transmission with
acknowledgement  of receipt at the number to which it is  required to be sent in
each case to the intended recipient as set forth above.

         SECTION  9.2  Survival  of  Agreement.   All   covenants,   agreements,
representations  and  warranties  made by the Credit  Parties  herein and in the
certificates  or other  instruments  prepared or delivered in connection with or
pursuant to this Agreement or any other Investment  Document shall be considered
to have been  relied  upon by the  Holders  and shall  survive the making by the
Holders of the investment,  regardless of any investigation  made by the Holders
or on their  behalf and shall  continue  in full force and effect as long as the
principal  of or any  accrued  interest on the  Debentures  is  outstanding  and
unpaid.

         SECTION 9.3 Binding Effect.  This Agreement shall become effective when
it shall have been executed by the Borrower and Allied Capital,  and when Allied
Capital shall have received counterparts hereof which, when taken together, bear
the  signatures of each of the other parties  hereto,  and  thereafter  shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns.

         SECTION 9.4 Successors and Assigns.

         (a) Whenever in this  Agreement  any of the parties  hereto is referred
to, such  reference  shall be deemed to include  the  permitted  successors  and
assigns of such party;  and all  covenants,  promises  and  agreements  by or on
behalf of the Borrower or the Holders that are contained in this Agreement shall
bind and inure to the benefit of their respective successors and assigns.

                                       40
<PAGE>

         (b) The  Borrower  shall not  assign or  delegate  any of its rights or
duties  hereunder  without the prior  written  consent of the  Holders,  and any
attempted  assignment or delegation without such consent shall be null and void.
Each Holder may assign to another  Holder or to one or more  Eligible  Assignees
all  or a  portion  of  its  rights  and  obligations  hereunder  or  under  the
Debentures,  provided  that (i) except in the case of an  assignment to a Person
that, immediately prior to such assignment, was a Holder or an assignment of all
of a Holder's rights and obligations under this Agreement,  the aggregate amount
of the  Debentures  being  assigned to such Eligible  Assignee  pursuant to such
assignment shall in no event be less than $1,000,000 and (ii) no such assignment
shall be permitted  without the consent of the Borrower (which consent shall not
be  unreasonably  withheld)  so long as no Event of  Default  has  occurred  and
continues to remain uncured.


         SECTION 9.5 Expenses; Indemnity.

         (a) The Borrower will pay to Allied Capital  closing points of $100,000
and a structuring fee of $300,000 (net of any deposit  received),  together with
all reasonable out-of-pocket expenses incurred by the Holders in connection with
the preparation and  administration  of this Agreement and the other  Investment
Documents,  in connection with any amendments,  modifications  or waivers of the
provisions hereof or thereof (whether or not the transactions  hereby or thereby
contemplated  shall be  consummated),  in  connection  with the  enforcement  or
protection of its rights in relation to this Agreement and the other  Investment
Documents, including any suit, action, claim or other activity of the Holders to
collect or  otherwise  enforce the  Obligations  or any portion  thereof,  or in
connection with the Transaction,  including,  without limitation, the reasonable
fees,  charges and  disbursements of Piper Rudnick LLP, counsel for the Holders,
and, in connection with any such enforcement or protection, the reasonable fees,
charges and disbursements of any other counsel for the Holders.

         (b) The Borrower  agrees to indemnify  each Holder,  and its respective
directors,  officers,  employees  and agents  (each such Person  being called an
"Indemnitee")  against,  and to hold each Indemnitee  harmless from, any and all
losses, claims, damages,  liabilities and related expenses, including reasonable
counsel fees,  charges and  disbursements,  incurred by or asserted  against any
Indemnitee  arising out of in any way connected  with, or as a result of (i) the
execution or delivery of this Agreement or any other Investment  Document or any
agreement or instrument  contemplated  thereby,  the  performance by the parties
thereto of their  respective  obligations  thereunder or the consummation of the
Transaction and the other transactions contemplated thereby, including any claim
of any broker engaged by the Credit Parties, (ii) the use of the proceeds of the
investment,  (iii) any claim, litigation investigation or proceeding relating to
any of the foregoing,  whether or not any Indemnitee is a party thereto, or (iv)
any actual or alleged presence or release of Hazardous Materials on any property
owned or operated by the Credit Parties,  or any Environmental  Claim related in
any way to any Credit Party;  provided that such  indemnity  shall not as to any
Indemnitee be available to the extent it resulted  from the gross  negligence or
willful misconduct of such Indemnitee.

         (c)  Notwithstanding  any provision to the contrary,  the provisions of
this Section 9.5 shall remain operative and in full force and effect  regardless
of the  expiration  of the  term  of this  Agreement,  the  consummation  of the
transactions   contemplated  hereby,  the  repayment  of  the  Debentures,   the
invalidity or unenforceability of any term or provision of this Agreement or any
other  Investment  Document,  or any  investigation  made by or on behalf of the
Holders.  All  amounts  due under this  Section  9.5 shall be payable on written
demand therefor.

                                       41
<PAGE>

         SECTION 9.6 Waiver of Consequential and Punitive  Damages.  Each of the
Credit Parties and the Holders  hereby waive to the fullest extent  permitted by
law all claims to  consequential  and  punitive  damages in any lawsuit or other
legal action  brought by any of them against any other of them in respect of any
claim  among or between  any of them  arising  under this  Agreement,  the other
Investment Documents,  or any other agreement or agreements between or among any
of them at any time,  including any such  agreements,  whether  written or oral,
made or alleged to have been made at any time prior to the Closing Date, and all
agreements  made  hereafter or otherwise,  and any and all claims  arising under
common law or under any  statute of any state or the United  States of  America,
including any thereof in contract, tort, strict liability or otherwise,  whether
any such claims be now existing or hereafter arising,  now known or unknown. The
Holders and the Credit Parties  acknowledge and agree that this waiver of claims
for  consequential  damages and  punitive  damages is a material  element of the
consideration for this Agreement.


         SECTION 9.7  Applicable  Law. THIS  AGREEMENT AND THE OTHER  INVESTMENT
DOCUMENTS  (OTHER THAN AS  EXPRESSLY  SET FORTH IN OTHER  INVESTMENT  DOCUMENTS)
SHALL BE CONSTRUED IN  ACCORDANCE  WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK (EXCLUDING CONFLICTS OF LAWS PROVISIONS).

         SECTION 9.8 Waivers; Amendment.

         (a) No  failure or delay of a Holder in  exercising  any power or right
hereunder  or under any other  Investment  Document  shall  operate  as a waiver
thereof nor shall any single or partial  exercise of any such right or power, or
any  abandonment  or  discontinuance  of steps to enforce such a right or power,
preclude  any other or further  exercise  thereof or the  exercise  of any other
right or power.  The rights and remedies of the Holders  hereunder and under the
other Investment Documents are cumulative and are not exclusive of any rights or
remedies  that it would  otherwise  have.  No  waiver of any  provision  of this
Agreement or any other  Investment  Document or consent to any  departure by the
Credit Parties  therefrom shall in any event be effective  unless the same shall
be permitted by paragraph  (b) below,  and then such waiver or consent  shall be
effective only in the specific  instance and for the purpose for which given. No
notice or demand on the  Credit  Parties in any case  shall  entitle  the Credit
Parties  to  any  other  or  further  notice  or  demand  in  similar  or  other
circumstances.

         (b) No  amendment  or waiver of any  provision  hereunder  or any other
Investment Document, nor consent to any departure by any Credit Party therefrom,
shall in any event be  effective  unless the same shall be in writing and signed
by the Required Holders, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given; provided,
however,  that (i) no amendment,  waiver or consent shall, unless in writing and
signed by all of the Credit  Parties do any of the  following  at any time:  (A)
waive any of the  conditions  specified  in Section 3.1, (B) reduce or limit the
obligations of any Guarantor or release such  Guarantor or otherwise  limit such
Guarantor's  liability  with  respect  to the  Obligations  owing to the  Credit
Parties,  or (C) amend this Section  9.8(b);  and (ii) no  amendment,  waiver or
consent  shall,  unless in writing and signed by all of the Holders:  (A) reduce
the  principal  of, or stated rate of interest on, the  Debentures  held by such

                                       42
<PAGE>

Holder or any fees or other  amounts  stated  to be  payable  hereunder  to such
Holder; or (B) postpone the final maturity of the Debentures held by such Holder
or any date fixed for any  payment of interest  on the  Debentures  held by such
Holder or the fees  hereunder or any  Guaranteed  Obligations  payable under the
Subsidiary Guaranty Agreement.

         SECTION 9.9 Interest Rate Limitation.  If at any time the interest rate
applicable to the Debentures, together with all fees, charges, and other amounts
which are treated under Applicable Law as interest thereunder  (collectively the
"Charges"),  shall exceed the maximum lawful rate (the "Maximum Rate") which may
be contracted for, charged,  taken,  received or reserved by the Holders holding
the Debentures in accordance with  Applicable Law, the rate of interest  payable
in respect  of the  Debentures,  together  with all  Charges  payable in respect
thereof  shall be  limited  to the  Maximum  Rate.  If,  from  any  circumstance
whatsoever,  the Holder shall ever receive  anything of value deemed  Charges by
Applicable Law in excess of the maximum  lawful  amount,  an amount equal to any
excessive  Charges shall be applied to the  reduction of the  principal  balance
owing under the Debentures in the inverse order of maturity (whether or not then
due) or at the  option of the Holder be paid over to the  Borrowers,  and not to
the payment of Charges. All Charges (including any amounts or payments deemed to
be  Charges)  paid or  agreed  to be paid to the  Holder  shall,  to the  extent
permitted by  applicable  law, be  amortized,  prorated,  allocated,  and spread
throughout the full period until payment in full of the principal balance of the
Debentures so that the Charges  thereof for such full period will not exceed the
maximum amount permitted by Applicable Law.

         SECTION 9.10 Entire Agreement.  This Agreement and the other Investment
Documents  constitute the entire  contract  between the parties  relative to the
subject  matter  hereof.  Any other  previous  agreement  among the parties with
respect to the subject  matter hereof is  superseded  by this  Agreement and the
other Investment Documents. Nothing in this Agreement or in the other Investment
Documents, expressed or implied, is intended to confer upon any party other than
the parties hereto and thereto any rights, remedies,  obligations or liabilities
under or by reason of this Agreement or the other Investment Documents.

         SECTION 9.11 WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY  LITIGATION  DIRECTLY  OR  INDIRECTLY  ARISING OUT OF,
UNDER OR IN  CONNECTION  WITH  THIS  AGREEMENT  OR ANY OF THE  OTHER  INVESTMENT
DOCUMENTS.  EACH PARTY HERETO (A)  CERTIFIES  THAT NO  REPRESENTATIVE,  AGENT OR
ATTORNEY OF ANY OTHER PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER  PARTY  WOULD NOT,  IN THE EVENT OF  LITIGATION,  SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES  THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER INVESTMENT DOCUMENTS, AS
APPLICABLE,  BY, AMONG OTHER THINGS,  THE MUTUAL WAIVERS AND  CERTIFICATIONS  IN
THIS SECTION 9.11.

         SECTION  9.12  Severability.  In  the  event  any  one or  more  of the
provisions  contained  in this  Agreement  or in any other  Investment  Document
should be held  invalid,  illegal or  unenforceable  in any way,  the  validity,

                                       43
<PAGE>

legality and  enforceability  of the remaining  provisions  contained herein and
therein  shall  not in  any  way be  affected  or  impaired  thereby  (it  being
understood  that  the  invalidity  of a  particular  provision  in a  particular
jurisdiction shall not in and of itself affect the validity of such provision in
any other  jurisdiction).  The parties shall endeavor in good faith negotiations
to  replace  the  invalid,   illegal  or  unenforceable  provisions  with  valid
provisions  the  economic  effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.

         SECTION  9.13   Counterparts.   This   Agreement  may  be  executed  in
counterparts (and by different parties hereto on different  counterparts),  each
of which shall constitute an original but all of which when taken together shall
constitute a single  contract and shall become  effective as provided in Section
9.3.  Delivery of an executed  signature  page to this  Agreement  by  facsimile
transmission  shall be as effective as delivery of a manually signed counterpart
of this Agreement.

         SECTION 9.14 Heading.  Article and Section headings used herein are for
convenience  of reference  only,  are not part of this  Agreement and are not to
affect the  construction of or to be taken into  consideration  in interpreting,
this Agreement.

         SECTION 9.15 Jurisdiction; Consent to Service of Process.

         (a) Each of the Credit Parties hereby  irrevocably and  unconditionally
submits,  for itself and its property,  to the nonexclusive  jurisdiction of any
New York State court or Federal court of the United States of America sitting in
the State of New York, and any appellate  court from any thereof,  in any action
or  proceeding  arising  out of or  relating  to  this  Agreement  or the  other
Investment Documents, or for recognition or enforcement of any judgment and each
of the parties hereto hereby  irrevocably  and  unconditionally  agrees that all
claims in respect of any such action or proceeding  may be heard and  determined
in the State of Maryland  or, to the extent  permitted  by law, in such  Federal
court.  Each of the  parties  hereto  agrees  that a final  judgment in any such
action  or  proceeding  shall  be  conclusive  and  may  be  enforced  in  other
jurisdictions  by suit on the judgment or in any other  manner  provided by law.
Nothing in this Agreement  shall affect any right that the Holders may otherwise
have to bring any action or proceeding  relating to this  Agreement or the other
Investment Documents against such Credit Party or their properties in the courts
of any jurisdiction.

         (b) Each of the Credit Parties hereby  irrevocably and  unconditionally
waives,  to the  fullest  extent  it may  legally  and  effectively  do so,  any
objection  which it may now or hereafter have to the laying of venue of any suit
action or proceeding  arising out of or relating to this  Agreement or the other
Investment Documents in any New York state or Federal court. Each of the parties
hereto hereby  irrevocably  waives,  to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.

         (c) Each party to this  Agreement  irrevocably  consents  to service of
process in the manner  provided  for  notices  in Section  9.1.  Nothing in this
Agreement  will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

                                       44
<PAGE>

         SECTION 9.16 Consents and Approvals; Defaults.

         (a) Subject to the terms of Section 9.16(c), to the extent that (i) the
terms of this  Agreement or any of the other  Investment  Documents  require the
Borrower to obtain the consent or approval  of the  Holders,  (ii) the  Borrower
seek an amendment to or termination of any of the terms of this Agreement or any
of the  Investment  Documents,  or (iii) the Borrower seek a waiver of any right
granted to the Holders under this Agreement or any of the Investment  Documents,
such consent,  approval,  action,  termination,  amendment or waiver  (each,  an
"Approval") shall be made by the Required Holders.

         (b)  Subject to the terms of Section  9.16(c),  to the extent  that the
terms of this  Agreement  or any of the other  Investment  Documents  require or
permit the Holders to take any enforcement action,  including but not limited to
declaring a payment  default or other Event of Default or  accelerating  amounts
due  under  any of the  Investment  Documents,  the  Required  Holders  shall be
permitted to make such  declaration or  acceleration  and to exercise all of its
rights and  remedies  under the  Investment  Documents,  on behalf of all of the
Holders,  as to the obligations of the Borrower and its Restricted  Subsidiaries
to the Holders.

         (c)  Notwithstanding  anything  to the  contrary  contained  in Section
9.16(a) or 9.16(b), the Holders shall not, without the prior written consent and
approval of all of the affected Holders,  amend,  modify,  terminate or obtain a
waiver of any provision of this  Agreement or any of the  Investment  Documents,
which  will  have  the  effect  of (i)  reducing  the  principal  amount  of any
Debentures or of any payment  required to be made to the Holders  hereunder,  or
modifying  the terms of a payment  or  prepayment  thereof;  (ii)  reducing  the
Interest Rate, or extend the time for payment of interest under any  Debentures;
or (iii)  releasing  the  Borrower,  any  Guarantor  or other  obligor  from any
obligation under this Agreement or any of the other Investment Documents.

         (d) Each Holder agrees that, for the benefit of the other Holders,  any
proceeds  received  upon  enforcement  by such Holder of its rights and remedies
under this Agreement, will be divided, pro rata, among all Holders.

         SECTION  9.17  Relationship  of the  Parties;  Advice of Counsel.  This
Agreement  provides  for the  making of an  investment  by the  Holders,  in its
capacity as an investor, in the Borrower,  in its capacity as borrower,  and for
the  payment of interest  and  repayment  of  principal  by the  Borrower to the
Holders. The provisions herein for compliance with financial covenants,  if any,
and delivery of financial  statements are intended solely for the benefit of the
Holders to protect their interests as investors in assuring payments of interest
and repayment of principal,  and nothing  contained in this  Agreement  shall be
construed  as  permitting  or  obligating  the Holders to act as a financial  or
business advisor or consultant to the Borrower,  as permitting or obligating the
Holders to control  the  Borrower or to conduct the  Borrower's  operations,  as
creating any fiduciary obligation on the part of the Holders to the Borrower, or
as creating any joint venture,  agency or other relationship between the parties
other than as explicitly and specifically stated in this Agreement.  The Holders
are not (and shall not be construed as) a partner,  joint  venturer,  alter-ego,
manager,  controlling person, operator or other business participant of any kind
of the  Borrower;  the Holders nor the Borrower  intend that the Holders  assume
such status, and,  accordingly,  the Holders shall not be deemed responsible for

                                       45
<PAGE>

(or a  participant  in) any  acts or  omissions  of the  Borrower  or any of its
partners.  Each of the Holders  and the  Borrower  represent  and warrant to the
other that it has had the advice of  experienced  counsel of its own choosing in
connection with the negotiation and execution of this Agreement and with respect
to all matters contained herein.

         SECTION 9.18 Confidentiality Each of the Holders agrees to maintain the
confidentiality  of the Information (as defined below),  except that Information
may be disclosed (a) to its and its Affiliates' directors,  officers,  employees
and agents,  including  accountants,  legal counsel and other advisors (it being
understood  that the Persons to whom such disclosure is made will be informed of
the  confidential  nature  of such  Information  and  instructed  to  keep  such
Information  confidential),  (b)  to the  extent  requested  by  any  regulatory
authority,  (c) to the extent  required by applicable  laws or regulations or by
any subpoena or similar legal process, (d) to any other party to this Agreement,
(e) in  connection  with the  exercise of any  remedies  hereunder  or any suit,
action or proceeding  relating to this  Agreement or the  enforcement  of rights
hereunder,  (f) subject to an agreement containing provisions  substantially the
same as those of this  Section,  to (i) any  permitted  transferee of any of its
rights or  obligations  under  this  Agreement  or (ii) any  direct or  indirect
contractual  counterparty  or  prospective  counterparty  (or  such  contractual
counterparty's or prospective counterparty's professional advisor) to any credit
derivative   transaction   relating  to  obligations  of  the  Borrower  or  its
Subsidiaries,  (g) with the  consent of the  Borrower,  (h) to the  extent  such
Information (i) becomes publicly available other than as a result of a breach of
this Section or (ii) becomes available to any Holder on a nonconfidential  basis
from a source other than the Borrower  provided that such source is not bound by
a  confidentiality  agreement.  For the purposes of this Section,  "Information"
means all information received from the Borrower or its Subsidiaries relating to
the  Borrower  or its  Subsidiaries  or  their  business,  other  than  any such
information that is available to any Holder on a nonconfidential  basis prior to
disclosure by the Borrower or its  Subsidiaries;  provided  that, in the case of
information  received from the Borrower or any Subsidiary after the date hereof,
such information is clearly  identified (in a reasonable  manner) at the time of
delivery as confidential. Any Person required to maintain the confidentiality of
Information  as provided in this Section  shall be  considered  to have complied
with its  obligation  to do so if such Person has  exercised  the same degree of
care to maintain the  confidentiality  of such  Information as such Person would
accord to its own confidential information.

         SECTION 9.19 Registration and Transfer of Debentures.

         (a) The Borrower will keep at its principal  office a register in which
the  Borrower  will provide for the  registration  of the  Debentures  and their
transfer.  The  Borrower  may treat any  Person in whose name any  Debenture  is
registered  on such  register as the owner  thereof for the purpose of receiving
payment of the  principal  of and interest on such  Debenture  and for all other
purposes, whether or not such Debenture shall be overdue, and the Borrower shall
not be affected  by any notice to the  contrary  from any Person  other than the
applicable  Holder.  All  references  in this  Agreement  to a  "Holder"  of any
Debenture  shall  mean the Person in whose  name such  Debenture  is at the time
registered on such register.

         (b) Upon surrender of any Debenture for registration of transfer or for
exchange to the Borrower at its  principal  office,  the Borrower at its expense
will execute and deliver in exchange therefor a new Debenture or Debentures,  as
the case may be, of the same type in  denominations of at least $100,000 (except
a Debenture may be issued in a lesser  principal  amount if the unpaid principal
amount of the surrendered Debenture is not evenly divisible by, or is less than,

                                       46
<PAGE>

$100,000), as requested by the holder or transferee,  which aggregate the unpaid
principal amount of such Debenture,  registered as such holder or transferee may
request,  dated so that there will be no loss of  interest  on such  surrendered
Debenture and otherwise of like tenor.

         (c) Upon receipt of evidence reasonably satisfactory to the Borrower of
the loss, theft,  destruction or mutilation of any Debenture and, in the case of
any such loss,  theft or  destruction  of any  Debenture,  upon  delivery  of an
indemnity  bond in such  reasonable  amount as the Borrower may determine (or an
unsecured  indemnity  agreement from the Holder  reasonably  satisfactory to the
Borrower),  or, in the case of any such  mutilation,  upon the surrender of such
Debenture for cancellation to the Borrower at its principal office, the Borrower
at their expense will execute and deliver,  in lieu thereof,  a new Debenture of
the  same  class  and of like  tenor,  dated  so that  there  will be no loss of
interest  on (and  registered  in the name of the holder of) such lost,  stolen,
destroyed or mutilated  Debenture.  Any  Debenture in lieu of which any such new
Debenture has been so executed and delivered by the Borrower  shall be deemed to
be not outstanding for any purpose of this Agreement.

                                      * * *

                             {Signatures next page}



                                       47
<PAGE>

                        SIGNATURE PAGE TO LOAN AGREEMENT


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

                                                 BORROWER:

                                                 HEADWATERS INCORPORATED


                                                 By:   /s/ Steven G. Stewart
                                                    ----------------------------
                                                     Steven G. Stewart
                                                     Chief Financial Officer




                                                 ALLIED CAPITAL CORPORATION


                                                 By: /s/ Thomas H. Westbrook
                                                    ----------------------------
                                                       Thomas H. Westbrook
                                                       Managing Director

                                       48

</TEXT>
</DOCUMENT>
