HAMPSHIRE GROUP LTD
EXHIBIT 10.2
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>EXHIBIT 10.2
<TEXT>

                                                               EXHIBIT 10.2

                              AMENDED AND RESTATED
                          CREDIT AGREEMENT AND GUARANTY

                                   dated as of

                                September 5, 2000

                                      among

                            HAMPSHIRE GROUP, LIMITED,

                                  as Borrower,

                           HAMPSHIRE DESIGNERS, INC.,
                         HAMPSHIRE INVESTMENTS, LIMITED,
                        GLAMOURETTE FASHION MILLS, INC.,
                         SAN FRANCISCO KNITWORKS, INC.,
                                       and
                     VINTAGE III, INC. d/b/a ITEM-EYES, INC.
                                 as Guarantors,

                                       and

                            THE CHASE MANHATTAN BANK,
                                 HSBC BANK USA,
                    THE CIT GROUP/COMMERCIAL SERVICES, INC.,
                              FLEET NATIONAL BANK,
                        ISRAEL DISCOUNT BANK OF NEW YORK
                                       and
                              BANK OF AMERICA, N.A.
                                    as Banks,

                                       and

                            THE CHASE MANHATTAN BANK,
                                    as Agent

                                       1
<PAGE>
                             EXHIBITS AND SCHEDULES

                                    Exhibits


Exhibit A .........   Form of Borrower Pledge Agreement
Exhibit B .........   Form of Borrower Security Agreement
Exhibit C .........   Form of Borrower Trademark Security Agreement
Exhibit D .........   Form of Borrowing Base Certificate
Exhibit E .........   Form of Borrowing Notice
Exhibit F .........   Form of Note
Exhibit G .........   Form of Blocked Account Agreement
Exhibit H .........   Form of Assignment and Acceptance

                                   Schedules

Schedule 1.01(a)......... Eligible Inventory Locations
Schedule 1.01(b)......... Eligible Trade Letter of Credit Locations
Schedule IA.01 .......... Existing Letters of Credit
Schedule 7.04 ........... Litigation
Schedule 7.08 ........... ERISA Matters
Schedule 7.09 ........... Ownership of Guarantors, Investments
Schedule 7.13 ........... Labor Disputes and Acts of God
Schedule 9.03 ........... Permitted Liens
Schedule 9.05 ........... Affiliate Transactions
Schedule 9.10(a)......... Permitted Payments for Item-Eyes Acquisition Debt
Schedule 9.10(b)(ii) .... Permitted Investments in HIL



                                       2
<PAGE>
                                TABLE OF CONTENTS

                                                                         Page
                                                                         -----
ARTICLE I.  DEFINITIONS, ACCOUNTING TERMS AND RULES OF CONSTRUCTION.........1
  Section 1.01     Definitions..............................................1
  Section 1.02     Accounting Terms.................................... ....19
  Section 1.03     Computation of Time Periods..............................19
  Section 1.04     Rules of Construction....................................19

ARTICLE IA   ACKNOWLEDGMENT AND RESTATEMENT.................................20
  Section IA.01   Existing Obligations......................................20
  Section IA.02   Acknowledgment of Security Interests......................20
  Section IA.03   Acknowledgment of Existing Agreement......................20
  Section IA.04   Restatement...............................................20
  Section IA.05   Release...................................................21

ARTICLE II.   REVOLVING CREDIT LOANS........................................21
  Section 2.01     Revolving Credit.........................................21
  Section 2.02     Notice and Manner of Borrowing...........................21
  Section 2.03     Conversions..............................................22
  Section 2.04     Non-Receipt of Funds by Agent............................22
  Section 2.05     Interest.................................................23
  Section 2.06     Notes....................................................23
  Section 2.07     Optional and Mandatory Prepayments.......................23
  Section 2.08     Method of Payment........................................25
  Section 2.09     Use of Proceeds..........................................25
  Section 2.10     Minimum Amounts..........................................25
  Section 2.11     Establishment of Loan Account; Blocked Accounts;
                   Collection of Accounts...................................25
  Section 2.12     Closing Fee..............................................26
  Section 2.13     Commitment Fee...........................................26

ARTICLE III.  LETTERS OF CREDIT.............................................27
  Section 3.01     Trade Letters of Credit..................................27
  Section 3.02     Reimbursement Obligation.................................27
  Section 3.03     Payment of Commissions, Expenses and Interest............28
  Section 3.04     Proper Drawing; Chase's Honoring.........................28
  Section 3.05     Standby Letters of Credit................................29
  Section 3.06     Amendment; Change; Modification; No Waiver...............29
  Section 3.07     U.C.P.; Agreements and Acknowledgments; Indemnification..29
  Section 3.08     Licenses; Insurance; Regulations.........................30
  Section 3.09     Airway and Steamship Guaranties..........................31
  Section 3.10     Additional Security......................................31
  Section 3.11     Continuing Rights and Obligations........................31
  Section 3.12     Instructions; No Liability...............................31
  Section 3.13     Steamship Guaranty.......................................32

                                       3
<PAGE>
ARTICLE IV.  PARTICIPATION..................................................32
  Section 4.01     Participating Banks' Pro Rata Shares.....................32
  Section 4.02     Sale and Purchase of Participation.......................32
  Section 4.03     Participation in Fees and Collateral; Relationship.......32
  Section 4.04     Procedures...............................................33
  Section 4.05     Collections and Remittances..............................33
  Section 4.06     Sharing of Setoffs and Collections.......................34
  Section 4.07     Indemnification; Costs and Expense.......................34
  Section 4.08     Administration; Standard of Care.........................34
  Section 4.09     Independent Investigation by the Participating Banks.....35
  Section 4.10     Participating Banks' Ownership of Interests in the
                   Participation; Repurchases by Chase......................36

ARTICLE V.  GUARANTY........................................................36
  Section 5.01     Guaranty.................................................36
  Section 5.02     Guarantor's Guaranty Obligations Unconditiona............36
  Section 5.03     Waivers..................................................37
  Section 5.04     Subrogation..............................................38
  Section 5.05     Limitation of Liability..................................38

ARTICLE VI.  CONDITIONS PRECEDENT...........................................38
  Section 6.01     Conditions Precedent to Initial Use of a Credit
                   Facility on and after the Closing Date...................38
  Section 6.02     Conditions Precedent to All Credit Facilities............41
  Section 6.03     Deemed Representation....................................41

ARTICLE VII.  REPRESENTATIONS AND WARRANTIES................................41
  Section 7.01     Incorporation.  Good Standing and Due Qualification......41
  Section 7.02     Corporate Power and Authority; No Conflicts..............42
  Section 7.03     Legally Enforceable Agreements...........................42
  Section 7.04     Litigation...............................................42
  Section 7.05     Financial Statements.....................................42
  Section 7.06     Ownership and Liens......................................43
  Section 7.07     Taxes....................................................43
  Section 7.08     ERISA....................................................43
  Section 7.09     Ownership of Guarantors; Investments.....................43
  Section 7.10     Operation of Business....................................44
  Section 7.11     No Default on Outstanding Judgments or Orders............44
  Section 7.12     No Defaults on Other Agreements..........................44
  Section 7.13     Labor Disputes and Acts of God...........................44
  Section 7.14     Governmental Regulation..................................44
  Section 7.15     Partnerships.............................................44
  Section 7.16     Environmental Protection.................................44
  Section 7.17     Solvency.................................................45

                                       4
<PAGE>
ARTICLE VIII.  AFFIRMATIVE COVENANTS........................................45
  Section 8.01     Maintenance of Existence.................................45
  Section 8.02     Conduct of Business......................................45
  Section 8.03     Maintenance of Properties................................45
  Section 8.04     Maintenance of Records...................................45
  Section 8.05     Maintenance of Insurance.................................45
  Section 8.06     Compliance with Laws.....................................45
  Section 8.07     Right of Inspection......................................45
  Section 8.08     Reporting Requirements...................................46
  Section 8.09     Compliance With Environmental Laws.......................49
  Section 8.10     Additional Guarantor.....................................49
  Section 8.11     Key-Person Life Insurance Policies.......................49

ARTICLE IX.  NEGATIVE COVENANTS.............................................50
  Section 9.01     Debt.....................................................50
  Section 9.02     Guaranties...............................................50
  Section 9.03     Liens....................................................51
  Section 9.04     Sale of Assets...........................................52
  Section 9.05     Transactions with Affiliates.............................53
  Section 9.06     Investments..............................................53
  Section 9.07     Mergers..................................................54
  Section 9.08     Leases...................................................54
  Section 9.09     Dividends................................................54
  Section 9.10     Restricted Payments......................................54
  Section 9.11     Fiscal Year..............................................54
  Section 9.12     Changes, Amendments or Modifications.....................54

ARTICLE X.  FINANCIAL COVENANTS.............................................55
  Section 10.01    Consolidated Tangible Net Worth..........................55
  Section 10.02    Consolidated Fixed Charge Coverage Ratio.................55
  Section 10.03    Consolidated Leverage Ratio..............................56
  Section 10.04    Consolidated Capital Expenditures........................56

ARTICLE XI.  EVENTS OF DEFAULT..............................................56
  Section 11.01    Events of Default........................................56
  Section 11.02    Remedies.................................................58

ARTICLE XII.  THE AGENT AND COLLATERAL MONITOR..............................59
  Section 12.01    Appointment, Powers and Immunities of Agent..............59
  Section 12.02    Reliance by Agent........................................59
  Section 12.03    Defaults.................................................60
  Section 12.04    Rights of Agent as a Bank................................60
  Section 12.05    Indemnification of Agent.................................60
  Section 12.06    Documents................................................60
  Section 12.07    Non-Reliance on Agent and Other Banks....................60
  Section 12.08    Failure of Agent to Act..................................61
  Section 12.09    Resignation or Removal of Agent..........................61
  Section 12.10    Amendments Concerning Agency Function....................61
  Section 12.11    Liability of Agent.......................................62
  Section 12.12    Transfer of Agency Function..............................62
  Section 12.13    Withholding Taxes........................................62
  Section 12.14    Collateral Monitor.......................................62

 .ARTICLE XIII.  YIELD PROTECTION............................................63
  Section 13.01    Additional Costs.........................................63
  Section 13.02    Illegality...............................................64
  Section 13.03    Certain Compensation.....................................64

ARTICLE XIV.  MISCELLANEOUS.................................................65
  Section 14.01    Amendments and Waivers...................................65
  Section 14.02    Usury....................................................65
  Section 14.03    Expenses; Indemnification................................65
  Section 14.04    Assignment; Participation; Additional Bank...............66
  Section 14.05    Notices..................................................68
  Section 14.06    Setoff...................................................68
  Section 14.07    Jurisdiction; Immunities.................................68
  Section 14.08    Governing Law............................................69
  Section 14.09    Counterparts.............................................69
  Section 14.10    Exhibits and Schedules...................................69
  Section 14.11    Table of Contents; Headings..............................69
  Section 14.12    Severability.............................................69
  Section 14.13    Integration..............................................70
  Section 14.14    Jury Trial Waiver........................................70

                                       5
<PAGE>
     AMENDED AND RESTATED CREDIT AGREEMENT AND GUARANTY dated as of September 5,
2000, among HAMPSHIRE GROUP, LIMITED,  ("Borrower"),  HAMPSHIRE DESIGNERS, INC.,
("Designers"),  HAMPSHIRE  INVESTMENTS,  LIMITED  ("HIL"),  GLAMOURETTE  FASHION
MILLS,  INC.,  ("Glamourette")  SAN  FRANCISCO  KNITWORKS,  INC.  ("Knitworks"),
VINTAGE III, INC. d/b/a ITEM-EYES,  INC.  ("Vintage"),  THE CHASE MANHATTAN BANK
("Chase"),  HSBC BANK USA  ("HSBC"),  THE CIT  GROUP/COMMERCIAL  SERVICES,  INC.
("CIT"), FLEET NATIONAL BANK ("Fleet"), ISRAEL DISCOUNT BANK OF NEW YORK ("IDB")
and  BANK OF  AMERICA,  N.A.  ("BOA")  (Chase,  HSBC,  CIT,  Fleet,  IDB and BOA
individually a "Bank" and collectively the "Banks", and THE CHASE MANHATTAN BANK
as Agent for the Banks (in such  capacity,  together with any successors in such
capacity, the "Agent").

     The parties hereto agree as follows:

ARTICLE I.  DEFINITIONS, ACCOUNTING TERMS AND RULES OF CONSTRUCTION

     Section I.1  Definitions.  As used in this  Agreement,  the following terms
have the following meanings (terms defined in the singular to have a correlative
meaning when used in the plural and vice versa):

     "Accounts"  means all of the  accounts  receivable  as defined in  Borrower
Security Agreement and the Guarantors Security Agreements.

     "Affiliate"  means, as to any Person,  any other Person: (a) which directly
or indirectly  controls,  or is controlled  by, or is under common  control with
such Person;  (b) which directly or indirectly  beneficially  owns or holds five
percent  (5%) or more of any class of voting  stock of the such  Person;  or (c)
five percent (5%) or more of the voting stock of which is directly or indirectly
beneficially  owned  or  held by such  Person.  The  term  "control"  means  the
possession,  directly  or  indirectly,  of the  power to  direct  or  cause  the
direction  of the  management  and  policies  of a Person,  whether  through the
ownership of voting securities,  by contract, or otherwise. The term "Affiliate"
shall include, without limitation, HIL.

     "Agent" means Chase,  when acting in its capacity as Agent under any of the
Loan Documents, and any successor thereto.

     "Agent's  Office"  means the address of Chase as set forth on the signature
page of this Agreement,  or such other address as Chase may designate by written
notice to Borrower, the Guarantors and the Banks.

     "Agreement" means this Credit Agreement and Guaranty.

     "Applicable  Margin"  means with  respect  to a  Eurodollar  Loan,  two and
one-quarter (2.25%) percent.

     "Application" means the application by Borrower for a Letter of Credit.

     "Assignment  of Proceeds  Agreement"  means  Assignment of Factored  Credit
Balance and Proceeds  Agreement,  in form and substance  satisfactory  to Agent,
duly executed by Borrower and the Restricted  Subsidiaries  and any Factor and a
Consent and Acknowledgment thereto duly executed by such Factor.

     "Authorized  Person"  means any duly  authorized  officer or  employee,  or
combination thereof of Borrower.

     "Availability  for  Revolving  Credit  Loans" has the  meaning set forth in
Section 2.01 hereof.

     "Availability  Reserves" shall mean, as of any date of determination,  such
reserves in amounts as Agent may from time to time  establish and revise in good
faith in accordance with customary  credit  practices in the commercial  finance
industry  reducing  the amount of  Revolving  Credit Loans and Letters of Credit
which would otherwise be available to the Borrower under the lending  formula(s)
provided for herein: (a) to reflect events,  conditions,  contingencies or risks
which,  as determined  in good faith by Agent in  accordance  with its customary
credit practices,  do or could reasonably be expected to adversely affect either
(i)-the Collateral or its value,  (ii)-the assets or business of the Borrower or


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<PAGE>

any Restricted  Subsidiary of the Borrower or (iii)-the  security  interests and
other  rights  of  Agent  in  the  Collateral   (including  the  enforceability,
perfection  and  priority  thereof) or (b) to reflect  Agent's good faith belief
that any collateral report or financial  information furnished to it any Bank by
or on behalf of the Borrower or any  Subsidiary of the Borrower,  is or may have
been  incomplete,  inaccurate or  misleading  in any material  respect or (c)-in
respect of any state of facts which Agent  determines in good faith  constitutes
an  Event  of  Default  or may,  with  notice  or the  passage  of time or both,
constitute  an  Event  of  Default.  The  amount  of  any  Availability  Reserve
established  by  Agent  shall  have a  reasonable  relationship  to  the  event,
condition or other matter which is the basis for such reserve as  determined  by
Agent in good faith.

     "Bank"  or  "Banks"  has the  meaning  specified  in the  preamble  to this
Agreement.

     "Bank Parties" means Agent and each of the Banks.

     "Banking Day" means any day on which commercial banks are not authorized or
required to close in London, England, New York City, New York or Anderson, South
Carolina.

     "Blocked Accounts" has the meaning set forth in Section 2.11 hereof.

     "Board of  Governors"  means the Board of Governors of the Federal  Reserve
System or any successor.

     "Book  Value"  shall  mean,  as to any  inventory  in respect of which such
amount is to be  determined,  the lower of  (a)-the  cost (as  reflected  in the
general ledgers of Designers, Knitworks, Vintage or, with the approval of Agent,
any other  existing or future  Subsidiary  of the  Borrower),  as  applicable or
(b)-market value (both cost and market value being determined in accordance with
GAAP calculated on a first in first out basis).

     "Borrower Pledge Agreement" means the Amended and Restated Pledge Agreement
substantially in the form of Exhibit A hereto, to be delivered by Borrower under
the terms of this Agreement.

     "Borrower  Security  Agreement"  means the  Amended and  Restated  Security
Agreement  substantially  in the form of Exhibit B hereto,  to be  delivered  by
Borrower under the terms of this Agreement.

     "Borrower  Trademark  Security  Agreement"  means the Trademark  Collateral
Assignment and Security Agreement substantially in the form of Exhibit C hereto,
to be delivered by Borrower under the terms of this Agreement.

     "Borrowing Base" shall mean, at any time, an amount equal to the sum of:

          (a) eighty-five  percent (85%) of the Net Amount of Eligible Accounts,
     plus

          (b) the lesser of: (x) fifty  percent  (50%) of Net Amount of Eligible
     Inventory,  or (y) the amount  for the  period in any given year  indicated
     below:

               (i)......$25,000,000 for the period January 1 through March 31,

               (ii).....$30,000,000 for the period April 1 through May 31,

               (iii)....$45,000,000  for the period  June 1 through  October 31,
          and

               (iv).....$30,000,000  for the period November 1 through  December
          31, plus

          (c)  fifty  percent  (50%)  of the  aggregate  undrawn  amount  of all
     outstanding Eligible Trade Letters of Credit, plus

          (d)  fifty  percent  (50%)  of  the  amount  of  Eligible   In-Transit
     Inventory, plus

                                       7
<PAGE>
          (e) the Supplemental Amount, less

          (f) Availability Reserves.

     "Borrowing Base  Certificate"  means the certificate  substantially  in the
form of Exhibit D annexed hereto.

     "Borrowing Notice" has the meaning specified in Section 2.02 hereof.

     "Capital  Lease" means any lease which has been or should be capitalized on
the books of the lessee in accordance with GAAP.

     "Cash  Collateral"  means  a  deposit  by  Borrower,  made  in  immediately
available funds, to a savings,  checking or time deposit account at Chase or the
purchase  by  Borrower  of a  certificate  of  deposit  issued  by Chase and the
execution of all documents and the taking of all steps  required to give Agent a
perfected  security  interest  for the  benefit of the Banks in such  deposit or
certificate of deposit.

     "Chase" means The Chase Manhattan Bank.

     "Closing Date" means September 5, 2000.

     "Code" means the Internal Revenue Code of 1986.

     "Collateral"  means any and all personal property subject to a Lien granted
by any of the Security Documents and this Agreement.

     "Collateral  Monitor"  means CIT, when acting in its capacity as Collateral
Monitor under any of the Loan Documents, and any successor thereto.

     "Collection  Determination Date" means the date following the occurrence of
an Event of  Default  that  Agent  notifies  Chase  that all funds  received  or
deposited  in the Blocked  Accounts  shall be under the  dominion and control of
Agent  and,  at  Agent's  discretion,  shall be  transferred  to the  Depository
Accounts of Agent or such other  account as Agent may designate for such purpose
and shall be applied to repay the Obligations on a daily basis.

     "Commitment"  means,  collectively,  the Revolving Credit  Commitment,  the
Trade Letter of Credit Commitment and the Standby Letter of Credit Commitment.

     "Consolidated Amortization" means the amortization of the intangible assets
of Borrower and the Restricted  Subsidiaries,  on a consolidated  basis,  all as
determined in accordance with GAAP.

     "Consolidated  Capital  Expenditures"  means  the  Dollar  amount  of gross
expenditures  (including the principal portion of payments under Capital Leases)
made for real property,  fixed assets,  property,  plant and equipment,  and all
renewals,  improvements and replacements thereto (including, but not limited to,
maintenance  and  repairs  thereof  but  only  to  the  extent  required  to  be
capitalized  in  accordance  with GAAP)  incurred  or paid by  Borrower  and the
Restricted Subsidiaries.

     "Consolidated   Depreciation"   means  depreciation  of  Borrower  and  its
Restricted  Subsidiaries,   on  a  consolidated  basis,  all  as  determined  in
accordance with GAAP.

     "Consolidated   Earnings   Before   Interest,   Taxes,   Depreciation   and
Amortization" means, for any period,  Consolidated Net Income, plus Consolidated
Interest Expense, plus Consolidated Taxes, plus Consolidated Depreciation,  plus
Consolidated Amortization, all for such period.

     "Consolidated Interest Expense" means, for any period, all interest paid or
required to be paid by Borrower and its Restricted  Subsidiaries on all of their
respective Debt, including the Obligations, during such period.

     "Consolidated  Inventory" means, at any time, the Inventory of Borrower and
its  Restricted  Subsidiaries  on a  consolidated  basis,  all as  determined in
accordance with GAAP.

     "Consolidated Net Income" means, for any period, the net income of Borrower
and its Restricted  Subsidiaries,  on a consolidated basis, all as determined in
accordance with GAAP.

                                       8
<PAGE>
     "Consolidated   Principal   Amortization"   means  scheduled   consolidated
principal   payments  of  all  funded  debt  of  Borrower  and  the   Restricted
Subsidiaries.

     "Consolidated  Subsidiaries"  means all existing and future Subsidiaries of
Borrower,  except HIL and any  subsidiary  of HIL,  that  should be  included in
Borrower's  consolidated  financial statements,  all as determined in accordance
with GAAP.

     "Consolidated  Tangible Net Worth" means the sum of (a) Consolidated  Total
Tangible Assets less (b) Consolidated Total Liabilities, less (c) the investment
in HIL by Borrower or the Restricted  Subsidiaries,  at cost, without adjustment
for losses or income of HIL,  and  including,  but not limited to, the equity of
HIL, any advances or loans to HIL and  guaranties by Borrower or its  Restricted
Subsidiaries of the obligations of HIL.

     "Consolidated  Taxes" means, for any period, the income and franchise taxes
of Borrower and its Restricted  Subsidiaries,  on a consolidated  basis,  all as
determined in accordance with GAAP.

     "Consolidated Total Tangible Assets" means the total assets of Borrower and
its  Restricted  Subsidiaries,  on a  consolidated  basis,  minus all intangible
assets (other than deferred taxes),  including,  but not limited to, non-compete
contracts,   employment  contracts,   deferred  or  prepaid  transactions  cost,
capitalized research and development cost,  capitalized interest,  debt discount
and expenses, goodwill, patents, trademarks,  copyrights,  franchises,  licenses
and other intangible assets, all as determined in accordance with GAAP.

     "Consolidated   Total   Liabilities"   means  total   liabilities  and  all
mandatorily   redeemable   preferred   stock  of  Borrower  and  its  Restricted
Subsidiaries,  on a  consolidated  basis,  all as determined in accordance  with
GAAP.

     "Credit Facilities" means, collectively, the Revolving Credit Loans and the
Letters of Credit.

     "Debt" means:  (a) indebtedness or liability for borrowed money, or for the
deferred purchase price of property or services  (including trade  obligations);
(b) the principal  portion of  obligations as lessee under Capital  Leases;  (c)
obligations  under letters of credit  issued for the account of any Person;  (d)
all  obligations  arising under bankers' or trade  acceptance  facilities of any
Person; (e) all guarantees,  endorsements  (other than for collection or deposit
in the  ordinary  course of  business),  and  other  contingent  obligations  to
purchase  any of the items  included in this  definition,  to provide  funds for
payment,  to supply  funds to invest in any  Person,  or  otherwise  to assure a
creditor  against loss; and (f) all obligations  secured by any Lien on property
owned by such Person,  whether or not the  obligations  have been  assumed.  For
purposes of the  foregoing,  (i) the amount of any Debt  described in clause (f)
shall be equal to the lesser of (A) the amount of such  liability  for  borrowed
money and (B) the Fair  Market  Value of the  property  subject to such Lien and
(ii)-the amount of any Debt described in clause (e) shall be equal to the lesser
of (A) the amount of the primary obligation in respect to which such guaranty is
issued and (B) the maximum liability amount under the terms of such guaranty.

     "Default"  means any  event  which,  with the  giving of notice or lapse of
time, or both, would become an Event of Default.

     "Default  Rate" means,  with respect to an amount of any  Revolving  Credit
Loan not paid when due,  a rate per annum  equal to two  percent  (2%) above the
Interest Rate then in effect thereon.

     "Designers   Pledge  Agreement"  means  the  Amended  and  Restated  Pledge
Agreement executed by Designers under the terms of this Agreement.

     "Designers  Trademark  Security  Agreement" means the Trademark  Collateral
Assignment and Security  Agreement  executed and delivered by Designers in favor
of Agent.

     "Depository Accounts" has the meaning set forth in Section 2.11(b) hereof.

                                       9
<PAGE>
     "Dollars"  and the sign "$" mean  lawful  money  of the  United  States  of
America.

     "Effective Date" means September 5, 2000.

     "Eligible Accounts" shall mean (a) the trade accounts receivable created in
the ordinary course of business by Designers,  Knitworks,  Vintage and, with the
approval of Agent,  other existing or future  Subsidiary of the Borrower,  which
(i) are subject to a valid, first priority, fully perfected security interest in
favor of Agent and which conform to the representations and warranties contained
herein and in the Loan  Documents,  and (ii) at all times  shall  continue to be
acceptable to Agent in all respects (the "Non-Factored Accounts"),  and, (b) the
trade  accounts  receivable  of  Designers,  Knitworks,  Vintage  and,  with the
approval of Agent,  any other  existing or future  Subsidiary  of the  Borrower,
created in the ordinary  course of business  which have been  purchased,  credit
approved  and  continue to be credit  approved  by the Factor  under a factoring
agreement,  provided that such factored accounts receivable remain subject to an
Assignment of Proceeds  Agreement which is satisfactory in all respects to Agent
(the "Factored Accounts").

     In general,  the Non-Factored  Accounts may, as determined by Agent in good
faith, be deemed eligible if:

          (a) delivery of the merchandise has been completed;

          (b) no return, rejection or repossession has occurred;

          (c) the merchandise has been accepted by the account debtor without

dispute,  setoff,  defense or counterclaim  (but the portion of the Non-Factored
Accounts  of such  account  debtor in excess of the  amount at any time and from
time to time owed by such  Subsidiary  of  Borrower  to such  account  debtor or
claimed to be owed may deemed an Eligible Account);

          (d) such  trade  account  receivable  is  unconditionally  payable  in
     dollars  within  90 days of the  invoice  date  and is not  evidenced  by a
     promissory  note,  chattel  paper  or any  other  instrument  or  document,
     Notwithstanding the prior sentence, a trade account receivable payable more
     than 90 days but less than 150 days from the  invoice  date may be eligible
     provided that, (i) Agent has been advised of such  receivable  prior to the
     merchandise being shipped and Agent has approved such receivable, (ii) such
     receivable is due from Marmaxx  Group,  Inc. or Burlington  Coat Factory or
     such other customer approved by Agent,  (iii)-such  receivable is scheduled
     in sufficient  detail to the Borrowing Base Certificate which includes such
     receivable, and (iv) such receivable is not more than 15 days past due;

          (e) no more than 60 days has elapsed  from the invoice due date and no
     more than 120 days have elapsed from the invoice date;

          (f) the  account  debtor is not an  Affiliate  of the  Borrower or any
     Restricted Subsidiary;

          (g) such trade account receivable does not constitute an obligation of
     the United States or any other governmental authority;

          (h) the chief  executive  office of the account  debtor  with  respect
     thereto is located in the continental United States,  unless the Receivable
     is supported by a letter of credit or other similar obligation satisfactory
     to Agent or Agent has received  evidence that credit insurance with respect
     to such Non-Factored  Account has been assigned to Agent and names Agent as
     loss payee;

          (i) the account debtor with respect  thereto is not also a supplier or
     a creditor  of the  Borrower  or any  Restricted  Subsidiary,  unless  such
     supplier or creditor has executed a no offset letter  satisfactory to Agent
     (but the portion of the  Non-Factored  Accounts of such  account  debtor in
     excess  of the  amount  at any  time  and  from  time to time  owed by such
     Subsidiary  of  Borrower to such  account  debtor or claimed to be owed may
     deemed an Eligible Account);

          (j) not more than 50% of the  aggregate  amount  of all trade  account
     receivables  from an account debtor with respect thereto remain unpaid more
     than 60 days past the invoice due date or 120 days past the invoice date;

                                       10
<PAGE>
          (k) the  account  debtor is not  insolvent,  subject to a  bankruptcy,
     reorganization,   receivership,   insolvency  arrangement  or  any  similar
     proceeding; and

          (l) no facts,  events or  occurrences  exist  that  would  impair  the
     validity, enforceability or collectibility of such trade account receivable
     or  reduce  the  amount  payable,  or  delay  payment  thereunder,  all  as
     determined in the good faith by Agent (provided,  that, as to facts, events
     or  occurrences  that reduce the amount  payable under such  receivable the
     amount payable thereunder as so reduced, may be deemed Eligible Account).

     The  aggregate  amount of all Eligible  Accounts of  Designers,  Knitworks,
Vintage and, with the approval of Agent, any other existing or future Subsidiary
of the Borrower,  shall be reduced by any reserves deemed  necessary by Agent in
good  faith,  including  a  reserve  in an  amount  which  would  represent  the
historical or anticipated ratio of dilution (i.e.  returns,  discounts,  claims,
credits,  and allowances) to collections to the extent that such amounts are not
already included in the Availability Reserves.

     "Eligible Inventory" shall mean inventory of Designers,  Knitworks, Vintage
and, with the approval of Agent, any other existing or future  Subsidiary of the
Borrower,  comprised solely of uncut fabric,  yarn and finished goods located in
the United States which meets all of the following specifications:

          (a) the inventory is owned by Designers,  Knitworks, Vintage and, with
     the  approval  of Agent,  any other  existing or future  Subsidiary  of the
     Borrower,  free and clear of any  existing  lien,  other than the liens and
     security  interests in favor of Agent under the Loan  Documents,  it is not
     held on consignment and may be lawfully sold and it continues to be in full
     conformity  with any  representations  and  warranties  made under the Loan
     Documents  by the Borrower and its  Restricted  Subsidiaries  to Agent with
     respect thereto;

          (b) Designers, Knitworks, Vintage and, with the approval of Agent, any
     other  existing  or future  Subsidiary  of the  Borrower,  has the right to
     assignment  thereof  and the  power to grant  liens  thereon  and  security
     interests with respect thereto;

          (c) the  inventory  arose or was  acquired in the  ordinary  course of
     business of Designers,  Knitworks,  Vintage or, with the approval of Agent,
     any other existing or future Subsidiary of the Borrower,  as applicable and
     does not represent returned, second quality or damaged goods;

          (d) the  inventory  is  readily  marketable  for  sale  by  Designers,
     Knitworks,  Vintage and, with the approval of Agent,  any other existing or
     future Subsidiary of the Borrower;

          (e) the  inventory is located at one of the addresses for locations of
     Collateral  set  forth  on  Schedule  1.01(a)  and  with  respect  to which
     inventory Agent has been granted and has perfected a valid,  first priority
     security interest therein;

          (f) the  inventory  is not goods to be  returned  to a supplier of the
     Borrower or any Restricted Subsidiary,  or, with the approval of Agent, any
     other existing or future Subsidiary of the Borrower;

          (g) the inventory is not samples;

          (h) if the inventory is sold under a licensed  trademark,  Agent shall
     have  entered  into  a  licensor  waiver  letter,  in  form  and  substance
     satisfactory  to Agent,  with the  licensor  with  respect to the rights of
     Agent to use the trademark to sell or otherwise dispose of such inventory;

          (i) the inventory is Eligible Prior Season Inventory;

          (j) the inventory is not obsolete,  slow-moving or unmerchantable  and
     is and at all  times  shall  continue  to be  acceptable  to  Agent  in all
     respects as determined by Agent in good faith.

          "Eligible  In-Transit  Inventory" shall mean "in transit" fabric, yarn
     or finished goods inventory of Designers,  Knitworks, Vintage and, with the
     approval of Agent, any other existing or future Subsidiary of the Borrower,
     shipped  under an Eligible  Trade Letter of Credit,  the amount of which is
     equal to the face amount of the related  Eligible  Trade  Letter of Credit,
     provided that such  inventory (a) has been paid for by the Borrower and has


                                       11
<PAGE>
     not  otherwise  been  included in Eligible  Inventory  or under an Eligible
     Trade Letter of Credit,  and (b) such inventory would otherwise  qualify as
     Eligible  Inventory  and  is  otherwise  satisfactory  in all  respects  as
     determined by Agent in good faith.

     "Eligible Prior Season  Inventory"  shall mean Prior Season Inventory which
Agent determines,  in good faith, to be eligible  inventory.  In general,  Prior
Season  Inventory  may be deemed  Eligible  Prior Season  Inventory if (a) it is
subject to a confirmed  purchase  order,  (b) the cost of such  inventory  is an
amount in the general  ledger of Designers,  Knitworks,  Vintage,  or such other
existing or future Subsidiary of the Borrower approved by Agent, as the case may
be, which will produce, when such inventory is sold, a gross profit margin which
is  satisfactory to Agent,  and (c) such inventory  would  otherwise  qualify as
Eligible  Inventory  and is otherwise  satisfactory  in all respects to Agent in
good faith.

     "Eligible Trade Letter of Credit" shall mean a commercial  letter of credit
issued  by Agent  for the  account  of the  Borrower  covering  fabric,  yarn or
finished goods inventory of Designers, Knitworks, Vintage and, with the approval
of Agent, any other existing or future Subsidiary of the Borrower, for which (a)
the  documents  of  title  have  been or will be  consigned  to  Agent,  (b)-the
underlying  goods have been or will be insured to the satisfaction of Agent, and
(c) the underlying goods have been or will be shipped to an eligible location in
the United States set forth on Schedule 1.01(b).

     "Environmental Discharge" means any discharge or release by Borrower or any
Restricted   Subsidiaries  of  any  Hazardous  Materials  in  violation  of  any
applicable Environmental Law.

     "Environmental Law" means any Law relating to pollution of the environment,
including  Laws  relating  to noise or to  emissions,  discharges,  releases  or
threatened releases of Hazardous Materials into the workplace,  the community or
the  environment,   or  otherwise  relating  to  the  generation,   manufacture,
processing,  distribution,  use,  treatment,  storage,  disposal,  transport  or
handling of Hazardous Materials.

     "Environmental  Notice"  means  any  complaint,  order,  citation,  letter,
inquiry,  notice or other written communication from any Governmental  Authority
(a)  affecting  or  relating  to  Borrower's  or  any  Restricted  Subsidiaries'
violation of any Environmental Law in connection with any activity or operations
at any time conducted by Borrower or such Restricted Subsidiary, (b) relating to
the  unpermitted  occurrence  or  Presence  of or  exposure  to or  possible  or
threatened  or alleged  occurrence  or presence of or exposure to  Environmental
Discharges  or  Hazardous  Materials  at any  of  Borrower's  or any  Restricted
Subsidiary's  locations or facilities,  including,  without limitation:  (i) the
existence of any  contamination  or possible or threatened  contamination at any
such location or facility and (ii) remediation of any Environmental Discharge or
Hazardous  Materials at any such location or facility or any part  thereof;  and
(c) any violation or alleged violation of any relevant Environmental Law.

     "ERISA"  means  the  Employee  Retirement  Income  Security  Act  of  1974,
including any rules and regulation promulgated thereunder.

     "ERISA  Affiliate"  means any  corporation  or trade or business which is a
member of the same  controlled  group of  corporations  (within  the  meaning of
Section  414(b) of the Code) as Borrower  or any  Guarantor  or is under  common
control (within the meaning of Section 414(c) of the Code) with Borrower or such
Guarantor;  provided however,  that for purposes of provisions herein concerning
minimum  funding  obligations  (imposed under Section 412 of the Code or Section
302 of ERISA), the term "ERISA Affiliate" shall also include any entity required
to be aggregated  with Borrower or any Guarantor  under Section 414(m) or 414(o)
of the Code.

                                       12
<PAGE>
     "Eurodollar  Base Rate"  means with  respect to any  Interest  Period for a
Eurodollar  Loan, the arithmetic mean, as calculated by Agent, of the respective
rates per annum  (rounded  upwards,  if  necessary,  to the nearest 1/16 of 1 %)
quoted at approximately 11:00 A.M. London time by the principal London branch of
Agent two (2) Banking  Days prior to the first day of such  Interest  Period for
the offering to leading banks in the London  interbank market of Dollar deposits
in immediately  available funds, for a period,  and in an amount,  comparable to
the Interest  Period and principal  amount of the Eurodollar Loan which shall be
made by Agent and outstanding during such Interest Period.

     "Eurodollar  Loan" means any  Revolving  Credit Loan when and to the extent
the  interest  rate  therefor  is  determined  on the  basis  of the  definition
"Eurodollar Base Rate."

     "Eurodollar  Rate" means,  for any Eurodollar  Loan for any Interest Period
therefor,  a rate per annum (rounded upwards,  if necessary to the nearest 1/100
of 1%)  determined  by Agent to be equal to the  quotient of (a) the  Eurodollar
Base Rate for such Loan for such Interest  Period,  divided by (b) one minus the
Reserve Requirement for such Loan for such Interest Period.

     "Event of Default" has the meaning specified in Section 11.01 hereof.

     "Existing  Agreement" means the Credit Agreement and Guaranty,  dated as of
May 28, 1998, by and among Borrower,  Guarantors (except Vintage), Agent and the
financial  institutions  parties  thereto as lenders  (as  amended,  modified or
supplemented from time to time).

     "Existing  Letters  of  Credit"  means,  collectively,  Letters  of  Credit
arranged for by Agent for the benefit of Borrower or its Restricted Subsidiaries
under the Existing Agreement set forth on Schedule IA.01.

     "Existing Loan Documents" means,  collectively,  the Existing Agreement and
all  agreements,  instruments  and  documents  executed or delivered to Agent or
Banks  pursuant  to  or  in  connection  therewith  (as  amended,   modified  or
supplemented from time to time).

     "Factor" shall have the meaning set forth in Section 9.03(f) hereof.

     "Factoring  Agreement"  means any  factoring  agreement  by and between any
Restricted Subsidiary and a Factor.

     "Fiscal Month" means each of the twelve (12) monthly  periods of Borrower's
Fiscal Year.

     "Fiscal  Month End Date"  means  the last day of any  Fiscal  Month of each
Fiscal Year.

     "Fiscal Quarter" means each of the four (4) quarterly periods of Borrower's
Fiscal Year.

     "First  Quarterly  Date" means the last day of the first Fiscal  Quarter of
each Fiscal Year.

     "Fiscal Year" means each calendar year ending December 31.

     "Foreign  Lender"  means any Lender that is  organized  under the laws of a
jurisdiction other than that in which Borrower is located.  For purposes of this
definition, the United States of America, each State thereof and the District of
Columbia shall be deemed to constitute a single jurisdiction.

                                       13
<PAGE>
     "Fourth  Quarterly Date" means the last day of the fourth Fiscal Quarter of
each Fiscal Year.

     "GAAP" means generally accepted accounting  principles in the United States
of America as in effect on the date hereof,  applied on a basis  consistent with
those used in the preparation of the financial statements referred to in Section
7.05 hereof.

     "Good  Faith  Contest"  means the  contest  of an item if:  (a) the item is
diligently contested in good faith by appropriate proceedings timely instituted;
(b) adequate  reserves are  established in accordance  with GAAP; (c) during the
period of such contest,  the  enforcement  of any contested  item is effectively
stayed;  and (d) the failure to pay or comply with the contested item during the
period of the Good Faith  Contest is not likely to result in a Material  Adverse
Change.

     "Governmental  Approvals"  means  any  authorization,   consent,  approval,
license, permit,  certification,  or exemption of registration or filing with or
report or notice to any Governmental Authority.

     "Governmental Authority" means any nation or government, any state or other
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.

     "Guarantors"  means,  collectively  Designers,  Glamourette,  Knitworks and
Vintage and any future Restricted Subsidiaries and HIL.

     "Guarantor  Security  Agreements" means any Security Agreements executed by
any of Designers, Knitworks and Vintage to secure the Guaranty Obligations.

     "Guaranty"  means,  collectively,  all of the  guarantees  provided  by the
Guarantors pursuant to Section-5.01 hereof.

     "Guaranty Obligations" has the meaning specified in Section 5.01 hereof.

     "Hazardous   Materials"   means  any   pollutant,   effluents,   emissions,
contaminants, toxic or hazardous wastes or substances, as any of those terms are
defined from time to time in or for the purposes of any applicable Environmental
Law, including asbestos fibers and friable asbestos,  polychlorinated biphenyls,
and any petroleum or hydrocarbon-based products or derivatives.

     "Instructions"   means  oral  or  written   instructions   or  instructions
transmitted by teleprocess given on behalf of Borrower by one or more Authorized
Persons.

     "Instrument"  means  with  respect  to any  Letter of  Credit or  Steamship
Guaranty,  Airway Guaranty,  any draft, receipt,  acceptance,  teletransmission,
including,  but not  limited to,  telex or cable,  or other  written  demand for
payment under such Letter of Credit.

     "Insurance Companies" shall mean Phoenix Home Life Mutual Insurance Company
and The Ohio National Life Insurance Company and their respective successors and
assigns and transferees under the Insurance Company Loan Documents.

     "Insurance Company Loan Documents" means the agreements and documents among
the  Insurance  Companies  and  Borrower  and/or  Guarantors  providing  for the


                                       14
<PAGE>
purchase by the Insurance  Companies of the Senior  Secured Notes of Borrower in
the  original  principal  amount  of  $15,000,000  and the  giving  of  security
therefor, as amended from time to time.

     "Intercreditor  Agreement"  means the agreement among the Banks,  the Agent
and the Insurance Companies and the Agent for the Insurance Companies.

     "Interest  Period" means,  with respect to any Eurodollar Loan, a period of
one,  two,  three  or six  months  commencing  on the  date  such  Loan is made,
converted  from  another  type of Loan or  renewed,  as  Borrower  may select in
accordance with Section 2.02 hereof,  provided that, each such Interest  Period,
which  commences on the last Banking Day of a calendar  month (or on any day for
which there is no numerically  corresponding  day in the appropriate  subsequent
calendar month),  shall end on the last Banking Day of the appropriate  calendar
month.

     "Interest  Rate" means  either (a) with  respect to a Prime Rate Loan,  the
Prime Rate or (b) with respect to a Eurodollar  Rate Loan, the  Eurodollar  Rate
plus the Applicable Margin.

     "Inventory" shall have the meaning set forth in Borrower Security Agreement
and Guarantor Security Agreements.

     "Item-Eyes  Acquisition"  shall mean the  acquisition by Vintage of certain
assets of  Item-Eyes,  Inc.  pursuant to that certain Asset  Purchase  Agreement
dated June 26, 2000 among Vintage,  Item-Eyes, Inc., Martin Axman, Marc Abramson
and Ellen Becker.

     "Item-Eyes  Acquisition Debt" shall mean unsecured debt of Vintage pursuant
to the Asset Purchase  Agreement  dated June 26, 2000 among Vintage,  Item-Eyes,
Inc., Martin Axman, Marc Abramson and Ellen Becker.

     "Law" means any  applicable  federal,  state or local  statute,  law, rule,
regulation,  ordinance,  order,  code,  policy  or rule of  common  law,  now or
hereafter   in  effect,   and  any   applicable   judicial   or   administrative
interpretation thereof by a Governmental  Authority or otherwise,  including any
judicial or administrative order, consent decree or judgment.

     "Letters of Credit" means Trade Letters of Credit,  the Standby  Letters of
Credit  and the  letters  of  credit  issued  by Chase on  behalf of CIT for the
account of Item-Eyes,  Inc. and assumed by Vintage in  connection  with the Item
Eyes Acquisition.

     "Letter  of Credit  Fee"  means the Trade  Letter of Credit Fee and any fee
paid in connection with any Standby Letter of Credit.

     "Letter of Credit Issuing Bank" means Chase.

     "Letter of Credit Obligations" means at any time an amount equal to the sum
of (a) the  aggregate  unused face amount of all  outstanding  Trade  Letters of
Credit  and  Standby  Letters  of  Credit,   (b)-the  aggregate  amount  of  all
unreimbursed  obligations  on Trade  Letters  of Credit and  Standby  Letters of
Credit,  (c) the  aggregate  amount of all  outstanding  overdrafts  created  to
satisfy any of the foregoing obligations,  (d) the amount of existing Letters of
Credit issued by Chase on behalf of CIT for the account of Item-Eyes,  Inc., and
assumed by Vintage in connection with the Item Eyes Acquisition,  (e) any Letter
of Credit  Fee due and  payable,  and (f) the  aggregate  amount  of all  Airway
Guaranties and Steamship Guaranties.

                                       15
<PAGE>
     "Lien"  means any  mortgage,  deed of trust,  pledge,  security,  interest,
hypothecation,  assignment, deposit arrangement, encumbrance, lien (statutory or
other),  or preference,  priority,  or other security  agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing  lease having  substantially  the same  economic  effect as any of the
foregoing,  and  the  filing  of  any  financing  statement  under  the  Uniform
Commercial  Code or comparable  Law of any  jurisdiction  to evidence any of the
foregoing).

     "Loan Account" shall have the meaning set forth in Section 2.11(a) hereof.

     "Loan Document(s)" means this Agreement,  the Notes, the Letters of Credit,
the Security Documents and the Intercreditor Agreement.

     "Material Adverse Change" means either (a) a material adverse change in the
status of the business, assets,  liabilities,  results of operations,  condition
(financial or otherwise) or property or prospects of Borrower and its Restricted
Subsidiaries,  taken as a whole,  or (b) any  event or  occurrence  of  whatever
nature which is likely to have a material  adverse effect on Borrower's  ability
to perform its obligations  under the Loan Documents to which it is a party. For
the avoidance of doubt, no matter affecting the business,  operations,  affairs,
financial  condition,  assets or properties of HIL or any Subsidiary  thereof in
and of itself shall be deemed to cause a material  adverse  change in the status
of  the  business,  assets,  liabilities,   results  of  operations,   condition
(financial  or  otherwise),  property or  prospects  of  Borrower or  Borrower's
ability to perform its obligations under any Loan Document.

     "Monthly  Date(s)"  means  the first  Banking  Day of each  calendar  month
occurring on or after the Closing Date.

     "Multiemployer  Plan"  means a Plan  defined  as such in  Section  3(37) of
ERISA.

     "Net  Amount of  Eligible  Accounts"  shall  mean and  include at any time,
without duplication, the gross amount of Eligible Accounts at such time less (a)
sales,  excise or similar taxes and  (b)-returns,  discounts,  claims,  credits,
allowances,  of any  nature at any time  issued,  owing,  granted,  outstanding,
available or claimed;  provided,  that such  amounts have not already  otherwise
been deducted.

     "Net Amount of Eligible  Inventory"  shall mean, at any time, the aggregate
Book Value of Eligible Inventory.

     "Net  Availability"  shall  mean,  at any date,  (a) the  Availability  for
Revolving  Credit  Loans  less  (b)-the   aggregate   principal  amount  of  all
outstanding Revolving Credit Loans.

     "Net  Borrowing  Base" shall mean, at any date, (a) the Borrowing Base less
(b) the sum of (i) the outstanding  principal amount of indebtedness of Borrower
and Restricted  Subsidiaries to the Insurance Companies in respect to the Senior
Secured  Notes  and  (ii)  the  outstanding  indebtedness  of  Borrower  and its
Restricted Subsidiaries under the Unsecured Lines.

     "Note(s)" means the Revolving Credit Notes.

                                       16
<PAGE>
     "Obligations"  shall mean any and all  Revolving  Credit  Loans,  Letter of
Credit  Obligations and all other  indebtedness,  liabilities and obligations of
every kind,  nature and description  owing by Borrower or Guarantors  (excluding
the Obligations of HIL other than Obligations arising under its Guaranty) to the
Banks and/or their Affiliates,  including principal,  interest,  charges,  fees,
expenses,  and  foreign  exchange  obligations,  however  evidenced,  whether as
principal,   surety,  endorser,  guarantor  or  otherwise,  arising  under  this
Agreement,  whether now existing or hereafter  arising,  whether arising before,
during or after the Revolving Credit  Termination Date or after the commencement
of any case with respect to Borrower or any Guarantor  under the Bankruptcy Code
or any similar  statute,  whether  direct or indirect,  absolute or  contingent,
joint  or  several,  due  or  not  due,  primary  or  secondary,  liquidated  or
unliquidated,  secured or unsecured,  original,  renewed or extended and whether
arising  directly or howsoever  acquired by the Banks  including  from any other
entity outright,  conditionally or as collateral security, by assignment, merger
with  any  other  entity,  participations  or  interests  of  the  Banks  in the
obligations of Borrowers or Guarantors to others, assumption,  operation of law,
subrogation  or  otherwise  and shall also  include  all amounts  chargeable  to
Borrower or any Guarantor  under this Agreement or in connection with any of the
foregoing, provided however, that indebtedness and obligations due to any of the
Banks in connection with transactions  between Borrower or any Guarantor and any
such Bank separate from this Agreement shall not be deemed "Obligations".

     "OG Asset Purchase Agreement" means the Asset Purchase Agreement,  dated as
of April 28,  2000 by and  among  Glamourette/OG,  Inc.,  Olympic  Group,  Inc.,
Glamourette, Knitworks and Designers.

     "OG Note" means the $8,000,000 note issued by Glamourette/OG, Inc. in favor
of Designers evidencing the indebtedness of Glamourette/OG, Inc. to Designers.

     "Optional Prepayment" has the meaning specified in Section 2.07 hereof.

     "Outstanding  Credit  Facilities"  means at any time an amount equal to the
sum of (a)-the  aggregate  principal amount of all outstanding  Revolving Credit
Loans plus (b) the Letter of Credit Obligations.

     "Participating Banks" means each Bank other than Chase.

     "Participation" has the meaning set forth in Section 4.01 hereof.

     "PBGC"  means the  Pension  Benefit  Guaranty  Corporation  and any  entity
succeeding to any or all of its functions under ERISA.

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

     "Plan" means any plan,  agreement,  arrangement  or commitment  which is an
employee  benefit  plan,  as  defined in Section  3(3) of ERISA,  maintained  by
Borrower,  any  Guarantor  or any  ERISA  Affiliate  or with  respect  to  which
Borrower,  any  Guarantor or any ERISA  Affiliate  at any relevant  time has any
liability or obligation to contribute.

                                       17
<PAGE>
     "Presence"  when used in  connection  with any  Environmental  Discharge or
Hazardous  Materials,  means and  includes  presence,  generation,  manufacture,
installation,   treatment,  use,  storage,  handling,   repair,   encapsulation,
disposal, transportation, spill, discharge and release.

     "Prime  Rate" means that rate of interest  from time to time  announced  by
Chase at its Principal Office as its prime commercial lending rate.

     "Prime  Rate Loan" means any  Revolving  Credit Loan when and to the extent
the Interest Rate therefor is based on the Prime Rate.

     "Principal  Office" means the principal office of Chase,  presently located
at 1411 Broadway, 5th Floor, New York, New York 10018.

     "Prior Season  Inventory" shall mean finished goods inventory of Designers,
Knitworks, Vintage and, with the approval of Agent, any other existing or future
Subsidiary of the Borrower, which was manufactured for sale in a shipping season
prior  to the  current  shipping  season,  as the  case  may be,  of  Designers,
Knitworks,  Vintage or such other existing or future  Subsidiary of the Borrower
which has been approved by Agent.

     "Pro Rata Share"  means (a) with  respect to each Bank's  Revolving  Credit
Commitment,  a fraction,  the  numerator of which is such Bank's  portion of the
Revolving Credit Commitment and the denominator of which is the total of all the
Bank's  Revolving  Credit  Commitments;  (b) with respect to each payment on the
Revolving  Credit Loans, a fraction,  the numerator of which is the  outstanding
principal  amount of all such Revolving  Credit Loans owed to such Bank, and the
denominator of which is the outstanding  principal  amount of all such Revolving
Credit Loans owed to all Banks;  and (c) with respect to Letters of Credit,  the
percentages set forth in Section 4.01 hereof.

     As of the date of this  Agreement,  the  amount  of each  Bank's  Revolving
Credit  Commitment and its Pro Rata Share of such Revolving Credit Commitment is
as follows:

    Bank             Commitment          Pro Rata Share
    ----             ----------          ---------------
   Chase             $19,587,500                20%
   BOA               $14,690,625                15%
   HSBC              $19,587,500                20%
   CIT               $19,587,500                20%
   Fleet             $14,690,625                15%
   IDB               $ 9,793,750                10%

     "Prohibited Transaction" means any transaction prohibited under Section 406
of ERISA or Section 4975 of the Code.

     "Quarterly Date" means the last Banking Day of each March, June, September,
and December.

     "Ratable Portion" means, at any time, a fraction, the numerator of which is
the outstanding  principal amount of the Outstanding  Credit  Facilities at such
time,  and the  denominator  of which is the sum of (a) the aggregate  principal
amount  of the  Senior  Secured  Notes  outstanding  at such  time  plus (b) the
aggregate principal amount of the Outstanding Credit Facilities at such time.

                                       18
<PAGE>
     "Regulatory  Change" means,  with respect to any Bank, any change after the
date of this Agreement in the United States federal, state, municipal or foreign
laws or regulations  (including without limitation Regulation D) or the adoption
or  making  after  such  date of any  interpretations,  directives  or  requests
applying to a class of banks  including  any of the Banks of or under any United
States federal,  state, municipal or foreign laws or regulations (whether or not
having  the force of law) by any court or  governmental  or  monetary  authority
charged with the interpretation or administration thereof.

     "Reportable  Event" means any of the events set forth in Section 4043(c) of
ERISA or in the regulations  thereunder  except for any such event for which the
30-day notice requirement is waived.

     "Required  Banks"  means  at any  time  the  Banks  holding  sixty-six  and
two-thirds  (66-_%) percent of the aggregate  Revolving  Credit  Commitment.  In
calculating  the Revolving  Credit  Commitment of each Bank for purposes of this
definition of "Required Banks",  each Bank (other than Chase) shall be deemed to
have a portion of the Trade Letter of Credit Commitment or the Standby Letter of
Credit  Commitment,  as the case may be,  equal to that Bank's Pro Rata Share of
the  Trade  Letter  of  Credit  Commitment  or  the  Standby  Letter  of  Credit
Commitment,  as the case may be, and Chase  shall be deemed to have a portion of
such Trade Letter of Credit  Commitment or Standby  Letter of Credit  Commitment
equal to one hundred  percent (100%) minus the sum of the Pro Rata Shares of the
other Banks.

     "Reserve  Requirement"  means,  for any  Eurodollar  Loan for any  Interest
Period   therefor,   the  rate  at  which  reserves   (including  any  marginal,
supplemental  or emergency  reserves) are required to be maintained  during such
Interest Period under Regulation D by member banks of the Federal Reserve System
in New York City with deposits exceeding  $1,000,000,000  against in the case of
Eurodollar Loans, "Eurocurrency Liabilities" (as such term is used in Regulation
D). Without limiting the effect of the foregoing,  the Reserve Requirement shall
reflect any other  reserves  required to be  maintained  by such member banks by
reason of any Regulatory  Change  against (d) any category of liabilities  which
includes  deposits  by  reference  to which  the  Eurodollar  Base Rate is to be
determined  as  provided in the  definition  of  "Eurodollar  Base Rate" in this
Section 1.01 hereof or (e) any category of  extensions of credit or other assets
which  include  Eurodollar  Loans.  Agent will use its best  efforts to promptly
notify Borrower of any change of such Reserve Requirement.

     "Restricted Subsidiaries" means, individually and collectively,  Designers,
Glamourette,  Knitworks,  Vintage and any  existing and future  Subsidiaries  of
Borrower,  except HIL and any subsidiary of HIL,  together with their respective
successors and assigns.

     "Revolving  Credit  Commitment"  means the commitment of the Banks to lend,
pursuant to their Pro Rata Share,  Ninety Seven  Million,  Nine  Hundred  Thirty
Seven Thousand Five Hundred  ($97,937,500)  Dollars to Borrower  pursuant to the
terms of this  Agreement as such  commitment  may be reduced in accordance  with
Section 2.07 hereof.

     "Revolving  Credit  Loan(s)"  has the  meaning  specified  in Section  2.01
hereof.

     "Revolving  Credit  Note(s)"  has the  meaning  specified  in Section  2.06
hereof.

     "Revolving Credit Termination Date" means August 31, 2003.

                                       19
<PAGE>
     "Second  Quarterly Date" means the last day of the second Fiscal Quarter of
each Fiscal Year.

     "Secured Parties" means Agent and each of the Banks.

     "Security  Documents" means the Borrower Security  Agreement,  the Borrower
Pledge  Agreement and the Guarantor  Security  Agreements,  the Designers Pledge
Agreement,  the Borrower  Trademark Security  Agreement,  the Designers Security
Agreement and the Vintage Trademark Security Agreement.

     "Senior  Secured  Notes"  means the 7.05%  Senior  Secured  Notes issued by
Borrower in favor of the Insurance  Companies  pursuant to the Insurance Company
Loan Documents in the original  principal  amount of $15,000,000  due January 2,
2008, as amended, transferred or exchanged from time to time, in accordance with
the Insurance Company Loan Documents.

     "Solvent"  means,  when used with respect to any Person,  that (a) the fair
value of the property of such Person,  on a going concern basis, is greater than
the total  amount of  liabilities  (including,  without  limitation,  contingent
liabilities)  of such Person,  (b) the present fair saleable value of the assets
of such Person,  on a going concern basis, is not less than the amount that will
be required to pay the probable  liabilities 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 as such debts and liabilities  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  unreasonably
small capital after giving due  consideration to the prevailing  practice in the
industry  in which  such  Person  is  engaged.  Contingent  liabilities  will be
computed  at the  amount  that,  in light  of all the  facts  and  circumstances
existing at such time,  represents the amount that can reasonably be expected to
become an actual or matured liability.

     "Standby Letter of Credit" means a Standby Letter of Credit issued by Chase
for the account of Borrower.

     "Standby Letter of Credit  Commitment"  shall have the meaning set forth in
Section 3.05 hereof.

     "Subsidiary"  means,  as to any Person,  a  corporation  of which shares of
stock having  ordinary  voting power (other than stock having such power only by
reason of the  happening of a  contingency)  to elect a majority of the board of
directors or other managers of such  corporation  are at the time owned,  or the
management of which is otherwise controlled, directly, or indirectly through one
or more intermediaries, or both, by such Person.

     "Supplemental Amount" shall mean, during each year, for each of the periods
set forth below, the following amounts:

                Period                                      Supplemental Amount
-------------------------------------------------------     -------------------
Closing Date through and including September 30, 2000            $17,000,000
October 1, 2000 through and including October 31, 2000           $ 3,000,000
November 1, 2000 through and including November 30, 2000                  $0
December 1, 2000 through and including December 31, 2000                  $0
January 1, 2001 through and including February 3, 2001                    $0
February 4, 2001 through and including March 3, 2001                      $0
March 4, 2001 through and including March 31, 2001                        $0
April 1, 2001 through and including May 5, 2001                   $ 7,000,000
May 6, 2001 through and including June 2, 2001                    $15,000,000
June 3, 2001 through and including June 30, 2001                  $20,000,000
July 1, 2001 through and including August 4, 2001                 $24,000,000
August 5, 2001 through and including September 1, 2001            $18,000,000
September 2, 2001 through and including September 29, 2001        $11,000,000
From September 30, 2001 through and including
  the Revolving Credit Termination Date                                    $0

                                       20
<PAGE>
     "Third  Quarterly  Date" means the last day of the third Fiscal  Quarter of
each Fiscal Year.

     "Trade Letter of Credit" has the meaning specified in Section 3.01 hereof.

     "Trade Letter of Credit  Commitment"  has the meaning  specified in Section
3.01 hereof.

     "Trade Letter of Credit  Obligations"  means at any time an amount equal to
the sum of (a)-the aggregate unused face amount of all outstanding Trade Letters
of Credit,  (b) the aggregate  amount of all  unreimbursed  obligations on Trade
Letters of Credit,  and (c) the aggregate  amount of all outstanding  overdrafts
created to satisfy any of the foregoing obligations.

     "Trademark   Agreement"  means  the  Trademark  Collateral  Assignment  and
Security  Agreement  executed by Borrower  and the  Restricted  Subsidiaries  to
secure the Obligations and the Guaranty Obligations.

     "Uniform  Customs  and  Practices"  means,  with  regard to each  Letter of
Credit,  the Uniform  Customs and  Practices for  Documentary  Letters of Credit
(1993 Revisions), International Chamber of Commerce Publication No. 500, and any
subsequent  revision  thereof  adhered  to by Chase on the date  such  Letter of
Credit is issued.

     "Unsecured  Lines"  shall have the  meaning  set forth in  Section  9.01(f)
hereof.

     "Vintage  Trademark  Security  Agreement"  means the  Trademark  Collateral
Assignment and Security  Agreement executed and delivered by Designers under the
terms of this Agreement.

     Section I.2 Accounting Terms. All accounting terms not specifically defined
herein  shall be construed  in  accordance  with GAAP,  and all  financial  data
required to be delivered hereunder shall be prepared in accordance with GAAP.

     Section I.3  Computation  of Time  Periods.  Except as  otherwise  provided
herein,  in this  Agreement,  in the  computation  of  periods  of  time  from a
specified  date to a later  specified  date,  the word  "from"  means  "from and
including" and words "to" and "until" each means "to but excluding".

     Section I.4 Rules of Construction. When used in this Agreement: (a) "or" is
not exclusive;  (b)-a  reference to a law includes any amendment or modification
to such law and any statutory amendments and recodifications; (c) a reference to
a Person  includes its permitted  successors  and permitted  assigns;  and (d)-a
reference to an agreement,  instrument or document shall include such agreement,
instrument or document as the same may be amended, modified or supplemented from
time  to time  in  accordance  with  its  terms  and as  permitted  by the  Loan
Documents.

ARTICLE IA   ACKNOWLEDGMENT AND RESTATEMENT

     Section IA.01  Existing  Obligations.  Borrower and each  Guarantor  hereby
acknowledges,  confirms and agrees that  Borrower is indebted to Banks for loans
to  Borrower  under  the  Existing  Agreement,  as of the close of  business  on
September 5, 2000, in the approximate aggregate principal amount of $18,700,000,
plus the approximate  aggregate amount of  $20,503,581.73 in respect of Existing
Letters of Credit,  together with all interest accrued and accruing thereon, and
all fees, costs,  expenses and other charges relating thereto,  all of which are
unconditionally  owing  by  Borrower  to  Banks,  without  defense,   offset  or
counterclaim  of any kind,  nature or  description  whatsoever.  Such Letters of
Credit shall constitute Letter of Credit Obligations hereunder.

     Section IA.02 Acknowledgment of Security Interests.

          (a Borrower  and each  Guarantor  hereby  acknowledges,  confirms  and
     agrees that Agent, for the ratable benefit of Banks, shall continue to have
     a security  interest  in and lien upon the  Collateral  (as  defined in the
     Existing  Agreement)  heretofore  granted to Banks pursuant to the Existing
     Loan Documents to secure the Obligations, as well as any Collateral granted
     to or held by Agent or any Bank  under this  Agreement  or any of the other
     Loan Documents.

                                       21
<PAGE>
          (b The liens and  security  interests  of Agent,  for  itself  and the
     ratable  benefit of Banks, in the Collateral  shall be deemed  continuously
     granted and perfected from the earliest date of the granting and perfection
     of such liens and  security  interests,  whether  under the  Existing  Loan
     Documents, this Agreement or any of the other Loan Documents.

     Section  IA.03  Acknowledgment  of Existing  Agreement.  Borrower  and each
Guarantor hereby  acknowledges,  confirms and agrees that: (a) the Existing Loan
Documents  have been duly executed and delivered by Borrower and each  Guarantor
and  each  is in  full  force  and  effect  as of the  date  hereof  and (b) the
agreements  and  obligations  of Borrower  and each  Guarantor  contained in the
Existing Loan Documents  constitute the legal, valid and binding  obligations of
Borrower and each  Guarantor  enforceable  against it in  accordance  with their
respective  terms and Borrower and each  Guarantor  have no valid defense to the
enforcement of such obligations.

     Section  IA.04  Restatement.  Except as otherwise  stated in Section  IA.02
hereof and this Section  IA.04,  as of the date hereof,  the terms,  conditions,
agreements, covenants,  representations and warranties set forth in the Existing
Loan  Documents  are hereby  amended and restated in their  entirety,  and as so
amended and  restated  are replaced  and  superseded  by the terms,  conditions,
agreements,  covenants,   representations  and  warranties  set  forth  in  this
Agreement  and the other Loan  Documents,  except that nothing  herein or in the
other Loan Documents  shall impair or adversely  affect the  continuation of the
liability  of  Borrower  or each  Guarantor  for  their  Obligations  heretofore
incurred to Agent or any Bank. The amendment and  restatement  contained  herein
shall not, in any manner,  be construed to constitute the payment of, or impair,
limit,  cancel or  extinguish,  or  constitute  a novation  in  respect  of, the
Obligations  or any  other  obligations  or  liabilities  of  Borrower  or  each
Guarantor  evidenced by or arising  under the Existing Loan  Documents,  and the
liens  and  security   interests   securing  such  Obligations  and  such  other
obligations  and  liabilities  shall  not in any  manner be  impaired,  limited,
terminated, waived or released.

     Section  IA.05  Release.  Borrower and each  Guarantor,  for itself and its
successors and assigns,  does hereby remise,  release,  discharge and hold Agent
and  each  Bank,  its  officers,  directors,  agents  and  employees  and  their
respective  predecessors,  successors  and  assigns  harmless  from all  claims,
demands,  debts,  sums  of  money,  accounts,  damages,   judgments,   financial
obligations,  actions,  causes of action, suits at law or in equity, of any kind
or nature  whatsoever,  whether or not now existing or known,  which Borrower or
any Guarantor or its successors or assigns has had or may now or hereafter claim
to have  against  Agent  or any  Bank or its  officers,  directors,  agents  and
employees and their respective  predecessors,  successors and assigns in any way
arising from or connected with the Existing Loan  Documents or the  arrangements
set forth  therein  or  transactions  thereunder  up to and  including  the date
hereof.

ARTICLE II.   REVOLVING CREDIT LOANS

     Section II.1 Revolving Credit.  Subject to the terms and conditions of this
Agreement,  each of the Banks  severally  agrees to make loans  (the  "Revolving
Credit  Loans")  according  to each such Bank's Pro Rata Share of the  Revolving
Credit  Commitment,  to  Borrower  from time to time  during the period from the
Closing Date up to but not  including  the Revolving  Credit  Termination  Date,
provided  that the  aggregate  principal  amount of all  Revolving  Credit Loans
outstanding at any time does not exceed the lesser of (a)-the  Revolving  Credit
Commitment  minus the sum of: (i) the Letter of Credit  Obligations and (ii) the
aggregate  amount of Borrower's  and its  Restricted  Subsidiaries'  outstanding


                                       22
<PAGE>
obligations  under the Unsecured Lines; and (b) the Net Borrowing Base minus the
Letter  of Credit  Obligations  ("Availability  for  Revolving  Credit  Loans").
Notwithstanding  the  foregoing,  during the  calendar  months of  November  and
December of each year, the aggregate  principal  amount of all Revolving  Credit
Loans shall not exceed, at any given time,  eighty-five (85%) percent of the Net
Amount of Eligible  Accounts of Borrower and the Restricted  Subsidiaries.  Each
Revolving  Credit Loan which shall not utilize the  Availability  for  Revolving
Credit  Loans in full shall be in the minimum  amount set forth in Section  2.10
hereof.  Subject to the terms hereof, the Borrower may borrow,  make an optional
Prepayment pursuant to Section 2.07 hereof, and reborrow under this Section 2.01
hereof.

     The failure of any Bank to make any requested  Revolving  Credit Loan to be
made by it on the date  specified  for such  Revolving  Credit  Loan  shall  not
relieve any other Bank of its obligation (if any) to make such Revolving  Credit
Loan on such date, but no Bank shall be responsible for the failure by any other
Bank to make such Revolving Credit Loans.

     Section  II.2  Notice and Manner of  Borrowing.  Borrower  shall give Agent
telephonic  notice, to be followed by written or telegraphic or facsimile notice
in the form of Exhibit E hereto (effective upon receipt) of any Revolving Credit
Loan by not later than 11:00 A.M. (New York time) on the date of such  Revolving
Credit Loan, and whether such  Revolving  Credit Loan shall be a Prime Rate Loan
or Eurodollar  Loan. Each of the foregoing  notices (a "Borrowing  Notice") must
specify the date and the amount of such  Revolving  Credit Loan to the Agent and
the Agent will promptly  notify each Bank of receipt by the Agent of a Borrowing
Notice  and of the  contents  thereof.  In the case of a  Eurodollar  Loan,  the
Borrowing  Notice  shall  be  received  three-(3)  Banking  Days  prior  to such
Eurodollar Loan and shall specify the Interest Period  selected.  Not later than
1:00 P.M. (New York time) on the date of a Revolving Credit Loan, each Bank will
cause to be  transmitted  to the  Agent,  to the  account  set forth  below,  in
immediately available funds, such Bank's Pro Rata Share of such Revolving Credit
Loan.  After the Agent's  receipt of such funds,  not later than 3:00 P.M.  (New
York time) on the date of a Revolving  Credit Loan, and upon  fulfillment of the
applicable  conditions  set  forth in  Article  VI,  the  Agent  will  make such
Revolving  Credit Loan available to Borrower in immediately  available  funds by
crediting  the amount  thereof to the  following  accounts  of  Borrower  or the
Restricted  Subsidiary  or other  accounts at Chase as designated by Borrower to
Agent:

                  Chase Account No. 323-092217 (Borrower)
                  Chase Account No. 323-092209 (Segue)
                  Chase Account No. 323-092144 (Designers)
                  Chase Account No. 323-092233 (Brands)
                  Chase Account No. 323-99999 (Vintage)

     Section II.3 Conversions. Borrower shall have the right to convert one type
of Revolving  Credit Loan into another type of Revolving Credit Loan at any time
or from time to time;  provided that: (a -Borrower shall give the Agent at least
three (3)  Banking  Days  notice of the  conversion  of a Prime Rate Loan into a
Eurodollar Loan and (b) Eurodollar Loans may be prepaid or converted only on the
last day of an Interest  Period for such Eurodollar  Loan.  Agent shall promptly
notify each Bank of any such conversion.

     Section  II.4  Non-Receipt  of Funds by Agent.  Unless the Agent shall have
received notice from a Bank,  prior to the date on which such Bank is to provide
funds to the Agent for a  Revolving  Credit  Loan to be made by such Bank,  that


                                       23
<PAGE>
such Bank will not make available to the Agent such funds,  the Agent may assume
that  such  Bank  has made  such  funds  available  to Agent on the date of such
Revolving  Credit Loan in accordance  with Section 2.02 hereof and the Agent, in
its sole  discretion,  may, but shall not be obligated to, in reliance upon such
assumption,  make available to Borrower on such date a corresponding  amount. If
and to the  extent  such Bank shall not have made such  funds  available  to the
Agent,   such  Bank  agrees  to  repay  the  Agent   forthwith  on  demand  such
corresponding  amount together with interest thereon, for each day from the date
such amount is made  available to Borrower  until the date such amount is repaid
to the Agent, for three (3) Banking Days, at the customary rate set by the Agent
for the correction of errors among banks; and thereafter,  at the Prime Rate. If
such Bank shall  repay to the Agent such  corresponding  amount,  such amount so
repaid shall  constitute such Bank's  Revolving Credit Loan for purposes of this
Agreement.  If such Bank does not pay such  corresponding  amount forthwith upon
Agent's demand therefor,  the Agent shall promptly notify Borrower, and Borrower
shall immediately pay such  corresponding  amount to the Agent with the interest
thereon,  for each day from the date such amount is made  available  to Borrower
until the date such  amount is  repaid  to the  Agent,  at the rate of  interest
applicable at the time to such proposed  Revolving Credit Loan. Unless the Agent
shall have received  notice from Borrower prior to the date on which any payment
is due to any Bank  hereunder  that Borrower will not make such payment in full,
the Agent may assume that Borrower has made such payment in full to the Agent on
such date and the Agent, in its sole discretion, may, but shall not be obligated
to, in reliance upon such  assumption,  cause to be  distributed to each Bank on
such due date an amount  equal to the amount  then due such Bank.  If and to the
extent  Borrower shall not have so made such payment in full to the Agent,  each
Bank shall repay to the Agent  forthwith  on demand such amount  distributed  to
such Bank together with interest thereon, for each day from the date such amount
is  distributed  to such Bank until the date such Bank repays such amount to the
Agent,  for three (3) Banking Days,  at the customary  rate set by the Agent for
the correction of errors among banks and thereafter at the Prime Rate.

     Section II.5 Interest.  Borrower  shall pay interest to the Agent,  for the
account of the applicable  Bank, on the outstanding and unpaid  principal amount
of the Revolving  Credit Loans at a rate per annum equal to the Prime Rate for a
Prime  Rate Loan and at the  Eurodollar  Rate plus the  Applicable  Margin for a
Eurodollar  Loan.  Any  principal  or  interest  amount  not  paid  when due (at
maturity, by acceleration or otherwise) shall bear interest thereafter,  payable
on demand, at the Default Rate.

     The interest  rate on each Prime Rate Loan shall change when the Prime Rate
changes.  Interest  on each  Revolving  Credit Loan shall not exceed the maximum
amount  permitted under applicable Law and shall be calculated on the basis of a
year of three hundred sixty (360) days for the actual number of days elapsed.

     Accrued  interest  shall be due and payable (a) in the case of a Prime Rate
Loan (i) in arrears on each Monthly  Date,  commencing  with the first such date
after such Prime  Rate  Loan,  and  (ii)-upon  each  payment  or  prepayment  of
principal on such Prime Rate Loan, (b) in the case of a Eurodollar  Loan, at the
end of each Interest  Period,  and (c) in the case of a prepayment  that reduces
the Revolving  Credit  Commitment in accordance  with Section 2.07 hereof,  upon
each such prepayment.

     Section II.6 Notes. All Revolving Credit Loans made by each Bank under this
Agreement shall be evidenced by, and repaid with interest in accordance  with, a
single  promissory note of Borrower in substantially  the form of Exhibit F duly
completed,  in the  principal  amount equal to such Bank's Pro Rata Share of the
total  Revolving  Credit  Commitment,  dated the date such bank  becomes a Bank,
payable  to such Bank and  maturing  as to  principal  on the  Revolving  Credit


                                       24
<PAGE>
Termination Date (the "Revolving Credit Notes").  Each Bank is hereby authorized
by Borrower to endorse on the  schedule  attached to the  Revolving  Credit Note
held by it the amount of each  Revolving  Credit Loan, and the payment amount of
each principal  payment received by such Bank on account of the Revolving Credit
Loans,  which endorsement shall, in the absence of manifest error, be conclusive
as to the outstanding  balance of the Revolving  Credit Loans made by such Bank;
provided  however,  that the failure to make such  notation  with respect to any
Revolving  Credit  Loan or  payment  shall not  limit or  otherwise  affect  the
obligations of Borrower  under this Agreement or the Revolving  Credit Note held
by such Bank.  Each Bank agrees that prior to any  assignment  of the  Revolving
Credit Note, it will endorse the schedule attached to its Revolving Credit Note.

     Section II.7 Optional and Mandatory Prepayments.

          (a Borrower  may prepay a Prime Rate Loan,  in whole or in part,  with
     accrued  interest  to the date of such  prepayment  on the amount  prepaid,
     provided that, each partial  prepayment  shall be in a principal  amount of
     not less than One Hundred Thousand  Dollars  ($100,000) (each such payment,
     an "Optional  Prepayment").  Eurodollar Loans may only be prepaid at end of
     any Interest Period.

          (b During the term of this  Agreement,  Borrower  shall make mandatory
     prepayments  (i) in an amount  equal,  during any Fiscal  Year,  to the net
     proceeds  received in excess of $250,000  in the  aggregate,  from the sale
     (other than a sale in the  ordinary  course of business) of all or any part
     of the assets of any Restricted Subsidiary;  (ii)-in an amount equal to the
     net proceeds  received by Borrower or any  Restricted  Subsidiary  from the
     sale or  issuance  of any  debt  instrument  or from  the  proceeds  of the
     Key-Person Life Insurance  Policies  referenced in Section 8.11 hereof, and
     (iii) in an amount  equal to the net  proceeds  received by Borrower or any
     Restricted  Subsidiary under any property and casualty insurance policy, to
     the extent that,  such proceeds are not used by Borrower or such Restricted
     Subsidiary to repair or replace the property  which was the subject of such
     insurance claim,  within a reasonable  period of time but in no event later
     than six (6) months from the date such proceeds are received by Borrower or
     such  Subsidiary,  unless  Borrower or such  Subsidiary has taken action to
     affect such repair or replacement, as determined by Agent in good faith, or
     unless otherwise agreed to by Agent. So long as the Intercreditor Agreement
     remains in  effect,  notwithstanding  anything  to the  contrary  contained
     herein, the Banks shall be entitled to receive their Ratable Portion of the
     prepayments  required  to be paid under this  Section  2.07(b) and if Agent
     shall be in receipt of any  proceeds of such  prepayments  in excess of the
     Banks'  Ratable  Portion of such  prepayments  (the "Excess  Prepayments"),
     Agent shall deliver such Excess  Prepayments  to the Note Agent (as defined
     in the Intercreditor  Agreement).  With respect to the prepayments received
     by Agent for the ratable  benefit of Lenders  under this  Section  2.07(b),
     such  prepayments  shall be applied  first,  to the  repayment  of the then
     outstanding  Revolving Credit Loans and second, at the discretion of Agent,
     to be held as Cash  Collateral  to secure  Letter  of  Credit  Obligations;
     provided  that, any mandatory  prepayment of the Revolving  Credit Loans or
     amounts held as Cash Collateral to secure Letters of Credit hereunder shall
     permanently  reduce  the  Supplemental  Amount  and  the  Revolving  Credit
     Commitment  on a dollar for dollar  basis to the extent such  proceeds  are
     received  by  Agent in  accordance  with  the  terms  of the  Intercreditor
     Agreement  (with  respect  to  secured  Letter of Credit  Obligations  such
     reduction will occur as Letter of Credit  Obligations  are satisfied by the
     Cash Collateral).

                                       25
<PAGE>
          (c To the extent that, at any given time, (i) the  Outstanding  Credit
     Facilities exceed the then effective  Revolving Credit Commitment,  or (ii)
     the Outstanding  Credit  Facilities  exceed the sum of the Availability for
     Revolving Credit Loans plus the Letter of Credit Obligations,  or (iii) the
     Revolving  Credit Loans exceed the Availability for Revolving Credit Loans,
     the Borrower shall  immediately pay to the Agent for the ratable benefit of
     the Banks a mandatory prepayment of the Revolving Credit Loans in an amount
     equal  to such  excess  and/or  Borrower  shall  immediately  provide  Cash
     Collateral for the Letter of Credit  Obligations to the extent  required to
     eliminate such excess. Any Cash Collateral deposited with the Agent for the
     ratable  benefit of the Banks in accordance  with the terms of this Section
     2.07 shall be credited, for purposes of the calculation of Availability for
     Revolving  Credit Loans under Section 2.01 hereof,  against the outstanding
     Letter of Credit Obligations subject to Section 2.07(d) hereof.

          (d In the event  Eurodollar  Loans are  outstanding at the time of any
     mandatory  prepayment  under  this  Section  2.07  hereof,  such  mandatory
     prepayment   shall  be  applied  first  to  reduce  any  Prime  Rate  Loans
     outstanding  to zero.  Any  remaining  mandatory  prepayment  amount  shall
     constitute  Cash Collateral and shall be deposited by Agent in a segregated
     account to be  applied to the  Eurodollar  Loans as more  particularly  set
     forth  below.  Such Cash  Collateral  shall be credited  against  Revolving
     Credit Loans for purposes of calculating  Availability for Revolving Credit
     Loans. Such Cash Collateral shall be used to repay Eurodollar Loans as such
     loans mature.  If the amounts in the  segregated  account are sufficient to
     pay (at  maturity) the then  outstanding  Eurodollar  Loans,  any remaining
     portion of such Cash  Collateral  shall then be held as Cash  Collateral in
     respect of any then outstanding  Letter of Credit Obligations in accordance
     with Sections 2.07(b) and (c) hereof.

          (e Borrower  may,  without  premium or penalty,  reduce the  Revolving
     Credit  Commitment  to an  amount  not less  than the sum of the  aggregate
     unpaid  principal amount of all Revolving Credit Loans and Letter of Credit
     Obligations then outstanding. Each such reduction (i) shall be in an amount
     which is an  integral  multiple  of  $1,000,000,  (ii)  shall be made after
     providing  not less than ten (10)  Banking  Days  written  notice to Agent,
     which  notice  shall  state the amount of the  payment to be made and shall
     confirm the amount of the Revolving  Credit  Commitment after giving effect
     to such payment,  (iii) shall reduce,  on a permanent  basis, the Revolving
     Credit  Commitment by an amount equal to the amount of such reduction,  and
     (iv) shall be irrevocable.  Once reduced,  the Revolving Credit  Commitment
     may not be increased.  Borrower may reduce the Revolving Credit  Commitment
     to  $0  provided  that  the  Revolving   Credit   Termination  Date  occurs
     simultaneously therewith.

     Section II.8 Method of Payment. Borrower shall make each payment under this
Agreement  and under the Notes not later  than noon (New York  time) on the date
when due in Dollars to the Agent at the Agent's Office in immediately  available
funds;  if such payment is received after 12:00 p.m. noon (New York time),  then
such payment  shall be credited on the next Banking Day. The Agent will promptly
thereafter  cause to be  distributed to each Bank (a) such Bank's Pro Rata Share
of the  payments of principal  and interest in like funds,  and (b)fees or sums
payable to such Bank in accordance with the terms of this Agreement,  including,
but not limited to, amounts due in accordance with Article-XIII.

     Borrower hereby authorizes the Agent to charge,  from time to time, against
any account it maintains  with the Agent or any Bank,  any such amount so due to
the Agent and/or the Banks.

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<PAGE>
     Except to the extent provided in this Agreement, whenever any payment to be
made under this  Agreement  or under the Notes  shall be stated to be due on any
day other than a Banking Day, such payment shall be made on the next  succeeding
Banking Day, and such extension of time shall,  in such case, be included in the
computation of the payment of interest and other fees, as the case may be.

     Section II.9 Use of Proceeds. On and after the date hereof, the proceeds of
the Revolving  Credit Loans will be used by Borrower to provide  working capital
for Borrower and its  Restricted  Subsidiaries,  including,  to  consummate  the
Item-Eyes  Acquisition,  and the  Trade  Letters  of  Credit  will  be used  for
importation   and  purchasing  of  inventory  by  Borrower  and  its  Restricted
Subsidiaries.

     Borrower will not,  directly or  indirectly,  use any part of such proceeds
for the purpose of purchasing or carrying any margin stock within the meaning of
Regulation U of the Board of Governors or to extend credit to any Person for the
purpose of purchasing or carrying any such margin stock.

     Section II.10 Minimum  Amounts.  Each Prime Rate Loan shall be in an amount
at least equal to One Hundred  Thousand  ($100,000)  Dollars and each Eurodollar
Loan shall be in an amount at least equal to Two Million Five  Hundred  Thousand
($2,500,000) Dollars.

     Section II.11 Establishment of Loan Account;  Blocked Accounts;  Collection
of Accounts.

          (a Agent shall  maintain a loan  account  (the "Loan  Account") on its
     books in which  shall be  recorded  the  Revolving  Credit  Loans and other
     Obligations,  all  payments  made by or on behalf of Borrower and all other
     appropriate  debits and credits as provided  in this  Agreement,  including
     fees,  charges,  costs,  expenses  and  interest.  All  entries in the Loan
     Account shall be made in accordance with Agent's customary  practices as in
     effect  from time to time.  The records of Agent  shall be  conclusive  and
     binding, in the absence of manifest error.

          (b All  proceeds of  Collateral  shall be  deposited  by Borrower  and
     Restricted  Subsidiaries into lockbox  accounts,  dominion accounts or such
     other blocked  accounts  (collectively,  the "Blocked  Accounts") at Chase.
     Borrower and Restricted  Subsidiaries  shall issue to Chase, an irrevocable
     letter of instruction  in the form attached  hereto as Exhibit G. All funds
     deposited in such Blocked Account shall immediately  become the property of
     Agent.  Neither Agent nor any Bank Party assumes any responsibility for any
     Blocked Account arrangement,  including,  without limitation,  any claim of
     accord and  satisfaction  or release with  respect to deposits  accepted by
     Chase thereunder.  Alternatively,  after the Collection Determination Date,
     Agent at its  discretion  may establish  depository  accounts  ("Depository
     Accounts")  in the name of Agent at a bank or banks for the deposit of such
     funds and Borrower and Restricted  Subsidiaries  shall deposit all proceeds
     of Collateral or, at Agent's option,  cause same to be deposited,  in kind,
     in such  Depository  Accounts  of Agent in lieu of  depositing  same to the
     Blocked Accounts.

          (c Until the  authority of Borrower  and  Restricted  Subsidiaries  is
     terminated by Agent (which notice Agent may give at any time  following the


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<PAGE>
     occurrence of the Collection  Determination Date), Borrower and each of the
     Restricted  Subsidiaries  will,  at their  sole  cost and  expense,  but on
     Agent's behalf and for Agent's account,  collect into the Blocked Accounts,
     as  Agent's  property,  and in trust for Agent,  all  amounts  received  in
     respect of the Accounts and shall not commingle such  collections  with any
     funds of Borrower  or any of the  Restricted  Subsidiaries  or use the same
     except  as  required  to  pay  Obligations  in  accordance  with  the  Loan
     Documents.  Borrower  and  Restricted  Subsidiaries  shall,  upon  request,
     deliver to Agent, in original form and on the date of receipt thereof,  all
     checks, drafts, notes, money orders, acceptances,  cash and other evidences
     of indebtedness.

          (d For purposes of calculating  interest on the Obligations  after the
     Collection  Determination  Date,  proceeds  of  Collateral  received in the
     Blocked  Account  will be applied to the  Obligations  in  accordance  with
     Section  2.08 hereof upon the  receipt of  collected  funds by Agent in the
     Loan Account.  If no Obligations  are  outstanding,  Agent shall remit such
     payments or other funds to an account specified by Borrower.

          (e  Borrower  shall,  until  payment  in full of the  Obligations  and
     termination  of this  Agreement,  pay to Agent,  for its sole  account,  on
     demand all usual and  customary  fees and  expenses  which Agent  incurs in
     connection  with the  forwarding of proceeds of the Revolving  Credit Loans
     and the establishment and maintenance of any Blocked Accounts or Depository
     Accounts as provided for in Section 2.11 hereof.  Agent may, without making
     demand, charge the account of Borrower for all such fees and expenses.

     Section II.12  Closing Fee.  Borrower  shall pay to Agent,  for the ratable
benefit of Banks,  a closing fee in the amount of  $150,000,  which fee shall be
fully earned and payable as of the date hereof.

     Section II.13  Commitment  Fee. If, for any  Agreement  Quarter (as defined
below) during the term of this  Agreement,  the average daily unpaid  balance of
the Revolving  Credit Loans plus Letter of Credit  Obligations  for Borrower for
each day of such quarter does not equal the Revolving  Credit  Commitment,  then
Borrower shall pay to Agent,  for the ratable  benefit of Banks, a fee at a rate
equal to one eighth of one  percent  (1/8%) per annum on the amount by which the
Revolving Credit Commitment  exceeds such aggregate average daily unpaid balance
of the Revolving  Credit Loans plus Letter of Credit  Obligations  for Borrower.
Such fee shall be  payable  by  Borrower  to Agent in arrears on the last day of
each  quarter,  shall be fully earned as of the date of payment and shall not be
subject to  refund,  rebate or  proration  for any  reason  whatsoever.  For the
purposes of this Section 2.13 only, the term "Agreement Quarter" shall mean each
calendar quarter of each calendar year.

ARTICLE III.  LETTERS OF CREDIT

     All  references  to  Chase  in this  Article  shall  refer  to Chase in its
capacity as the Letter of Credit Issuing Bank.

     Section  III.1  Trade  Letters of Credit.  Chase  agrees,  on the terms and
conditions  hereinafter  set forth,  to issue trade letters of credit payable at
sight with a maturity date of up to one hundred  eighty (180) days from the date
of issuance ("Trade Letters of Credit") for the account of Borrower,  during the
period from the  Effective  Date to five (5) Banking Days prior to the Revolving
Credit  Termination  Date;  provided that, at no time will the outstanding Trade
Letter of Credit  Obligations  exceed  the  least of (a) Sixty  Million  Dollars


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<PAGE>
($60,000,000)  less all Letter of Credit Obligations (other than Trade Letter of
Credit  Obligations),  or (b) the Revolving Credit Commitment less the aggregate
of: (i) outstanding  Revolving Credit Loans,  (ii) Letter of Credit  Obligations
(other  than  Trade  Letter  of  Credit   Obligations)  and  (iii)  the  amounts
outstanding under Unsecured Lines or (c) the Net Borrowing Base less outstanding
Revolving Credit Loans and Letter of Credit  Obligations other than Trade Letter
of Credit  Obligations  (the  "Trade  Letter of  Credit  Commitment");  provided
further that,  Chase will not be required to issue a Trade Letter of Credit with
a maturity  date of more than 90 days  after the  Revolving  Credit  Termination
Date,  provided  however,  all of  such  outstanding  Trade  Letters  of  Credit
Obligations and/or Standby Letters of Credit Obligations, as of five (5) Banking
Days  prior to the  Revolving  Credit  Termination  Date,  are  secured  by Cash
Collateral at one hundred and five (105%) percent of the face value.

     Title  documents shall be consigned to Chase at Chase's  request;  provided
that with respect to any  Existing  Letters of Credit for delivery of goods from
outside of the United  States  into the United  States,  within five (5) Banking
Days of the Closing Date, Borrower shall apply for amendments to such Letters of
Credit to  provide  that all title  documents  related  to such  goods  shall be
consigned to Chase.

     Section III.2 Reimbursement Obligation.  Borrower will pay Chase, on demand
at Chase's Principal Office, in immediately available funds, the amount required
to  reimburse  Chase in  respect of Chase's  payment  of each  Instrument.  Such
reimbursement  shall be made with  interest  at the  Default  Rate on  Revolving
Credit  Loans  from  the  date  of  Chase's  demand  for  reimbursement  of such
Instrument  to the  date  of  reimbursement.  If the  Instrument  is in  foreign
currency,  such  reimbursement  shall be in Dollars at Chase's  selling rate for
cable transfers to the place of payment of the Instrument current on the date of
payment or of Chase's  settlement of its obligation,  as Chase may require.  If,
for any cause,  on the date of payment or settlement,  as the case may be, there
is no selling rate or other rate of exchange  generally  current in New York for
effecting such transfers, Borrower will pay Chase on demand an amount in Dollars
equivalent to Chase's  actual cost of settlement  of its  obligation  however or
whenever Chase shall make such  settlement,  with interest at the Prime Rate for
Revolving  Credit  Loans  from the date of  settlement  to the date of  payment.
Borrower will comply with all governmental exchange regulations now or hereafter
applicable to each Letter of Credit or Instrument  or payments  related  thereto
and will pay Chase,  on demand,  in Dollars,  such amount as Chase may be or may
have been required to expend on account of such regulations. Chase may debit, or
direct any other Bank to debit,  any account or accounts  maintained by Borrower
with  any  office  of  Chase  or any  other  Bank  or any  of  their  respective
Subsidiaries  or Affiliates (now or in the future) and apply the proceeds to the
payment of any and all amounts  owed by Borrower  to Chase  hereunder,  and such
Bank,  Subsidiary or Affiliate shall be authorized to act in accordance herewith
and shall treat this authorization as irrevocable.

     Section III.3 Payment of Commissions,  Expenses and Interest. Borrower will
pay Chase, on demand,  Chase's  commission and all charges,  costs, and expenses
paid or incurred by Chase in connection with any Letter of Credit,  and interest
where  chargeable,   including  reasonable  fees  and  charges  of  counsel,  or
reasonable  costs allocated by Chase's  internal legal  department in connection
with the enforcement of this Agreement or any Letter of Credit. Unless otherwise
agreed:

          (a  commissions  payable  hereunder  shall be at the rate  customarily
     charged by Chase at the time in like circumstances;

          (b interest  payable  under this  Article III on amounts not paid when
     due  shall  be at the  lesser  of (i the  maximum  rate  permissible  under
     applicable Law and (ii) the Default Rate; and

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<PAGE>
          (c in addition to commissions, fees and amounts otherwise payable with
     respect to the  issuance  of the Letter of  Credit,  Borrower  shall pay to
     Chase on demand such amounts as Chase, in its sole  discretion,  determines
     are necessary to compensate it for any cost  attributable to its issuing or
     having  outstanding such Letter of Credit resulting from the application of
     any  Law  or  regulation   applicable  to  Chase   regarding  any  reserve,
     assessment, capital adequacy or similar requirements relating to letters of
     credit or the  reimbursement  agreements with respect thereto or to similar
     liabilities or assets of Chase whether  existing at the time of issuance of
     the Letter of Credit or adopted thereafter  including,  but not limited to,
     fees and amounts  payable with respect to  amendments to and increases of a
     Letter of Credit.  Borrower  acknowledges that there may be various methods
     of  allocating  costs to the  Letter  of Credit  and  agrees  that  Chase's
     allocation for purposes of determining the costs referred to above shall be
     conclusive  and binding upon Borrower  provided such  allocation is made in
     good faith.

          In  addition  to any and all of Chase's  customary  issuance  fees and
     other  expenses to be paid by Borrower  with  respect to a Trade  Letter of
     Credit,  Borrower  shall pay to Chase under a Trade  Letter of Credit a fee
     for each  draw in the  amount  of the  greater  of (x)  one-quarter  of one
     percent  (.25%) of the  amount  drawn  under  such  Trade  Letter of Credit
     ("Trade Letter of Credit Fee") and (y)-Chase's  minimum fee for draws under
     letters of credit,  as in effect from time to time.  All such fees shall be
     due and payable at the time of drawing.

     Section III.4 Proper Drawing; Chase's Honoring. Chase may accept or pay any
Instrument  presented  to it on or before the  expiration  date set forth in the
related  Application.  Except insofar as written instructions may be given by an
Authorized Person expressly to the contrary,  and prior to Chase's issuance of a
Letter of Credit:

          (a Chase may honor the related  Instrument(s)  in an amount or amounts
     not exceeding the amount of such Letter of Credit,  although shipment(s) in
     excess of the quantity called for under such Letter of Credit are made, and

          (b Chase may  honor,  as  complying  with the terms of such  Letter of
     Credit  and of the  Application  relating  to it, any  Instrument  or other
     document  otherwise in order signed or issued by a person  purporting to be
     an administrator,  executor,  trustee in bankruptcy,  debtor in possession,
     assignee for the benefit of creditors,  liquidator, receiver or other legal
     representative  of the party authorized under such Letter of Credit to draw
     or issue such Instruments or other documents.

     Section  III.5  Standby  Letters of Credit.  Chase may open,  at Borrower's
request,  Standby  Letters of Credit;  provided,  that, the aggregate  amount of
Standby Letters of Credit shall not, at any given time,  exceed  $1,000,000 (the
"Standby Letter of Credit Commitment"). No Standby Letter of Credit shall have a
stated  expiration  date later than the earlier of (a) 364 days from the date of
issuance or (b) the Revolving Credit Termination Date, unless  collateralized as
provided  in  Section  3.01  hereof.  For the  purpose  of  calculating  the Net
Availability,  Standby  Letters of Credit shall be deemed  Revolving  Loans.  In
addition to all other fees, commissions and other amounts otherwise payable with
respect to issuance of Letters of Credit,  Borrower shall pay to Chase an amount
equal to the  greater of (i) two and one  quarter  (2 1/4%)  percent of the face
amount of each Standby  Letter of Credit  payable upon  issuance  (the  "Standby
Letter of Credit Fee") and (ii)  Chase's  minimum fee for issuance of letters of
credit, as in effect from time to time.

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<PAGE>
     Section III.6 Amendment; Change;  Modification;  No Waiver. In the event of
any  amendment,  change or  modification  relating  to a Letter of Credit or any
Instruments   or  documents   called  for   thereunder,   including   waiver  of
noncompliance of any such Instruments or documents with the terms of such Letter
of Credit,  this  Agreement  shall be binding upon  Borrower with regard to such
Letter of Credit as so amended,  changed,  or modified,  and to any act taken by
Chase or any of its  correspondents  relating  thereto.  No  amendment,  change,
waiver,  or  modification  to which Chase has consented  shall be deemed to mean
that Chase will consent or has consented to any other or  subsequent  request to
amend, change,  modify or waive a term of such Letter of Credit. Chase shall not
be  deemed to have  waived  any of its  rights  hereunder,  unless  Chase or its
authorized  agent shall have signed  such  waiver in  writing.  No such  waiver,
unless expressly stated therein,  shall be effective as to any transaction which
occurs  subsequent to the date of such waiver,  nor as to any  continuance  of a
breach after such waiver.

     Section III.7 U.C.P.; Agreements and Acknowledgments;  Indemnification. The
Uniform  Customs and Practice shall be binding on Borrower and Chase,  except to
the extent it is otherwise expressly agreed. It is also agreed that:

          (a user(s) of a Letter of Credit shall not be deemed agents of Chase;

          (b none of Chase, its Affiliates,  Subsidiaries, or its correspondents
     shall be responsible for:

               (i failure of any Instrument to bear any reference to the related
          Letter of Credit or  inadequate  reference in any  Instrument  to such
          Letter of Credit,  or failure of any  document  (other than  documents
          expressly  required  to be  presented  under such Letter of Credit) to
          accompany any Instrument at  negotiation,  or failure of any person to
          note the  amount  of any  Instrument  on the  reverse  of a Letter  of
          Credit,  or to  surrender  or take up a Letter of Credit or to forward
          documents  apart from  Instruments  as  required  by the terms of such
          Letter of Credit,  each of which provisions,  if contained in a Letter
          of Credit itself, it is agreed may be waived by Chase; or

               (ii errors,  omissions,  interruptions or delays in transmission,
          or delivery of any message, by mail, telex, cable, telegraph, wireless
          or other teletransmission or by oral instructions, whether or not they
          may be in cipher;

          (c Chase  shall not be  responsible  for any act,  error,  neglect  or
     default,  omission,  insolvency  or  failure  in  business  of  any  of its
     correspondents;

          (d Borrower will promptly examine:

               (i any copy of a Letter  of  Credit  (and of any  amendments  the
          thereof) sent to it by Chase; and

               (ii all Instruments  and documents  delivered to it, from time to
          time, and, in the event of any claim of non compliance with Borrower's
          instructions or other  irregularity,  Borrower will immediately notify
          Chase thereof in writing,  Borrower being conclusively  deemed to have
          waived any such claim against Chase and its correspondents unless such
          notice is given as aforesaid;

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<PAGE>
          (e any action, inaction or omission on the part of Chase or any of its
     correspondents,  under or in  connection  with a Letter  of  Credit  or the
     related  Instruments,  documents or property,  if, in good faith,  shall be
     binding   upon   Borrower   and  shall  not  place  Chase  or  any  of  its
     correspondents under any liability to Borrower; and

          (f in the event that Chase shall  preassign a letter of credit  number
     or numbers to Borrower, Borrower shall keep such number(s) confidential and
     shall not disclose any such number to any Person until the Letter of Credit
     to which such number relates has been approved by Chase.

     Borrower  agrees to hold Chase,  each  Affiliate  and  Subsidiary of Chase,
Collateral Monitor,  each Bank, each Affiliate and Subsidiary of each Bank, each
of their  officers,  directors,  employees and  correspondents  indemnified  and
harmless  against  any and all  claims,  loss,  liability  or damage,  including
reasonable counsel fees, howsoever arising from or in connection with any Letter
of Credit or any Application,  including,  without  limitation,  any such claim,
loss, liability or damage arising out of any transfer, sale, delivery, surrender
or  endorsement  of any  document  at any  time(s)  held by  Chase or any of its
Affiliates  or  Subsidiaries,  or held for the account of any one of them by any
correspondent  of any of them,  or arising out of any action for  injunctive  or
other judicial or administrative relief arising out of or in connection with any
Letter of Credit and affecting, directly or indirectly, Chase, or each Affiliate
or Subsidiary of Chase.

     Section  III.8  Licenses;  Insurance;  Regulations.  Borrower  will procure
promptly any necessary import,  export or other licenses for the import,  export
or shipping of the property  shipped under or pursuant to or in connection  with
each  Letter  of  Credit,   and  will  comply  with  all  foreign  and  domestic
governmental  regulations  in regard to the  shipment  of such  property  or the
financing  thereof,  and will furnish such certificates in that respect as Chase
may, at any time(s),  require, and will keep such property adequately covered by
insurance in amounts,  against risks and with companies  satisfactory  to Chase,
and will assign the policies or certificates of insurance to Chase, or will make
the loss or adjustment,  if any,  payable to Chase, at Chase's option,  and will
furnish  Chase,  on its demand,  with  evidence of acceptance by the insurers of
such  assignment.  Should the  insurance  upon such  property  for any reason be
unsatisfactory  to Chase,  Chase may, at Borrower's  expense,  obtain  insurance
satisfactory to Chase.

     Each  Application for a Trade Letter of Credit  hereunder shall  constitute
the warranty and  certification  made by Borrower that no shipment or payment to
be made in connection  with such Trade Letter of Credit violates or will violate
any Law or any United States export, currency control, or other regulations.

     Section  III.9  Airway  and  Steamship   Guaranties.   Chase  may,  in  its
discretion,  issue a letter of indemnity or such other document requested by the
party in possession of merchandise to enable Borrower to take possession of such
merchandise  forthwith without  production of the shipping documents (an "Airway
Guaranty" or "Steamship Guaranty",  as the case may be). Such Airway Guaranty or
Steamship  Guaranty  shall be deemed a part of the Letter of Credit  Obligations
and shall be included as such in  calculation of the Borrowing  Base,  provided,
however,  that any  merchandise  which is the subject of such Airway Guaranty or
Steamship  Guaranty  shall not be  included in  Eligible  Inventory  or Eligible
In-Transit Inventory or Eligible Trade Letters of Credit.

     Section III.10 Additional Security.  If a temporary restraining order or an
injunction  (preliminary  or  permanent)  or any  similar  order  is  issued  in
connection  with any Letter of Credit or any  Instrument  or documents  relating
thereto,  which  order,  injunction,  or similar  order may apply,  directly  or


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indirectly,  to Chase, Borrower shall, on demand, deliver,  convey, transfer, or
assign to the Agent additional security of a value and character satisfactory to
Chase, or make such payment as Chase may require.

     Section III.11 Continuing Rights and Obligations.  Chase's rights hereunder
shall  continue  unimpaired,  and  Borrower  shall be and  remain  obligated  in
accordance  with the terms and provisions  hereof,  notwithstanding  the release
and/or  substitution  of any  property  which may be held as  Collateral  at any
time(s),  or of any rights or interest  therein.  No delay,  extension  of time,
renewal,  compromise or other  indulgence which may occur or be granted by Chase
shall impair Chase's rights or powers hereunder.

     Section III.12 Instructions;  No Liability.  Instructions may be honored by
Chase when received from an Authorized  Person.  Borrower may furnish Chase with
written  confirmation of any such Instruction,  but Chase's  responsibility with
respect to any Instruction  shall not be affected by its failure to receive,  or
the content of, such confirmation.  Chase shall have no responsibility to notify
Borrower of any discrepancies  between  Borrower's  instructions and its written
confirmation, and in the event of any such discrepancy, the original Instruction
shall govern. Chase shall be fully protected in, and shall incur no liability to
Borrower for,  acting upon any  Instructions  or any oral,  written,  telephone,
teleprocess,  electronic,  or other amendments thereto which Chase in good faith
believes  to have been given by any  Authorized  Person,  and in no event  shall
Chase be liable for special,  consequential,  or punitive damages. Chase may, at
its option,  use any means of verifying  any  Instruction  received by it. Chase
also  may,  at  its  option,  refuse  to  act  upon  any  instruction  or  other
communication or any part thereof,  without incurring any responsibility for any
loss,  liability or expense arising out of such refusal. All such authorizations
and instructions  shall continue in full force and effect unless Chase may elect
to act upon  additional  instructions  delivered to it by Borrower  prior to the
issuance of a Letter of Credit in reliance upon the original Instructions.

     Section III.13 Steamship Guaranty.  Any Steamship Guaranty which the Letter
of Credit Issuing Bank may issue from time to time at its sole  discretion  will
be deemed Trade Letter of Credit Obligations.

ARTICLE IV.  PARTICIPATION

     Section IV.1 Participating Banks' Pro Rata Shares. Subject to the terms and
conditions hereinafter set forth in this Article IV, Chase hereby agrees to sell
and each  Participating  Bank  hereby  agrees to  purchase a risk  participation
("Participation")  from  Chase in each  Letter of  Credit  to the  extent of the
percentage set forth below opposite such Bank's name (as such  percentage may be
reduced or otherwise  modified from time to time in accordance with the terms of
this Article IV):

           Bank                   Pro Rata Share
           ----                   --------------
           BOA                          15%
           HSBC                         20%
           CIT                          20%
           Fleet                        15%
           IDB                          10%

     Section IV.2 Sale and Purchase of Participation.  Each  Participating  Bank
hereby  irrevocably  and  unconditionally  agrees to purchase,  and Chase hereby
agrees to sell and transfer to each Participating Bank, an undivided  fractional
interest  equal to such  Participating  Bank's Pro Rata Share in each  Letter of
Credit upon issuance thereof and each draw thereunder upon such drawing,  and in
the  obligations of Borrower in respect of each such Letter of Credit under this
Agreement  and  the  Letter  of  Credit  (including  all  related  payments  and
recoveries to which such Participating Bank is entitled pursuant to Section 4.05
hereof).

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<PAGE>
     Section IV.3  Participation  in Fees and  Collateral;  Relationship.  Chase
shall pay each  Participating  Bank its Pro Rata Share of each  Trade  Letter of
Credit Fee and Standby  Letter of Credit Fee.  This fee shall be due and payable
promptly, after such Fee is paid to Chase, in arrears on each Quarterly Date.

     The   relationship   between  Chase  (in  its  capacity  as  seller)  of  a
Participation  pursuant to this Article IV) and each  Participating Bank (in its
capacity as  purchaser  of a  Participation  pursuant to this Article IV) is and
shall  be that of a  purchaser  and  seller  of a  property  interest  and not a
creditor-debtor  relationship or joint venture. Chase (in its capacity as seller
of a Participation  pursuant to this  Article-IV)  shall owe each  Participating
Bank (in its capacity as purchaser of a  Participation  pursuant to this Article
IV) no duty except as specifically set forth in this Article IV.

     Section  IV.4  Procedures.  Whenever a draw shall be made under a Letter of
Credit and Borrower shall fail to reimburse  Chase  therefor in accordance  with
this  Agreement,  Chase will promptly notify each  Participating  Bank regarding
such draw as follows: (a) the date of such draw, and (b) the amount of such draw
or payment.  Although  Chase shall be  responsible  for paying each such draw on
each Letter of Credit,  each Participating Bank shall bear its Pro Rata Share of
the credit risk associated with each such draw.  Accordingly,  in the event that
the amount of any such draw is not paid in full by or on behalf of Borrower when
required in accordance with the terms of this Agreement,  for any reason,  Chase
shall give prompt notice by telephone  (promptly  confirmed in writing) or telex
to each  Participating  Bank of such event.  Upon  receipt of such  telephone or
telex notice, each Participating Bank shall cause to be transmitted to Chase, to
an account to be specified by Chase,  an amount in immediately  available  funds
equivalent  to its Pro Rata  Share of such  draw or  payment  in such  manner to
ensure that such funds are  received by, and  available  to, Chase by 3:00 P.M.,
New York City time, on the date demand therefor was made by Chase (if demand was
made by 11:00 A.M., New York City time) or by 10:00 A.M., New York City time, on
the Banking Day following the date demand therefore was made (if demand was made
after 11:00 A.M., New York City time) and any such payment by each Participating
Bank shall be deemed a Revolving Loan.

     Chase shall advise each  Participating Bank quarterly of its Pro Rata Share
of the Letter of Credit Obligations. In addition, Chase shall supply any notices
of reasonable requests in the ordinary course of business.

     Section IV.5  Collections  and  Remittances.  Whenever  Chase  receives any
payment, interest reimbursement,  collection,  recovery, setoff, counterclaim or
banker's  lien on account  of a Letter of Credit,  whether  from  Borrower,  the
Collateral, or otherwise, it shall allocate such receipt as follows:

          (a First, to the payment of taxes,  assessments,  insurance  premiums,
     legal fees, or for similar purposes as required by the Letter of Credit, as
     the case may be, or any other Loan  Document,  and, if  previously  paid by
     Chase, such sums shall be retained by Chase; and

          (b Second,  in the event Borrower fails to reimburse Chase,  when due,
     for any draw under a Letter of Credit,  and Chase  receives a payment of or
     on account of such defaulted  amount as to which a  Participating  Bank has
     paid  Chase the  amount of its Pro Rata  Share  pursuant  to  Section  4.04
     hereof, that portion of the amount received shall be allocated between each
     such  Participating  Bank and Chase pro rata, with each such  Participating
     Bank's  percentage of the principal  amount based on its Pro Rata Share and
     with each such Participating Bank's portion of the interest and fees on its
     Pro Rata Share based upon the amounts set forth above.

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<PAGE>
     If  any  payment  received  by  Chase  and  distributed  or  credited  to a
Participating  Bank is later  rescinded  or is  otherwise  returned by Chase for
whatever reason (including, without limitation, settlement of an alleged claim),
each such  Participating  Bank, upon demand by Chase,  shall  immediately pay to
Chase, such Participating Bank's Pro Rata Share of the amount so returned,  with
interest  at the  Federal  Funds  Rate from and after  the date of  demand.  The
covenants  contained in this  paragraph  shall survive the  termination  of this
Agreement.

     Section IV.6 Sharing of Setoffs and Collections.  Each  Participating  Bank
agrees that to the extent any  payment is  received  by it on any of  Borrower's
obligations under a Letter of Credit, whether by counterclaim,  setoff, banker's
lien, by realizing on  collateral or otherwise and such payment  results in such
Participating  Bank receiving a greater payment than it would have been entitled
to under  Section  4.05 hereof had the total  amount of such  payment  been paid
directly  to  Chase  for  disbursement  according  to that  Section,  then  such
Participating Bank shall immediately  purchase for cash from Chase an additional
Participation  and a participation  from the other  Participating  Banks in such
Letter of Credit (subject to the same terms and conditions provided for herein),
sufficient in amount so that such payment shall  effectively  be shared pro rata
with Chase and the other  Participating Banks in accordance with the amount, and
to the extent, of their respective  interests in the Letter of Credit;  provided
however, that if all or any portion of such payment is thereafter recovered from
such  Participating  Bank at any time,  the purchase  shall be rescinded and the
purchase  price  returned  to the extent of such  recovery  upon  demand by such
Participating  Bank with  interest at the Federal  Funds Rate from and after the
date of demand.

     Section  IV.7  Indemnification;  Costs  and  Expense.  To  the  extent  not
reimbursed by Borrower,  and without  limiting the  obligation of Borrower to do
so, each Participating Bank agrees to, on demand, reimburse Chase for, indemnify
Chase  against,  and hold  Chase  harmless  from,  to the  extent  of each  such
Participating  Banks Pro Rata  Share of, any and all  liabilities,  obligations,
losses,  damages,  penalties,  actions,  judgments,  suits, costs,  expenses, or
disbursements   of  any  kind   whatsoever   (including,   without   limitation,
disbursements  necessary,  in the judgment of Chase,  to preserve or protect the
Collateral),  that may,  at any time,  be imposed on,  incurred  by, or asserted
against  Chase in any way relating to this  Agreement,  a Letter of Credit,  the
Collateral  or any other  Revolving  Credit Loan  Document  or other  instrument
relating to any of the foregoing,  or the transactions  contemplated thereby and
hereby,  or any action taken or omitted by Chase under or in connection with any
of the foregoing;  provided however,  that no Participating Bank shall be liable
for the  payment  of any  portion  of  such  liabilities,  obligations,  losses,
damages, penalties, actions, judgments, suits, costs, expenses, or disbursements
resulting  from Chase's gross  negligence or willful  misconduct.  The covenants
contained  in this Section 4.07 hereof  shall  survive the  termination  of this
Agreement.

     Section IV.8  Administration;  Standard of Care. Chase will administer each
Letter of Credit in the ordinary  course of business and in accordance  with its
usual practices,  modified from time to time as it deems  appropriate  under the
circumstances.  Except as  expressly  set forth in the third  paragraph  of this
Section  4.08,  Chase  shall be  entitled  to use its  discretion  in  taking or
refraining from taking any actions in connection with any of the foregoing as if
it were the sole party  involved in any of the  foregoing  and no  Participation
existed.

     Each  Participating  Bank acknowledges that its Participation  hereunder is
without  recourse  to Chase  and that  each such  Participating  Bank  expressly
assumes all risk of loss in connection with its  Participation in the Letters of
Credit as if such  Participating  Bank had  directly  provided  such  Letters of
Credit.  Chase shall have no liability express or implied,  for any action taken
or omitted to be taken by Chase or for any  failure or delay in  exercising  any


                                       35
<PAGE>
right or power  possessed  by Chase under any of the Loan  Documents  except for
actual losses, if any,  suffered by any Participating  Bank that are proximately
caused either by Chase's  gross  negligence  or by Chase's  willful  misconduct.
Without  limiting  the  foregoing,  Chase (a) may  consult  with legal  counsel,
independent  public  accountants,  appraisers,  and other  experts,  selected by
Chase,  and shall not be liable for any  action  taken or omitted to be taken in
good faith by it in  accordance  with the advice of such  persons,  (b)-shall be
entitled  to rely  on,  and  shall  incur  no  liability  by  acting  upon,  any
conversation, notice, consent, certificate, statement, order, or any document or
other writing (including,  without limitation,  telegraph, telex, telecopy, TWX,
or other  telecommunication  device) believed by Chase to be genuine and correct
and to have  been  signed,  sent,  or made by the  proper  person,  (c) makes no
warranty or representation of any kind or character  relating to Borrower or the
Collateral, and shall not be responsible for any warranty or representation made
in or in  connection  with any of the Loan  Documents,  (d) makes no warranty or
representation  as to, and shall not be  responsible  for the  correctness as to
form,  the  due  execution,  legality,  validity,  enforceability,  genuineness,
sufficiency,  or collectability of any of the Loan Documents, for any failure by
Borrower or any Person to perform its obligations thereunder, for Borrower's use
of the proceeds  therefrom,  or for the  preservation  of the  Collateral or the
loss, depreciation,  or release thereof, (e) makes no warranty or representation
as to, and assumes no responsibility for, the authenticity,  validity, accuracy,
or  completeness  of any  notice,  financial  statement,  or other  document  or
information  received by Chase or any Participating  Bank in connection with, or
otherwise  referred  to in,  any of the Loan  Documents,  and (f)  shall  not be
required to make any inquiry  concerning  the  observance or  performance of any
agreement  contained  in, or  conditions  of, any of the Loan  Documents,  or to
inspect the property, books, or records of Borrower or any Person.

     Notwithstanding the provisions of the first paragraph of this Section 4.08,
Chase  agrees  that it will not take any of the  following  actions  without the
written  consent of each  Participating  Bank:  (i) -waive any Event of Default;
(ii)-extend  the maturity  date of any Letter of Credit  beyond ninety (90) days
after the Revolving  Credit  Termination  Date; (iii) increase the amount of the
Trade Letter of Credit  Commitment or the Standby  Letter of Credit  Commitment;
(iv) reduce the fees charged on the Letters of Credit below the amount  required
to be paid to Chase or to the Participating  Banks pursuant to the terms of this
Article IV; or (v) release any Guarantor or any Collateral,  except as otherwise
contemplated in any Loan Documents. Chase shall be fully justified in failing or
refusing  to take any  action  under any of the Loan  Documents  unless it shall
first receive such advice or concurrence of the Participating Banks.

     Chase and the Participating  Banks may lend money to, accept deposits from,
and  generally  engage in any kind of business with Borrower as freely as though
no Participation had been granted to a Participating Bank.

     Section IV.9 Independent  Investigation by the  Participating  Banks.  Each
Participating  Bank acknowledges (a) that Chase has provided such  Participating
Bank with  copies of all of the Loan  Documents  and  Borrower  has  provided or
granted such  Participating  Bank access to,  certain  financial  data and other
information  pertaining  to Borrower and the Guarantor  that such  Participating
Bank has  requested  in  order to  enable  it to make an  independent,  informed
judgment with respect to the  desirability  of purchasing  Participation  in the
Letters of Credit, (b) that Chase has not made any representations or warranties
to such Participating Bank and that no prior or future act by Chase,  including,
without  limitation,  any review of the affairs of Borrower,  shall be deemed to
constitute  a   representation   or  warranty  of  Chase,   and  (c)  that  such
Participating Bank has independently,  without reliance upon Chase, and based on
such information as such Participating Bank has deemed appropriate, made its own
appraisal  of  and  investigation  into  the  business,  operations,   property,
financial  condition,  and general credit  worthiness of Borrower,  made its own
analysis  of the  value  and Lien  status  of any  Collateral,  and made its own
decision to execute  this  Agreement  and thereby  purchase a  Participation  in
accordance  with this  Article IV in the Letters of Credit.  Each  Participating
Bank  agrees  that,  independently  and  without  reliance  upon  Chase  or  any
representations  or statements of Chase,  and based on such  information as such
Participating  Bank deems  appropriate at the time, it will continue to make and
rely upon its own  credit  analysis  and  decisions  in taking or not taking any
action under this Article IV or any of the Loan Documents.

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<PAGE>
     Section  IV.10   Participating   Banks'   Ownership  of  Interests  in  the
Participation;  Repurchases by Chase. Each  Participating Bank hereby represents
and warrants to Chase that the purchase of its  Participation  in the Letters of
Credit (a) is legal pursuant to the Law under which such  Participating  Bank is
organized  and  operates,  (b) has been  duly  authorized  and  approved  by all
necessary action of the management of such  Participating  Bank, and (c) is made
for such Participating Bank's own account.

     Upon the  occurrence  of an Event of  Default  and  failure to consent to a
change in this  Agreement  where such  Participating  Bank's consent is required
pursuant to this Article IV,  Chase,  or any party  designated by it, shall have
the right (but not the  obligation)  to  repurchase  such  Participating  Bank's
Participation  in any Letter of Credit for a purchase  price equal to any unpaid
amount  due the  Participating  Bank with  respect to such  Participation.  Upon
demand and payment therefor,  such Participating Bank shall promptly transfer to
Chase its Participation in any such Letter of Credit by executing and delivering
to Chase an instrument of transfer in form and substance  satisfactory  to Chase
and  such   Participating   Bank;   provided  however,   that  failure  by  such
Participating  Bank  to do so  shall  not  affect  Chase's  repurchase  of  such
Participating   Bank's  Participation  in  any  such  Letter  of  Credit,  which
repurchase   shall  be  effective  upon  payment   therefor  by  Chase  to  such
Participating  Bank.  At any time before each  payment,  Chase may  withdraw and
terminate its offer to repurchase such Participating Bank's Participation in any
such Letter of Credit prior to the payment of such price.

ARTICLE V.  GUARANTY

     Section  V.1  Guaranty.  Each  Guarantor  hereby,  jointly  and  severally,
irrevocably,  absolutely and  unconditionally  guarantees to each Bank Party and
their  successors,  endorsees,  transferees  and assigns the prompt and complete
payment by Borrower,  as and when due and payable (whether at stated maturity or
by required prepayment, acceleration, demand or otherwise), of all indebtedness,
obligations  and  liabilities  of  Borrower  to each Bank Party now  existing or
hereafter  incurred under or arising out of or in connection with the Notes, the
Letters of Credit,  including any Airway  Guaranty or Steamship  Guaranty,  this
Agreement  and  the  other  Loan  Documents  whether  for  principal,  interest,
reimbursement   obligations,   fees,  expenses,   or  otherwise  and  all  other
obligations of Borrower to each Bank Party (all such  indebtedness,  obligations
and  liabilities  being herein called the  "Obligations");  and agrees to pay on
demand any and all expenses,  (including counsel fees and expenses) which may be
paid or incurred by any Bank Party in collecting  any or all of the  Obligations
and/or  enforcing  any  rights  under  any of the Loan  Documents  or under  the
Obligations (the  "Guaranty").  The Guaranty of each Guarantor of the payment of
the Obligations is such Guarantor's "Guaranty Obligation".

     Section V.2 Guarantor's Guaranty Obligations Unconditional.

     (a) Each Guarantor  hereby  guarantees  that the  Obligations  will be paid
strictly in accordance with the terms of the Loan  Documents,  regardless of any
Law now or hereafter in effect in any jurisdiction  affecting any such terms or,
the  rights  of any  Bank  Party  with  respect  thereto.  The  obligations  and
liabilities  of each  Guarantor  under  this  Guaranty  shall  be to the  extent
permitted by applicable law absolute and unconditional  irrespective of: (i)-any
lack  of  validity  or  enforceability  of  any  of the  Obligations,  any  Loan
Documents,  or any agreement or instrument relating thereto;  (ii) any change in
the time, manner or place of payment of, or in any other term in respect of, all
or any of the Obligations, or any other amendment or waiver of or consent to any
departure from any Loan Documents or any other documents or instruments executed
in connection with or related to the Obligations;  (iii) any exchange or release
of, or  non-perfection  of any Lien on or in, any Collateral,  or any release or
amendment or waiver of or consent to any departure from any other guaranty,  for
all or any of the  Obligations;  or (iv) any  other  circumstances  which  might
otherwise  constitute  a  defense  (other  than  indefeasible  payment  in full)
available to, or a discharge of,  Borrower or any other  guarantor in respect of
the Obligations of any Guarantor in respect of this Guaranty.

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<PAGE>
     (b) This  Guaranty is a continuing  guaranty and shall remain in full force
and  effect  until:  (i)-the  payment  in full of all  the  Obligations  and the
termination of the Commitment;  and (ii) the payment of the other expenses to be
paid by the  Guarantors  pursuant  hereto.  This Guaranty  shall  continue to be
effective  or shall be  reinstated,  as the case may be,  if, at any  time,  any
payment,  or any part thereof,  of any of the  Obligations  is rescinded or must
otherwise  be  returned  by any  Bank  Party  upon the  insolvency,  bankruptcy,
dissolution,  liquidation  or  reorganization  of Borrower or otherwise,  all as
though such payment had not been made.

     (c) The  obligations  and liabilities of each Guarantor under this Guaranty
shall not be conditioned or contingent upon the pursuit by the Agent or any Bank
or any other Person at any time of any right or remedy  against  Borrower or any
other Person which may be or become  liable in respect of all or any part of the
Obligations or against any Collateral or security or guarantee therefor or right
of setoff with respect thereto.

     (d) Each  Guarantor  hereby  consents  that,  without the  necessity of any
reservation  of rights  against any Guarantor  and without  notice to or further
assent by any Guarantor,  any demand for payment of any of the Obligations  made
by any Bank Party may be rescinded by such Bank Party and any of the Obligations
continued after such rescission.

     Section V.3  Waivers.  To the extent  permitted  by  applicable  law,  each
Guarantor hereby waives: (a) promptness and diligence; (b) notice of or proof of
reliance by any Bank Party upon this Guaranty or  acceptance  of this  Guaranty;
(c) notice of the  incurrence  of any  Obligation  by Borrower  or the  renewal,
extension or accrual of any  Obligation;  (d) notice of any actions taken by any
Bank Party or Borrower or any other party under any Loan Document,  or any other
agreement or  instrument  relating to the  Obligations;  (e) all other  notices,
demands and protests, and all other formalities of every kind other than such as
are provided for in the Loan Documents in connection with the enforcement of the
Obligations or of the obligations of any Guarantor hereunder, the omission of or
delay or which,  but for the provisions of this Section 5.03,  might  constitute
grounds for relieving any Guarantor of its  obligations  hereunder;  and (f) any
requirement that any Bank Party protect,  secure,  perfect or insure any Lien on
any  property  subject  thereto or exhaust any right or take any action  against
Borrower or any other Person or any Collateral.

     Section V.4  Subrogation.  Each Guarantor  agrees that it hereby defers any
rights which it may acquire by way of subrogation  under this Guaranty,  whether
acquired by any payment made hereunder, by any setoff or application of funds of
such Guarantor by any Bank Party or otherwise  until the  Obligations  have been
paid in full.

     Section V.5  Limitation of Liability.  The  obligations  of each  Guarantor
hereunder  shall be limited to an aggregate  amount equal to the largest  amount
that would not render  its  obligations  hereunder  subject to  avoidance  under
Section 548 of the United States Bankruptcy Code or any comparable  provision of
any applicable state law.

ARTICLE VI.  CONDITIONS PRECEDENT

     Section VI.1  Conditions  Precedent to Initial Use of a Credit  Facility on
and after the Closing Date. The obligations of the Banks on or after the Closing
Date to make a Revolving  Credit Loan and the  obligation  of Chase to issue the
initial  Letter of Credit is subject to the condition  precedent  that the Banks
shall  have  received  on or  before  the  Closing  Date  each of the  following
documents,  in form and substance  satisfactory  to the Banks and their counsel,
and each of the following requirements shall have been fulfilled:

     (a) Evidence of Due Organization and all Corporate  Actions by Borrower and
each  Guarantor.  A  certificate  of the  Secretary  or  Assistant  Secretary of
Borrower  and  each  Guarantor,   dated  the  Closing  Date,  attesting  to  the
certificate of incorporation  and by-laws of Borrower and each Guarantor and all
amendments  thereto and to all  corporate  actions  taken by  Borrower  and each
Guarantor,  including  resolutions  of its board of directors,  authorizing  the


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<PAGE>
execution,  delivery  and  performance  of the Loan  Documents,  and each  other
document to be delivered pursuant to the Loan Documents;

     (b) Incumbency and Signature Certificates of Borrower and each Guarantor. A
certificate  of the  Secretary  or  Assistant  Secretary  of  Borrower  and each
Corporate  Guarantor,  dated the  Closing  Date,  certifying  the names and true
signatures of the officers of Borrower and each Guarantor authorized to sign the
Loan Documents to which it is a party,  and the other  documents to be delivered
pursuant to the Loan Documents;

     (c)  Good  Standing   Certificates  of  Borrower  and  each  Guarantor.   A
Certificate, dated reasonably near the Closing Date, from the Secretary of State
(or other appropriate official) of the jurisdiction of incorporation of Borrower
and each Guarantor  certifying as to the due  incorporation and good standing of
Borrower or such Guarantor and  certificates,  dated reasonably near the Closing
Date, from the Secretary of State (or other appropriate  official) of each other
jurisdiction  where  Borrower and each  Guarantor is required to be qualified to
conduct  business,  certifying that Borrower or such Guarantor is duly qualified
to do such business and is in good standing in each such state;

     (d) Notes. The Revolving Credit Notes;

     (e) Borrower Security Agreement.  Borrower Security Agreement duly executed
by Borrower together with (i) duly executed UCC-1 financing statements and UCC-3
financing statements with respect to UCC-1 financing statements previously filed
under the Uniform  Commercial  Code of all  jurisdictions  necessary  or, in the
opinion of the Agent or any Bank,  desirable  to perfect the  security  interest
created by such Security  Agreement;  and (ii) Uniform  Commercial Code searches
identifying all of the financing  statements on file with respect to Borrower in
all  jurisdictions  referred to under (i),  including the  financing  statements
filed by the Agent  against such party  indicating  that no party other than the
Agent  claims an  interest  in any of the  Collateral  except  with  respect  to
Permitted Liens;

     (f) Guarantor  Security  Agreements.  Guarantor  Security  Agreements  duly
executed by the  Guarantors  (other than HIL)  together  with (i) duly  executed
UCC-1 financing  statements and UCC-3  financing  statements with respect to all
UCC-1 financing statements previously filed under the Uniform Commercial Code of
all  jurisdictions  necessary  or,  in the  opinion  of the  Agent or any  Bank,
desirable to perfect the security  interest created by such Security  Agreement;
and  (ii)-Uniform  Commercial  Code  searches  identifying  all of the financing
statements  on file  with  respect  to the  Guarantors  (other  than HIL) in all
jurisdictions  referred to under (i) including the financing statements filed by
the Agent  against  such  party  indicating  that no party  other than the Agent
claims an interest in any of the  Collateral  except with  respect to  Permitted
Liens;

     (g) Borrower Pledge  Agreement.  Borrower Pledge Agreement duly executed by
Borrower,  together  with  the  certificates  representing  the  shares  pledged
pursuant to Borrower Pledge Agreement and undated stock powers executed in blank
for each such certificate;

     (h) Borrower  Trademark  Security  Agreement.  Borrower  Trademark Security
Agreement and the Special Power of Attorney related thereto each duly execute by
Borrower;

     (i) Designers Pledge Agreement. Designers Pledge Agreement duly executed by
Designers,  together  with the  certificates  representing  the  shares  pledged
pursuant to the Designers  Pledge Agreement and undated stock powers executed in
blank for such certificates;

     (j) Guarantor  Trademark Security  Agreement.  Designers Trademark Security
Agreement  and Vintage  Trademark  Security  Agreement  and the Special Power of
Attorneys related to the foregoing, each duly executed by Designers and Vintage;

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<PAGE>
     (k) Intercreditor  Agreement.  Amended and Restated Intercreditor Agreement
duly executed by each of the Insurance Companies and the Banks;

     (l) Opinions of Counsel for Borrower and Guarantors. A favorable opinion of
Willkie Farr & Gallagher, counsel for Borrower and each Guarantor,  addressed to
all Banks, dated the Closing Date;

     (m) Insurance  Coverage.  A certificate  from  Borrower's  and  Guarantors'
insurance  carriers  evidencing  the  coverage  required by Section  8.05 hereof
(which  certificates shall show that the Agent or the Insurance  Companies is an
additional insured and loss payee);

     (n) Payment of Fees.  Payment in full to the Agent of all fees  required to
be paid to the Agent  pursuant  to the terms of the Fee  Letter;  and payment in
full of all  other  fees  required  to be  paid  in  accordance  with  the  Loan
Documents;

     (o) Officer's  Certificate.  The following statements shall be true and the
Agent shall have received a certificate  signed by a duly authorized  officer of
Borrower dated the Closing Date stating that:

               (i)  The  representations   and  warranties   contained  in  this
          Agreement  and in each of the other Loan  Documents are correct on and
          as of Closing Date as though made on and as of such date; and

          (ii) No Default or Event of Default has occurred and is continuing;

     (p)  Assignment  of OG Note.  An  assignment by Designers of the OG Note in
favor of Agent;

     (q) Blocked  Accounts.  Duly  executed  agreements,  in form and  substance
satisfactory to Agent,  establishing the Blocked Accounts or Depository Accounts
with financial institutions  acceptable to Agent for the collection or servicing
of the Accounts and proceeds of the Collateral;

     (r)  Terminations.  Termination  or Assignment of UCC Financing  Statements
terminating or assigning Liens other than Permitted Liens;

     (s) Trademark Agreement.  Trademark Agreement duly executed by Borrower and
Restricted  Subsidiaries  together  with duly  executed  Powers of Attorney with
respect thereto;

     (t) Assignment of Key-Person Life  Insurance.  Assignment of the Key-Person
Life  Insurance  covering Mr. Ludwig  Kuttner and Mr. Martin Axman in amounts of
not less than $5,000,000 and $1,000,000, respectively, from an insurance carrier
acceptable  to Agent,  duly  executed by the insured for such policies with such
Assignments acknowledged in writing by the insurance carriers;

     (u) Assignment of Proceeds Agreement. Assignment of Proceeds Agreement duly
executed  by  Borrower  and  the  Restricted  Subsidiaries  and  a  Consent  and
Acknowledgment thereto duly executed by Factor;

     (v)  Pre-Closing  Borrowing  Base  Certificate.  After giving effect to any
Revolving Credit Loans and Letter of Credit  Obligations and any other extension
of  credit  to be made by the Banks on the  Closing  Date  (based on a pro forma
sources  and uses of funds as of  August  31,  2000  prepared  by  Borrower),  a
Borrowing Base Certificate of Borrower and its Restricted  Subsidiaries  showing
Net  Availability  in excess of $4,000,000 and  notwithstanding  anything to the
contrary  contained  herein,  with respect to such Borrowing  Base  Certificate,
Collateral Monitor, at the request of the Agent, shall have the right to conduct
an updated  field  examination  of the books and records of the Borrower and its
Subsidiaries to verify the accuracy of such Borrowing Base Certificate;

     (w) Pro Forma  Balance  Sheet and  Sources  and Uses of Funds.  A pro forma
balance sheet of Borrower and the Restricted  Subsidiaries as of August 31, 2000
reflecting the  transactions  contemplated  hereunder  including,  the Item Eyes
Acquisition, a statement of sources and uses of funds and a certificate dated as
of the Closing Date of the chief financial officer of Borrower stating that such
pro forma balance sheet and  statement of sources and uses  represent,  the good
faith opinion of such officer as to the subject matter thereof; and

                                       40
<PAGE>
     (x) Additional Documentation.  Such other approvals,  opinions or documents
as the Agent or any Bank may reasonably request.

     Section VI.2 Conditions Precedent to All Credit Facilities. The obligations
of the Banks or Chase,  as the case may be, to  provide  each  Credit  Facility,
shall  be  subject  to the  further  conditions  precedent  that on the  date of
providing such Credit Facility:

     (a) The following statements shall be true:

          (i)  (A)  the   representations  and  warranties  with  a  materiality
     provision  contained  in  this  Agreement  and in each  of the  other  Loan
     Documents  are  correct  on and as of the  date of  providing  such  Credit
     Facility  as  though  made  on  and  as  of  such  date  and  (B)  all  the
     representations  and warranties with no materiality  provision contained in
     this  Agreement and in each of the other Loan  Documents are correct in all
     material  respects on and as of the date of providing such Credit  Facility
     as though made on and as of such date; and

          (ii) no Default or Event of Default has occurred and is continuing, or
     could result from providing such Credit Facility;

     (b) The Agent  shall  have  received  such  other  approvals,  opinions  or
documents as the Agent or any Bank may reasonably request.

     Section VI.3 Deemed  Representation.  Each request under a Credit  Facility
and acceptance by Borrower of any proceeds of such Revolving  Credit Loan or the
issuance of any Letter of Credit,  as the case may be, shall  constitute (a) for
representations  and warranties with a materiality  provision,  a representation
and warranty that the  statements  contained in Section  6.02(a) hereof are true
and correct both on the date of such notice and as of the date of the  providing
of such Revolving Credit Loan or issuance of such Letter of Credit,  as the case
may  be,  and  (b)  for  representations  and  warranties  with  no  materiality
provision,  a  representation  and  warranty  that the  statements  contained in
Section 6.02(a) hereof are true and correct in all material respects both on the
date of such notice and as of the date of the providing of such Revolving Credit
Loan or issuance of such Letter of Credit, as the case may be.

ARTICLE VII.  REPRESENTATIONS AND WARRANTIES

     Borrower and each Guarantor hereby represents and warrants that:

     Section VII.1 Incorporation. Good Standing and Due Qualification.  Borrower
and each Guarantor is duly  incorporated,  validly existing and in good standing
under the laws of the jurisdiction of its incorporation, has the corporate power
and  authority to own its assets and to transact the business in which it is now
engaged  or  proposed  to  be  engaged,  and  is  duly  qualified  as a  foreign
corporation  and in good standing under the laws of each other  jurisdiction  in
which such  qualification is required,  except to the extent that its failure to
be so qualified could not result in a Material Adverse Change.

     Section VII.2 Corporate Power and Authority;  No Conflicts.  The execution,
delivery and performance by Borrower and each Guarantor of the Loan Documents to
which it is a party have been duly authorized by all necessary  corporate action
and do not and will not: (a) require any consent or approval of its stockholders
which has not been obtained;  (b) contravene its certificate of incorporation or
by-laws;  (c) violate any  provision  of, or require any filing  (other than the
filing of the  financing  statements  contemplated  by the Security  Documents),
registration,  consent or approval under any Law (including, without limitation,
Regulations  T, U and X of the  Board  of  Governors),  order,  writ,  judgment,
injunction,   decree,   determination   or  award  presently  in  effect  having
applicability  to  Borrower  or any  Guarantor;  (d)-result  in a  breach  of or
constitute a default under or require any consent under any indenture or loan or
credit agreement or any other  agreement,  lease or instrument to which Borrower
or any  Guarantor  is a party or by which it or its  properties  may be bound or
affected;  (e) result in, or require,  the  creation or  imposition  of any Lien
(other than as created  under the Security  Documents),  upon or with respect to
any of the  properties  now  owned or  hereafter  acquired  by  Borrower  or any
Guarantor;  or (f) cause such  corporation  to be in default under any such Law,


                                       41
<PAGE>
order, writ, judgment,  injunction,  decree,  determination or award or any such
indenture, agreement, lease or instrument.

     Section VII.3 Legally Enforceable  Agreements.  Each Loan Document to which
Borrower and each Guarantor is a party is a legal,  valid and binding obligation
of Borrower and each Guarantor,  enforceable against Borrower and each Guarantor
in accordance with its terms,  except to the extent that such enforcement may be
limited by applicable  bankruptcy,  insolvency  and other similar laws affecting
creditors' rights generally.

     Section VII.4  Litigation.  As of the Closing  Date,  there are no actions,
suits or proceedings  (private or governmental)  pending or, to the knowledge of
Borrower or any  Guarantor,  threatened,  against or  affecting  Borrower or any
Guarantor before any Governmental  Authority or arbitrator,  except as set forth
in  Schedule  7.04.  None of the  actions  set  forth  on  Schedule  7.04  could
reasonably be expected to have a Material Adverse Change

     Section  VII.5  Financial  Statements.  Each of: (a) the  combined  balance
sheets of Borrower and its  Subsidiaries as of December 31, 1999 and the related
combined statements of income and retained earnings,  and combined statements of
cash flows of Borrower and its Subsidiaries for the Fiscal Year, then ended, and
the accompanying  footnotes,  together, with the opinion thereon, dated December
31, 1999, of Deloitte & Touche LLP,  independent  certified public  accountants,
copies  of which  have  been  furnished  to the  Banks,  and (b) the  internally
prepared  financial  statements as of December 31, 1999 showing Borrower and the
Restricted  Subsidiaries and the internally prepared financial  statements as of
March 31, 2000 showing Borrower and the Restricted  Subsidiaries,  each of which
financial  statements  shall fairly present the financial  condition of Borrower
and its  Subsidiaries  as at such  dates and the  results of the  operations  of
Borrower and its Subsidiaries for the periods covered by such statements, all in
accordance  with  GAAP  consistently  applied  except  as set forth in the notes
thereto and subject in the case of interim financials  statements to normal year
end adjustments.

     As of the Closing  Date,  there has been no Material  Adverse  Change since
December 31, 1999.

     As of the Closing Date,  there are no liabilities of Borrower or any of the
Subsidiaries,  fixed or contingent,  which are material but are not reflected in
the financial  statements referred to above or in the notes thereto,  other than
liabilities  arising in the ordinary course of business since December 31, 1999.
No  information,  exhibit,  or report  furnished  by Borrower or any  Restricted
Subsidiaries to the Agent or any Bank in connection with the negotiation of this
Agreement and the other Loan Documents  contained any material  misstatement  of
fact or  omitted  to state a  material  fact or any fact  necessary  to make the
statements contained therein not materially misleading.

     Section VII.6 Ownership and Liens.  Borrower and each Restricted Subsidiary
have title to, or valid  leasehold  interests  in, all of their  properties  and
assets,  real and personal,  including the properties and assets,  and leasehold
interests  reflected  in the  financial  statements  referred to in Section 7.05
hereof (other than any properties or assets  disposed of in the ordinary  course
of  business),  and none of the  properties  and assets owned by Borrower or any
Restricted  Subsidiary and none of their leasehold  interests are subject to any
Lien, except as may be permitted under this Agreement.

     Section VII.7 Taxes. Borrower and each Guarantor have filed all tax returns
(federal,  state  and  local)  required  to be filed  and have  paid all  taxes,
assessments  and  governmental  charges and levies thereon to be due,  including
interest  and  penalties,  except to the extent  they are the  subject of a Good
Faith Contest.

     Section  VII.8  ERISA.  Each  Plan is  administered  in  compliance  in all
material  respects with all  applicable  provisions of ERISA and the Code except
where such  failure  would not  reasonably  be  expected to result in a Material
Adverse  Change.  Neither a Reportable  Event nor a Prohibited  Transaction  has
occurred  with respect to any Plan;  no notice of intent to terminate a Plan has


                                       42
<PAGE>
been  filed nor has any Plan  been  terminated;  no  circumstance  exists  which
constitutes  grounds under Section 4042 of ERISA entitling the PBGC to institute
proceedings to terminate,  or appoint a trustee to  administer,  a Plan, nor has
the PBGC instituted any such proceedings; neither Borrower nor any Guarantor nor
any ERISA Affiliate has completely or partially  withdrawn under Section 4201 or
4204 of ERISA from a  Multiemployer  Plan; and no Plan which is a  Multiemployer
Plan is in  reorganization  (within  the meaning of Section  4241 of ERISA),  is
insolvent  (within  the  meaning  of Section  4245 of ERISA) or is  terminating;
Borrower,  each Guarantor and each ERISA  Affiliate has met its minimum  funding
requirements under ERISA with respect to all of its Plans subject to Title IV of
ERISA  and  there  are no  unfunded  vested  liabilities  except as set forth in
Schedule  7.08; and neither  Borrower nor any Guarantor nor any ERISA  Affiliate
has incurred any liability to the PBGC under ERISA;  and neither  Borrower,  any
Guarantor,  nor any ERISA  Affiliate  has liability  for retiree  medical,  life
insurance or other death  benefits  (contingent  or  otherwise)  other than as a
result of a continuation of medical coverage required under Section 4980B of the
Code or as required pursuant to an employment agreement.

     Section VII.9 Ownership of Guarantors; Investments. As of the Closing Date,
all of the outstanding  capital stock or other interest of each Guarantor is set
forth  on  Schedule  7.09  and has  been  validly  issued,  is  fully  paid  and
nonassessable and, is owned free and clear of all Liens. As of the Closing Date,
Schedule 7.09 lists all capital stock and other equity  securities or other debt
or equity investments owned or held by Borrower or any Restricted Subsidiary.

     Section  VII.10  Operation  of  Business.   Borrower  and  each  Restricted
Subsidiary  possesses all licenses,  permits,  franchises,  and trade names,  or
rights thereto,  to conduct its business  substantially  as now conducted and as
presently proposed to be conducted,  and Borrower and each Restricted Subsidiary
is not in  violation  of any valid  rights of others with  respect to any of the
foregoing.

     Section VII.11 No Default on Outstanding Judgments or Orders.  Borrower and
each  Guarantor have satisfied all judgments and Borrower and each Guarantor are
not in default with respect to any judgment, writ, injunction,  or decree of any
court,  arbitrator or any rule or regulation of any federal, state, municipal or
other   Governmental   Authority,   commission,   board,   bureau,   agency   or
instrumentality, domestic or foreign.

     Section VII.12 No Defaults on Other  Agreements.  Neither  Borrower nor any
Restricted  Subsidiary is a party to any indenture,  loan or credit agreement or
any lease or other  agreement or  instrument  or subject to any  certificate  of
incorporation or corporate  restriction  which is likely to result in a Material
Adverse Change.  Neither Borrower nor any Restricted Subsidiary is in default in
any  respect  in  the  performance,  observance  or  fulfillment  of  any of the
obligations,  covenants or conditions  contained in any agreement or instrument.
Neither  Borrower nor any Guarantor is a party to any agreement  which restricts
or prohibits any Guarantor from declaring and/or paying dividends to Borrower.

     Section VII.13 Labor Disputes and Acts of God. Neither the business nor the
properties of Borrower or any  Restricted  Subsidiary  are affected by any fire,
explosion,  accident,  strike, lockout or other labor dispute,  drought,  storm,
hail,  earthquake,  embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance), except as specified in Schedule 7.13.

     Section VII.14 Governmental Regulation.  Neither Borrower nor any Guarantor
is subject to regulation  under the Public Utility  Holding Company Act of 1935,
the Investment  Company Act of 1940,  the  Interstate  Commerce Act, the Federal
Power  Act  or  any  statute  or  regulation   limiting  its  ability  to  incur
indebtedness for money borrowed as contemplated hereby.

     Section VII.15 Partnerships. Neither Borrower nor any Restricted Subsidiary
is a partner in any partnership.

     Section  VII.16  Environmental  Protection.  Borrower  and each  Restricted
Subsidiary have obtained all permits,  licenses and other  authorizations  which
are required under all Environmental  Laws, except to the extent failure to have
any such permit,  license or authorization is not likely to result in a Material
Adverse Change.  Borrower and each Restricted  Subsidiary are in compliance with
all  Environmental  Laws and the terms and  conditions of the required  permits,
licenses and authorizations, and is also in compliance with all other applicable
limitations,  restrictions,  obligations,  schedules and timetables contained in


                                       43
<PAGE>
those Laws or contained in any plan, order, decree, judgment, injunction, notice
or demand letter  issued,  entered,  promulgated  or approved by a  Governmental
Authority  thereunder,  except to the extent  failure to comply is not likely to
result in a Material Adverse Change.

     The   Collateral   contains  no  Hazardous   Materials   that,   under  any
Environmental Law then in effect,  (a)-would impose liability on Borrower or any
Guarantor that could result in a Material  Adverse Change or (b) could result in
the imposition of a Lien on the  Collateral or any portion  thereof or any other
assets of Borrower or any  Guarantor,  in each case if not  properly  handled in
accordance with applicable Law.

     Section  VII.17  Solvency.   Borrower  and  each  Guarantor  is,  and  upon
consummation of the transactions  contemplated by this Agreement, the other Loan
Documents, and any other documents,  instruments or agreements relating thereto,
will be Solvent.

ARTICLE VIII.  AFFIRMATIVE COVENANTS

     So long as any of the Notes  shall  remain  unpaid or any  Letter of Credit
Obligation shall remain outstanding or any Bank or Chase shall have a Commitment
hereunder,  or any other amount is owing by Borrower to any Bank Party hereunder
or under any other Loan Document,  Borrower and each  Guarantor,  except HIL and
its Subsidiaries as to the covenants  contained in Sections 8.07, 8.08, 8.10 and
8.11 hereof, shall:

     Section  VIII.1  Maintenance  of  Existence.   Preserve  and  maintain  its
corporate  existence and good standing in the jurisdiction of its incorporation,
and qualify and remain qualified as a foreign  corporation in each  jurisdiction
in which such  qualification is required,  except to the extent that its failure
to so qualify could not result in a Material Adverse Change.

     Section VIII.2  Conduct of Business.  Continue to operate its business in a
manner consistent with the conduct of it on and prior to the Closing Date.

     Section VIII.3 Maintenance of Properties.  Maintain,  keep and preserve all
of its  properties,  (tangible and  intangible)  necessary or used in the proper
conduct of its business in good working order and  condition,  ordinary wear and
tear excepted.

     Section VIII.4  Maintenance of Records.  Keep adequate records and books of
account,  in  which  complete  entries  will be made in  accordance  with  GAAP,
reflecting all of its financial transactions.

     Section   VIII.5   Maintenance  of  Insurance.   Maintain   insurance  with
financially  sound and reputable  insurance  companies or  associations  in such
amounts and covering such risks as are usually  carried by companies  engaged in
the same or a similar  business and similarly  situated and such other insurance
as reasonably required by the Banks.

     Section  VIII.6  Compliance  with  Laws.  Comply in all  respects  with all
applicable Laws, such compliance to include,  without limitation,  paying before
the same become  delinquent  all taxes,  assessments  and  governmental  charges
imposed upon it or upon its  property,  except (a) in the case of the failure to
pay taxes,  such taxes are the subject of a Good Faith  Contest,  and (b) to the
extent  that its  failure  to so  comply is not  likely to result in a  Material
Adverse Change.

     Section VIII.7 Right of Inspection.

     (a)  Except  upon the  occurrence  of an Event of  Default  and  during the
continuance  thereof,  upon prior  notice,  at any time during  normal  business
hours, permit Agent,  Collateral Monitor or any agent or representative thereof,
to examine and make copies and  abstracts  from the records and books of account
of, and visit the properties of,  Borrower and any Restricted  Subsidiary and to


                                       44
<PAGE>
discuss the  affairs,  finances  and  accounts of  Borrower  and any  Restricted
Subsidiary with any of their  respective  officers and directors and independent
accountants;  permit Agent,  Collateral  Monitor or any agent or  representative
thereof, to examine and audit the inventory and receivables of Borrower and each
Restricted Subsidiary, such costs to be borne by the Banks.

     (b) In addition  to, and not in  limitation  of the  foregoing,  Collateral
Monitor  shall be permitted,  at any time,  once during each twelve month period
from and after the  Closing  Date (the  "Annual  Period"),  to examine  and make
copies  of and make  extracts  from the  books  and  records  of,  and visit the
properties  of, and discuss the  affairs,  finances and accounts of Borrower and
its Subsidiaries with any of their respective employees, officers, directors and
independent accountants, at the expense of the Borrower (such foregoing right of
inspection   and  review  to  be  referred  to  as  the  "First   Annual   Field
Examination").  The  Collateral  Monitor shall be paid $750 per day per examiner
plus the  reasonable  out-of-pocket  costs  incurred  by  Collateral  Monitor in
conducting the First Annual Field Examination.  Prior to the commencement of the
First Annual Field Examination,  Borrower,  if requested by Collateral  Monitor,
shall pay Collateral Monitor a deposit of not more than $20,000,  to be credited
to the  payment  of the fees and  expenses  incurred  by  Collateral  Monitor in
connection with the First Annual Field  Examination.  Any unused portion of such
deposit shall be returned to Borrower.

     In addition to, and not in limitation of the foregoing,  with respect to in
each such Annual  Period,  Collateral  Monitor shall have the right to conduct a
second separate field examination (the "Second Annual Field Examination") at the
expense of Borrower,  provided that (i) Collateral  Monitor shall only be paid a
flat fee of  $5,000  prior  to the  commencement  of such  Second  Annual  Field
Examination, and (ii) such Second Annual Field Examination shall be conducted at
such time in the Annual Period as when Borrower and its Restricted  Subsidiaries
are projected to have Outstanding  Credit  Facilities,  prior to the addition of
the  Supplemental  Amount to the Borrowing  Base, in excess of the Net Borrowing
Base.

     In  consideration  for serving as Collateral  Monitor,  Collateral  Monitor
shall  be  paid  a fee of  $10,000,  non-refundable  and  earned  regardless  of
circumstances, on the Closing Date and an additional $10,000 on each anniversary
thereof.  Such fee is in addition to the  payment to  Collateral  Monitor of any
other fees referred to in this Section 8.07(b).

     Section  VIII.8  Reporting  Requirements.  Furnish  directly to each of the
Banks:

     (a) Borrower's Quarterly Financial Statements.  As soon as available and in
any event within  forty-five  (45) days after the end of each of the first three
quarters of each Fiscal Year of Borrower,  the  consolidating  balance sheets of
Borrower, and (i)-its Restricted Subsidiaries,  and (ii)-all of its Subsidiaries
as of the end of such  quarter,  consolidated  and  consolidating  statements of
income,  statements of stockholders' equity and cash flow statements of Borrower
and (A) its Restricted  Subsidiaries  and (B) all of its  Subsidiaries  both for
such quarter and for the period  commencing  at the end of the  previous  Fiscal
Year and  ending  with the end of such  quarter,  all in  reasonable  detail and
stating in comparative form corresponding unaudited consolidated figures for the
corresponding  date and period in the  previous  Fiscal Year and all prepared in
accordance with GAAP  consistently  applied and certified by the chief financial
officer of Borrower (subject to year-end adjustments).

     (b) Borrower's Annual Financial Statements. As soon as available and in any
event within one hundred  twenty (120) days after the end of each Fiscal Year of
Borrower:  (i)  for  Borrower  and  its  Subsidiaries,  on  a  consolidated  and
consolidating basis, the balance sheets,  statements of changes in stockholders'
equity,  income statements and statements of cash flow for such Fiscal Year, all
in reasonable detail and stating in comparative form the respective consolidated
figures  for the  corresponding  date  and  period  in the  Fiscal  Year and all
prepared in accordance  with GAAP  consistently  applied,  and the  consolidated
financials  referenced  in this  Section  8.08(b)(i)  shall be  audited  by such
independent  certified public accountants selected by Borrower and acceptable to
Banks and the  consolidating  financial  statements  referenced  in this Section
8.08(b)(i)  shall be certified by the chief financial  officer of Borrower;  and
(ii)  for  Borrower  and the  Restricted  Subsidiaries,  on a  consolidated  and


                                       45
<PAGE>
consolidating basis, the balance sheets,  statements of changes in stockholders'
equity,  income statements and statements of cash flow for such Fiscal Year, all
in reasonable detail and stating in comparative form the respective consolidated
figures  for the  corresponding  date and  period for such  Fiscal  Year and all
prepared  in  accordance  with GAAP  consistently  applied,  and which  shall be
certified by the chief financial officer of Borrower, and (iii) for Borrower and
the Restricted  Subsidiaries,  the balance sheets and income statements prepared
on a consolidated basis in accordance with GAAP consistently  applied, and which
shall be audited by such independent  certified public  accountants  selected by
Borrower and acceptable to Banks. As of the date hereof,  Deloitte & Touche, LLP
is acceptable to Banks.

     (c) Borrowing  Base  Certificate.  Within  twenty-one  (21) days after each
Fiscal  Month End Date,  a Borrowing  Base  Certificate,  in form and  substance
satisfactory to the Agent  reporting that all Revolving  Credit Loans and Letter
of Credit  Obligations  as of such Fiscal Month End Date are in compliance  with
the Net Borrowing  Base as of such Fiscal Month End Date and such Borrowing Base
Certificate shall be accompanied by a summary accounts receivable aging.

     (d)  Management  Letters.  Promptly  upon  receipt  thereof,  copies of any
reports  submitted to Borrower and any  Consolidated  Subsidiary by  independent
certified public accountants in connection with the examination of the financial
statements  of  such  Borrower  and   Consolidated   Subsidiary   made  by  such
accountants.

     (e) Certificate of No Default. Within forty-five (45) days after the end of
each  quarter  of each  Fiscal  Year of  Borrower,  a  certificate  of the chief
financial officer of Borrower (i)-certifying that no Default or Event of Default
has occurred and is continuing or, if a Default or Event of Default has occurred
and is continuing,  a statement as to the nature thereof and the action which is
proposed  to  be  taken  with  respect  thereto,   and  (ii)  with  computations
demonstrating  compliance  with the covenants  contained in Article X, as of the
end of that fiscal period.

     (f)  Notice  of  Litigation.  Promptly  after  receipt  of  notice  of  the
commencement thereof,  notice of all actions,  suits, and proceedings before any
Governmental  Authority,  affecting Borrower or any Restricted Subsidiary which,
if determined adversely to Borrower or any Restricted  Subsidiary,  could result
in a Material Adverse Change.

     (g) Notices of Defaults  and Events of Default.  As soon as possible and in
any event within ten (10) days after the  occurrence of each Default or Event of
Default a written  notice  setting forth the details of such Default or Event of
Default and the action which is proposed to be taken with respect thereto.

     (h) ERISA Reports.  As soon as possible and in any event within twenty (20)
days after  Borrower  knows or has reason to know that any  Reportable  Event or
Prohibited Transaction has occurred with respect to any Plan or that the PBGC or
Borrower has instituted or will institute proceedings under Title IV of ERISA to
terminate any Plan or that  Borrower,  or any ERISA  Affiliate has completely or
partially  withdrawn  from a  Multiemployer  Plan  or  that a  Plan  which  is a
Multiemployer  Plan is in reorganization  (within the meaning of Section 4241 of
ERISA),  is  insolvent  (within  the  meaning  of  Section  4245 of ERISA) or is
terminating,  Borrower  will deliver to each of the Banks a  certificate  of the
chief financial  officer of Borrower setting forth details as to such Reportable
Event  or  Prohibited   Transaction   or  Plan   termination  or  withdrawal  or
reorganization  or  insolvency  and the action  Borrower  proposes  to take with
respect thereto.

     (i) Annual  Business  Plan.  As soon as possible  and in any event no later
than January 31 in any year, a copy of an annual  consolidated  business plan in
form and  substance  acceptable  to the Banks with  respect to the then  current
Fiscal Year  (consisting  of  consolidated  balance  sheets of Borrower  and its
Subsidiaries,  and consolidated  statements of earnings and cash flow statements
of Borrower and its  Subsidiaries,  prepared on a quarterly basis for such year)
for Borrower and its  Subsidiaries  approved by  Borrower's  Board of Directors,
together  with the  assumptions  and  projections  on which the business plan is


                                       46
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based;  provided,  that,  at Borrower's  option,  on or about May 1 in any year,
Borrower may deliver a revised annual consolidated business plan with respect to
the current Fiscal Year (as described above and along with all of the supporting
documentation  also described above) so that the Banks may reconsider,  in their
sole and absolute  discretion,  the amount of the  Supplemental  Amount for such
subsequent  Fiscal Year.  Any material  changes made to the plan during the year
will be provided by Borrower as soon as possible.

     (j) Insurance. Upon the occurrence of any casualty, damage or loss, whether
or not giving rise to a claim under any insurance  policy,  in an amount greater
than Five Hundred Thousand  ($500,000)  Dollars,  notice thereof,  together with
copies of any document relating thereto  (including copies of any such claim) in
possession or control of Borrower and any Restricted  Subsidiary or any agent of
Borrower and any Restricted  Subsidiary;  and  immediately  after the occurrence
thereof,  written notice of any cancellation of any insurance policy required to
be maintained by Borrower and any Restricted Subsidiary pursuant to Section 6.05
hereof.

     (k) Material  Adverse  Change.  As soon as possible and in any event within
five (5) days after the occurrence of any event or circumstance  which is likely
to result in or has  resulted  in a  Material  Adverse  Change,  written  notice
thereof.

     (l) Environmental  Notices. As soon as possible and in any event within ten
(10) days  after  receipt  by any  corporate  executive  officer,  copies of all
Environmental  Notices  received by Borrower or any Restricted  Subsidiary which
are not received in and do not relate to the ordinary course of Borrower or such
Restricted Subsidiary's business.

     (m) General Information.  Such other information  respecting the conditions
or operations,  financial or otherwise, of Borrower or any Restricted Subsidiary
as the Agent or any Bank may from time to time reasonably request.

     Section VIII.9 Compliance With  Environmental  Laws. Comply in all respects
with all applicable  Environmental Laws where the failure to comply could result
in a Material Adverse Change.

     Section VIII.10 Additional Guarantor. Borrower shall cause Keynote Services
Limited  ("Keynote")  to become a Guarantor  hereunder at such time as Keynote's
assets (as  calculated  in  accordance  with GAAP)  equal or exceed One  Hundred
Thousand ($100,000) Dollars.

     Section VIII.11 Key-Person Life Insurance Policies.

     (a)  Borrower  shall  maintain  with  an  insurance  company  or  companies
reasonably  acceptable  to Agent,  key-person  life  insurance  policies  in the
aggregate  face amount of not less than  $5,000,000  insuring the life of Ludwig
Kuttner.  All life  insurance  policies  owned and  maintained  by  Borrower  as
required by this  Section  8.11 shall  designate  Borrower as owner and shall be
assigned to Agent or agent for the Insurance  Companies (subject to the terms of
the  Intercreditor  Agreement) as collateral  security for the Obligations.  The
proceeds payable to such assignee under said insurance  policies in the event of
the  death of  Ludwig  Kuttner  shall  at no time be less  than  the  amount  of
$5,000,000.  So long as any of the Obligations remains outstanding,  without the
prior  written  consent of Agent,  Borrower  shall not (i) amend or modify  said
insurance  policies,  (ii) take any  action to  affect  the face  amount of said
insurance policies, or (iii) borrow any amount against such policies or take any
action to affect the cash surrender value of such policies which would cause the
aggregate  proceeds  payable to Agent or agent for the Insurance  Companies,  as
assignee,  from all such policies in the event of the death of Ludwig Kuttner to
be less  than  $5,000,000.  In the  event of the  death of  Ludwig  Kuttner  all
proceeds  of the  insurance  policies  required  by this  Section  8.11 shall be
applied in respect of the  Obligations in such order and manner as Agent, in its
sole discretion, determines.

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<PAGE>
     (b)  Borrower  shall  maintain  with  an  insurance  company  or  companies
reasonably  acceptable  to Agent,  key-person  life  insurance  policies  in the
aggregate  face amount of not less than  $1,000,000  insuring the life of Martin
Axman. All life insurance  policies owned and maintained by Borrower as required
by this Section 8.11 shall designate  Borrower as owner and shall be assigned to
Agent  or  agent  for the  Insurance  Companies  (subject  to the  terms  of the
Intercreditor  Agreement)  as  collateral  security  for  the  Obligations.  The
proceeds payable to such assignee, under said insurance policies in the event of
the  death  of  Martin  Axman  shall  at no time  be less  than  the  amount  of
$1,000,000.  So long as any of the Obligations remains outstanding,  without the
prior  written  consent of Agent,  Borrower  shall not (i) amend or modify  said
insurance  policies,  (ii) take any  action to  affect  the face  amount of said
insurance policies, or (iii) borrow any amount against such policies or take any
action to affect the cash surrender value of such policies which would cause the
aggregate  proceeds  payable to Agent or agent for the Insurance  Companies,  as
assignee, from all such policies in the event of the death of Martin Axman to be
less than $1,000,000.  In the event of the death of Martin Axman all proceeds of
the insurance policies required by this Section 8.11 shall be applied in respect
of the  Obligations in such order and manner as Agent,  in its sole  discretion,
determines.

ARTICLE IX.  NEGATIVE COVENANTS

     So long as any of the Notes  shall  remain  unpaid or any  Letter of Credit
Obligation  shall  remain  outstanding  or any  Bank or  Chase  shall  have  any
Commitment  hereunder or any other amount is owing by Borrower to any Bank Party
hereunder  or under  any  other  Loan  Document,  Borrower  and  each  Guarantor
(excluding HIL and its Subsidiaries with respect to this Article IX), shall not:

     Section  IX.1  Debt.  Create,  incur,  assume  or suffer to exist any Debt,
except:

     (a) Debt of Borrower and the Guarantors under this Agreement, the Notes, or
any other Loan Document;

     (b)  Accounts  payable to any Person  that  supplies  goods or  services to
Borrower  or any  Guarantor,  and other  current  liabilities  (other than Debt)
incurred,  in the ordinary course of business;  provided that, all such accounts
and liabilities are paid in the ordinary course of business;

     (c) Debt of Borrower under the Insurance Company Loan Documents;

     (d) Debt  secured by purchase  money Liens (i)  permitted  by Section  9.03
hereof  and  (ii)  of  acquired  properties  and  acquired  Persons  who  become
Restricted Subsidiaries;

     (e) an unsecured  five (5) year term loan from  Merchant  National  Bank to
Borrower; provided, that, (i) the principal amount of such loan shall not exceed
$3,000,000,  (ii) the terms and conditions of such loan shall be in all respects
satisfactory  to Banks,  and (iii) Borrower shall provide copies of all document
and  agreements  related  thereto  to Agent and  neither  the  Borrower  nor any
Subsidiary shall execute or deliver such documents or agreements until Agent has
consented to such term loan in writing;

     (f) up to an aggregate Two Million  ($2,000,000) Dollars in unsecured lines
of credit provided by CBC Bank (formerly known as MTB Bank), Carolina First Bank
and Merchants  National Bank to be used for trade and standby  letters of credit
payable at sight (the "Unsecured Lines");

     (g) Guaranties permitted under Section 9.02 hereof; and

     (h) Item-Eyes Acquisition Debt.

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<PAGE>
     Section  IX.2  Guaranties.  Assume,  guarantee,  endorse or otherwise be or
become  directly  or  contingently  responsible  or liable  (including,  but not
limited to an agreement  to purchase any  obligation,  stock,  assets,  goods or
services or to supply or advance any funds,  assets,  goods or  services,  or an
agreement to maintain or cause such Person to maintain a minimum working capital
or net worth or otherwise to assure the  creditors of any Person  against  loss)
for the obligations of any Person, except:

     (a)  guaranties by  endorsement  of negotiable  instruments  for deposit or
collection or similar transactions in the ordinary course of business;

     (b) the Guaranty Obligations;

     (c)-guaranties by Borrower or any Restricted Subsidiary of accounts payable
incurred in the  ordinary  course of  business  by  Borrower  or any  Restricted
Subsidiary, as the case may be;

     (d)-guaranties by Borrower and the Restricted  Subsidiaries for the benefit
of HIL, but not in excess of the amount provided in Section-9.10 hereof;

     (e) guaranties under Insurance Company Loan Documents;

     (f) the guaranty by Borrower of the Item-Eyes Acquisition Debt;

     (g)  guaranties  up to  $100,000  of trade  obligations  of  other  Persons
provided such guaranties are within the amount of Restricted Payments; and

     (h) Guaranties permitted under Section 9.06(h) hereof.

     Section IX.3 Liens. Create, incur, assume or suffer to exist any Lien, upon
or with respect to any of its real or personal  properties  (including,  without
limitation,  leasehold interests,  leasehold improvements and any other interest
in real  property or  fixtures),  now owned or  hereafter  acquired,  except the
following ("Permitted Liens"):

     (a)  Liens granted under and pursuant to the Loan Documents;

     (b)  Liens  granted  under  and  pursuant  to the  Insurance  Company  Loan
Documents.

     (c) Liens for taxes or assessments or other government charges or levies if
not yet due and  payable or if due and payable if they are the subject of a Good
Faith Contest;

     (d) Liens imposed by law, such as  mechanic's,  materialmen's,  landlord's,
warehousemen's   and  carrier's  Liens,   and  other  similar  Liens,   securing
obligations  incurred in the ordinary  course of business which are not past due
for more than  ninety  (90)  days,  or which  are the  subject  of a Good  Faith
Contest;

     (e) Liens under  workmen's  compensation,  unemployment  insurance,  social
security  or similar  legislation  (other  than  ERISA) or to secure  letters of
credit obtained in connection therewith;

     (f) Liens of GMAC Commercial  Credit LLC ("GMAC") in its capacity as factor
for  Borrower  or a  Restricted  Subsidiary  ("Factor"),  so long as  Agent  has
obtained  the  following in form and  substance  satisfactory  to Agent:  (i) an
assignment of factoring  proceeds and (ii) an agreement  duly executed by Factor
pursuant to which Factor  agrees,  among other things,  not to make any loans or
advances  to  Borrower or a  Restricted  Subsidiary  or to guaranty on behalf of
Borrower or any Restricted Subsidiary any amounts;

     (g) Liens,  deposits or pledges to secure the performance of bids, tenders,
contracts  (other than  contracts for the payment of money),  leases  (permitted
under the terms of this  Agreement),  public or statutory  obligations,  surety,
stay,  appeal,  indemnity,  performance or other similar bonds, or other similar
obligations arising in the ordinary course of business;

                                       49
<PAGE>
     (h) judgment  and other  similar  Liens  arising in  connection  with court
proceedings,  provided  that, the existence of such Liens does not constitute an
Event of Default;

     (i)  easements,  rights-of-way,  restrictions,  zoning  and  other  similar
encumbrances  which,  in the  aggregate,  do not  materially  interfere with the
occupation,  use and  enjoyment by Borrower or any  Guarantor of the property or
assets  encumbered  thereby in the normal  course of its business or  materially
impair the value of the property subject thereto;

     (j) each of the Liens listed on Schedule 9.03  securing the Debt  specified
on such schedule,  including any extension or  modification  thereof but not the
extension of such Lien to other property in whole or in part;

     (k)  purchase  money  Liens on any real  property,  fixtures  or  equipment
hereafter  acquired or the  assumption of or taking  subject to any Lien on real
property,  fixtures or equipment existing at the time of such acquisition,  or a
Lien incurred in connection with any  conditional  sale or other title retention
agreement or a Capital Lease; provided that:

          (i) any  property  subject  to any of the  foregoing  is  acquired  by
     Borrower or any  Guarantor in the  ordinary  course of its business and the
     Lien on any such property (if not preexisting) is created contemporaneously
     with such acquisition or within 90 days thereof;

          (ii) the Debt  secured by any Lien so  created,  assumed  or  existing
     shall not exceed one  hundred  percent  (100%) of the lesser of the cost or
     fair market value as of the time of  acquisition  of the  property  covered
     thereby including shipping and installation costs; and

          (iii) each such Lien shall attach only to the property so acquired and
     fixed improvements thereon.

     Section IX.4 Sale of Assets.  Sell,  lease,  assign,  transfer or otherwise
dispose of any of its now owned or  hereafter  acquired  assets to any Person or
any capital stock of Borrower or its Subsidiaries to any Person,  except for (a)
inventory disposed of in the ordinary course of business;  (b) the sale or other
disposition of worn out or obsolete assets or assets no longer necessary for the
conduct  of its  business;  (c) the sale or other  dispositions  of  assets  not
exceeding  One Hundred  Thousand  ($100,000)  Dollars per Fiscal  Year;  (d) the
leasing of assets having an aggregate book value not exceeding One Hundred Fifty
Thousand  ($150,000)  Dollars;  (e) accounts  receivable pursuant to a factoring
agreement  acceptable to Agent in its sole discretion;  (f) assets sold pursuant
to the OG Asset Purchase Agreement, and (g) Borrower's issuance of capital stock
or options related thereto or other equity interests in Borrower.

     Section IX.5  Transactions  with  Affiliates.  Enter into any  transaction,
including, without limitation, the purchase, sale or exchange of property or the
rendering  of any  service,  with  any  Affiliate  other  than  Borrower  or any
Restricted  Subsidiary  or  enter  into  any  transaction,   including,  without
limitation,  the purchase,  lease, sale or exchange of property or the rendering
of any service, with any such Affiliate,  except for transactions among Borrower
and its Restricted Subsidiaries or in the ordinary course of and pursuant to the
reasonable  requirements of Borrower's or the Restricted  Subsidiary's  business
and upon fair and  reasonable  terms no less favorable to Borrower or Restricted
Subsidiary than it would obtain in a comparable arms' length  transaction with a
Person not an Affiliate or described  on Schedule  9.05,  provided  however that
Borrower  and  Restricted  Subsidiaries  may make  loans,  and  advances  to and
investments  in HIL;  so long  as all  such  loans,  advances,  investments  and
guaranties provided in Section 9.02 hereof do not, in the aggregate,  exceed the
amount  of  permitted  Restricted  Payments  allowed  in  Section  9.10  hereof.
Notwithstanding  anything to the contrary  contained herein,  HIL shall not make
any payments in respect of the Senior  Secured  Notes except (a) if such payment
is made in  connection  with its  guaranty of the  obligations  evidenced by the
Senior Secured Notes in accordance with the terms of the Intercreditor Agreement
or (b) if the Banks receive their Ratable Portion of such payment;  such payment
described  in  subsection  (b) of this  sentence  shall be  deemed  a  mandatory
prepayment and treated in accordance with Section 2.07(b) hereof.

                                       50
<PAGE>
     Section IX.6 Investments. Without the written approval of the Banks, except
as provided in Sections  9.05 and 9.10  hereof,  make any loan or advance to any
Person or purchase or otherwise acquire any capital stock,  assets,  obligations
or other  securities of, make any capital  contribution  to, or otherwise invest
in, or acquire any interest in, any Person in excess of  $250,000,  except:  (a)
direct   obligations   of  the  United  States  of  America  or  any  agency  or
instrumentality  thereof  with  maturities  of one year or less from the date of
acquisition;  (b)-commercial paper of a domestic issuer or government securities
rated at least  "A-1" by  Standard  &  Poor's  Corporation  or "P-1" by  Moody's
Investors Service, Inc.; (c) time deposits,  demand deposits and certificates of
deposit with maturities of one year or less from the date of acquisition  issued
by and  commercial  bank  operating  within the United States of America  having
capital  and surplus in excess of  $50,000,000;  (d) for stock,  obligations  or
securities  received in settlement of debts  (created in the ordinary  course of
business)  owing  to  Borrower  (each  of (a)  (b)  (c)  and  (d),  collectively
"Permitted  Investments");  (e) investments made in accordance with Section 9.10
hereof;  (f) the Item-Eyes  Acquisition;  (g) the formation of additional wholly
owned Subsidiaries of Borrower or the Restricted  Subsidiaries;  provided, that,
in connection therewith,  unless Agent shall waive such requirements,  each such
Subsidiary shall deliver to Agent a joinder to this Agreement, the capital stock
or other equity  interests of such Subsidiary  shall be pledged to Agent for the
benefit of Banks and such Subsidiary shall deliver to Agent a security agreement
substantially  the form of a the  Guarantor  Security  Agreements  and any other
agreement,  document or instrument  reasonably  requested by Agent in connection
with the  foregoing;  (h)  investments  in  Borrower's  common  stock  made with
director  and officer  deferred  compensation  pursuant to the terms  Borrower's
common  stock  purchase  plan and  investments  made with  director  or  officer
deferred compensation pursuant to Borrower's deferred compensation plan; and (i)
loans or advances to any  employees  of Borrower or a Restricted  Subsidiary  or
guaranties  made by Borrower and the Restricted  Subsidiaries of indebtedness or
obligations  of any of their  employees not to exceed  $200,000 in the aggregate
during any Fiscal  Year  outstanding  in the  ordinary  course of  business  for
reasonable and necessary work-related,  moving, entertainment and other ordinary
business  expenses to be incurred by such  employee(s) in connection  with their
employment;  provided,  that, as of the date of such loan or guarantee and after
giving effect thereto, no Event of Default shall exist or have occurred.

     Section IX.7 Mergers.  Merge or consolidate with, or sell, assign, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its assets (whether now owned or hereafter acquired)
to any  Person  or form any  Subsidiary,  except  that the  foregoing  shall not
prohibit the merger of Restricted  Subsidiaries with and into each other or into
Borrower,  so long as at the time thereof or as a result  thereof there shall be
no Default or Event of Default.

     Section  IX.8  Leases.  Create,  incur,  assume,  or  suffer  to exist  any
obligation  as lessee  for the rental or hire of any real or  personal  property
except:  (a) Capital Leases permitted under Section 9.03(k) hereof,  (b) each of
the  retail  and  warehouse  leases in effect on this date and those  retail and
warehouse  leases entered into in the future,  and (c) leases that do not in the
aggregate  require  Borrower and its  Subsidiaries  to make payments  (including
taxes, insurance,  maintenance,  and similar expenses which Borrower is required
to pay under the terms of the lease but  excluding  all  payments  based  upon a
percentage  of sales or  revenues)  in any  Fiscal  Year in excess of the amount
permitted under Section 10.04 hereof.

     Section IX.9 Dividends.  Declare or pay any cash dividends on capital stock
of Borrower; or purchase,  redeem, retire, or otherwise acquire for value any of
the capital stock or securities  convertible  into capital stock of Borrower now
or hereafter  outstanding or make any distribution of assets to its stockholders
as such whether in cash, assets, or in obligations of Borrower or any Restricted
Subsidiary,  or allocate or  otherwise  set apart any sum for the payment of any
dividend or distribution on, or for the purchase,  redemption,  or retirement of
any shares of its capital stock,  except in all cases for transactions  that are
(a)-made  in  common  stock  of  Borrower  or  (b)  otherwise   permitted  under
Section-9.10 hereof.

     Section IX.10 Restricted Payments. Notwithstanding anything to the contrary
contained in this Article IX, (a) Borrower or any  Restricted  Subsidiary  shall
not make any payments in respect of the Item-Eyes Acquisition Debt; except that,


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<PAGE>
so long as no Default  exists and is  continuing,  Vintage may make  payments in
respect of the Item-Eyes  Acquisition Debt in accordance  Schedule 9.10(a);  and
(b) Borrower shall not declare or pay any cash dividend, optional pre-payment of
subordinated  debt,  issue any  guaranties  (except as provided in Section  9.02
hereof),  repurchase any shares of the Borrower or make any advances or payments
to,  investments  in, or issue  guaranties  for HIL;  except that, so long as no
Default exists and is continuing,  (i)-Borrower may repurchase treasury stock in
an aggregate amount not to exceed $600,000,  and (ii) Borrower may make advances
or payments to or  investments  in, or issue  guaranties for HIL as indicated on
Schedule 9.10(b)(ii), and to the extent that the aggregate amount of investments
in,  advances  to or  guaranties  of  the  obligations  of  HIL  do  not  exceed
$25,635,287.  In calculating Restricted Payments under this Section 9.10 (b)(ii)
investments  shall be valued at cost without  adjustment  for losses or earnings
incurred by HIL.

     Section  IX.11 Fiscal  Year.  Change its fiscal year to a period other than
its fiscal year in effect on the date hereof.

     Section IX.12 Changes,  Amendments or Modifications.  Change, amend, modify
or supplement any of the following: (a) its certificate of incorporation; or (b)
by-laws.

ARTICLE X.  FINANCIAL COVENANTS

     So long as any of the Notes  shall  remain  unpaid or any  Letter of Credit
Obligation  shall  remain  outstanding  or any  Bank or  Chase  shall  have  any
Commitment  hereunder or any other amount  hereunder is owing by Borrower to any
Bank Party hereunder or under any other Loan Document:

     Section X.1  Consolidated  Tangible Net Worth.  Borrower and its Restricted
Subsidiaries  shall maintain at all times a  Consolidated  Tangible Net Worth of
not less than the amount specified below:

     (a) for the quarter ending September 30, 2000, $44,500,000;

     (b) for the quarter ending December 31, 2000, $49,700,000;

     (c) for the quarter ending March 31, 2001, the actual Consolidated Tangible
Net Worth set forth in the Annual Financial  Statements required to be delivered
under Section  8.08(b) hereof for the Fiscal Year ending  December 31, 2000 less
$3,000,000;

     (d) for the quarter ending June 30, 2001, the actual Consolidated  Tangible
Net Worth set forth in the Annual Financial  Statements required to be delivered
under Section  8.08(b) hereof for the Fiscal Year ending  December 31, 2000 less
$6,000,000; and

     (e) for all subsequent quarters,  the actual reported Consolidated Tangible
Net  Worth  set  forth in the  Quarterly  Financial  Statements  required  to be
delivered under Section 8.08(b) hereof for the period ending June 30, 2001, plus
fifty (50%) percent of the amount of  Consolidated  Net Income earned after June
30, 2001 as  reflected  in the  Quarterly  Financial  Statements  required to be
delivered to Agent under Section 8.08(a) hereof, calculated on a quarterly basis
without deduction or offset for net losses.

                                       52
<PAGE>
     Section X.2 Consolidated Fixed Charge Coverage Ratio.

     (a) Borrower and its Restricted  Subsidiaries will maintain a ratio of: (i)
(A) Consolidated Earnings Before Interest,  Taxes, Depreciation and Amortization
for such period, less (B) Consolidated Capital Expenditures made by the Borrower
or any Consolidated  Subsidiary during such period, less (C) Consolidated Taxes,
to (ii) the sum of (A) Consolidated  Interest Expense for such period,  plus (B)
Consolidated Principal Amortization shall not be less than the ratio of:

     (1) 3.00 to 1, for the three (3) Fiscal Months ending September 30, 2000;

     (2) 3.00 to 1, on a cumulative  basis, for the six (6) Fiscal Months ending
December 31, 2000; and

     (3) 2.25 to 1, on a cumulative basis, for the nine (9) Fiscal Months ending
March 31, 2001.

     (b) Borrower and its Restricted  Subsidiaries will maintain for each twelve
(12) month period calculated on a rolling four (4) quarter basis a ratio of: (i)
(A) Consolidated Earnings Before Interest,  Taxes, Depreciation and Amortization
for such period, less (B) Consolidated Capital Expenditures made by the Borrower
or any Consolidated  Subsidiary during such period, less (C) Consolidated Taxes,
to (ii) the sum of (A) Consolidated  Interest Expense for such period,  plus (B)
Consolidated  Principal Amortization shall not be less than the ratio of 1.75 to
1, for the Fiscal Year ending June 30, 2001 and all subsequent quarters.

     Section  X.3  Consolidated  Leverage  Ratio.  Borrower  and its  Restricted
Subsidiaries  shall  maintain  at all  times a ratio of (a)  Consolidated  Total
Liabilities to (b) Consolidated Tangible Net Worth of not greater than:

      For the quarter ending September 30, 2000            2.75 to 1
      For the quarter ending December 31, 2000             1.20 to 1
      For the quarter ending March 31, 2001                0.90 to 1
      For the quarter ending June 30, 2001                 1.50 to 1
      For the quarter ending September 29, 2001            2.25 to 1
      For the quarter ending December 31, 2001             1.00 to 1
      For the quarter ending March 30, 2002                1.25 to 1
      For the quarter ending June 29, 2002                 1.50 to 1
      For the quarter ending September 28, 2002            2.25 to 1
      For the quarter ending December 31, 2002             1.00 to 1
      For the quarter ending March 29, 2003                1.25 to 1
      For the quarter ending June 28, 2003                 1.50 to 1

     Section X.4 Consolidated Capital Expenditures.  Borrower and its Restricted
Subsidiaries   shall  not,  in  any  Fiscal  Year,  make  Consolidated   Capital
Expenditures in the aggregate amount in excess of $1,000,000.

     Section  X.5  Consolidated   Interest  Coverage  Ratio.  Borrower  and  its
Restricted  Subsidiaries  will  maintain  for  each  twelve  (12)  month  period
calculated  on a rolling four (4) quarter  basis a ratio of:  (a)-the sum of (i)
Consolidated Net Income plus  Consolidated  Interest  Expense plus  Consolidated
Taxes for such period,  plus (ii) rents paid for such period,  to (b) the sum of
(i) Consolidated Interest Expense for such period, plus (ii) rents paid for such
period, of not less than the ratio of 2.10 to 1.

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ARTICLE XI.  EVENTS OF DEFAULT

     Section  XI.1 Events of Default.  Any of the  following  events shall be an
"Event of Default":

     (a) Borrower shall: (i) fail to pay the principal of any Note or shall fail
to reimburse  any Bank on a Letter of Credit as and when due and  payable;  (ii)
fail to pay  interest  on any Note  within  five (5)  Banking  Days of when such
interest  is due and  payable;  (iii) fail to pay within ten (10) days after the
request for  payment is made any fees or expenses  required to be paid under the
terms  of  any of the  Loan  Documents;  (iv)  fail  to  make  any  payments  or
prepayments  under Section 2.07 (b) hereof  within three (3) Banking  Days;  (v)
fail to make any payments  under Section 2.07 (c) hereof on the date required by
that  Section and (vi) fail to deliver,  in  accordance  with  Section  8.08 (c)
hereof,  a Borrowing Base  Certificate  showing that the  outstanding  Revolving
Credit Loans and Letter of Credit  Obligations  as of such Fiscal Month End Date
are equal to or less than the Net  Borrowing  Base as of such  Fiscal  Month End
Date;

     (b) any  representation  or warranty made or deemed made by Borrower or any
Guarantor in this Agreement or in any other Loan Document to which it is a party
or which is contained in any certificate,  document, opinion, financial or other
statement  furnished at any time under or in  connection  with any Loan Document
shall prove to have been incorrect in any material  respect on or as of the date
made or deemed made;

     (c)  Borrower or any  Guarantor  shall fail to perform or observe any term,
covenant or agreement  contained in this  Agreement or any of the Loan Documents
and such failure shall  continue for five (5) days or more following the earlier
of the time (i) an  executive  officer of Borrower  knew or should have known of
such Event of Default;  or (ii) written notice of such Event of Default is given
to Borrower by the Agent (except that this Section  11.01(c)  shall not apply to
the delivery of a Borrowing  Base  Certificate  not in  compliance  with Section
8.08(c) hereof);

     (d) Borrower or any Guarantor  shall: (i) fail to pay all or any portion of
a Debt in an amount greater than Two Hundred Fifty Thousand  ($250,000)  Dollars
(other than the payment obligations  described in (1) above), of Borrower or any
Guarantor  when  due  (whether  by  scheduled  maturity,   required  prepayment,
acceleration,  demand or otherwise)  after giving effect to any applicable grace
period;  (ii) fail to perform or observe any term,  covenant or condition on its
part to be performed  or observed or an event of default has occurred  under any
agreement  or  instrument  relating to any such Debt,  including  the  Insurance
Company Debt when  required to be performed or observed,  the effect of which is
to cause any such Debt to become,  or to permit  such Debt to be declared to be,
due and payable prior to its scheduled maturity;

     (e) Borrower or any Guarantor: (i) shall generally not, or be unable to, or
shall admit in writing its inability to, pay its debts as such debts become due;
or (ii) shall make an assignment for the benefit of creditors, petition or apply
to any tribunal for the  appointment of a custodian,  receiver or trustee for it
or a  substantial  part of its assets;  or (iii) shall  commence any  proceeding
under  any  bankruptcy,  reorganization,   arrangement,  readjustment  of  debt,
dissolution or liquidation  law or statute of any  jurisdiction,  whether now or
hereafter  in effect;  or (iv) shall have had any such  petition or  application
filed or any such proceeding shall have been commenced,  against it, in which an


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adjudication  or  appointment  is made or order for relief is entered,  or which
petition, application or proceeding remains undismissed or unstayed for a period
of sixty  (60) days or more;  or shall be the  subject of any  proceeding  under
which its assets may be subject to seizure, forfeiture or divestiture; or (v) by
any act or omission shall indicate its consent to,  approval of or  acquiescence
in any such  petition,  application  or  proceeding  or order for  relief or the
appointment of a custodian,  receiver or trustee for all or any substantial part
of its property;  or (vi) shall suffer any such  custodianship,  receivership or
trusteeship to continue undischarged for a period of thirty (30) days or more;

     (f) one or more  judgments,  decrees or orders for the  payment of money in
excess of Two Hundred Fifty Thousand  ($250,000)  Dollars in the aggregate shall
be rendered  against Borrower or any Guarantor,  and such judgments,  decrees or
orders  shall  continue  unsatisfied  and in effect for a period of thirty  (30)
consecutive  days  without  being  vacated,  discharged,  satisfied or stayed or
bonded pending appeal;

     (g) any of the  following  events  shall  occur or exist  with  respect  to
Borrower or any Guarantor or any ERISA Affiliate: (i) any Prohibited Transaction
involving any Plan;  (ii) any  Reportable  Event shall occur with respect to any
Plan;  (iii) the  filing  under  Section  4041 of ERISA of a notice of intent to
terminate  any  Plan  or  the  termination  of  any  Plan;  (iv)  any  event  or
circumstance  exists  which  might  constitute  grounds  entitling  the  PBGC to
institute proceedings under Section 4042 of ERISA for the termination of, or for
the appointment of a trustee to administer,  any Plan, or the institution by the
PBGC of any such proceedings;  (v) complete or partial  withdrawal under Section
4201  or  4204  of  ERISA  from a  Multiemployer  Plan  or  the  reorganization,
insolvency,  or  termination  of any  Multiemployer  Plan;  (vi) an  accumulated
funding  deficiency  (as  defined in Section  302 of ERISA or Section 412 of the
Code)  exists with  respect to a Plan,  whether or not waived;  and in each case
above, such event or condition, together with all other events or conditions, if
any,  would  reasonably be expected to subject  Borrower or any Guarantor or any
ERISA Affiliate to any tax, penalty, or other liability to a Plan, Multiemployer
Plan, the PBGC, or otherwise (or any combination thereof) which in the aggregate
exceeds or may exceed Two Hundred Fifty Thousand ($250,000) Dollars;

     (h) in the event that:  (i) the sum of (A) Revolving  Credit Loans plus (B)
Letter of Credit  Obligations plus (C) the outstanding  indebtedness of Borrower
and  Restricted  Subsidiaries  to the  Insurance  Companies  under the Insurance
Company Loan Documents  plus (D) the  outstanding  indebtedness  of Borrower and
Restricted  Subsidiaries  under  Unsecured  Lines  exceeds  (ii)  the sum of the
Borrowing Base.

     (i) in the  event  that  Glamourette,  from  and  after  the  date  hereof,
purchases  any  Inventory  or engages in any  business  activity  other than the
orderly liquidation of its business operations and the sale of its assets; or

     (j) Article V shall,  at any time after the  execution and delivery of this
Agreement  and for any reason,  cease to be in full force and effect or shall be
declared  null and void,  or the  validity or  enforceability  thereof  shall be
contested  by any  Guarantor  or any  Guarantor  shall  deny it has any  further
liability or  obligation  under or shall fail to perform its  obligations  under
Article V.

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<PAGE>
     Section  XI.2  Remedies.  If  any  Event  of  Default  shall  occur  and be
continuing,  the Agent may and,  upon  request of the Required  Banks,  shall by
notice to  Borrower,  (a) declare the  Revolving  Credit  Commitment,  the Trade
Letter of Credit  Commitment and the Standby  Letter of Credit  Commitment to be
terminated,  whereupon the same shall forthwith terminate;  (b)-require Borrower
to provide Cash Collateral or the equivalent  thereof in an aggregate  amount of
one  hundred  and five  percent  (105%)  of all  outstanding  Letter  of  Credit
Obligations;  (c) declare the outstanding  Notes, all interest thereon,  and all
other amounts payable under this  Agreement,  and any other Loan Documents to be
forthwith due and payable,  whereupon the Notes, all such interest, and all such
amounts due under this Agreement, and under any other Loan Document shall become
and be forthwith  due and payable,  without  presentment,  demand,  protest,  or
further  notice  of any  kind,  all of which  are  hereby  expressly  waived  by
Borrower;  (d)  exercise  any  remedies  provided  in any of the Loan  Documents
including,  without limitation, any rights under Section 2.11 hereof; and/or (e)
exercise  any  remedies  provided  by  Law;  provided  however,  that  upon  the
occurrence of an Event of Default referred to in Section  11.01(f)  hereof,  the
Revolving  Credit  Commitment,  and the Trade  Letter of  Credit  Commitment  or
Standby  Letter of  Credit  Commitment  shall  automatically  terminate  and the
outstanding  Notes,  Letters of Credit, and any other amounts payable under this
Agreement  or any of the other Loan  Documents,  and all  interest on any of the
foregoing  shall be  forthwith  due and  payable  without  presentment,  demand,
protest or further notice of any kind, all of which are hereby  expressly waived
by Borrower.

ARTICLE XII.  THE AGENT AND COLLATERAL MONITOR

     Section XII.1 Appointment, Powers and Immunities of Agent. Each Bank hereby
irrevocably  appoints and authorizes the Agent to act as its agent hereunder and
under any other Loan Document with such powers as are specifically  delegated to
the Agent by the terms of this Agreement and any other Loan  Document,  together
with such other powers as are  reasonably  incidental  thereto.  The Agent shall
have no duties or  responsibilities  except  those  expressly  set forth in this
Agreement and any other Loan Document, and shall not by reason of this Agreement
be a trustee for any Bank.  The Agent shall not be  responsible to the Banks for
any recitals, statements,  representations or warranties made by Borrower or any
Guarantor or any officer or official of the Borrower or any  Guarantor or anyone
purporting  to be an  Authorized  Person or any other  Person  contained in this
Agreement or any other Loan Document, or in any certificate or other document or
instrument  referred  to or  provided  for in, or received by any of them under,
this Agreement or any other Loan Document, or for the value, legality, validity,
effectiveness,  genuineness,  enforceability or sufficiency of this Agreement or
any other Loan  Document  or any other  document  or  instrument  referred to or
provided  for herein or  therein,  for the  perfection  or  priority of any Lien
securing  the  Obligations  or for any failure by Borrower or any  Guarantor  to
perform any of its  obligations  hereunder or  thereunder.  The Agent may employ
agents and attorneys-in-fact and shall not be responsible, except as to money or
securities  received  by it or its  authorized  agents,  for the  negligence  or
misconduct  of  any  such  agents  or  attorneys-in-fact  selected  by  it  with
reasonable care. Neither the Agent nor any of its directors, officers, employees
or agents shall be liable or  responsible  for any action taken or omitted to be
taken by it or them  hereunder or under any other Loan Document or in connection
herewith or therewith,  except for its or their own gross  negligence or willful
misconduct.  Borrower shall pay any fee agreed to by Borrower and the Agent with
respect  to  the  Agents  services  hereunder  at  the  Closing  Date  and  each
anniversary thereof during the term of this Agreement.

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<PAGE>
     Section XII.2  Reliance by Agent.  The Agent shall be entitled to rely upon
any  certification,  notice or other  communication  (including  any  thereof by
telephone,  telecopy,  telex, telegram or cable) reasonably believed by it to be
genuine  and  correct  and to have  been  signed  or sent by or on behalf of the
proper  Person or Persons,  and upon  advice and  statements  of legal  counsel,
independent  accountants and other experts  selected by the Agent. The Agent may
deem and treat each Bank as the holder of the Revolving  Credit Loans made by it
and  Participation  purchased by it for all purposes  hereof  unless and until a
notice of the assignment or transfer thereof satisfactory to the Agent signed by
such Bank  shall  have been  furnished  to the Agent but the Agent  shall not be
required  to deal  with any  Person  who has  acquired  a  participation  in any
Revolving  Credit Loan or Bank.  As to any matters  not  expressly  or any other
Revolving Credit provided for by this Agreement, the Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder in accordance
with  instructions  signed by the Required Banks,  and such  instructions of the
Required Banks and any action taken or failure to act pursuant  thereto shall be
binding  on all of the Banks and any other  holder of all or any  portion of any
Revolving Credit Loan or Participation.

     Section XII.3 Defaults.  The Agent shall not be deemed to have knowledge of
the occurrence of a Default or Event of Default,  other than a payment  default,
unless the Agent has  received  notice from a Bank or Borrower or any  Guarantor
specifying  such  Default or Event of Default and stating  that such notice is a
"Notice of Default." In the event that the Agent  receives  such a notice of the
occurrence of a Default or Event of Default,  the Agent shall give prompt notice
thereof to the Banks.  The Agent shall  (subject to Section  12.08  hereof) take
such action with respect to such Default or Event of Default which is continuing
as shall be directed by the Required Banks;  provided that, unless and until the
Agent shall have received such  directions,  the Agent may take such action,  or
refrain  from  taking  such  action,  with  respect to such  Default or Event of
Default as it shall  deem  advisable  in the best  interest  of the  Banks;  and
provided  further that,  the Agent shall not be required to take any such action
which it determines to be contrary to Law.

     Section XII.4 Rights of Agent as a Bank. With respect to its Commitment and
the  Revolving  Credit Loans  provided by it and the Letters of Credit issued by
it, the Agent in its capacity as a Bank hereunder shall have the same rights and
powers  hereunder  as any other Bank and may exercise the same as though it were
not  acting as the  Agent,  and the term  "Bank" or  "Banks"  shall,  unless the
context  otherwise  indicates,  include the Agent in its capacity as a Bank. The
Agent and its  Affiliates may (without  having to account  therefor to any Bank)
accept  deposits  from,  lend money to (on a secured or  unsecured  basis),  and
generally  engage in any kind of banking,  trust or other business with Borrower
or any  Guarantor  and any of their  Affiliates  as if it were not acting as the
Agent, and the Agent may accept fees and other  consideration  from Borrower for
services in  connection  with this  Agreement  or  otherwise  without  having to
account for the same to the Banks.

     Section XII.5  Indemnification  of Agent.  The Banks agree to indemnify the
Agent (to the extent not  reimbursed  under  Section  13.03  hereof or under the
applicable  provisions  of any other Loan  Document,  but without  limiting  the
obligations of Borrower under Section 13.03 hereof or such provisions),  for its
Pro  Rata  Share  of any  and all  liabilities,  obligations,  losses,  damages,
penalties,  actions,  judgments,  suits, costs, expenses or disbursements of any
kind and nature  whatsoever  which may be imposed  on,  incurred  by or asserted
against the Agent in any way relating to or arising out of this  Agreement,  any
other Loan Document or any other documents contemplated by or referred to herein
or  the  transactions   contemplated  hereby  or  thereby  (including,   without


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limitation, the costs and expenses which Borrower or any Guarantor are obligated
to pay under  Section 13.03  hereof) or under the  applicable  provisions of any
other Loan Document or the  enforcement of any of the terms hereof or thereof or
of any such other  documents or  instruments;  provided  that,  no Bank shall be
liable  for any of the  foregoing  to the  extent  they  arise  from  the  gross
negligence or willful misconduct of the Agent.

     Section  XII.6  Documents.  The Agent will  forward to each Bank,  promptly
after  the  Agent's  receipt  thereof,  a copy of each  report,  notice or other
document  required by this  Agreement or any other Loan Document to be delivered
to the Agent for such Bank.

     Section XII.7  Non-Reliance on Agent and Other Banks. Each Bank agrees that
it has,  independently  and without  reliance  on the Agent,  Chase or any other
Bank, and based on such documents and information as it has deemed  appropriate,
made its own credit  analysis of Borrower and each Guarantor and the decision to
enter into this Agreement and that it will,  independently  and without reliance
upon the  Agent,  Chase or any  other  Bank,  and  based on such  documents  and
information as it shall deem  appropriate at the time,  continue to make its own
analysis and  decisions in taking or not taking  action under this  Agreement or
any other Loan Document. The Agent shall not be required to keep itself informed
as to the  performance  or  observance  by  Borrower  or any  Guarantor  of this
Agreement  or any other  Loan  Document  or any other  document  referred  to or
provided for herein or therein or to inspect the properties or books of Borrower
or  any  guarantor.   Except  for  notices,  reports  and  other  documents  and
information  expressly  required  to be  furnished  to the  Banks  by the  Agent
hereunder,  the Agent shall not have any duty or  responsibility  to provide any
Bank with any credit or other  information  concerning  the  affairs,  financial
condition or business of Borrower or any Guarantor (or any of their  Affiliates)
which may come into the  possession of the Agent or any of its  Affiliates.  The
Agent shall not be required to file this  Agreement,  any other Loan Document or
any  document or  instrument  referred to herein or therein,  for record or give
notice of this Agreement,  any other Loan Document or any document or instrument
referred  to herein or therein,  to anyone;  provided  however,  the Agent shall
(a)-file the  Trademark  Assignment  with the United States Patent and Trademark
Office,  and  (b)-file  financing  statements  (UCC-1) set forth in Section 6.01
hereof in the appropriate jurisdictions.

     Section XII.8 Failure of Agent to Act. Except for action expressly required
of the Agent  hereunder,  the Agent  shall in all  cases be fully  justified  in
failing or  refusing  to act  hereunder  unless it shall have  received  further
assurances   (which  may  include  Cash   Collateral)  of  the   indemnification
obligations  of the Banks under  Section  12.05 hereof in respect of any and all
liability  and  expense  which  may be  incurred  by it by  reason  of taking or
continuing to take any such action.

     Section XII.9  Resignation or Removal of Agent.  Subject to the appointment
and acceptance of a successor Agent as provided  below,  the Agent may resign at
any time by giving  written  notice  thereof  to the  Banks,  Borrower  and each
Guarantor, and the Agent may be removed at any time with or without cause by the
Required  Banks;  provided  that,  Borrower,  each Guarantor and the other Banks
shall be promptly  notified thereof.  Upon any such resignation or removal,  the
Required Banks shall have the right to appoint a successor Agent,  which, unless
an Event of Default shall have occurred and be  continuing,  shall be reasonably


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acceptable  to Borrower.  If no successor  Agent shall have been so appointed by
the Required Banks and shall have accepted such  appointment  within thirty (30)
days after the retiring  Agent's giving of notice of resignation or the Required
Banks' removal of the retiring Agent,  then the retiring Agent may, on behalf of
the Banks,  appoint a successor Agent, which shall be a bank which has an office
in New  York,  New York and  assets  in an  amount  not  less  than One  Billion
($1,000,000,000)  Dollars, which, unless an Event of Default shall have occurred
and be  continuing,  shall be reasonably  acceptable  to Borrower.  The Required
Banks or the retiring Agent, as the case may be, shall upon the appointment of a
successor  Agent  promptly  so notify  Borrower  and the other  Banks.  Upon the
acceptance of any  appointment  as Agent  hereunder by a successor  Agent,  such
successor  Agent  shall  thereupon  succeed  to and become  vested  with all the
rights,  powers,  privileges and duties of the retiring Agent,  and the retiring
Agent shall be discharged from its duties and obligations  hereunder.  After any
retiring  Agent's  resignation or removal  hereunder as Agent, the provisions of
this  Article  XII shall  continue  in effect for its  benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the Agent.

     Section XII.10 Amendments  Concerning Agency Function.  The Agent shall not
be bound by any waiver, amendment,  supplement or modification of this Agreement
or any other Loan  Document  which  affects its duties  hereunder or  thereunder
unless it shall have given its prior consent thereto.

     Section XII.11 Liability of Agent. The Agent shall not have any liabilities
or  responsibilities  to Borrower or any  Guarantor on account of the failure of
any Bank to perform its  obligations  hereunder or to any Bank on account of the
failure of Borrower or any  Guarantor  to perform its  obligations  hereunder or
under any other Loan Document.

     Section  XII.12  Transfer  of  Agency  Function.  Without  the  consent  of
Borrower,  any Guarantor or any Bank,  the Agent may at any time or from time to
time transfer its functions as Agent  hereunder to any of its offices located in
New York, New York,  provided that, the Agent shall promptly notify Borrower and
the Banks thereof.

     Section XII.13  Withholding Taxes. Each Bank represents that it is entitled
to receive any payments to be made to it hereunder  without the  withholding  of
any tax and will furnish to the Agent such forms, certifications, statements and
other  documents  as the Agent may request  from time to time to  evidence  such
Bank's  exemption from the withholding of any tax imposed by any jurisdiction or
to enable the Agent to comply with any applicable  laws or regulations  relating
thereto.  Without  limiting  the  effect  of the  foregoing,  if any Bank is not
created or organized under the laws of the United States of America or any state
thereof,  such Bank will  furnish to the Agent  Form 4224 or Form  W-8BEN of the
Internal Revenue  Service,  or such other forms,  certifications,  statements or
documents,  duly  executed and completed by such Bank as evidence of such Bank's
complete  exemption from the withholding of U.S. tax with respect  thereto.  The
Agent shall not be  obligated  to make any  payments  hereunder  to such Bank in
respect of any Revolving  Credit Loan or  Participation or such Bank's Revolving
Credit Commitment or obligation to purchase  Participation until such Bank shall
have  furnished to the Agent the  requested  form,  certification,  statement or
document.

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<PAGE>
     Section XII.14  Collateral  Monitor.  Each Bank and Agent  acknowledge  and
agree that:  (i) any and all reports  prepared by  Collateral  Monitor are being
supplied to them solely to assist them in their own independent  credit analysis
of Borrower and its Subsidiaries and (ii) Collateral Monitor makes absolutely no
representation or warranty whatsoever regarding (x) the accuracy completeness or
adequacy of such  reports or (y) any  financial or other  information  contained
therein or the  financial  condition  of Borrower  and its  Subsidiaries.  It is
further  understood  and  agreed  that  Collateral  Monitor  shall not incur any
liability to Agent or Banks  whatsoever in connection  with the delivery of such
reports or the contents of such reports or their use thereof or reliance thereon
and Agent and Banks each  hereby  waive any and all claims  that they may now or
hereafter have against Collateral Monitor in connection therewith.

     Borrower and its Subsidiaries hereby waive any and all claims that they may
now or hereafter have against Collateral Monitor arising in connection with such
reports and/or Collateral  Monitor's  performance of its duties and functions as
Collateral  Monitor and hereby indemnifies and holds Collateral Monitor harmless
from  any and all  loss  liability  or  expense  incurred  by  Borrower  and its
Subsidiaries as a result of such reports or the contents thereof.

     Collateral Monitor's reports may contain confidential  information which is
non-public,  confidential  or  proprietary  in nature,  and  therefore  is being
provided  to Agent and Banks on a  confidential  basis and is to be used for the
sole purpose of assisting Agent and Banks in their  independent  credit analysis
of Borrower and its Subsidiaries as described above.

     Except as may be required by applicable law or by any federal  regulator or
any auditor of Agent or any Bank,  each Bank and Agent will not  disclose any of
the contents of such reports to any person including, other than those officers,
directors, employees,  representatives and professional advisors of such Bank or
Agent or who need to know the  contents  thereof  for the purpose of such credit
analysis described above. The contents of such reports shall not be disclosed by
any Bank or Agent to Borrower or its Affiliates.

     The  Collateral  Monitor  shall have no duties or  responsibilities  except
those  expressly set forth in this  Agreement and any other Loan  Document.  The
Collateral  Monitor shall not be bound by any waiver,  amendment,  supplement or
modification  of this  Agreement or any other Loan  Document  which  affects its
duties  hereunder  or  thereunder  unless it shall have given its prior  written
consent.

ARTICLE XIII.  YIELD PROTECTION.

     Section  XIII.1  Additional  Costs.  (a) Borrower shall pay directly to the
Agent  from  time to time on  demand  such  amounts  as any Bank may  reasonably
determine  to be  necessary  to  compensate  it for any  costs  which  the  Bank
determines are  attributable to its making or maintaining  any Eurodollar  Loans
under this Agreement or its obligation to make any such loans hereunder,  or any
reduction in any amount  receivable by the Bank hereunder in respect of any such
loans or such  obligation  (such  increases in costs and  reductions  in amounts
receivable  being  herein  called  "Additional   Costs"),   resulting  from  any
Regulatory  Change  which:  (i)  changes  the basis of  taxation  of any amounts


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<PAGE>
payable to the Bank under this  Agreement in respect of any of such loans (other
than taxes  imposed on the  overall net income of the Bank for any of such loans
by the  jurisdiction in which the Bank has its principal  office or is deemed to
hold the loans);  or  (ii)-imposes  or modifies  any reserve,  special  deposit,
deposit  insurance or  assessment,  minimum  capital,  capital  ratio or similar
requirements  relating to any  extensions  of credit or other  assets of, or any
deposits with or other  liabilities of, the Bank (including any of such loans or
any deposits  referred to in the definition of "Eurodollar  Base Rate"; or (iii)
imposes any other  condition  affecting  this  Agreement  (or any  extensions of
credit or  liabilities),  except to the  extent any such  Regulatory  Change has
previously  resulted  in a change in the  calculation  of  Eurodollar  Rate as a
result of being included in the Reserve  Requirement  used in  calculating  such
Eurodollar Rate. The Agent will notify Borrower of any event occurring after the
date of this Agreement which will entitle the Bank to  compensation  pursuant to
this  Section  13.01(a) as promptly as  practicable  after it obtains  knowledge
thereof and determines to request such compensation.

     (b) Without limiting the effect of the foregoing provisions of this Section
13.01,  in the event that, by reason of any Regulatory  Change,  the Bank either
(i) incurs Additional Costs based on or measured by the excess above a specified
level of the amount of a category of deposits or other  liabilities  of the Bank
which  includes  deposits by reference to which the interest  rate on Eurodollar
Loans is determined as provided in this Agreement or a category of extensions of
credit  or other  assets of the Bank  which  includes  Eurodollar  Loans or (ii)
becomes  subject to restrictions on the amount of such a category of liabilities
or assets which it may hold,  then, if the Bank so elects by notice to Borrower,
the  obligation of the Bank to make or renew,  and to convert loans of any other
type into,  loans of such type hereunder  shall be suspended until the date such
Regulatory Change ceases to be in effect.

     (c) Without limiting the effect of the foregoing provisions of this Section
13.01 (but without  duplication),  Borrower shall pay directly to the Agent from
time to time on request such amounts as the Agent may  determine to be necessary
to compensate any Bank for any costs which it determines are attributable to the
maintenance by it or any of its affiliates  pursuant to any Regulatory Change of
any court or  governmental  or monetary  authority  of capital in respect of its
loans hereunder or its obligation to make loans hereunder (such  compensation to
include,  without  limitation,  an amount  equal to any  reduction  in return on
assets or equity of the Bank to a level below that which it could have  achieved
but for such Regulatory  Change),  except to the extent the Eurodollar Base Rate
has been adjusted to reflect such costs.  The Agent will notify  Borrower if any
Bank is entitled to compensation  pursuant to this Section  13.01(c) as promptly
as practicable after it determines to request such compensation.

     (d)  Determinations  and  allocations  by the Agent or Bank for purposes of
this   Section-13.01  of  the  effect  of  any  Regulatory  Change  pursuant  to
subsections  (a) or (b),  or of the effect of  capital  maintained  pursuant  to
subsection (c), on its costs of making or maintaining loans or its obligation to
make loans, or on amounts receivable by, or the rate of return to, it in respect
of  loans  or  such  obligation,  and  of the  additional  amounts  required  to
compensate  the Bank under this Section  13.01,  shall be  conclusive,  provided
that, such  determinations  and  allocations are made on a reasonable  basis and
absent  manifest  error  and  having a  retroactive  effect  of no more than one
hundred twenty (120) days.

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<PAGE>
     Section  XIII.2  Illegality.  Notwithstanding  any other  provision in this
Agreement,  in the event  that it becomes  unlawful  for a Bank to (a) honor its
obligation to make or renew  Eurodollar  Loans hereunder or convert loans of any
type into loans of such type, or (b) maintain  Eurodollar Loans hereunder,  then
the Bank shall promptly  notify  Borrower  thereof and the Bank's  obligation to
make or renew Eurodollar Loans and to convert other types of loans into loans of
such type  hereunder  shall be  suspended  until such time as the Bank may again
make,  renew,  or  convert  and  maintain  such  affected  loans and the  Bank's
outstanding  Eurodollar  Loans shall be converted to Prime Rate Loans at the end
of the then current Interest Period unless earlier required by law.

     Section XIII.3 Certain Compensation.  Borrower shall pay to the Agent, upon
the request of the Agent,  such amount or amounts as shall be sufficient (in the
reasonable  opinion of the Agent) to compensate  any Bank for any loss,  cost or
expense which the Bank determines is attributable to:

     (a) any payment or prepayment of a Eurodollar Rate Loan made by the Bank on
a date other than the last day of an Interest  Period for such Loan  (whether by
reason of acceleration or otherwise); or

     (b) any failure by Borrower to borrow a Eurodollar  Rate Loan to be made by
the Bank on the date specified therefor in the relevant notice.

     Without limiting the foregoing,  such compensation  shall include an amount
equal to the excess, if any, of (i) the amount of interest which otherwise would
have accrued on the  principal  amount so paid,  prepaid or not borrowed for the
period from and  including  the date of such  payment,  prepayment or failure to
borrow to but  excluding  the last day of the then current  Interest  Period for
such Loan (or, in the case of a failure to borrow, to but excluding the last day
of the  Interest  Period for such Loan which  would have  commenced  on the date
specified  therefor in the relevant  notice) at the applicable  rate of interest
for such  Loan  provided  for  herein;  over  (ii)-the  amount of  interest  (as
reasonably  determined  by the  Bank)  the Bank  would  have  bid in the  London
interbank  market for Dollar  deposits for amounts  comparable to such principal
amount and maturities  comparable to such period. A determination of the Bank as
to the amounts payable pursuant to this Section 13.03 shall be conclusive absent
manifest error.

ARTICLE XIV.  MISCELLANEOUS

     Section  XIV.1  Amendments  and  Waivers.  No  amendment  or  waiver of any
provision  of this  Agreement  or any other  Loan  Document  nor  consent to any
departure  by  Borrower  or any  Guarantor  therefrom,  shall  in any  event  be
effective  unless the same  shall be in writing  and signed by the Agent and the
Required  Banks 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 no  amendment,  waiver or consent,  shall,  unless in writing and
signed by all Banks do any of the following:  (a) increase the Revolving  Credit
Commitment or the Trade Letter of Credit  Commitment or Standby Letter of Credit
Commitment  ; (b) reduce  the  principal  of, or  interest  on,  the Notes;  (c)
postpone  the date fixed for the payment of  principal  of, or interest  on, the
Notes or any other amount due hereunder or under any Loan Document, or waive any
default in the payment of principal,  interest or any other amount due hereunder
or under any Loan  Document;  (d) change the  definition  of  "Required  Banks";
(e)-release  any Guarantor or release or subordinate  any Collateral  (except as
contemplated by the Loan Documents); (f) change the definition of Borrowing Base
or any defined term referenced  therein or change the definition of Supplemental
Amount;  or (g)amend  this Section 14.01 or any other  provision  requiring the-
consent  of all  Banks.  No  failure  on the  part of the  Agent  or any Bank to


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exercise,  and no delay in exercising,  any right  hereunder  shall operate as a
waiver thereof or preclude any other or further exercise thereof or the exercise
of any  other  right.  The  remedies  herein  provided  are  cumulative  and not
exclusive of any remedies provided by Law.

     Section XIV.2 Usury. Anything herein to the contrary  notwithstanding,  the
obligations  of Borrower and the  Guarantors  under this Agreement and the other
Loan  Documents  shall be subject to the  limitation  that  payments of interest
shall not be required to the extent that  receipt  thereof  would be contrary to
provisions of Law  applicable to a Bank limiting  rates of interest which may be
charged or collected by such Bank.

     Section XIV.3 Expenses;  Indemnification.  Borrower agrees to reimburse the
Agent,  Collateral  Monitor  and each of the  Banks,  on demand  for all  costs,
expenses,  and charges (including,  without limitation,  all reasonable fees and
charges of external legal counsel for the Agent,  Collateral Monitor,  Chase and
each Bank)  incurred by Agent,  Collateral  Monitor,  or any Bank, in connection
with the  preparation of the Loan  Documents.  Borrower  agrees to reimburse the
Agent,  Collateral  Monitor,  and each of the  Banks on  demand  for all  costs,
expenses,  and charges (including,  without limitation,  all fees and charges of
external  legal  counsel  for the  Agent,  Collateral  Monitor,  and each  Bank)
incurred by the Agent,  Collateral  Monitor,  or any Bank in connection with the
performance,  or enforcement  of this  Agreement,  the Notes,  or any other Loan
Documents. Borrower agrees to indemnify the Agent, Collateral Monitor, Chase and
each  Bank and  their  respective  directors,  officers,  employees  and  agents
(collectively,  the "Indemnified Persons),  from, and hold each of them harmless
against, any and all losses,  liabilities,  claims, damages or expenses incurred
by any of them arising out of or by reason of any investigation or litigation or
other proceedings (including any threatened investigation or litigation or other
proceedings)  relating to any actual or proposed use by Borrower of the proceeds
of the  Revolving  Credit Loans or the Letters of Credit or to any  violation or
alleged  violation  of any  Environmental  Law  by  Borrower  or any  Guarantor,
including without  limitation,  the reasonable fees and disbursements of counsel
incurred  in  connection  with any such  investigation  or  litigation  or other
proceedings  (but  excluding any such losses,  liabilities,  claims,  damages or
expenses incurred by reason of the gross negligence or willful misconduct of any
Indemnified  Person or any other  Indemnified  Person of which such  Indemnified
Person is an affiliate or agent).

     The  obligations of Borrower under this Section shall survive the repayment
of the  Obligations  and all amounts due under or in connection  with any of the
Loan Documents and the termination of the Commitments.

     Section XIV.4 Assignment; Participation; Additional Bank.

     (a) The provisions of this Agreement shall be binding upon and inure to the
benefit  of the  parties  hereto and their  respective  successors  and  assigns
permitted  hereby  (including  any  Affiliate of Chase that issues any Letter of
Credit),  except that the Borrower or any  Subsidiary  signatory  hereto may not
assign or otherwise transfer any of its rights or obligations  hereunder without
the prior written consent of each Bank (and any attempted assignment or transfer
by the Borrower or any Subsidiary signatory hereto without such consent shall be
null and void).  Nothing  in this  Agreement,  expressed  or  implied,  shall be
construed  to confer upon any Person  (other than the parties  hereto) and their
respective  successors and assigns  permitted hereby (including any Affiliate of
the Chase that issues any Letter of Credit) any legal or equitable right, remedy
or claim under or by reason of this Agreement.

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<PAGE>
     (b) Any Bank may  assign to one or more  assignees  all or a portion of its
rights and obligations  under this Agreement  (including all or a portion of its
Commitment  and the  Revolving  Credit Loans and other  Obligations  at the time
owing to it); provided that (i) except in the case of an assignment to a Bank or
an Affiliate of a Bank, each of the Borrower and the Agent must give their prior
written  consent to such  assignment  (which  consent shall not be  unreasonably
withheld), (ii) except in the case of an assignment to a Bank or an Affiliate of
a Bank or an assignment of the entire  remaining  amount of the assigning Bank's
Commitment,  the amount of the  Commitment of the assigning Bank subject to each
such  assignment  (determined as of the date the Assignment and Acceptance  with
respect to such  assignment  is  delivered  to the Agent) shall not be less than
$5,000,000  unless each of the Borrower and the Agent otherwise  consent,  (iii)
each partial  assignment shall be made as an assignment of a proportionate  part
of all the assigning  Bank's rights and obligations  under this Agreement,  (iv)
the  parties  to each  assignment  shall  execute  and  deliver  to the Agent an
Assignment and Acceptance (in the form attached  hereto as Exhibit H),  together
with a processing and  recordation  fee of $3,500,  and (v) the assignee,  if it
shall not be a Bank, shall deliver to the Agent an Administrative Questionnaire;
and provided further that any consent of the Borrower  otherwise  required under
this paragraph  shall not be required if an Event of Default has occurred and is
continuing.  Subject to acceptance and recording  thereof  pursuant to paragraph
(d) of this  Section,  from and  after  the  effective  date  specified  in each
Assignment and Acceptance the assignee  thereunder  shall be a party hereto and,
to the extent of the interest  assigned by such Assignment and Acceptance,  have
the rights and  obligations  of a Bank under this  Agreement,  and the assigning
Bank thereunder shall, to the extent of the interest assigned by such Assignment
and Acceptance,  be released from its obligations  under this Agreement (and, in
the case of an Assignment  and Acceptance  covering all of the assigning  Bank's
rights and obligations under this Agreement, such Bank shall cease to be a party
hereto but shall  continue to be entitled to the benefits of Article XIII hereof
and  Section14.03  hereof).  Any  assignment  or transfer by a Bank of rights or
obligations  under this Agreement that does not comply with this paragraph shall
be  treated  for  purposes  of  this  Agreement  as a sale  by  such  Bank  of a
participation in such rights and obligations in accordance with paragraph (e) of
this Section.

     (c) The Agent,  acting for this purpose as an agent of the Borrower,  shall
maintain at one of its offices in The City of New York a copy of each Assignment
and Acceptance  delivered to it and a register for the  recordation of the names
and addresses of the Bank's,  and the Commitment of, and principal amount of the
Obligations  owing to, each Bank  pursuant to the terms hereof from time to time
(the  "Register").  The entries in the  Register  shall be  conclusive,  and the
Borrower,  the Agent,  Chase and the Banks may treat each  Person  whose name is
recorded in the Register  pursuant to the terms hereof as a Bank  hereunder  for
all purposes of this  Agreement,  notwithstanding  notice to the  contrary.  The
Register shall be available for inspection by the Borrower,  Chase and any Bank,
at any reasonable time and from time to time upon reasonable prior notice.

     (d) Upon its receipt of a duly completed Assignment and Acceptance executed
by an assigning Bank and an assignee,  the assignee's  completed  Administrative
Questionnaire  (unless the  assignee  shall  already be a Bank  hereunder),  the
processing and  recordation fee referred to in paragraph (b) of this Section and
any  written  consent  to such  assignment  required  by  paragraph  (b) of this
Section,  the Agent shall accept such  Assignment  and Acceptance and record the
information  contained therein in the Register. No assignment shall be effective
for purposes of this  Agreement  unless it has been  recorded in the Register as
provided in this paragraph.

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<PAGE>
     (e) Any Bank may, without the consent of the Borrower,  the Agent or Chase,
sell  participations to one or more banks or other entities (a "Participant") in
all or a portion of such  Bank's  rights and  obligations  under this  Agreement
(including all or a portion of its Commitment and the Obligations  owing to it);
provided  that (i) such Bank's  obligations  under this  Agreement  shall remain
unchanged,  (ii) such Bank shall remain solely  responsible to the other parties
hereto for the  performance  of such  obligations  and (iii) the  Borrower,  the
Agent, Chase and the other Banks shall continue to deal solely and directly with
such Bank in  connection  with such  Bank's  rights and  obligations  under this
Agreement.  Any  agreement or  instrument  pursuant to which a Bank sells such a
participation  shall  provide  that such Bank  shall  retain  the sole  right to
enforce this Agreement and to approve any amendment,  modification  or waiver of
any provision of this Agreement;  provided that such agreement or instrument may
provide that such Bank will not, without the consent of the  Participant,  agree
to any  amendment,  modification  or waiver  described  in the first  proviso to
Section 14.01 hereof that affects such Participant.  Subject to paragraph (f) of
this Section,  the Borrower and any Subsidiary signatory hereto agrees that each
Participant shall be entitled to the benefits of Article XIII hereof to the same
extent as if it were a Bank and had acquired its interest by assignment pursuant
to  paragraph  (b) of  this  Section.  To the  extent  permitted  by  law,  each
Participant  also shall be entitled to the  benefits of Section  14.06 hereof as
though it were a Bank, provided such Participant agrees to be subject to Section
14.06(c) hereof as though it were a Bank.

     (f) A  Participant  shall not be entitled  to receive  any greater  payment
under Article XIII hereof than the  applicable  Bank would have been entitled to
receive with respect to the participation  sold to such Participant,  unless the
sale of the  participation to such Participant is made with the Borrower's prior
written  consent.  If a Participant  is a Foreign  Lender such  Participant  and
shall,  for the benefit of the  Borrower,  comply with  Section  12.13 hereof as
though it were a Bank.

     (g) Any Bank may at any time pledge or assign a security interest in all or
any portion of its rights  under this  Agreement to secure  obligations  of such
Bank,  including  any pledge or assignment  to secure  obligations  to a Federal
Reserve Bank,  and this Section shall not apply to any such pledge or assignment
of a security interest; provided that no such pledge or assignment of a security
interest  shall  release  a  Bank  from  any  of its  obligations  hereunder  or
substitute any such pledgee or assignee for such Bank as a party hereto.

     Section XIV.5 Notices.  Unless the party to be notified  otherwise notifies
the other party in writing as provided in this Section,  and except as otherwise
provided in this  Agreement,  notices  shall be given to the Agent by telephone,
confirmed by telex,  telecopy or other writing, and to the Banks and to Borrower
by ordinary  mail,  telecopy or telex  addressed to such party at its address on
the  signature  page of this  Agreement.  Copies of notices  mailed to  Borrower
should also be mailed by ordinary mail to Willkie, Farr & Gallagher, 787 Seventh
Avenue, New York, NY 10019, Attention:  Steven J. Gartner,  counsel to Borrower.
Notices shall be effective:  (a) if given by mail upon receipt; and (b) if given
by  telex,  when the telex is  transmitted  to the  telex  number as  aforesaid;
provided  that,  notices to the Agent,  and the Banks  shall be  effective  upon
receipt.

     Section  XIV.6  Setoff.  Borrower  agrees that, in addition to, and without
limitation  of any right of setoff,  bankers'  lien or  counterclaim  a Bank may
otherwise have, each Bank shall be entitled,  at its option,  to offset balances
(general or special,  time or demand,  provisional  or final) held by it for the
account of Borrower at any of such  Bank's  offices,  in Dollars or in any other
currency,  against  any  amount  payable  by  Borrower  to such Bank  under this
Agreement or such Bank's Note, or any other Loan Document which is not paid when
due  (regardless  of whether such balances are then due to  Borrower),  in which


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case it shall promptly  notify  Borrower and the Agent  thereof;  provided that,
such Bank's  failure to give such notice shall not affect the validity  thereof.
Each Bank  agrees  that to the extent any such  payment is received by it as the
result of a set-off or otherwise and such payment results in such Bank receiving
a greater  payment than it would have been  entitled to, had the total amount of
such payment been paid directly to the Agent for disbursement to the Banks, then
such  Bank  shall   immediately   purchase   for  cash  from  the  other   Banks
participations  in the loans  sufficient  in amount so that such  payment  shall
effectively  be  shared  pro rata with the other  Banks in  accordance  with the
amount,  and to the extent,  of their respective  interests in all the Revolving
Credit Loans;  provided  however,  that if all or any portion of such payment is
thereafter recovered from such Bank at any time, the purchase shall be rescinded
and the  purchase  price  returned to the extent of such  recovery,  but without
interest or other return thereof.

     Section XIV.7 Jurisdiction;  Immunities. Borrower and each Guarantor hereby
irrevocably  submit to the  jurisdiction  of any New York State or United States
Federal court sitting in New York City over any action or proceeding arising out
of or relating to this Agreement, the Notes, the Letters of Credit, or any other
Loan Document, and Borrower and each Guarantor hereby irrevocably agree that all
claims in respect of such action or  proceeding  may be heard and  determined in
such New York State or Federal court.  Borrower and each  Guarantor  irrevocably
consent to the service of any and all  process in any such action or  proceeding
by the mailing of copies of such process to Borrower and each Guarantor at their
respective  addresses  specified  in Section  14.05  hereof.  Borrower  and each
Guarantor  agree  that a final  non-appealable  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.  Borrower and each
Guarantor  further  waive any objection to venue in such State and any objection
to an action or proceeding  in such State on the basis of forum non  conveniens.
Borrower and each Guarantor agree that any action or proceeding  brought against
the Agent or any Bank shall be brought  only in New York State or United  States
Federal Court sitting in New York County.

     Nothing in this Section 14.07 hereof shall affect the right of the Agent or
any Bank to serve legal  process in any other manner  permitted by law or affect
the right of the Agent or any Bank to bring any action or proceeding against any
of  Borrower  or any  Guarantor  or their  property  in the  courts of any other
jurisdictions.

     To the extent that  Borrower or any  Guarantor has or hereafter may acquire
any immunity from  jurisdiction of any court or from any legal process  (whether
from  service or notice,  attachment  prior to  judgment,  attachment  in aid of
execution,  execution  or  otherwise)  with  respect to itself or its  property,
Borrower and each Guarantor hereby irrevocably waive such immunity in respect of
its obligations under this Agreement,  the Notes, and any other Revolving Credit
Loan Document.

     Section  XIV.8  Governing  Law.  This  Agreement  shall be  governed by and
construed in  accordance  with the laws of the State of New York  applicable  to
agreements made and to be performed entirely within such State.

     Section XIV.9  Counterparts.  This Agreement may be executed by the parties
hereto in separate counterparts,  each of which, when so executed and delivered,
shall be an original,  but all such counterparts  shall together  constitute one
and the same  instrument.  Each  counterpart  may  consist of a number of copies
hereof,  each signed by less than all, but together signed by all of the parties
hereto.

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<PAGE>
     Section  XIV.10  Exhibits and  Schedules.  The Exhibits and Schedules are a
part of this Agreement as if fully set forth herein.

     Section  XIV.11 Table of Contents;  Headings.  The headings in the Table of
Contents and in this Agreement are for reference  only, and shall not affect the
interpretation or construction of this Agreement.

     Section XIV.12  Severability.  If any word,  phrase,  sentence,  paragraph,
provision or section of this Agreement  shall be held,  declared,  pronounced or
rendered invalid, void, unenforceable or inoperative for any reason by any court
of competent jurisdiction,  governmental authority,  statute or otherwise,  such
holding, declaration,  pronouncement or rendering shall not adversely affect any
other word, phrase, sentence, paragraph, provision or section of this Agreement,
which  shall  otherwise  remain in full  force and  effect  and be  enforced  in
accordance with its terms.

     Section  XIV.13  Integration.  The Loan  Documents  set  forth  the  entire
agreement  among the parties hereto  relating to the  transactions  contemplated
thereby and  supersede any prior oral or written  statements or agreements  with
respect to such transactions.

     Section XIV.14 Jury Trial Waiver.  The Agent,  the Banks,  Borrower and its
Restricted  Subsidiaries each waive any right it may have to a jury trial in any
action or proceeding  which pertains  directly or indirectly to this  Agreement,
the Obligations,  the Collateral or, in any way, directly or indirectly,  arises
out of or relates to the relationship between or among Borrower,  the Restricted
Subsidiaries, the Agent and the Banks.


                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


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

                              HAMPSHIRE GROUP, LIMITED

                              By:    /s/  Ludwig Kuttner
                              Title:  Chairman and Chief Executive Officer

                              HAMPSHIRE DESIGNERS, INC.

                              By:  /s/ Charles W. Clayton
                              Title: Vice President

                              HAMPSHIRE INVESTMENTS, LIMITED

                              By:  /s/ Charles W. Clayton
                              Title: Vice President

                              GLAMOURETTE FASHION MILLS, INC.

                              By:  /s/ Charles W. Clayton
                              Title: Vice President

                              SAN FRANCISCO KNITWORKS, INC.

                              By:  /s/ Charles W. Clayton
                              Title: Vice President

                              VINTAGE III, INC. d/b/a ITEM-EYES, INC.

                              By:  /s/ Charles W. Clayton
                              Title: Vice President

                       [SIGNATURES CONTINUED ON NEXT PAGE]

                                       68
<PAGE>
                         THE CHASE MANHATTAN BANK, as Agent

                         By:  /s/ Abby Parsonnet
                         Title: Agent

                         THE CHASE MANHATTAN BANK

                         By:  /s/ Abby Parsonnet
                         Title:  Agent

                         THE CIT GROUP/COMMERCIAL SERVICES, INC.

                         By:  /s/ Richard Lyons
                         Title: Vice President

                         HSBC BANK USA

                         By:  /s/ Dalliah Jacoby-Lerner
                         Title: Assistant Vice President

                         FLEET NATIONAL BANK

                         By:  /s/ Cynthia Selover
                         Title: Vice President

                         ISRAEL DISCOUNT BANK OF NEW YORK

                         By:  /s/ Howard Weinberg
                         Title: First Vice President

                         BANK OF AMERICA, N.A.

                         By:  /s/ Richard C. Stanland III
                         Title: Sr. Vice President
</TEXT>
</DOCUMENT>
